Manufacturers look to add lost pop to beverage category
Changing consumer tastes, increased commodity costs and the economy have taken a big toll on the carbonated beverage category and have left manufacturers scrambling to develop strategies to meet the demands of a new marketplace.
The biggest problem carbonated beverage manufacturers face is an undeniable decline in consumption.
“The trend is against them,” said Greggory Warren, an analyst with Morningstar. “Consumers are looking to other beverages, and I don’t know how you reverse that trend.”
Coca-Cola Co.’s president and chief executive officer, Muhtar Kent, addressed the issue in his recent speech at InterBev 2008. “It’s tough out there, and it’s probably only going to get tougher,” he said. “Customer preferences…expectations have shifted dramatically over the last decade…commodity and energy prices have soared.”
Rather than write off the future of carbonated soft drinks, Kent believed sparkling beverages have a strong future with such products as Coca-Cola Zero, which he called the biggest product launch in 22 years. Coca-Cola Zero, he said, was “central to driving sparkling beverage leadership” and was bringing consumers back into the category, as well as generating great interest among new users.
PepsiCo has its own plans to revitalize its carbonated beverage business. In a recent meeting with bottlers in Westchester County, N.Y., Pepsi executives outlined the company’s new commitment to the carbonated soft drink category, which includes redesigned graphics and a broad range of new products and packages in both carbonated and noncarbonated beverages. New packaging in 2009 will affect many Pepsi brands, including Mountain Dew, Gatorade and Tropicana.
Morningstar’s Warren said the companies face a challenge. “The consumer has gotten very price-sensitive, so it’s not a matter of whether they should spend a little more for an enhanced water; it’s about not buying anything and drinking tap water instead,” he said.
The biggest hit to retailers is at the point of purchase. Bottlers are reluctant to shave their margins, and consumers are not buying product, so retailers are left with coolers generating slow turns. “There’s a real hesitation on the part of bottlers to get more promotional in the single-serve category,” Warren said. “They are already taking a hit absorbing a lot of increased costs, and there’s an unwillingness to take a hit in a high-margin category.”
While Warren is hard-pressed to find any segment in the beverage category that shows promise in this current economy, other industry experts said such segments as enhanced waters and functional beverages provide some lift to the category.
“Enhanced waters are holding up pretty well,” said John Sicher, publisher of Beverage Digest. “Fuze, for example, is a small but strong brand, and Coke is doing OK with Glaceau’s Vitaminwater.”
A number of product introductions for the Vitaminwater brand in 2009 and a strong distribution system that will allow Coca-Cola to increase the availability should provide some additional growth. Vitaminwater already has a strong profile in Costco, where multipacks are very visible in the club store’s aisles.
Energy drinks also are showing good growth. Dollar sales for the category were ahead nearly 22 percent for the 52 weeks ended Oct. 5, according to Information Resources Inc. There are threats to the segment as pressure mounts to crack down on the sale of caffeinated energy drinks to young people. One hundred U.S. scientists and physicians recently petitioned the Food and Drug Administration for greater regulation of energy drink products.
Another growing segment is functional beverages. “People are more interested in functional beverages,” Sicher said. “This is one segment of the beverage category where price isn’t the top priority.”
“As price becomes more important due to economic conditions, it helps a lot that we provide real nutritional benefits to our customers,” said Jason Dolenga, brand manager of Coca-Cola’s Odwalla. “Even when times are tough, there are some things that consumers tend to continue as part of their routine, and we know that attention to good nutrition is one of them.”
Winn-Dixie remodels Pensacola, Fla., stores
PENSACOLA, Fla. Winn-Dixie grocery stores in three different Pensacola, Fl., locations—Bayou Boulevard, Mobile Highway and East Nine Mil Road—went through a makeover recently. Produce and bakery sections were expanded, restrooms remodeled, an updated assortment of organic products was added, as well as another store entrance. All three stores received a new design, as well as other renovations.
The company is celebrating Friday and Saturday with special events for the public, including wine and cheese tasting and a “family fun day” at two of their refashioned locations.
Lindt gets into the holiday spirit with seasonal packaging for its chocolates
KILCHBERG, Switzerland Lindt just made the holidays a little sweeter. The Swiss chocolate manufacturer has refashioned its premium chocolate packaging with holiday designs and prices affordable enough to pick up a few for relatives and friends with a sweet tooth.
Lindt’s Holiday Tree, for $7.99, is filled with a bag of Lindor Truffles, and their red poinsettia box, for $6.99, brings to mind the holiday flower often used for decoration this time of year. The milk or dark chocolate Santa Claus, wrapped in brightly colored foiled, is available for only $3.99, as are the reindeer, which are wrapped in gold foil and are available in milk, dark and white chocolate.