New SKUs Challenge Packaged Carbonated Beverages

Today’s huge selection of drink choices is taking a toll on the sale of packaged carbonated beverages. In 2007, packaged carbonated drinks made up 25.4% of the U.S. beverage segment, but that figure dropped to 22.1% by 2012, according to Beverage Marketing Corp. (BMC).

“The category has been soft for a number of years, and our expectation is that it’s likely to continue over the next several years,” said Gary Hemphill, managing director of research for BMC, a New York City organization that provides consulting to the industry. “Consumers aren’t going to drink the same product all the time. “They may be buying a drink from your store, but it won’t necessarily be a carbonated beverage. It may be a sports drink, an energy drink or bottle of water. The marketplace has grown and expanded. There are many more products available.”

Healthy Offerings
Iven Sharrak owns 13 Detroit-area convenience stores that operate under different names. These days he gives more vault space to energy drinks and water, as he watches carbonated beverage sales slip. “The trend is toward energy drinks,” he said. Everybody’s buying them. People like the taste and they mix it with other beverages.

As for waning enthusiasm surrounding carbonated drinks, “it seems that people are more conscious about the sugar,” he said.
Historically, soft drinks have been marketed as “refreshment” with no mention of health benefits. Today shoppers want better-for-you options amid growing health concerns, and manufacturers have responded by offering products enhanced with vitamins, minerals and antioxidants.

“As people become more aware of what they consume from a health standpoint, they’ve migrated to products they believe to be healthier,” Hemphill said. “However, carbonated soft drinks are still the best-selling beverage category in the U.S. People drink more soft drinks than any other beverage.”

The development and diversification of non-carbonated packaged beverages isn’t expected to slow. “That’s where the growth is,” said David Portalatin, convenience store analyst for NPD Group, a global research organization. “With all the stuff going on with flavored and vitamin-enhanced water, the lift in the fourth quarter [2012] was in plain water. Not flavored, not enhanced; just water.”

Still Big in the Vault
At Plaid Pantry, the 100-plus store chain based in Beaverton, Ore., energy drink and packaged tea sales continue to flourish, but carbonated soft drinks remain important.

“They have fallen a little bit, but they are still a predominant area of the vault,” said Butch Fulton, merchandising manager for Plaid Pantry. “Five years ago they were about 65% of vault, but now it’s down to about 45%.”

Fulton believes in promoting the products as much as possible. “We are probably the promotion leader in the Northwest,” he said. “We run promotions all the time. We take every coupon the manufacturers bring out and put them in the stores so consumers can take advantage of them.”

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