Soft drink sales flow into discount

Drug Store News, Oct 9, 1995 by Darren Chervitz

Discounters may want to break out the bubbly and celebrate, but leave the champagne for New Year's Eve. The kind of bubbly most appropriate for this celebration is Sprite, Pepsi or any other non-alcoholic carbonated beverage.

A new survey conducted exclusively for FM shows that more and more people are looking to non-supermarket retail outlets to buy non-alcoholic beverages for their households, even while the percentages of people buying most individual types of beverages in any store have remained flat.

Since the survey was last conducted in 1994, the percentage of people who bought any beverage at a discount department store, warehouse club or drugstore has gone up six percentage points, to 58% of the 450 households randomly selected in the annual study conducted by Leo J. Shapiro & Associates.

The percentages of households buying the types of carbonated beverages mentioned in the survey at non-supermarket outlets have gone up almost entirely across the board. For instance, at clubs, the total number of households buying carbonated cola and soft drinks in other flavors each went up two percentage points, and the percentage buying the new clear carbonated drinks at warehouse clubs doubled since 1994.

Linda Wilson, a national accounts sales manager for Pepsi-Cola Co., said she feels that the impact of mass retail channels on the beverage industry is growing dramatically.

"A smaller percentage of our pie is going out to grocery stores," Wilson said. "We're trying to be within arm's length of everybody."

Wilson noted Wal-Mart as a company that has had a large effect on beverage sales in non-supermarket outlets. But Wilson added that Pepsi is looking at even less traditional retail channels for beverages, like home improvement or office supplies category killers, as possibilities for future sales.

While The Home Depot or Staples may seem like unusual places to sell carbonated beverages, customers who don't have any grocery shopping to do besides picking up some soda may be willing to purchase beverages anywhere they find them - so long as the beverages are reasonably priced.

Alternative types of beverages may also find the ideal home at alternative retail outlets. Consumers are buying flavored iced teas and juices at non-supermarket outlets much more than before, and as already mentioned, new clear carbonated drinks like Clearly Canadian are also doing well at these outlets.

Still, most people regard non-supermarket outlets as a secondary source for carbonated beverages. The percentages of consumers who reported they "mainly" buy the different types of beverages at a discount department store, warehouse club or drugstore hardly ever reached double digits.

Because the supermarket or grocery store remains the primary beverage source, mass retailers often have trouble deciding whether to sell carbonated beverages to generate traffic or profits. In the past, many retailers would advertise 2-liter bottles of soft drinks at a below-cost price to bring people into the store. But soda or pop, especially in multiunit packs, can be effective profit-makers as well, and more mass retailers are using the carbonated beverages for this reason.

Wilson said retailers often "ping-pong back and forth" about how to solve the traffic-vs.-profit dilemma with soda. She believes retailers can achieve both objectives by selling high- and low-margin brands and packages.

Bridgeton, Mo.-based Grandpa's has been using carbonated beverages as a major traffic item for quite some time, said Larry Taylor, vice president, hard lines.

"During my tenure, soft drinks have always been a vehicle for traffic. It's the most effective tool we have to bring people into the store," Taylor said, adding that Pepsi, followed by Coke, are the two biggest sellers at the GrandPa's chain.

Other findings related to carbonated beverages in the survey were:

* In the new, clear carbonated beverage category, Clearly Canadian was the clear winner. The product was preferred by an impressive 22% of the households polled. The closest competitors were store-brand drinks. New York Seltzer, which was mentioned by 10% in 1992, didn't even get mentioned once this year.

* Households with children are generally more likely than those without kids to buy beverages mainly from discount retailers.

* Warehouse clubs attracted a younger beverage-buying audience.

* 7-Up's share of the non-cola carbonated beverage market continued to decrease. 7-Up's lead over Sprite diminished greatly as the age of the respondents declined.

* The same is true with Coke and Pepsi. The gap between Coke (the leader) and Pepsi diminished with the decreasing age of the respondents. Coke had close to a 17% lead over Pepsi among respondents 55 and older, but its total lead was only 7.5%. Pepsi and Dr. Pepper were preferred more by people with kids. Pepsi actually beat Coke by 5% in households with children.

* Not too surprisingly, no matter what brand or type, carbonated beverage purchasing declined with age.