Shop-A-Snak Food Mart Inc. made the decision two years ago to wrap its arms firmly around the beer customer. The Birmingham, AL-based chain of 37 convenience stores expanded its mix by increasing the number of doors it allocated to beer and other alcoholic beverages from four to six, with the exceptions of smaller stores (five doors) and a new 3,850 sq. ft. store format (a whopping eight doors). The chain found the extra room necessary to give greater emphasis to the budget beers and flavored malt beverages that were keeping tills so busy at Shop-A-Snak checkout counters.
The increased space helped boost sales but also facilitated the chain’s efforts to offer greater variety and position its stores as destinations for new items. The added room enabled Shop-A-Snak to give Anheuser-Busch two full doors, as well as give ample representation to the Miller and Coors brands. Even better, the chain was able to increase the average ring by carrying larger package sizes, namely 18-packs and 20-packs.
Robert Fuentes, director of marketing for Shop-A-Snak, says the 18s and 20s have been strong sellers; package sizes larger than 20-packs sell well in select markets, such as those near college campuses. Regardless, Fuentes says multi-packs offer higher dollar rings and "adequate" profit margins. This year, Shop-A-Snak is once again refocusing its coolers with an eye toward beer, but many of the SKUs responsible for driving growth in the beer doors two years ago have since faded from the forefront, especially many flavored malt beverages. Some of the segment’s heavy hitters remain, however, primarily those beverages bearing the Bacardi or Smirnoff label, according to Fuentes.
"The beer segment is essentially maintaining the same amount of space in our stores this year, but we’re reducing flavored malt beverages and imports based on the specific performance of those brands over the past year," says Fuentes. "We’re also doing a slight expansion in budget beers and maintaining our premium segment beers like Bud and Bud Light, since the premium segment accounts for about 65% of our beer business."
Fuentes has several other irons in the fire for reconfiguring the cooler doors to meet consumer demand and bump up company profits. He gets most excited discussing, appropriately, the energy segment. There, the chain has gone from one shelf to two full shelves—one for drinks in the 8-oz. slim-line can, and another for its big brother, the 16-oz. can. Even so, Fuentes wishes he had three shelves to allocate to this hyper-charged beverage segment. And that day may soon come if the segment’s growth continues on its current path.
Fuentes says he gets both "lines" at the same cost, so he charges the same retail and enjoys the same penny profit for both 8-oz. and 16-oz. energy drinks. But he’s not sure how long that luxury will last. Before that happens, he’d like to raise the retail on the 16-oz. to gain more margin points.
"Red Bull is the dominant player in the markets we serve, but Monster is right on its tail in terms of unit movement," Fuentes says. "Monster has been aggressive with promotions that drive movement. We’ve offered a two-for-$3 promotion on the 16-oz., and if you drink that much of that stuff, you’re going to be wired. But the demographics for energy drinks are basically 16- to 25-year-olds, and those kids are consuming the larger cans—it’s their coffee. Also, Pepsi has begun to ramp up its promotions and offer multi-purchase discounts for SoBe Adrenaline Rush and Amp."
The bottled water category also has been the beneficiary of increased attention at Shop-A-Snak. At about the same time the chain increased its beer doors from four to six, it devoted one full door to water, focusing on the brands from Coke (Dasani) and Pepsi (Aquafina). Shop-A-Snak also offers a "warehouse water" from its grocery wholesaler. Fuentes says the budget water trades the customer down to a lower ring but produces a better penny profit than the waters from the major bottlers.
While not experiencing the same "gold rush" volume it saw a decade or more ago, the carbonated soft drink category still performs solidly for Shop-A-Snak stores. CSDs have a good home at Shop-A-Snak, with a minimum of three doors per store; larger stores allocate four doors to CSDs. Fuentes says Coke and Pepsi have parity contracts enabling the two beverage behemoths to share equal space. But the cooler doors are just one part—albeit a big one—of Shop-ASnak’s beverage-merchandising strategy. The CSD vendors used to get secondary placements in cylindrical ice barrels near the point of sale, but Shop-A-Snak removed them because they were becoming a liability in terms of customer safety.
