pack outlets

Singles may account for the bulk of a convenience retailer’s packaged beverage sales, but multi-packs represent a home-run growth opportunity as “gateway items” to other impulse purchases.

About three years ago, Diane Clark surveyed her market to see her conveniencestore rivals getting aggressive with multi-pack soft drinks: large warm displays,both inside and out. Her 27 Mr. Mike’s Markets already had that “arrow in theirquiver” at the time, but they just hadn’t promoted multi-packs very heavily.

“We had always had them in the stores as a convenience to customers,” says Clark, director of retail for the Leominster, MAbased chain, which operates stores inMassachusetts and New Hampshire. “The competitors in our area started going with huge outdoor displays with real competitive prices. That made me realize that maybe I needed to be more aggressive.”

And aggressive she got. All her stores now offer “very competitive” price points on soft drink multi-packs. She also worked with vendors to offer “two-for” deals, a strategy that has helped spur sales of soft drinks and other complementary categories, like packaged snacks, for instance.

“We’re competitive with grocery stores in terms of our pricing, and being that competitive with 12-packs of soda has really helped our business,” she says. “We see our numbers change dramatically when we run a two-for deal. More and more consumers are thinking of convenience stores as not just grab-and-go outlets, although we still do quite a bit of single-serve business.”

Most of Clark’s merchandising strategies for driving multi-pack sales are in-store only; she’s never been a fan of the towering displays out front or by the fuel island. Extreme temperatures—especially during cold New England winters—can take a toll on the packaging and the product itself, she suggests, thereby defeating the purpose.

“It’s almost like lost inventory out there,” she says. “From my perspective, the customer has no real comfort level purchasing them outside. Besides that, we’re trying to compete with the Hesses and the Irvings of the world and we can’t offer our multi-packs as a loss leader.”

Most of the soft drink multi-packs sold by Mr. Mike’s are merchandised warmsince cold multi-packs are offered in fewer than half of its stores. In Massachusetts,Mr. Mike’s cannot sell beer, so coolers have a little more “wiggle room” tooffer multipacks cold—but never at a valueadded price. In its New Hampshirestores, where alcohol sales are permitted, Mr. Mike’s offers soft drink multi-packsonly warm to accommodate multi-packs of cold beer.

Taking a field trip
Clark’s multi-pack strategies depend on vendor relationships, but they’re alsoinfluenced by “in the trenches” feedback gathered with the help of her storemanagement team. For example, insights into pricing of 12-packs convinced herto maintain “pricing parity” on specials.

“When I’m out in the field and I see customers purchasing 12-packs, I talk to them about pricing,” she says. “I get a lot of feedback from that and from our store managers, and I’ve learned that we have gained a lot of customers because they’re upset with other retailers that charge more for a single package when they have a special. If we do a two for $6 promotion but the customer only wants one, for example, they can buy it for $3. With some other stores, it’s almost like customers are being penalized with a higher price for not buying the second package.”

When Mr. Mike’s Markets runs specials on multi-packs, displays are positioned up front so the customer can’t miss them; when warm multipacks are “off special,” they’re typically positioned on an endcap next to the 2-liter bottles.

Whenever possible, the chain advertises multi-pack pricing outdoors, but Clark says town ordinances can be fairly restrictive about exterior signage. To combat that, Mr. Mike’s has employed digital displays at its gas pumps to inform customers about multi-packs or whatever other items are on special each month.

Taking a field trip
Unlike Mr. Mikes’s, the Cubby’s convenience stores run by Cubby’s Inc.(Omaha, NE) do use multi-packs as a loss leader. The company, which has rootsin the grocery business, is not afraid to sell multi-packs at cost, accordingto President Dick Cosaert, and typically prices its soft-drink multi-packs inline with the everyday pricing seen in many supermarkets.

“We like to keep our multi-packs at a 10% to 12% profit margin, but there have been instances where we’ve gone to cost,” says Cosaert, who has 25 years of experience in grocery retailing to his credit. “Sometimes we’ll advertise them at cost to spark some excitement in our stores. We’ve always been aggressive on things like big-pack pop, beer and milk, as well as bread and the snack chip category.

“This strategy has worked for us over the years,” he continues. “A numberof grocers in our market are getting into the gas business, so we have a cloudymix of things we’re dealing with. We’ve done well with multipacks compared tothe grocers simply because, in most cases, we’re easier to get to than a lotof the big grocery stores and the customers don’t have to walk as far.”

Energy boost

Beer and soft drinks aren’t the only members of the packaged beverage categorydriving sales through multi-packs. The energy drink segment—the hyperactivedarling of the cold vault the past few years—is causing a stir of its own.

Carey Alexander, vice president of Kentucky Lake Oil Co. (Murray, KY),has beefed up his energy drink set with fourpacks from Red Bull, Monster,Adrenaline Rush and others. Some are merchandised warm; some are soldcold. Regardless of their position in Alexander’s 11 Pocket’s ConvenienceStores, energy drink multi-packs are hot.

“They’re doing well everywhere, but we’re in two college towns and theenergy drinks thrive there,” he says. “[The students] use them as mixers,and the younger guys drink them when they work out. We’re carrying four-packsof sugar-free and regular, and it’s a much bigger ring: $7.49 or $7.99for a four-pack compared to $1.99 for a single.”

Last year, Red Bull was Pocket’s No. 1 growth item. This year, Monstertook the crown. He predicts that next year, despite the flood of new entrantsin the segment, retailers will have to become much more choosy in pickingenergy drink SKUs and run only with “the horses that bring in the money.”

Goose Creek Food Stores (Salisbury, MD) is just beginning to discoverthe power of energy drinks. Until now, energy drinks didn’t have a permanenthome in the cooler; stores sold them out of ice barrels by the point ofsale. Greg Stutzman, director of marketing for the eight-store chain,says resets this fall will provide energy drinks, water, isotonics andother more “health conscious” items with greater visibility.

Flu shot in a can

With the groundswell of concern surrounding a potential “killer flu” outbreakthis season, consumers may be flocking toward any product that claims tohave high doses of flu-fighting ingredients. The packaged beverage categoryprovides plenty of options, ranging from functional beverages
(stuffed tothe gills with vitamins, fortified minerals and antioxidants) like YES!and Formula 7 Energy Drink found on 7-Eleven shelves, to new entrants likeDefense Vitamin & Mineral Supplement from Brain Twist Inc., the pioneeringbeverage company that introduced “Liquid Cereal” to the world (see Slurpyour cereal, Jan. ’05, p. 14).

Defense utilizes FreshCan technology, a patented delivery system specificallydeveloped to contain an air-and water-tight plastic container called theFreshCan Wedge, according to Brain Twist (www.brain-twist.com). The FreshCansystem stores a blend of vitamins and minerals in its protected environmentuntil “activated” by the customer. The vitamins are not dissolved in thebeverage until the tab is pulled, activating the FreshCan Wedge and ensuringmaximum potency and immune-boosting efficacy.

Natural Orange or Lemon Lime Defense Vitamin & Mineral Supplements,which come in 14.5 fl. oz. cans, contain a unique formulation of zinc,vitamin C, pectin, vitamins A, B2, & E and calcium to help defendagainst germs that cause common colds and influenza. Defense, which foundits way onto 7-Eleven shelves this fall, has an SRP of $2.49.

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