Beverage buzz: C-store shoppers ‘treating themselves’ and trading up on back of lower gas prices, says Wells Fargo

By Elaine Watson

- Last updated on GMT

Coca-Cola-backed Glaceau Smartwater has been a hit with many c-store retailers
Coca-Cola-backed Glaceau Smartwater has been a hit with many c-store retailers

Related tags Retailing Convenience store

The last quarter of 2014 was pretty positive (+5.9%) for sales of non-alcoholic beverages in US convenience stores as shoppers spent cash they saved at the pumps on ‘treating themselves’ and ‘trading up’, according to Wells Fargo.

Analysts at the firm, which recently surveyed beverage retailers representing more than 15,000 c-store locations across the US for its Beverage Buzz report, said: “100% of our contacts indicated that lower gas prices had a favorable impact on sales relative to last year…

“The most notable impact… is consumers “treating themselves” and trading up to higher priced premium items… without necessarily increasing frequency of visit (traffic) or quantity of items purchased (basket size) in many stores.”

Sparkling Ice still a winner; Smartwater, Vita Coco and Bai5 doing well

But which brands are winning and losing in c-stores, and which new products are c-store retailers excited about?

In general, c-store retailers said energy, iced tea, and bottled water categories led sales growth in Q4, with Sparkling Ice, Smartwater, Vita Coco and Bai5 singled out for praise.

According to Wells Fargo: “A big winner appears to be Smartwater, which one retailer suggested ‘grew within our store by over 120% vs same stores in the previous year. The brand went from #4th ranked (sales dollars ranking) water brand to #1 by the end of Q4.”

Dr Pepper brand declining

However, there were mixed feelings about Coca-Cola’s new products Fairlife lactose-free milk and Coca-Cola Life (in green cans, sweetened with stevia and sugar), and not much positive to say about Dr Pepper Snapple Group’s core brands.

While retailers are generally encouraged by DPS’s allied brand performance, including Vita Coco and Bai5, results for core brands have been less favorable, with one retailer reducing DPSG cooler space having ‘wiped out the entire ​[low calorie Dr Pepper] TEN line-up’.”

C-store retailer on Fairlife milk: ‘I do feel this is a great product and at some point will be a strong brand’

Views on Coca-Cola-backed/distributed Fairlife high-protein, lactose-free, ultra-filtered milk​ were mixed, with some retailers feeling it was a strong brand with real potential but others feeling cautious about allocating space to it in stores at the moment.

One retailer said: “This eventually could be a more than $1bn brand, but that’s a long way off.

Another added: “Millennials, health centric, skews more female than I originally thought,”​ while another said it doubted Fairlife would be a winner, adding: “Dairy has been in a severe decline in the last few years. For those that still drink milk I don't think this will resonate with them. It may still do well, if Coke leverages it into their schools, hospital, food service accounts.”

However, one retailer was much more positive, provided that the brand owner “communicates the value proposition well and invests to build awareness and trial… They have all the right consumer valued characteristics with this product.”

Some are sitting on the fence, meanwhile: “I have seen the Fairlife milk, we are not bringing it into our 2015 sets… In the convenience store world, not sure if we would benefit by selling a premium milk product. I do feel this is a great product and at some point will be a strong brand. If we see it doing well in rest ofmarket, we will be a fast follower.”

C-store retailers are on the fence over Fairlife ultra-filtered milk, with some excited about its potential but others more skeptical

Coca-Cola Life: Too early to say, but heading in right direction?

Similarly, feelings about Coca-Cola Life - which 40% of retailers surveyed had trialed in Q4 - varied a lot, with one retailer saying it was “not setting the world on fire” ​and was a “cannibalization product” ​and another saying it was “doing extremely well”.

Others were on the fence, with one adding: “Too early in process to get a true read but heading in right direction, thus far.”

Coca-Cola-Life landcape
share a coke

Finally, while the ‘Share a Coke’ initiative had been hugely successful in the c-store space, Coca-Cola’s “strategic push towards smaller packs is generally not being well received by retailers, who suggested, ‘they do not represent a value to the consumer’ and are ‘in direct conflict with what retailers want’ given they have “lower sales $, penny profit, and margin %,” ​said Wells Fargo.

Fairlife CEO Steve Jones is speaking at our Beverage Innovation Summit​ tomorrow at 11.30am eastern time. Register HERE​ to listen in (it's free!)

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