Weather, Payroll Taxes Take Toll on C-store Beverage Sales

NEW YORK -- The latest Beverage Buzz survey found that the first quarter was not kind to non-alcoholic beverage sales in convenience stores.

According to the Wells Fargo Securities LLC report, which surveys beverage retailers representing more than 10,000 c-store locations across the United States, non-alcoholic beverage sales in the convenience channel dipped 2.7 percent year over year. The survey pointed to the cold weather and higher payroll taxes for driving store traffic down.

Specifically, 66 percent of the respondents indicated sales of non-alcoholic beverages declines year over year in the first quarter, vs. 16 percent in the fourth quarter. No respondents indicated a drop in sales in the third quarter, said Bonnie Herzog, senior managing director of tobacco, beverage and consumer research at Wells Fargo Securities.

"Given the boost c-stores typically provide, we think beverage companies' North American results could be pressured," she explained.

To make up for weaker volumes, beverage manufacturers increased prices slightly but the move failed to fully offset the effects of the weather, payroll taxes and gas prices, Herzog said.

"With one of the coldest March's on record, payroll tax changes reducing disposable income, and persistently high gas prices, volumes were negatively impacted in the c-store channel," she noted. "As a result, higher promotions were used to help drive volume, with 83 percent of respondents indicating increased promotions in the first quarter year over year."

Herzog added she expects improved second and third quarters as a result of heavy promotions to compensate for the first quarter numbers.

Broken out to specific segments, the survey found that energy drinks captured the most shelf space growth in convenience stores, up on average 11 percent year over year. In addition, teas and flavored carbonated soft drinks (CSDs) performed well, up 6 percent and 3 percent respectively, Herzog said.

However, CSDs are expected to remain weak in 2013 despite continued improvements in momentum of flavors, she added.