Boosting Beverages

Retailers, CPG companies rethink how best to turn up the spigot on their liquid assets.

The beverage aisle is undergoing a radical transformation in regard to what products consumers are buying, a pattern that suggests grocers need to rethink how they’re presenting beverages to their shoppers.

It’s no longer simply Coke versus Pepsi — it’s traditional carbonated soft drinks versus upscale sodas, enhanced waters, juices, teas, milk and energy drinks. Some are shelf-stable and some are refrigerated, so they’re merchandised in different parts of the store, according to tried-and-true models that some would argue have been rendered obsolete.

Remember the old tagline for orange juice, “It isn’t just for breakfast anymore”? Much the same could be said for nearly every other beverage in the store as dayparts have collided, eating occasions have changed and new products have evolved to address consumers’ unique needs.

If you can put a cooler in the middle of the pet food aisle, why can’t you do the same for beverages in center store? A category management innovation like that could make it easier for shoppers to make side-by-side comparisons and easily see what all of their beverage alternatives are.

More Pop For the Buck

“We’ve reached a point of critical declines,” admitted Paddy Spence, CEO of Los Angeles-based Zevia, the stevia-sweetened soda that continues to rise in popularity. “Retailers have to think about a new blueprint for CSD. Brands like Zevia are becoming increasingly important. Retailers can make money — it doesn’t have to be a loss leader.”

During a booth visit at the recent Natural Products Expo West, in Anaheim, Calif., Spence said his sales team touts Zevia to retailers as a greater profit driver than traditional CSDs. “People aren’t going down the aisle, they’re going to Walgreens or [other channels] for soda,” he notes. “Zevia is bringing people down the beverage aisle, where they’re also buying sparkling water and tea.”

There’s a generation change, too, Spence observed: “Millennials have less of an affinity to soda than any other generation before, but Zevia is something they’re reaching for.”

Zevia, the first brand to offer naturally sweetened, zero-calorie sodas, holds a 78 percent share of the naturally sweetened low-/zero-calorie CSD segment in the grocery channel, according to SPINS data. Zevia partnered with key grocery retailers to develop and anchor sections of highly differentiated zero-calorie, naturally sweetened CSD items. Using in-store signage and on-pack messaging, Zevia communicated its simple brand proposition, allowing shoppers to “find their flavor.” In-store sampling events and dietitianled education programs helped to spread awareness of this emerging segment in the CSD aisle.

This has brought sales boosts for retail partners like Matthews, N.C.-based Harris Teeter, which the Zevia team credits for having a “flawless” reset plan and execution, along with carefully managed schematic compliance, a successful consumer-marketing couponing program and collaboration on promotional strategy.

Among traditional brands, Atlanta-based CocaCola is finding success by cross-merchandising its beverages with snacks as a way to capture sales from “hurried professionals, overwhelmed students and multitasking parents.” Coke teamed with Mondelēz International (Nabisco) to create the Sustaining Snack Rack Program, which offers a one-stop solution for shoppers, and increases purchase points in high-traffic perimeter destinations and impulse zones.

Tapping shopper insights showing that consumers want “value solutions” that align with how they purchase beverages and snacks, Coke and Deerfield, Ill.-based Mondelēz partnered with three major southeastern retailers that agreed to activate and sustain snack racks that displayed sparkling beverages and popular snacks side by side to catch shoppers’ attention and encourage impulse buys. The variety of display sizes enabled the racks to be placed in strategic locations — for example, the premier deli cheese area prompted home entertaining purchases, while perimeter placements grabbed shoppers who didn’t venture into center store. Participating retailers experienced double-digit sales growth and significant incremental sales.

Meanwhile, companies like LaCroix Beverages are using alternative sparkling quaffs to draw folks down the beverage aisle. About three years ago, the Fort Lauderdale, Fla.-based company started promoting the idea of a dedicated sparkling water set within the traditional grocery and mass segments.

“Most retailers today have a dedicated sparkling set, and the category has grown by double digits, compounded annually, for the last several years,” Nicole Cheifetz, LaCroix’s trade promotions manager, told PG at Expo West. Last year, LaCroix continued to drive sparkling segment growth by urging retailers to split the sparkling aisle between “pure” and “sweetened” subsets, thereby clarifying the distinction for consumers and increasing shopability and sales.

“Consumers’ growing demands and changing preferences regarding natural/organic beverages are causing retailers to re-examine older floor plans with schematics that have traditionally dedicated a tremendous amount of space to carbonated soft drinks and sugary beverages,” Cheifetz said. “Category management will shift from large-company domination as consumers demand more variety. The smaller companies developing niche segments are better suited to handling shifting and evolving consumer demand.”

Tea-totalers

Another legacy CSD brand is helping its retailer partners boost their sales of ready-to-drink tea.

Facing consumer feedback that the tea aisle is disorganized and difficult to shop, Purchase, N.Y.-based PepsiCo created a new set designed to “elevate the tea experience.” Partnering with a major southeastern retailer, the beverage giant tested brand-based and occasion-/package-based shelf sets. The results: The brand-based set drove incremental purchases for new users, while the occasion-based set drove incremental purchases for new buyers to the category. The resulting proposed set was a hybrid of both types to grow current buyer purchases and capture new users.

