CSP February 2013 55 N ew-product activity is at an all-time high in the beverage category, and the desire to drive interest in new products shows in terms of new flavors, new sweeteners, new packaging and more. “After sluggish performance during the depths of the recession, the U.S. beverage indus- try is showing signs of life,” says Gary Hemphill, senior vice president of information services for Beverage Marketing Group in New York. “Overall growth has yet to return to what we saw pre-recession, but the industry is moving in a positive direction, with some categories performing better than others.” Beverage Marketing Group data shows recent new-product activity hit an all-time high of 4,000 new SKUs per year, providing a market- ing boost to the beverage category and keeping things fresh in the cold vault. “There’s huge growth potential here,” says Mel Landis, chief customer officer for Coca-Cola Refreshments, Atlanta. “Particularly as the [convenience-store] industry moves into areas like food and snacking, it really plays into our wheelhouse.” Coca-Cola has rededicated itself to new- product development. PepsiCo has recommitted itself to its flagship brand while making tweaks to Diet Pepsi. Nestle Waters has increased its portfolio in multiple ways. The major beer brew- ers are increasingly interested in specialty beers, and Kraft Foods has put beverages in new focus since launching liquid water enhancer MiO. And the most important move? “People want healthier refreshment,” Hemphill says. “Beauty is in the eye of the beholder, and this is true to some extent to perceptions of what is healthier, too. That said, lower-calorie, better- for-you products are generally outpacing the performance of those that are less healthy.” It all makes for intriguing groundwork. CSP takes a look at the trends driving the evolution of some of the fastest-growing categories and changes made by manufacturers to meet the new needs. Fresh products abound, but which trend is driving innovation? By Steve Holtz || [email protected]2013 | BEVERAGE REPORT A New Crop in the Beverage Garden
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C S P February 2013 55
N ew-product activity is at an all-time
high in the beverage category, and
the desire to drive interest in new
products shows in terms of new flavors, new
sweeteners, new packaging and more.
“After sluggish performance during the
depths of the recession, the U.S. beverage indus-
try is showing signs of life,” says Gary Hemphill,
senior vice president of information services
for Beverage Marketing Group in New York.
“Overall growth has yet to return to what we
saw pre-recession, but the industry is moving
in a positive direction, with some categories
performing better than others.”
Beverage Marketing Group data shows
recent new-product activity hit an all-time high
of 4,000 new SKUs per year, providing a market-
ing boost to the beverage category and keeping
things fresh in the cold vault.
“There’s huge growth potential here,” says
Mel Landis, chief customer officer for Coca-Cola
Refreshments, Atlanta. “Particularly as the
[convenience-store] industry moves into areas
like food and snacking, it really plays into our
wheelhouse.”
Coca-Cola has rededicated itself to new-
product development. PepsiCo has recommitted
itself to its flagship brand while making tweaks
to Diet Pepsi. Nestle Waters has increased its
portfolio in multiple ways. The major beer brew-
ers are increasingly interested in specialty beers,
and Kraft Foods has put beverages in new focus
since launching liquid water enhancer MiO.
And the most important move? “People
want healthier refreshment,” Hemphill says.
“Beauty is in the eye of the beholder, and this
is true to some extent to perceptions of what
is healthier, too. That said, lower-calorie, better-
for-you products are generally outpacing the
performance of those that are less healthy.”
It all makes for intriguing groundwork. CSP
takes a look at the trends driving the evolution
of some of the fastest-growing categories and
changes made by manufacturers to meet the
new needs.
Fresh products abound, but which trend is driving innovation?
Wines sales saw healthy double-digit growth in convenience stores in 2012, making it one of the fastest-growing segments by percentage in the channel. All brands in the top 10 saw both dollar and volume growth in 2012.
Brand Dollar sales ($ millions) PCYA* Volume sales (thousands) PCYA*
Barefoot $76.0 26.3% 892.6 25.4%
Sutter Home $66.0 22.0% 877.0 17.9%
Yellow Tail $36.1 16.3% 413.3 14.9%
Gallo Family Vineyards $25.1 17.9% 355.1 19.2%
Woodbridge $23.6 30.7% 279.9 34.4%
Beringer $13.5 0.8% 169.1 1.8%
Vendange $11.6 64.4% 178.3 53.3%
Kendall Jackson $11.2 9.9% 66.4 13.2%
Cavit Collection $8.8 14.0% 90.3 14.6%
Franzia Box $8.3 23.9% 344.9 22.1%
Total category $541.9 21.6% 6,743.4 19.4%
*Percent change from a year ago Source: Convenience InfoScan, SymphonyIRI Group
slightly sweeter options,” says Gaines. “A
key consumer is the millennial, who may
not be in the beer category. Since only
20% of the [convenience-store] channel
can sell spirits, brands such as Bud Light
Platinum and Bud Light Lime-A-Rita can
target a traditionally hard-liquor-buying
consumer and are strategic items to focus
on in these stores.”
