Drinks manufacturers have launched a New Generation of several hundred novel soft drink and juice or milk based variants in the last 18 months. Of these, just over 200 have turned up in significant volumes in fridges at convenience outlets. Mind you, there have been a similar number of product deletions. So just what’s going on in the drinks market?
Not everyone agrees on what New Generation Drinks actually are. ACNielsen says that almost every drinks manufacturer has a different definition. While it’s certainly true that there have been a lot of innovative product launches of late, one soft drink executive told ACSN that the New Age drink category of the late 90’s has settled down into well defined categories and sub-categories such as energy, sports, iced teas and so on. The latest flourish of new products reflects activity within existing categories, rather than a new direction in the overall drinks market.
But in general terms, New Generation may describe the raft of new products that have appeared in response to consumer demands for an energy pick-me-up or for a refreshing drink with additional health benefits. Some of these new products have come as new brands, while others have arrived as variants of existing brands. Some are referred to by the more recent classification of “functional beverages”. Collectively, the newer entrants are driving soft drink growth at convenience stores.
Generally, drinks are split between carbonated and non-carbonated products, juices, waters and milks. The non-carbonated category is essentially divided into energy drinks, sports drinks and sports waters.
Sports drinks are higher in sugars and contain electrolytes like sodium and potassium. They are said to re-hydrate the body quickly after strenuous exercise. Powerade, Gatorade and G-Force are leading brands in convenience stores. Sports waters, or functional waters as they are often called, are largely flavoured waters with added vitamins. These include Mizone, Aquavita and the more recently launched Thorpedo.
Energy drinks generally contain the stimulants caffeine or guarana or essential amino acids, like taurine. The energy drink market is dominated by Red Bull and V and these products have had a major influence on drinks sales at Australian convenience outlets. The manufacturers of both have been pressing the trade for an increase in facings.
John Sawicki is Trade Marketing Manager for Frucor Beverages, which is owned by international dairy and beverage giant, Group Danone. Frucor set up on its own in Australia three years ago after its local distributor, Spring Valley was acquired by Cadbury Schweppes. Frucor’s new generation brands include V, G-Force and Mizone. The recently launched Mizone Peak contains the 5 essential vitamins, C, B3, B5, B6 and B12 of regular Mizone, but it has the added Teavigo, which is a green tea extract that helps utilise energy levels by increasing blood flow. Frucor’s landmark brand, V is now among the top handful of brands in the total drinks market at Australian convenience stores.
“ The Australian and global beverage markets are in a period of growth and major transformation. In general, there has been a switch away from carbonated drinks to beverages with less sugar and additional functional benefits,” said Mr Sawicki. “To the younger customer, the older brands are looking a little staid and energy drinks are seen as more cool and exciting, and this is reflected in the marketing and advertising. campaigns.
“ People these days are working harder and have greater commitments. Energy drinks are replacing other traditional beverages because they provide refreshment as well as a functional benefit, such as a re-invigoration, replenishing energy levels, improving mental alertness and enhancing concentration. They appeal to everyone from partygoers to office workers, through to truck drivers” said John Sawicki
Red Bull is the second leading brand in the energy segment. The company is a privately owned concern based in Europe. Red Bull in Europe was developed from Asian energy type products that had been in existence for many years as mind and body elixirs.
“ Red Bull created an entirely new category that has taken the world by storm and seen many imitators," said Red Bull Marketing Manager. “I see the energy drink segment as quite separate from so-called New Age or New Generation drinks. Red Bull is not about taste, refreshment or thirst. Red Bull is about renewable energy for people who are tired, mentally or physically.
“ As far as new products are concerned, this is very much a market where first in is best dressed. V launched before Red Bull in the Eastern States and has led the energy market there. Red Bull launched first in South Australia and WA and is ahead of V in those States. That’s why retailers need to exercise care with some of the new products that are coming along. The market is crowded and some new products arrive and leave in very quick time.
“ Red Bull and V comprise over 85% of the energy drink market. Energy drinks represent about 19% of soft drinks sales and should logically be getting 19% of facings. That’s not happening at most route and convenience outlets, even though the energy segment is delivering a genuinely good return as well as high growth for retailers.”
