Subtracting Sugar

LIZ PARKS

Healthier versions of beverages geared toward little ones are finding their way up tiny straws this back-to-school season. But that's not all that's being drawn.

Retailers are reporting a rise in incremental sales amid a steady flow of new products.

“We're seeing more and more launches of flavored water drinks and reduced-sugar beverages,” said Tom Vierhile, director of Naples, N.Y.-based Datamonitor's Productscan Online. “It's partially because schools are cutting back on calorie-laden drinks with high sugar content, and partly because parents are looking for healthy beverage alternatives for their kids.”

During the first half of 2007, 146 new kids-focused beverages were launched, he said. That's on top of 349 in 2006.

The hottest kid drink trends involve water.

Drink boxes, pouches and bottles of water are being flavored and/or fortified. Similarly, kids' juices are being diluted with water.

“Juices are more nutritional than soft drinks, but the problem with regular juice is that the body processes sugar as sugar, and it doesn't care if it is in the form of a soft drink or a fruit juice,” noted Vierhile.

Plastic straws filled with flavored powders that can be added to a bottle of water or a carton of milk are also gaining in popularity, and consequently revitalizing the powdered-drink market.

“These sticks have been the innovation that has turned this category around dramatically,” Vierhile said.

Merchandising strategies for healthy kids' beverages vary. Some retailers are displaying brands in their specialty food departments, while others opt for the more heavily traveled beverage aisle.

Whole Foods Market is placing purified water and flavored-water beverages, like those marketed by Wateroos-brand drink boxes, in its water aisles.

Healthy kids' juices, on the other hand, are segregated to a kids' juice area in the juice aisles.

A six-pack of Wateroos sells for $2.79 at Whole Foods, while an eight-pack of Honest Tea's Honest Kids line of organic, low-sugar, fruit-flavored pouch drinks in Tropical Tango Punch, Berry Berry Good Lemonade and Goodness Grape flavors retails for $4.99.

“They're selling very well,” said an East Coast Whole Foods store manager.

Growth in the healthy kids' beverage segment is outperforming the overall beverage category at Bashas' stores, according to Duane Proulx, vice president of grocery procurement for the Chandler, Ariz.-based chain.

The retailer's fast-moving kids' beverages include Kraft's Capri-Sun, which claims to be an excellent source of antioxidant vitamins C and E; Coca-Cola's Minute Maid; Nestlé's Juicy Juice; and Kool-Aid Koolburst. They're merchandised within the shelf-stable bottled juice section.

Bashas' promotes healthy kids' beverages six to eight times a year in its ads, as well as with temporary price reductions that are on rotation, by brand, each week.

“We always have a product on promotion,” noted Proulx.

The Capri Sun 10-pack is the most popular seller at Bashas'. The retailer sometimes promotes it with prices as aggressive as 3 for $5.

Sixty-four-ounce bottles of Juicy Juice 100% Juice also sell well at the retailer, as do Hi-C box drinks.

Pittsburgh-based Giant Eagle, which carries various beverages that appeal to children, is seeing strong category growth. One of the key drivers is price, noted spokesman Dan Donovan.

In-store placement at the retailer varies from location to location, but multi-serve and aseptic juices are often displayed side-by-side. Typically, these beverages take up 12- and 8-foot sections, respectively. Giant Eagle's best sellers are beverages marketed by Capri Sun and Juicy Juice.

Dayton, Ohio-based Health Foods Unlimited merchandises healthy kids' beverages both in its children's section and on the lower shelves of its beverage aisle.

Wateroos are faring well at the retailer, as are Hansen's Juice Slams, a 100% juice drink enriched with the equivalent of 17 daily essential vitamins and minerals for children. Crayons Fruit Juice Drinks are also among Health Foods Unlimited's best sellers.

The fortified, low-calorie, all-natural drinks include an ingredient called SugarGuard to help manage the way the body absorbs sugar. Crayons Juices were launched in March and are also distributed in Wild Oats Markets, Whole Foods and Sprouts Farmers Market stores.

“People are getting smarter, and they're not buying all those drinks with sugar and high-fructose corn syrup for their kids,” said Rhonda Miller, Health Foods Unlimited's co-owner. “They are looking for functional, healthy beverages.”

Among the new sugar-free entrants to the market are Crayola Color Coolerz, a naturally fruit-flavored purified water that is free of sugar, carbohydrates, caffeine and calories. The line has nationwide distribution in independent stores, as well as at many large retail chains such as Target Super Centers, Kroger and Wal-Mart. Wild Waters, a fortified and flavored line of water that claims to have 60% less sugar than the leading juice drinks, was launched last year. It's being distributed in many Northeast-based chains, including Big Y and Hannaford Bros.

To accommodate these and other brands, retailers like Roots Market are creating healthy kids' beverage departments.

“It's all coming together now,” said James Klink, grocery manager for the independently owned 15,000-square-foot health food store in Clarksville, Md. “Pretty soon we'll have enough products to create a 4-by-4 kids' corner up in the front near the heavily trafficked cookie and candy aisle. Every week you see more launches.”

Among the fastest-moving lines merchandised at Roots are Wateroos, Honest Kids Thirst Quenchers and Nestlé's Aquapod, a round-shaped, 11-ounce bottle of natural spring water.

Wateroos asks retailers to merchandise its water-flavored beverages with their other shelf-stable boxed juices, because that's where their primary target shoppers typically shop.

Aquapod is usually merchandised next to Nestlé's other case-packed waters in the main beverage aisle, but on promotion it is often cross-merchandised on endcaps with a variety of items targeting children. Wal-Mart created a “lunchbox” display for Aquapod during a recent promotion.

Honest Tea is asking retailers to put Honest Kids in their mainstream beverage section, following the logic that people are trending more and more to healthy drinks.

“Retailers should have these drinks adjacent to their traditional mainstream counterparts, but highlighted as healthy kids' beverages,” said Jon Haupton, a partner at the Barrington, Ill.-based Willard Bishop consulting firm. “That way, they can benefit from traffic and make as many people aware of the items as possible.”

The growth in the kids' juice category doesn't seem to be a passing fad, but a trend that can be expected to continue to grow in the years ahead. “I think you are going to see continued strong growth in reduced-sugar products for kids,” said Vierhile. “Schools are really clamping down now on the kinds of foods and beverages they will allow in school vending machines.”

The new launches are “addressing a gap in the market created by the decline of calorie-heavy carbonated soft drinks,” said Jeffrey Klineman, editor of Cambridge, Mass.-based BevNet.com.

With the exception of carbonated soft drinks, dollar sales of the top beverages grew across the channels.

BEVERAGE WATCH