Why Dr Pepper Is 2016’s Packaged Beverage Category Captain

PLANO, Texas — Despite growth in the channel, there are some trends working against convenience stores. Chief among them are the trend toward fewer fuel trips driven by the growth in fuel efficiency and the generational shift in driving habits, as well as the declining trend in smoking.

In spite of the declines in these two trip drivers, however, there is a bright spot: Beverage and food trips have increased, with 58 percent of c-store visitors now saying that beverages and food are the primary reasons for their trip, according to Dr Pepper Snapple Group. 

Inside the beverage business, there has been a shift in the importance of the categories. Over the last decade, energy has grown from a niche part of the business to the second-largest category. Many retailers have given it the lion’s share of their attention and, in many cases, the largest share of their space. With that said, the largest category continues to be carbonated soft drinks (CSDs), selling almost twice as many units as energy, according to Nielsen.

With beverages becoming the driver of trip growth and CSDs remaining the largest category within that business, it is critical that retailers ensure their CSD business is healthy.

For its efforts, Dr Pepper Snapple Group was selected winner of the 2016 Convenience Store News Category Captains award in the packaged beverages category.

Now in its third year, the awards program applauds outstanding category management initiatives implemented in the convenience channel over the past 12 months. All entries were judged by product development experts at consumer research firm Past Times Marketing based on the information supplied by participating companies.

With the focus on energy and new beverage categories, many shoppers have begun to feel as if variety is suffering with a net of 27 percent stating they would like to see more variety in the category vs. 4 percent who would like to see more energy, Dr Pepper Snapple Group cited.

Research also shows that variety in CSD flavors is a significant driver of the business, with 39 percent of shoppers saying they would travel to a different store if the variety they are seeking isn’t available. In fact, within the category, Dr Pepper has seen the explosion of the importance of variety, with non-cola CSDs now making up 57.3 percent of total CSD sales.

Still, most c-store operators continue to place cola-flavored beverages in the most prominent position in the cold doors, the “Strike Zone,” even though suppliers have found that non-colas are the most impulsive CSDs, with 30 percent of purchases unplanned vs. 15 percent for colas.

Based on the sum of its knowledge, Dr Pepper Snapple Group proposed to several of its retail partners the implementation of what it calls the “Flavor Zone.”  The implementation of the Flavor Zone, in theory, is very simple: Non-colas and colas are separated, with non-colas placed in the Strike Zone position, therefore not requiring the reallocation of space or the addition or deletion of any SKUs.

Despite the simplicity, there was initial reluctance to adoption because of the longstanding reliance upon manufacturer contracts in the allocation and positioning of CSDs. However, “a handful of progressive retailers prioritized their shoppers over contracts or the status quo, and implemented the recommendation,” the company explained. 

For retailers that have implemented the Flavor Zone, there has been category results by growing their 20-ounce CSD dollar sales 6 percent more than accounts without a Flavor Zone implementation. Equally important, the growth has not been limited to non-cola CSDs. Cola CSDs have grown at a 5.7-percent greater pace vs. accounts without Flavor Zone.

These results affirmed the company’s hypothesis that moving colas — a much more heavily planned purchase — out of the Strike Zone would not negatively impact sales, and would be offset by the increased traffic to the CSD cold doors due to the perception that there was greater variety.

In addition, video monitoring by VideoMining has shown conversion rates for Flavor Zone stores increased by 2 percent for the category, cross-purchases for colas with non-colas increased by 2 percent, total basket increased by 2 percent, and CSDs within the basket increased by 2.5 percent.

Shopper intercepts also proved that Flavor Zone implementation resulted in greater customer satisfaction with 90 percent of respondents stating the new arrangement made shopping easier and 69 percent saying they were more satisfied with the new arrangement. The Flavor Zone also decreased the total time spent shopping the CSD door by 16 percent, from 12.6 seconds to 10.6 seconds on average, giving shoppers back more time to shop the rest of the store.

For more on the winners and their category management initiatives, look in the Convenience Store News Guide to Category Management, published this month.