C-stores See All-Around Beverage Strength in Q4

NEW YORK — The fourth quarter of 2015 was good for beverage sales in the convenience channel.

According to Wells Fargo Securities LLC's latest Beverage Buzz survey, non-alcoholic beverage sales trends remained strong, increasing 5.5 percent in the quarter. Not to be outdone, alcoholic beverage sales were up 4.1 percent.

Beverage Buzz surveys beverage retailers representing more than 15,000 convenience store locations across the United States.

The survey also found that non-carbonated drinks, energy drinks and craft/import beers continue to generate "robust growth given lower gas prices and favorable weather conditions," explained Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities.

"We continue to believe the risk/reward for both beverage manufacturers and c-stores ahead of fourth-quarter results remains favorable given the benefit from lower gas prices/higher consumer disposable income and relatively benign weather," Herzog said.

Diving deeper into specific brands, the survey results showed sales of Monster Beverage Corp. products re-accelerated as the company's transition issues "appear to be largely resolved," she added.

"Based on our survey, we estimate Monster's c-store sales were up 10 percent in the fourth quarter of 2015, a sequential increase from the third quarter of 2015 (7-percent growth per our survey)," Herzog explained. "Importantly, following two quarters of disruption in distribution given the transition to the Coca-Cola system, most retailers reported that 'service issues have been addressed and we are now seeing great service levels.'"

Retailers also reported that out-of-stocks have improved, down to only 2.3 percent in the quarter vs. 2.5 percent in the previous quarter. In addition, frequency of deliveries has gone up to 1.6 times per week on average (the highest since the transition). Retailers reported "allocating a larger percentage of shelf space" to core Monster Green to alleviate inventory out-of-stocks as well. 

For 2016, retailers project that Monster will outperform the energy category with high single-digit sales growth.

The Coca-Cola Co., meanwhile, saw solid Q4 results driven largely by more aggressive pricing and successful promotions. Based on the results of Beverage Buzz, Wells Fargo Securities estimates that Coca-Cola's retail sales were up 2.9 percent in the quarter, a sequential decline from the third quarter but an improvement from the previous year.

PepsiCo Inc. also saw strong results in the convenience channel and retailers are "excited about forthcoming innovation" from this company, according to Herzog. Based on the survey, Pepsi's beverage sales in the c-store channel were up 3.2 percent thanks to solid results from Gatorade and Starbucks drinks, and more aggressive pricing. 

Several retailers believe the Emoji Pepsi 20-ounce bottle coming this summer "is going to be huge," which could translate to a reversal of Pepsi brand's sales declines and share losses.

Similar to the other leading beverage companies, Dr Pepper Snapple Group turned in strong Q4 sales growth in convenience stores. Wells Fargo Securities estimates the company's retail sales in the channel increased 6.1 percent in the quarter driven by flavor trends, strength in Snapple, and overall solid results in the channel.