RETAILERS PREPARE FOR MID-SUGAR COLA WARS 2004-06-07 (2)

LUCIA MOSES

ATLANTA -- The summer of the "halfs and half-nots" is coming to the supermarket beverage aisle, as retailers prepare to integrate Coke and Pepsi's new reduced-sugar sodas.

The cola makers are betting that Splenda-sweetened Pepsi Edge and Coca-Cola C2, set to appear by mid-month, will pep up flagging soda sales by appealing to people who want the same taste as regular carbonated soft drinks, but with less sugar.

Retailers interviewed by SN are planning promotions around the line extensions, but do not know what to expect.

Soft-drink consumers are "either going to buy one or the other," said Joe Boyd, beverage category manager, Minyard's Food Stores, an independent based in Coppell, Texas. "I don't think it's going to bring new people to the category."

Minyard's will place the new soft drinks in the manufacturers' existing space on shelves and in secondary displays, he said. "Anytime anything comes in," he said, "something has to go."

"We get new products all the time," said Thad Streeter, store manager of Quality Foods IGA, Schofield, Wis. "It's just a matter of evaluating what's selling and what's not. It'll be a trade-off."

Randy Miller, merchandise manager for Bigg's in Cincinnati, predicted the new sodas will do well. "It's another item, but it is a little special because of the low-carb craze," he said. "People like to try new things."

He said his dozen stores would merchandise the new sodas in the beverage aisles and at the nearby "Wall of Values," a new-products section.

Retail beverage aisles are already bursting with activity, with 200 or so new soft-drink products introduced during each of the past few years, according to Productscan Online, a new-product database published by Marketing Intelligence Service, Naples, N.Y.

"The challenge is shelf space," added beverage consultant Manny Goldman, who is president of Goldman Consulting Services, Hillsborough, Calif. "It's a crowded aisle, and [soda] may be the highest revenue producer of any packaged product in the supermarket."

The cola companies are taking different tacks, with Coke seeking incremental, stand-alone displays in supermarkets for C2, and Pepsi planning to use its existing space to introduce Edge, according to major bottlers for the soda companies.

To encourage trial and repurchase, Coke intends to offer in-store sampling starting June 16, and consumer promotions like special prices and coupons, said a spokeswoman for Atlanta-based Coca-Cola Enterprises, Coke's biggest bottler. While both low-sugar sodas will be available in 20-ounce bottles, Coke will seek to differentiate C2 by introducing it in eight- and 18-packs of 12-ounce cans, as opposed to the conventional six- and 12-packs. Pepsi, meanwhile, plans to fit Edge in existing Pepsi displays, either in the beverage aisle or in adjuncts "winging" its endcap displays, said Liam Fuller, director of field marketing for Pepsi Bottling Group, Somers, N.Y., one of Pepsi's biggest bottlers.

"We're basically looking at other Pepsi brands we can reduce," Fuller said.

The bottler will seek two facings in checkout lane coolers, and add Edge to stacks or dump-ins to encourage trial purchases.

In addition to 20-ounce bottles, Pepsi Edge will make its debut in traditional six-packs in most parts of the country with two-liter bottles and six-packs of eight-ounce cans to follow in July. Another multi-pack configuration will probably come out after Labor Day, he said.

While 20-ounce bottles of Edge will cost retailers the same as their full-sugar counterparts, six-packs will be priced at a premium, he said, reflecting consumers' lower price sensitivity and the higher cost of Splenda relative to other sweeteners.

While Coke listed lower carbs as one of C2's benefits over the full-sugar version, Fuller said Pepsi isn't positioning Pepsi Edge as low-carb, given it will still contain a substantial amount of sugar.

Still, the new offerings come at a time when the category is ailing as people are opting for healthier options -- most notably, bottled water.

Per-capita consumption of carbonated soft drinks declined to 53.8 gallons in 2003 from 54.9 gallons in 1998. During the same period, bottled water consumption rose to 22.6 gallons per capita from 15.3, according to Beverage Marketing Corp., New York.

"They're all worried about losing these occasional soft-drink buyers," Tom Vierhile, executive editor of Productscan Online, said of soda manufacturers. "It's just a way to keep them there."

Skeptics point out that reduced-sugar soda has been tried before, with limited success. Amira Rashad, a food and beverage consultant and vice president of The Valen Group, Cincinnati, and former marketer for Pepsi, listed a few reasons these versions may succeed this time. They use Splenda, which promises to solve the aftertaste problem of past diet soda formulas. People are more health-conscious than before. Since the low-carb dieter is typically male, reduced-sugar sodas will have a bigger potential market than their diet soda forerunners.

"I really think the target market is the mainstream user now," Rashad said.

In any case, retailers and bottlers will evaluate sales post-launch, probably a few weeks after the products debut, and adjust shelf space accordingly, she said. If sales do well, manufacturers may decide to pay for more display space. It will be up to retailers to decide whether to grant it.

"Their challenge is going to be keeping a finger on how it's doing," Rashad said.