Soft drinks is proving resilient to the sugar levy as consumers still like to grab a beverage from the c-store to cool down. Asian Trader reports.
Soft drinks continues to be one of the most profitable categories for convenience retailers, worth £2.2 billion and growing at 2.7% (IRI).
From June – August – the crucial summer period for soft drinks sales – shoppers consume 26% (IRI) more soft drinks, with water, fruit drinks and other flavoured carbonates seeing the most benefit. Retailers who adapt their ranges to reflect this range, particularly in the chiller, will benefit significantly.
To ensure the best performance from soft drinks, it’s crucial that retailers offer a wide selection of products to cater to a broad spectrum of consumer tastes.
“The world of soft drinks is changing with shopper demand for mid, low and no-sugar soft drinks growing,” says Adrian Troy, Marketing Director at Barr Soft Drinks. “However the overriding reasons why consumers choose a soft drink have remained constant – great taste, flavour choice and the right pack formats.”
There are major lifestyle changes happening across the UK and this is impacting on how soft drinks are consumed.
“It’s challenging for retailers to be an expert on every category in their store but our new category vision can help retailers to understand their shoppers at local level to increase sales,” adds Troy.
Barr’s new approach to managing the soft drinks fixture focuses on three key drivers that we believe will be a major contributor to category growth in convenience retailing.
The three drivers – Health and Wellbeing, Taste & Fun and Lifestyle & Culture – reflect changing consumer lifestyles, influences and needs in relation to buying and consuming soft drinks.
Barr has used these three category drivers to develop a blueprint for the future of soft drinks merchandising in the UK, translating them into six specific shopper need states which cover all the major soft drinks’ consumption occasions. This forms a chiller planogram which will enable retailers to merchandise their fixture to engage shoppers.
The six consumer needs states are: Healthy Refreshment – Water and water-plus products; Tasty Hydration – Low calorie products with the health benefits of water and the great taste of a carbonate; Everyday Enjoyment; Adult Social; Connecting Cultures; and On The Go.
The relative size of each section and which products a retailer should stock within each section will vary dependent on geographical location and shopper profile. Retailers can use Barr’s regional planograms based on their shoppers’ need states to ensure they are offering the local range their shoppers want.
“Merchandising the chiller in a clear and engaging way with our bespoke POS to signpost each need state, will make shopping the soft drinks fixture much easier and ensure that your store stands out from the crowd,” says Troy.
The most recent four-week stats for the convenience sector show the total plain water market is currently in huge value and volume growth – 40% and 40.3% respectively (IRI).
This is largely down to the tropical heatwave the UK experienced over the summer.
The Met Office is reporting the warm weather is set to continue well into September and beyond, which presents independent convenience retailers with an excellent extended sales opportunity, as the demand for soft drinks on-the-go is set to continue.
Consumers shopping in independents are usually local and use these stores for convenience and distress purchases, and for this reason, it is essential to ensure a key range of bottled water is merchandised within the chiller to help drive consumers to purchase, says Carol Saunders, Head of Customer Marketing, Highland Spring Group.
“Outlets should stock a variety of single bottles in the fridge to cater for immediate consumption with high sellers on the bottom shelf and situating the chiller near the entrances and payment points will ensure they are visited by the highest number of people,” Saunders comments.
The increasing consumer and media focus on health, as well as the imposition of the sugar tax – which was introduced in April this year – continues to be a major driver of product choice and is a significant consideration for consumers when choosing between drinks.
Research shows that 36% of consumers are more concerned with sugar in food compared to the previous year (KWP), showing that shoppers were beginning to make healthier choices prior to the introduction of the sugar tax.
This health trend will continue to grow as consumers continue to adapt to healthier lifestyles.
“Bottled water’s lack of calories, sugar, preservatives and additives, together with its convenience and refreshing taste, provides health-conscious consumers alternatives to fizzy drinks and sugary juices,” Saunders adds. “Bottled water is also versatile, available in still, sparkling and flavoured varieties and various size formats, making it suitable for consumption at any time of day.”
