BONUS CONTENT: A Wholesale Perspective on Beverages
TEMPLE, Texas — When convenience store retailers decide to take action in improving their beverage business, they don't have to go it alone. Their wholesale and distribution partners are in a good position to offer extra assistance and guidance, particularly to small operators with fewer resources.
Competitive pricing is an area in particular where c-store operators need to pay close attention, according to Jennifer Hutto, senior category development analyst, merchandising, for Temple-based distributor McLane Co. Inc. Margin pricing can cause an unfair perception of the quality of an item if the retail has too large of a gap, she said. Price caps also have a place.
"The desire for specialty items causes the cost of items to increase dramatically. It is critical to understand at which point we have priced an item out of the market," Hutto said. "This is important with regards to frequently purchased or habitual items, as [customers] will be more aware of the cost in other channels."
C-store customers are also more responsive to promotional activity and unique item bundles.
McLane recommends all c-store operators hold a yearly planogram review to incorporate those items that are increasing average sales per store per week, and cut non-performing items out of the mix.
Other ways retailers can work with their distributor to maximize the beverage categories' potential are: obtaining objective item recommendations; cross-checking multiple data sources; validating the manufacturer's credibility; openly discussing ideas; and validating new ideas and goals against other knowledgeable resources.
There are certain common mistakes that McLane sees c-store retailers make in the beverage categories, such as signing contracts with direct-store delivery providers/manufacturers that limit the concept of category management.
"Retailers need to be careful that they are not over-allocating space to a category that is diminishing in sales," said Michael Carlson, McLane's category manager for beverage and cold vault.
A balance can be struck by not restricting a store's item selection to the largest or most well-known suppliers, but also seeking out key items and product innovation with smaller suppliers.
Leading beverage trends on McLane's radar right now for growth potential in 2017 are:
- Consumer desire for more variety in item selection and flavor profiles;
- Healthy or better-for-you drinks with product messaging that can reference lower calories, smaller portion sizes, cleaner ingredients, or specific diet inclinations;
- Engaging marketing strategies with "intense" labels that have unique product names, intense flavor profiles, or things that bring a shock value to obtain trial; and
- Sparkling water, drinkable yogurt, and beverages with specialty callouts such as protein content or dietary restrictions.
At the same time, convenience store chains should be careful to avoid a one-size-fits-all mindset across all their stores, which could artificially limit category management effectiveness.
"The item selection is critical to the categories' success and can differ from store to store, even when located in the same zip code," Hutto advised. “It is critical to understand the occasion with which the consumer is shopping the destination. Foodservice programs can also encourage item selection."
Although there is no specific product mix that is objectively correct, a core mix should capture between 75 and 80 percent of a store's customers.
"The biggest mistake with regards to item selection would be focusing too much attention on the consumer you are trying to attract, while neglecting the shopper you have already obtained," she said.
Editor's note: For our full report on "Defending Your Beverage Business," look in the February issue of Convenience Store News. A digital edition can be accessed by clicking here.