DALLAS -- The battle for the most important beverage in the cold vaults of convenience stores has never been as fierce as it stands right now.
And while carbonated soft drinks (CSDs), bottled water, energy drinks and beer are the top contenders going into 2007, health and wellness beverages are expected to drive the industry for the next few years, according to Gary Hemphill, managing director and COO, information services, for Beverage Marketing Corp., New York.
Despite that [CSDs] is the largest category by a factor of two, [image-nocss] it's been decaying, Hemphill said during CSP's Beverage Category Roundtable Meeting held in Dallas this past week. Bottled water is huge. Health and wellness beverages will continue to drive the beverage industry through 2010. The strongest growth is projected for bottled water, sports beverages, energy drinks and RTD tea and coffees.
Those conclusions reflect the shift retailers have been seeing over the past few years, as cold-vault mainstays such as CSDs and beer have hit flat or declining growth periods and retailers have shifted shelf space to newer categories and product.
It's the nature of the beast, said Greg Olson, business manager for Circle K Phoenix and a participant in the two-day meeting. The business of the convenience store is driven by innovation. Business changes and you either have the processes in place to make those changes or you don't.
Presenter Hemphill said, Increasingly fragmented need-states and usage occasions have opened up new product opportunities over the past four decades. [Additionally], packaging forms have proliferated to accommodate consumers' desire for convenience and brand/retailer needs for differentiation.
The CSD category is struggling to retain its once-enviable growth path, Hemphill said.
The [CSD] category hasn't kept pace with U.S. population growth, which averages about 1% per year. We use that as something of a benchmark, he said. In 2005, CSD volume actually dropped for the first time in history, and once all the data from 2006 is collected, it's expected to have dropped again.
The industry thought diets were going to be their saving grace and the category was going to grow, said Hemphill. That worked for 2002 through 2004, but ultimately, it didn't work.
He added, however, that is appears the category has found the right path more recently, signaling a likely comeback this year. The category is moving in the right direction to get it growing again, he said. CSDs will address different need-states [with new products this year]. Absent of this, we expect CSDs to be down again in 2007.
Those new need-states, according to Hemphill, include energy, reinvigoration, mood enhancement, wellness and weight management.
Similarly, beer saw about 1% growth in 2006, after losing 3.0 share points to wine and spirits from 2001 through 2005.
2006 was a fairly significant rebound [for beer], said Hemphill. The category's going to be up 1%. He noted that consumers continue to favor light beers over regular beers, while also trading up to premium and imported beers, paving the way for larger market-basket totals for retailers.
For more from the meeting and input from retailers on how their dealing with these trends, watch for the March issue of CSP magazine.
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