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2013 | BEVERAGE REPORT
A New
Crop in the
Beverage
Garden
Fresh products abound, but which trend is driving innovation?
By Steve Holtz || [email protected]
N
ew-product activity is at an all-time
recent new-product activity hit an all-time high
ers are increasingly interested in specialty beers,
high in the beverage category, and
of 4,000 new SKUs per year, providing a market-
and Kraft Foods has put beverages in new focus
the desire to drive interest in new
ing boost to the beverage category and keeping
since launching liquid water enhancer MiO.
products shows in terms of new flavors, new
sweeteners, new packaging and more.
things fresh in the cold vault.
And the most important move? “People
“There’s huge growth potential here,” says
want healthier refreshment,” Hemphill says.
“After sluggish performance during the
Mel Landis, chief customer officer for Coca-Cola
“Beauty is in the eye of the beholder, and this
depths of the recession, the U.S. beverage indus-
Refreshments, Atlanta. “Particularly as the
is true to some extent to perceptions of what
try is showing signs of life,” says Gary Hemphill,
[convenience-store] industry moves into areas
is healthier, too. That said, lower-calorie, better-
senior vice president of information services
like food and snacking, it really plays into our
for-you products are generally outpacing the
for Beverage Marketing Group in New York.
wheelhouse.”
performance of those that are less healthy.”
“Overall growth has yet to return to what we
Coca-Cola has rededicated itself to new-
It all makes for intriguing groundwork. CSP
saw pre-recession, but the industry is moving
product development. PepsiCo has recommitted
takes a look at the trends driving the evolution
in a positive direction, with some categories
itself to its flagship brand while making tweaks
of some of the fastest-growing categories and
performing better than others.”
to Diet Pepsi. Nestle Waters has increased its
changes made by manufacturers to meet the
portfolio in multiple ways. The major beer brew-
new needs.
Beverage Marketing Group data shows
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F ebruary 2013
55
BEER & WINE
Beer Gets Special, Wine Gets Sweet
W
ith the total volume of beer sold
in convenience stores up just
shy of 4%, the 2012 volume growth of
three of the most-popular import beers
in convenience stores tells a significant
story: Corona Extra up 8.3%, Heineken
up 8.0% and Modelo Especial up an
impressive 27.6%.
“We expect continued solid performance at the high end of the beer
category,” says Hemphill of Beverage Marketing Group. “Specialty beers continue to
outperform the market and gain share.”
That’s because consumers are continuing on a trend “toward higher-value beers:
craft and import,” says Jeff Schouten,
director of channel marketing for MillerCoors, Chicago. Yet strength remains in
the “core” premium beers in the industry:
Bud Light, Coors Light and Miller Lite,
which is growing again.
For beer brewers, this means investing
in high-profile promotions, extending
their most popular brands and investing
in specialty beers like never before.
“We are providing product and
merchandising expertise on craft beers
through our craft division, Tenth &
Blake,” says Schouten of the MillerCoors
arm started in 2010. “You’ll see product
innovation, including Third Shift Amber
Lager, Redd’s Apple Ale and Batch 19, as
well as new offerings from the Blue Moon
and Leinenkugel’s brewing companies.”
Heineken USA, meanwhile, is focused
on building its major import brands to
drive continued sales.
“Wherever beer is growing, ‘upscale’
is driving that growth,” says Nick Lake,
senior director, category management,
national accounts for Heineken USA,
White Plains, N.Y. “Winning in the
upscale segment is about building longterm consumer brands that appeal to
beer lovers, delivering smart innovations
that change the game and providing real
value to our retail partners.”
For retailers, this focus on new products and brand building requires knowing what your customer wants.
“Convenience-store operators must
win the upscale consumer by optimizing assortment by focusing on variety
vs. duplication,” Lake says. “The key is to
understand which packs actually drive
incremental volume and which are substitutable.”
More fundamentally, Schouten says,
“Retailers should consider beer as a destination traffic driver, as they do with other
categories such as coffee and foodservice.
[They] should take a hard look at the space
they devote to beer, especially as they enter
into the craft category. Beer inventory
turns are already among the highest in the
store, making out-of-stocks a risk.”
