SPORTS DRINKS ON THE MOVE

PAT NATSCHKE LENIUS

The sports drink category is enjoying a burst of energy as new items continue to enter the market.

Meanwhile, some grocers are thinking about harnessing that energy by moving sports drinks out of the juice section and into an area of their own.

"If a few major retailers moved sports drinks to the soft drink aisle, I am sure the category would sell as well as it has in the juice aisle," said a buyer for one of the country's top-10 chains, who requested anonymity.

"In reality, it's not a juice item, and it's the only item in the juice aisle that does not contain at least some juice," the buyer told SN.

"We haven't tried doing that yet, but we're looking at it. I would not be surprised to see other retailers doing the same thing. Most of the retailers in our area don't have space in the juice aisle to carry the additional brands coming out in the sports drink category. That's one 96-foot aisle. The aisle with soft drinks may consist of several aisles or at least two sides of an aisle, so there's more space in which to move around product," he said.

"As of now, we display sports drinks in the regular fruit juice aisle, but we have to evaluate

that," said Chuck Lisi, grocery director at Roche Bros. Supermarkets, Wellesley Hills, Mass. "The juice aisle is tight. It will depend on what kind of department this blossoms into. I think the pie will get sliced up." Regardless of how the pie is sliced, most retailers have high expectations for the category, due in part to heavy advertising of the new products.

"We definitely expect to see an increase in sales this year, possibly a double-digit increase," said Margue Hunt, grocery buyer at Haggen Inc., Bellingham, Wash., a 12-unit retailer. She added that 1993 sales of sports drinks were higher than in 1992, due in part to introductions and promotional activities for new items, which also generated additional promotional opportunities for the existing items.

"The sports drink category seems to be like the waters: on the rise. Let's take advantage of it while it's hot," said Bob Verbosky, a buyer for Quality Markets, Jamestown, N.Y. He said a hotter-than-normal summer helped sales in 1993, but continued promotions offered in support of new items should keep sales strong. "With increased emphasis this year the category should do well," he said.

Mike Cobb, merchandising manager at Roth IGA Foodliners, Salem, Ore., said the increased number of items being carried and the accompanying promotions have moved the category. "Anytime you have that much advertising, it increases awareness and will increase sales. Sales look good for this year," he said.

"New entries will mean more advertising, most likely brand advertising, but it will serve as institutional advertising for the category. That will push the category," said Mark Polsky, senior vice president of operations at Magruder Inc., Rockville, Md.

"Gatorade was such a big item on its own," said Rod Boni, grocery buyer for Pay Less Supermarkets, Anderson, Ind. "Obviously, the market recognized the potential for some other players in there. There's a lot of marketing support out there with Coca-Cola and Pepsi. You've got some big players, and I think they're determined to get a piece of that Gatorade pie."

In spite of the anticipated sales gains, none of the retailers contacted has immediate plans to increase the stockkeeping units carried or space allocated to the category. Rather, they will discontinue slow movers to make room for any new items.

"Trying to find the space and create new departments for these new products has been a real challenge," said Boni. "But we're working diligently to get it done. It's really created a whole new category."

Paul McCurry, manager of grocery purchasing at Brookshire Bros., Lufkin, Texas, said the number of brands of sports drinks carried is expected to decrease in 1994, and total SKUs may decline also.

"We plan to delete some of the products introduced in the last couple of years that did not perform," he said.

All the retailers contacted currently stock sports drinks in the bottled juice aisle. However, a few have additional displays, usually in a cooler with chilled soft drinks.

"The volume of sales of the 16-ounce is in chilled," said Roche Bros.' Lisi. "We are in the process of putting one to two coolers on end-displays in all of the stores. Half the stores have done it. The coolers usually go to Coke or Pepsi. We ask them for X number of shelves where we can display other beverages, such as bottled waters, iced teas and sports drinks. The majority of space goes to the soft drink company."

Some of the stores operated by Roth IGA Foodliners also have sports drinks in a refrigerated section, Cobb said.

"Chilled sports drinks may sell a little better than chilled soft drinks because soft drinks are a planned purchase, and people coming in from some activity are more likely to want a cold sports drink," he said.

