State of Supplements Within Convenience Stores
What’s the current state of supplements within the convenience sales channel?
Well…I might be a bit biased considering my professional background, but I've always believed the best and brightest of specifically the sports/active nutrition space could compete against any large CPG incumbent when it comes to functional food/beverage. And if you walked around this year’s NACS Show expo, you undoubtedly felt the below meme playing out IRL…
Observations (NACS Show 2022 vs. 2023):
The sheer volume increase of exhibitors that would be considered “birthed/incubated within the supplement industry” was extremely noticeable.
Many of these “supplement brands” exhibiting, that are on maybe year 2 to 5 within their convenience sales channel strategy, definitely went larger in terms of marketing budgets.
Why are those observations important?
Big CPG are collectively a sneaky voyeuristic group, oftentimes contracting strategists/analysts (like me) that are extremely fluent in the supplement industry to help them spot the mainstreaming ideas within the influential epicenter of the CPG world. For many years, Big CPG utilized that intel to launch watered-down copycat innovations without much fear of competition. And that’s mainly because the previous era of sports/active nutrition entrepreneurs stayed in their sales channel lanes (e.g. specialty). But if the NACS Show 2023 was any indication, that sales channel expansion fear isn’t prevalent anymore…and it should make large food/beverage CPG incumbents a bit nervous.
NACS: Unpacking Energy+, Supplements with Joshua Schall [BevNet]
I recently spoke with BevNET editor-in-chief Jeff Klineman about how the NACS Show 2023 was a perfect example of the growing collision happening between Big CPG and supplement trends.
WATCH THE ENTIRE INTERVIEW HERE
For those that don’t currently have a BevNet Insider subscription, I provided a few paraphrased highlights below from the 25-minute interview…
Traditional Supplement Formats
Q: Are supplements more or less prevalent in convenience retail today? If less so, are they shifting more to functional food and beverage? Why?
When I hear someone from outside the industry say the term supplements, I assume they are thinking about the traditional product formats of capsules, powders, and pills.
Here’s the deal…
Are we in the old era of truck stop ephedra capsules and boner pills? No! Are we seeing an explosion of traditional formats within c-stores? Not yet! You did see more hydration, energy, and protein powders, but this is still generally a cumbersome user experience that requires having another vessel to mix them in or buying an additional item like a bottle of water.
So, yes…most of these supplement brands are leaning more into food and beverage formats. This supports the continuation of long-term secular wellness trends…driven A LOT from Millennials and younger consumers seeing food/beverage as supplements (aka a way to manage their health conditions and detoxify their bodies). Being that they’re also willing to pay more for functional ingredients in convenient formats…the demand for merchandising resets inside c-stores is only growing in importance. On the business end, these supplement brands want to access bigger TAMs. With A LOT of the barriers to entry continuing to get lower, they’ve been successfully extending into more appropriate channel-specific formats.
Supplement Categories
Q: It feels like there's clear segmentation now…are there emerging areas that you saw?
In my world, the big 3 buckets that are currently commercially viable in the convenience channel are energy, hydration, and protein.
Each of those are starting to segment into different offerings that are gaining placements in c-stores.
Energy+ = performance (fitness), nootropic (focus), and weight management
Hydration = mainstream flavor-forward (e.g. PRIME), traditional athlete (e.g. Gatorade), and advanced athlete (but also hangover relief)
Protein = convenience is still very much a milk protein world, but you did see PepsiCo lean into plant with Muscle Milk
On the functional food (snacking) side, it’s still a story around remaking the “white trash diet stuff I grew up on” but packing more protein and little bit higher quality ingredients that don’t take away from taste. Many pundits would like the “functional makeover” of c-store snacks to happen quicker, but brands can easily swing too far (and too fast) in the wrong direction and “Shelly from Ohio” is going to be confused and default to regular purchasing habits.
Energy+ C-Store Takeover
Q: What are some of the developments you saw regarding product trends within the Energy+ category?
One thing that’s clearly been energizing the convenience retailing sector is the growth and evolution of the energy drink category. Early pioneers like Red Bull and Monster Energy have been joined by a cohort that features CELSIUS, C4 Energy, GHOST Energy, Alani Nu and others that have roots in the supplement industry. Those brands together accounted for nearly $3 billion in sales, according to NielsenIQ all-channel data supplied by Goldman Sachs analyst Bonnie Herzog, and they are leading to changes in shelf sets across the convenience store channel.
When I say the niche jargon of “Energy+,” what I really mean is…
Energy = carbonated water with sugar/sweetener, flavor, and caffeine
Energy+ = everything in “energy” plus extra nutraceutical ingredients
But I think Energy+ was the biggest winner overall at this year’s NACS Show. There seems to be further segmentation happening with the subcategory.
Performance = gym occasion (or fitness lifestyle)
Nootropic = weird jargon for consumers that likely will evolve into a word like “focus” (high-performance non-fitness lifestyle)
Weight Management = how this “first product benefit” marketing strategy plays out in the Ozempic world is still undecided
We also saw a move by some brands to add a heavier caffeine extension (or re-position existing sub-brands) to take advantage of Bang Energy void within retailers.
Supplement trends
Q: Which supplement trends are mainstreaming, emerging, stalling?
Mainstreaming:
Energy+ = Beyond the commercial successes, I believe this product subcategory has helped consumers think more positively about energy drinks market overall.
“Hydration for Everyone” = Again, the commercial successes cannot be argued against, but hydration segmentation has allowed consumers to think about these beverages as more than a one-dimensional sports/athletic beverage category.
Emerging:
Lightly Flavored and/or All-Natural Everything = The advancements in flavor science are mind-blowing…and it has really pushed these categorical entrepreneurs’ ability to create great-tasting all-natural functional beverages that are getting close to parity with artificial versions.
Female-Positioned Energy+ Brands = I think Celsius did a great job at driving females into the energy drink category, but I think we will see that gender segmentation evolve further (e.g. Gorgie).
Stalling:
Licensing IP (Entertainment & Flavor) = There were some exceptions (e.g. C4 Energy x Popsicle), but the quantity of announcements were down this year. While I don’t believe there’s “deceptive marketing” risk, the sheer increase in consumer watchdog/regulatory/governmental heat could have created an impact.
CBD = The green rush was kept alive by some (mostly non-food/beverage brands), but it’s a shell of what it was and will continue to be that way under the extended regulatory purgatory state.
Final Thoughts
Q: What are your takeaways for emerging “supplement brands”? How should they think about the convenience business?
I mentioned this old adage to BevNet Founder John Craven lately…
“Prospectors get slaughtered, and the settlers prosper.”
I think too many “supplement brands” look at large incumbent offerings and say things like “I can make a better mousetrap.” You certainly can…but its imperative you remember that convenience buyers are shopping in a hurried manner. They aren’t sitting there comparing mouse trap design nuance. So, be different…but not so much that you scare customers away.