From lifeline to lifetime – Britvic’s Phil Sanders

With lockdown restrictions starting to become a memory and life at last returning to normal, Britvic had the foresight to carry out some research looking at how things were going to change in terms of consumer behaviour.

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Phil Sanders Britvic
Phil Sanders

In the soft drinks category the pandemic proved a sales shock, because what had been a massive on-the-go purchase – especially during the summer – had effectively suffered from having the opportunity snatched away: instead of being out and about, or daily commuting, the shoppers who would usually grab a can or bottle were for the most part no longer there.

Instead, shopping patterns changed, and consumers began to buy larger format packs and multi-packs to take home – the suppliers responded in kind. Trips to local convenience stores increased in frequency and basket size under lockdown, offsetting the loss in impulse spend by increasing the top-up value of consumers who were suddenly living locally and favouring smaller shops that were reassuringly far away from crowded supermarkets.

Now, as the last vestiges of lockdown rules – and much of the lockdown mentality – fades away, Asian Trader met up with Phil Sanders, out-of-home commercial director at Britvic, to find out what his research had shown about changing patterns of consumer habits and spending, and whether we could expect there to be a return to business as usual – or even an improvement on it.

“Soft drinks is a hugely valuable category in convenience, worth £2.3bn, but macro trends are influencing what products consumers choose and where they choose to buy them,” Phil says. “Our research shows that on-the-go soft drinks are very much back in business, and there is a clear opportunity for retailers to drive sales as a result.”

On-the-go sales are vital not just for the soft drinks manufacturers such as Britvic, but also for the snacks and confectionery sectors, whose products are often bought alongside a soft drink as part of an integrated snack or a meal-deal – soft drinks are an “umbrella” product for on-the-go impulse buying, and their success can also float all the other boats, so to speak.

Source: Britvic

“We know that during the pandemic soft drinks remained the number one category bought on a food-to-go mission, and our latest research reflects this, with a quarter of those surveyed saying the reason they buy soft drinks on-the-go is to have them with food at lunchtime,” says Phil. “Retailers should be including soft drinks in their meal deal solutions, clearly signposting the offer in-store and encouraging cross-category purchases to maximise the opportunity.”

Sell more soft drinks and you will sell more of everything else as well.

Back to abnormal

It’s not just the shoppers but everybody in commercial life who is gradually adjusting back to a revised way of the old style of working – which might be best described as “office lite”.

“We did a survey around Britvic towards the end of Covid, and everybody came back and said, ‘Look, there are definite advantages to working at home, I don’t have to sit in a car and I save on travel time,’ etc.” says Phil. “But everybody also came back and said, ‘But I do miss a bit of social interaction and coffee machine conversations and seeing people in the office’. So the answer for the vast majority of people is somewhere in the middle.”

That attitude probably mirrors organisations (and so commuter shopping patterns) everywhere across the country, and it means two things: soft drinks sales will partially revert to how they were, but there will also be an increased at-home element to sales – and there could be a net benefit for retailers in this.

“I look after all of the out-of-home business for Britvic, basically everything that’s not a supermarket or a discounter,” says Phil. “It’s a pretty broad church, and obviously a big bit of that is the area you cover.” It is, and it means that Phil is a man worth listening to.

“What do people think they’re going to buy more of and less of going forward? And how are their shopping habits going to change?” he asks, describing the scope of the research – a survey of 2000 Brits who regularly indulge in delicious soft drinks, Britvic and otherwise.

“I guess what we’re trying to do is to help your readers get on the front foot, and to be honest, what we’re beginning to see in the latest market data is that what people were buying during Covid is not what they’re going to be buying going forward – and I guess quite a lot of your readers will be stocking ranges based on what has been selling.”

The key thing, then, is to quickly restock according to what’s in the pipeline in terms of changing consumer habits.

“That is the crux of it, to be honest,” Phil agrees. “During lockdown, we had an enormous number of people going into convenience stores buying take-home packs. And we did very well out of that to be honest, because we sold a lot of Pepsi 2 litre and 1.5 litre bottles and a huge amount of Robinsons Squash. Squash did really, really well during lockdown because as a category that’s about the cheapest way you can give your kids a soft drink when they’re at home. It went absolutely nuts.”

That, however, is changing, and Phil thinks the secret of success here is to pick up on-the-go sales again while retaining a good portion of the extra at-home sales generated under lockdown.

“The honest answer is that we’re not going to hold on to all of the shoppers we recruited into convenience stores during lockdown. But if we if we can get to our benchmark, which is 2019 traffic, and say ‘Okay, we recruited a lot more shoppers through 2020 and into 2021, so if we can come back to a level which is above 2019, then we’ve held on to a portion of those shoppers.’ And that’s what we’re trying to do, and in a lot of cases at the minute that is that is what we’re seeing.”

