MAKING THE CASE 2004

Kelly Gates

Everywhere consumers shop nowadays, stores are piled high with cases of beverages -- from water and beer to soda and alternative drinks -- packaged in 12-, 24- and even 18-packs for shoppers with unquenchable thirsts.

While warehouse stores may have started this trend of larger packages, traditional grocers and convenience stores are pushing cases too, enabling them to effectively compete with other retailers who specialize in bulk.

According to Bill Bishop, president of Willard Bishop Consulting in Barrington, Ill., cases of beverages have already become a staple in many supermarkets. However, there are a few innovative breakthroughs in this category in recent years.

"Over time, most beverages have gone to progressively larger packages, from the six-packs of older days to 12- and 24-packs," said Bishop. "The newest thing, though, is manufacturers are coming out with different types of cases like the refrigerator packs for soda and even Coca-Cola's C2, which is available in an 18-pack size."

Beverage manufacturers are trying to develop anything unusual that will differentiate them from competing products; likewise, they also want to seduce consumers.

"With odd sizes, consumers are less likely to make price comparisons," said Tom Vierhile, executive director for Productscan Online, a product database company based in Naples, N.Y. "I've seen razor refills and tobacco come in odd counts and Coke has come out with an 18-pack that is different from their usual packaging. I've heard that because the 2-liter soda bottle is one of the most discounted sizes in the beverage aisle, Coke is trying to move away from that size, too."

Indeed, larger packaging has emerged as a strategy manufacturers are using to engender loyalty, said Bishop. For example, if a shopper purchases a larger pack of one specific brand, the product will likely be in a household for much longer than a smaller pack, hence strengthening that consumer's loyalty to the brand.

Clark Crowdus, principal of High-Definition Consulting Group, San Francisco, added that consuming the same-branded drink over and over also keeps consumers away from the beverage aisle where they could potentially abandon one brand in favor of a different brand of water, soda, beer or alternative beverage.

"Manufacturers know that if they can sell a case of 24 instead of a six-pack, they can solidify a purchase decision for a long period of time," said Crowdus. "If consumers still have a portion of a case in the pantry back at home, they won't be in a position to choose another brand the next time they're at the store buying other groceries. It closes the window of opportunity for them to select a competitor's brand, or at least keeps it closed longer."

In the energy drink category, Red Bull continues to dominate nationally, accounting for nearly 50% of volume and unit share, according to recent figures from Chicago-based Information Resources Inc.

With a jolt of caffeine in each can, a single serving was formerly enough for most consumers, but Red Bull has been working hard to promote the sale of its four-pack, said Tim Jennings, marketing and sales director for Roth's Family Markets, a 12-store chain based in Salem, Ore.

According to Jennings, distributors of Red Bull have been pushing for multi-packs instead of single cans of the boosted beverage. They've even upped the ante by rewarding retailers who stack their shelves with packs.

"They won't offer co-op dollars to me for single-serves, only four-packs," said Jennings.

At the same time, Rock Star Energy, which increased unit sales by 126% in the last year, according to IRI, is differentiating itself by offering a larger, 16-ounce container, almost twice the size of the 8.3-ounce Red Bull.

"They've just raised the price on [Rock Star] to over $2 [it retails for $2.19, vs. Red Bull at $1.99]," said Jennings. "I'm anxious to see what happens now."

Eric Anderson, vice president of marketing for Finlay, Ohio-based Fresh Encounter, has noticed an influx of consumers buying cases of beverages from his chain's 30 stores. While 12- and 24-packs of sodas, beer and other drinks have done fairly well, it's the cases of water that seem to be winning out in terms of sales.

"We're seeing larger package sizes, especially in waters. The 16-ounce size sold in case quantity is becoming extremely popular," said Anderson. "These are easy to merchandise; they hit a competitive price point and are easy for the customer to pick up. But, our in-store water dispensers are still popular too."

Sales of smaller packages of soda are also gaining popularity in Fresh Encounter's stores. "The 24-ounce plastic bottles sold in six-packs are a good alternative to the over-advertised 12-pack can soda," he said.

Anderson believes that at least some of the size increase is due to the time of year as Fresh Encounter typically pushes larger sizes in the summer. This is because consumers are having more picnics, barbecues, weddings, graduation parties and other get-togethers that warrant the purchase of bulk beverages, he said.

At the 12 stores owned and operated by Des Moines, Iowa-based Dahl's Food Markets, cases of water are literally pouring off the shelves, said Ross Nixon, vice president of merchandising for the chain.

"Water is one of the categories that has seen double-digit growth in the past few years, even for the 12-, 24- and 32-packs," he said. "It's unreal how this category has continued to grow. I thought it would have leveled out by now, but it's not even showing signs of stopping."

From one end of the scale to the other, Nixon has seen smaller-sized beverages creating quite the niche within Dahl's stores.

