Brands, Promotions Benefit CSDs

Concern For CSDs

16 million fewer Americans are drinking sugary soft drinks today compared to six years ago (68% of adults versus 76%).
7.8 million switched to diet soft drinks.
24 million have moved to bottled water.
17 million are opting for energy drinks.
11 million have tried sports drinks.
16 percent of Americans are concerned about high-fructose corn syrup.
15 PERCENT say they are worried about artificial sweeteners in diet drinks.
Source: Mintel International

Concerns over health and childhood obesity, together with greedy governments looking for new tax revenue, have pushed many Americans away from carbonated soft drinks (CSDs). But convenience store retailers can still do well with soda by leveraging the power of brands, selling more conveniently-sized bottles and bundling drinks with food.

Many have come to view soda as the new tobacco. For example, in Colorado, the state Senate has given final approval to a bill that would eliminate a sales tax exemption on some soft drinks and candy. Similarly, throughout New York, a proposed soda tax was “falling flat” on the business community, quoting a local business leader who called it a “strict revenue grab designed to crush retailers.”

For 2009, carbonated soft drink sales were down 1%, according to Information Resources Inc. (IRI) data. But retailers seem optimistic that 2010 will be a rebound year for CSD sales.

John Gaudrault, senior vice president of Pittsfield, Mass.-based O’Connell Oil, pointed out that the category is still heavily driven by big brands.

“Incremental sales and line extensions have increased CSD sales,” said Gaudrault, who oversees 37 stores. Leading the way, he noted, has been Coca-Cola’s test launch of a 16-ounce bottle in 2009, which he sells for 99 cents. “Obviously it’s four ounces less than the classic 20-ounce bottle, but it’s the right size and right price in this downturn of an economy.”

Karen Riley, vice president of operations for nine-store Jiffy Mini-Marts Inc. in Terre Haute, Ind., said that while many around the country are indeed seeing soda sales slipping, her chain has seen growth and her forecast for 2010 is bright.

“I have found this category is driven by new promotions. For example, when a customer buys any Pepsi product—it can be soda, juice or energy drink—we give them a punch card that enables them to earn a free drink,” Riley said.

These promotions generally run for two weeks. Jiffy stores also cross-market CSDs with snack items, such as a 20-ounce Pepsi with a hot dog. Recently, Jiffy began including Pepsi’s Daily Express sandwich line in its deals. A coupon lets customers get a 20-ounce Pepsi or Mountain Dew for $1 when they buy a sandwich.

Gaudrault suggested that customers are drifting back to carbonated beverages. “Consumers are more health-conscious, and they’re not drinking as much carbonated soda as they used to. But a lot of people have gone away from flavored water and isotonics and fallen back a little bit.”

For 2010 Gaudrault advised marketers to focus on offering value. His stores are doing well with bundle programs, combining a 16-ounce soda with a fresh-made wrap for $3.49 to $3.89. “The consumer who has bought the bundle now has this new Coke bottle in his hand. Once this happens our mission to get the product in their hands and give them a reason to return has been accomplished.”

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