"We took them out two years ago because they were leaking and could create slip-and-fall situations," Fuentes says. "In their place we started putting in low-profile ice-down bins by the register. In the bins we position 16-oz. beers, CSDs, energy drinks and water. These products now receive the No. 1 selling position. The performance [of the bins] thus far has been above acceptable."
Shop-A-Snak worked with a local company to manufacture the bins, which measure about a foot deep and five to six feet wide. The bins require an investment of about $2,500 each, and the chain is negotiating with key suppliers to help offset some of the costs. So far the bins have made their way into a small fraction of Shop-ASnak’s stores. By year’s end, however, Fuentes hopes to have the bins in the majority of the chain’s 37 stores.
"They’re very versatile," he says. "On the back side of these units we have pegs and shelves for merchandising higher-margin items such as meat snacks, peanuts and salty snacks. We started that project a little over a year ago, and it’s something we can use to offer exclusive space to select vendor partners. It’s been a great way to capture customers at the point of sale who may not have intended to purchase beverages or snacks during that particular visit."
Filling up on flavors
In 2004, flavored waters accounted for just 3% of total industry single-serve wholesale dollars. But that number could double within the next five years, according to the Beverage Marketing Group, which made this forecast in a new report "The Flavored Water Market: Boom or Bust?" Sales could reach as high as $800 million by 2009, but the unpredictable nature of consumers might also mean the segment spikes for a few years then sinks into obscurity.
Bottled water remains the fastest growing major beverage category in the United States, and beverage marketers are seeking new areas of growth by offering variations on a theme with proven success. Flavored waters seem to be fitting that mold, driven by the growth of brands like Propel and Fruit20.
Coca-Cola tosses its massive hat into the ring with two new Splenda-sweetened flavors of its Dasani brand—Lemon and Raspberry. As of this month, the new additions are available in both 20-oz. plastic bottles and six-packs of 500-mL plastic bottles.
Beer as status symbol?
Is there psychology behind a beer purchase? Consumers have their favorite brands, while others have to stick to a certain budget—but there are ways to get customers interested in other brands not
The Integer Group, a promotional marketing agency which counts Coors Brewing Co. among its clients, conducted studies last year to help understand how and why beer drinkers make the decisions they do. The "Beer Run" studies rounded up a group of frat guys, gave them a fistful of cash and sent them out to "the store" (i.e., a mocked-up convenience store) to gauge their behavior and see what factors influenced their decisions. The results were eye-opening.
The studies found that there were essentially three "modes" in which beer drinkers make their purchases: Me Mode ("I’m buying this for me to consume"); We Mode ("I’m buying on behalf of others"); and She Mode ("I’m making this purchase in consideration of a female"). The exercise afforded a deeper understanding of how other variables—especially the "woman factor"—could affect and potentially unseat a pre-disposition toward a certain beer.
"It’s one thing if a guy is running into a store to get a six-pack of Bud for himself," says Meg Kinney, senior vice president, research and account planning for The Integer Group. "But if Coors Light has signage or some other message in the store along the lines of ‘Improve Your Chances with Her with Coors Light,’ then maybe he’ll change his mind and go with Coors Light."
Bump Williams, Information Resources Inc.’s executive vice president, general manager – global consulting for beer, wine and spirits practice, says beer purchases—especially when made when others are involved—reflect on the purchaser.
"Image is everything when it comes to beer," says Williams. "And that’s why I don’t see private-label beer brands really taking off. If I were going to buy beer for a party, I wouldn’t want to embarrass myself with ‘Jewel-brand’ beer. In that case I’m going to buy premium because it’s a reflection of the buyer."
Big in 2005: ‘Stuff that goes in drinks’
One of the most recent innovations to invigorate the beverage category isn’t a beverage at all. Andrea Myers, vice president of marketing for 35-store Kocolene Marketing LLC (Seymour, IN), says 2005 is going to be a big year for "stuff that goes in drinks"—individual packets of vitamins, flavors or other value-added essentials that get poured into single-serve bottles of water.
"You have Crystal Light On the Go packets, and Nestl Waters just offered a little vitamin pack—the manufacturers are finding cool ways to innovate," she says. "These packets just clip onto the beverage cooler doors with suction cups and retail for 15′ each.
"I admire their marketing," Myers continues. "[Manufacturers] are selling more water, but they’re also finding new ways to increase the sale and the profit per transaction."