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02/17/2022

Beverage Demand at C-stores Remains Strong Despite Supply Chain Headwinds

Energy drink sales led the way in the fourth quarter, according to latest Beverage Bytes report.
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Shopping for beverages in a store

NEW YORK — Beverage sales were up as convenience stores closed out 2021 and energy drinks led the charge, according to a recent survey.

Goldman Sachs' Q4 Beverage Bytes found that overall beverage sales were up 8 percent year over year in the fourth quarter of 2021. The survey, which represents nearly 40,000 retail locations, also found that energy drinks experienced 15-percent growth.

"Importantly, retailers indicated that the strength across the energy drink category was driven in part by the large beverage incumbents — even as new brands continue to enter the category," said Bonnie Herzog, managing director at Goldman Sachs.

Beverage trends in the convenience channel during the last three months of 2021 continued to point to solid consumer demand, although it's increasingly clear that supply chain pressures are still a headwind, based on feedback from Goldman Sachs' retailer contacts, she added.

According to Herzog, retailers expect beverage sales growth to remain strong in 2022 with growth expected to be up 7 percent — on top of 9-percent growth in 2021. The outlook is a sign that consumer mobility is likely to continue to improve.

"Elsewhere, we note that retailers are broadly frustrated by out-of-stock challenges across both non-alcoholic and alcoholic beverages, although it appears that some of these pressures are easing across certain pockets of the industry — a key positive in our view even though out-of-stock pressures remained elevated," Herzog said.

According to Herzog, additional takeaways from Q4 Beverage Bytes include:

  • Retailers' outlook on the beverage category remains generally positive, although concerns related to labor, trucking, manufacturing and supply challenges, as well as the new COVID-19 variant, are weighing on sentiment.
  • Retailers expressed optimism about innovation across the broader beverage space in categories such as energy drinks, ready-to-drink (RTD) coffee, carbonated soft drinks, RTD cocktails and wellness/functional beverages, but many are seeing limited innovation in 2022 as manufacturers continue to deal with supply challenges.
  • Consumer product goods (CPG) companies broadly took pricing in 2021 and most retailers expect CPG companies to take more pricing in 2022 in response to mounting supply chain and inflationary pressures.
  • Overall, beer/flavored malt beverage sales growth accelerated in the fourth quarter to 8 percent in c-stores (vs. 1 percent in the third quarter), reflecting easing supply conditions.
  • Most retailers surveyed expect a shakeout of the hard seltzer category is coming or is already underway and expect a shakeout to ultimately benefit large incumbent brands.