Hard seltzers will be receiving more shelf space in convenience stores, according to Goldman Sachs analyst Bonnie Herzog’s latest “Beverage Bytes” survey of convenience store beverage buyers (representing 30,000 retail locations, or about 20% of the c-store channel).
Of the c-store retailers surveyed, 90% said they plan to give hard seltzers incremental shelf space. A lot of that space will be allocated to the leaders within the $4.1 billion segment, Boston Beer Company’s Truly Hard Seltzer and Mark Anthony Brands’ White Claw. Other brands likely to gain space include Constellation Brands’ Corona Hard Seltzer; Anheuser-Busch’s Bud Light Seltzer, Michelob Ultra Organic Seltzer, and Cacti Agave Spiked Seltzer; Mark Anthony’s Mike’s Hard Lemonade Seltzer; and a potential entry from Monster.
Hard seltzers were a hot topic in the survey. Overall, c-store retailers say they are “increasingly positive” about the future, due to increased consumer mobility and the rollout of COVID-19 vaccines.
Nevertheless, the reopening of on-premise bars and restaurants has led to “a slowdown” in demand for alcoholic averages for at-home consumption. Still, some retailers reported “strong demand” continuing within their c-stores.
Overall beer category sales decelerated by nearly half in Q1 (+12%) in convenience stores, down from +23% in Q4. Still, Herzog said the beer category’s performance remains “impressive given comps are getting tougher and it coincides with the broader reopening of bars/restaurants.”
Out of stocks continue to be an issue and retailers surveyed reported a “slightly worse” situation in the first quarter compared to Q4, although they are “broadly less of a headwind to the category than they were throughout much of 2020.” Nearly 40% of retailers said out of stocks are bad today, up from less than 30% in Q4. Two-thirds of retailers surveyed said they expect out of stocks to persist through July and maybe beyond.
Retailers said they expect alcoholic beverage manufacturers to increase pricing this year, which most major producers have already done.
Back to hard seltzers, sales “remained strong,” increasing 95% year-over-year in Q1, and c-store retailers told Herzog that they are projecting +90% growth for the segment in 2021.
Retailers surveyed also expect the hard seltzer segment’s top two brands, Truly and White Claw, to maintain their dominance of the segment, “leaving the rest of the field to compete head-to-head with new entrants.” Which brand emerges as the clear No. 3 player in the space remains uncertain.
Even with an overwhelming tide of new products, c-store retailers said they are upbeat about the new products, especially from Truly and White Claw.
The Truly brand family increased c-store sales 120% year-over-year, and retailers surveyed said they expect the brand to continue gaining share within the channel. Respondents said they expect Truly’s momentum to continue, with Truly Iced Tea Hard Seltzer, which launched in January, and the launch of Truly Punch in May.
Although retailers said they’re excited for new Truly products, many said they won’t be allocating extra shelf space to Truly Punch, instead cutting into Truly’s existing space, Herzog found.
In fact, some retailers are questioning how much incremental growth is left in the hard seltzer segment. Other retailers said they were “maxed out” on space they can allocate to hard seltzers and they will run sales data to look for existing SKUs to replace before adding space.
Herzog also shared retailers’ thoughts on several new hard seltzers.
On Mike’s Hard Lemonade Seltzer, retailers shared positive views of the new offering, although some said it was too early to judge its success. Others said the brand is “off to a slightly slower-than-expected start,” and some said the brand hasn’t received much marketing support until recently.
Molson Coors’ Topo Chico Hard Seltzer also generated mixed reception from retailers, with some saying it’s too early to know how it will perform and others saying they don’t believe the brand will resonate with consumers outside of the southwestern U.S. Just a few retailers said they were delayed in receiving the product.
Emerging brands retailers said they were most enthusiastic about included Heineken USA and AriZona’s SunRise Hard Seltzer and Bang Mixx Hard Seltzer.
Brands falling out of favor, Herzog found, included A-B’s Bon & Viv, Talking Rain’s Sparkling Ice Spiked, Heineken USA’s Dos Equis Ranch Water, and High Noon Hard Seltzer, with “several retailers planning to allocate lesser, or no space at all.”
Also of note, ZOA, the non-alcoholic energy drink collaboration between Molson Coors and Dwayne “The Rock” Johnson, is so far not receiving shelf space or getting many repeat sales, the survey found. Herzog wrote that retailers are “mixed” on the brand, with a minority of retailers surveyed saying they plan to give the brand shelf or cooler space. Some retailers said pricing for the brand was “too high” compared to other 16 oz. energy products.