Steve Everly, division manager at Food Giant Supermarkets, Sikeston, Mo., said Food Giant had not been selling sports drinks chilled now, but may before the summer is out. "We may even try the 32-ounce in there," he said.

Four of the retailers contacted -- Brookshire Bros., Roth IGA Foodliners, Haggen and Quality Markets -- said the 32-ounce is the best-selling size of sports drink. Lemon-lime was the most popular flavor.

The 64-ounce size was said to be most popular by two of the retailers contacted.

"That's because that's the size we promote," said the buyer with the top-10 chain. "If we chose to promote the 32-ounce, that could turn into the leader. We promote the 64-ounce because it is a bigger ticket item. We can sell it for $1.99 or $1.79 compared with 99 cents or $1.09 for the 32-ounce. "If the consumer buys the 64-ounce, she is likely to consume it as quickly as she would the 32-ounce and return to the store to buy some more. If we can make a bigger sale at one time, the consumer has more product, has saved some money versus buying the same quantity in 32-ounce containers and will pick up another big size when she returns."

"The big size, 64-ounce, in a plastic jug is the best-seller. It is light, easy to carry and easy to hold," said Polsky of Magruder.

Only a few of the retailers contacted have private-label sports drinks.

The top-10 chain has private label in 64-ounce in three flavors that sell for about 50 cents less than the branded, the buyer said. "We think the 64-ounce size is the way we ought to be. That's our niche for private label. It sells as well as all the other brands such as Power-Ade and 10K, but nothing like Gatorade," the buyer said.

Quality Markets has a private-label sports drink, but has not had it long enough to measure its performance, Verbosky said.

Cobb of Roth IGA said he does not have a private-label sports drink yet. "I think it's highly possible we will have a private label in the future.

"A lot of people are betting on the future of the sports drink category," Cobb added. Some other retailers said the category's growth in the future may not be a sure thing yet.

Lisi said that while the new items in the category will stimulate growth, "some brands will get knocked out of the market. Companies will have to spend a lot [on promotions]. It could initially help the category as far as increasing awareness," he said.

"The customer is becoming more educated as to what's in the makeup of what vendors are promoting as a sports drink," Haggen's Hunt said. "Some of those items do not contain what a sports enthusiast would need in a drink. Unless the formulas change, the category will eventually die.

"But I believe the manufacturers know this and are going to address it, because as new items have been introduced, they have included in the formula more and more of what is actually needed by sports-minded customers," Hunt said.

Brookshire's McCurry said he is concerned the category is saturated. "There are too many brands. I think sports drinks will be a permanent item, but it has reached its saturation point, unless someone comes out with new flavors. That could shift some business," he said.

Gatorade continues to be the big player in the market, in spite of flat sales last year, the buyer for the top-10 chain said. "The only reason Gatorade's sales have been flat is because everyone else is coming into the market and eating away what their increase would have been. They still own 80% or better of the market, at least in our area," he said.

"Gatorade basically has the whole market," said the grocery buyer for a smaller East Coast chain. "We are not necessarily going to add both the Pepsi and Coke sports drinks. We will wait and see. We may take just one of the two. "I am leaning toward Coke's product because I expect it to have much more media support. I have heard the Pepsi product has some carbonation in it and may be more like something between a soda and an isotonic beverage," the buyer said.

The Top 10 Performers

Sports drinks account for more than $366 million in sales at supermarkets. While market share continues to be dominated by perennial powerhouse, Gatorade, some newcomers to the competition have shown amazing growth during the last 12 months. The top 10 brands in dollar volume are charted below.

DOLLAR VOLUME % CHANGE IN ANNUAL $ VOLUME

(for 12 months ended 3/12/94)

$320,600 10% Gatorade

$15,231 9% 10-K

$11,898 957% Powerade

$6,681 115% Jogging in a Jug

$4,129 30% Private Label

$2,794 >999% Everlast

$1,689 -24% Daily's 1st Ade

$1,148 -7% Snapple

$651 24% Spike

$395 4% Recharge