Energy and non-carbonated drink sales drive the non-alcoholic beverage category at convenience stores.
Wells Fargo Securities LLC’s most recent “Beverage Buzz” survey that polls more than 15,000 c-store locations across the nation found that non-alcoholic beverage sales climbed 6% in the second quarter of 2015, buoyed by the strength in the energy drinks and non-carbonated beverage segments.
“Non-alcoholic beverage trends remain very strong with +5.9% year-over-year sales growth projected, while alcoholic beverage sales decelerated slightly from Q1 to +4.1% growth,” said Bonnie Herzog, a senior analyst at Wells Fargo. “Non-alcoholic beverage growth was driven by ongoing strength in Energy (led by Red Bull) and bottled water/enhanced waters/sports drinks, iced teas and craft beers.”
She noted that improved weather and lower gas prices have driven solid growth in foot traffic and contributed to strong in-store sales for both c-stores and beverage manufacturers.
“C-stores continue to benefit from macro tailwinds, and we remain broadly encouraged by Q2 results for beverage manufacturers. Coca-cola appears to be well positioned to perform well in Q2, while our concerns about Monster’s Q2 results remain. Based on our survey, we estimate Monster’s c-store sales were up 8% in Q2 2015, a deceleration from last quarter. It appears that distribution issues weighed on results…”
Some additional takeaways from Wells Fargo included:
(1) Retailers are generally cautious on the impact of M100, Monster’s new mid-calorie product;
(2) Over 50% of retailers expect to pass along the full 6% price increase Monster will implement on its products on Aug. 30, 2015; however some fear a short-term negative volume impact as a result;
(3) about 35% of retailers suggested they would buy additional volume ahead of the planned price increase, which Wells Fargo believes might have a favorable impact on Q3 volumes;
(4) Retailers reported 2.8% average out of stocks for Monster SKUs, in line with results from our Memorial Day survey, suggesting distribution issues may have stabilized more recently; and
(5) Retailers project the energy category will grow 10% for 2015, with Red Bull’s 9% growth outperforming Monster’s projected 8% growth.
“Overall, we continue to expect Monster’s second half results should improve,” Herzog said.