"We carry the 8-ounce singles from American Bottling, like Diet Rite, Squirt and Dr Pepper, which have done really well, and we now carry six-packs of those instead of the singles," said Nixon. "The smaller sizes aren't necessarily for kids either, but more for the mid-to-older consumers who can't always consume 12, 16 or 20 ounces of soda in one sitting. Even though these smaller sizes cater to a definite niche, it's surprising that the companies have made them because the concept has always been to get people to drink more of their products, not less."

One outlet of retail that hadn't given Dahl's much competition in the beverage category in the past is the convenience store channel, which has been ratcheting up its sale of cased beverages in recent years, said Nixon.

"There definitely is a trend of more convenience stores in our area carrying packs of soft drinks, beer and other beverages," he said. "Some are stacking 24-packs high by the front entrance of their stores and even out by the pumps to make it more convenient for their customers."

Finding room to stack cases where shoppers can have access without being too intrusive is one of the more difficult problems for retailers to overcome, particularly in stores where space is at a premium. Giant Eagle, a 222-store chain based in Pittsburgh, has found creative ways to spread cases of water, soda, beer and other beverages throughout its stores.

"We utilize space management techniques to position our beverage case displays in a manner that maximizes our sales floor and does not interfere with the shopping experience," said the chain spokesman Brian Frey. "We place them in locations where space allows. We cross merchandise these displays with other related products at the end of aisles as well as the front or back of the stores."

Charleston, S.C.-based Piggly Wiggly Carolina Co. has dedicated several doors within its stores' beer coolers for larger cases of beer, said John Owens, director of merchandising. "In a lot of our new stores, we have a separate four- to six-door cooler section allotted just for our large 18- and 24-packs of beer," said Owens. "Other than the occasional floor display, all of our beer is refrigerated and these larger packs are popular pick-up packs, especially in our beach and resort stores. We have a lot of stores near beaches, so chilled cases do really well."

Owen added that many of Piggly Wiggly's stores also display cases of water on front-end caps.

Boulder, Colo.-based Wild Oats, a natural food store chain with 102 locations, has experienced a growth in larger sized beverage packaging, particularly water, said Tracy Spencer, spokeswoman.

"The multi-pack segment is growing due to the on-the-go trend we've been seeing. Water is driving the segment, with 1-liter and 1.5-liter bottles as the top two sellers," said Spencer. "As far as price, it does cost more to produce multi-packs

due to outside wrappings, but we do see some volume discounts, which tends to really attract consumers."

Penn Traffic Co., which owns 216 stores in Ohio, West Virginia, Pennsylvania, New York, Vermont and New Hampshire, merchandises products either in mass displays or full endcap displays, depending on the size of the individual store. Of all the beverages, however, water also is the best-selling case mover.

"Water is the only category in which we are experiencing increasing sales of full cases, which are sold mostly off of displays. This is more of a growing trend than the 12- and 24-packs of other beverages," said Joe Ramirez, Penn Traffic's spokesman. "The smaller, more consumable sizes, like the half-liter and 20-ounce sizes, seem to sell very well in cases."

Because water is selling so feverishly in cases, the company regularly promotes the larger, bulk packaging vs. smaller sizes. "All promotions are at a 'value' to make the case purchase more attractive to the consumer," said Ramirez.

ROOM FOR GROWTH

Consumer trends influencing purchases of consumer packaged goods, even specific items like cases of soft drinks, beer or water, don't necessarily have to be evident at the store level.

Many "generic" or general lifestyle trends can have an impact on the types and quantities of items that make it into the homes of shoppers, said Jon Cheffings, executive vice president of planning for Chicago-based Upshot, a consumer-focused marketing agency.

"In the last few years, since Sept. 11, people have been cocooning more than they did in the past. People initially stayed home and stockpiled products out of fear, but they've since realized that they enjoy staying home more often," said Cheffings, who added this macro-trend has accelerated the home improvement industry as well.

Upshot tracks a number of general consumer trends taking place outside of the supermarket, including the size of homes that are built, what homeowners are putting in their houses and even the type of vehicles they're now driving. All of these factors can be translated at store level, and are evident in what beverages they buy, said Cheffings.

"People are having larger houses built and as a result, they have a lot more room to store food and beverages," he said. "Consumers are also using their garages more than ever for storing bulk items and companies like Whirlpool have picked up on this trend and have started to develop whole new lines of refrigerators, freezers and other appliances for use in garages."

Kitchen refrigerators have also increased in size, enabling consumers to purchase and chill greater quantities of soda, beer, water and other alternative beverages alongside the groceries. And, as most beverage companies know, time-conscious consumers are likely to drink more beverages if they are already cold, especially if it means they don't have to take additional time to add ice to a glass.

Even the cars people are driving, with the multitude of sport utility vehicles dotting America's roadways, can affect the volume of groceries the average consumer transports in a single trip, said Cheffings. Several cases of soda can easily fit in the back of the typical SUV with plenty of room left over for a week's worth of groceries.

In short, if consumers have the room to move and store cases of beverages, they'll do it, he said.