Beer trends remained “relatively stable” in the convenience channel in Q3, according to Goldman Sachs analyst Bonnie Herzog in the latest BevBytes report.
Goldman Sachs surveyed retailers representing 28,000 locations, or 19% of total c-stores. Respondents reported +3% year-over-year (YoY) sales growth for beer in Q3.
While beer is in the black, “retailers’ growth outlook for the category moderated” in the quarter, Herzog wrote. C-store retailers expect beer to increase full-year (FY) sales +2% in both 2024 and 2025. Expectations have lowered since Goldman Sachs’ Q2 survey, when retailers projected beer sales growth of +4% in 2024 versus 2023.
“Several retailers called out a slowdown in their beer business, with one calling out consumers shifting from premium beer to either more affordable alternatives or reducing consumption,” Herzog wrote. “In addition, the same retailer noted that new legal consumers are not drinking as much as older generations, which weighs on the category.”
Despite negative scan trends, craft outpaced the total beer category in Q3, according to surveyed retailers. The segment increased sales +4% in the quarter, and is expected to maintain that growth for FY 2024, up from the +3% FY increase projected in Q2.
However, craft is still losing shelf space (-2% on a weighted average store basis).
Total beverage trends have also moderated in c-stores, with sales increasing +1% YoY in the quarter, versus +2.6% in Q2. Retailers expect total beverage sales to increase +0.7% for FY 2024, a decline from the +2.6% growth predicted in the Q2 survey, and significantly below the +6.2% growth recorded in FY 2023.
The cause of the moderation is mainly due to traffic declines, “which we believe reflects a pullback in discretionary spend given continued pressure on the consumer,” Herzog wrote. Traffic is expected to decline -1.3% YoY in FY 2024, below the +0.3% growth predictions set in Q2. If trends play out as expected, it would be the first YoY decline in traffic since 2020, according to Herzog.
However, “retailers expect faster beverage growth in the c-store channel next year,” Herzog wrote. Retailers expect total beverage sales growth of +2.2% and a +0.7% increase in traffic in FY 2025.
Manufacturers of non-alc drinks and bev-alc products alike are expected to enact incremental price increases through the rest of the year and “modest price increases next year,” Herzog wrote. More than half of respondents (57%) said brewers “continued to push through more pricing” in Q3, “but 71% expect manufacturers to take modest additional pricing” through the rest of the year.
“Looking ahead, the majority of retailers (57%) are also bullish on brewers’ ability to push through incremental pricing versus having to promote more,” Herzog wrote. “This is a step up from Q2 when retailers were split 50/50 on brewers’ pricing power.”
Meanwhile, promotional activity is down slightly in bev-alc, with 39% of respondents reporting an uptick in promotions versus 45% in the Q2 survey.
“One respondent noted that most promos from TAP [Molson Coors] and ABI [Anheuser-Busch InBev] are offered via QR codes that route consumers online to receive a rebate – forcing consumers to take that extra step which isn’t as convenient as an immediate discount at the register,” Herzog added.
Herzog also analyzed Q3 trends and retailer comments for some of the largest beer suppliers:
Constellation Brands: Q3 c-store sales increased +11% YoY in the quarter, in-line with Q2 trends. Retailers expect the company’s portfolio of Mexican import brands to also post +11% growth for FY 2024, “well ahead of their expectations for the beer category.”
Herzog specifically called out Modelo Especial for continuing its momentum in the channel, while Modelo Oro – the brands’ lower-calorie, lower-carbohydrate extension that went national in early 2023 – continues to receive mixed feedback.
For FY 2025, retailers project a +5% YoY increase in Constellation’s c-store sales.
Molson Coors: Q3 sales increased +5%, slightly below the YoY growth reported in Q2 (+8%).
Retailers remain positive on the company’s beer portfolio “from a market share standpoint,” Herzog wrote. For FY 2024, they expect Molson Coors to increase c-store sales +4% YoY, below the +7% growth expectations shared in Q2. For FY 2025, the company is expected to record +3% growth.
“While share gains appear to be moderating in the wake of the Bud Light controversy given tough comparisons, we still expect their growth to outpace the category, both in FY24 and FY25,” Herzog wrote.
Molson Coors was also the shelf/cooler space winner during fall resets, and Goldman Sachs continues to believe those share gains are underestimated, Herzog added.
Boston Beer Company: Q3 sales increased +1%, below the +2% growth recorded in the channel in Q2.
Retailers now expect the company’s brands (Samuel Adams, Dogfish Head, Twisted Tea, Truly Hard Seltzer and Angry Orchard) to collectively increase sales +1% in FY 2024, below the +3% growth expectations shared in Q2, and below the total beer category’s projections, “suggesting share losses.”
Goldman Sachs remains cautious on Boston Beer “given pressures on Truly and strong, but moderating momentum for Twisted Tea.”
Truly continues to lose share to segment leader Mark Anthony Brands’ White Claw. White Claw increased c-store sales +3% YoY in Q3, following +8% growth in Q2. Retailers now expect the hard seltzer brand to record +3% growth for FY 2024 (down from +6% projected in Q2).
Meanwhile, Truly sales declined -9% in Q3, after declining -7% in Q2. The brand is expected to record a -7% YoY decline for FY 2024, suggesting Truly will “continue to meaningfully lag the category,” which is expected to record +1% growth in FY 2024.
Retailers are also “slightly more cautious” on Twisted Tea’s outlook for the rest of the year. However, the hard tea brand has remained “largely insulated from rising competition from new entrants” including Monster’s Nasty Beast Hard Tea and Gallo’s High Noon Vodka Iced Tea, and retailers “expect the brand to remain the dominant player,” Herzog wrote.
“One retailer highlighted that while Nasty Beast was doing fine, the target consumer is different versus that of Twisted, and therefore it won’t take much share from Twisted,” Herzog added.
Ready-to-drink (RTD) hard tea as a segment is in the black YoY, an improvement versus the prior two years, when the segment recorded YoY declines.
“Interestingly, several retailers highlighted that [Boston Beer’s vodka-based hard tea] Sun Cruiser is doing relatively well, but its distribution will be somewhat limited since not all stores are able to sell spirit-based RTDs,” Herzog wrote.
Anheuser-Busch InBev: Q3 sales were flat YoY after declining -4% in Q2. The company is projected to record a -1% YoY decline in c-store sales for FY 2024, below the +1% growth expectations reported in Q2, “implying continued market share losses.”
Still, retailers reported “stabilization” for A-B’s Bud Light, “with retailers now more bullish around its ability to recapture lost share,” Herzog wrote. Nearly two-thirds of respondents (63%) expect the brand to recapture more than one point of share by the end of 2024, up significantly from the 20% of respondents who shared the same sentiments in Q2.
For FY 2025, A-B is expected to return to growth (+2%) and be back in line with beer category trends.
Heineken: Q3 c-store sales declined -2%. Retailers now expect the company to report a -2% decline in sales for FY 2024, below the +2% growth expectations shared in the Q2 survey. Declines are also expected to continue in FY 2025 (-1%).