Tony Gaines, vice president of small
format for St. Louis-based AnheuserBusch, agrees, saying, “Most retailers
use weekly supply as the metric to make
sure they have enough coverage in their
sets, but more than 60% of beer is purchased Thursday night through Sunday
afternoon.
“Winning retailers need to be on top
of available cold beer for the weekend,
while managing selection. The driver for
a convenience store is premium beer. If
the store is out of premiums, the consumer will move to another store.”
Sweet Flavors
Meanwhile, another trend in alcohol beverages, arguably started by sweet-flavored
vodkas and other spirits, is taking root
throughout the category.
“Consumers continue to look for
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57
BEER & WINE
Best-Selling Beers
C-store sales, 52 weeks ending Nov. 4, 2012
Coors Light continues to gain ground on Budweiser in convenience stores, where six of
the top 10 brands saw volume growth in 2012.
Brand slightly sweeter options,” says Gaines. “A
key consumer is the millennial, who may
not be in the beer category. Since only
20% of the [convenience-store] channel
can sell spirits, brands such as Bud Light
Platinum and Bud Light Lime-A-Rita can
target a traditionally hard-liquor-buying
consumer and are strategic items to focus
on in these stores.”
A-B has made a concerted push
toward these sweet tastes, extending its
Budweiser and Michelob brands: Bud
as mentioned above, and Michelob with
fruit-flavored extensions.
It also has introduced Michelob Ultra
Light Cider, which capitalizes on recent
growth in hard ciders, a trend also recognized via purchases by MillerCoors and
Heineken USA and a brand rollout by
Boston Beer Co. [CSP—Dec. ’12, p. 151].
This swing toward sweet has also
hit the wine category, where traditional
vintners have introduced sweeter vino,
inspired by the strength of moscato.
“You’re starting to see a bunch of
moscato-flavored items coming out, such
as a pink moscato, red moscato, not just
from Gallo, but from competition. It’s
basically going after what we believe the
consumer wants,” says George Ubing,
director of the convenience channel
for E&J Gallo Winery, Modesto, Calif.
Gallo’s recent product launches include
a Chocolate Rouge Wine, as well as a new
malt-based line under the name Delicia.
Dollar sales ($ millions) PCYA*
Case sales (millions) PCYA*
Bud Light $4,052.6 4.9% 191.8 2.9%
Budweiser
$1,441.5 –1.7% 68.1 –3.5%
Coors Light $1,277.9 7.1% 60.6 4.2%
Miller Lite $1,066.3 6.8% 50.5 4.6%
Natural Light $848.4 4.6%
53.6 1.9%
Corona Extra $588.1 9.8%
18.7 8.3%
Busch Light $523.1 1.9%
33.9 –0.8%
Busch $514.3 –2.5% 32.7 –5.2%
Michelob Ultra Light $353.1
28.3%
13.9 22.9%
Keystone Light $335.8 –2.8% 22.1 –5.2%
$16,407.2 7.3% 788.7 3.7%
Total category *Percent change from a year ago
Source: Convenience InfoScan, SymphonyIRI Group
Best-Selling Wines
C-store sales, 52 weeks ending Nov. 4, 2012
Wines sales saw healthy double-digit growth in convenience stores in 2012, making it
one of the fastest-growing segments by percentage in the channel. All brands in the top
10 saw both dollar and volume growth in 2012.
Brand Dollar sales ($ millions) PCYA* Volume sales (thousands) PCYA*
Barefoot $76.0 26.3% 892.6 25.4%
Sutter Home $66.0 22.0% 877.0 17.9%
Yellow Tail $36.1
16.3% 413.3 14.9%
Gallo Family Vineyards $25.1 17.9%
355.1 19.2%
Woodbridge $23.6 30.7% 279.9 34.4%
Beringer $13.5 0.8% 169.1 1.8%
Vendange $11.6 64.4% 178.3 53.3%
Kendall Jackson $11.2
9.9% 66.4
13.2%
Cavit Collection $8.8 14.0% 90.3 14.6%
Franzia Box Total category $8.3 23.9% 344.9 22.1%
$541.9 21.6% 6,743.4
19.4%
*Percent change from a year ago
Source: Convenience InfoScan, SymphonyIRI Group
CSP
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59
BOTTLED WATER
A Clear Rebound
“P
rice continues to be an ongoing story for bottled
water,” says Hemphill of Beverage Marketing Group
about water in all categories. “There remains significant pricing
pressure in the category with the emergence of private label as
a force in the category.”
