Consumers’ desire for newer, healthier and more convenient drinks is fueling c-stores’ profits.
By Howard Riell, Associate Editor
Dual demand for healthy packaged beverages and variety still drives sales of teas and juices at convenience stores.
To take advantage of such momentum, attentive c-store owners and operators are paying heed to the trends, keeping top-selling items in stock and leaving some room for the next big thing.
Liquid teas remain strong with dollar sales growth of 10.5%, according to Wells Fargo Securities’ latest report covering Nielsen sales data, covering a four-week period ending Dec. 20, 2014.
In terms of refrigerated juices in the c-store channel, sales are up 2.3% in dollars versus a year ago, according Sherry Frey, vice president of New York City-based Nielsen’s perishables group.
“A couple of the growing flavors are lemonade, apple and orange juice, but there are declines in fruit drinks, citrus punches and grapefruit,” Frey said.
Within shelf-stable juices at the c-store, Nielsen analysts are seeing growth in ciders, clam juices, pineapple, cranberry, tropical and apple flavors. “(There are) declines in other flavors like grapefruit and lemonade and a mixed bag—dollars up, units down—in flavors like berry and fruit punch.”
Nielsen’s numbers also illustrate consumers’ gradual migration from carbonated beverages to teas and juices. “Soft drinks are up in dollar sales (1.8%), but only slightly down in c-stores,” Frey said.
How strong is the consumer desire for healthier teas and juices? According to Frey, demand is strong and on the upswing.
“That makes sense because healthier juices and teas are at the intersection of two key consumer trends: a desire to eat healthier and use food and beverages as medicine, and the continuing need for convenience,” Frey said. “In the traditional grocery channel, we see strong growth in beverages sold in the produce department, everything from fresh-squeezed juices to smoothies that could be meal replacements.”
Neither those health nor convenience trends appear at a point of stalling anytime soon.
“The greatest trend impacting beverage growth today is the demand for healthy refreshment,” said Gary Hemphill, managing director of research for Beverage Marketing Corp. in New York City. “Additionally, today’s consumers want variety.”
Ready-to-drink tea, in particular, is a growing segment, Hemphill said. “The category has performed well because of its healthy image, along with strong innovation in the category.”
On the other hand, he continued, overall juices are struggling a bit due to relatively high price points and high levels of sugar and calories in most of the products.
“There has been success at the super-premium end of the market with growth of products like Odwalla, Naked, Bolthouse (Farms) and others,” Hemphill said. “Additionally, a crop of new companies have emerged touting their technology to produce cold-pressed juices, which they claim produce the healthiest juice possible thanks to extraction methods that give the end product the highest level of vitamins and nutrients.”
The super-premium end for both teas and juices has performed the best in recent years, he added.
“It’s been a rapidly growing category for us over the last couple of the years and a category that we are expanding and adding all kinds of new and different beverages to,” said Kizer Couch, who along with his father Kent owns Stop and Go Mini Mart in Bend, Ore.
The c-store caters to health-conscious customer who is looking for natural products, such as kombucha tea, which is reportedly able to stimulate the immune system, prevent cancer, and improve digestion and liver function, as well as natural sodas.
“We have a whole door dedicated to those kinds of items next to the teas and juices. Kombucha is a tea, so it falls in pretty well,” Couch said. “That’s had really strong growth and it has a much higher ring and profit. It’s been a lot of fun for us when it comes to marketing and promoting it.”
Part of what is fueling the growth of juices and teas is societal, Couch is convinced.
“A lot of it is blowback against carbonated soft drinks. People wanting to get away from them as much as possible and they feel that the teas and juices have less sugar, or at least more natural sugar,” Couch said. “People are looking for variations, and there are so many different flavors out there with tea and juice.”
Couch said that 24-ounce cans of tea, specifically AriZona but also a few other brands, have been exceptionally popular. The c-store devotes five of its 17 cooler doors to teas and juices.
“Those sales have just been incredible sales for us,” he said. “We are always looking for another variation that is not pre-priced that we can substitute in there. But it has been a huge growth for us.”
Stop and Go has even found success with juices and teas that promise health benefits, like increased energy, a better memory and sounder sleep.
“We’ve gotten into all those,” said Couch. “Every time you see another of those variations in a category that keep it growing you jump onto it. Even if it’s not going to take off we want to try it out. Maybe it will take off. I think there is a component of that the people are looking for. That’s why people are increasingly choosing kombucha.”
Silvia Gibson, manager of retail operations at Southern Sandoval Investments’ Warrior Fuel 2 in Bernalillo, N.M., has also seen sales of teas and juices rise over the past several months. Gibson’s store includes a dozen cooler doors, three of which are devoted to juices and teas. A second, larger location has 22 doors, of which six are stocked with them. Among teas, Gold Peak has proven to be a strong seller. Its four flavors are priced at $2.19. Among juices, Simple Juice is the leading brand.
Warrior Fuel’s strategy for keeping its beverage assortment fresh is to pay close attention to requests from customers, and respond to each and every one. “If I have one customer requesting one product, then I bring it to the store,” said Gibson. “My goal is to get one customer at a time. If I can bring it, I do it.”
Going forward, Nielsen’s Frey said, interest in ‘fresher’ juices, smoothies and other beverages will continue. “Outside of the c-store channel, we’re seeing the emergence of cold-pressed juices,” Frey said.
To take the fullest advantage of the trends she and her colleagues have identified, Frey recommended that convenience retailers continue to evaluate their selections to ensure they have a range of products, including healthful juices.
“One suggestion would be to provide merchandising rotations near the checkout that are timed to time-of-day needs; for example, orange juice in the morning replaced with more of a ‘pick me up’ juice in the afternoon.”
Retailers, Hemphill is convinced, need to continue to offer a wide array of choices in cold vaults that appeal to consumer demands for both healthy refreshment and variety in beverage offerings.
“New products help to drive growth so it is important to add new brands to the mix frequently in place of products that do not sell as well.”