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    Labor Day Caps Off Strong Summer for Beverage Sales

    Lower gas prices, good weather help boost the category.

    NEW YORK — Gas prices, promotions and good weather had cash registers ringing with beverage sales during the unofficial end of summer.

    According to Wells Fargo Securities LLC's Beverage Buzz survey, beverage sales in the convenience channel were up 6 percent for Labor Day 2015 vs. 4 percent for Labor Day 2014.

    Strong holiday weekend results were driven partly by lower gas prices, which were down $1 per gallon on average vs. last year's holiday. The decrease drove increased traffic and inside sales including up-trading to premium brands, a trend that benefited beverages, snacks and premium tobacco, explained Bonnie Herzog, managing director, beverage, tobacco and consumer research at Wells Fargo Securities.

    In addition, fewer promotions vs. last year, a strong performance from energy drinks and improved weather conditions also contributed to boosted beverage sales, she said. 

    "Given the strong 4th of July (plus 5 percent) and Labor Day (plus 6 percent) holiday results, we are encouraged that beverage trends have accelerated through the key summer season which should help drive solid third-quarter results for beverage manufacturers," Herzog said.

    On a brand level, The Coca-Cola Co. and PepsiCo Inc. products outperformed Dr Pepper Snapple Group. Red Bull also continues to beat Monster Energy Corp. so far this quarter, she said.

    Wells Fargo Securities also projects alcoholic beverages to be up 4 percent in third quarter, led by crafts and imports.

    Beverage Buzz survey results also point to continued disruptions and service issues for Monster deliveries following its transition to Coca-Cola's system; however, it appears issues are being addressed and broadly improving. 

    According to Herzog, retailers reported 2.5 percent out of stocks on average currently vs. 2.9 percent at the beginning of July given they are now receiving 1.4 deliveries a week vs. 1.3 in early July. 

    "We are broadly encouraged by the improvements reported by retailers and believe the 'much improved' distribution will be directly reflected in sequentially improved results for Monster," she said. "Importantly, with inventory loading ahead of Monster price increases in September and limited negative impact on retail volumes purchased following the price increase according to retailers, we believe third-quarter results should improve sequentially from the second quarter." 

    Interestingly, she noted, several retailers believe that Coca-Cola's partnership with Monster will benefit Coca-Cola more than Monster, at least in the near term. 

    While Monster results have been weighed down by distribution issues including out-of-stocks and lower service levels, retailers generally believe that Coca-Cola has been a significant beneficiary of the partnership by gaining distribution of Monster products to improve domestic volume growth; directly benefiting from Monster price increases; and leveraging Monster distribution in negotiations with retailers "to increase space in other categories in the cold vault that they do not have strong brands currently in," according to Herzog.

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