In c-stores, however, SymphonyIRI Group scan data shows
private-label bottled-water volume sales dropped 22% in 2012.
Coca-Cola’s Dasani and PepsiCo’s Aquafina saw some growth
as a result, but Nestle Waters North America’s regional brands
and premium waters were the real winners. And that growth is
expected to continue after a couple of slow years in the late 2000s.
“We project bottled water will see 5% to 6% growth in 2013
and 2014, and even into 2015 due to health and wellness trends,”
says Jim Donker, director of national accounts for Nestle Waters
North America, Stamford, Conn.
Hemphill also credits the move toward health and wellness
as the driving force that allowed bottled water to “rebound
since the depths of the recession.” “The category is aided by its
positioning as the ultimate health beverage,” he says.
“Bottled water is the No. 1 selling beverage around the world,
but here in the U.S. it still trails carbonated soft drinks,” Donker
says, underscoring the potential of the category. “We’re looking
closer at when bottled water will pass CSDs as [the most popular] packaged beverage [in all channels], and what we’re seeing
now is probably as soon as 2018.” Of course, in c-stores, water
surpassing CSDs is a distant reality—5.4 billion units for CSDs
vs. 1.9 billion for water—but the movement in all channels
illustrates the opportunity.
Landis of Coca-Cola agrees there is tremendous opportunity
in the noncarbonated-beverage business and says Coca-Cola
hopes to lead the way in innovation. “This whole space for
consumers in an active, healthy lifestyle, the hydration space,
really resonates well with us,” he says. “Vitaminwater Zero and
PowerAde Zero have opened up that category, particularly to
women that … wanted the hydration benefits but never wanted
the calories.”
One Drop at a Time
Meanwhile, enhanced waters have reached a new level of prominence as several beverage company startups—Karma, Activate,
etc.—have entered the category to challenge vitaminwater,
which dropped almost 5% in volume in 2012.
Adding to the new bevy of brightly colored bottles are
enhancers that consumers can add themselves. Products such
as Crystal Light to Go and MiO from Kraft Foods, Dasani Drops
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F e br u a ry 2 0 1 3
Best-Selling Bottled Waters
C-store sales, 52 weeks ending Nov. 4, 2012
After a period—the recession—in which many felt private-label
bottled water achieved a new level of acceptance, branded waters
are making a roaring comeback, including premium brands that
saw double-digit growth in 2012.
Dollar sales Unit sales
Brand ($ millions) PCYA*(imillions)PCYA*
Glaceau vitaminwater $368.7 –3.78
210.4 –4.6%
Aquafina $362.6 5.4% 243.8 3.0%
Dasani $346.7 3.6% 262.2 4.4%
Glaceau smartwater $284.0 38.4% 151.2 33.8%
Nestle Pure Life $188.8 14.8% 125.2 17.2%
Deer Park $158.3 44.8% 114.6 40.0%
Poland Spring $148.4 15.8% 97.3 Private label $127.4 –21.1% 100.3 –22.2%
Fiji $124.2 36.8% 59.3 30.6%
79.8 –1.2%
Ozarka
Total category
$111.5 2.6% $2,829.6 7.4% 14.0%
1,880.2 5.5%
*Percent change from a year ago
Source: Convenience InfoScan, SymphonyIRI Group
from Coca-Cola and private-label brands have pioneered a new
beverage/general merchandise subcategory.
“We continue to see consumer trends toward customization, flavor variety and convenience,” says Jessica Sheth, senior
associate brand manager for Kraft Foods, Northfield, Ill., about
the rollout of MiO Liquid Enhancer in 2010. MiO and Dasani
Drops come in less-than-2-ounce bottles and are intended to
be mixed with bottled water, allowing the consumer to add as
much or as little to their preferred taste. “Specifically, MiO targets millennials, and while price is an important consideration
for this group, uniqueness and trend-inspired attributes are also
essential,” Sheth says.