A-B has made a concerted push
toward these sweet tastes, extending its
Budweiser and Michelob brands: Bud
as mentioned above, and Michelob with
fruit-flavored extensions.
It also has introduced Michelob Ultra
Light Cider, which capitalizes on recent
growth in hard ciders, a trend also recog-
nized via purchases by MillerCoors and
Heineken USA and a brand rollout by
Boston Beer Co. [CSP—Dec. ’12, p. 151].
This swing toward sweet has also
hit the wine category, where traditional
vintners have introduced sweeter vino,
inspired by the strength of moscato.
“You’re starting to see a bunch of
moscato-flavored items coming out, such
as a pink moscato, red moscato, not just
from Gallo, but from competition. It’s
basically going after what we believe the
consumer wants,” says George Ubing,
director of the convenience channel
for E&J Gallo Winery, Modesto, Calif.
Gallo’s recent product launches include
a Chocolate Rouge Wine, as well as a new
malt-based line under the name Delicia.
BEER & WINE
C S P February 201360
“P rice continues to be an ongoing story for bottled
water,” says Hemphill of Beverage Marketing Group
about water in all categories. “There remains significant pricing
pressure in the category with the emergence of private label as
a force in the category.”
In c-stores, however, SymphonyIRI Group scan data shows
private-label bottled-water volume sales dropped 22% in 2012.
Coca-Cola’s Dasani and PepsiCo’s Aquafina saw some growth
as a result, but Nestle Waters North America’s regional brands
and premium waters were the real winners. And that growth is
expected to continue after a couple of slow years in the late 2000s.
“We project bottled water will see 5% to 6% growth in 2013
and 2014, and even into 2015 due to health and wellness trends,”
says Jim Donker, director of national accounts for Nestle Waters
North America, Stamford, Conn.
Hemphill also credits the move toward health and wellness
as the driving force that allowed bottled water to “rebound
since the depths of the recession.” “The category is aided by its
positioning as the ultimate health beverage,” he says.
“Bottled water is the No. 1 selling beverage around the world,
but here in the U.S. it still trails carbonated soft drinks,” Donker
says, underscoring the potential of the category. “We’re looking
closer at when bottled water will pass CSDs as [the most popu-
lar] packaged beverage [in all channels], and what we’re seeing
now is probably as soon as 2018.” Of course, in c-stores, water
surpassing CSDs is a distant reality—5.4 billion units for CSDs
vs. 1.9 billion for water—but the movement in all channels
illustrates the opportunity.
Landis of Coca-Cola agrees there is tremendous opportunity
in the noncarbonated-beverage business and says Coca-Cola
hopes to lead the way in innovation. “This whole space for
consumers in an active, healthy lifestyle, the hydration space,
really resonates well with us,” he says. “Vitaminwater Zero and
PowerAde Zero have opened up that category, particularly to
women that … wanted the hydration benefits but never wanted
the calories.”
One Drop at a TimeMeanwhile, enhanced waters have reached a new level of promi-
nence as several beverage company startups—Karma, Activate,
etc.—have entered the category to challenge vitaminwater,
which dropped almost 5% in volume in 2012.
Adding to the new bevy of brightly colored bottles are
enhancers that consumers can add themselves. Products such
as Crystal Light to Go and MiO from Kraft Foods, Dasani Drops
from Coca-Cola and private-label brands have pioneered a new
beverage/general merchandise subcategory.
“We continue to see consumer trends toward customiza-
tion, flavor variety and convenience,” says Jessica Sheth, senior
associate brand manager for Kraft Foods, Northfield, Ill., about
the rollout of MiO Liquid Enhancer in 2010. MiO and Dasani
Drops come in less-than-2-ounce bottles and are intended to
be mixed with bottled water, allowing the consumer to add as
much or as little to their preferred taste. “Specifically, MiO tar-
gets millennials, and while price is an important consideration
for this group, uniqueness and trend-inspired attributes are also
essential,” Sheth says.
Extensions of MiO have already included an “energy” line
that adds caffeine and a “fit” line, rolled out in January, that
provides electrolytes for a sports-drink-like beverage. MiO
Energy sold more than 7 million units in c-stores in its first year
on the market, according to SymphonyIRI Group data.
Retailers and consumers can likely expect extensions of Dasani
Drops if the first four flavors, introduced this past fall, catch on.