" With energy showing tremendous growth levels in the last few years, the key is to ensure that the market leaders have their fair share of space in an average convenience store. That should really be a full door. If we have that then there can be room to experiment,” said Mr Stacey. “I’d like to see a shelf in the fridge at every convenience store reserved for Manager’s Choice. This would give staff at store level a chance to trial products that they think their customers might like.”
“ We see a lot of the smaller independent convenience outlets and corner stores trying to carry too many beverage products, often limiting their display to just one facing of each. This is not good category management,” said Frucor’s John Sawicki. “Some outlets are still stocking products that were deleted by the major convenience outlets years ago, in response to changing consumer dynamics suppliers. These outlets need to optimise their product range in order to generate efficiencies.”
Another soft drink executive said privately that he was amazed that so many retailers chose their sales range mostly on buying price alone. “They look at how much they are going to make on each sale and forget that the product may be a very slow mover. This means that they often have trouble selling the stuff inside its expiry date,” he said. “The majors have got better in the past year or so and have deleted a lot of sub-profitable lines, largely in response to supermarket competition. But the smaller independents really need to be managing their drinks business more effectively because fridge space is a precious resource.”
P&N Beverages is well known to grocery operators and its two litre juice packs are a common site at convenience stores. In August this year, P&N launched Wild NRG, an energy drink targeted at the 18 to 30 club scene.
“ The drinks market is a very competitive market, especially in route and convenience,” said P&N Beverages’ Marketing Services Manager Harris Spyrou, “because that’s where consumers usually trial new beverages. Single serve drinks rarely make it into the grocery chains unless they have already become established in route and convenience.
“ The current trend in drinks is towards products with specific health or functional benefits. These kinds of products, mostly water based, are now collectively taking some sales from the more traditional sugar-based soft drinks. These are trend products, which often peak for a short period. That’s why retailers need to catch the crest of each trend and ride it for as long as it lasts in order to maximise their income from the category.”
One of the most widely publicised launches of recent times has been the Thorpedo range of four ‘high tech energy waters’, from Thorpedo Foods, a joint venture with So Natural Foods. Thorpedo features ‘ultra low GI of 16’ with anti oxidants and added electrolytes with less calories and reduced sugar.
“ We’re tapping into a growing demand for healthier, lower GI alternatives by providing a range of great tasting drinks that anyone can enjoy,” said olympian Ian Thorpe at the Thorpedo launch in September.
The company said its research shows that people want better tasting and healthier alternatives to many of the soft drinks and sports drinks currently available. “Over 90 per cent of Australians say we consume too many very sugary or caffeine based drinks. And people say the biggest hurdle to switching to a healthier drink is the lack of better tasting alternatives.”
Cadbury Schweppes has launched Aquaveta under the Spring Valley brand. The Company says that Aquaveta is a ‘nutrient enhanced water designed with women in mind’. Each of the three flavours offers a different combination of essential nutrients and the 700ml plastic bottle is designed to fit comfortably in the hand.
" Aquaveta is definitely not a sports water and it's not an energy drink," said a Cadbury Schweppes spokesperson. "We have listened to what women want and need during the day and we believe Aquaveta is the ultimate refreshment to enhance well-being and complement a busy lifestyle. A hint of natural fruit juice also provides a wonderfully fresh flavour to help people get through their daily water intake.
Musashi is an Australian owned and run health and sporting supplement company, established for over 15 years. Its products are now found in convenience stores.
“ Flavoured and fortified waters suit consumers who want a water alternative, but they are not really energy drinks,” said Musashi’s spokesperson, Jane Morrison. “Given the speed of life now, it is no surprise that stimulant drinks have found an important niche in the beverage market. Musashi’s E Shot is a favourite with gym goers as a pre workout or “kick start” drink.
“ While our functional beverages, especially Muscle, SLM Cola and Recovery continue to sell well in the convenience market, it is our recently released P30 and P40 Milk Protein Drinks that have stolen the show. Convenient and great tasting drinks high in quality protein are certainly in a league of their own,” said Ms Morrison. “They appeal to the carbohydrate conscious, busy and physically active individuals who recognize they need more than a sugar and caffeine hit to sustain them.”