PepsiCo’s test partner reported results “beyond expectations,” with the best performance from a test set featuring new merchandising and signage, compared with others tested with just one or the other, resulting in double-digit category dollar lift, increased units and a bump in household penetration. PepsiCo is working to expand the program.

“The tea category has been growing, but the growth has been coming from different segments of the business,” said Meghan Conboy, marketing manager for Stamford, Conn.-based Nestlé Waters’ Sweet Leaf refrigerated organic and Tradewinds premium shelf-stable RTD tea brands.

“We try to come in with a full approach to meet the needs of retailers,” Conboy told PG at Expo West. “The key to making consumers happy is giving them something they love to come back to and bringing them something new for new usage occasions.” Targeting the latter need is Sweet Leaf’s new coffee-tea blend, which Conboy said “extends into and captures the morning usage occasion.”

That’s the Spirit

Two years ago, Anheuser-Busch rolled out what it called a “balanced portfolio approach” to the beer aisle, working with retailers to develop custom shelf sets that found the most lucrative combination of value, premium and craft beers for each individual store. The St. Louis-based brewer lauded this program’s success at a media open house last fall, when it noted beer sales were up 2.7 percent for the year, compared with a 3 percent drop for CSDs and flat numbers for other beverages.

Building a trade program “starts with the shopper,” Sanjiv Chhatwal, A-B’s VP of trade marketing, said at the time, noting how brands are prioritized by channel. For grocery, he explained the top priorities are Bud and Bud Light, marketed with pizza and sporting events; Michelob Ultra and similar low-carb offerings, along with Shock Top; and value brands, plus a focus on Latino consumers.

Last year, A-B initiated a study to identify winning retailers, pulling category and segment information for 40,000 outlets across the country. The company then segmented those accounts by channel type; route-to-market strategies (e.g., value grocery, savvy, associate); and population density.

“At the end of all of this segmentation, we had large clusters of like-for-like retailers, all of whom had the same potential to sell the same amount of beer, but did not, based off in-store tactics,” explains C.J. Watson, VP of category management at Anheuser-Busch.

A-B then quartiled those outlets by volume to determine the highest-volume retail outlets by segment, and next looked at assortment, planograms, features, pricing, displays and cases on display to identify and better understand differences in top-quartile retailers versus bottom-quartile ones. “This new type of analysis was a departure from our ‘2012 Balanced Portfolio Approach’ (BPA) study, which evaluated winning retailers based on their trends versus the market,” Watson says. “We believe this new approach allows us to better understand winning retailer tactics and customize winning recommendations for each retailer.”

With its “Your BPA” study, Watson says, A-B has been able to offer customized recommendations for retailers in their stores. “We have been able to pinpoint the tactics that offer the highest ROI and provide insights that helped retailers build winning plans,” he notes.

Over the next few years, Watson asserts, channel lines will continue to blur. “Large-format retailers will continue to test small-concept retail outlets, and small-format retailers will continue to build larger stores,” he says. “Winning retailers will recognize the market is becoming more competitive and continue to focus by optimizing assortment, leveraging engaging promotions and overindexing their fair share of innovative products.”

Meanwhile, E&J Gallo has sought to help retailers boost wine aisle sales by making the section easier to shop. Consumer behavior has changed dramatically over the past decade, but, Gallo argues, the grocery retail environment hasn’t evolved with it. Faced with a generation of consumers accustomed to shopping online, where they can quickly see recommendations, best sellers and new items, retailers must adapt or risk losing these shoppers as they seek out more progressive shopping experiences.

In response, the Modesto, Calif.-based winery surveyed more than wine consumers to better understand how to engage shoppers in-store and drive retail sales. Several key trends emerged: Most are overwhelmed shopping for wine and are looking for recommendations; instead of exploring the section, most shop within a “comfort zone” because they’re afraid of making the wrong choice.

In response, Gallo developed a “wine navigation” platform to simplify the shopping experience, creating clearly marked 4-foot sections within the existing aisle and putting all of the new items together in a “What’s New” section; with new items accounting for a fraction of SKUs but more than two-thirds of category growth, this section was a popular choice across several retailers. Further, Gallo developed a comprehensive menu of options, including “Today’s Trends,” “Expert Picks,” “Best Sellers,” “Sweet Spot” and “Wines You’ll Like,” each strategically placed based on the retailer’s goals, shopper preferences and priority segments.

Tested by major retailers in three key regions of the country, the program yielded significant sales lift, household penetration and shopper engagement, with retailers seeking to expand the initiative.

“We’ve reached a point of critical declines. Retailers have to think about a new blueprint for CSD.”
—Paddy Spence, Zevia

“Consumers’ growing demands and changing preferences regarding natural/organic beverages are causing retailers to re-examine older floor plans with schematics that have traditionally dedicated a tremendous amount of space to carbonated soft drinks and sugary beverages.”
—Nicole Cheifetz, LaCroix Beverages