STORE LABELS MAKE SPLASH

PEGGY BRESNICK KENDLER

Store-brand beverages are not just a drop in the bucket for retailers across the country, who report sales of these items, including juices, carbonated drinks, bottled water and others, have been flowing well.

According to Mel Korn, president and chief executive officer of Saatchi & Saatchi Collaborative Marketing, New York, all beverages are involved in a battle for share of stomach.

"You're only going to drink so many beverages each day," Korn said.

He noted that the beverage segment is one of the top performing categories for most retailers. "Not too many categories can drive traffic, but beverages do."

Retailers are setting up entire beverage and snack aisles to become more lifestyle-connected and, in addition, occasion marketing is also occurring more and more in stores. One can now easily spot packages that fit different occasion-thinking that consumers may be doing as they traverse the store.

"Spreading beverages around the store in a creative merchandising sense, placing the products in strategic areas, is very, very critical," Korn pointed out. "The 2-liter bottle might be in the beverage aisle, cold beverages in 20-ounce sizes might be in a refrigerated case, and there may be cans of soda in the deli section, for instance."

Colas and other carbonated soft drinks are still dominated by the national brands, with private-label sodas commanding only a small share of the total market. "Coke and Pepsi are still quite strong," Korn noted. "Their ability to continue to keep building brand awareness and positioning makes it extremely difficult for private labels to compete."

Ken Kurzyniec, manager of corporate brands for Spartan Stores, Grand Rapids, Mich., said he believes private-label sodas and juices are seen as a threat to the national brands due to their low cost, and are doing more than merely occupying shelf space. "We have seen increased promotions in these categories," Kurzyniec pointed out.

Even though private-label carbonated beverages only represented 7% of the total $12.5 billion market, according to statistics compiled by Information Resources Inc., Chicago, store-brand sodas still brought in a whopping $880.5 million in revenues in 1999, rendering the overall category one of the strongest for retailers.

Even so, Greg Pearson, retail operations manager at Econofoods, Worthington, Minn., doesn't believe private-label colas are given a lot of consideration by the major brands. "There's a certain demographic that is going to buy those, and they certainly haven't affected super-premium sales," Pearson said. He estimates that private-label carbonated beverages have about a 15% to 20% market share.

However, Jim Heitbrink, category manager for Federated Group, Arlington Heights, Ill., noted that retailers still sell plenty of private-label soda. "For the most part, in most grocery stores, if you put all the sales together, you see soda as one of the main products and one of the best sellers," Heitbrink said. "With private label, you're lucky if you grab 5% to 6% of that market. But, 6% of a tremendous category is a heck of a lot."

He said that in order for retailers to be successful they must carry a full line of private-label soda. "You have to have everything available -- a cola, root beer, lemon-lime, orange, grape, and on and on," Heitbrink noted. "If you put them all together, you get a lot of sales out of the private-label soft drinks."

Spartan Stores' Kurzyniec said sales of store-brand carbonated beverages have dropped recently, due to problems with the store's manufacturer, but private-label juices have remained strong and stable for years.

Heitbrink agrees that retailers sell more private-label juices than anything else out there. "Private label is always a lot cheaper and it probably controls up to 60% to 70% of that category," he noted. "Cranberry juice is also strong, with private label controlling about 40% of the market."

He saw a bump in sales of canned juices just before the Y2K turnover. "But the one thing that went nuts was bottled water. We saw a jump in sales in November and December, but now sales are suffering. People aren't buying until they use what they stockpiled. If you have six bottles of juice and extra canned goods on hand, you're not going to buy it for a while," Heitbrink said.

According to the IRI figures, one of the strongest juice segments is frozen juice concentrates. In 1999, sales of frozen juices totaled $1.1 billion, while sales of private-label frozen juices amounted to $332 million, representing nearly one-third, or 31.6%, of total sales in this category.

On the other hand, private-label shelf-stable juice-drink concentrate pulled in 0.6% of total sales or $842,393. Total sales of these products amounted to $136.9 million last year. Consumers purchased $4.3 billion worth of refrigerated juices in 1999; of that, private-label products accounted for $717.5 million, or 16.9%.

Store-brand canned and bottled juices are also popular with consumers, according to IRI. Private-label, shelf-stable canned juices pulled in $115.1 million last year, 16.1% of the total $714.2 million. And, bottled juices raked in $578.7 million in 1999, 17.9% of the total $3.2 billion market. As mentioned by Heitbrink, the strength of these shelf-stable products is due, in part, to the pre-Y2K changeover, as consumers rushed to stockpile food and beverages to prepare for possible millennium problems.

Kathryn Steel, a spokeswoman for Sobey's, Nova Scotia, said private label is a dynamic market in her store and, therefore, the retailer is always adding products. "The beverage area is certainly one where customers are purchasing private-label brands," Steel noted. Sobey's has more than 1,400 locations in Canada under a variety of banners; 144 carry the Sobey's name.

Sobey's offers two private-label brands, the Smart Choice and Compliments lines. Steel said that, for the Compliments line, the quality is equal to or better than the national brands at a reduced cost. "This is primarily because the Compliments products don't have the same degree of packaging, marketing or added features, so we can offer them at a lower cost," she said.

The retailer promotes its entire Compliments line seasonally. For spring and summer, Sobey's is planning a barbeque-theme promotion, with a one- or two-page addition to its flyer, showcasing many Compliments products and beverages.

Sobey's has a popular line of bottled spring water that is produced locally in Atlantic Canada and shipped across the country. Steel said the chain found that it garnered increased sales in December, but very low sales in January. "It's not that there was an increased amount purchased, just a shift in the consumers' buying pattern during that time period," Steel pointed out.