It was generally expected that the extraordinary gains made by the convenience channel would not outlast the pandemic period, but it was also hoped that the revelation of how good shopping locally could be, would stay with consumers even after lockdown, expanding the scope and revenue accruing to the channel – perhaps permanently.

“Obviously, a lot of them will go back to supermarkets because the reason they went into convenience stores was because it was a pretty hideous shopping experience in supermarkets under lockdown and it was a lot nicer to go to a decent convenience store and buy your take-home products there,” Phil says. But at the same time something really has changed.

“What we’re beginning to see is that the line is coming down, and it’s settling above 2019 in convenience.” Hurrah!

“The way we’re looking at it,” he says hastily, “there’s a big question over what will happen in 2022. When the pubs reopened, hospitality, etc, where was all that volume that people were drinking at home going to go? Was that going to go back into restaurants and pubs again?”

As Phil says, the data is still coming in, and we are in a period of flux and readjustment. But it looks as if to an extent home entertaining is persistent, helped by staycations and an economic squeeze, meaning that the shrinkage in the on-trade is partially permanent, and the expansion in convenience likewise.

“We’re finding that actually, in aggregate, the volumes versus historical norms across both channels, when you add them together, is very strong. And we’re all going to have a big Christmas because we didn’t have one last year. So, we’re thinking that that strong demand signal in aggregate, however it comes out between grocery and the out-of-home channels, will be strong right the way through to the end of December.”

Happy sugar-free New Year

Shortages, rising prices, squeezed incomes – a cold new year beckons for many, in more ways than one. But soft drinks – as an inexpensive treat – can prove a counter-cyclical success story if merchandised correctly.

“The question is about what happens once everyone’s had a big Christmas, in January, when the nation sort of pauses for breath,” says Phil.“Will everybody at that point have spent the money that they stored up during lockdown, and have they realised that they need to cut back on the overconsumption? And if so, will things be a bit more normal after that?”

Phil says that Britvic’s motto, “enjoying life’s everyday moments,” understands that a soft drink is the last thing to be given up on, and can even benefit from being a cheaper substitute for a more expensive luxury that has been cancelled. He says that the results of the survey bear out this attitude.

“We surveyed convenience shoppers geographically spread across the UK and said okay, what were their intentions in terms of shopping habits now that restrictions are lifted?”

They found that 61 per cent said that they were going to buy more on-the-go soft drinks going forward; 29 per cent said they were already consuming on-the-go soft drinks once a day, and 58 per cent said they were already consuming on-the-go soft drinks once a week. “So it does absolutely appear that the on-the-go market is coming back,” Phil concludes.

Britvic growth in annual revenue and profits

Digging further into the data, questions were asked about what sort of drinks people would favour, and the top answer was that 54 per cent said sugar-free carbonates.

“This is the other big dynamic with the on-the-go market that has gone through lockdown: there was a massive trend prior to Covid, accelerated by the sugar levy, towards  low-sugar and no-sugar soft drinks,” Phil explains although the drinks that were selling most in on-the-go during lockdown were, paradoxically, full sugar and energy drinks. What was going on?

“When we dug into it, the belief from our Insights Team is it was actually just to do with a demographic of the people that were out there consuming on-the-go soft drinks: it was a lot of delivery drivers, a lot of builders, gardeners, etc, who were still out and about during lockdown.You’re doing home improvements, delivering Amazon packages, or whatever – those are the type of people or type of jobs where, frankly, you do need a bit of an energy hit or a sugar boost.”

So, mystery solved: it wasn’t people who were no-sugar drinkers before suddenly changing their consumption habits. “It was just the nature of the people that were out there. And what this research would say, and what our belief is, is that actually that trend towards no-sugar drinks will continue as we come out of lockdown, and hence things like Pepsi Max Tango sugar-free and sugar-free Seven Up will come back on the trajectory that they were on before.”

So think carefully about stocking up with more low and zero drinks, and also realise that meal deals, dinner-tonight deals and combined on-the-go buys are on the increase.

“The ‘with lunch’ bit is the other thing,” stresses Phil.“Again, for your readers, I suppose you’d say the thing with hanging on to the take-home shoppers, one of the things that they can do to help with that, is to offer meal-for-tonight solutions. The other thing that will return is naturally the lunchtime meal-deal – sandwich, packet of crisps and a drink, which has largely dried up through lockdown.”

He recommends retailers “re-bias your lockdown-biased range away from take-home packs and back to single serves. I know it was big packs then because I was out and about in convenience stores that were selling 24-pack cans of beer and soft drinks – that was just unheard of previously, and they were selling really well.”

