While many companies have benefited from the drop in oil prices, for a variety of reasons beverage companies may have gained a particular edge. Major beneficiaries may be The Coca-Cola Co (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP), and the coming week should shed some light on how these two benefited as they prepare to disclose their financial numbers for the fourth quarter.
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Whenever consumers go to fill up their gas tanks, convenience stores are right there and many buy snacks and drinks. Americans have saved some money from the steep drop in gasoline prices, those savings should have come to the retail sector during the holiday season. But that has not happened, as holiday sales came in lower than expected. Therefore, the next possibility as to where the savings have gone could be food and beverage firms.
Convenience Stores At Gas Stations
Both Coca-Cola Co Pepsi enjoy big shelf space in convenience stores available at gas stations throughout the United States, i.e. few steps away from the car during fill-up time, which is conceivably more often now as Americans are driving more thanks to lower gas prices. For the first time since 2004, oil prices dropped below $30 per barrel while gasoline prices plummeted 50% in the last 18 months to trade below $2 a gallon on average.
According to a survey conducted by Wells Fargo & Co (NYSE:WFC), non-alcoholic beverages sales witnessed 5.5% growth in the December quarter in convenience stores in the United States. That was a much faster rate of growth than supermarkets. As a result, convenience-store operators aw soda sales grow 3.8% in the current year while the sale of bottled water, iced teas, and energy drinks witnessed a minimum of 7% growth each.
Beverage Firms Raise Prices
There is also another reason to expect that that Coke and Pepsi stand to gain as salty-snack sales witnessed 4.5% growth in the four weeks of January 23. Morgan Stanley (NYSE:MS) said that Pepsi products specifically have advanced 4.1%. For its part, the beverage firms have increased their prices in the recent past aggressively. Soda sales in America have stabilized following a two-year downturn.
However, some unfavorable data may give reason for concern. In the December quarter, personal consumption growth witnessed a growth of 2.2% compared to 3% in the September quarter. That was partly because not everyone chose to spend the extra money saved from low gas prices.
