A proven c-store leader, packaged beverages can benefit even more from cross merchandising and value-added promotions.
By Traci Dawn Carneal, Contributing Editor
A known profit center in the convenience world, the packaged beverage category offers even more opportunities for innovative retailers who keep up with the trends and explore unique promotion and merchandising strategies.
Although carbonated soft drinks (CSD) and energy shot sales are down slightly, growth in bottled water, iced beverages/frozen drinks, teas, juices and energy drinks remain strong. On the rise, though are CSD with healthier—opposed to artificial—ingredients.
According to Mintel Group Ltd.’s recent “Carbonated Soft Drinks: Spotlight on Natural/Craft U.S. 2015” report, 34% of U.S. adults are interested in craft and natural carbonated soft drinks. While the research revealed that those surveyed do not currently drink craft sodas, 44% of non-craft drinkers are interested in trying craft products.
“A similar trend is seen with natural soft drinks, which 40% of consumers currently drink, with usage highest among parents at 60% and Millennials at 58%,” said Billy Roberts, Mintel’s senior food and drink analyst.
DRIVING DRINK TRAFFIC
Some retailers have found that focusing on the store’s biggest money makers in packaged beverages can pay off in big ways.
For the first time this past summer, Brecksville, Ohio-based truenorth, which operates 110 stores in Ohio and Illinois, held specialized promotions centered around one of its key items: Powerade. The Powerade 99-cent promotion involved contests—including one for store workers, which focused on erecting creative displays and another based on volume sales.
“We wanted to drive foot traffic and create excitement for both our personnel and customers,” said John Herbert, truenorth’s senior category manager of beverages.
“This is our biggest promotion to date in terms of the volume we are expecting,” Herbert said.
The chain is targeting top-performing stores comprised of highway and suburban types. The goal with the Powerade promotion is a lofty one; to reach a 400% sales increase. “Several stores are already posting results well beyond this amount,” Herbert said.
Of course, stocking the hottest brands is a necessity.
“We’ve run similar contests with Monster, Red Bull and Coke, but the Powerade promotion was more successful than the others because we were able to get everybody involved and generate excitement behind the giveaways,” Herbert said. “It brings a lot more enthusiasm to the promotion than simply establishing it and sending out POS to your stores.”
The Ohio c-store runs a variety of store-based contests as often as possible throughout the year, but brand-focused promotions are limited to one a month in order to focus on one store category at a time.
“The hope is that we will see increased Powerade sales of course, but we also hope the promotion won’t cannibalize other sales in the coolers at those signature stores,” Herbert said. “It’s about driving enough traffic so customers are coming back for other things the next day, like gas and snacks, because we showed them we’re in it to have fun, too.”
CROSSING IT UP
Because a large majority of shoppers enters a c-store to purchase a drink, the packaged beverage category provides significant cross merchandising opportunities. Consumers can pick up a candy bar, salty snack or meal with their drink, resulting in incremental sales. They are seeking value for the dollar, which has led to more BOGO (buy one, get one free or reduced price) promotions.
Across truenorth, the chain has seen success pairing up complementary packaged beverage items. A recent cold vault cross promotion paired Fiji water with Snapple half liters, with good response from customers. The Snapple/Fiji two-for-$2 promo resulted in sales increases of 77% over the same period last year.
“We were going for a ‘better for you’ approach,” Herbert said.
The c-store recently switched a few packaged beverage promotions away from buy one, get one free to buy one, get the second one for $1, which has generated more attention.
“We’ve done it with CSD, Powerade and Monster,” said Herbert. “We took all of our CSD brands and tried buy one, get one for $1 and had pretty good success with it.”
Very recently, Sunoco’s 650 APlus-branded convenience stores were offering two-fer specials on several packaged beverage items, including Monster, Nantucket Nectars, Dr. Pepper, Gatorade, Naked, Evian and Yoo-hoo, along with a mix ‘n match choice of two items from Tradewinds and a few regional bottled water brands. Consumers could buy two 16-ounce Monster Energy drinks for $4.
HIGHLIGHTING HEALTHY ITEMS
Herbert said more people are moving from value brands to premium items. As c-stores become a destination for higher-priced, healthier food and beverages, there is a potential for bigger basket rings.
“One of the biggest changes I have seen is a push for more better-for-you items as opposed to focusing on some of the value brands,” Herbert said.
Although truenorth has experienced some stagnation in its Arizona beverage sales, the Snapple, Honest Tea and Lipton brands are experiencing huge increases.
A recent Arizona 20-ounce two/$1.50 promotion was successful in bringing added attention to the brand, resulting in a sales increase of 87% over the previous year.
“We also see huge increases in our Fiji and Smartwater brands,” Herbert said. “We see people willing to spend a little bit more, and that could be due to having a bit more in their pocket. They see these products as being healthier, more reliable, more trustworthy.”
Also, truenorth has seen continued success with sparkling waters, specifically Sparkling Ice, which its stores have carried for the last couple of years.
Water, in general, is a strong seller. This year, bottled water sales were up 50% over the previous year and Fiji jumped 64%, compared to 2014.
Comparably, energy drinks are still big, and although Monster and Red Bull are still the top sellers, truenorth has seen huge gains with NOS and Rockstar energy drinks.
The focus on healthier packaged beverages, including craft and natural carbonated soft drink options, has helped stem the mounting negative health perceptions surrounding traditional soft drinks, according to Mintel. This includes concerns regarding artificial sweeteners.
Of Americans who currently consume or are interested in craft soda, 54% indicate that natural or real ingredients are important to them, including 50% of parents, highlighting natural soda’s potential in the market, reported Mintel. Another third of U.S. adults are interested in seeing carbonated soft drinks with added benefits, such as protein, vitamins or minerals.
“Increased craft consumption is not only driven by its appeal to consumers turning away from regular carbonated soft drinks, but also from those looking for alternatives to alcoholic beverages,” Roberts said.
C-stores are primed for promoting natural and craft sodas, which are still alien to many consumers.
Among non-craft drinkers, one quarter said that they are unfamiliar with craft soda brands, craft soda flavors or just do not know what craft soda is, according to the Mintel report.
“Unlike regular carbonated soft drinks, which are facing negative perceptions of health-associated risks and artificial ingredients, primary consumer disinterest in natural and craft sodas is driven by product unfamiliarity and premium pricing,” Roberts said.
Comparisons to carbonated soda also hinder U.S. consumers from embracing craft and natural options.
“In fact, 42% of consumers worry that natural versions of their favorite soda brands will not taste the same, with 18% of non-craft drinkers not interested in craft products because they prefer the taste of regular soda,” Roberts said.
This provides an opportunity for c-stores to expand on packaged beverage category sales, while capitalizing on the trend for healthier alternatives.