Thirst Quenchers

Packaged beverages remain key for c-stores as innovation beckons consumers.

Thirst Quenchers

May 2024   minute read

By: Terri Allan

If there’s one thing universally available in convenience stores, it’s packaged beverages. According to Emma Tainter, research analyst at NACS, “99.9% of convenience stores sell packaged beverages.” As a result, it’s hard to think of a more vitally important category to the channel than the one that drives in-store traffic, often leads to bigger shopper baskets and encourages c-store loyalty. Indeed, Tainter said, “packaged beverages have been a top-performing category in terms of sales and gross profit growth over the last 10 years.” In 2022 alone, packaged beverages comprised 17.2% of in-store sales and 21% of in-store gross margin.

And packaged beverages’ strength continued in 2023. Through November, per store, per month sales outperformed those of the same period in 2022, and at press time the 2023 numbers were likely to surpass the year-earlier average of $37,500 per store, per month. “Packaged beverages is one of the few categories that typically remains steady year over year,” explained Tainter, noting that the segment isn’t impacted by time-of-day variants, with products like carbonated soft drinks (CSDs) and energy drinks selling well throughout the day.

Bryan Santee, chief commercial officer at PepsiCo Beverages North America, said that a resurgence in business and leisure travel in 2023 and consumers spending more time away from home aided the category. “People shopped more outside of traditional grocery stores, and that raised the bar for convenience stores as consumers looked for better-for-you options and new flavors,” he said.

While there are eight packaged beverage subcategories, the two biggest—CSDs and energy drinks—combine for more than half of total category sales. The two subcategories are running “neck and neck” for the lead based on currently available per store, per month sales in 2023, Tainter said, each accounting for approximately $10,500 in average sales.

Energy Drinks Surge

Energy drinks, driven by new brands and innovation within established labels, continue to gain ground in c-stores. Through November, per store, per month sales of energy drinks easily outperformed those of the same 2022 period, according to NACS CSX data. Tony Guilfoyle, executive vice president, sales, North America, at Celsius Holdings, reported that dollar sales of energy drinks surged 15% in c-stores last year. According to Guilfoyle, “Celsius was the No. 1 driver,” accounting for 39% of the growth, as sales of the brand skyrocketed 173%.

Celsius is now distributed by PepsiCo, a move that Guilfoyle said has enabled national coverage and placement in independent c-store accounts. Earlier this year, 7-Eleven named Celsius its 2023 non-alcohol supplier of the year.

C-store operators concur that energy drinks are thriving. At Wesco stores in Michigan, dollar sales of energy drinks jumped 27% last year, Jason Grimm, category manager, packaged beverage, reported. Similarly, at TXB stores in Texas, “energy drinks by far were one of the biggest trends as new brands grew dramatically,” Ben Hoffmeyer, vice president, marketing and merchandising, said.

“We’re betting big on category-specific growth in the water, energy and sports segments.”

In addition to Celsius, Hoffmeyer pointed to upstart brands like Prime, C4, Ghost, and Alani Nu as those gaining share within the energy subcategory. Unique flavors are also trending, Hoffmeyer said, as are co-branded offerings, like C4 Skittles, Ghost Warheads and Ghost Sour Patch Kids. Meanwhile at Tank-N-Tummy c-store in Cleveland, Oklahoma, energy stalwarts like Red Bull, Monster and Rockstar are the overall heavy lifters in the cold box, according to owner DeAnn Tracy, as consumption occasions expand. “People drink energy drinks in the morning, and then come back and drink them in the afternoon,” the retailer said.

Through November, per store, per month sales of CSDs were also outperforming year-earlier trends. Perhaps the biggest trend within CSDs is the growing popularity of zero-sugar beverages, and marketers have responded in kind. Last year, PepsiCo reformulated Pepsi Zero Sugar, and according to Santee, the new version is “outpacing the old formula across the board.” Other zero sugar options from the company include Mtn Dew Pitch Black and Starry. At TXB, Hoffmeyer said, “zero sugar has become a staple requirement on new items,” while “indulgent” soft drinks like Dr Pepper Strawberries & Cream have been well received too.

Keeping Things Fresh

Innovation has long been instrumental to cold-box sales and packaged beverage marketers continue to churn out new offerings. Earlier this year, The Coca-Cola Company launched Coca-Cola Spiced and Coca-Cola Spiced Zero Sugar, its first new permanent flavor in years. New and relaunched CSDs from PepsiCo, meanwhile, include Starry and Pepsi Wild Cherry, along with the recent national rollout of Mtn Dew Baja Blast. Starry is particularly resonating with Gen Z consumers, said Santee, pointing to their high interest in lemon-lime flavors. Moreover, the recent relaunch of Pepsi Wild Cherry was “designed with millennial females in mind, as they’re driving flavored cola growth,” the executive continued.

