The 99-Cent Solution

New "entry-level" packaging gives soft-drink sales a boost at BP
ATLANTA -- Can 99 cents improve sales, and perhaps even revive a category? That's the question Coca-Cola aimed to answer when it began testing its flagship products in 99-cent 14- and 16-oz. PET bottles in late 2008. The goal, according to Ed Coleman, assistant vice president, shopper marketing for Coca-Cola North America, was to develop an "entry-level package" for its products.

"Coca-Cola employs a packaging diversification strategy that matches the right package with the right shopper for the right occasions," Coleman told CSP Daily News. "For convenience retail, [image-nocss] Coke developed a unique three-tier sparkling immediate-consumption package strategy to fill the needs of customers who are thirsty, thirstier and thirstiest.

"The entry-level package offers an affordable, ice-cold Coca-Cola, appealing to teens and lighter convenience retail users. The 20-oz. package continues to deliver the breadth of our portfolio and appeals to the broadest shopper base. In addition, the 1-liter package is ideal for frequent shoppers seeking more ounces."

With a full year of testing under its belt, Coca-Cola has increased distribution of the products and is now investing in additional advertising to drive sales. It's a strategy, said Phil Smallwood, beverages category manager for BP's ampm convenience stores, that's proven successful for the chain.

"We had two primary goals associated with this introduction," Smallwood told CSP Daily News. "One was to reverse negative sales trends by driving new users into the category. And two was to provide our customers with value during these tough economic times."

The results?

"The package more than doubled our sales expectations, and we believe we accomplished both goals," Smallwood said. "We have experienced a reversal in our negative sales trend, attributing it to new younger customers entering the category. In addition, ampm believes it has built consumer loyalty and repeat business by providing a strong value offering."

Not that the product test hasn't raised concerns from retailers. Some have questioned Coca-Cola prepricing the drinks at 99 cents, while others are concerned the smaller, less-expensive drinks will cannibalize the sale of 20-oz. Coca-Cola products. Evidence suggests neither has been a major issue.

"The 14- and 16-oz. bottles of Coke are not pre-priced, rather the MSRP is 99 cents," Coleman said. Much of the advertising, however, shouts the 99-cent price point, about which Coleman noted, "We believe 99 cents is a powerful price point that can convert more shoppers, driving beverage and in-store sales in our customers' outlets."

Smallwood agreed: "Based on the economic environment, as well as recent category trends, the entry-level package was well timed for the market place."

Meanwhile, the concern about cannibalization also seems to have played out positively.

"Sales trend data reflects minimal affect on 20-oz. Coke sales," Smallwood said. "In fact, 20-oz. is still our most popular package with consumers and the package size that we use to build basket and margin dollars through promotional activity."

Coleman added, "The entry-level package is delivering 1 million incremental transactions per week in the convenience-retail channel."

So with innovative packaging one way to attract new business, would Smallwood welcome additional brands in the 14- or 16-oz. package?

"The consumer demands value in today's economic environment, and if you do not give it to them, they will find it someplace else," he said. "I think we will continue to see manufacturers innovate packaging to hit the consumers' value sweet spot.

Coke has also tested 99-cent, 16-oz. cans, and Pepsi is now testing 16-oz. cans for its Pepsi, Diet Pepsi, Mt. Dew and Diet Mt. Dew brands in c-stores in select markets. The cans are pre-priced at 99 cents.

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