2005 WAS BEVERAGE'S YEAR

LUCIA MOSES

CHICAGO - Overall CPG dollar sales grew just 1.6% in 2005, but sales of beverages that tapped into health and wellness trends increased more than twice that, found a report by Information Resources Inc.

Beverage sales rose 5.1%, led by gains in sports drinks, bottled water, coffee and wine, IRI reported in "2005 CPG Year in Review: A Remarkable Year of Challenges and Wins." Sports drinks and bottled water were the fastest-growing CPG categories by dollar sales, jumping 25.1% and 16.5%, respectively.

Apart from beverages, other product segments whose dollar sales increased faster than the industry average were "other nonedibles," which includes paper and tobacco products (3.1%); health care (2.7%); frozen (2.3%); and beauty/personal care (2.3%).

Figures reflect year-over-year sales across food, drug and mass channels, including Wal-Mart. (IRI derives Wal-Mart figures from its MarketInsight service, which uses household panelists to collect purchase data from retailers such as Wal-Mart that don't provide point-of-sale data.)

Of the 10 biggest CPG categories in dollar sales, seven grew in 2005, led by frozen dinners/entrees, up 7.2%. The three decliners were soft drinks, milk and chocolate candy.

Prices rose in several Center Store categories as manufacturers sought to offset rising costs due to high fuel prices and hurricane-caused supply disruptions. Categories hardest hit in 2005 included coffee, with prices up 13.3%; toilet tissue, up 9.6%; and bottled water, up 8.2% (Wal-Mart sales excluded).

Channel migration may be slowing, the report found, yet drug stores may be emerging as a major force in the center aisles.

For the first time in several years, grocery stores' share of CPG sales held steady vs. value retailers in 2005, and improvement that suggests that retailers' efforts to set themselves apart through new formats and assortments are working, according to IRI.

Wal-Mart's CPG share gains slowed down, to 0.3 share points in 2005 from 1.1 points in 2004. That deceleration is likely the result of an economic slowdown that disproportionately hurt low-income customers, the report stated.

Drug stores were by far the winner, with a 4.9% gain in CPG dollar sales that reflects the channel's growing role as a purveyor of beverage and convenience foods, and focus on local merchandising.

All channels face increased pressure to connect with shoppers, however, with consumers visiting stores less often. Consumers visited all stores 13.67 times per month last year, down from 14.53 in 2001, IRI found.