While inflation has been an issue in all categories, including packaged beverages, the category is nevertheless the No. 2 in-store gross profit contributor behind prepared food for the convenience industry. And as a leading motivator for in-store visits and a top basket builder, the non-alcoholic section of the cold vault offers plenty of opportunity regardless of the pricing environment.

“Following a dip in 2020 and rebound in 2021, packaged beverages continued growth in 2022,” said Jayme Gough, NACS research manager. But, as with virtually all categories, “the impact of pricing and inflation played a role in the performance of packaged beverages last year,” she added. 

According to the NACS State of the Industry Report of 2022 Data, sales of packaged beverages in c-stores jumped 10.1% in 2022. “NACS generated an inflation model which indicated that 7.9% of merchandise sales in 2022 were price driven, so outpacing that figure means true sales growth for the category,” Gough said. 

“We’re seeing an increase in packaged beverage sales,” remarked Luke Gardner, co-owner of Colorado-based Miltons c-store chain, with three locations. “Even with inflation, these products are still selling. Consumers are habit-based.” Stephanie Johnson, manager of Pit Stop Express in Dorton, Kentucky, reported that customers “are still buying packaged beverages,” with all packaged beverage subcategories showing strength. While energy drinks are the store’s top sellers, Johnson said, “there aren’t any underperforming subcategories in the cold vault.”

Double-Digit Gains

Indeed, nearly all packaged beverage subcategories posted increases in sales and gross profit dollars in 2022, Gough said, including the leading segments of carbonated soft drinks, energy drinks and sports drinks. Energy, sports and enhanced waters were particularly strong and enjoyed double-digit sales and gross profit gains during the period.

Energy drink sales in c-stores were aided by expanded household penetration last year, said Brenda Jones, senior vice president, business development and e-commerce at Zoa Energy. Zoa—co-founded by celebrity Dwayne “The Rock” Johnson—contributed to that expansion as the brand increased distribution in 2022. “Zoa sales are driving category incrementality with approximately one-third of Zoa’s national sales growth coming from new consumers in the energy category,” Jones said. Earlier this year, the brand was “reinvigorated” with a new 12-ounce can and marketing campaign.

The C4 energy brand is also likely to gain a greater presence in c-stores, thanks to Keurig Dr Pepper’s recent stake in its parent company. Kevin Martello, vice president of foodservice solutions and industry relations, convenience retail at Keurig Dr Pepper, said transitioning C4 to the company’s distribution network began earlier this year, and “c-stores continue to be priority outlets and should expect continued rapid expansion of C4 across the market,” as well as additional innovation for the product. Keurig Dr Pepper’s Core Hydration enhanced water, meanwhile, is resonating with Gen Z consumers, Martello added, helping the company strengthen its share position in the segment.

Energy drinks are going from strength to strength, c-store operators said. “Every day more and more people are doing energy drinks,” stated Chris Reitman, owner of Mighty Moose convenience store in Keene, New Hampshire, where the energy segment leads all other packaged beverages in gross revenue and is within striking distance of overtaking carbonated soft drinks on a volume basis. Increasingly, Mighty Moose customers are opting for energy drinks over coffee. “We sell energy drinks throughout the day, but most are sold before noon,” Reitman said. 

Nathan Arnold, director of marketing at Englefield Oil Company, operator of 120 Duchess c-stores in Ohio and West Virginia, where packaged beverage sales jumped 13% last year, agreed that “more consumers are seeking caffeine in their drinks.” Marketers have responded with products like Fast Twitch, Gatorade’s first-ever caffeinated energy drink, with each bottle containing 200 milligrams of caffeine, plus electrolytes and B vitamins. According to Kate Garner, senior vice president, demand accelerator, at PepsiCo, Fast Twitch, introduced earlier this year, is already seeing “great success.”

Health and Wellness Spillover

In addition to the blurring of subcategory lines, other trends within packaged beverages today include spillover from health and wellness considerations, new flavors and other innovations. “Health and wellness are macrotrends that were really solidified during the pandemic as consumers committed to self-care in a way that penetrated all aspects of their lives, including food and beverage,” said Jones. “Due to this, we’re seeing Zoa and other better-for-you energy drinks expanding the category and bringing in new consumers.” PepsiCo, meanwhile, is leaning into the zero-sugar segment, and earlier this year rolled out a revised Pepsi Zero Sugar. “Zero sugar is a key growth area for our brands as demand grows for great-tasting zero-sugar cola options,” said Garner. 

Compelling new flavors always have a place in the cold box, retailers and suppliers said. “We see consumers seeking variety in packaged beverages, from new flavors that deliver unique experiences to new twists on classic favorites,” said Martello. Flavor innovations such as Dr Pepper Strawberries & Cream and Sunkist Watermelon Lemonade launched in the first quarter of 2023 and already have had a positive reception from consumers, the beverage executive noted. 

Meanwhile, at PepsiCo, “our innovations are rooted in consumer insights,” Garner said, “and one trend we’re having fun with is an increased desire for products rooted in nostalgia.” This summer, MTN DEW launched the limited-edition Summer Freeze, a combination of the soda’s classic taste and red, white and blue ice pop flavors.

Major packaged beverage brands pulled back on innovation during the pandemic, Arnold from Duchess stores notes, “but we’re seeing that is starting to change.” He and Gough applaud the innovations. “Packaged beverages are one of the biggest sales and profit centers for c-stores,” Gough remarked. “It’s important to stay on the lookout for innovation and any fun they can bring to the category.”

Basket Builder

According to the 2022 NACS Convenience Voices survey, packaged beverages are the most common impulse purchase among in-store categories, with a 19.5% share. Moreover, packaged beverage purchases often include other items in the basket, most frequently salty snacks and candy.

With the category offering big profit and basket-building opportunities, convenience stores often turn to effective merchandising tactics to further drive sales of packaged beverages. Pit Stop Express, Miltons and Mighty Moose rely on two-for deals to increase volume sales, particularly with consumers still reeling from inflation on a constant search for deals. “It’s our most successful weapon,” said Mighty Moose owner Reitman. 

Arnold credits Duchess’s “deep dive into our consumers’ behavior by analyzing loyalty data” for enabling the chain to offer promotions that “our customers want.” For example, “we always strive to be first to market with a product,” he explained, and the chain promotes those products through features such as an “innovation shelf.” 

Martello, Jones and Garner encourage retailers to tie in packaged beverages to bundled offers. “Marketing programs that incentivize food bundling are a great way to engage shoppers across dayparts, with not only packaged beverages but also salty snacks, candy and freshly prepared categories,” remarked Martello, the Keurig Dr Pepper executive. Secondary placements of packaged beverages can also serve as points of inspiration for shoppers, he said.

With continued concerns that the current inflationary environment will remain throughout the year, the packaged beverage category contribution to c-store basket building and profitability can’t be overlooked.