Nov. 2015: Spotlight on Ready-to-Drink Beverages

Although the U.S. carbonated soft drink market has seen sales decline in recent years, many other ready-to-drink (RTD) beverage segments remain in strong growth mode. In a May publication, global market research firm Mintel says it expects the U.S. energy drink market to grow by approximately 52 percent between 2014 and 2019, for example, bolstered by older millennial transitioning to parenthood.

Merchandising can play a critical role in RTD growth efforts. To see what retailers are doing well and not so well here, we visited three supermarkets: a Kroger store in Ottawa, Ill, operated by The Kroger Co., Cincinnati; a Schnucks store in DeKalb, Ill, operated by St. Louis-based Schnuck Markets Inc.; and a Hy-Vee store in Sycamore, Ill, operated by West Des Moines, Iowa-based Hy-Vee Inc. Our visits took place on a weekday in early October.

Kroger

General observations: The RTD beverages are located in several areas of the Kroger store, with RTD teas and coffees, sparkling/seltzer water, energy drinks, sports drinks, soft drinks and more merchandised in aisles toward the left-hand side of the store (looking into the store from the front entrance). Some refrigerated RTD offerings are located on the right-hand side of the store against the back wall. Store brands are offered in the RTD soft drink (Big K brand), refrigerated tea (Turkey Hill brand) sparkling water/seltzer water (Kroger brand) and lemonade (Kroger brand) subcategories.

Foot traffic was moderate during our mid-morning visit, and the store was neat and clean. Some RTD beverage categories were well-stocked while others had empty spaces for missing SKUs.

The upside:

• A refrigerated front-of-store end-cap display was dedicated to single- and multi-serve RTD flavored tea, lemonade and lemonade-tea under Kroger’s Turkey Hill brand. The multi-serve offerings were on promotion and featured large shelf tags communicating the price reduction.
• The retailer offers an abundance of soft drinks (dozens of SKUs/flavors) under its own Big K brand and gives the products the brand-blocking treatment.
• During our visit, Big K 2-liter soft drinks were on promotion, “buy 3 — get 1 free,” and sported large shelf tags announcing the sale. In addition, Big K 12-packs and 12-packs of Kroger Lemonade and Kroger Pink Lemonade were on sale, as indicated by large “4 for $9” shelf tags.
• A front-of store end-cap display was dedicated to Big K 2-liter soft drinks; a large sign at the bottom of the display communicated the “buy 3 — get 1 free” promotion.

The downside:

• Turkey Hill RTD beverages occupy five shelves in the refrigerated RTD section, but the premium eye-level space is given to the national Gold Peak tea brand.
• We noticed no own-brand RTD sports drinks, energy drinks, tea or coffee in the shelf-stable beverage aisles.

Schnucks

General observations: The shelf-stable RTD beverages are located in several aisles slightly to the right of the center of the Schnucks store (looking into the store from the front entrance). Store brands are offered in the RTD tea (exclusive Sweetie Pie’s brand), sparkling water (Schnucks brand), and French sparkling soda (World Classics brand from Elk Grove Village, Ill.-based Topco Associates LLC) subcategories.

Foot traffic was moderate during our lunchtime visit. The store was neat, clean and generally well-stocked (a number of multi-serve tea offerings needed to be restocked).

The upside:

• Large shelf signage communicated the “everyday low price” (68 cents) of Schnucks Diet Sparkling Water.
• The retailer’s World Classics French Sparkling Soda is merchandised at eye level.

The downside:

• The Luzianne Sweet Tea and Luzianne Diet Sweet Tea merchandised to the right of Schnucks’ Sweet Pie’s Sweet Tea (in Original Sweet and Berry Berry varieties) featured large signage communicating a “10 for $10” sale. The Sweetie Pie’s teas were not on sale; their regular price was 3.7 cents more per ounce than the Luzianne sale price.
• We noticed a number of national brand RTD beverage displays (Arizona, Powerade, Gatorade and more), but no store brand displays in the category.
• Although the store carries value-brand soft drinks (under the Stars & Stripes and Vess brands from Mississauga, Canada-based Cott Beverages) and local-brand soft drinks (under the Fitz’s brand), we spotted no soft drinks under a store brand. We also did not spot any store brand offerings within the RTD sports drink, energy drink and coffee subcategories.

Hy-Vee

General observations: At the Hy-Vee store, the soft drinks are located in an aisle at the center of the store, while the RTD teas, energy drinks, sparkling water and more are located in an aisle slightly left of the center of the store (looking into the store from the front entrance). Store brands are offered in the soft drink (Hy-Vee brand), lemonade (Hy-Vee Select brand), Italian soda (Hy-Vee Select brand) and value-added water (Hy-Vee Nutra H2O, Hy-Vee Water Coolers, Hy-Vee Water Refreshers and Hy-Vee Simply Ice brands) subcategories.

Foot traffic was rather heavy during our mid-afternoon visit. The store was neat, clean and well-stocked.

The upside:

• Hy-Vee offers a number of soft drinks under the Hy-Vee brand in both 12-packs and 2-liter-bottle formats, and gives them the brand-blocking treatment.
• Certain Hy-Vee soft drinks (e.g., a 12-pack of Hy-Vee Black Cherry soda) sported “Price Decline” shelf tags advertising a “2 for $5” sale.
• Hy-Vee merchandises its Hy-Vee Select Flavored Lemonade and Hy-Vee Select Italian Soda on the top shelf, making them easy for shoppers to spot.
• We spotted a large “Best Seller” shelf tag under the six-packs of Hy-Vee Water Coolers (flavored waters). The products are given prime top-shelf placement, right above single bottles of Hy-Vee Water Refreshers and Hy-Vee Water Coolers.
• Single-serve Hy-Vee Nutra H2O beverages (nutrient-enhanced flavored waters) sported large “Best Seller” shelf signage that communicated a “5 for $5” price.
• Large “Price Decline” shelf signage announced a “10 for $10” sale on various flavors of Hy-Vee Simply Ice sparkling water beverages.

The downside:

• We spotted two end-cap displays merchandising Dr Pepper soft drinks and Coca-Cola soft drinks, respectively, but no displays tied to own-brand soft drinks.
• We noticed no store brand RTD sports drinks, energy drinks, tea or coffee in the shelf-stable beverage aisles.