Within the energy subcategory, “we’re seeing a shift from traditional energy drink flavors to fruity, confectionary flavors, or more distinct flavor profiles,” Guilfoyle said. Seasonal and limited-time-only flavors are also making inroads. “Alani Nu’s Witch’s Brew and Red Bull’s Winter Edition in pear cinnamon had strong sales as guests gravitated to new LTO flavors,” Hoffmeyer reported.

Packaged-beverage innovation has also included a number of crossover drinks, beverages that don’t necessarily fit snugly in any one subcategory, as well as the expansion of established brands into new subcategories. PepsiCo, for example, recently added the energy drink Fast Twitch from Gatorade and Gatorade water. “We’re betting big on category-specific growth in the water, energy and sports segments,” said Santee. Gatorade water, which rolled out in c-stores in the first quarter of 2024, is “the first-ever unflavored water to support all-day hydration for active consumers and is electrolyte infused for a refreshing and crisp taste,” Santee said. With the new entries, he added, “We saw more people turning to convenience stores for Gatorade and snack purchases in 2023, highlighting how these innovations can fuel growth for retailers.” Rockstar energy drink, meanwhile, has crossed into the functional energy space with the recent introduction of Rockstar Focus, claiming an “energy and mental boost.”

Better-for-you offerings continue to gain share in the cold vault, whether from established players or newcomers. According to Santee, PepsiCo is working to reduce added sugars across its beverage portfolio with the goal of shifting a “significant portion” of its beverage portfolio toward lower added-sugar levels.

“We’ve set a goal to achieve 100 calories or fewer from added sugars per 12 oz serving in at least 67% of our beverage portfolio by 2025,” he revealed, with brands like Pepsi Zero Sugar and Starry Zero contributing to the mission. At Celsius, Guilfoyle said that the brand’s better-for-you attributes are “critical” to its success. “Consumers are looking for something different, and Celsius’s innovation and sugar-free offerings answer the call,” he said.

“Zero sugar has become a staple requirement on new items.”

Functional sodas are increasingly appearing on c-store shelves. Olipop, for example, is now available in most Casey’s, Kum & Go and Plaid Pantry stores, as well as West Coast locations of 7-Eleven, according to Andrew Steele, vice president of sales, c-store and drug, at Olipop Inc. He added that expansion with an “iconic East Coast c-store” was planned at press time. “As consumers are increasingly searching for better-for-you options across the board, our presence in c-stores has been very well received,” Steele said. “This positive response has influenced our strategy to continue expanding into additional convenience retailers and locations.” With sodas one of the most popular items in c-stores, “we’re excited to provide a healthier option that doesn’t compromise on taste for shoppers,” Steele said.

At Wesco stores, “Customers are definitely looking for better-for-you beverages,” noted Grimm. As a result, key brands like Celsius and Gatorlyte are registering double- and even triple-digit sales gains, the retailer said. Similarly, Hoffmeyer noted that Celsius is gaining share at TXB, while enhanced functional waters like Bai and Propel have also experienced strong growth.

Promotional Aids

With packaged beverages so key to virtually all c-stores, promotional and merchandising support are imperative to drive in-store traffic and build bigger baskets. “The shopper journey begins well before customers arrive at the store, so omnichannel marketing is one of the biggest ways to boost sales,” said Santee. “Starting with digital communications that drive foot traffic to signage in and around the store—from the curb to cold vault—there are many ways to elevate the customer experience and expand on touchpoints along the path to purchase.”

At Wesco, loyalty members can often save at the pump via special offers on packaged beverages, Grimm noted. Displays and secondary placements, meanwhile, are successful tools at Tank-N-Tummy and TXB, Tracy and Hoffmeyer said. “We have different points of interruption beyond just the cooler vault,” the Texas retailer explained, such as floor coolers near the checkout area featuring hydration drinks, water, energy drinks and teas.

“Energy drinks by far were one of the biggest trends as new brands grew dramatically.”

But perhaps the most effective sales tactics for packaged beverages, the retailers agreed, are deals on multiples. With hot weather in Texas in 2023, Hoffmeyer said that TXB “experienced more guests taking advantage of multibuy promotional offers such as ‘buy 2, get 1 free’ or ‘2-for’ buys to stretch their purchasing power.”

Multibuy promotions, along with the chain’s line of private-label drinks, are expected to continue to drive sales of packaged beverages at TXB this year, Hoffmeyer noted. Innovation will also remain a factor for the category. Led by energy and hydration drinks, “We expect to see the continued blurring of lines across subcategories,” he said.

Terri Allan

Terri Allan

Terri Allan is a New Jersey-based freelance writer. She can be reached at [email protected].

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