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NEW YORK — Lower gas prices are having a positive effect on beverage sales, a key category for convenience stores.
The latest Wells Fargo Securities LLC Beverage Buzz survey found that non-alcoholic beverage trends remain very strong with 6.4-percent sales growth in the first quarter, and alcoholic beverage sales up a solid 5.5 percent.
Beverage Buzz surveyed beverage retailers representing more than 15,000 convenience store locations across the United States.
According to Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities, it appears lower gas prices continue to drive robust results. One retailer said "no doubt that consumers had more money to spend and indulge," which resulted in "a lot of trade-up as they could 'afford' the premium brands" as well as increases in basket size and fuel purchased per trip.
"We continue to believe the risk/reward for both beverage manufacturers and c-stores remains favorable given the benefit from lower gas prices/higher consumer disposable income and relatively benign weather," Herzog said.
Looking to the rest of this year, retailers project mid-single-digit beverage sales to continue in 2015, with one retailer projecting "this will be a banner year for the beverage industry."
As for specific brands, Monster Energy Corp.'s c-store volume grew 9 percent in the first quarter with minimal net retail pricing growth, according to the survey. However, several retailers continue to raise concerns about the pending transition in distribution in terms of out-of-stocks and delivery issues.
In addition, several retailers have taken advantage of favorable buy-in options from legacy Anheuser-Busch distributors as they deplete their Monster inventory, which could result in retailer destocking next quarter, Herzog explained.
Beverage Buzz results also indicate that The Coca-Cola Co.'s average retail price growth was up 2.5 percent and volumes were up 4.1 percent in the first quarter — above results posted for the past four quarters, according to Herzog, who noted "retailers consistently called out smartwater as a leading contributor to growth, along with new package innovation."
As for PepsiCo Inc., the survey found that volumes were up 4.1 percent with average retail prices for Pepsi beverage products up 2.2 percent in the quarter. Similar to last quarter, Gatorade sales were very strong in the quarter with one retailer suggesting "Gatorade is one of the fastest growing brands we have today."
Based on the latest Beverage Buzz results, Wells Fargo Securities also estimated that Dr Pepper Snapple Group's retail volume was up 0.6 percent and its prices were up 0.7 percent. These results, Herzog noted, place the beverage company "at the bottom of its peers."
She said many retailers believe Dr Pepper Snapple's "c-store focus has declined," though most are generally encouraged by the company's Allied brand performance, including Vita Coco and Bai5.