Selling The Sport

The sports drinks category may have posted declines in 2009, but there are still ways for c-stores to score with the segment

Win or lose it's how you play the game, but how are convenience stores playing in sports drinks? The fifth-largest packaged beverage category in c-stores posted declines in 2009, contributing to the overall packaged beverage sales loss in the channel, according to Convenience Store News' 2010 Industry Report. Average sales of sports drinks per store went from $14,070 in 2008 to $12,666 last year, a loss of 10 percent.

And the sports drink sales downturn in c-stores continues this year. In fact, of all the subsegments in packaged beverages posting a loss recently, sports drinks suffered the greatest drop in dollar sales (down 6.5 percent), compared to bottled water (falling 3.1 percent), carbonated soft drinks (dropping 2.9 percent) and other packaged beverages (losing 0.2 percent), according to The Nielsen Co./Scantrack data for the 52 weeks ended July 10, 2010.

It is packaged beverage competition, coupled with the economy, which some retailers cite as the culprit for slower sales. "It's not the products themselves, it's the fact that everyone [in bottled drinks] is trying to keep their category share, so they're diversifying with new-product introductions," said Phyllis Simpler, operations manager for Minute Market, based in Medford, Ore., with 13 stores. "The consumer has never had more beverages to choose from than they do right now. Some are trying a Glaceau water or maybe a new tea. There's also Muscle Milk and other things for athletes to replace their electrolytes beyond Gatorade. There just wasn't all this competition years ago."

Nevertheless, Simpler hasn't cut back on the category because "we do a lot of category management here," she noted. "Once a month, I see where our stores are at and if something doesn't earn its space, it goes. In the case of some of the sports drinks, including Gatorade, I take what sells the best, which is 32-ounce. I've dropped some of the 20-ounce [bottles]. It's as simple as that."

An anonymous grocery buyer in the South said in this economy, Coca-Cola's Powerade has better price promotions than the category's leading brand, Gatorade, from PepsiCo. "There's about a 60-cent difference between the two items right now, and Coke's giving us a cooler, too," he said. "Given the economy right now, Gatorade's prices aren't cutting it with a lot of my customers, and that's hurting sales. Powerade is coming on strong with creative programs and pricing, but the leader isn't coming back to the table with much right now."

Then there are those c-stores in the channel that report positive sports drink sales, such as Oscar Dominguez, buyer for Arguindegui Oil Co. in Laredo, Texas, with 11 Conoco Pump N Shop stores. "It's especially good right now. Because of the heat, sales are up," he said. "For us, summers are longer than in the rest of the country. We start in April and our weather stays in the 100s all the way through the middle of September — and a lot of our customers use sports drinks to replenish what they've lost from the heat."

He believes the category is also doing well because "our population here is 95-percent Hispanic." Recent research from Mintel revealed Hispanic consumers are considerably more likely than the average consumer to drink sports drinks (57 percent vs. 38 percent).

Three out of six cooler doors in Pump N Shop stores are devoted to sports drinks and energy drinks, according to Dominguez. He also takes full advantage of ice chests/ coolers to promote the drinks near the front of the store, as well as racks next to the coolers to promote "non-chilled" sports drinks. "We discovered that many of our customers like to buy sports drinks at room temperature, so we make that available in single servings, too," he explained.

One of Pump N Shop's stores is located directly across from a gym — and Dominguez is using that store to gauge popular SKUs and ways to most effectively merchandise the category. "Those customers gave us the idea to start selling bottles at room temperature," he explained. "But we discovered that our sports drink customers in all the stores responded to it."

Powerade price points at Pump N Shop stores are clearly more economical than Gatorade — which is now known as "G," although most buyers and consumers still refer to it as Gatorade. Powerade 20-ounce has run on special for 99 cents, and the 32-ounce SKU is two for $2.50, or $1.25 each; whereas Gatorade is $1.89 for 32 ounces. "We have some customers who prefer the leading brand and some that prefer the cheaper price," Dominguez said.

Regarding sizes, Simpler sees a missed opportunity she believes would help boost sales in sports drinks: "The market they're missing is a small, 8-ounce bottle with a sport cap for kids playing soccer and other sports," she said. "When kids play hard, they dehydrate, but they don't need something too big or something that can spill over. Moms would love this. I think this is one area sports drink manufacturers are missing the boat on."

And there is future incentive for the market and c-stores to maintain their good sportsmanship with sport drinks. Across all channels, the U.S. sports drink market is forecasted to reach $2.4 billion in value by 2013, representing a compounded annual growth rate of 8.1 percent since 2009, according to Mintel.

For comments, please contact Renée M. Covino, Contributing Editor, at [email protected].

Bottom Line

• Sports drinks posted a 6.5-percent drop in dollar sales for the year ended July 10, 2010.
• Packaged beverage competition and the economy are to blame.
• Nevertheless, 'sporty' merchandising opportunities are being realized by some c-stores.

Shrinking Sports Drinks

(Percent of packaged beverages category)

'Sporty' Consumers

• More consumers purchase sports drinks for at-home consumption (68 percent) than they do for immediate consumption; however, a minimum of 50 percent of all adults who use these beverages also buy them for immediate consumption.
• African-American and Hispanic consumers are considerably more likely than the average consumer to drink sports drinks; 57 percent of all Hispanics and 44 percent of all African Americans aged 18 and older drink sports drinks, compared to an average of 38 percent among the general population.
• Children, teens and adults aged 18-24 are the key consumers; they are more likely than the average consumer to drink non-alcoholic beverages, particularly ones such as sports drinks (and energy drinks).

Source: "Non-alcoholic Beverages: The Consumer," March 2010/Mintel, a market research firm in Chicago

Sports Drinks in the Convenience Channel

For the 52 weeks ending July 10, 2010

"Once a month, I see where our stores are at and if something doesn't earn its space, it goes."

PHYLLIS SIMPLER, MINUTE MARKET