PLANO, Texas -- With an expanding test of its Venom Energy Drink at a prepriced 99 cents, Dr Pepper Snapple Group has done what many convenience-store retailers have tried to avoid: commoditize energy drinks and give consumers a reason to look for the lowest price.
The price change, which is accompanied by a repackaging to a standard 16-oz. can, echoes DPSG’s general reluctance to increase pricing in an effort to drive unit sales over dollar sales.
Pricing Disparity
“DPSG carbonated-soft-drink dollar sales were up a soft 0.7% during the [4-week period ending May 16] as a result of average equivalent price increases below its peers of only 3.0%,” beverage analyst Bonnie Herzog of Wells Fargo Securities wrote this week. During the same period, Coca-Cola boosted prices 4.5%, while PepsiCo prices grew 5.8%, according to Herzog’s report.
Asked about being behind its competition on pricing, CEO Larry Young said, “We take price anywhere we can,” attributing the seeming disparity to growing packaging changes by Coca-Cola and PepsiCo.
“We know others … are reporting some higher price mix from some of their smaller packages, which we're not completely in,” added chief financial officer Martin Ellen.
DPSG did not respond to inquiries about the prepriced Venom test. The company’s energy drink has historically rated near the bottom of Wells Fargo Securities’ pricing gap chart (see chart below), and dropped off significantly in late 2014.
Over the years, c-store retailers have said they’d prefer not to undercut the price of energy drinks to maintain the category’s premium-price—and high-margin—positioning. Venom Energy has struggled to build its name in the category since being introduced in early 2008 in 16.9-oz. resealable aluminum bottles.
Category Breakdown
Meanwhile, CSD unit volume for all manufacturers fell 1.8% in all retail channels during the 4-week period, while dollar sales were up 2.6%, according to Nielsen data cited by Wells Fargo Securities.
Energy-drink dollar sales rose 11.7%, and unit volume grew 8.7%, largely on strong results from Red Bull, which saw dollar sales grow 14.1% during the period. Monster Energy, which is currently transitioning its distribution from Anheuser-Busch to Coca-Cola, saw a 9.7% increase in dollar sales and 9.5% in unit volume.
Craft and import brands continued to drive growth in the beer category, according to the report. Beer dollar sales were up 3.6% during the 4-week period, although AB InBev dollar sales grew only 0.9% and MillerCoors was flat.
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