Sales Performance Differences Of Alternative Beverages in Vending Vs. Other Retailing Channels

There has been much discussion in recent years of "alternative" beverages and their growing prominence in the packaged cold-drink marketplace. Management Science Associates has analyzed vending results reported to the "VendScape" market research service, and compared them with a recent Beverage World study (March, 2001) comparing sales performance of the most common alternative beverages in 1999 and 2000. The alternative beverage subcategories are ready-to-drink tea, juice and juice drinks, isotonics, small-package bottled water and coffee-based cold beverages.

According to the Beverage World study, alternative beverage sales in C-stores and supermarkets increased in 2000, compared with 1999. While some subcategories behaved differently in each channel - RTD tea sales inched up in supermarkets but dipped in C-stores; isotonics essentially held steady in supermarkets but rose in C-stores - the category as a whole increased in both. In supermarkets, alternative beverages gained 0.8 share points between 1999 and 2000. In C-stores, which are prime purveyors of single-serving packaged beverages for immediate consumption, alternative beverages increased by 2.4 share points. Sales of fountain (cup) drinks and alcoholic beverages, are not included in the cold beverage totals for either channel.

By contrast, alternative beverages appear to have lost share in the vending channel between 1999 and 2000, "VendScape" data shows (Chart 1). In fact, only isotonics showed a sales increase in vending, MSA reports, and wonders: "Is this difference due to different buying patterns of consumers between vending and other retail channels, or is it a result of distribution and availability?"

The packed cold-beverage machines tracked by "VendScape" impose limitations on the operator's ability simply to add new items; either another machine must be installed ton increase overall selections, or a new product must replace an existing one. Moreover, many packaged-beverage machines cannot accommodate all the sizes and styles of container in which alternative beverages are offered in C-stores, and even more so in supermarkets.

Distribution - the effect of machine stocking decisions by operators - certainly had an effect on year-to-year results, MSA points out. Based on the "VendScape" ssample of 39,510 cold-drink machines, alternative beverages were allocated less vending machine space in 2000 than in the prior year. The only exception was the isotonic sub-category; but the increase in sports-drink column allocation could not offset the decrease in space allotted to the other subcategories. Thus, the percentage of packaged cold-drink vending machines offering one or more alternative beverages decreased from 48.3 to 47.2 between 1999 and 2000, "VendScape" data reveals (Chart 2). Teas took the biggest hit, losing 3.8 points, MSA reports.

With less distribution overall, the tea and juice subcategories lost sales share within the alternative beverage category to isotonics. "Juice is still the number one contributor to the category, with 35.8 percent of category sales; isotonics are second, followed by tea," MSA reports (Chart 3).

"Sports drinks replace tea, which had been in the number two spot, moving up from 22.2 to 33.5 percent while tea experienced a 6-point decrease, declining to 18.1 percent. Water's sales share held steady from 1999 to 2000, and coffee-based beverages (a minuscule subcategory) exhibited little change.

MSA points out that the loss in distribution - availability through machines - and sales share is evident when looking at total results for the vend channel. Within that channel, however, there are substantial differences among different types of location. "Total offices" and "total plants/factories" did show trends more in line with those displayed by convenience stores and supermarkets, the researchers report. In those location types, total alternative beverages experienced an average share point gain of 1.6 in 2000, compared with the previous year. Juice, isotonics and water all showed year-to-year growth (Chart 4).

Schools maintain the highest share of alternative beverages across locations of any type (28.14), the research shows (Chart 5). Oddly enough, however, the school segment exhibited a dramatic decline between 1999 and 2000, showing a 12.3 percent share loss. "Does this imply that, despite significant gains in distribution of isotonics, and a strong and stabilized water distribution base, school-age consumers are changing their preferences from alternative beverages back to carbonated soft drinks? MSA wonders. "Are the millions of dollars being spend on consumer promotion targeted at this demographic - loyalty-point programs, TV advertising with teen pop sensations, and the like - paying off for the national soft-drink manufacturer? Is the activity of the school location a forecast of what to expect in the future, not only across other vending locations but also in other retail channels?"

One might ask also whether factors extrinsic to patron choice - increased competitive efforts by bottlers to capture school locations - might have played a role in the purchasing shift.

Sales Analysis

"One thing is certain," MSA sums up. "A 'one-size-fits-all' solution is not recommended for vending. A profit opportunity for one location might be a risk for another. Understanding the dynamics across locations, consumer preferences, and the operator's own sales data, and proactively identifying trends, will result in the best, most profitable product mix."

"VendScape" is a joint data collection and analysis program developed by Validata Computer & Research (Montgomery, AL) and Management Science Associates. The data derived from it is provided free to participating operators, and by subscription to others. MSA also offers a vending market analysis service, "Vscan," to suppliers of vendible products.

© Vending Times; Management Science Associates, Inc. May 25, 2001 All Rights Reserved.
Vendscape is a trademark of the Validata Computer and Reserach Corp.