Extensions of MiO have already included an “energy” line
that adds caffeine and a “fit” line, rolled out in January, that
provides electrolytes for a sports-drink-like beverage. MiO
Energy sold more than 7 million units in c-stores in its first year
on the market, according to SymphonyIRI Group data.
Retailers and consumers can likely expect extensions of Dasani
Drops if the first four flavors, introduced this past fall, catch on.
“Dasani Drops—that’s an enhanced water, just in a different form,” says Landis. “How do we add value to core water,
whether it’s nutrients or flavor or whatever it is? … The whole
ingredient-enhanced thing is really interesting. If you can do
drops in flavors, why can’t you do nutrients in concentrate? Why
can’t I do energy, vitamins, etc.?”
CSDs
A Subcategory in Search of a Boost
S
tagnation: That’s the 2012 story for
the carbonated-soft-drink (CSD)
category. “Premium niche categories
outperformed traditional categories,”
says Hemphill of Beverage Marketing
Group. “Broad-based beverages, such as
CSDs, milk and fruit beverages, which
are consumed by more middle-class and
blue-collar consumers with higher levels
of unemployment, continue to stagnate.”
Beverage Marketing Group data for
all channels shows CSDs “are on pace to
decline for the eighth consecutive year” as
aggressive competition comes from other
categories, especially bottled water, and
consumers seek healthier alternatives.
In c-stores, however, CSDs saw small
dollar-sales growth—1.7%—in 2012,
while volume was flat, according to
SymphonyIRI Group scan data. But in
general, it’s another lackluster year for
one of c-stores’ largest categories.
While bottled water threatens to overtake CSDs in terms of overall volume sales,
Landis of Coca-Cola says it’s much too
soon to play “Taps” for the soda category.
“I think people forget how big of a
category it is,” he says. “When you have a
category this big, this mature, it’s not going
to grow at double digits. You’ve got smaller
categories like energy and others that are
half or a third of the size of [CSDs]; they
can do that. This is a big category. If it ekes
out 1%, 2% or 3% growth, you’re talking
about a massive amount of growth.
“We’re still really bullish on the category, but it’s going to drive into that lowsingle-digit growth rate [going forward].”
Coca-Cola has tackled the problem
through new package sizes, downsizing
the classic single-serve 20-ounce bottle to
16 ounces and then 12.5 ounces, creating
more options for consumers. And there
may be more repackaging to come.
“If you look around the globe in the
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F e br u a ry 2 0 1 3
Coke system, the way they’ve been able to
keep the category growing and relevant is
through packages,” says Landis, citing that
in Mexico there are more than a dozen
package sizes of Coke based on demographics, occasion, etc. “You’re seeing a
little of that here now as we do 12.5-ounce
at the entry level under $1” on up to “1 liter
playing the big-size value role.”
“We think there’s still room to grow
within that construct,” he continues. “I
think you’ll continue to see us diversify
packaging.”
Meet Me Halfway
Meanwhile, mid-calorie colas have
become the newest battleground for the
three major CSD manufacturers.
Dr Pepper’s Dr Pepper 10 was the first
to hit shelves, in fall 2011. Success with the
10-calorie drink, created with a combination of sweeteners, has since led to several
10-calorie line extensions, including 7-Up,
Sunkist, Canada Dry, RC Cola and A&W
Root Beer, rolled out in January.
PepsiCo followed suit and introduced
Pepsi Next, a 60-calorie version of its
namesake cola made with a mixture of
sweeteners, in early 2012. PepsiCo CEO
Indra Nooyi has since said she expects
to experiment further with the multiple
sweeteners now on the market, beginning
with Diet Pepsi, which quietly changed its
sweetener mix ahead of a major rebranding of the soft drink set for the first quarter of 2013, according to various reports.
This comes after Pepsi said it would
devote more funding to advertising its
key brands Pepsi and Diet Pepsi.
Finally, Coca-Cola is testing Fanta
Select and Sprite Select in a few markets.
The sugar- and stevia-sweetened sodas
promise 70 calories per serving.
“We’re going to look at those as ways
we may want to go,” said Landis. “That’s
consistent with our health and wellness
message. We’ve got full-calorie, we’ve got
no-calorie, and we’ve got mid-calorie
options. And we want to have all those
things.”