Sparkling flavoured water has seen an increase in the last year as shoppers move away from heavy sugar content – volume is up by 6.9% and 6.2% in value (IRI). The sparkling flavoured water category has been particularly buoyant in convenience in the four weeks up to 21 July, where it has seen a monumental value increase of 53.3% and 54.6% volume (IRI). Stores should include a range of flavoured sparkling waters in the chiller alongside plain water to maximise demand.
Recording a 5% YOY volume increase within convenience (IRI), plain sparkling water is another opportunity which retailers should capitalise on.
“It is important not to just view water as a thirst quencher for customers,” Saunders adds. “As the only mixer with zero calories, many consumers prefer adding sparkling water to alcoholic beverages instead of soda water, for example – its minerality contributes to a clean and cooling flavour profile while the smaller size of the bubbles give a more pleasing texture and mouthfeel.”
Sparkling water is often under-represented in the soft drinks chiller and providing additional options in terms of brand and pack format can help convenience stores make the most of the opportunities here.
The good weather always sparks an increase in impulse purchases in the soft drink category, so independents should ensure that their top selling lines are merchandised within the chiller to help capitalise on these purchases.
Impulse purchases in the total plain water category over the 12 weeks up to 21 July are up 12.6% in value and 10.8% in volume (IRI).
Chillers need to be kept fully stocked on a regular basis and a secondary siting of bottled water at the payment points in the store can also encourage impulse sales, Saunders recommends.
Energy is the biggest selling soft drink segment within the category for independents with over £400m worth of sales in the channel (IRI) so is a core part of any retailer’s range.
Juice drinks are also a great profit opportunity. They’re growing year-on-year, showing just how popular they are with consumers looking for great-tasting refreshment on-the-go.
“Retailers should consider the rise in consumers focusing on their health and what that means for their range,” commented Scott Meredith, UK Sales Director, Lucozade Ribena Suntory.
“It’s vital that they respond to this trend by stocking the lower-sugar and zero-sugar drinks shoppers will be looking for in their chiller – particularly with the Soft Drinks Industry Levy now in place meaning consumers are paying more for some high-sugar drinks.”
Convenience shoppers look for their favourite brands they can pick up on-the-go so retailers should ensure their chillers are full of the best-sellers, Meredith suggests.
Price-marked packs are incredibly important to help demonstrate value. Price-marked soft drinks have a faster rate of sale than their non-PMP equivalents, which has increased in the past year. 76% of convenience shoppers think PMPs improve a store’s overall price image (him!), showing they’re getting the best value around.
Providing a visibly low price on products across your shop encourages shoppers to spend more and makes them more likely to return too.
“Availability is essential – with each shopper spending up to £232 a year on soft drinks, every person who walks through the door is a profit opportunity,” Meredith added. “Top-sellers should be placed at eye level to help shoppers find their favourites quickly. The range should be regularly reviewed on sales performance and shopper feedback to make sure the best possible selection of drinks, including all the top-selling brands, are offered.”
The convenience channel has a high proportion of its sales in the standard category.
Yet in 2017, the majority of growth either at a top line level, or within most sub categories, was driven by the diet sector (IRI). This shows that the health trend, as well as the subsequent shift towards more perceived healthier products and sub categories, is having an impact on the channel.
“Retailers will need to ensure that they keep up with the trends being seen in the market and ensure their ranges are fit for purpose,” commented Trystan Farnworth, Commercial Director, Convenience & Impulse at Britvic. “Retailers should consider dedicating enough space to emerging healthier categories like water, water plus, natural energy and no added sugar carbonates, to tap into these health trends.”
Last year, the biggest sub categories continued to grow in convenience and this was no exception for the largest of them all, cola. 2017 saw cola grow by £21m, +4.2% value growth, with 76% of this growth coming through from the diet segment (IRI). As consumer demand continued to move towards healthier soft drinks, leading low-calorie cola brands benefitted with Pepsi MAX growing the most in absolute value, up £10.9m vs the previous year (IRI).
Britvic’s research, conducted by Censuswide UK, indicated that of those consumers who planned to reduce their alcohol consumption last Christmas, 39% consumed less alcohol all year round, increasing to 41% in those aged 25-34 and to 46% in those aged 55+.
