Packaged beverages are driving merchandise performance in conveniences stores, with the category experiencing 10 consecutive years of growth. In 2021, the packaged beverages category increased 16.5% in sales dollars over 2020 and delivered an average gross margin of 42.71%.

“Packaged beverage has been a bright spot among c-store categories despite a challenging two years,” said Mary Mamalakis, director of packaged beverages, RaceTrac.

The category represents 16.3% of inside sales and is only second to the cigarette category in sales percentage contribution. When looking at profitability, packaged beverages was the No. 1 gross profit dollar contributor at 20.2% of in-store gross margin dollars in 2021. Looking at the eight subcategories that make up the packaged beverages category, all eight experienced growth in 2021. Energy drinks were up an impressive 14.2% in 2021 year over year, and the subcategory commands one-third of category dollars.

“Energy drinks provide lift to the profitability of the entire category with higher-than-category-average margins at 44% versus 43% for the category,” said Mamalakis.

The carbonated soft drinks subcategory delivered double-digit growth in 2021 at 10.8% year over year, while sports drinks grew the most of all subcategories last year at 27.2% compared with 2020. “Sports drinks already challenge water in size and sales contribution. If its growth continues, it could overtake water in the coming years,” said Mamalakis. Water grew 20.6% in 2021 year over year and makes up 12.2% of the category, while sports drinks are 10.5% of the packaged beverages category.

Energy drinks provide lift to the profitability of the entire category with higher-than category average margins at 44% versus 43% for the category. 

WHAT SHOPPERS WANT

The 2021 NACS Convenience Voices survey found that the top reason consumers visited a particular c-store was because they were thirsty and wanted something to drink right then—46.3% of respondents.

“Our cold vault assortment is a point of differentiation versus our competitors, and shoppers look to us as a destination for quenching their thirst, all while providing unbelievable variety,” said Mamalakis.

She also noted that shoppers are becoming more experimental. The percentage of respondents who said they visited a c-store because they wanted to “look around and find something new and interesting” was up almost two points.

This was a departure from behavior patterns during the height of the pandemic when consumers prioritized known and trusted brands above all else, said Mamalakis. “Discovery definitely has new legs,” she said.

Despite energy drinks being up over 14% in 2021, c-store retailers report supply chain stress and out of stocks in top-selling energy drink brands, including Monster and Red Bull, so retailers have been forced to throttle down promotions in response to supply challenges. “Demand outpaced sales forecasts causing supply issues, plus the labor shortage both on the store side and vendor side led to out of stocks more than ever in 2021,” said Mamalakis. “It’s more critical than ever to communicate with your suppliers so you can know what to expect.”

TRENDS TO WATCH

Shopper trends for 2021 in the packaged beverage category included new energy drink flavors, new releases and limited or exclusive options.

“[The energy drink category] has been discussed over the past few years, but it’s important—energy drinks are delivering significant growth to the category. This type of growth would not be possible without strong years from the name brands in this space,” said Mamalakis, adding that Celsius delivered explosive growth last year that should continue into 2022.

Sports drinks benefited from consumer demand for nutrition-filled, low-calorie options with clean labels, while at the same time, they shifted back to “trusted” big brands even through the supply chain disruptions.

“We cannot forget about the core brands that consumers are looking for year after year in large volumes. These products delivered in 2021 and helped lead the category to that 16.5% growth,” Mamalakis said.

For 2022, trends in the packaged beverages category include core-brand line extensions and new entrants into the category. The key packaged beverage priorities for this year, according to Mamalakis, include merchandising, assortment, pricing and promotion, and space allocation.

We cannot forget about the core brands that consumers are looking for year after year in large volumes. 

HOW TO MERCHANDISE

Mamalakis encouraged retailers to think through the merchandising flow across the cold vault, and how the consumer thinks through each of the subcategories. Retailers should anchor their cooler with the core subcategories that are driving people to c-stores: carbonated soft drinks, energy drinks, water and sports drinks. Then retailers should think about how the other subcategories interact with these core subcategories.

“Does ready-to-drink coffee belong next to energy since it’s also a source of caffeine? Or should you set it beside dairy since there’s milk in that product?” asked Mamalakis.

She also said that packaged beverages inspire valuable attachments and incremental sales. For instance, 62.3% of consumers are pairing their packaged beverages with pre-packaged sandwiches and wraps, and 45.7% of them are buying a packaged beverage alongside their grab-and-go meal. Candy is paired with a packaged beverage 43% of the time.

“Packaged beverages are a natural ally to foodservice, snacks, confection and other high margin categories,” said Mamalakis.

Additionally, having a vast assortment of packaged beverages puts the c-store channel at a competitive advantage. “Failure to meet [consumers’] needs can result in a lost sale 34% of the time,” said Mamalakis. “We are the channel for that cold-drink assortment, and the core is very important, but also lean into innovation to have that discovery brand.”

She said retailers should look to other channels for emerging innovation and to develop distributor networks. “Build relationships with [distributors] so you can be mutually successful to keep the store in stock,” said Mamalakis.

Looking at price and promotions, shoppers want to get and do more on every trip, she said. In 2020, bogos gave way to bundles as the No. 1 promotion that c-store shoppers noticed because shoppers consolidated trips and stocked up in 2020. However, in 2021, bogos reclaimed the No. 1 spot.

“Guests seek out beverages, and when [beverages] are in our stores, they are adding to that basket,” said Mamalakis. “They’re adding different products throughout different dayparts. Continue to add value for them through these rising costs.”