While labor, supply and fuel concerns abound for convenience store operators, the cold vault has been a saving grace. Packaged beverages, specifically, are firing on all cylinders and serve as a key profit center and trip driver for retailers.

“It’s been a great recovery,” said Jayme Gough, NACS research manager, of packaged beverages’ performance last year. Following subdued trends for much of 2020, conditions began to shift on a monthly basis starting in March 2021, she reported, “and continued throughout the year.” As a result, average store sales of packaged beverages jumped higher than in 2020, as well as 2019 and 2018.

“Trips came back a little bit last year,” Gough explained of the improvement, “although they’re still not back to 2019 levels. And all subcategories registered increases in average store sales and gross profits, although some performances were better than others.”

Indeed, Reilly Robinson Musser, vice president of marketing and merchandising at Robinson Oil Corp., reported that package beverage sales are up 15% at the company’s Rotten Robbie stores in California. “All categories are up for us,” she said, with energy drinks, carbonated soft drinks and bottled waters as top performers. 

According to the NACS State of the Industry Report of 2021 Data, packaged beverage sales surged 14.4% year over year to $33,683 per store, per month, from $29,439. That followed just small gains for the category in both 2020 and 2019. And the category continues to be a profitable one for retailers. “Packaged beverages are the most profitable of all categories for c-stores,” Gough remarked, accounting for 23.3% of inside gross margin contribution last year. “A lot of in-store profit comes from packaged beverages,” Gough said. Heat map data from PDI Insights Cloud indicated that 7 a.m. is the busiest time for packaged beverage sales in c-stores. “That’s when people come in for their caffeine,” Gough explained, “whether it’s energy drinks, RTD coffee drinks or CSDs.”

FULL OF ENERGY

Energy drinks grew its lead as the top packaged beverages subcategory (accounting for 26.8% of total category sales in 2021) with a remarkable average-store sales gain of 14.4% last year. Gross profit jumped 19.9%. Continued strong demand for established energy drinks propelled the segment last year, while new products and flavors also received strong response from consumers. Gough noted that energy drinks, among other beverage segments, are being impacted by a “blurring” of subcategories, such as with Starbucks Baya, a sparkling energy drink powered by caffeine from the whole coffee fruit. Amid the wave of new entries, Musser reported that Red Bull and Monster remain the top-performing energy drinks at Rotten Robbie.

7 a.m. was the busiest time for packaged beverage sales in c-stores.

Carbonated soft drinks enjoyed an average-store sales gain of 9.1% last year, while gross profit jumped 11.3%. Gough attributed the strong showing for the No. 2 packaged beverage subcategory to the continued demand for core products and comfort brands from consumers in the aftermath of the pandemic. Kevin Martello, vice president, national retail sales, convenience and industry relations at Keurig Dr Pepper, said sales of the company’s flavored CSDs outpaced overall CSD trends in c-stores last year. “Dr Pepper was one of the fastest growing major CSD brands in the U.S. last year,” he said, while Sunkist, A&W and Canada Dry also contributed to increased dollar sales.

Bottled water, meanwhile, experienced a 22.1% gain in average-store sales and a 27.3% increase in gross profits in 2021. “This subcategory has come back with strong gains compared to 2020,” Gough remarked of the subcategory that was negatively impacted by the pandemic. “As an industry, c-stores faced several challenges due to COVID-19, but as everything reopens, convenience is one of the fastest growing channels for bottled waters, particularly premium waters,” added Thomas Conquet, marketing director at Nestlé Premium Waters.

Sales of the catchall “other” packaged beverages subcategory also grew at a double-digit rate last year, driven by ready-to-drink coffees, which have seen tremendous growth in recent years. According to Carlton Austin, director of convenience retail strategy and commercialization at The Coca-Cola Company, chilled coffee is one of the company’s fastest growing segments in c-stores. “Our chilled coffee category, which includes our popular Dunkin’ RTD products, grew 44% in 2021,” Austin reported.

