Consumers guzzle gallons of New Age drinks

Drug Store News, Feb 21, 1994

According to sales statistics, in drug chains, candy is still king among consumables, accounting for some $1.5 billion ion sales in chain drug stores in the 52 weeks ending Sept. 12, 1993. But, the venerable category grew only at a 1.2-percent clip, according to Information Resources Inc.

The impressive growth percentages, according to IRI, are being generated by beverages: Carbonated soft drinks grew by 8.95 percent in the drug channel; single serving juices, by 13.63 percent; and bottled waters, by 13.16 percent.

And, according to buyers and industry experts, the most explosive growth is in the smallest beverage segment of all -- ready-to-drink iced teas, with current total sales estimated to be worth some $950 million in wholesale dollars, according to a just-releasd study by beverage Marketing Corp.

Obviously, the New Age movement, which includes bottled waters and flavored juices as well as ready-to-drink iced teas, has not yet reached mid-life crisis. That's fine with buyers, who enjoy the consumer appeal and healthier margins these beverages generate.

The grand dame of drinks

Carbonated soft drinks are still the core draw in drug chains. But, today, it's a category that lacks excitement. "There's still some growth in the category, but it's basically flat," Frank Gable, vice president of distribution, Harco Drug, said. "There's really nothing new in the category." Besides, he added, "we're coming off a very high base of growth for carbonated soft drinks."

"In the total beverage market, soft drinks are No. 2 (beer is No. 1)," said Hank Behar, editor, Beverage World magazine. "Both segments are declining -- in that they are not growing as fast as they used to."

Plus, added Raymond Hoy, director of marketing, I Got It At Gary's, there's little profit left in carbonated soft drinks. The category is a traffic-builder. "We give it away," Hoy said.

Indeed, a sampling of advertised prices across the country during the last week of November and first week of December showed prices ranging from 79 cents for a 2-liter bottle of 7Up advertised by SupeRx in the Cincinnati Enquirer, to 88 cents advertised for a 2-liter bottle of Pepsi at Drug World in the Columbus Dispatch, to $1.99 advertised for a 12-can pack of 12-ounce Classic Coke at Phar-Mor in the Houston Chronicle.

In-line pricing is extremely competitive, with everyone competing against everyone else on razor-thin margins. Immediate consumption, however, is a different story. "The cold sale is a different customer," said Hoy. "If you're thirsty and if the price is under a buck, you don't care."

Depending on the retailer, immediate consumption beverages can generate margins from 25 percent to 40 percent, according to Robert Baskin, director of public relations for Coca-Cola USA.

In a market hungry for new product and better margins, Coca-Cola has introduced a 20-ounce plastic bottle single serving. The new product has evoked a mixed reaction, however. Eckerd spokesperson Michael Polzin summed up the concerns: "We're not sure that that's what the customer is looking for. Is the customer who buys a caffeine-free diet drink going to want to drink 20 ounces all at once? We think our consumer is looking for a thirst quencher."

Plus the new size creates space management challenges. It's several inches taller, therefore taking up more cubic space. That's particularly a problem in crammed coolers where space is already tight.

Cramming the cooler

Contributing to the space management challenges is the burgeoning New Age beverage segment, which includes ready-to-drink iced teas, bottled waters and single serving juices.

"The growth is in the New Age beverages," said Hoy.

"New Age beverages are taking part of the carbonated soft drink business," added Gable. "These beverages are definitely a factor."

The ready-to-drink iced tea segment exploded in 1993. According to the beverage Marketing Corp., last year ready-to-drink iced teas grew 91.2 percent in wholesale dollars over 1992, partly because Lipton and Nestea went national with their products in '93, partly because the population was ready to drink iced tea; and partly because wide-mouth glass bottles solved the taste problem.

Ready-to-drink iced tea's growth is expected to remain healthy for the next two years. Beverage Marketing, in its newly released study, the Ready-to-Drink Tea Report, estimates that ready-to-drink iced teas will grow 39.8 percent in 1994, reaching 465.1 million gallons and reach 570 million gallons by 1995.

Gallons isn't the only measure expected to grow in this segment, however. "Everybody and their brother will be trying to get into this market," Hellen Berry, Beverage Marketing's vice president of research, said. "I predict a minimum of 100 brands by the end of 1994."

Still, Snapple dominates the market, and as one buyer said, "As Snapple moves, my market moves." Production and delivery problems have been plaguing the trend-setting supplier, however, as it endures the growing pains involved in evolving from a regional company to a national powerhouse.