CSD Growth
C-store sales, 52 weeks ending Nov. 4, 2012
Carbonated-soft-drink sales growth continues to lag behind many smaller beverage categories. Manufacturers say single-digit growth of a nearly $9-billion category shouldn’t be
overlooked.
Total category
Dollar sales ($ millions)
PCYA*
$8,855.7 1.7%
*Percent change from a year ago
Source: Convenience InfoScan, SymphonyIRI Group
Unit sales (millions)PCYA*
5,383.8
0.1%
ENERGY DRINKS
Energy Faces Its First Big Challenge
T
here’s been no stopping energy-drink volume growth
since the category was established in the mid-1990s.
But energy drinks’ first real challenge, by congressmen and
potentially the Food and Drug Administration, could put the
category to the test in the next year or two.
The FDA confirmed in November that it is reviewing the
safety of energy drinks containing caffeine and other ingredients
that act as stimulants, and it may require regulatory action if
evidence of a health risk is found.
The agency said that because energy drinks are new products
that have raised safety concerns, they warrant investigation:
“New products and patterns of use require us to remain vigilant,
and we are working to strengthen our understanding of the
nature of energy drinks and any causal risks to health.”
Possible regulation could vary from an age limit to caps on
caffeine allowed in a drink—as enacted in Canada in January—to an all-out ban of the products.
Consider it a warning, but until some action is taken, the category continues to deliver on the promise it has established over
the past almost 20 years, growing more than 17% during the past
two years. This comes after comparatively lackluster performance
during the recession—including flat volume sales in 2008—but a
healthy distance from the 27% growth seen in 2006.
Continued double-digit growth is anticipated in the next
two years as well. “According to Mintel, we can anticipate 14%
growth in total energy-drink sales in 2012 and 13% growth in
2013 and 2014,” says Guy Wootton, director of category insights
for Red Bull North America, Santa Monica, Calif.
The main drivers of this growth, according to Wootton:
▶ Energy drinks heavily overindex in two core emerging
demographic sections, Hispanic consumers and millennials,
resulting in increased category penetration.
▶ Busier lifestyles are fueling consumers’ need for an energy
boost; 96% of the U.S. population claims to purchase a “pickme-up product.”
▶ Innovation from the top three brands—Red Bull, Monster and Rockstar—continue to generate buzz and excitement
among consumers and provide new reasons to enter the
category.
Wootton says an increased focus on category management will
mean additional growth for the category in c-stores. “Investment
in these programs will inevitably drive growth as the category
becomes more efficient and expands its in-store presence,” he says.
Red Bull is doing its part in adding new products this year
with the March rollout of its first three flavored line extensions.
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Best-Selling Energy Drinks
C-store sales, 52 weeks ending Nov. 4, 2012
Even as less successful energy drinks begin to fall away, the top
10 best-selling brands in c-stores are all seeing growth, and the
category as a whole is again growing by double digits.
Dollar sales Unit sales
Brand ($ millions) PCYA*(millions)PCYA*
Red Bull
$2,367.9
14.9%
803.8
14.8%
Monster Energy
$1,369.9
15.2% 597.2
15.7%
Monster Rehab
$265.3
227.0%
117.6 224.3%
Rockstar
$251.4 14.5% 123.116.2%
NOS
$227.8
8.6% 106.0
10.5%
Java Monster
$219.5
27.5%
86.4
30.9%
Monster Mega Energy $211.4
21.0
68.5
20.1%
AMP Energy $143.4
7.9%
71.7
10.7%
Rockstar Recovery $110.5
0.7%
54.4 1.5%
Rockstar Sugar Free $102.4
1.4% 50.1 3.5%
$6,229.6
17.3% Total category
2,527.3 17.4%
*Percent change from a year ago
Source: Convenience InfoScan, SymphonyIRI Group
Mixing It Up
Coca-Cola Refreshments is also making moves in the energy
category with a hybrid new product that brings thirst relief to
its NOS energy brand. “NOS Active Energy is a hybrid between
a sports drink and an energy drink,” says Landis of Coca-Cola.
“We think this fits well into that space for consumers in an
active, healthy lifestyle, the hydration space.”
