CSNews Exclusive: CSDs Pumped Up With 99-cent Promo

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CSNews Exclusive: CSDs Pumped Up With 99-cent Promo

By Mehgan Belanger - 09/24/2009
NEW YORK -- Carbonated soft drinks (CSDs) have long suffered a decline in popularity among consumers due to many causes -- among them the energy drink phenomenon, the trend towards "better-for-you" beverages and the economic downturn that hit consumers' wallets. In 2008, sales of CSDs -- the largest segment of the packaged beverages category -- were down 0.2 percent over 2007, according to the 2009 Convenience Store News Industry Report.

In an effort to stave off the drop and reignite consumers' desire for the beverages, while appealing to their value-minded shopping habits, BP's ampm convenience stores adopted a pilot promotion in summer 2008 offered by major soft drink maker Coca-Cola North America, which featured 14- and 16-ounce bottles of some of its beverages for 99-cents.

The convenience chain introduced the package because of two major factors, the recession and a trend of younger consumers migrating away from CSDs, Phil Smallwood, beverages category manager for ampm, told CSNews Online in an exclusive interview.

"The 99-cent, entry-level package was a solution for both of the major factors impacting the CSD business. Knowing our customers have less money in their pocket, the package provides us a value offering," he said. "In addition, we believe the smaller packaged size drove more usage by the younger consumer."

Roughly 700 ampm stores initially trialed the packages in barrel displays, and based on the success there, ampm moved the product into its cooler set at all of its 1,200 stores, Smallwood said, noting the consumer acceptance of the package was "very positive" and sales were double the chain's performance expectations for the portfolio of brands offered in the package size, which included Coke, Diet Coke, Coke Zero and Sprite.

Smallwood also attributed its success to the timing of its entrance, which was during the middle of the recession, when consumers were looking for a value offering and switching back to CSDs from the energy segment.

"CSDs were on a bit of a negative trend prior to the recession. Recently, however, we have seen a reversal," Smallwood explained. "We believe some consumers are switching back to CSDs from energy drinks, based on the affordability factor. And we are seeing the entry-level package as a product the consumer is picking up."

The merchandising and promotion of the package also assisted in its positive performance, he added. Stores promoted the package at the checkout area for more than six months, then more recently, added exterior and landscape signage to bring people onto the lot and catch the attention of gas customers.

Outside of stores, the package size was promoted with an end-to-end marketing approach, including television and billboards, said Ed Coleman, associate vice president of shopper marketing for Coca-Cola North America.

Coca-Cola introduced the package to "appeal to more shoppers and drive purchases inside the store," Coleman told CSNews Online in an exclusive interview. "This package works as a complete immediate consumption solution for all shoppers: 14- and 16-ounce for the light users (particularly teens and younger adults); 20-ounce for the broad appeal; and 1-liter for the thirstiest shoppers."

As for the package's potential cannibalization of other Coke brand CSD packages, Smallwood said the two options serve different customer bases.

"It's evident this 99-cent package is delivering its goal of attracting new consumers, while other beverage packages, such as the 20-ounce bottle, continue to play a key role among everyday shoppers as a promotional package that delivers a wide range of flavor options," he said. "There are new products and packages introduced to the market all the time, and anytime that happens the category mix changes."

Calling the package a "winner with our customers," Smallwood said its future would depend on consumer behavior. "As with any product in our assortment, we continually analyze the data to understand consumer behavior. If our customers choose not to support a product we make changes," he said.

Currently available nationally, the program will continue due to its overall success, Coca-Cola's Coleman added.

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