“With figures showing a big decline in alcohol consumption throughout the year, it’s important to stock a dynamic range of soft drinks including well-known brands like J2O and Pepsi MAX as well as chilled on-the-go and sharing formats, throughout the year to cater for this growing interest in soft drinks,” added Farnworth.
“So far in 2018, we’ve seen demand for premium products go up as more people choose to socialise at home. There is also a trend for recreating cocktails and bar-quality drinks at home to bring a sense of occasion to a night in” says Amy Burgess, Trade Communications Manager at Coca-Cola European Partners (CCEP).
Social media is also having an impact, with people looking for trendy products they can photograph and share with friends on Facebook or Instagram.
“Because of this, factors such as stylish packaging, like the iconic Coca-Cola glass bottle, can influence the difference between whether someone buys or not,” added Burgess.
Mixers are also growing in popularity, whether consumed with or without alcohol. This is partly due to the popularity of cocktails and non-alcoholic mocktails, as people are becoming more adventurous with home-made cocktails. Some are even buying bar equipment and cocktail glassware – such as martini glasses – to recreate a ‘bar atmosphere’ at home.
“Retailers should consider mixers to go alongside their alcohol ranges, so people can stock up on everything they need for their night in in one go,” Burgess suggests.
Garnishes and botanicals are also becoming more popular as people look to expand their homemade cocktail range or jazz up a classic mixed drink like a gin & tonic.
Adult soft drinks is also a growing sector that is ideal for home entertaining, and products like Appletiser are popular whether served on their own, or as an ingredient for cocktail or mocktail making.
“Creating eye-catching displays can help increase sales, especially impulse buys,” Burgess believes. “Additionally, cross merchandising soft drinks with barbecue items and food, and offering ‘meal deal’ type offers is a great sales opportunity for retailers, providing consumers with value for money.”
Displays could see best-selling soft drink brands like Coca-Cola and Schweppes stocked alongside products like burgers and buns, condiments and even disposable barbecues, enabling consumers to stock up on everything they need in one place, according to Burgess.
“Highlighting the display prominently in the shop can play a role in encouraging consumers to plan a spontaneous barbecue when they’re shopping for dinner items, leading to incremental growth for retailers,” she said.
“In order to make the most of these displays, retailers should proactively look ahead and see which notable sport, TV moments or events are coming up, and it may be worth putting together displays themed around these events in order to leverage the high level of interest that can be generated ahead of these occasions.”
Within soft drinks, flavoured milk is an established category worth £297.6m, growing +4.3% year on year (IRI).
During the warmer season there is a surge in the purchase of chilled drinks making it a sub-category that retailers cannot overlook when considering their soft drink sales – especially as shoppers look for healthier alternatives to traditional high sugar soft drinks.
The sugar levy tax launched earlier this year has now been in place for four months, and since being implemented retailers have had to reconsider their soft drink offering ensuring that they are tapping into the health conscious consumers with alternative products available.
“With flavoured milks exempt from the new tax, stores need to not only look at low sugar alternatives, but drinks with health benefits, like milk drinks such as YAZOO, which is high in calcium, protein and vitamin B2,” said Richard Duplock, Marketing Manager at Yazoo.
Dairy drinks are often considered as a separate category to soft drinks and are not sited in the same place in store, but flavoured milk offers retailers opportunity for growth following the launch of the sugar levy this month.
Currently they are exempt from the levy due its high milk content (95%) and the recognisable benefits (vitamin B2, calcium and protein), more retailers are stocking Yazoo as an alternative soft drinks, and are seeing success.
“The sales of flavoured milk drinks have the potential to be huge if positioned correctly and when the market is ever changing, it is important that retailers are educated on the category,” added Duplock.
“Retailers should consider siting flavoured milk drinks within the soft drinks offering to tap into the different shopper occasions such as on-the-go.”
After a simple shelf reorder and the use of branded POS, sales within the dairy category at David Charman’s SPAR store in West Malling increased by over +48% and sales of Yazoo more than doubled.