Rockstar has a hybrid extension of its own. Rockstar Energy
Water is a noncarbonated, caffeinated vitamin- and herbenhanced water beverage. Las Vegas-based Rockstar is urging
retailers to merchandise the drink, which comes in tropical
fruit, orange tangerine and blueberry pomegranate acai, in
the enhanced-water section of the cold vault rather than with
energy drinks. It’s part of a frequent refrain from manufacturers
in the category to give it more space wherever possible.
“C-stores can continue to drive these trends by planning the
right amount of shelf space for the anticipated future growth
for the category,” says Wootton. “By 2014, the category will be
30% bigger, and c-stores need to plan their shelf space to accommodate that. Additionally, secondary placement of cold product
is critical for driving impulse purchase of energy drinks.”
ICED TEA
Good Things Come in Threes
Best-Selling Iced Teas
C-store sales, 52 weeks ending Nov. 4, 2012
Acquisition activity on several iced-tea brands could add up to
major changes in top brands, though the independent AriZona
brand remains a c-store favorite.
Dollar sales Unit sales
Brand ($ millions) PCYA*(millions)PCYA*
T
hose little bags of tea that need to steep in water and then
refrigerated in pitchers? Their days may be numbered.
Instead, “ready-to-drink tea has accounted for virtually all of the
growth in the U.S. tea market” since 2006, according to Beverage
Marketing Group data. And RTD tea “now accounts for over
30% of the total volume,” up from 24% in 2006.
The boom, including an 8.6% jump in RTD tea unit sales in
c-stores in 2012, according to SymphonyIRI Group, is due to
two reasons: a reflection of consumer demand for convenience,
and an increasing focus on health and wellness.
Major suppliers have noticed and reacted by creating full
complements of brands. Call them the “three tiers of tea.” As
two major suppliers—Coca-Cola Co. and Nestle Waters North
America—solidified their iced-tea lineups in 2012, their threetiered products will receive strong pushes from sales representatives and heavy marketing and advertising campaigns designed
to draw relevant consumers.
For Coca-Cola, its triumvirate includes Honest Tea at the
high end, Gold Peak in the premium-to-popular range, and an
expanded Fuze product line in the popular-to-value play.
“Tea is a huge platform,” says Landis of Coca-Cola. “Over
the last five to seven years, we’ve been in the [tea] category but
probably not in the way we would have like to have participated,
given the growth. So you’re going to see a hard push this year—
as we’ve ended our Nestea relationship—around Fuze, Gold
Peak and Honest Tea.
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AriZona
$284.6
0.1% 269.1 1.1%
Lipton Brisk $200.8
0.4% 189.1
1.6%
Lipton Pureleaf $107.5
1.8% 60.6 –0.4%
AriZona Arnold Palmer $96.6 10.4% 92.2 11.2%
Gold Peak $82.2 34.8% 48.9 35.6%
Snapple $73.2 3.8% 50.2 4.8%
Lipton $64.7 –4.4% 42.1 –7.8%
Peace Tea $62.6 28.7% 63.2 28.6%
Nestea $41.5 –19.8 34.9 –20.9%
Diet Snapple $36.0 28.7% 23.0 27.1%
$1,211.4 8.6% 995.2 8.6%
Total category
*Percent change from a year ago
Source: Convenience InfoScan, SymphonyIRI Group
“We want to dive into tea, which is an untapped category for us.”
Nestea, meanwhile, is now in the hands of Nestle Waters,
which, after years as a water-only company, has three iced-tea
brands of its own.
“We’re trying to do the same thing that we did in water. We’ve
created [three tiers],” says Donker of Nestle Waters. “We’ve got
the mainstream tier, where Nestea’s going to play. Stepping up,
we’re creating a premium category, where Tradewinds will play.
And in the specialty category, we’ve got Sweet Leaf.”
Retailers can expect promotions around all three of those
brands “as we attack the category and build our brands and our
business for the long term,” Donker says.
Between the refocused brands and the growth in the category,
retailers may want to review their tea sets. To that end, Donker
recommends retailers consider dedicating a full door to tea.
“With the predicted growth of over $1 billion in the next four
years, it’s important to make sure they are capturing this trend,”
he says. “By doing so, they will be able to offer their customers
the variety they are looking for, particularly in the premium
[fresh-brewed teas] and specialty teas that are providing some
of the greatest growth.” n