NEW YORK -- The list of new products introduced by beverage-makers in the past couple yearsand the list of products scheduled to roll out this yearcould fill a reporter's notebook; in fact, it has. But with the goal of reaching more consumers and giving each one of them what they want, are these new drinks paying off for convenience retailers?
Not according to a recent survey of 11 c-store beverage category managers conducted by Deutsche Bank Securities Inc., New York. Few contacts expressed enthusiasm about recent and upcoming product innovation, confirming [image-nocss] our fear that cannibalization and complexity pose a real risk to volume and earnings growth, noted a bulletin from analyst Marc Greenberg.
The 11 category managers, representing 15,000 convenience stores, agreed with reports that carbonated-soft-drink (CSD) sales are waning; however, all but one reported overall category sales improved vs. the prior year. (The 11th retailer said sales were flat.) The vast majority of category managers attribute growth to the non-CSD category (energy, water), followed by beer and CSDs, the report states. This is not surprising, as the consumer shift from CSDs to non-CSDs has been well-documented.
The report offers the following analysis of the three above-mentioned subcategories:
Beer. Although beer didn't move the needle for the overall category, sales trends were flat to up slightly, with imports and flavored malt beverages leading the way. Hot package SKUs included 12- and 18-packs, with a recent rise in the 24- and 30-packs resulting from discounting on those packages. CSDs. Our category managers affirmed the decline in the CSD category. Regardless, the category is shifting favorably toward single-serve over take-home packages. The overpricing seen in 2004 appears to be reversing itself. Non-CSDs. Non-carbs drove the overall category growth with water up mid-teens and energy up 35% to 40% in some markets.The report also enumerates retailers' concerns with the onslaught of new products making its way into stores. Most retailers were wary of increasing shelf space for new products. The view is, they are your SKUsremove and replace at your own risk, the report notes. In other words, the onus is on the brand owner to win its way into the retailer's heart with a new product. Many category managers felt that few, if any of the recent new products were likely to move the dial for either Coke or Pepsi.
The report noted the following takes on some of the new products hitting shelves:
Bud Select: No incremental growth was expected from this brand. One Anheuser-Busch supporter claimed, If Bud has their name on it, they'll make it work. Display space for Select is coming from slower-moving SKUs. Coke with Lime: Doing OK, with shelf space coming at the expense of C2. One source thought Pepsi with Lime would stunt the growth of this brand. Coke Zero: Lackluster results. One retailer noted similar packaging to Coca-Cola Classic could confuse the consumer. Diet Coke Sweetened with Splenda: Recent popularity of Splenda left retailers more open to a successful product launch (not until later in the year). One risk mentioned was confusion between Coke Zero and this brand. Pepsi with Lime: Retailers concerned that it will take growth away from Coke with Lime with no one to benefit, just hitting some markets. Pepsi One: Contacts indicate, The first one didn't work, why would this one? while others state it has the potential to be a bomb. Only one source indicated that customers were already asking for the product.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.