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Sales in the long-established carbonated drinks segment have been flat to slightly down over the past five years, according to Mintel, a leading market research company. During 2003-08, Mintel estimates the regular soda segment lost 15.6 million consumers aged 18 and over, and the diet soda segment only added half as many, or 7.8 million adult consumers.
The Chicago-based research company also found 34 percent of all adults who purchase beverages started drinking more water and fewer carbonated beverages to manage weight or other health conditions such as diabetes compared to 2006, as outlined in its “America’s Changing Drinking Habits” report (February 2009).
Specifically in the c-store channel, dollar sales in carbonated soft drinks were down 1.9 percent (to more than $8.3 billion), while unit volume declined 5.5 percent (to more than 5.5 billion) for the 52 weeks ending Dec. 27, 2008, according to Nielsen Company Scantrack data. Nevertheless, the category is still the largest in packaged drinks -- more than twice as large in dollar sales and more than three times as large in unit sales as the next-largest subsegment, alternative drinks -- and c-stores have certainly not written carbonated soft drinks (CSD) off.
However, many recently downsized the cooler doors devoted to CSDs -- several have gone from three doors to two, including some of the 12 stores operated by Arguindegui Oil Co. in Laredo, Texas.
“We basically have a Coke-dominant door and a Pepsi-dominant door, and anything new that gets brought into the category has to be worked into that existing space,” said buyer Jaime Fuentes. “The door that took a hit was taken over by things like Gatorade, VitaminWater and Sobe. We saw a lot of customers move on from traditional carbonated sodas to a lot more flavored teas, bottled water, calorie-free enhanced water and juice drinks. A lot more of that is going out of the stores now.”
The CSD category seems to be having success reverting back to its core. In January 2009, both Coca-Cola and Pepsi launched new advertising campaigns for their base brands, and Pepsi went a step further with a logo and packaging redesign “intended, in part, to strengthen and simplify the brand’s presence on the shelf,” according to Mintel.
Many convenience stores said they would not be unhappy if the category’s line-extension proliferation started to taper off.
“I know you have to do a little of that to stay competitive, but the problem right now is there are just so many flavors,” said Edy Diaz, general buyer and supervisor for Petroleum Sales Inc., with 11 stores in Greenbrae, Calif.
Phyllis Simpler, operations manager and buyer for Medford, Ore.-based Minute Market, with 13 stores, tried a lot of the new Coke and Pepsi products, and “Pepsi used to have a new flavor every month or a new line of products, but I didn’t see any real upswing in sales with them,” she said. “Their best sales with us still end up being in the packages we’ve always sold -- the classics, the original recipes.”
Fuentes found with Vanilla Coke, for example, “nobody bought it. They reinvented the wheel, but they wasted money on the latest and greatest. People buy regular Coke all year long – there’s no need to mess it up.”
What is sitting well with c-stores so far is reduced sizing in sodas -- the trend plays into portion control and reduced costs, which are two customer concerns right now.
“The 14- and 16-ounce sizes at good prices seemed to have helped the category some for us,” noted Jim Schacklett, general buyer and supervisor for Shay Oil Co. Inc. in Yuma, Ariz., with 17 stores. “It’s still early to tell -- Coke has had their 16-ounce version out for eight months, and Pepsi about three months, and the 14-ounce size has only been out since February. But I think it’s good that we can now offer the younger core consumer better prices on soda.”
Dickie Mayes, director of retail operations for Cockerham Oil Co., Inc., with seven company-owned stores in Galax, Va., also mentioned “a small upward trend in manufacturers’ downsizing their soda bottles. It helps us get a lot more aggressive on the retails,” he said.
The promotional aspect of CSDs, as well as their lower relative prices to energy drinks and more niche beverage categories, is also predicted to re-fizz the category in these economic times. Even convenience giant 7-Eleven recently reported in The Dallas Morning News that customers are buying more Mountain Dew, trading down from more expensive energy drinks and waters.
As consumer groups, African-Americans and Hispanics like CSDs, so c-stores with a good base of these consumers have a bigger opportunity in the category. According to Mintel, African-Americans and Hispanics consume more glasses of regular carbonated drinks per week than Caucasians or Asians -- a difference of approximately one to two glasses more per week.
“Here in south Texas, our Hispanic customers keep our carbonated beverage category alive and well,” said Fuentes. “A lot of them get used to something and for better or worse they don’t change -- especially when dealing with the older generation. I speak from experience. I couldn’t get my diabetic grandmother to stop drinking root beer.”
David Tooley, VP of marketing and general buyer for Tooley Oil Co., based in Sacramento, Calif., with 26 stores, finds his Hispanic customers are big purchasers of fruit soda flavors, particularly from Fanta. “What’s really great is Coke has it on promo right now -- 99 cents for 20 ounces, so that is picking up,” he said.
Overall, it’s true soda sales are not what they used to be, but Diaz believes they are a mainstay serving more focused customer needs.
“With some things -- like pizza -- you just have to have a soda,” he said. “I don't think that will change.”