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Beverages: Citrus, Sports, Lite Are Hot
(Beverage sales vary by category and by trade class, reflecting a high level of market segmentation in the business)
MMR , Volume: 15 , Number: 7 , Page: 28
February 23, 1998

Abstract: Beverage sales vary by category and by trade class, refecting a high level of market segmentation in the business. Traditional soft drinks and conventional beer brands command the lion's share of their respective categories, but the fastest growth is being seen in the citrus-flavored soda and light and specialty beer segments. Supermarkets account for about 90% of beer sales. Sales growth of bottled water volume at discounters was virtually 3X that of the drug and supermarket trade, but $8+ out of every $10 spent on bottled water still went to supermarkets. The article includes additional information on specific firms and products, such as Quaker Oats Co (Gatorade, Gatorade Frost), Coca-Cola Co (Surge, Coca-Cola Classic), and Pepsi-Cola (Mountain Dew, Pepsi).

Text:
NEW YORK -- The performance of beverages vary widely by category and by trade class, reflecting a high level of market segmentation in the business.

While traditional soft drinks and conventional beer brands command the lion's share of their respective categories, the fastest growth is being seen in the citrus-flavored soda and light and specialty beer segments.

Broken down by distribution class, beverage sales continue to advance much faster at discount stores than at supermarkets and drug stores. Sales vary widely, from last year's 69% increase in beer sales recorded by discounters to the 9.5% slide suffered by drug stores. But both of those figures must be viewed in the context of continuing domination of overall beer sales by supermarkets, which account for almost 90% of the market.

Likewise, sales growth of bottled water volume at discounters last year was virtually triple that of the drug and supermarket trade classes, but more than $8 of every $10 spent on bottled water still went to supermarkets.

"Discount stores are luring beverage customers with price, but they've still got a long way to go to catch up to supermarkets," comments one food retailer.

One segment in which suppliers believe that sales growth can be sparked across all classes is sports beverages. Part of the appeal of the subcategory for both manufacturers and retailers is that it targets young consumers, who have the potential to become intensely loyal to a brand and the stores that carry it.

Quaker Oats Co. extended the core market for the Gatorade brand beyond athletic young adults to 13-to-18-year-old teenagers last year with the launch of the lighter Gatorade Frost line. With $148 million in first-year sales, Frost passed Coca-Cola Co.'s PowerAde and Pepsi-Cola Co.'s All Sport as the No. 2 sports drink behind Quaker Oats' flagship Gatorade brand.

This year the company is extending Frost with a purple-colored Riptide Rush flavor, while adding a Midnight Thunder blackberry blend offering to the original line. Both products began shipping last month and will be on shelves nationwide by April 1.

"Everything about Midnight Thunder scored with teens," says Gatorade vice president of marketing Sue Wellington. "It's not just a thirst killer; it's got a contemporary, edgy image that excites young consumers."

She adds that Riptide Rush should "ride the wave" of Frost. Starting March 30 the new flavor will be supported by TV commercials, coupons, in-store merchandising and sampling.

The importance of vivid colors has not been lost on the competition. Coca-Cola is widening the distribution of Surge, a bright green citrus soda, to such major markets as New York City and Los Angeles. Surge is positioned as a rival to Pepsi-Cola's well established light green Mountain Dew soda, so Coca-Cola has devised an eye-catching green and red label to help its product stand out.

Meanwhile new TV commercials for Coca-Cola Classic emphasize the brand's signature red.

At the same time, Pepsi-Cola is premiering blue packaging for Pepsi.

Gatorade is also facing heightened competition for sports sponsorships. The brand's sponsorship of the National Basketball Association (NBA) was renewed in January in recognition of the fact that basketball is the most popular sport among teenagers. The five-year deal ends in 2002, a year after the expiration of Gatorade's 10-year endorsement pact with Michael Jordan.

Coca-Cola, for its part, last year signed a $30 million deal making PowerAde the official sports drink of the National Hockey League. The brand is also a sponsor of the Women's National Basketball Association and the Olympic Games.

Quaker Oats is also trying to develop local loyalty to Gatorade by sponsoring NBA- sanctioned teen basketball tournaments around the country. And the company plans to increase sales through vending machines at gyms, schools and parks.

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Copyright 1998 Racher Press Inc.

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