OVERFLOWING WITH INNOVATION

Several factors are driving the strong performance of packaged beverages. Increased store traffic is one. “As pandemic restrictions eased, consumers became more mobile,” remarked Kent Montgomery, head of industry relations at PepsiCo. “We saw sales rise by double digits in the convenience and gas station channel, driven by core business and new innovations,” he explained, pointing to products like zero-sugar offerings in sports drinks and CSDs, the growth of energy drinks and new Mountain Dew flavors. Martello added that “immediate consumption growth is returning as mobility has increased.” As a result, Keurig Dr Pepper’s single-serve CSDs have enjoyed mid to high single-digit sales increases. 

Dr Pepper was one of the fastest growing major CSD brands in the U.S. last year. 

The packaged beverages category is also brimming with innovation, driving trial and expanding occasion opportunities. “Both innovation and base growth are needed to drive the category,” remarked Austin, noting that in c-stores “consumers are looking for their favorites and wanting to discover something new.” Among new offerings from Coca-Cola are Coca-Cola with Coffee and bottled Minute Maid Aguas Frescas. New products and flavors are also a priority at PepsiCo, Montgomery said, pointing to entries like Pepsi Nitro, Mountain Dew Spark and Mountain Dew Flamin’ Hot. “Data revealed that younger consumers love more spicy flavors, and this has proven true,” he said.

Limited-time-only CSDs are also popular. Coca-Cola Creations entries such as Starlight and Starlight Zero Sugar launched in February and will remain in the market until August, according to Austin, while a new LTO program for Fanta will be released this July. At Keurig Dr Pepper, Martello reported that the LTO Dr Pepper Dark Berry will return this year.

Convenience retailers acknowledged the wave of new packaged beverage entries. At Hat Six Travel Center in Evansville, Wyoming, merchandise manager Erin Breeden attributed nearly all of the store’s “fantastic” packaged beverage growth to new energy drinks and flavors, including the likes of Alani Nu, Ghost and Celsius. “They’ve been able to get a leg up on the leading brands, which have been hampered by supply issues,” she said. And consumers have been receptive. “Everyone wants what’s new,” Breeden remarked. At OK One Stop in Ardmore, Oklahoma, manager Elsa Douglas said sports drinks offerings have proliferated. “We have 19 flavors alone for BodyArmor,” she noted, adding that BodyArmor Edge has been a particularly strong performer.

Health and functionality demands from consumers are also dramatically impacting the packaged beverage space. “Consumers want beverages that embrace more active lifestyles, like zero-sugar options,” said Montgomery, “but as they adapt to new routines in post-pandemic life, they’re more focused on product function.” Chris Kinch, vice president, distributor sales, at Nestlé Premium Waters, added that bottled water drinkers also desire functionality. “Consumers are more educated and engaged in vetting and selecting brands than ever before,” he said, and c-stores can benefit. “Lower calories, better hydration and functionality are top of consumers’ minds, and leveraging this can lead to future success.”

Douglas said she’s already seeing the trend at her store. “Nobody wants to drink their calories or sugar anymore,” the Oklahoma retailer said of demand for zero-sugar CSDs. “They’d rather get it from a candy bar.” 

Our chilled coffee category, which includes our popular Dunkin’ RTD products, grew 44% in 2021.

MERCH MADNESS

Following a phenomenal year of growth for packaged beverages, convenience retailers want to keep the momentum going. Suppliers said it’s possible by adhering to effective merchandising and marketing strategies.

Austin encouraged retailers to focus on capturing shoppers who may not have intended to purchase a beverage during a visit. “Find ways to interrupt their shopping trip, and present an opportunity for them to leave with a beverage in hand,” he said, via tactics like incremental placements throughout the store. Martello recommended that signage at the cold vault be clear and concise to emphasize must-buy pricing and promotional offers. “Digital engagement and customized programs” will also strengthen loyalty and return on investment, the Keurig Dr Pepper executive said.

Understanding customer need is critical to growing packaged beverage sales, Montgomery added. “Convenience and relevance play a more important role than ever before in many shoppers’ value equations,” he said. “Understanding how this varies for different shopper segments can drive trips and loyalty.”