NONALCOHOLIC BEVERAGE SALES ON THE RISE

KAREN DEMASTERS

New millennium parties are expected to boost sales of nonalcoholic bubbly, according to supermarket retailers and the manufacturers of nonalcoholic beer and wine.

Nonalcoholic wines and sparkling fruit drinks, which are often used to take the place of champagne, have seen steady increases in sales in recent years, and almost all sales of both types of beverages occur in supermarkets. NA beers, on the other hand, while also sold in supermarkets, have seen sales decline since they peaked in 1992.

Because all types of nonalcoholic drinks combined still amount only to a small percentage of supermarket sales, many retailers pay little attention to the product, although they feel they have to cater to consumers who want an alcohol-type drink minus the alcohol.

"We have to have it to take care of the needs of all of our customers," said Ross Nixon, vice president of merchandising for Dahl's Food Markets, based in Des Moines, Iowa. "But, day in and day out we don't sell a lot, so we don't have a lot of information on it."

NA wines and beers and sparkling juices are most frequently sold around the Thanksgiving, Christmas and New Year's holidays, and Dahl's limits nonalcoholic promotions to that time of year, Nixon said.

While the category generates 60% to 70% of its sales during the holidays, wines dominate sales, with NA beer accounting for less than 2% of the space devoted to beers, and sparkling juices make up an even smaller percentage of the space on the juice aisle, he added.

In Dahl's, customers can find the NA beers and wines in the beer and wine sections and the sparkling apple ciders and other juices in the juice aisle, which the store has found to be an effective merchandising technique, Nixon said.

For Nickel's and Food 4 Less stores based in Visalia, Calif., "Sales of NA beer and wine and sparkling juices have been pretty steady because of the crackdown on drunken driving and the push to have designated drivers," said Greg Whitney, marketing director. "We have a representation of each, which we will continue to carry, but I don't see us expanding it much in the future or doing any promotions. It is a small portion of sales, but a relatively lucrative one."

A spokeswoman for IGA in Chicago, and John Schnepp, a spokesman for Big Y Foods of Springfield, Mass., echoed most other retailers sentiments when they said that, although they carried the beverages, they are such small volume items that they couldn't indicate trends and did not plan any additional promotions other than to occasionally include some in holiday advertising.

However, some manufacturers feel their best opportunity to expand sales may come in the next few months as people start planning millennium parties and look for alcohol substitutes.

"Bookings from retailers are up and we are projecting a 15% to 25% increase in sales because of parties connected with the millennium," said Tony Robinson, spokesman for S. Martinelli's and Company, Watsonville, Calif., which makes three types of sparkling juices and dominates this segment of the market.

Martinelli's makes three varieties of sparkling juices -- apple-grape, cider and apple-cranberry -- and accounts for 63% of the market for sparkling drinks. Two other companies, Welch's and J.C. Meier, make up most of the rest. There are at least 100 different flavors of sparkling fruit drinks on the market now, and Martinelli's is looking at adding at least one new one, Robinson said.

Sales of nonalcoholic wines have also been increasing in recent years, growing 6.2% from $63 million in 1995 to $67 million in 1996, and 4.4% from $75 million in 1997 to $79 million in 1998, according to ACNielsen, market researchers in Schaumberg, Ill.

"Anyone who says NA wines are not great tasting has not tasted them lately," said Rob Celsi, Fre-Sutter branch manager for Sutter Home Winery in St. Helen, Calif. "The taste and flavor have come so far in recent years, which accounts for the slow but steady growth we have seen."

Between 60% and 70% of sales of NA wines take place in supermarkets, he said, adding that NA wine can be sold in supermarkets in states where wine cannot be.

Sutter, which has a full line of Fre-Sutter flavors, added a Merlot this year and is looking for ways to expand even further, said Celsi, who agreed that the millennium parties present a golden opportunity for his company.

On the other hand, manufacturers face a constant problem in trying to increase sales, because consumers often have a difficult time finding NA products in the supermarket, Celsi said. "Most retailers put our product in the wine section, and it seems to have good display there."

Craig Rosser, sales marketing director for Ariel Vineyards of Napa, Calif., a company that makes only nonalcoholic wines, agreed with that marketing strategy.

"It works best because NA wines cost more than juices, so if an NA is next to a more expensive product like wine, it does better," Rosser said. "The beers and wines are together, so the nonalcoholic wines should be there too so the consumer can see there is an alternative."

Seasonal promotions around Thanksgiving and Christmas still rule the market, according to Rosser, although Ariel is trying to work with individual chains to set up NA drink centers year round and has ad slicks and racks it would like retailers to use.

Unlike NA wines and sparkling juices, sales of NA beers have declined in recent years, dipping 2% from $147 million in 1995 to $144 million in 1996, and dropping 5.6% from $136 million in 1997 to $132 million in 1998, according to ACNielsen. This decline started after the initial splash NA beers made for two or three years when they were first introduced in 1989.

"The consumption level drops a little every year, and yet there are more players each year to split the market," said Steve Love, national partner for the food industry for Senn-Delaney, a unit of Arthur Andersen of Chicago.

"Nonalcoholic beers have a high retail margin, but they are not a significant percentage of the market, so it is a small category that does not get much attention in supermarkets." NA beers, which are sold more in supermarkets than other outlets, make up 2% of supermarket beer sales, Shepard said.

At the same time, beer makers feel there is room for growth in the NA category, and some have special promotions lined up. Coors Brewing Company of Golden, Colo., will promote Coors NA, which replaced Coors Cutter, this winter with a contest featuring a deck for the home as the grand prize.

Anheuser-Busch, St. Louis, Mo., offered customers a chance to win luxury golf vacations and other prizes as its summer promotion for O'Doul's and O'Doul's Amber, said Diane Burnell, a spokesperson for Anheuser-Busch.

Miller Brewing Company Milwaukee, Wis., claims to have produced the first NA beer during prohibition and began doing so again in 1990 with Sharp's, the third largest seller behind O'Doul's and Old Milwaukee NA. Busch NA is fourth and Coors NA fifth, said Jeff Waalkes, a Miller spokesman.

"Supermarkets are our main trade channel, where 80% of our NA sales have been," Waalkes said, "and it is the same for all the others."

"This is a small brand for us, but it is one of substance," said Dan Tearno, vice president of corporate affairs for Heineken USA, White Plains, NY. "It is the responsible thing to do, because people expect us to offer this choice. America is all about choices."