Though drink sticks haven't gained mass appeal, retailers are benefiting from high profit margins relative to size
Do-it-yourself beverage prep has never yielded such professional results.
As innovations like single-cup coffee brewers and home carbonating machines give way to entirely new grocery categories, consumers are taking charge of their own refreshment.
With low- and no-calorie varieties touting hunger satiety, energy and even beauty benefits, powdered beverage sticks portioned for use with plain old bottles of water are among the categories making inroads. There are a number of options from which to choose.
The Enhanced line from Crystal Light, for instance, touts 5-calorie per stick varieties with added fiber, antioxidants, skin essentials, and claims to satisfy hunger and improve one's focus. The Metabolism + Tea Mix is among its most popular, with sales up 3.5%, across food, drug and mass channels during the 52 weeks ending Aug. 7, according to SymphonyIRI Group, Chicago.
Also gaining momentum are mixes packing a lot of energy for a small caloric commitment. Sales of 4C Totally Light 2Go Energy Rush are up 54%; Crystal Light On the Go Energy Mix, 13.3%; and Power Edge On the Go Energy Drink Mix, 7%.
A range of concentrates, including those for sports drinks from Gatorade and Starbucks' new instant Via coffee, have also taken on the new form. But just as portable flavor enhancers occupy a small corner of
their respective beverage category, their target market is likewise niche.
Industry observers note that these packs have yet to gain mass appeal, but low-calorie versions have found favor among an affluent group: weight-conscious women who are willing to pay a premium to help reach their goals. In fact, this segment is so committed to its objective, price is seldom an issue, Tom Pirko, president of the Santa Barbara, Calif.-based Bevmark consulting firm, told SN.
“You may like your bottle of water, you may like your flavor and you may want to stay as thin as the mirror is telling you you're not, but you're going to spend some money on this stuff,” he said.
Priced at 30 to 75 cents per serving (excluding the cost of the base ingredient), on-the-go drink mixes aren't cheap, especially when compared to the cost of pitcher packs and bulk quantities. Still, the slim packets with easy-tear openings that allow for quick prep offer something that the other forms do not: portability. Given the ubiquity of bottled water, users have taken to carrying these sticks in their gym bag, handbag and even their pocket.
“The segment is perfectly positioned for today's consumer lifestyle,” said Gary Hemphill, managing director of Beverage Marketing Corp., New York. “In general, convenience is where the greatest growth in the beverage marketplace has been.”
Another emerging trend involves expressing one's individuality with food and drink.
Take, for instance, the beer segment, which has seen flat sales among mainstream brands but explosive growth in the more specialty craft segment, said Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill. The same applies to non-alcoholic beverages. “The ability to have a product that I can customize just for me or that has just my flavor has a lot of appeal right now,” he said.
Kraft Foods was so cognizant of the trend it based an entirely new category on the concept with its Mio flavor enhancer. The product aligns so closely with the customization movement that even its name translates from Spanish and Italian to “mine.”
Launched last March, Mio comes in a portable liquid form designed to appeal to on-the-go consumers, aged 18 to 39.
“Millennials expect to be able to personalize nearly every aspect of their lives — from iPod playlists to DVR recordings to smartphone apps,” said Perfecto Sanchez, Mio associate brand manager for Kraft. “Mio finally offers them a chance to create a drink as personalized as they are.”
Mio is different from drink mix sticks that complement bottled water since there are no pre-portioned quantities. Users can add as little or as much as they'd like, depending on personal preference and whether they're flavoring a half glass of water or an entire pitcher. Since Mio is self-mixing there is no need to secure the cap and shake. Containers retail for up to $5.99 and include about 24 servings.
At Hiller's Market, a family-owned chain in Southfield, Mich., sales of beverage sticks have been flat with the exception of Arizona Green Tea with Ginseng and Arnold Palmer instant tea mix, said assistant grocery buyer Stephen Brooks. Mio, on the other hand, has done so well that he has trouble keeping it on the shelf.
“We've gone through prolonged periods where we can't even get enough product to satisfy need,” Brooks said.
One reason might be its compatibility with tap water. While sales of the bottled variety remain strong at Hiller's, some consumers have expressed concern about plastic bottles being contaminated with bisphenol A and the environmental implications of choosing plastic over reusable containers. “Our customers have turned to purification systems and other means to drink their water,” Brooks said.
Another factor is exclusivity. In addition to being a one-of-a-kind product, there aren't any other forms of the Mio brand to cannibalize sales. Such is not the case with Gatorade and Propel sports drinks, for instance, which come in powder and ready-to-drink versions. At Hiller's the bottled sports drinks preempt sales of the pricier sticks. “The bulk of our business is done with the drinks,” he said.
For retailers, concentrated beverage mixes have an advantage over RTD thirst-quenchers, one that's related to size. “They're small boxes and they don't take up a heck of a lot of space,” Tim Cummisky, grocer manager at Highland Park Market's Glastonbury, Conn.-store, told SN. “They also have a nice ring.”
Indeed, attached to multipacks of 5, 10, 16 and 20 sticks are the high margins that accompany convenience packs. “You're not just selling the product and its functional use but the convenience of having it in a form that is very portable,” Wisner said.
High rings are even more attractive when you consider that profits are measured by square inch rather than square foot. Powdered beverage sticks also lend themselves to a number of merchandising schemes.
“There is the ability to display these in small spaces,” Wisner said. “It's kind of intriguing since you can move them around the store with different tie-in items.”
In addition to placement in the juice or water aisle depending on location, Hiller's sells the mixes from several spots throughout the store, such as on endcaps alongside bottled water. “They've done quite well for us,” Brooks said.
Beverage sticks are also suction-cupped to cold cases housing refrigerated water. Pirko sees this as a smart move since drink sticks have such grab-and-go appeal. “Especially if you can pose it in a way that doesn't discuss price, it becomes an impulse item,” he said.
Featuring drink sticks beside other products that help beverage consumers help themselves may lead to incremental sales.
“This all feeds into a psychology where if you can add it to the water you're in more control than if the product was made elsewhere and sealed,” said Pirko. “If you have the ability to do it with your own hands it's an empowerment.”
Retailers should consider positioning drink sticks beside private-label water since it's leading a sales surge
|WATER BRAND||DOLLAR SALES CHANGE VS. YEAR AGO*||UNIT SALES CHANGE VS. YEAR AGO|
SOURCE: SymphonyIRI Group
* Sales in food, drug and mass outlets (excluding Wal-Mart), during the 52 weeks ending Aug 7.