Pop Goes the C-Store

Beverage companies wooing convenience channel customers with price, size

NEW YORK -- Beverage companies including The Coca-Cola Co., PepsiCo Inc. and Dr Pepper Snapple Group Inc. are trying to woo more shoppers at convenience stores and gas stations, according to a report in The Wall Street Journal, hoping that these more-profitable sales can provide some relief for higher commodity costs.

Drinks sold at those stores are typically higher priced per ounce than at supermarkets, said the report, so they generate higher profits. That's key for drinks makers now, as it blunts some of the pain from rising costs for plastic used to make bottles, [image-nocss] fuel to ship them and other ingredients.
But high gasoline prices and frugal shoppers have slowed c-store purchases, the report said. So beverage companies are trying to lure shoppers with smaller, less-expensive sizes, new flavors and package deals.

"The [immediate consumption] channel is critical for generating new profit," Katie Bayne, Coca-Cola's president of sparkling beverages in North America, told the newspaper.

The beverage industry has slowly lost some sales in the convenience channel, as consumers increasingly buy drinks in other places like dollar stores. According to Beverage Digest, 10.4% of sodas were sold in the channel in 2010, down from 10.8% in 2009.

To woo price-conscious shoppers, Pepsi is "aggressively expanding" the availability of 99-cent 16-oz. bottles to sell alongside the traditional 20-oz. bottles which sell for about $1.50, Tom Greco, Pepsi's chief commercial officer, told the Journal. The price matches the 16-oz. offering from Coke, a size the company says now makes up 20% of sales to the convenience channel.

Dr Pepper Snapple is also coming out with smaller sizes, the report said. Earlier this year, the company started selling six packs of cans, rather than 12, at many c-stores and gas stations, hoping the price of between $1.99 and $2.49 is easier to swallow than $4.99 for the larger size. The company also replaced two-liter bottles with one-liters that cost between 99 cents and $1.19.

"There's still that customer who has four quarters in his ash tray that he wants to scrape together and spend on a beverage," David McMichael, Dr Pepper Snapple's vice president of sales to c-stores and gas stations, told the paper.

To balance out lower-priced sales, Coke and Pepsi both offer liter sizes priced higher than the smaller 20-oz. drinks. They may also promote a drink as a combo meal with a convenience's food selection.

Pepsi, which is defending its leading market share in the convenience channel, has introduced flavors to target some core c-store customers, like Gatorade's Limon Pepino (lime cucumber) for Hispanic consumers. It also offers bundles of a drink and a snack from its Frito-Lay portfolio, so that customers who come into c-stores, rather than just filling up at the pump, are encouraged to spend more.

"If traffic declines, you have to get the basket size up," Greco said.