A Drop In The Bucket

Drink mixes are getting new formats and flavors, spurring new interest in this category — and new store brand opportunities.

Instead of "cream or sugar?" consumers might now ask: "One drop or two?" At least that appears to be the hope behind new product launches last year of liquid water enhancers such as Kraft Food's MiO Energy, which adds flavor and caffeine (one squirt contains 60 mg of caffeine) when squirted into water.

So how do retailers capitalize on the freshly awoken drink mix category with store brand offerings?

The first step is acknowledging that the once sleepy category is worth fighting for as national brand manufacturers pump money and attention into their offerings.

"Presently, I don't believe that most of the retail stores are taking advantage of all of the opportunities available to them in the private label category," says Corey Schiff, vice president sales and marketing, Jus-Made LP, based in Dallas. "It seems that many retailers are looking at private label as an opportunity for low-end products."

Do consider offering different tiers of store brand drink mixes to meet the unique needs of your customers.

Store brands slip

According to data from Chicago-based SymphonyIRI Group, dollar and unit sales within the $68.8 million store brand drink mix category did, in fact, decline by 7.7 percent and 6.7 percent, respectively, during the 52 weeks ending Dec. 25, 2011 (U.S. supermarkets, drugstores and mass merchandiser outlets, excluding Walmart). The $632.9 million total category, meanwhile, saw dollar sales increase 5.4 percent during the same timeframe, but realized a 1.5 percent decline in unit sales.

"Demand is still strong, but private label has reported some softness in sales versus [the] year-ago [period] due to aggressive competitive activity and liquid beverage enhancer introductions," says Harry Overly, vice president, marketing and sales for Sturm Foods, a division of TreeHouse Foods, Manawa, Wis.

The lower price point of store brand drink mixes can work to retailers' advantage, however, as consumers still look for less-expensive alternatives in this still-shaky economic environment.

"In the U.S., drink mixes are often bought as a cheaper alternative to buying the [prepared] product, so the lower price positioning of private label brands works in their favor," says Ty Law, U.S. research analyst, Datamonitor Group, Chicago.

Taste and convenience

Liquid beverage enhancers such as MiO appeal to consumers who want value, great taste and a non-messy package, says Tarick Gamay, business development manager for Alexandria, Va.-based DreamPak LLC.

"These bottles are selling for about $3 to $3.50, but consumers are getting 24 servings for 12 to 15 cents a piece, so they are really not paying much more than they were in the past for powdered mixes," he notes.

Many retailers are working on their own version of MiO. Walmart, for example, is collaborating with DreamPak on a store brand version.

Other retailers might be hesitant to invest in portable liquid concentrates because of the research and development costs involved.

"I don't think this would be as easy for private label to break into on both a positioning and price standpoint," Law says.

However, according to Overly, retailers must offer different tiers of private label to meet the unique needs of their customers.

"There is no one clear-cut path," he says. "For some, a $1.00 price point is critical, while others are willing to pay a premium or super-premium price to get customization and versatility — from a liquid beverage enhancer — or functional benefits such as energy or immunity."

Overly adds that he expects to see more drink mixes with functional benefits such as relaxation, recovery and satiety, as well as superfruits such as coconut, acai, pomegranate and yumberry.

Energy ingredients— including caffeine and guarana — have become popular drink mix additives, especially in brands positioned to be used during a workout, Law says. But the jury is still out on whether that trend will continue.

"I also believe you will find companies becoming more cautious and reducing the amount of caffeine, guarana and other ingredients," Schiff says.

Another trend can be seen in higher-end functional products made with real juice, he says.

"The benefits of some of the superfruits are too important for them to go away any time soon," Schiff says. "The products have to taste good and provide functional benefits at the same time."

Speaking of health and wellness, zero-calorie products also are important to many consumers.

"Many are eschewing cola carbonates to drink more bottled water, and that point would be moot if their drink mix added sugar or high-fructose corn syrup," Schiff says.

In addition, exotic or unique flavors such as dragon fruit and guava are hitting supermarket shelves, Overly notes.

These unique flavors are important, but they need to be mainstream enough for consumers to recognize them, notes Susie Fausto, vice president of marketing for Jel Sert Co., West Chicago, Ill.

"Flavor combinations with more traditional flavors are gaining in popularity," she says. "Once-trendy flavors such as acai are not as popular now as cherry limeade or strawberry lemonade."

Don't go overboard when it comes to unique flavors — they need to be mainstream enough for consumers to recognize them.

Fausto points out that natural sweeteners (such as stevia) are another great way to bring consumers who avoid artificial sweeteners into the sugar-free segment.

"You have to know your own customer," Schiff adds. "Are they looking for a sugar-free product, reduced calorie or simply a product with juice or fruit puree with no additional sugar added?"

Do focus on the high-growth area of single-serve drink mixes.

Investing in packaging

On the packaging side, single-serve formats are increasing in popularity.

"Private label should focus on single-serve packages as they increase convenience, and thereby usage, of the powder drink mix," Law says.

Packaging also represents the best advertising vehicle for a store brand product, Overly says.

"[Packaging] needs to drive a high quality perception, make shopping for specific benefits easy and subsequently drive trial," he notes. "Some manufacturers have not invested in their private label graphics, which is a big miss."

In addition to investing in the right packaging, retailers also will want to engage in merchandising that properly highlights their own-brand drink mix products.

"Many stores restrict their powder sections to a 4-foot set, missing out on the opportunity to gain incremental sales by expanding their sets," Fausto says. "Powdered soft drinks are ranked 20th in the dry grocery department in unit sales [according to Nielsen], and their velocity and sales per inch are much higher than many other categories in the store. A bigger powder set will deliver stronger sales than many other categories in the center aisle, especially when stocked with the right variety of SKUs."

And retailers also could cross-merchandise their drink mixes with water, naturally, Gamay says.

"Retailers can also be environmentally friendly and display thermoses by the drink mixes, as well," he says.

Don't discount the popularity of liquid water enhancers — consider adding them to your store brand mix.