Labor Day Sales Drive Up Beverage Outlook

NEW YORK -- Labor Day weekend showed solid beverage sales for convenience stores, with an increase of 4 percent this year compared to a 3.5-percent increase in 2013, according to the latest Beverage Buzz survey by Wells Fargo Securities LLC. Combined with solid Independence Day sales, the third quarter of 2014 should see improved results for beverage suppliers.

Major contributors to the sales increase were successful product and package innovation from The Coca-Cola Co. and PepsiCo Inc., improved trends in the energy category, and improved traffic and increased basket sizes inside c-stores. Survey respondents noted that the Share-a-Coke campaign and Pepsi's "Real Sugar" lines in particular have helped increase volume.

Energy drinks are also seeing strong growth, with approximately 50 percent of surveyed retailers stating that they believe the segment has accelerated to double-digit growth.

"Further, our retailers are generally very encouraged by [Monster Energy's] innovation pipeline through its Ultra line extensions, as they are 'targeting new dayparts' and 'increasing household penetration' which should drive incrementality," wrote Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities.

Overall c-store beverage sales are estimated to be up 4 percent during Q3 2014 so far. Along with solid holiday weekend sales and strong energy performance, good weather is also a factor, with two-thirds of survey respondents indicating that the weather is having a positive impact on sales compared to the previous quarter.