Tight Squeeze
The average juggler will juggle about three balls at a time. Managing a beverage vault is like juggling about 30 or 40 balls at the same time — it's pretty difficult," said Keith Broviak, marketing manager for the 32-store Ricker Oil Co. chain, based in Anderson, Ind.
Simply put, a beverage category manager's life ain't easy. When managing the cold vault, a retailer must look not only at how a particular item is selling, but how that item's sales relate to the total category. And with the constant influx of new products knocking on cooler doors by the day, there are a lot of heavy-hitting decisions to be made by the end of the week. Knocking off one item to sell another doesn't necessarily mean the overall business will benefit.
Retailers that don't constantly introduce a steady flow of new products, however, are doing a disservice to their customers. "If a company has some strong marketing and advertising, it's important to jump on that product quickly so when customers come looking for it in your store they can find it," said Rich Mione, vice president of marketing for Wilmington, N.C.-based Worsley Companies Inc., with 146 stores under the Scotchman Stores, Young Food Stores and S&E Food Mart banners.
Now the only question — where is it going to fit once it arrives?
Big Beverages = Big Contracts
Even the beverage manager who wants to try as many new products as possible faces two major roadblocks: distribution access and space constraints from limited doors and manufacturer contracts. If a small beverage company has a promising new product but hasn't aligned with a wholesaler yet, a retailer has limited options getting the product on the shelf.
"It's very tough for the small beverage companies. We usually go through the wholesaler, and it's tough for them to get the product into the wholesaler portfolio," Mione said, adding, "The major beverage companies have entered into all the different segments, so it's tougher and tougher for somebody to come out with a new water or juice or carbonated beverage that they can really support and compete with."
Chris Peters, category manager for Victoria, Texas-based Speedy Stop, said his company has experimented with a shelf or two dedicated to new products such as some local beverage companies and Hispanic drinks, but with minimal to average success.
"It's not my choice, but since [the major manufacturers] own most of the cooler you have to stay within your contracts," Peters said. "I wish it wasn't that way, because I'd love to be able to experiment a bit more."
Many retailers, locked into these cold vault agreements with the major suppliers, often end up relying on the supplier to conduct category management practices for them. According to Mione, this can be either beneficial or detrimental to the category depending on how flexible the beverage reps are. "They now see that as they continue to add items, they have to look at deleting items, too," he said. "They still don't do as good a job as the beer people do, but they're getting better."
At Ricker Oil, Broviak said the approach is a bit different from other retailers. The company currently does not have a cooler agreement program with the two largest beverage companies — Coca-Cola and Pepsi —which, he said, "allows us to practice true category management in our cold vault, even if we have to give up a certain amount of rebate dollars to do that."
Before Ricker gave up the contracts two or three years ago, Broviak said that he would end up carrying something like four different brands of orange juice in order to honor the contracts and carry maybe a local vendor or brand from the wholesaler. "That's a little overkill, because who needs four orange juices?" he said.
Following the orange juice example, Ricker now carries only one SKU each of root beer, orange soda and grape soda, eliminating the additional shelf space required by cooler contracts.
Even with nine SKUs in the bottled water category, which Broviak said has been huge lately, cooler contracts are not an issue. "Pepsi's water is Aquafina and Coke's water is Dasani, and I don't sell either one of them in my stores," he said. "If you give somebody a good quality water at a fair price, they're going to purchase it from you."
It's All in the Placement
Certain beverage categories are producing more new products than others, adding to the messy equation for category managers.
For a typical eight-door beverage planogram set for Ricker Oil, Broviak said three doors are devoted to carbonated soft drinks (CSDs), one New Age door to ready-to-drink teas and energy drinks, one isotonic door, one water, one milk and one dedicated to juice, coffee drinks and Slim Fast-type drinks.
At Speedy Stop, Peters said the company has experimented with the most new products in the energy drink category and even added shelf space in the cooler for the popular beverage subsegment. "We're up from one shelf to three in the cooler," Peters said. "We're running 12 to 15 SKUs in energy now, but Red Bull accounts for four of them with four-packs and singles."
For Mione, whose company manages store-specific planograms based on a store's demographics, footprint and cooler size, it's the health-oriented beverages that are bringing in the business these days. "Just like the rest of the industry, we're seeing so many carbonated soft drink customers moving to more healthy alternatives," Mione said. "The diet drinks, juices, waters and even teas and some of the New Age items are all growing."
In terms of where new products are merchandised in the store, Mione said experimentation is key. "We'll usually test it 60 days in stores where we have adequate space, or we may test it in an ice barrel just to get a feel for what the volume is going to be," he said. "Most of the new items are coming from the major players, which already have space."
The problem with new products is that they are constantly coming out, yet planogram sets for some retailers stay dormant for months at a time.
"We don't look at new products and say 'sorry, we only do cooler planograms twice a year so we're not going to put it in for six more months,'" Broviak said. "We make ongoing changes to our planogram year round. When Coke comes up with a new product like Coke Zero, we'll look at the scan data and our cold vault planogram and either de-list something from the Coke set or we'll decide to reduce Coca-Cola Classic by one facing and insert Coke Zero in its place."
Depending on the advertising campaigns that the beverage companies have and what kind of programs they want to use for introducing a new item, Broviak said sometimes he does use supplier resources to his benefit. With Coke Zero, for example, he said the soft drink giant wanted to introduce it at a discounted price, as well as promote it throughout the store in secondary positions and ice barrels. "We don't do this all the time, but if we feel it's going to be a decent product then we'll go ahead and authorize a secondary position for it to be merchandised in so that we can kind of kick off the introduction of the new product," he said. n
Pullquote:
"The average juggler will juggle about three balls at a time. Managing a beverage vault is like juggling about 30 or 40 balls at the same time — it's pretty difficult."
