BARQ'S CANNY STRENGTH

JOHN KAROLEFSKI

NEW ORLEANS -- "We've done extremely well in a relatively hostile environment dominated by giants," says John Koerner, president of Barq's, a feisty soft drink company based here that markets a root beer by the same name.

The giants, in this case, are Coke and Pepsi. When it comes to marketing brands inside the supermarket, Barq's is proving that it belongs with the biggest in the business. Its secret is an unconventional marketing approach that is -- in a word -- wacky.

Take the award-winning promotion, "Soviet Union Going Out of Business Sale," held soon after the U.S.S.R. fell apart. For proofs of purchase, shoppers received such authentic "Commie Junk" as Russian army hats and telephones from the Kremlin. The 20-week campaign earned the Grand Reggie award in 1992 from the

Promotion Marketing Association of America.

Barq's has partnered with Polaroid for the National Halloween Costume Contest, the first nationwide photo-entry competition for best costume.

For spokesmen to woo shoppers in the store at Easter and Halloween, Barq's has relied on Ralf Rabbit, a lovable, 7-foot inflatable bunny, and the equally lovable Freddy Krueger, the slasher of "Nightmare on Elm Street" fame.

Kind of kooky? Yes, but effective and perhaps necessary, considering the marketplace. After all, the stakes are high for Barq's as it shares turf with the giants.

"If you don't make it in the supermarket, you don't make it in this industry," says Richard Hill, vice president of marketing. "You can't be a really good C-store brand. So, we have attempted to come up with attention-getting, high-interest and high-involvement promotional concepts to benefit the brand."

Hill and Fred Walters, director of marketing, come up with ideas for the promotions. But a penchant for the outrageous isn't confined to the creative marketing execs. It goes right to the top. "The types of promotions that we do say something about our product. Each one of them reinforces our brand with something the target audience seems to like," says Koerner, adding that the target audience is 12- to 24-year-olds, particularly males.

Along with a focus on reaching the consumer inside the supermarket, Barq's knows the value of the trade itself.

"You have to stimulate distribution -- every level of distribution," Koerner says. "You have contests for salespeople who set the shelves or for the merchandiser. Obviously, you have low prices so that the supermarket can make a good margin. That's part of their allowing us to build a big display and cause excitement in the store. We stimulate management through sales contests and bonus dollars. "We stimulate each level of distribution to the consumer. That's one of the reasons we seem to be outselling the industry by a large margin and have done so historically."

Last year was no exception. For the 52 weeks ended Dec. 25, 1993, Barq's regular was the fastest-growing root beer by far in supermarkets with annual sales of more than $2 million, according to Nielsen Marketing Research. At 9.3% dollar share, Barq's regular is in a second-place tie with A&W Diet among branded root beers. It still trails far behind the 23.8% dollar share of A&W regular, recently added to the Cadbury-Schweppes portfolio.

Root beer accounts for more than 80% of Barq's volume. Its other brands are very regional and very creative: Red Rattler, a carbonated soft drink in Texas; Delaware Punch, a noncarbonated fruit punch gaining a following in Mexico; Red Cream and French Vanilla Cream, popular in the South and Northeast, respectively, and Luzianne, a flavored iced tea in the Sunbelt.

But Barq's makes its splash inside the supermarket with root beer. Since about 70% is purchased on impulse, the goal becomes stimulating impulse. The modus operandi, which Barq's calls Retail Promotional Marketing, is designed to create awareness, interest and trial inside the supermarket.

"There are a lot of marketers who go immediately to trial without creating any underlying interest," says Hill. "That's why there are so many coupons around. We put a lot of emphasis on retail, much more so as a percentage of our effort than any other brand in our category.

"Virtually everything we do has got some kind of display aspect or element to it," he says. "Typically, this will involve the consumers. We try to get consumers involved with the brand, but first of all, involved with the store."

For example, there's the promotion called Barq's Sample America. Barq's gives away 12-ounce cans of root beer to consumers as they're leaving the store.

"The retailers obviously love this," says Hill. "It's something of true value."

He singles out several chains that have especially succeeded with the Barq's approach: Vons in southern California, Jewel and Dominick's in Chicago and Clemens Markets in Pennsylvania.

They respond to the "consumer pull" created inside the supermarket, according to Koerner. But this is only half of the equation for success.

"We decided early on that we needed to have two things: consumer pull and distribution push. I know that sounds rather mechanical, but distribution systems are extremely important. You've got to have availability or you can't make the sale."

The "distribution push" is handled by nearly 300 bottlers in three-quarters of the country where Barq's root beer is now available.

"We chose a rather unique and focused distribution system, and that was in the franchised bottler delivery system," explains Koerner. "There are many ways to get to market -- through food brokers or other methods -- but we cherish that franchised bottler system. We know that they're in the store every day. We know that they control much of the allocation."

This bottler relationship is critical. Barq's tries to come up with creative promotions that the bottlers will support because they in turn support the retailer.

"We're competing with the offerings of the Coca-Cola Co., PepsiCo and all their resources worldwide," says Koerner. "But we're typically smart enough not to go after the same events. We'll instead go for off-peak holidays -- Easter and Halloween -- and try to make them peak. And," he adds, "the summer. That's very important." So instead of fighting Coke and Pepsi -- a fight that can't be won -- Barq's joins them by building a franchise. The aim is to make Barq's the bottler's root beer brand in every market.

A key merchandising technique for "second family" brands involves secondary displays in the supermarkets.

"We encourage and provide custom materials. Bottlers have a turnkey [point of sale] for their own allied brands. These are the Dr. Peppers, Barq's, Mello Yellos, Welch's Grapes, Country Times, Sunkists. What they could do is call and we would print a sticker for them to use in merchandising and POS that will have whatever line they want to feature on the 'second family' display, in addition to the core display," Hill explains.

According to Koerner, the future for Barq's is full of potential. That's been the case since 1976, when he and law school friend John Oudt, now chairman, bought the company from the Barq family. Today, they are looking at some niche soft drink brands and maybe a snack food company for acquisitions. There's already been talk of an initial public offering.

"I think we could bring the same energy and expertise to other consumer products that go through supermarkets," Koerner says. "As a manager, I'll always consider acquisitions and IPOs and mergers or anything of that nature. Our job is not only to serve the customer, but from a financial standpoint, to enhance the value of our company. As we become a stronger company, we can serve our customer base better."