Discounters, drugstores raid C-store niche - convenience stores - Food Merchandising

Discount Store News, April 3, 1995

Drug and discount store retailers are banking on their image to help them build sales of New Age beverages, especially in the single-serve area where they compete with convenience stores.

The so-called New Age beverages carry with them a more health-oriented image that augurs well with mass market stores, especially drugstores. What this means is that when it comes to beverages, many discount and drugstores are becoming a bigger threat to convenience stores.

"There are shoppers, especially females, who don't give convenience stores a favorable rating," explained Carl Steidtmann, chief economist for Management Horizons, the Ohio-based retail consulting firm.

He explained that many people, especially moderate shoppers of convenience stores, don't associate the C-stores with offering a healthy choice of foods and beverages.

Management Horizons recently completed a study on the convenience store industry for the year 2000. The study clearly identified drugstores in particular as going after the convenience business.

"They are well positioned to gain in areas that tie into their health image," added another Management Horizons source. "Drugstores are getting out of cigarettes, but into health foods and beverages."

Providing single-serve, New Age beverages has become a growth area for non-food operators. Several moves in the market bear that point out.

Caldor, for example, has added an endcap cooler of Snapple at one of its checkouts. The chain also recently had case loads of Snapple in assorted flavors at the checkout priced at $12.99 for 24 16-oz. bottles.

Within Caldor's snack department, two full gondola runs are turned over to natural and New Age drinks including Veryfine, Mistic, Snapple, Gatorade, Arizona Ice Tea, Ocean Spray, Capri Sun and Minute Maid.

The selection includes cases, 16-oz. bottles and single-serve containers.

At CVS, a cooler case in the rear of the store carries only a few facings of Coke and Pepsi. However, three-quarters of the cooler is stocked with Snapple, Nestea, Fruitopia and Veryfine.

And at Rite Aid, stores are being remodeled. The new look has a 10-or 12-ft. cooler wall filled with single-serve beverages. A sign in the window alerts customers to Rite Aid's Convenience Foods section. Osco, too, has a similar convenience foods section in many of its stores.

Revco recently promoted Snapple as a "hot buy," priced $3 for five single-serve 16-oz. bottles.

Walgreens has been a player in New Age beverages for some time.

"The new breed of beverages certainly fits into the image of a drugstore," said a Walgreens spokesman. Even convenience store operators admit their image needs work when it comes to beverages. "People think of us for a hot dog and an icy drink. It is a different customer picking up Snapple Raspberry Iced Tea," one said.

Drug and discount stores also have an edge over supermarkets, especially in single serve.

"People don't want to trek across a supermarket or superstore for one can or bottle," Steidtmann said.

Rather than compete head to head with supermarkets and convenience stores on Coke and Pepsi, non-food retailers are carving out a healthy business in New Age, which experts define as sparkling waters, teas, waters, fruit drinks and sports drinks. And New Age sales continue to rise with per capita consumption exceeding 6 gals. That's two times that of wine and spirits combined and just over 10% of traditional soft drinks. Although the New Age category has seen its once-meteoric growth curtailed and market share splintered, there's no denying it is no longer considered just a fad, but a bona fide portion of the market.

The barrage of "healthier" beverages continues.

Ocean Spray will unleash four juice drink flavors via a Juice Jam '95. The flavors include Caribbean Colada, Kiwi Strawberry, Mandarin Magic and Mango Mango.

Tom Manchester, business unit manager for Ocean Spray's bottler division, said more sophisticated consumer palates are inspiring needs for new juice flavors. "Nearly 90% of our target audience surveyed indicated a strong interest in trying the new flavors," he said.

Tropicana is introducing new 20-oz. single-serve sizes for its popular Twisters. The value-added packaging replaces 16-oz. bottles.

Veryfine has extended its Chillers to include new flavors such as Freezin Fruit Avalanche and Lemon Lime Blizzard.

Captiva, a Winston-Salem-based firm, is offering a private label program for New Age-style beverages.

And Coca-Cola has extended Fruitopia to include three new flavors and is investing $150 million in additional production capability. The new flavors are tangerine, apple raspberry and tropical.

Bottled water sales gush

Only a few years ago, most people subscribed to the maxim that bottled water sold wherever tap water was worst and consumers the trendiest. Those distinctions are going down the drains, as bottled water's popularity has begun to soak retailers everywhere.

According to the International Bottled Water Association, Alexandria, Va., sales in the decade skyrocketed by more than 200%. Lisa Prats, vice president, believes consumers are looking at bottled water as a beverage in its own right, choosing it over soft drinks, fruit juices and alcohol.