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Although non-alcoholic ready-to-drink (NARTD) beverage consumption has maintained stability over the past decade, there have been a series of meaningful shifts among categories, according to Bonnie Herzog, senior analyst of Beverage, Tobacco and Consumer Research for Wells Fargo Securities, LLC, whose keynote speech, “Evolution of the Beverage Shopper,” kicked off the 2013 Beverage and Beer Retailing Summit hosted by Convenience Store News and Progressive Grocer on June 6-7, 2013, in Wheeling, Ill.
According to Herzog, large-format retail remains the dominant liquid refreshment beverage (LRB) distribution channel, yet supermarkets and vending have lost share of CSD volume while mass merchandise, convenience and gas have gained share.
Of the factors that negatively impact sales of NARTDs, weather remains a significant one, as precipitation and lower temperatures tend to discourage activities associated with high-volume beverage purchases, such as barbeques, family get-togethers, etc.
Based on a survey of 10,000-plus beverage retailers, sales were up 6 percent for Memorial Day 2012 versus only 2 percent for Memorial Day 2013, as this year’s holiday weekend was decidedly wetter and colder in the “Top 15” cities. Further, 60 percent of respondents indicated that weather has had a “much worse” impact on Q2 beverage sales thus far.
Additionally, Herzog noted that the beverage promotional environment remains high, particularly during the Memorial Day holiday, with survey respondents indicating that promotions were up 4.6 percent this year versus 3.1 percent during the same time last year. Respondents ranked Energy as the No.1 most promoted category, followed by Colas and Enhanced Waters/Sports Drinks.
Seventy-three percent of respondents indicated that multi-purchase promos are up this year and are showing a positive impact on volume, though take-rates for multi-promos are declining, with consumers becoming fatigued by this method, as they want value not necessarily volume. Herzog added that pricing and displays have the greatest impact on sales, as most consumers make their purchase decisions in-store.
As expected, health and wellness trends remain a key factor in the beverage category. As consumers continue to seek lower calorie and more natural beverage products, manufacturers are responding by aligning their messages with balance and healthy, active lifestyles, as well developing innovative sweeteners and brand and product extensions that provide more low- and no-calorie offerings.
Examples of this trend include Dr. Pepper Snapple’s TEN platform, Coca-Cola’s global commitment to fight obesity, and PepsiCo’s partnership with Senomyx to develop sweetener technology that could potentially lower sugar, HFCS and calories in beverage offerings.
In terms of the competitive environment, Herzog concluded that Coca-Cola is the best positioned company overall by virtue of its leading global market share and distribution system, dominant trademark brand, comprehensive LRB portfolio and occasion-based beverage strategy. Dr. Pepper Snapple holds its ground in the U.S. with strong flavored CSDs and improving teas, as well as the potential of its TEN platform to drive volume growth over time. PepsiCo, however, needs to improve in the beverage category to accelerate its shares higher, Herzog added, as the company relies heavily on snacks to drive growth and profitability.