Convenience Retailers Temper Outlook for Beverage Sales
NEW YORK — The second quarter delivered another healthy period for beverage sales in the convenience channel; however, retailers are a bit more cautious in their outlook for the remainder of 2024.
According to the Goldman Sachs "Beverage Bytes" survey for the second quarter of 2024, trends for beverage sales in the channel remained healthy with sustained growth momentum on a sequential basis — up 2.6% in the quarter which was in line with the first quarter.
However, retailers' expectations for 2024 growth have come down by roughly 200 basis points to +2.6% vs. +4.6% growth for 2024 in the Q1 "Beverage Bytes" survey and against roughly +6% growth in 2023, reported Bonnie Herzog, managing director and senior consumer analyst at Goldman Sachs.
"Retailers' more modest growth outlook this year is largely driven by more tempered traffic growth expectations, which we think continues to reflect some pullback in discretionary spend given the ongoing inflationary impacts," Herzog said.
[Read more: Four Trends Impacting Energy Drinks]
The survey found that overall, retailers remain "very positive" about the sales growth trajectory for Constellation Brands, which grew 10.5% in the second quarter in the c-store channel, with 11% growth expected this year, and the energy drink category, which grew 4% in Q2 and is expected to grow 6% this year.
"Despite retailers' slightly more guarded beverage category growth outlook this year in the c-store channel, there appears to be some signs of optimism — particularly given favorable (warmer) temperatures that have helped boost beverage sales recently, something several retailers noted, while growth in the energy drink category appears poised to accelerate — per retailers," Herzog said.
Other notable takeaways from the latest "Beverage Bytes" include:
- The pricing environment remains broadly healthy/rational with most retailers (56% and 75%, respectively) still expecting incremental pricing by both nonalcoholic beverage manufacturers and brewers this year.
- That said, pricing growth expectations moderated compared to the first quarter survey, and some retailers now expect pricing will be maintained across both the alcoholic/nonalcoholic categories.
- Fewer retailers (29% in Q2 vs. 35% in Q1) are seeing promotional activity pick up in the nonalcoholic space. However, retailers increasingly expect that manufacturers will have to start to promote more to prevent volume erosion (80% of retailers in Q2 vs. 75% in Q1).
- Fewer retailers (45% in Q2 vs. 58% in Q1) are seeing an uptick in promotional activity in alcoholic beverages, a modest reversal following the majority indicating seeing signs of increased promo activity over the past few quarters.
- Retailers remain evenly split on whether brewers can continue to push through more pricing this year (in line with the Q1 survey), though most (75%) still expect manufacturers to take modest additional pricing in the year.
- Retailers' traffic expectations for 2024 have moderated, with traffic now expected to grow just 0.3% (vs. 2% in the Q1 survey).
- Hard Seltzer category declines accelerated in the second quarter and retailers expect category weakness to persist through the year.
The feedback in the Goldman Sachs "Beverage Bytes" Q2 2024 survey represents approximately 30,000 retail locations or approximately 20% of the c-store channel.