A continuing proliferation of New Age beverage varieties, along with a maturing ready-to-drink iced tea market, has the beverage aisle primed to heat up again this summer.
Increases in manufacturer advertising, better deals and more display space in their stores are among the predictions from retailers in light of the category's enduring popularity.
"I expect the New Age category to continue to grow in 1996, especially if we have a nice warm summer," said Nick Wedberg, vice president of sales and merchandising at Plumb's, Muskegon, Mich.
"As a result, we will probably be expanding the footage that we devote to the category by 10% to 20% this year compared to last year," he said, adding he has high hopes for several new offerings.
"Snapple is coming out with new plastic 32-ounce bottles. I think those will go over pretty well. Fruitopia is coming out with more new flavors. When we merchandise those we tend to merchandise them cold, and we will add a few more coolers in the stores to house them," Wedberg explained.
Pat Redmond, grocery buyer at Rosauers Supermarkets in Spokane, Wash., said the company also expects the ready-to-drink iced teas and New Age beverages to grow again this year.
"We aren't going to expand our selling area for these products because we are pretty maxed out on space right now. We've added tremendously over the last few years, and we find now that we have adequate space to cover almost any situation," he said.
"Our customers like the ready-to-drink iced teas and New Age beverages and we will be doing quite a bit with them this summer," said Glenn Hobbs, a grocery merchandiser at Supervalu's Pittsburgh Division, New Stanton, Pa.
"Those items are part of a category that the stores traditionally give away. But the New Age items are not that way, and the stores can make some profit off them," Hobbs said, adding that the large soft drink manufacturers are now including New Age drinks in their marketing agreements.
"The Cokes and Pepsis of the world give you a list invoice price, but if you do large in-store displays, they will create a marketing agreement with you where they will pay you a case rate on everything that you buy from them over a certain period of time. Historically, the New Age items weren't included in that and they had no marketing rates that went along with them. This year they do.
"The marketing agreements will make it more appealing for the retailers to display and promote those items," Hobbs said. "This year we will be advertising the New Age items in our ad circular very often. When we do that it is suggested that the stores support the ad with displays, so there will be more displays in our stores this year."
Likewise, Redmond expected to increase the display and advertising activity in his stores this summer as well.
"We try and tie the iced teas and New Age items in with our regular pop ads. We have coolers at the checkouts and all over the store. These items are very profitable, compared to pop. Instead of a minus 10% we come up with maybe a plus 10%," he said.
The explosion of New Age offerings is forcing retailers to take a long, hard look at what's on their shelves.
"There have been a tremendous amount of stockkeeping units introduced in that section, and we're trying to sort out what is unique and what items the consumers want. We're trying to offer the best variety," said Ken Powers, a category manager at Houston-based Randalls Food Markets.
"We have had a problem in offering so many varieties, that we haven't done a good job of optimizing our space to sales," Powers said. "In the past the category has been so new and so many items have come out that we have taken just about everything that has come out. Right now we are in the process of going back and really cleaning up and offering a good presentation of product to the stores.
"You almost have to go through a SKU rationalization program. If you have a lemon-lime flavor, you may not need a lemon-lime from five different vendors because they are not all that different. If the consumer can pick up the same product in another brand, then movement doesn't become that much of a factor. We'll just discontinue one of them. Instead of five varieties in lemon/lime, we'll offer two or three," he explained.
Powers said it is important for retailers to have an adequate "pack-out," or supply, on the shelves.
"When the consumer comes in and the shelf is messed up and the product is stacked behind the other, it doesn't give a good presentation for them and makes it difficult to shop. By getting it to where it is a full case pack-out on the shelf, you reduce your out-of-stocks and you are making it more shoppable for the consumer. They are also much more receptive to the items," he said.
The New Age/iced tea category is not without its problems. Wedberg cited the segment's intense competition.
"The category is doing pretty well, but there is a ton of competition over there and I think everybody is getting hurt a little bit more. Snapple is taking it on the chin in a big way because of the competition," he said.
"The iced tea business has really peaked and you are looking at a share battle now," noted Jon Kramer, president of J. Brown/LMC Group, a consulting firm headquartered in Stamford, Conn. "While I don't see the iced tea/New Age beverage category going away, I think the next evolution is upon us. What it is, I don't know."
Packaging may play a role in the segment's rise or fall, he added. "The supermarket experience is a multiserve, large-pack experience. The iced tea experience is a single-serve experience. All of those brands have made their mark in the convenience store channel. As a result, they just never made it in the supermarket," Kramer said.
John Caperton, direct-store-delivery buyer at Coppell, Texas-based Minyard Food Stores, echoed Kramer's sentiments.
"I believe the ready-to-drink iced teas are too expensive for people to take home and serve as a meal. That is an item that is probably selling very well in convenience stores where it is sold one unit at a time, and they drink it cold as they leave the store. We don't sell them that way, and consequently the tea business has really just gone to pot here," he said.
"The New Age drinks have reached their peak and are on the downhill side of the mountain. I think it is just because the fad went away," Caperton added.
A buyer for a Southern chain, who did not wish to be identified, said that in his operating area, home-brewed iced tea from tea bags is more popular with consumers than the ready-to-drinks.
"The ready-to-drink iced teas and New Age beverages don't sell well enough for us to worry about. They are not big sellers in our market."
