CHICAGO -- Is the traditional direct-store-delivery (DSD) truck going to be a thing of the past? Changes in the carbonated soft drink (CSD) market are favoring warehouse-delivery systems going into the future, said Marc Greenberg, a beverage and tobacco analyst with Deutsche Bank.
Addressing approximately 250 retailers and suppliers at the National Association of Convenience Stores' State of the Industry Summit in partnership with CSP earlier this month in Chicago, Greenberg said sales growth in traditional CSDs has slowed, while at the same time, the [image-nocss] fastest growth (and higher margins) are coming from sports drinks, bottled water and energy drinks, products typically delivered through the warehouse system.
In addition, improvements in controls, such as the use of radio-frequency [technology] and automated replenishment have given retailers a greater idea of what's in the stores, said Greenberg.
Throw in the fact that the number of items retailers are selling in their coolers has exploded (shelf allocation grows 7% to 8% annually, Greenberg noted), means that stores are stocking more items with declines in velocity. DSD works best with fewer products that sell fast, he said.
Besides addressing supply chain issues, Greenberg also talked about changes in the beer and wine categories. He noted the following trends:
Hispanics favor beer. At-home consumption is relatively high in this demographic, with the ethnic group's purchasing power becoming evident. Beer is a pre-game choice. Fifty-seven percent of wine drinkers have beer before watching a sports event. C-store profits are critical to the beer industry. Major brewers invest heavily in the convenience channel. A large gender gap exists between beer and wine, with the female demographic favoring wine. Wine growth is compelling. The projections for sales growth in wine is 5% vs. 1% for beer.Greenberg said that retailers should follow the money when choosing a direction for their beverage category. He said energy drinks, sports drinks and ready-to-drink coffee punch above their weight profit-wise and suggested ongoing participation in those subcategories.
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