Goldman Sachs: C-Store Sales Decelerate in Q2; 71% of Retailers Plan to Increase Hard Seltzer’s Shelf and Cooler Space

Beverage alcohol sales at some convenience stores have begun to decelerate as the on-premise channel reopens, Goldman Sachs analyst Bonnie Herzog reported in her Q2 “Beverage Bytes” survey of c-store retailers.

“In general, many retailers are seeing demand for alcoholic beverages moderate in c-stores as bars/restaurants have broadly reopened,” Herzog wrote. “This mean reversion doesn’t surprise us, as stepped-up at-home consumption was a significant driver behind demand in the c-store channel for alcoholic beverages in 2020.”

Half of survey respondents reported no impact to alcohol sales during the July 4 holiday weekend. Meanwhile, 33% reported a moderate negative impact, and 17% reported a significant moderate impact.

“Not all retailers are seeing a slowdown in alcoholic beverage demand in their stores,” Herzog wrote “In fact, some retailers were particularly pleased with alcoholic beverage performance over the all-important July 4th weekend — which held up better-than-expected despite cycling last year’s significant increases in pantry loading at the start of COVID.”

Overall beverage sales at c-stores are accelerating; sales increased 12% in Q2 compared to the same period last year, an increase over Q1’s +10% growth. Non-alcoholic energy drinks (+23% in Q2) are driving sales, which stem from consumers resuming normal activity. However, beverage alcohol’s performance varies, as the category is up against tough comps from last year and increased competition from a reopened on-premise channel.

Within beverage alcohol, growth of core beer and flavored malt beverages decelerated to +3% at c-stores in Q2, compared to +12% in Goldman Sachs’ Q1 survey. Retailers have cut their expectations for beer and FMB growth for the rest of 2021 in half to +5%, compared to +10% in the Q1 survey. They predict that beer and FMBs will grow +5% in 2022.

“We believe these trends are encouraging nonetheless, and think they are largely reflective of a return to normalized channel-mix, and also remain significantly above flat-to-modest declines seen in the beer category historically,” Herzog wrote.

Sales of the hard seltzer segment also slowed in Q2, but the segment is still outpacing beer and FMB in growth. For the quarter, hard seltzer sales increased +32% year-over-year, and +42% during the July 4 holiday weekend. However, the segment’s Q2 growth “represented a sharp deceleration” compared to its +94% increase in Q1.

Retailers attributed hard seltzer’s growth to Boston Beer’s Truly Hard Seltzer, Molson Coors’ Vizzy Hard Seltzer, E & J Gallo Winery’s High Noon Sun Sips and Anheuser-Busch InBev’s Bud Light Seltzer. Segment leader Mark Anthony Brands’ White Claw underperformed compared to overall segment growth.

However, retailers’ sentiments toward hard seltzer seem to be cooling somewhat. More than 70% of retailers said they plan to allocate more shelf and cooler space for hard seltzers this year (down from 90% in Q1), but that expanded territory will likely go to established segment leaders, rather than new entrants.

“While a few retailers are trying new brands, respondents are broadly seeing interest in only the top 5-10 brands (despite several new brands entering the space), and going forward they expect to be selective in allocating shelf space to brands in the upcoming resets,” Herzog wrote. “Other retailers were more explicit, saying that while they are trying a few new hard seltzers in their sets, they continue to see White Claw and Truly dominate — a theme we’ve consistently highlighted that suggests the incumbent brands are likely to emerge as the leading players in the category over the long term.

Only four hard seltzer brands — White Claw, Truly, Bud Light Seltzer and Corona Hard Seltzer — did not receive survey responses that retailers planned to exclude them from shelves. However, retailers indicated they plan to allocate less shelf space to Bud Light Seltzer (33%) at nearly or more than double the rate of White Claw (14%), Truly (14%) and Corona Hard Seltzer (17%).

Surveyed retailers said the plan to allocate shelf and cooler space thusly:

  • White Claw
    • No space — 0%
    • Less space — 14%
    • Same space — 29%
    • More space — 57%
  • Truly
    • No space — 0%
    • Less space — 14%
    • Same space — 14%
    • More space — 71%
  • Bud Light Seltzer
    • No space — 0%
    • Less space — 33%
    • Same space — 33%
    • More space –33%
  • Corona Hard Seltzer
    • No space — 0%
    • Less space — 17%
    • Same space — 50%
    • More space — 33%
  • Vizzy
    • No space — 17%
    • Less space — 0%
    • Same space — 33%
    • More space — 50%
  • Coors Hard Seltzer (which Molson Coors discontinued earlier this month)
    • No space — 29%
    • Less space — 14%
    • Same space — 43%
    • More space — 14%
  • High Noon (which has a vodka base and may not be legally permissible for c-stores in some markets)
    • No space — 50%
    • Less space — 0%
    • Same space — 33%
    • More space — 0%
    • New space — 17%

Among new entrants, Mark Anthony’s Mike’s Hard Lemonade Seltzer seemed to be most popular with retailers:

  • Mike’s Hard Lemonade Seltzer
    • No space — 0%
    • New space — 100%
  • Topo Chico Hard Seltzer
    • No space — 17%
    • New space — 83%
  • Michelob Ultra Organic Seltzer
    • No space — 14%
    • New space — 86%
  • Cacti Agave Spiked Seltzer
    • No space — 17%
    • New space — 83%
  • Dos Equis Ranch Water
    • No space — 83%
    • New space — 17%
  • Lone River Ranch Water
    • No space — 67%
    • New space — 33%
  • Bang Mixx Hard Seltzer
    • No space — 43%
    • New space — 57%
  • A possible hard seltzer form Monster Energy
    • No space — 43%
    • New space — 57%.

Nearly three quarters (71%) of respondents said they do not plan to allocate shelf or cooler space to other emerging hard seltzer brands, while 29% said they plan to give those new entrants more space.

Between Goldman Sachs’ April survey and its July survey, retailers’ sentiments have warmed on some brands and cooled on others. In April, 33% of respondents said they planned to give Vizzy no shelf or cooler space; Vizzy cut that number nearly in half in the July survey. However, the number of retailers not allocating any space to Dos Equis Ranch Water increased 10% between the two surveys.

Several brands in the April survey did not appear in July results: Smirnoff Spiked Seltzer, Bon & Viv, Natty Light Seltzer and Talking Rain Sparkling Ice Spiked Seltzer.

Inventory issues continue to plague some brands. Two-thirds of retailers reported that Q2 out-of-stocks were “bad or very bad” for Molson Coors and Constellation Brands products, up from 43% of retailers reporting the same for Molson Coors and 33% for Constellation in Q1. No retailers reported “bad or very bad” out-of-stocks for Boston Beer or Mark Anthony in Q2, down from 40% for Boston Beer and 20% for Mark Anthony in Q1.