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10/28/2013

Innovation Alley

Beverage makers are increasingly trying new ideas for flavors, packaging and marketing

Starting in March, retailers across the nation saw a change in the single-serve Pepsi bottles they stocked. For the first time in 17 years, PepsiCo Inc. redesigned its flagship beverage to have a more contoured, easier grip and a shorter wraparound label that exposes more of the drink. Other redesigns for beverages from the PepsiCo portfolio followed, beginning a planned two-year rollout.

While Pepsi’s across-the-board redesign may be the greatest recent change to a longtime look, manufacturers throughout the beverage industry are innovating and experimenting with existing brands in order to get consumers’ attention, rather than coming up with entirely new product offerings.

“It’s increasingly challenging for brand owners to get their product noticed on the shelf,” Gary Hemphill, managing director of research for Beverage Marketing Corp., told Convenience Store News. As the cold vault grows ever more crowded, customers have more choices. As a result, companies are placing more emphasis on developing unique proprietary packaging that helps their brand stand out.

“It’s really a cost-effective marketing tool,” Hemphill said. Since ready-to-drink beverages must come in a package anyway to protect the product, developing a unique package that features a proprietary design with bold graphics can make it more impactful. Especially for brands owned by companies that lack a substantial marketing budget, eye-catching packaging “can often become their prime marketing tool,” he noted.

Advertising, sampling and other forms of marketing all play a part in driving sales, but many of today’s consumers — particularly in the case of impulse buys — enter a store knowing they want a drink but without a clear idea of which one, according to Hemphill. Packaging serves as the last chance to market to the consumer at the shelf.

Design-based marketing doesn’t have to come from permanent changes, either. “[Packaging innovation] allows brands to give their consumers a new and exciting interaction with the product,” said James Ford, head of business insights and category development for Red Bull North America. “For example, Perrier water released a limited-edition, Andy Warhol-designed bottle. Brands are increasingly releasing ‘throwback’ packaging from earlier in the product’s brand evolution.”

Red Bull itself designed limited-edition “Red Bull Latagrafica — the Calavera Edition” cans to celebrate Dia de Los Muertos and the Latino art community. Southern California artists competed to create the best original artwork inspired by the Mexican holiday, which was then immortalized on 2 million cans. Additionally, 2013 marked the second summer that the company offered Red Bull Camo Cans on military bases and donated a portion of the proceeds to the Military Warriors Support Foundation and its Homes4WoundedHeroes program.

Changing the packaging design might be the most obvious form of innovation, but beverage makers are trying new things with other brand aspects, too.

EXTENSIONS

“Something old, something new…”

Not only is this half of the saying you often hear at weddings, but it’s also a guideline for suppliers as they come up with new beverages for the cold vault. While the incredible number of new drinks on the market can be a challenge, name recognition gives overwhelmed customers something to latch onto, and consumer research indicates most purchase decisions are influenced by trusted brands.

Although it had previously offered a sugar-free version, Red Bull ventured into new territory early this year with the launch of the Red Bull Editions line in cranberry, lime and blueberry flavors, complete with new color-coded cans. “This was the first time in Red Bull’s 15-year history in the U.S. that an alternative to the company’s well-known flavor was introduced,” said Ford.

Consumer response so far has been positive, as a large-scale marketing plan continues to support the new flavors, including a dedicated communications campaign that launches this month.

Meanwhile, other beverage brands are adding on and blurring the lines of what segment they belong in, such as PepsiCo’s Mountain Dew Kickstart. Not quite a soda and not quite an energy drink, this carbonated beverage contains 5-percent juice, vitamins B and C, and a “jolt” of caffeine that is less than what’s found in a can of Red Bull or Monster. Kickstart comes in energy drink-sized 16-ounce cans and was developed in response to Mountain Dew fans’ desire for an alternative morning drink.

“They didn’t really see anything that fit their needs,” Simon Lowden, chief marketing officer for PepsiCo Americas beverages, explained at the time of Kickstart’s launch.

Brand extensions that seek to provide healthier refreshment are yet another trend, according to Hemphill. Beverage makers are trying out “more all-natural ingredients, more organic [ingredients], fewer artificial ingredients…You see companies searching to develop all-natural diet sweeteners.”

This has led to an increased number of sodas that create a bridge between regular and calorie-free diet drinks. Mid-calorie beverages like Pepsi Next and the 10-calorie Dr Pepper TEN, along with new energy drink Red Bull Total Zero, have received sizable marketing pushes, but mixed results.

“[While] a number have been quite successful… in aggregate, diets are actually underperforming,” Hemphill reported. Some new mid-calorie drinks boast success stories, “but some consumer issues with that segment of the business are causing it to have greater declines than [the] overall market.”

MARKETING

Some new beverage options aren’t breaking new ground as products, but the way they’re being marketed is. For example, 7-Eleven Inc. and AriZona Beverages got especially creative this summer with their promotion of the new Soda Shaq line of all-natural cream sodas.

In a contest reminiscent of the golden tickets in “Charlie and the Chocolate Factory,” five golden cans of Soda Shaq were hidden in five different 7-Eleven stores across the country over a four-week period. Customers who found a golden can won a prize package and the chance for a meet-and-greet with former basketball all-star Shaquille O’Neal himself, including roundtrip airfare for the winner and a guest, one-night hotel accommodations and a $500 spending allowance.

7-Eleven also invited customers to “try [Soda Shaq] on for size” by placing their feet inside in-store decals of O’Neal’s size 23 shoes, taking a picture and then uploading it to Twitter or Instagram using @drinkarizona and #sodashaq for a chance to win weekly prizes over a 10-week period.

Another retailer pushing innovation in beverage marketing is Rutter’s Farm Stores. Through an industry-first partnership with The Coca-Cola Co., its customers can earn gas savings through My Coke Rewards. By purchasing Coke products and earning points through the rewards program, Rutter’s customers can redeem 20 points for a 5-cents-per-gallon discount on fuel, for a savings of up to 20 gallons.

SIZE & FUNCTION

One more trend currently on the rise among the beverage companies is packaging that comes in more sizes and provides different ways of consuming a beverage.

“This is a way for beverage manufacturers to reach consumers in different need states and price point options,” said Ford. “For example, [carbonated soft drink] manufacturers are making smaller, 8-ounce can sizes to appeal to consumers who want less liquid and want to spend less money on their shopping trip. Another example is that energy drinks are widely available over multiple sizes to appeal to different energy boost needs.”

Additionally, more suppliers are experimenting with twist-off tops to allow for later consumption.

Whether retailers should stock more aesthetically-interesting or functionally innovative drinks depends on the brand, the target audience and the needs of their stores. “They’re both meaningful and potentially significant,” Hemphill said.

While there’s no one-size-fits-all answer, staying aware of consumer research and paying attention to the desires of a store’s customer base will help operators stock the most successful cold vault mix.

“Both functionality and aesthetics are important design functions able to trigger a purchase or command a higher price,” Ford said. “Functionality is, in general, more effective, provided it brings a real solution to the consumer, but aesthetic changes are easier to communicate and understand. They speak to our emotional side and work well in an impulse environment.”