“Dasani Drops—that’s an enhanced water, just in a differ-
ent form,” says Landis. “How do we add value to core water,
whether it’s nutrients or flavor or whatever it is? … The whole
ingredient-enhanced thing is really interesting. If you can do
drops in flavors, why can’t you do nutrients in concentrate? Why
After a period—the recession—in which many felt private-label bottled water achieved a new level of acceptance, branded waters are making a roaring comeback, including premium brands that saw double-digit growth in 2012.
Dollar sales Unit salesBrand ($ millions) PCYA* (imillions) PCYA*
Glaceau vitaminwater $368.7 –3.78 210.4 –4.6%
Aquafina $362.6 5.4% 243.8 3.0%
Dasani $346.7 3.6% 262.2 4.4%
Glaceau smartwater $284.0 38.4% 151.2 33.8%
Nestle Pure Life $188.8 14.8% 125.2 17.2%
Deer Park $158.3 44.8% 114.6 40.0%
Poland Spring $148.4 15.8% 97.3 14.0%
Private label $127.4 –21.1% 100.3 –22.2%
Fiji $124.2 36.8% 59.3 30.6%
Ozarka $111.5 2.6% 79.8 –1.2%
Total category $2,829.6 7.4% 1,880.2 5.5%
*Percent change from a year ago Source: Convenience InfoScan, SymphonyIRI Group
Carbonated-soft-drink sales growth continues to lag behind many smaller beverage cat-egories. Manufacturers say single-digit growth of a nearly $9-billion category shouldn’t be overlooked.
Dollar sales ($ millions) PCYA* Unit sales (millions) PCYA*
Total category $8,855.7 1.7% 5,383.8 0.1%
*Percent change from a year ago Source: Convenience InfoScan, SymphonyIRI Group
A Subcategory in Search of a Boost
CSDs
C S P February 201364
T here’s been no stopping energy-drink volume growth
since the category was established in the mid-1990s.
But energy drinks’ first real challenge, by congressmen and
potentially the Food and Drug Administration, could put the
category to the test in the next year or two.
The FDA confirmed in November that it is reviewing the
safety of energy drinks containing caffeine and other ingredients
that act as stimulants, and it may require regulatory action if
evidence of a health risk is found.
The agency said that because energy drinks are new products
that have raised safety concerns, they warrant investigation:
“New products and patterns of use require us to remain vigilant,
and we are working to strengthen our understanding of the
nature of energy drinks and any causal risks to health.”
Possible regulation could vary from an age limit to caps on
caffeine allowed in a drink—as enacted in Canada in Janu-
ary—to an all-out ban of the products.
Consider it a warning, but until some action is taken, the cat-
egory continues to deliver on the promise it has established over
the past almost 20 years, growing more than 17% during the past
two years. This comes after comparatively lackluster performance
during the recession—including flat volume sales in 2008—but a
healthy distance from the 27% growth seen in 2006.
Continued double-digit growth is anticipated in the next
two years as well. “According to Mintel, we can anticipate 14%
growth in total energy-drink sales in 2012 and 13% growth in
2013 and 2014,” says Guy Wootton, director of category insights
for Red Bull North America, Santa Monica, Calif.
The main drivers of this growth, according to Wootton:
▶ Energy drinks heavily overindex in two core emerging
demographic sections, Hispanic consumers and millennials,
resulting in increased category penetration.
▶ Busier lifestyles are fueling consumers’ need for an energy
boost; 96% of the U.S. population claims to purchase a “pick-
me-up product.”
▶ Innovation from the top three brands—Red Bull, Mon-
ster and Rockstar—continue to generate buzz and excitement
among consumers and provide new reasons to enter the
category.
Wootton says an increased focus on category management will
mean additional growth for the category in c-stores. “Investment
in these programs will inevitably drive growth as the category
becomes more efficient and expands its in-store presence,” he says.
Red Bull is doing its part in adding new products this year
with the March rollout of its first three flavored line extensions.
Mixing It UpCoca-Cola Refreshments is also making moves in the energy
category with a hybrid new product that brings thirst relief to
its NOS energy brand. “NOS Active Energy is a hybrid between
a sports drink and an energy drink,” says Landis of Coca-Cola.
“We think this fits well into that space for consumers in an
active, healthy lifestyle, the hydration space.”
Rockstar has a hybrid extension of its own. Rockstar Energy
Water is a noncarbonated, caffeinated vitamin- and herb-
enhanced water beverage. Las Vegas-based Rockstar is urging
retailers to merchandise the drink, which comes in tropical
fruit, orange tangerine and blueberry pomegranate acai, in
the enhanced-water section of the cold vault rather than with
energy drinks. It’s part of a frequent refrain from manufacturers
in the category to give it more space wherever possible.
“C-stores can continue to drive these trends by planning the
right amount of shelf space for the anticipated future growth
for the category,” says Wootton. “By 2014, the category will be
30% bigger, and c-stores need to plan their shelf space to accom-
modate that. Additionally, secondary placement of cold product
is critical for driving impulse purchase of energy drinks.”
