By: Rachel Gignac | August 9, 2023
The dynamics of the convenience-store customer are back to pre-pandemic levels, with 84% of consumers visiting c-stores once a month and 63% once a week. And 60% enter the store nearly every time they purchase fuel, according to Technomic data.
Of those customers, 55% purchased packaged and prepared beverages once a week and 74% purchased them once a month.
There has also been an increase in female visitation to c-stores after the pandemic leveled out, said Donna Hood Crecca, principal at Technomic, Chicago, at CSP’s Outlook Leadership Conference in Rancho Palos Verdes, California.
Midyear 2023 data shows that energy drinks hold the top share of sales, at 35%. Carbonated soft drinks (25%), water (14%) and sports drinks (11%) are next in line. Volume did not increase as much due to inflation but spend is up, Crecca said.
“This is a category that’s just so vital to the health of the overall store, the total business, and we’re seeing consumers out and about again so that engagement and spend on beverages is definitely increasing,” she said.
Resist Channel Blurring
Competition is evolving, and it’s coming from a lot of sectors outside of the c-store industry, Crecca said.
Retail segments have increased their focus on single serve packaged beverages. Dollar stores, for example, are the fastest-growing channel within retail overall. Drug and grocery stores also offer cold beverages by the register.
Beyond dollar, drug and mass stores, other channels are going all-in on beverages.
“Wherever there’s an outlet next to a cash register, they’re probably going to put in a reach-in refrigerator for packaged beverages,” said Crecca.
Fast food locations are starting to have refrigerators for on-the-go packaged beverages. Even stores that aren’t beverage destinations, like Home Depot, are competition, she said.
“There was a time when convenience stores really owned single-serve beverages, but right now, we’ve got other types of retail that are gaining traction in this space, and you’ve got that channel blurring,” said Crecca.
The coffee/cafe segment overall was up 13.2% in sales last year, with Starbucks up 14.5% and Dunkin up 8.3% in total sales, all rebounding post-pandemic.
Don’t Knock the Drive Thru
Emerging quick-service drive thrus are a big disruptor, said Crecca, and they are becoming increasingly important. About 45% of consumers are more likely to visit a location with a drive thru for a beverage occasion, according to Technomic data. New stores are emerging that offer beverages as the main menu item.
Swig, a Saint George, Utah-based drive-thru soft drink quick-service restaurant (QSR), has 45 locations. The concept is a customizable combination of fountain soda, flavored syrup, cream and other toppings over pebble ice. It also offers energy soft drinks, refreshers, hot cocoa and snacks.
Swig’s sales were up 24% in 2022, and an 18% increase in unit count shows that the sales growth isn’t just from opening new locations.
Another chain entering the space is HTeaO, a Midland, Texas-based iced tea QSR that has 26 tea varieties, seasonal flavors, all-natural ingredients and its own water plant with a special filtration system. With 62 locations, 44 locations in the pipeline and franchise opportunities, “they are going to explode,” said Creed.
Even with the threat of these unique stores, “Convenience is the only channel that’s positioned to satisfy all consumer beverage need states,” said Crecca. “There’s an opportunity and an imperative here to strategically leverage both beverage formats so that you can be the beverage destination in your markets.”
Other channels can’t offer one-stop-shopping, she said. Lean in on that.
When a consumer chooses to go to a c-store, they still have an abundance of stores to choose from. Creed recommends reassessing how these priorities are being met: convenience location, cleanliness, organized, beverage taste, overall value, competitive price, quality of beverages and variety of beverages.
Respect All Engagement
With the highest level of engagement in both formats of c-store beverage offerings, Gen Z is particularly important to beverage sales.
“The competition is just that much more intense for them,” said Crecca.
Earning their beverage loyalty will drive growth in the future, she said. Larger cup sizes, quality ice and customization options will increase their value perception. While Gen Z’s packaged and foodservice beverage purchases are both driven by cravings, foodservice beverages are more often an impulse buy for a treat.
Gen Z’s personal beverage portfolio is the most diverse across the generations, and the age group gravitates toward more unique beverages and those with functional benefits. They value nourishment, promoting wellness and energizing products instead of the concept of taking food and drink away.
“It’s important to engage them now so you can sharpen your competitive edge and continue to grow your sales through the future,” said Crecca.
Hispanic/Latinos are also frequent visitors to convenience stores with 60% purchasing nonalcohol beverages at c-stores once a month or more. Hispanic consumers over index on purchasing refreshing, flavorful and cultural beverages, according to Technomic, including juice-infused water, horchata, lemonade, plant-based milks, hot teas, frozen drinks, iced coffee and flavored regular hot coffee.
“They have this interest in flavored carbonated soft drinks,” said Crecca. “Is there opportunity to increase what you’re offering there?”
The Hispanic population is increasing across the country, and Crecca suggests understanding how operating markets are changing. Make sure you’re relevant, she said, with additions like bilingual signage.
Leverage Beverage Programs
Creativity within a beverage program might look different for everyone.
Savannah, Georgia-based Parker’s highlights what it’s known for in its beverage subscription-chewy ice.
Consumers also see value in bundles, Crecca said, so offering three-fors or two-fors can work and give consumers chances to try new flavors. Another idea is pairing a beverage with a signature foodservice item.
Loyalty programs are evolving to more engaging app-driven programs, and this could be an opportunity to offer exclusivity.
“Can [consumers] get a sample of a new flavor that’s coming out before everybody else does? Is there something exclusive on the beverage front that you can offer as a loyalty component?” said Crecca.