Cold Fusion

Balanced product assortment, effective marketing drive beverage decisions.

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But the real surprise is that even diet drinks, particularly low-calorie carbonated soft drinks, are hurting, indicating the next phase in the continuing move away from the CSD category.

“It comes down to health and wellness,” Modi said. Consumers are hearing a lot of negative news about low-calorie sweeteners, particularly aspartame, that’s turning them away from the category.

“Just as consumer interest in aspartame peaked (in the first quarter of 2013), diet CSD trends began to worsen, while regular CSD trends remained,” he said. “There are a lot of companies out there chasing the low-calorie trend. I’m not sure it’s as important today as it used to be.”

For c-stores, those more indulgent beverages are still an area of growth. “Seventy percent of what I sell in my stores have nothing to do with health and wellness,” said retailer Lundy Edwards of Forward Corp., Standish, Mich.

Still, Modi and others pointed out, the trend suggests these full-calorie categories are falling out of favor with the public.

Ivan Alvarado, director category management for Plano, Texas-based Dr Pepper Snapple Group, acknowledged that in just the past year, the average CSD set has shrunk from 14 shelves to nine in c-stores, most of it claimed by energy drinks and bottled water. “Some of this is related to health and wellness, and some of it is self-inflicted,” he said, citing beverage makers’ hesitance to innovate and that “CSDs have not been able to communicate with millennials. New tactics are needed to reach these consumers.”

Added Clinton McKinney, group director category advisory for Atlanta-based Coca-Cola North America, “If you want to be known as one of the retailers who embraces innovation, you’ve got to go all the way and let the consumer know that’s your play with signage and other messaging.”

“It’s all about interrupting that autopilot behavior that consumers have in the store,” Alvarado said.

One challenge for retailers is the latest generation—those 21 to 35—coming of age. These millennials are less trusting of big business, making a warning message about the industry’s oldest artificial sweetener resonate all the more.

“They have a very low level of trust for institution,” Modi said. Instead, millennial consumers rely on their friends for recommendations, whether it’s a co-worker they see every day or a distant but respected acquaintance they communicate with only through Facebook.

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