Retailers are expecting another hot summer for healthy and functional refrigerated beverages
With low-carb dieting a distant memory, juice and juice blends have been enjoying steady growth during the past few years. Many health-conscious shoppers are eager to try out the latest “superfood” or just get a quick antioxidant fix, and these drinks offer a simple, relatively inexpensive way for them to add something to their diet that they can feel good about.
According to Information Resources Inc., Chicago, the total refrigerated juice/drink category grew approximately 4.2% during the latest 52 weeks ending Feb. 24. Refrigerated blended fruit juice dollar sales were up approximately 10.5% in the same time period.
“A major trend in refrigerated beverages is that ‘healthy’ products are now becoming increasingly mainstream,” said Ted Taft, beverage expert at Meridian Consulting, Wilton, Conn. “This is not due to seasonality, but overall health and wellness trends.”
Not only is the health factor important with consumers when purchasing refrigerated beverages, innovation also tends to catch their eye as well, with consumers becoming more adventurous with the types of food and drink they consume.
“We're seeing more innovation, especially with enhanced products with [added] minerals and vitamins, as well as more ‘superfruit’ beverages, which are rich in antioxidants,” said Gary Hemphill, senior vice president of information services for Beverage Marketing Corp., New York.
Some retailers are still seeing the superberry craze continue, along with the health trend.
“All the superberries are very hot at the moment, [including] goji, yumberry, pomegranate and blueberry,” said Suman Lawrence, Living Well business manager for United Supermarkets, Lubbock, Texas. Sales of “smoothies, juice blends and flavored functional drinks like VitaminWater or Function usually increase during the summer,” he added.
At Associated Food Stores, Salt Lake City, sales of apple juice, Simply Orange juice from Minute Maid, and Welch's and Dole juices have been taking off lately, according to Doug Pitt, frozen and dairy category manager. Meanwhile, sales of punches and juice drinks with added sugar, such as Sunny Delight, have been lagging.
“Those sugar-type drinks are decreasing quite a bit,” Pitt said. “Any [added-] sugar items, consumers are not buying as much.”
Corby Bleckert, DSD snack and beverage category manager for Associated, agreed.
“Health-consciousness is a big thing,” he said. “[Customers] are reading labels and seeing what they're actually putting in their bodies. A lot of the manufacturers, you can see now, are starting to change to pure cane sugar, for instance, instead of [using] high-fructose corn syrup.”
Pitt added that many premium juices have also been enjoying robust sales at Associated. “Simply Orange juice is just going crazy right now,” he noted.
This hasn't been the case across the board, however. Notably, several smaller brands seem to be taking a hit as larger competitors introduce less expensive variations of super-premium products. According to IRI, pomegranate segment leaders POM Wonderful refrigerated juice and Odwalla PomaGrand sales decreased 5.1% and 11.6%, respectively, in the latest 52 weeks ending Feb. 24.
The declines may be due to shoppers opting for new lower-priced juice blends, according to David Morris, senior analyst for Chicago-based Mintel. “While brands such as Naked, POM Wonderful and Odwalla have strong growth track records, consumers might gravitate to a low-priced offering, especially in this harsher economic climate,” Morris said. “PepsiCo's launch of Tropicana Pure shows this may already be under way. Tropicana Pure, priced at almost one-third the price of POM, may have curtailed POM's sales momentum in 2007.”
Pitt agreed. “The pomegranate stuff has really taken off, especially the blends, because you can get the price down.”
However, Pitt added that selecting new products and line extensions is always a difficult process, given space constraints in the cooler.
“I'm bringing in new flavors, but I have to watch it, because the stores that we have, they're really under-spaced in the orange juice section. When I bring something in, I have to make sure that I'm right, because I'm discontinuing things that are moving 120 to 150 cases a week to bring a new item in.”
Combining new product innovations and a lack of space presents a challenge to most retailers.
“The refrigerated beverage section is likely to get more crowded, with the new segments and new products emerging,” Hemphill said. “Space is the biggest challenge. Despite this challenge, retailers have to remember to keep an open mind with new products.”
Fortunately, single-serve sales are one of the best ways to test the appeal of new flavors and new product lines using grab-and-go coolers in other areas of the store.
“Large sizes only result in a much slower trial curve with one's shoppers,” Taft said. “Retailers should put ‘healthy beverages’ in departments like deli and bakery, especially single-serve.”
United Supermarkets has a refrigerated beverage section in its foodservice department, Lawrence told SN, but currently the company is focusing on line extensions, rather than testing completely new products there.
“We have a refrigerated beverage section, including single-serve beverages, in our foodservice section. You can find everything from Jones Soda to Odwalla juice.”
Associated has also added coolers to some of its deli and bakery departments. “Our bakery and delis are kind of combined in most areas, so we do have those functional beverages that are being put over there — VitaminWater and things like that are being added,” Bleckert said. “But we haven't done any advertising with meal deals or anything around those functional beverages yet. We're looking at it right now.”
Because single-serve refrigerated beverages tend to be impulse purchases, Associated has added refrigerated beverages at every other checkout lane in its corporate stores, Bleckert told SN.
“That was a big move for us — I know it's not a big move for the industry, but it's a big focus on getting those items up front for our consumers, because they're such impulsive purchases,” Bleckert said.
Another tactic Associated has been developing is the use of more points of interruption to boost those impulse sales.
“For instance, if we don't have room for more coolers in the stores, they're putting ice barrels up, or they're adding different locations.”
Associated also merchandises its super-premium juices like Odwalla and Naked Juice in stand-alone coolers in the produce department in order to drive more volume, Bleckert explained. At the same time, Associated is working on making refrigerated beverages a destination category through consistent ad activity, and having most orange juice products on an everyday low price program. Minute Maid and Tropicana orange juices are always on promotion, and the store just negotiated a deal with Florida's Natural to put that brand on the EDLP program as well, Pitt said.
“It's just the nature of the category — everyone's lowballing it, not taking a lot of margin in it, and using it as a destination category,” Pitt said.
“People buy the orange juice and they expect a certain price, so we're on EDLP every day, and we reduce the margin and put it on ad every week. We try to promote them in multiple units, like two for $5 or $6. And every now and then, we'll throw some money against it and try to pull some out.”
Yet despite the ongoing success of the refrigerated beverage category, it's still important for category managers to keep their eyes peeled for the next emerging trend, according to Morris.
“To maintain consumer interest, and to continue to command premium prices, innovation and placement are of prime importance.”