Energy Faces Its First Big Challenge
Best-Selling Energy DrinksC-store sales, 52 weeks ending Nov. 4, 2012
Even as less successful energy drinks begin to fall away, the top 10 best-selling brands in c-stores are all seeing growth, and the category as a whole is again growing by double digits.
Dollar sales Unit salesBrand ($ millions) PCYA* (millions) PCYA*
Red Bull $2,367.9 14.9% 803.8 14.8%
Monster Energy $1,369.9 15.2% 597.2 15.7%
Monster Rehab $265.3 227.0% 117.6 224.3%
Rockstar $251.4 14.5% 123.1 16.2%
NOS $227.8 8.6% 106.0 10.5%
Java Monster $219.5 27.5% 86.4 30.9%
Monster Mega Energy $211.4 21.0 68.5 20.1%
AMP Energy $143.4 7.9% 71.7 10.7%
Rockstar Recovery $110.5 0.7% 54.4 1.5%
Rockstar Sugar Free $102.4 1.4% 50.1 3.5%
Total category $6,229.6 17.3% 2,527.3 17.4%
*Percent change from a year ago Source: Convenience InfoScan, SymphonyIRI Group
ENERGY DRINKS
C S P February 201366
Those little bags of tea that need to steep in water and then
refrigerated in pitchers? Their days may be numbered.
Instead, “ready-to-drink tea has accounted for virtually all of the
growth in the U.S. tea market” since 2006, according to Beverage
Marketing Group data. And RTD tea “now accounts for over
30% of the total volume,” up from 24% in 2006.
The boom, including an 8.6% jump in RTD tea unit sales in
c-stores in 2012, according to SymphonyIRI Group, is due to
two reasons: a reflection of consumer demand for convenience,
and an increasing focus on health and wellness.
Major suppliers have noticed and reacted by creating full
complements of brands. Call them the “three tiers of tea.” As
two major suppliers—Coca-Cola Co. and Nestle Waters North
America—solidified their iced-tea lineups in 2012, their three-
tiered products will receive strong pushes from sales representa-
tives and heavy marketing and advertising campaigns designed
to draw relevant consumers.
For Coca-Cola, its triumvirate includes Honest Tea at the
high end, Gold Peak in the premium-to-popular range, and an
expanded Fuze product line in the popular-to-value play.
“Tea is a huge platform,” says Landis of Coca-Cola. “Over
the last five to seven years, we’ve been in the [tea] category but
probably not in the way we would have like to have participated,
given the growth. So you’re going to see a hard push this year—
as we’ve ended our Nestea relationship—around Fuze, Gold
Peak and Honest Tea.
“We want to dive into tea, which is an untapped category for us.”
Nestea, meanwhile, is now in the hands of Nestle Waters,
which, after years as a water-only company, has three iced-tea
brands of its own.
“We’re trying to do the same thing that we did in water. We’ve
created [three tiers],” says Donker of Nestle Waters. “We’ve got
the mainstream tier, where Nestea’s going to play. Stepping up,
we’re creating a premium category, where Tradewinds will play.
And in the specialty category, we’ve got Sweet Leaf.”
Retailers can expect promotions around all three of those
brands “as we attack the category and build our brands and our
business for the long term,” Donker says.
Between the refocused brands and the growth in the category,
retailers may want to review their tea sets. To that end, Donker
recommends retailers consider dedicating a full door to tea.
“With the predicted growth of over $1 billion in the next four
years, it’s important to make sure they are capturing this trend,”
he says. “By doing so, they will be able to offer their customers
the variety they are looking for, particularly in the premium
[fresh-brewed teas] and specialty teas that are providing some
Acquisition activity on several iced-tea brands could add up to major changes in top brands, though the independent AriZona brand remains a c-store favorite.
Dollar sales Unit salesBrand ($ millions) PCYA* (millions) PCYA*
AriZona $284.6 0.1% 269.1 1.1%
Lipton Brisk $200.8 0.4% 189.1 1.6%
Lipton Pureleaf $107.5 1.8% 60.6 –0.4%
AriZona Arnold Palmer $96.6 10.4% 92.2 11.2%
Gold Peak $82.2 34.8% 48.9 35.6%
Snapple $73.2 3.8% 50.2 4.8%
Lipton $64.7 –4.4% 42.1 –7.8%
Peace Tea $62.6 28.7% 63.2 28.6%
Nestea $41.5 –19.8 34.9 –20.9%
Diet Snapple $36.0 28.7% 23.0 27.1%
Total category $1,211.4 8.6% 995.2 8.6%
*Percent change from a year ago Source: Convenience InfoScan, SymphonyIRI Group