C-stores warm up to the growing demand for popular energy drinks by infusing their store selections with top sellers.
By Anne Baye Ericksen, Contributing Editor
As soon as the temperatures outside signaled the onset of summer, Terry Messmer, sales manager for Tri Star Energy, increased in-store signage promotions for his top-sellers in the energy drink category.
The company, based in Nashville, Tenn., operates 91 Twice Daily and Tri Star convenience store locations throughout the state.
“Usually, to start off summer, we put a big push on the top brands in energy. Starting in May, we had a promotion for the 12-ounce Red Bull Summer Edition flavor, which is coconut berry this year,” said Messmer. “We’ve been pushing it with signage outside, by the cooler and on the sales floor.”
Red Bull this past April released the fruity flavor, distinguished by a 12-ounce white can, on sale until Labor Day.
For the convenience store industry, summer traditionally brings expectations of greater foot traffic and in-store sales, especially for cold packaged and fountain beverages. This year, expectations for a boost in energy drink purchases have been set higher than usual due in part to a lackluster performance over the past 12 to 18 months.
“Energy drinks experienced modest growth in 2017, while energy shots have seen sales slip somewhat of late,” said Gary Hemphill, managing director of research for the Beverage Marketing Corp.
“Shots are struggling, but that may be because there’s not really much excitement with the category lately,” agreed Messmer. “The introduction of new 5-hour Energy shot flavors and the media exposure has slowed a bit.”
According to Information Resources Inc. (IRI), a Chicago-based market research firm, 5-hour Energy SS Energy Shot maintains its market dominance with nearly 93% of the dollar share.
So far in 2018, consumers seem to be reaching for cans of energy drinks with more frequency. In fact, when compared to carbonated soft drinks (CSD), caffeinated beverages, including coffee and tea, earned more in convenience store sales for the past 52 weeks: CSD cashed in $7.8 billion versus $8.3 billion for energy drinks, according to Wells Fargo Securities data.
“The energy drink category was up slightly in 2017, but has been up high single digits since December 2017,” said David Hallman, senior category manager, packaged beverages, for Kum & Go L.C. The Des Moines, Iowa-based c-store chain owns and operates more than 400 stores in 11 Midwestern states.
As the months ticked closer to summer, the numbers continued to pick up momentum. For the four weeks ending May 19, 2018, energy drinks in all retail channels posted 7% growth in sales per Nielsen data, reported by Wells Fargo Securities. In c-stores, energy drink sales rose 6.8% in the same four weeks. However, 12- and 52-week measurements still reveal a lingering effect from last year’s stale sales: 4.8% and 3.3% increases, respectively.
According to Nielsen, sales of Monster jumped more than 17% for the same four weeks, bringing its 12-week activity up to 14.1%.
Although Red Bull leads Monster in total dollar share, according to data from IRI, sales remained weak. For the four weeks ending May 19, sales grew 2%. Meanwhile, Rockstar lost ground, declining 6.6% in dollar sales.
Conversely, the energy drink mix segment recorded an impressive 23.85% rise in dollar sales in a year-to-year comparison ending April 22, per IRI. Several brands reported substantial unit sales gains, including Crystal Light’s three offerings: Energy on the Go (147.47%), Pure SS Energy (589.23%) and SS Energy (39.26%). Another big performer was Vital 4U SS Energy Drink Mix (42.90%).
While late spring sales figures show promise, enthusiasm is tempered with concern regarding rising prices at the fuel pumps. The U.S. Energy Administration anticipates the inflated fuel costs will carry on throughout the summer.
When Wells Fargo Securities queried 65,000 c-store owners and operators about the effects the higher gas prices have had on both cigarette and beverage sales, nearly two-thirds thought the situation could dissuade customers from buying energy drinks, especially if Monster hikes its prices, too.
Then there’s the effect on basket-item purchases if fuel customers don’t come inside for energy drinks. Common companion items include cigarettes, roller-grill products, soft drinks and even other brands of energy drinks.
“Performance of the c-store channel has a significant impact on the performance of the category since about half of the energy drink volume goes through that channel,” said Hemphill. “That’s because energy drink sales remain primarily driven by impulse.”
So how do c-store managers and operators support and expand the energy drink category’s growth despite a possible negative influence of higher gas prices? For many, the answer is to increase customer awareness through multiple merchandising efforts.
“Summer months are a key selling season for non-alcoholic (NA) beverages, [and] energy is the largest category within NA beverages,” said Dragana Ilic, NA beverage buyer for Army & Air Force Exchange Services (AAFES). Because the energy category is the largest in NA beverages, their cooler space/presence has increased as a result of the increased sales.” AAFES serves military personnel and their families with operations in all 50 states as well as U.S. military facilities abroad.
“Vendors/distributors provide our stores with a vast variety of promotional materials ranging from banners, pallet wraps, window clings, shelf danglers, and even additional coolers to highlight new item launches or featured promotions,” Ilic said.
While Hallman hasn’t allotted greater cooler space for cold energy drinks in the Kum & Go stores, he has expanded marketing signage, including pump-topper clings.
“We also ran an Energy Club where consumers got their 10th free when they bought nine. The signage and Club were key contributors to the growth of the energy drinks in 2018,” Hallman said.
In addition to traditional merchandising and promotional strategies, Tri Star engages social media channels to reach customers even before they arrive at the stores.
The retail chain also uses the medium to advertise local events and sponsorships.
“We had success with a consumer giveaway that we tied in with an energy drink partner and gave the prize away thru social media. We also look to promote and execute programs with energy drinks that sponsor local events where we can engage our consumers and give them an opportunity to win prizes and other experiences through our social media,” said Messmer.