Consumer Sentiment Slows Q3 C-store Beverage Sales Growth

NEW YORK — The convenience channel saw a slowdown in beverage sales growth in the past quarter, driven by several key factors. Even still, the category remains healthy, according to Wells Fargo Securities LLC. 

According to Wells Fargo Securities' third quarter Beverage Buzz survey, non-alcoholic sales were up 3.9 percent and alcoholic beverage sales were up 4.5 percent, a sequential slowdown. 

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

According to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities, the slowdown could be attributed to by "dampening consumer sentiment," the Colonial Pipeline outage that drove down transactions for a few weeks in September for some retailers, gas price trends, and weather.

As for segments, bottled water, sports drinks, energy drinks, and craft and imported beers continue to outpace other offerings in the cold vault, according to the survey.

"We believe the risk/reward for most beverage manufacturers and c-stores for third-quarter results is neutral as despite the sequential," Herzog said.

According to Beverage Buzz, some brands saw a better third quarter than others. 

Based on the survey, Wells Fargo Securities estimated Monster Beverage Corp. convenience channel sales were up 5 percent in the third quarter. 

Retailers "broadly" blamed the soft results on the continued slowdown in the energy category in the U.S. — with only a modestly improving future outlook, limited opportunity for near-term price increases, and a disappointing launch of Monster's Mutant, Herzog noted.

Despite a planned launch in September, not one retailer surveyed reported having Mutant on their shelves until October, while more than one-third of retailers still don't have it, she added.

On the other hand, convenience store retailers reported strong 9.8 percent sales growth in the third quarter for Constellation Brands Inc., which continues to "dominate the beer growth" as it benefits from "demographic trends, superior execution, communication, and thoughtful collaborative planning with retail partners," according to Herzog.

She added 100 percent of retailers plan to give Constellation Brands — with a portfolio including Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico — incremental shelf space next year.

Looking at other beverage brands, retailers reported slightly positive sales for The Coca-Cola Co.; however, its Smartwater and Gold Peak brands delivered strong results. Many survey respondents also express enthusiasm for new Smartwater innovation in 2017, according to Herzog.

Dr Pepper Snapple Group saw its c-store sales grow 5.6 percent, based on Beverage Buzz results, driven mostly by strong results from Allied brands, including Body Armor and Bai, she added.

In addition, PepsiCo Inc. third-quarter results reflected general slowdown, though its non-carbonated products performed well. According to Herzog, retailers reported strong reports from Starbucks and Gatorade, as well as continued strength from Kickstart.