Managing Packaged Beverages

New products and core beverages will always drive cold vault sales. So when is the right time—and how often does that right time come—for category managers to reset them?

“We do cold vault resets twice a year, which means we’re making fairly minor adjustments all the time,” said Richard Ginther, category manager for Kum & Go in West Des Moines, Iowa. Those resets happen early in the year, and then again during August and September. Either of the annual resets could see a 10-15% change in the cold vault product selection across the chain’s 425 stores. The company uses category management as its guideline.

“We do not put ourselves in agreement situations,” said Ginther, who that added his stores are now doing a solid 12-pack and two-liters business. “We focus on what sells.”

Iris Yost, president of Yost Family 7-Elevens in Las Vegas, said packaged beverage sets should be reset as often as consumer demand requires.

“A general rule used to be twice a year for summer/winter changes. We certainly continue to make considerable product assortment decisions based on seasonality,” said Yost, who operates five stores. “However, it may be necessary to make changes in categories much more regularly, being proactive and resetting for shifts in consumer habits.”

Terry Messmer, director of merchandising for NOCO Energy Corp. in Tonawanda, N.Y., operator of 32 NOCO Express locations, agreed with Yost.

“Sometimes what we’ll end up doing—if something looks like a hot new item—is entertain a conversation with a supplier. Then, if we have room and I think it’s got legs, we may use an open-air cooler where we have extra space,” Messmer said. “Otherwise, we usually begin the process in the beginning of September for the new year and ideally get our sets done by February.  It’s harder to do sets midyear due to all the contractual obligations. Once you’re done with the layout, all the space has been dedicated.”

Avoid Cooler Confusion
The 55-unit Rutter’s Farm Stores chain in York, Pa., does a major reset in March after both the NACS show and contract negotiations and a smaller-scale planogram adjustment in July.

“There are late entries in the springtime and we want to make sure we don’t miss those opportunities,” said Rutter’s Director of Marketing Robert Perkins. Between 10% and 20% of the cooler will change during the year’s first reset, he added. “I think that’s what sparks a lot of the interest.”

Recent additions at Rutter’s have included Nantucket Nectars, some of the larger sizes of Red Bull and Monster Nitrous, all line extensions for the Pennsylvania chain.

Additional minor adjustments throughout the year are possible, Perkins added, because no one likes to miss an opportunity. “That said, you don’t want to be changing things in the middle of the summer and all of a sudden confuse customers,” he said. “We may make plans to change something around the end of August and September.”

Rutter’s stores average from 7-12 doors for packaged beverages. Sales floor displays generally feature 12-packs and two-liter bottles. “The 12-pack is a tougher and tougher sell because of the pricing structure that the companies have gone to,” said Perkins, “but two liters is still a viable option.”

Supplier promotions play a role in shaping the set, Perkins confirmed. “We try to plan out a yearly calendar on promotions, and we try and keep some variety within all the subcategories. The promotions we circle around are to drive volume, so it’s mostly two-fers.”

Owning the Vault
For Scott Zaremba, president of Zarco 66 Inc. in Lawrence, Kan., a watershed moment in his company’s history came six months ago. “It was taking over the cold vault. For a lot of years—because we’re not very big—the major distributors like Coke and Pepsi always liked to rule the roost, so we would duke it out with them. We would go back and forth between the two to find out who had the best deal and then that entity would get priority for the cooler items.”

About two years ago that all changed. “We took over our cooler shelves and dictated to them what they were going to do, and where they were going to do it,” Zaremba said of his nine stores. “We just said, ‘That’s the way it’s going to be, take it or leave it—and if you don’t want it that’s fine, we’ll take you out and somebody else will take your space.’ That has been very successful for us.”

Though Zaremba described his relationship with both Coke and Pepsi as outstanding, he feels he was able to get the layout he needed to be successful only after taking charge. “For years we felt as if we didn’t have a choice when it came to the cold vault until we finally said, ‘We don’t like the cooler sets. We don’t need 40 fronts of Coke or Pepsi.’ The variety in the category now has increased dramatically, and we need to put in the products that are hot, that we think are the viable items we need,” he said.

One major and unorthodox change at Zarco has been the creation of a diet door. As Zaremba explained, “We don’t have a door of Diet Coke and then a door of Diet Pepsi, a door of this diet and a door of that diet. We’ve segregated the cooler into items that make sense for us,” he said. “We in the little world have not had control over that for years, and finally we just took control. It’s a revolution.”

All told, Zarco added in the neighborhood of 60 items and booted the products that weren’t selling but were being pushed on category managers. The change has also seen a stronger presence of energy drinks and waters.

The move took resolve, Zaremba admitted. “That’s the hard thing to swallow—to set your foot down and say, ‘Look, I own it, I’m paying for it, who wants to be the lead in what we’re doing? And who wants to go with the program I’m putting in place, because this is what we’re going to do,’” he said. “We can’t argue with the results. We think the layouts we’re doing are better than what they had, and that overall the category will improve. But you have to be willing and able to stand up and back that up.”

That said Zaremba was careful to also have a backup plan. “You always have to make sure you have access to those top products—even in limited varieties—from another vending source,” he said. “That’s the plan we had. We had a backup source, so we were not going to be out of Pepsi, Diet Pepsi or Mountain Dew. And we weren’t going to be out of Coke, Diet Coke or Dr. Pepper. You have to have a contingency plan, otherwise it will adversely affect your business tremendously.”

Zaremba said his cold vault is reassessed continually. “It’s almost a weekly tweak because we have control and there is no fight over who, what and where things are laid out. That makes it much easier to move things around and decide what you want to do continually, and the financial obligations are not as heavy as they were before,” he said. “Things are changing all the time, and if something becomes hot, well, that’s an item that may need multiple facings. We don’t have unlimited resources and we don’t have unlimited buying power. So we have to be smart and agile all the time.”

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