Beverage manufacturers Using “Everything Must Go” pricing to drive volumes, reports Wells Fargo.
Wells Fargo has reported that c-store non-alcoholic beverages were up +3% in the third quarter (Q3) of 2013, with Energy strength offsetting weakness in other catgories.
Wells Fargo recently conducted a survey of beverage retailers representing more than 15,000 C-Store locations across the U.S. to get a sense of Q3 2013 trends. This “Beverage Buzz” survey, showed non-alcoholic beverage trends improved during Q3, increasing +2.6% y/y.
“While we are generally encouraged by the improving sequential sales in Q3, we think this was almost entirely due to strength in Energy, which offset weakness in virtually every other category. We therefore believe U.S. beverage volumes may be under pressure for all the leading manufacturers and are cautious about Q3 and FY13 results,” the Wells Fargo report noted.
The survey results further suggested that the current beverage pricing format is being kept artificially low to counteract weak volumes. “We believe the combination of aggressive pricing on larger formats to drive volume and the proliferation of package sizes to drive trial has left the manufacturers in a challenged position to drive volume growth while still creating value to consumers and maximizing profitability,” Wells Fargo reported. “This in turn has led to underpricing in 20-ounce CSDs, with our retail contacts believing that consumers would be willing to pay 10% more. Bottom line, manufacturers’ aggressive pricing appears below what the market will bear to fight particularly weak volumes.”