Along with this, stocking the nation’s favourite flavours (chocolate, strawberry, vanilla and banana) can support an increased sell-through. 89% of flavoured milk volume in the independent retail channel comes from these flavours, which is important when space is at a premium.
We have been seeing an ongoing consumer trend of shoppers shifting from ‘unhealthy’ products such as carbonated colas and lemonades as well as sugary juice drinks, which are seeing declining sales, to perceived ‘healthy’ products such as reduced sugar or ‘diet’ versions of the same product, according to Mark Neville, Managing Director of UPBEAT Drinks.
“However, sales of these ‘healthy’ products are now becoming static as consumers have entered the next phase of the healthier mindset as they move towards what we would call ‘healthful’ products – those with zero sugar or which have proactively introduced balanced diet ingredients such as vitamins or protein,” said Neville.
This switch is evidenced by the sale growth of the water plus sub-category and ‘natural’ energy drinks.
As part of this healthy mindset shift, awareness of the nutritional benefits of protein is in rapid growth with 25% of consumers believing that a high protein diet should be part of a healthy eating regime.
Currently, protein drinks focus on niche fitness and body composition consumers, but, as the awareness around the nutritional everyday benefit of protein continues to grow, the consumption and demand for protein ‘on the go’ and in the drinks category will increase across mainstream consumers.
“This has led to a high number of new product launches with added protein across many categories,” Neville added. “Within the drinks space however, there are no mass-appeal high protein drinks available which taste great, have low sugar and offer an affordable price point.”
UPBEAT’s new range of Protein and Vitamin Waters and Protein Super Smoothies deliver against all of these consumer needs with products that are high in protein, low in calories, contain real fruit and low in sugar – delivering strength, energy and mental performance. The new branding is bold and confident, aimed at the younger generation for ‘look good’ appeal and high visibility on shelf.
Arla Foods manufactures, distributes and markets Starbucks premium milk-based ready-to-drink coffee beverages for the European market.
Michael Lomas, Commercial Marketing Manager, Arla Foods says: “Choice and variety remain important to consumers and Starbucks is currently the only chilled coffee brand to offer a broad choice across its Chilled Classics, Doubleshot and bottled Frappuccino range. This year Starbucks also launched Signature Chocolate, inspired by the existing coffeehouse customer favourite – the first non-coffee dairy drink in the range.”
The Starbucks ready-to-drink range closely linked to its coffee house favourites, delivers against core consumer need states and ideal for on-the-go occasions.
Starbucks Chilled Classics range includes Skinny Latte, Caffè Latte, Cappuccino, Caramel Macchiato and Signature Chocolate – perfect for busy consumers who are seeking a great tasting, beverage on-the-go.
Starbucks Frappuccino, comprising Caramel, Mocha Chocolate, Coffee, Vanilla, is ideal for those looking for a sweeter treat.
Doubleshot, now available in Doubleshot and Milk, Doubleshot Espresso and Milk No Added Sugar and Doubleshot Espresso Black, appeals to consumers seeking a delicious energy boost.
Purity Soft Drinks supplies the Juice Burst range.
The range includes Still Lemonade, Apple, Orange, Tropical, Mango & Lime, Peach & Passionfruit, Orange & Passionfruit, Raspberry Lemonade, Orange & Carrot, Cranberry, Blood Orange, Blackcurrant and Berry Burst.
Purity Soft Drinks’ Firefly brand has been leading the way since 2003 with a range of great tasting, revitalising juice drinks boosted with botanical extracts.
Available in 400ml bottles, the drinks contain no added sugar, no colours or preservatives and are vegan friendly.
Firefly Peach & Green Tea is a perfect peachy pick-me-up, positively enlivened with green tea and kola nut.
Consumers can pour over crushed ice and a slice of fresh peach for a virgin cocktail, or make it sing with a drop of gin.
The Firefly range also includes Kiwi, Lime & Mint, Lemon, Lime & Ginger, Pomegranate & Elderflower, Grapefruit & Passion Fruit, Bramley Apple & Ginger and Superfly.