Somewhere in the middle of all these new arrivals is a well-known name: Lucozade Energy. Now with three flavours, Lucozade has been around for more than five decades, but has lost ground over the last few years.
“ We’ve been hit hard by all the new entries into the market and this is something we need to address,” said Carol-Ann Stewart - Consumer Manager, Lucozade for GlaxoSmithKline. “But the brand continues to perform well, wherever it’s given space. For example in Coles we have a 21% MAT value share of their Functional Drinks category, which is something that cannot not be ignored."(Source: Coles Snapshot MAT to Sept 26th 04.)
“ That’s because Lucozade is the original energy drink! It has heritage in convalescence and people know it works as a day-to-day pick-me-up. The body naturally prefers glucose as a source of energy and ours is the only pure glucose syrup formulation available, so it is unique to the energy category in that sense and should be merchandised as such."
“ The important thing for retailers is to be very clear in the way they merchandise these different categories, so it’s easier for the consumer to identify the type of beverage they need and then find it on the shelves. By matching merchandising to consumer need this category will perform strongest for you.”
Recharge by Sprite was launched by Coca-Cola Australia in June, supported by major consumer advertising and promotion – all hooked around the ‘Refreshment + Energy’ proposition.
“ Recharge by Sprite is designed to refresh and energise our drinkers, by offering them the refreshment of ‘Sprite’ with the pick me up of an energy drink” said Joanna Ryan, Public Affairs and Communications Manager, Coca-Cola Australia. “This product has been launched as a response to consumer demand, and the campaign had been designed to deliver a strong brand presence to the target audience of 18-24 year olds.”
Powerade Active Water was launched by Coke at the beginning of September in the flavours of Mandarin, Lemon and Lime. Coke also launched Diet Coke With Lime in May, followed by Neverfail water in a five litre retail pack in July.
" When allocating space in fridges, convenience stores really need to consider who their customers are. Location and demographics play a large part in what product mix will create the highest profits for convenience stores. CCA believes stores should consider each new product in terms of what it might deliver to your business," said Alec Wagstaff, Group Corporate Affairs Manager for Coca-Cola Amatil.
" If you believe a new product will be successful in your store, trial it. If it doesn't perform it’s easy to discontinue that line. But if it does perform in surrounding stores and you're not carrying it, then you have clearly missed out on potential growth for your business. Of course, with so many new products continually emerging, it’s important to sit down with your sales representative and determine what new products are right for your business."
" It's important to work with your sales representatives to talk through what products are going to be the fast movers,” said Mr Wagstaff. “It’s just as important for CCA to have fast moving products in your fridges as it is for you, so it makes sense to look at the situation together.
" The percentage of fridge space for each product should of course be directly linked to the percentage of sales that product makes. Water for example is the fastest growing category, so I'd say there would be something very wrong if water wasn't making up a large percentage of your fridge.”
Zenergy Beverages has recently added Temple Hydrotherapy - a range of Exotic Vitamin waters, infused with added nutrients in six flavours, currently ranged at Coles, Coles Express, 7-Eleven and Nightowl stores.
“ Temple provides a delicious and healthy alternative in a convenience store fridge that is often dominated by fizz, sugar and fat,” said Zenergy Director, Sharon Evans.
“ We think that alternative beverages will become an irresistible force,” said Ms Evans. “As consumers become more demanding and informed, traditional sugar-based soft drinks will inevitably come under the glare of the same blow torch that is currently been applied to super sized fast food. This will be especially true in the route and convenience market where product trends usually begin.”
From ACSN’s viewpoint, the bottom line for store operators must be:
Top 100 newly launched drinks appearing on convenience store shelves in the past 18 months. These are the top 100 of THE NEWLY LAUNCHED PRODUCTS in descending order of dollar sales and do not represent the overall top sellers. Source: ACNielsen C*Track 6 quarters to 8/8/004. For top sellers refer to www.c-store.com.au.
Red Bull says this novel merchandiser has been very successful in trials and is a great example of the kind of innovation that it is currently working on. If any retailer wishes to get a red bull cooler Phone Red Bull at 02 9023 2800 or email mike.stacey@au.redbull.com.