Hurricanes Add Even More Headwinds to Beverage Sales

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Hurricanes Add Even More Headwinds to Beverage Sales

09/11/2017
A cooler with beverages in a convenience store

NEW YORK — As the summer selling season ended, convenience stores saw beverage sales dip during the Labor Day holiday weekend, according to a new survey by Wells Fargo Securities LLC.

In surveying beverage retailers representing approximately 15,000 U.S. convenience stores for the recent Labor Day holiday, Beverage Buzz found that the total beverage sales in c-stores were down 1.5 percent for Labor Day 2017 vs. growth of 4.1-percent last year.

Several factors drove the numbers down, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities, including: out of stocks, weather, and spikes in retail gas prices associated with Hurricane Harvey in Texas.

However, despite industry headwinds ready-to-drink (RTD) coffee, premium waters, and imported beer all performed well, the survey found.

On the other side of the coin, retailers reported the energy segment in the convenience channel remains pressured, with sales expected to grow only about 4 percent.

Herzog added numerous industry headwinds are weighing on beverage sales, but strong brands continue to perform well.

"Overall, beverage sales were weak over the holiday, and have remained broadly under pressure in the c-store channel based on macro headwinds," she explained. "That said, we are highly encouraged by the strength in Constellation Brands' beer brands, and expect the resolution of some out-of-stock issues for brands like Dunkin and Hydro could drive better performance for these brands as well."

Looking at specific beverage companies, Wells Fargo Securities said the sales outlook for Monster Energy Corp. remains weak for the year as out of stocks continue to weigh on performance. According to Beverage Buzz, retailers continue to project less than 5-percent growth for Monster in 2017.

"Despite the growing relevance of non-tracked channels, c-stores remain Monster's largest channel, and we continue to have concerns about near-term trends as a result of the light in-store traffic reported," Herzog said. "While we are encouraged by new innovation like Hydro, out-of-stocks continue to weigh on results."

Dr Pepper Snapple Group's Bai Brands' trajectory remains disappointing, according to Wells Fargo Securities, and its retailer contacts are only projecting 14-percent growth for the brand in 2017, well below management's target of 40 percent to 50 percent — across all channels — despite the focus on c-stores.

As for The Coca-Cola Cola Co., it saw a strong performance with Dunkin RTD Coffee but availability limited its impact. Retailers surveyed said performance of Dunkin RTD has been "great when they have supply" but "we have been out of stock as much as in stock since introducing the line," Herzog commented.

And despite reaching a deal with Starbucks Corp. to distribute Teavana RTD Tea and acquiring Hiball Energy, Anheuser Busch's non-alcoholic brands having minimal impact so far, according to Wells Fargo Securities.