Staple items spill over into add-on sales - discount retail sales

Discount Store News, Nov 6, 1995 by Laurie Freeman

Discount chains are looking to front-end beverage coolers to pay big dividends in the near future.

They are hurrying to catch up to sales gains in cold soft drinks, juices and dairy products charted by convenience stores and drug chains. The thinking is that by carrying many of the mid-week staples, such as orange juice and milk, discounters can lure shoppers into their stores and grab incremental, mid-week beverage sales.

"Long-term, discount chains see grocery items as part of the format, said John Bauer, divisional manager for mass, club and military at Tropicana Products, Bradenton, Fla. The problem is that many older, existing discount outlets simply do not have enough floor space to accommodate a supercenter format. "What retailers are looking for is some kind of hybrid," he said.

Increasingly, the discount cooler concept is focusing on more traditional beverages, like milk, orange juice and other dairy products. One reason is that there's a developing sense that too many of the ready-to-drink fruit-flavored teas and "New Age" beverages are falling out of favor with consumers. These consumers, who turned to the New Age teas, juices and sodas because they perceived them to be more healthy than reguler soft drinks, have come to find out that many of the alternative drinks have as much sugar as traditional soft drinks.

According to Beverage Marketing Corp., a New York-based industry consulting firm, sales of ready-to-drink teas, waters, juices and sports drinks are expected to reach about $5.36 billion in 1995, up 12% from $4.78 billion in 1994. That rise is due to the constant introduction of new products, including the latest from Mistic, a ginseng iced tea.

Still, New Age drinks are a tiny drop in the $51 billion soft drink industry and are showing signs of topping out.

Sales of ready-to-drink teas alone are expected to grow only 10% to 15% this year, compared to 65% growth in 1994 and 95% growth in 1993, according to Beverage Marketing. The consultancy noted that sales of sparkling juices, ready-to-drink coffees and all-natural sodas are also flat or declining.

Keeping the fickle and demanding consumers tastes in mind, discounters appear more willing to build long-term cooler programs on the staples, a course that fits neatly with Tropicana's desire to win discount store placement for its category-leading chilled orange juice products, particularly Tropicana Pure Premium items.

Nationwide, Tropicana accounts for about one-third of orange juice sales. Tropicana is testing--with selected retailers and in certain markets--a cooler program that, if sales meet projections, will be expanded in 1996.

What makes this program different from previous efforts is that Tropicana is developing a refrigerated dairy network, forming partnerships with regional dairies that already are involved with direct-store delivery. Working with DSD partners makes it easy for retailers, like discount chains, that are just beginning to understand how DSD distribution works.

Also, these coolers carry the Tropicana brand name, conveying to consumers the message that the store is stocking top-quality products. "It enhances the image of the stores to have prestige brands on display," said Bauer. "This is not a private label program, but it's a national brand backed with national advertising and national promotion that is attractive to consumers."

Early results show that the cooler program works best when juices are combined with milk and other selected dairy products, according to Bauer. "Milk is the No. 1 convenience item, something that many families are looking for during the week."

What these preliminary sales results also show is that by competitively pricing milk and juice, shoppers are inclined to pick up other non-foods items such as cosmetics and clothing, products that previously may have been pushed off to weekend shopping trips.

"There's no question that we're helping build traffic mid-week for discount chains," said Bauer. "That's a win-win for both retailers and for us."