CORONA, Calif. -- While most of the focus following the increase to packaged-beverage fees charged by distributors announced in January has been on Gatorade and Nestle Waterspurely because they are the two largest beverage companies using wholesale distributors as a means of deliverythey're certainly not the only suppliers being affected.
Many private-label brands, established mainly for their high margins, are subject to price increases. And smaller beverage companies are at risk as well, particularly those in the burgeoning energy-drink category.
It could squeeze their margins to where they're not as attractive, because right now, all they are is price-driven, anyway, Richard Hastings, vice president of national accounts with Hansen Natural Corp., told CSP Daily News. The Corona, Calif.-based company is the manufacturer of Monster and Lost energy drinks.
While Hastings said Hansen's brands, which are distributed by Anheuser-Busch Inc.'s wholesale network, will be minimally affected by the new packaged-beverage pricing model, he added that the greatest impact is likely to be on small warehouse-delivered brands.
They don't typically have marketing support, consumer promotions, awareness with athletes and things like we do and Red Bull does, for example. They go on price, he said. Well if the price goes up a couple dollars, are they still that attractive or are they not? Time will tell. I think some will fare OK and some will not be around.
Ultimately for energy drinks, however, Hastings sees little impact to the overall competitive playing field. DSD brands are the driving force when you look at the energy category, he said, noting that Hansen and three other suppliersRed Bull North America Inc., Coca-Cola Co. and Pepsi's AMP, No Fear and SoBe brandsown 90% of sales. It's that remaining 10% that may likely see a thinning of the herd.
Retailers are looking to some of these guys coming through the McLanes of the world as attractive because there's extra margin, said Hastings of the small warehouse-delivered energy drinks. They try them, they don't work, and then they try the next brand in six months. Historically that's the way things have been for last four years.
On Jan. 19, McLane Co., the convenience channel's largest wholesaler, announced it would revamp its pricing structure for the delivery of packaged beverages, shifting from a markup model to an activity-based-costing (ABC) strategy that sets a price based on the actual cost incurred during the receiving, product management and delivery process. Initially, it was suggested that new cost would be 9.5 cents per pound, with a minimum of $2.50 per case.
Since then, most of the top 10 industry wholesalers said they would fall in line with the change. They negotiated with Gatorade, Nestle Waters North America and other suppliers to ease the blow of such an increase.
For a look at how retailers are dealing with the price increases, watch for the May issue of CSP magazine.
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