His other recommendation is to replace the big packs with more range and variety – the many colours and flavours that are the lifeblood of vibrant impulse buys.

“So think about the sugar, no-sugar balance. If people have rationalised ranges through lockdown, then bringing things about like a range of flavours with brands like Pepsi Max, Cherry, Pepsi Max Raspberry, Pepsi Max Lime – those sorts of thing will keep people interested.”

It’s incredibly incremental

There is also the K-shaped recovery to think about – the phenomenon of some consumers looking to save money while others are premiumising like mad (though perhaps buying less). And there is also the matter of enticing customers with NPD and PMP.

“There’ll be people out there who are looking for premium and there will be people out there who are looking for value,” Phil agrees.“You should be catering to both of those groups. NPD is the other one: [during lockdown] a lot of producers shut up shop, a lot of brands shut up shop, as we did to an extent, and just focused on pumping out what we’re selling. But NPD is a huge thing in soft drinks. We launched Tango Dark Berry and that’s been absolutely flying and it will come back and do very well, I’m sure. The Rockstar energy brand that we’re doing for PepsiCo now – we’re launching a no-sugar version of that. Just bringing those things back in again and getting them on the shelf so that there’s definitely a ranging bit.”

And value? “Value is the other one, and despite having said that people are looking for premium and NPD, price-marked-packs are clearly a big thing and again during lockdown I know a number of manufacturers cut PMPs back in order to get their production pumping on core lines that were selling. But we flipped our no-sugar 500ml range over to a £1 PMP as we came out of lockdown because we think there’s a group of people out there who will want a £1 value pack offering value, and that’s flying very nicely as well.”

These are hints of what 2022 is going to be like: new products and a brighter, wider shelf style, interspaced with a lot of PMP deals encouraging baseline purchases to lift average revenue and overall sales. The £1 PMP seems to be the charm across categories at the moment: crisps have certainly found a £1 sweet spot. Is this re-diversification of ranging being hampered by delivery supply problems?

“Yeah it is,” laughs Phil. “I mean, honestly, it’s going to be a plague of locusts next is what it feels like. It’s just wave after wave of challenge. The answer is that there’s no lack of production, the stock is there, but yes, we have been hit by what we can get out.

“What people are ordering we are delivering as best we can. It is getting a bit better but we did have a period where we just weren’t been able to deliver everything, even though the underlying demand is there. We just haven’t been able to deliver everything that people are ordering.”

On the basis that you can only sell what you can get, what is the merchandising outlook into the Christmas season?

“Certainly, if you look at our service level into the wholesalers, and then the service level into the stores, some of the retailers have suffered on that final leg pretty badly. I’ve got to say so,” he says.

“What we’ve said to people is we’ll allocate numbers of loads to retailers,” Phil explains. “We’ll say, look Mr. Retailer, you normally order four trucks, we can give you three, let’s manage those three and fill them right up with everything that you need, as best you can. And then the following week, we’ll come back and review whether we can give you four the following week.”

Most things are now getting through and the situation is improving, he says.

“It’s been a collaborative approach and I think we’re in a great industry where every crisis that comes along, we work together well between the customers, and this has been another really good example of that.”

So from a merchandising point of view, Phil says to make sure to focus on the fundamentals: “If you’ve got product in the store, make sure it’s chilled, especially the on-the-go stuff – concentrate on your customer service. Soft drinks is a very impulsive category so there’s hot spots in the stores which are right for displays, and any promotions should be well featured,” he advises.

“The other one that’s we’re seeing a lot more of, is the shopper marketing side of it, making sure that that meal deals are well featured, seasonal events are well featured – Halloween, Diwali, Christmas – and use of POS and social media as well. It’s all about trying to get that excitement back up again, because it’s a fun category that people will respond to.”

I return to the point that even though the massive lockdown sales-spike in convenience has receded, there does seem to be a large remnant of extra sales and new customers in the channel.

“What is definitely happening about working from home is commuters not going into the city centres so much, meaning the opportunity is there for a lot more soft drinks sales in suburban and village locations than pre pandemic. There are retailers out there who before would have said, ‘I’m not going to get that lunchtime visit,’ who will now be getting those visits because of home working.”

So all in all, a difficult period over and an uncertain one beginning – but the outlook is promising and the research backs it up.

“I remember early in lockdown,” Phil sums up,“I think it was a Costcutter I was talking to at the time, and they were saying they’d recruited a lot of take-home shoppers during lockdown who were using them as a lifeline. And they said, what we want to do is keep those shoppers as lifetime shoppers. So, from lifeline to lifetime, and I thought that summed it up really nicely.”