New products and core beverages will always drive cold vault sales. So when is the right time—and how often does that right time come—for category managers to reset them?
“We do cold vault resets twice a year, which means we’re making fairly minor adjustments all the time,” said Richard Ginther, category manager for Kum & Go in West Des Moines, Iowa. Those resets happen early in the year, and then again during August and September. Either of the annual resets could see a 10-15% change in the cold vault product selection across the chain’s 425 stores. The company uses category management as its guideline.
“We do not put ourselves in agreement situations,” said Ginther, who added that his stores are doing a solid 12-pack and two-liters business. “We focus on what sells.”
Still, according to Beverage Marketing Corp. (BMC), packaged beverages have been facing an uphill climb. BMC reported that packaged and dispensed carbonated beverages, which it combines into one category, continue their slow, steady decline in consumption, said Gary Hemphill, managing director for the New York-based organization. BMC expects volume to decrease by anywhere between 1-3%.
Retailers such as J. P. Jordan, merchandising manager for Corpus Christi, Texas-based Texas Star convenience stores, agreed that “the soda industry as a whole is declining” with even the biggest cola behemoths feeling the pinch. Jordan explained that his stores are seeing a growing number of customers reaching for beverages they perceive as healthier, such as waters, teas and juices.
Butch Fulton, beverage category manager for Portland, Ore.-based Plaid Pantry stores, also agreed with BMC that, within the traditional soda category, non-cola flavors are gaining some ground. He attributed this switch to younger generation consumers “who are used to having more flavor choices available to them and don’t want to drink what their moms and dads did.”
Fulton also sees a new group of males beginning to opt for diet drinks.
“Up until recently, diet beverages were purchased primarily by females,” Fulton said. “Now we’re seeing male students buying them as well.”
Plaid Pantry is also testing Coke’s new 8.5-ounce size PET bottles “for customers who don’t want to drink an entire 16-ounce bottle or end up throwing half the bottle away,” Fulton said.
One category subset of the carbonated beverage category that is growing at a rapid rate is energy drinks, Hemphill said. Top players such as Red Bull, Monster, Amp and Rockstar have powered an annual volume increase of at least 10% over the past five years. BMC’s preliminary estimate of the subcategory’s growth between 2010 and 2011 is close to 15%.
“Younger consumers are driving energy drink sales because this group is into everything energy from drinks to shots to bars,” Jordan said.
Scott Zaremba, president of Zarco 66 in Kansas explained that as the bottled beverage category continues to expand through innovation and new products, cold vault space is becoming increasingly premium property. “It’s getting harder to try to predict the next hot seller,” Zaremba said. But energy drinks, with their “high ring and good profit margins,” will continue to earn their prominent space in the case.
Beverage Growth Rates By Category for 2011
While convenience store beverage sales were strong, sales at supermarkets and mass merchandisers dragged down overall sales numbers, according to Beverage Marketing Corp. (BMC).
Carbonated soft drink sales struggled while energy drinks and sports beverages soared, BMC reported. Preliminary sales by beverage segment included:
Bottled Water, 4.1%
Carbonated Soft Drinks, -1.6%
Ready-to-Drink Coffee, 7.5%
Distilled Spirits, 2.9%
Energy Drinks, 14.8%
Fruit Beverages, -2.3%
Sports Beverages, 8.5%
Ready-to-Drink Tea, 4.7%
Value-Added Waters, -1.6%