When gas prices drop, as they have across the U.S. for more than six months beginning last September, convenience store operators brighten. That may seem counterintuitive given that about 84 percent of the 153,000 c-stores in the U.S. sell gas and that 70 percent of their sales are made at the pump, not inside the stores.
But c-store retailers don’t make a lot money selling gas; only about 30 percent of their profits are from the gas pump, according to the National Association of Convenience Stores (NACS). So when gas prices drop, a couple of things typically happen: people tend to travel more (and therefore stop to gas up more often) and, since they’re spending less at the pump, they have more disposable income to spend inside the store.
And what do c-store shoppers tend to buy inside the store after making a gas purchase? Most are likely to purchase beverages, according to a NACS consumer survey. Recent data supports that.
Sales of non-alcoholic beverages were up a strong 5.9% in c-stores in the final three months of 2014, according to a recent “Beverage Buzz” survey of 15,000 c-store locations conducted by Wells Fargo Securities.
Sales volumes for Coke, Pepsi, Dr Pepper Snapple Group and Monster Beverage Corp. all increased in the fourth quarter of 2014.
Beer dollar sales in c-stores were up a solid 4.0% year-to-year in the 12 weeks ending December 20, 2014, according to Wells Fargo in another report.
“It’s all about low gas prices with 100% of our contacts indicating lower gas prices had a favorable impact on sales relative to last year,” the “Beverage Buzz” report noted.
It went on: “The most notable impact of lower gas prices (and steady gains in employment) is consumers ‘treating themselves’ and trading up to higher-priced premium items in categories such as craft/import beer…that lend themselves to trading up.”
The data backs that up: In the same 12-week period ending Dec. 20, 2014, according to Wells Fargo, dollar sales for Constellation Beer were up a stunning 19.2 percent. Heineken and Boston Beer, too, saw double-digit sales growth during that period. Comparatively, sales for AB InBev were up just 1.1% and sales for MillerCoors were up 3.2%.
This “trading up” phenomenon in beverages isn’t limited to c-stores or to the beer category. The general growth and outperformance of premium beverage brands over regular brands across the board is significant.
Shifting consumer dynamics have a lot to do with it, with generally more disposable income as just a part of a much broader picture, as editor-at-large Jeff Cioletti found out in putting together this month’s cover story, “Top shelf goes mainstream” on page 44.
“Cost is taking a back seat as premium-price-point brands are transcending socioeconomic boarders and connecting with a broader array of mainstream beverage buyers,” he points out.
Higher consumer incomes and employment, of course, can’t hurt. Neither can six months of fantastic weather. Now that’s worth dreaming about. BW