- Keith Broviak, Ricker Oil Co.
Simply put, a beverage category manager's life ain't easy. When managing the cold vault, a retailer must look not only at how a particular item is selling, but how that item's sales relate to the total category. And with the constant influx of new products knocking on cooler doors by the day, there are a lot of heavy-hitting decisions to be made by the end of the week. Knocking off one item to sell another doesn't necessarily mean the overall business will benefit.
Retailers that don't constantly introduce a steady flow of new products, however, are doing a disservice to their customers. "If a company has some strong marketing and advertising, it's important to jump on that product quickly so when customers come looking for it in your store they can find it," said Rich Mione, vice president of marketing for Wilmington, N.C.-based Worsley Companies Inc., with 146 stores under the Scotchman Stores, Young Food Stores and S&E Food Mart banners.
Now the only question — where is it going to fit once it arrives?
Big Beverages = Big Contracts
Even the beverage manager who wants to try as many new products as possible faces two major roadblocks: distribution access and space constraints from limited doors and manufacturer contracts. If a small beverage company has a promising new product but hasn't aligned with a wholesaler yet, a retailer has limited options getting the product on the shelf.
"It's very tough for the small beverage companies. We usually go through the wholesaler, and it's tough for them to get the product into the wholesaler portfolio," Mione said, adding, "The major beverage companies have entered into all the different segments, so it's tougher and tougher for somebody to come out with a new water or juice or carbonated beverage that they can really support and compete with."
Chris Peters, category manager for Victoria, Texas-based Speedy Stop, said his company has experimented with a shelf or two dedicated to new products such as some local beverage companies and Hispanic drinks, but with minimal to average success.
"It's not my choice, but since [the major manufacturers] own most of the cooler you have to stay within your contracts," Peters said. "I wish it wasn't that way, because I'd love to be able to experiment a bit more."
Many retailers, locked into these cold vault agreements with the major suppliers, often end up relying on the supplier to conduct category management practices for them. According to Mione, this can be either beneficial or detrimental to the category depending on how flexible the beverage reps are. "They now see that as they continue to add items, they have to look at deleting items, too," he said. "They still don't do as good a job as the beer people do, but they're getting better."
At Ricker Oil, Broviak said the approach is a bit different from other retailers. The company currently does not have a cooler agreement program with the two largest beverage companies — Coca-Cola and Pepsi —which, he said, "allows us to practice true category management in our cold vault, even if we have to give up a certain amount of rebate dollars to do that."
Before Ricker gave up the contracts two or three years ago, Broviak said that he would end up carrying something like four different brands of orange juice in order to honor the contracts and carry maybe a local vendor or brand from the wholesaler. "That's a little overkill, because who needs four orange juices?" he said.
Following the orange juice example, Ricker now carries only one SKU each of root beer, orange soda and grape soda, eliminating the additional shelf space required by cooler contracts.
Even with nine SKUs in the bottled water category, which Broviak said has been huge lately, cooler contracts are not an issue. "Pepsi's water is Aquafina and Coke's water is Dasani, and I don't sell either one of them in my stores," he said. "If you give somebody a good quality water at a fair price, they're going to purchase it from you."
It's All in the Placement
Certain beverage categories are producing more new products than others, adding to the messy equation for category managers.
For a typical eight-door beverage planogram set for Ricker Oil, Broviak said three doors are devoted to carbonated soft drinks (CSDs), one New Age door to ready-to-drink teas and energy drinks, one isotonic door, one water, one milk and one dedicated to juice, coffee drinks and Slim Fast-type drinks.
At Speedy Stop, Peters said the company has experimented with the most new products in the energy drink category and even added shelf space in the cooler for the popular beverage subsegment. "We're up from one shelf to three in the cooler," Peters said. "We're running 12 to 15 SKUs in energy now, but Red Bull accounts for four of them with four-packs and singles."
For Mione, whose company manages store-specific planograms based on a store's demographics, footprint and cooler size, it's the health-oriented beverages that are bringing in the business these days. "Just like the rest of the industry, we're seeing so many carbonated soft drink customers moving to more healthy alternatives," Mione said. "The diet drinks, juices, waters and even teas and some of the New Age items are all growing."
In terms of where new products are merchandised in the store, Mione said experimentation is key. "We'll usually test it 60 days in stores where we have adequate space, or we may test it in an ice barrel just to get a feel for what the volume is going to be," he said. "Most of the new items are coming from the major players, which already have space."
The problem with new products is that they are constantly coming out, yet planogram sets for some retailers stay dormant for months at a time.
"We don't look at new products and say 'sorry, we only do cooler planograms twice a year so we're not going to put it in for six more months,'" Broviak said. "We make ongoing changes to our planogram year round. When Coke comes up with a new product like Coke Zero, we'll look at the scan data and our cold vault planogram and either de-list something from the Coke set or we'll decide to reduce Coca-Cola Classic by one facing and insert Coke Zero in its place."
Depending on the advertising campaigns that the beverage companies have and what kind of programs they want to use for introducing a new item, Broviak said sometimes he does use supplier resources to his benefit. With Coke Zero, for example, he said the soft drink giant wanted to introduce it at a discounted price, as well as promote it throughout the store in secondary positions and ice barrels. "We don't do this all the time, but if we feel it's going to be a decent product then we'll go ahead and authorize a secondary position for it to be merchandised in so that we can kind of kick off the introduction of the new product," he said. n
Pullquote:
"The average juggler will juggle about three balls at a time. Managing a beverage vault is like juggling about 30 or 40 balls at the same time — it's pretty difficult."
- Keith Broviak, Ricker Oil Co.