As quarter two progresses, retailers have reported significant growth in multiple beverage categories. This growth is expected to continue throughout the year.
New innovations and heavy promotions from a number of beverage manufacturers have led to strong category growth in the beverage category in the second quarter of 2016.
Memorial Day Holiday Sparks Beverage Sales
A recent survey of beverage retailers conducted by Wells Fargo Securities studying trends from the recent Memorial Day weekend, which kicks off the peak beverage selling season, has revealed some key consumer trends. The survey revealed that total beverage sales in c-stores accelerated 5.5% for Memorial Day 2016 compared to a 4.9% increase last year, with nearly 90% of retailers reporting higher sales this holiday weekend versus last year.
The survey from Wells Fargo Securities also revealed the following trends:
- The Coca-Cola Co. and Monster outperformed in the c-store channel with the most effective promotions.
- Foot traffic growth was strong during the holiday weekend. Retailers expect a 6-7% traffic increase this summer, due to low gas prices and greater miles driven.
- Energy category sales up 8% year over year so far during the second quarter, and retailers expect it to grow 9% for the full year driven by share gains from Monster (+9.8%).
- Monster has introduced new innovation that is generating excitement among retailers, as the company has revealed plans to expand into water, soda, coffee and/or better for you isotonic/sports drinks with functional benefits.
- Alcoholic beverage sales are up a solid 3-4% year over year so far during the second quarter with Constellation Brands a key driver. Despite heavy promotions by Anheuser-Busch, most retailers don’t expect this will negatively impact Constellation Brands, given the company’s focus on “quality-taste-experience over price” and a different consumer.
“Overall, we are broadly encouraged heading into quarter two results for both beverage manufacturers and c-store retailers, given strong beverage sales thus far in the second quarter and upbeat comments from our retailer contacts,” said Bonnie Herzog, managing director, beverage, tobacco & convenience store research, Wells Fargo Securities LLC.
Energy Category Sales UP
The survey from Wells Fargo Securities revealed that disruptions and service issues for Monster appear to be largely behind the company. Herzog stated that Wells Fargo Securities remains excited about Monster’s innovation and encourages investors to buy Monster stock in advance of what could be disruptive growth for the company.
“We anticipate Monster’s new ‘Mutant’ should be in coolers by July 4, 2016 and therefore could boost quarter two results,” Herzog continued.
Wells Fargo Securities expects Monster to launch four new products across three new platforms in Fiscal Year 2016/2017, with two platforms likely hitting retail in the second and third quarters, based on conversations with its industry contacts.
“We believe Monster will roll out these new products in a major way, leveraging the entire Coca-Cola system on a scale significantly larger than its previous launches of Ultra and Rehab. We think these products will blur category lines thereby giving Monster additional cooler space at retail, expansion into new households and greatly increase consumer penetration. We continue to expect at least one new platform will be an energy-enhanced water and possibilities include; soda, coffee and an isotonic/sport drink. Ultimately we expect these new products could significantly accelerate growth for Monster and if the past is any indication, this could be a $1 billion opportunity,” Herzog concluded.
Alcoholic Beverage Sales Strong during Memorial Day Holiday
According to the recent beverage survey from Wells Fargo Securities, alcoholic beverage sales were strong during the Memorial Day holiday weekend, while they are also up 3-4% so far, during the second quarter. The survey revealed that Constellation Brands is currently driving the majority of the category’s growth. Despite heavy promotions from Anheuser-Busch InBev (AB InBev), prices are expected to be up modestly for the full year, as retailers are seeing imports and premium/super premium brands as key category drivers. Constellation Brands is not expected to be negatively impacted by AB InBev’s heavy promotions.
“We remain bullish on Constellation Brands, given its strong position in one of the fastest growing, super-premium categories,” Herzog stated.