Let’s play a game. Sit outside any convenience store in Anytown, USA, for several minutes and take turns guessing what each customer walking inside is there to buy. If you guess something to drink, you’ll be a winner more times than not.
That’s because nearly three-quarters of convenience store customers come through the door looking for something to drink, and this translates to almost 30 percent of inside sales.
Still, the beverage categories — including packaged, alcoholic and dispensed beverages — are not immune to shifting consumer trends and preferences, as attendees of the 2015 Convenience Store News Beverage Retailing Summit learned at the June event held in St. Louis.
Key beverage themes, according to Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC, are the continued move toward better-for-you and healthier products; a broad shift away from carbonated soft drinks (CSDs), especially the downturn in diet; and the growth of bottled water and functional beverages.
Notably, Herzog pointed out, bottled water has driven the majority of incremental growth in beverages, and energy drinks are the No. 2 non-CSD segment in retail sales. That aside, CSDs are still the largest beverage segment.
As for diet CSDs, the downturn has stabilized a bit as manufacturers are getting better at pricing — which is almost a page out of tobacco’s playbook, she noted.
As Wells Fargo Securities’ early summer Beverage Buzz survey found, convenience store retailers have reason to be optimistic. According to the survey respondents, beverage sales were up about 5 percent during the Memorial Day holiday vs. last year’s holiday weekend. In addition, c-store beverage sales were trending up — approximately 6 percent — in the second quarter.
And things may only get better. Retailers responding to the survey were predicting a 9-percent increase in customer traffic this summer. Broadly, this should be a good thing for the beverage categories, Herzog explained.
Overall, she said, beverage industry trends are getting better as c-store retailers experience tailwinds such as lower gas prices and higher disposable incomes.
ATTENTION C-STORE SHOPPERS
While the majority of convenience store customers are coming through the door looking for something to drink, retailers must still work to grab the consumer’s attention in beverages and ancillary categories to increase the overall basket.
This can be challenging. People have an average attention span of eight seconds, down from 12 seconds in 2000. A goldfish, by comparison, has an attention span of nine seconds.
There are some key factors for retailers to keep in mind to win the customer. One important finding of Red Bull’s 2014 Global C-store Path Tracker research, which included on-site interviews with customers at ampm, Chevron and Circle K stores, was that shoppers in c-stores are on “auto-pilot” more than any other retail format.
“Shoppers are like robots in a c-store,” said Laura Lynn Freck, shopper insights manager for Red Bull North America, one of this year’s Beverage Retailing Summit speakers. “The majority choose the store on their path to or from someplace. Eighty percent said they went to the store ‘out of habit’ and the most frequent shoppers tended to be male and millennials.”
Half of the shoppers said they went to the c-store on a weekly basis, and 70 percent of all shoppers were on a beverage mission, according to the Red Bull research. Upon entering the store, 84 percent head straight for a specific product and 56 percent head straight to the register to pay.
“C-stores need to grab a shopper’s budget — the majority spend less than $5 — fast since most shop in under five minutes,” Freck said.
Energy drink customers are even quicker customers: 48 percent shop in under four minutes, compared to 37 percent of non-energy drink customers who shop in the same time.
What’s more, once inside the store, shoppers are bombarded with an average of 250 different messages on signs, counters, shelves and cooler doors. Despite all of this messaging, two-thirds of customers couldn’t recall any point-of-sale communication when queried about it after shopping.
Repetition is key, Freck advised. Messaging needs to be clean, consistent and repeated along the path to purchase.
She emphasized that beverages are as important as fuel to a c-store operator. In Red Bull’s research, customers were equally likely to say beverages or fuel were the main reason for their visit to the c-store. Even among those who said fuel was their primary purpose, 53 percent of them said they also purchased a drink.
Among all shoppers who make a second purchase, beverages and food are the most common grabs. “Drinks provide an easy opportunity to drive additional purchases,” Freck said.