THE GUZZLE PUZZLE

RICHARD TURCSIK

Retailers are getting plenty of exercise as they wade through the steady stream of new offerings in the beverage aisle, trying to develop the right product mix to line their shelves.

That mix can be determined, they say, by:

Using category management programs supplied by manufacturers.

Monitoring their customers' taste and buying habits.

Only a few years ago, ready-to-drink supermarket beverage offerings were mostly limited to several flavors of pop, canned and bottled juices, and maybe a bottled water or two. But now literally hundreds, if not thousands, of new beverage concepts, flavors, line extensions and pack-

aging options are being introduced each year by scores of national, regional and niche manufacturers.

And what is hot one summer might not necessarily be popular the next. Witness the ready-to-drink iced tea category. Two summers ago it seemed all the tea in China was being bottled and destined for supermarket shelves. But in 1995 a stain was forming on the ready-to-drink tea industry as consumers began to turn to waters and sports drinks as the next beverage fads.

"When it comes to beverages and their share of stomach, it is very important for retailers to

get their core business right," noted Ken Harris, a partner in Cannondale Associates, a consulting firm maintaining offices in Evanston, Ill., and Wilton, Conn.

"A company like Ocean Spray can help retailers see what the trends should be, as opposed to having to figure it out on their own," he added. "The pace in the beverage aisle is frenetic, but consumers are also incredibly fickle and this fickleness leads to the incredibly short life span of many new products."

In order not to be stuck with an aisle full of misses, retailers need to consult with manufacturers as well as their customers to determine the next beverage hits. The leading beverage manufacturers, including Coca-Cola, Pepsi and Ocean Spray, offer category management programs to retailers.

"We've been involved in making recommendations to our retail customers for about four or five years now," said Robert Baskin, a spokesman for Coca-Cola Co., Atlanta. David Egner, a spokesman for Somers, N.Y.-based Pepsi-Cola Co., said Pepsi route drivers possess handheld computers that keep track of what sells and how many cases of each variety should be carried in each store location.

Several retailers have already formed partnerships with manufacturers in order to gain a better handle on the beverage department.

"We have formed a partnership for the carbonated soft drink category," said Peter Dudis, director, grocery operations, Big Y Foods, Springfield, Mass. "However, it was a long process trying to find a bottler willing to become a partner."

Dudis added, "We are currently doing an analysis on carbonated soft drinks in category management. This analysis will help answer basic merchandising questions. Currently our space is allocated by sales. But with category management, there are many more pieces to that, including demographics, market share, etc."

At Minyard Food Stores, Coppell, Texas, the space allocated to particular brands of soft drinks is determined by the manufacturer's percentage of total business, said Gary Price, vice president of merchandising.

"For example, if the Coke bottler has 50% of the sales, then he would get 50% of the space. Coke goes back and determines what sells in that area. They pull the figures and go by what sells in each store. For instance, in some areas we sell a lot of diet drinks and in others we hardly sell any," he said.

Price said Minyard's category management systems will one day allow category managers to check product movement themselves without having to ask the manufacturers.

Retailers expect category management to play a bigger role in shaping the category in the future.

"We're not big-time into category management yet, although we will probably get there later this year," said Mark Polsky, senior vice president of Magruder Inc., Rockville, Md.

Polsky said Magruder has reset its soft drink sections, taking away space from Coca-Cola and Pepsi.

"In the competitive type of business that we're in, you don't sell soft drinks off of the shelf. Whatever is on sale is what sells. You just need representation for a customer who might want a particular item. We've been cutting back on the national brands of soft drinks and filling the space with the waters and the things that are moving," he said.

Hughes Family Markets, Irwindale, Calif., determines how much space to devote to each beverage area by looking at the previous year's movement numbers, according to Michael Shultz, senior vice president.

"Because of improvements in technology, determining how much space to devote to items is easier today than in the past years," he told SN.

"We determine the right product mix to carry in our stores by careful consideration of new items and by promotional support offered by the various vendors. Our product mix will vary according to the ethnic and demographic makeup of our individual stores."

Inside the store itself, retailers merchandise their beverages in a variety of ways. Some prefer to merchandise all of the beverages in one aisle, while others find items sell better when merchandised in different places around the store.

"We find that it is best to put the beverage items in separate sections. To stimulate impulse sales, we often use creative displays," Shultz said.

"We generally merchandise each category separately according to waters, soft drinks and alcoholic products. We utilize endcap displays because we find that is the best vehicle to capture impulse sales," said Big Y's Dudis.

Price of Minyard said because soft drinks are such high-volume items, they are usually merchandised late in the shopping pattern.

"Usually we don't position soft drinks in the first aisle of the store; we like to position them in an aisle so that the customer has to go through the store and shop. Usually it is on an outside aisle, or close to the end of the shopping pattern, to draw the customer through the store," Price said, adding that layout varies from store to store.

"We have conventional stores, combo stores and warehouse stores, and it is almost an individualized thing. We have to look at how many square feet a store has, how many gondolas they have. There are all kinds of variables, including ethnic makeup. Hispanics like the pineapple drinks, for example," he said.

Paul J. Kelly, principal at Silvermine Consulting Group, Westport, Conn., said smaller beverage manufacturers often fare better when they are merchandised away from the big guns.

"Most of the smaller beverage manufacturers would prefer to be away from Coke and Pepsi because they dominate the aisle so much that they've never felt that they've gotten their fair share of aisle space," he said.

Category management also plays a role in stores that carry alcoholic beverages as breweries roll out scores of new microbrews and distillers continue to introduce single-barrel bourbons, liqueurs and cordials.

Oscar Sicola, liquor and beer buyer-merchandiser at Fiesta Mart, Houston, said to increase sales of beer and wine, he tries placing them throughout the store.

"Because of our diversity in our stores, we do try to cross-merchandise as much as possible with the delis, international foods aisles and meat cases," he said.

And a proliferation of liquor stores is making it harder to sell hard liquor in Texas, Sicola said.

"Alcohol sales haven't been growing because there are a lot more stores opening up all of the time. The pie is getting smaller, so you have to put your thinking cap on to try and block the competition."