Thirsty Consumers Developing Particular Tastes

WHEELING, Ill. – Coffee, energy drinks, carbonated soft drinks (CSD), alcoholic beverages and more were on the agenda and prompted spirited discussion among convenience store and grocery channel retailers and suppliers from across the United States at the 2013 Convenience Store News and Progressive Grocer Beverage and Beer Retailing Summit. The second annual event was held June 6-7 at the Westin Chicago North Shore.

The Summit was sponsored by Red Bull North America, Anheuser-Busch InBev, Java City, Scotsman Ice Systems and WhiteWave Foods. Retailer participants included representatives from BP Americas, The Pantry Inc., Sunoco Inc., Mid-Atlantic Convenience Stores, The Kroger Co., Walgreen Co., Maverik Inc., Brookshire Brothers, Hess Corp., Bobby & Steve's Auto World, Bradley Petroleum and Casey's General Stores Inc. Other attendees and speakers included representatives from Red Bull, the Category Management Association (CMA), Nielsen and more.

Bonnie Herzog, managing director of beverage, tobacco and consumer research at Wells Fargo Securities LLC, kicked off the event with an opening keynote. Her presentation, entitled "Evolution of the Beverage Shopper," took an insightful look at who today's shoppers are, how they're making purchases and what they're buying — as well as what they aren't.

According to Herzog, large-format retail remains the dominant liquid refreshment beverage distribution channel, yet supermarkets and vending have lost share of CSD volume while the mass-merchandise, convenience and gas channels have gained share. She also pointed out that the beverage promotional environment remains high.

The next segment of the Summit offered concurrent breakout sessions based on attendees' areas of interest:

• Coffee bar
   
• Alcohol, beer and wine
   
• Non-alcoholic beverages

Those attendees interested in improving their coffee bars heard from Steve Montgomery, president of b2b Solutions LLC, who discussed current trends in convenience store coffee. When it comes to coffee sales, he said Starbucks Corp. did the c-store industry a favor. While the Seattle-based coffee king is a competitor to the many c-store operators who have or are in the process of investing in their coffee programs, the coffeehouse chain also forced c-store retailers to take a second look at how the industry does coffee.

Today's coffee drinkers are more knowledgeable about coffee and what makes it good, and while they still seek convenience, they're demanding more from the stores they visit.

Customization options are also highly important. Montgomery described customers' attitude as "I want it and I want it my way," something that the growing number of coffee condiment choices allows them to achieve in greater detail. While some c-store competitors have added full-service baristas to achieve a more upscale presentation, Montgomery noted that taking the "We can allow you to do it yourself" attitude can serve as a point of differentiation, letting customers customize their coffee without sacrificing time.

On the packaged beverages side, Guy Wooton, Red Bull North America's director of category insights, updated attendees on the state of energy drinks in the U.S. He said the segment’s high growth rates and growth margins, along with its impulsive nature and other factors, make it an attractive segment for retailers. In fact, he reported that energy drinks drove 59 percent of total beverage growth in the first quarter of 2013.

While energy drink customers are primarily young and male, retailers should not ignore the 38 percent that are female, said Wooton. He also noted that while there has been less innovation within the segment recently, the innovation that has occurred has had more of an impact. Cross-category beverage innovation has been a particular trend, such as energy-enhanced waters or giving existing beverage brands an energy spin as is the case with new Mountain Dew Kickstart.

Additional Summit sessions included:

• "Targeting One of Today’s Largest Consumer Groups and Shaping Tomorrow’s,” presented by Sarah Theodore, global beverage analyst for Mintel;
   
• "Winning With Beer," presented by Dean Zurliene, senior director, category management for Anheuser-Busch; and
   
• "Best Practices in Category Management," presented by CMA's Blaine Ross, executive vice president global sales and marketing, and Gordon Wade, director of best practices;

Stay tuned for more Beverage and Beer Retailing Summit coverage in the August issue of Convenience Store News.