News & Solutions Merchandising Report
For many retailers, beverages have become synonymous with volume. A heavily advertised beverage aisle with hot prices on leading soft drinks, popular new-age items and beers can be a real traffic builder, drawing in flocks of shoppers.
As a result, beverages -- especially Coca-Cola, Pepsi and, to a lesser extent, popular beers and some new-age items -- play an indispensable role in the ad plans and merchandising strategies of supermarket operators. Shoppers will make an extra trip to a store if "loss leader" prices are available on Coke or Pepsi, retailers report.
"The beverage category thrives on promotion," said Peter Dudis, director of grocery operations at Big Y Foods, Springfield, Mass. "However, carbonated soft drinks are such a strong subcategory that they often need to be treated separately."
"Every single week we run a hot national-brand soda pop, as well as a national-brand beer. On occasion, about twice a month or so, we will run a new-age beverage. Almost every week there are several juices featured, like Ocean Spray," Richard Bellows, retail buyer at Scolari's Food & Drug Co., Sparks, Nev., told SN.
"We find having the lowest price around helps build sales. It is one of our biggest traffic builders. Between the soda pop and the beer, beverage probably would account for over 10% of [total store] volume," Bellows said.
"We advertise a soft drink every week. It is a great way to draw traffic into the stores," said Larry Goetsch, buyer at Ingles Markets, Black Mountain, N.C.
Goetsch said Coke, Pepsi or other soft drink flavors are placed in every ad. "These items are loss leaders. Period. We hope that they draw the customers into the stores and that they buy other items," he said.
"Beverages are advertised more frequently than other grocery items due to the volume and high consumption of soda," said Mike Shultz, senior vice president at Hughes Family Markets, Irwindale, Calif.
At Hughes, an average of three to five different beverage items are on ad each week. "We merchandise beverages 52 times per year. Juice and soda are advertised weekly, and we place more sodas than juice in any given ad," Shultz said.
"Beverage advertising draws shoppers to the stores some weeks more than others, but it sure keeps them from going to the competition if you advertise and price it right," he said, adding, "Our most successful promotions have been those during the key summer selling holidays."
Mark Polsky, senior vice president at Magruder Inc., Rockville, Md., said soft drink merchandising stands apart from the merchandising of every other product in the store.
"Soft drinks are an every week item. It is such a huge category that we're not permitted to make any money. It is something that you advertise every week and then just sort of give it away," he stated. "Soft drinks are the key advertising point. They are a real traffic builder."
But not all retailers use colas as loss leaders.
"We don't use loss leaders in our chain," said Howard Hodgson, buyer for beer, wine, liquor and direct store delivery at Heinen's, Warrensville Heights, Ohio. "Everything stands on its own. We usually rotate between a Coke and Pepsi product. We use a lot of displays and they are good at generating sales of these items."
Other retailers agreed with Hodgson about alternating between Coke and Pepsi on a weekly basis, while featuring a few smaller brands, such as Royal Crown, A&W, 7-Up and Dr Pepper in every ad for good measure.
"Our sales rotate between Coke and Pepsi," said Bob Jennings, buyer-merchandising manager of the beverage department at Raley's Supermarkets, West Sacramento, Calif. "Coke has something like 27 ads and Pepsi has 25 ads. Then there is advertising by 7-Up, Dr Pepper and the other secondary brands. The advertising really doesn't change very much."
Vern Buford, head grocery buyer at Houston-based Rice Food Markets, said that while his chain doesn't necessarily advertise soft drinks every week, he finds they definitely are a draw if they are featured at the "right" price.
"We usually rotate our features between brands. We try to rotate it by using our strongest beverage on our weakest week," he said.
John Carlson, a senior consultant with Cannondale Associates, a consulting firm headquartered in Wilton, Conn., said retailers should lessen their reliance on heavily featuring Coke and Pepsi and promote some different flavors and new-age items.
"Certainly the retailer attitude is that you have to have products on display every week. And a lot of those weeks, endcaps are tied up with Coke and Pepsi. But consumers are looking for new and different options. Coke and Pepsi can provide some of those, but companies like Cadbury Beverages can provide a lot more," he said.
Buford of Rice said his chain has been having success advertising juices on a more sporadic basis than the soft drinks.
"It is not nearly as important to advertise juices as in the soft drink category, because you have so many segments and flavors in the juices to draw from," he explained. "You definitely have to advertise the juices, but not necessarily on a weekly basis. If it is a pull item, then you advertise it as a draw item; otherwise, you have to advertise it to get the customer to that area of the store."
Several retailers said the proper merchandising of beer can be as big a draw as the soft drinks.
"Alcoholic beverages are real important to us, especially with my consumer base. My consumer base loves beer," said Oscar Sicola, liquor and beer buyer-merchandiser at Fiesta Mart, Houston.
Sicola said he promotes beers from different segments of the category in each ad.
"In my total ad I'll run as many as nine or 10 beers each week. I try to cover the entire gamut of Hispanic to German to Heineken. If there is a customer out there who drinks beer, I'm going to try to capture his business for that week," he said. "I'll go with a premium, a popular-priced and maybe a budget beer," he said.
Jennings of Raley's said he advertises at least two or three beers a week.
"One of them is always a feature of either Budweiser, Miller, Coors or Henry Weinhard. Then we have a secondary brand in the premium, like Red Dog, Red Wolf or a lower-end one like Keystone. It at least gives the customer an opportunity to buy two different beers. Now we're putting in a rotation of a microbrew beer," he said.
Jennings said "hot" beer prices have proved effective at luring shoppers.
"I really like to think that we are a destination point when we advertise Budweiser at $5.99. We need to be real competitive with those items," he said.
But Buford of Rice said beer isn't a major traffic builder in his stores.
"Beer is something that we feel we do need to advertise because we do carry beer and wine. Wine far outsells beer in our stores because we have more upscale stores. We always have a wine in our ads," he said.
The retailers reported that large displays and cross-merchandising help to build beverage sales.
"The buy-one-get-one-free sale is the type of promotion that works the best at moving beverage products," said Big Y's Dudis.
Shultz of Hughes said price, the location of the display and display creativity are important tools for stimulating sales.
"The use of in-store displays, signage and point-of-purchase advertising are very important in driving sales. Most of the major beverage companies do an excellent job with point-of-sale material," he said.
Shultz said Hughes makes an effort to cross-merchandise all of its beverages.
"We try to include general merchandise items on all beverage displays to increase the return on the total display," he said.
