Sports Drinks Score

Gatorade's move to DSD distribution is one of the pleasant surprises in the isotonics segment

Convenience stores are good sports regarding sports drinks.

For the 52 weeks ending Jan. 21, the nearly $2-billion sports drinks subcategory of packaged beverages was up 11.6 percent in the c-store channel, nearly double the 6.4-percent dollar sales gain of the overall packaged beverages category, according to according to Nielsen. Sports drinks also were up 14 percent in units, more than double the 5-percent unit gain of the total packaged beverages category, for the same period.

These figures are especially impressive after PepsiCo's switch last year from warehouse delivery of Gatorade products in the convenience channel to direct-store delivery (DSD) through company owned and independent bottlers. At the time the delivery change began — the start of 2011 — the industry had its share of skeptics; retailers told Convenience Store News then that they had pricing and out-of-stock concerns.

But now, more than a year later, several retailers said they've been pleasantly surprised.

"When I had my end-of-the-year meeting with our account rep from Pepsi, I told her I had misgivings the previous year whether Pepsi could handle it. But I was able to report a banner year with Gatorade," said Flank Kaiser, buyer for Olympic Oil Co. in Gainesville, Ga., with a dozen stores operating under the PetroFast Food Stores banner. "I told her I was pleasantly surprised. There were no out-of-stocks to speak of. It was a very, very good transition."

A buyer from a larger southern chain also reported being "up nicely" over the last year in Gatorade. "DSD works out well for our stores," he said. "The people from Pepsi can focus on it a lot better than our stores can. They took care of it and rotated it well."

Butch Fulton, beverage category manager for Plaid Pantries in Beaverton, Ore., with 105 stores, said he also expected there to be a lot of holes and out-of-stocks, but gladly, it never materialized. "The Pepsi warehouse in Portland is a very compact unit and it shocks me how many cases they can get out of there. As far as I can see, in our corner of the world, Pepsi handled the transition very well. I expected a lot of problems and didn't have any at all — it was very smooth," he said.

Even with an extremely hot summer, "Pepsi took good care of it. They didn't miss a beat for us," maintained Russ Cato, buyer for Frontier Fuel Co. in Dalhart, Texas, with 15 stores.

He recognizes, however, that there are pros and cons to DSD vs. warehouse delivery. "It always depends on the driver," Cato stated. "If they're new and weak, they might miss some flavors; they don't know the best sellers. But the same goes for having an experienced store manager who knows the nuances of a particular store."

For Frontier Fuel, it's about adjusting to temperature variations. Its sales of Gatorade will double or triple with hot temperatures. "We have about 12 SKUs in Gatorade — and we were in pretty good shape this summer with Pepsi at the helm," said Cato.

He added that because his area is dominated by Coca-Cola and Dr Pepper bottlers, his thoughts last year were that Pepsi would not handle the transition well. "But they adapted with more trucks and more people," he said. "It was a good shot in the arm."

One large chain retailer, commenting off the record about the DSD/ Gatorade situation, said he "felt it was the right move" from their business' perspective. He explained that as a retailer that self-distributes, a lot of the space on its delivery trucks got eaten up when it expanded its foodservice offerings to meeting the growing demand from customers.

"I actually prefer DSD for Gatorade because it freed up space on our trucks," he said, noting that sports drinks is a $30-million-a-year category for the chain. "In the peak of the summer, we were formerly hauling 100 loads of Gatorade out of the warehouse to our stores. It was a lot of cube and weight."

PRICING PROWESS

With distribution concerns put to rest, the c-store operators report that pricing continues to be a focus within the sports drinks category. Promotions are a necessary and expected sales boost not only for Gatorade, but all isotonics, they said.

"I'm actually starting my promos a month early this year because it looks like it's going to warrant it," said Kaiser of Olympic Oil Co. "It's warmer than normal and it seems like the opportune time to kick off the category."

For Olympic Oil, this will mean 32-ounce Gatorade SKUs will be offered at two for $3 in March. And Powerade, the other significant player in the category from The Coca-Cola Co., will go on sale in April, according to Kaiser.

Other retailers also report following suit with "twofer" promotions during the shoulder months of the year — January through March, and October through December — with some reporting even "hotter" deals during the hot months, such as three for $4 in July and August to really drive volume.

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

Are Juice Sales Juicy?

The juice/juice drinks subcategory has been a mixed bottle for the c-store retailers that Convenience Store News recently spoke to — some were down, some were flat and some were up.

Casey's General Stores of Ankeny, Iowa, is one company reporting a very healthy flow in sales of juice. "We were up 20 percent in dollar sales in January; 19.7 percent in December; 11.5 percent in November; 9.5 percent in October; and 11.5 percent in September. We have been fairly successful at growing that category, it's one of our good ones," reported Dana Sump, category manager for the Midwest chain.

What's his secret? "We just have a good assortment of healthier-for-you kids' SKUs, like TummyTicklers at $3 and $4 a bottle," he said. The chain also picked up Coca-Cola's Simply brand in 2010, expanded it in 2011 and is extending it a bit more this year.

Plaid Pantries, based in Beaverton, Ore., is another chain "doing real well" with the more-expensive brands in the juice category, such as Simply, Naked and even Odwalla, according to Butch Fulton, beverage category manager. "These are not the $1.99 juice drinks. They're $3.50 to $4, some, like Odwalla, are over $4," he clarified. "When I first started, I really had my doubts they would sell in a c-store, but they sell very well for us. There is continual growth at about 30 to 40 percent a year."

Meanwhile, at Olympic Oil Co. in Gainesville, Ga., juices and juice drinks are down overall. "I would say less than five percent, but still down," said Hank Kaiser, buyer.

He reasoned that energy drinks and even bottled teas are much more popular in the overall packaged beverages category right now and as a result, the chain has cut back on juices. Same as with other retailers, he said the one juice brand that is doing well is the Simply line, particularly the orange and lemonade flavors in the 13.5-ounce, single-serve size, which Olympic sells for $1.99 before tax.

Another c-store chain that has "dropped it way back" on juices is Frontier Fuel Co. in Dalhart, Texas, according to Russ Cato, buyer. Like Kaiser, Cato said he's noticed more of an energy drink loyalty and assortment demand and thus, has scaled most of its store coolers back to one shelf of juices and juice drinks.

"Much of the younger generation has caused the switch to energy drinks. Even early in the morning, they're getting energy drinks over orange juice," he stated. "The category is pretty saturated with Minute Maid, Ocean Spray, Dole and now, Simply. There are so many juice choices now, but I don't think there's big loyalty with any of them. As long as we have one available, they're not going to another store for a particular brand or flavor."