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Three of the leading diet soft drinks, all cola-flavored, recorded double-digit growth last year.

On the cusp of the new decade, beverage sales and consumption patterns went through changes that may signal what's to come in the years ahead:

* Dry and cold-filtered beers established a foothold in a market where light beer continues to be the growing segment in a flat category overall.

* Cold and iced coffee drinks may develop into the coffee industry's answer to soft drinks.

* Apple juice sales scored healthy gains despite the Alar controversy.

* Soft drinks' volume growth fell off the 1980s pace as cola prices were said to be rising.
...1989 at a glance
  Total supermarket...    +7.16%
  Soft drinks & mixes...  +7.04%
  Juice (grocery) ....... +5.12%
  Beer & wine ........... +3.04%
  Coffee & tea..........  +0.82%
                        $ volume
Biggest sellers         (billion)
  Carbonated soft drinks  ... $8.73
  Beer    .................... 6.31
  Fruit juices (grocery) ..... 2.20
  Ground & whole bean
  coffee ...         ......    1.83
  Wine                         0.96
  Bottled water  ............  0.96
  Most growth over $100 million
  % gain
  Bottled water    .......   +16.80%
  $ gain
  Carbonated soft
 drinks. . .     . + $521.20 million
  Most growth under $100 million
  % gain
  Decaffeinated tea .....  +7.85%
  Herbal tea .....  $3.81 million

Mirroring the beer industry as a whole, supermarket beer sales made negligible gains in 1989, rising only 3.3 %. Symbolizing the flat market was the performance of regular Budweiser. By far the best selling brand, it accounts for slightly more than one of every four beers sold. But volume movement of the King of Beers dropped 0.1% in 1989, according to industry estimates.

Increased attention to health and a corresponding moderation in consumption of alcoholic beverages is seen as a key reason for the static state of beer sales. In a flat market, players typically go after larger market share by rolling out new products and discounting on price. That is what the major brewers are doing, including Anheuser-Busch. The St. Louis-based brewer announced last fall that it would cut prices to counter dealing by competing brewers. The announcement surprised analysts and caused an immediate drop in the value of Anheuser-Busch stock.

But retailers say Anheuser-Busch appears to be discounting very selectively to avoid devaluing its flagship Budweiser beers. Ross Nixon, merchandising manager for Dahl's Foods, Des Moines, Iowa, says that although deals on regular Budweiser have been more frequent since the announcement, the discounts themselves are not any deeper than they had been. Deals on some other Anheuser- Busch brands, such as Busch and Busch Lite, have increased in frequency and the discounts also have grown deeper, says Nixon. In addition, the retail on another Anheuser-Busch product, Natural Lite, has dropped sharply. A year ago, a six-pack was priced at $4.79, says Nixon. Now it is $3.29.

An executive for a Midwest wholesaler says there is little chance of a price war breaking out among the major brewers: "Some of the majors are trying to be more competitive, but that's just because they don't intend to let the other guy get the upper hand."

The brightest spot in the beer market is the light segment, which continues to grow. Miller Lite maintains its solid position as the number two brand in the entire beer market, after regular Budweiser. However, Miller Lite recorded volume growth of only 1.1% last year; Coors Light and Bud Light, gained 17.5 % and 12.5 % respectively, according to industry estimates, and were responsible for driving the light segment.

At the same time, some industry analysts, along with Anheuser-Busch, say dry beers could well be the hot segment during the 1990s. Dry brews account for slightly more than 1% of volume now, say analysts, but could grow to as much as 5% or 10% by the turn of the century. Anheuser-Busch introduced the first domestic dry brew, Michelob Dry, in 1988 and is now rolling out Bud Dry.

Bud Dry is a cold-filtered beer designed to do battle with Miller Genuine Draft, which has grown steadily to become the number 10 brand nationally. The success of Genuine Draft, a cold-filtered beer, is said to have spurred Anheuser Busch's development of Busch Cold-Filtered Draft, now testing in Tulsa, Okla. Trade publications have reported on the striking similarity between the packaging of the Busch beer and that of the Miller product.

Cold-filtered brews have a growing cachet, according to some retailers. "There seems to be a surge to cold-filtered beers," says John Lucey, buyer-merchandiser for Waldbawn's FoodMart division, Holyoke, Mass. "They seem to have the taste consumers are looking for."

The import segment dropped 8 % in volume last year, according to analysts and brewers. Retailers say the decline is due to the general trend toward lighter beverages and moderation in alcohol consumption. Most imports are seen by consumers as having a stronger, "heavier" flavor. While brewers conduct ongoing campaigns to promote responsible consumption of alcoholic beverages, they recently expressed alarm over the tendency of some anti-drug groups to view alcohol on a par with illegal narcotics. Brewers were further troubled when the federal Office of Substance Abuse Prevention said it was dropping the term "substance abuse," in favor of the phrase, "alcohol and other drug use."

Robert Weingarten, director of national accounts for Coors, says he is concerned about the tendency "to put malt beverages into the category of drugs and narcotics. That's not where they belong." Coors and Anheuser-Busch have published booklets that highlight the differences between legal, alcoholic beverages and illegal drugs. They also publish material designed to educate consumers about responsible consumption of alcoholic beverages.

Brewers and retailers say they applaud increased enforcement of drunk driving laws as a way to curb irresponsible consumption. Lucey of Waldbaum's says police enforcement of drunk driving laws may actually have a positive influence on super-market beer sales. He points out that while beer sales from all outlets in Connecticut are flat to declining, supermarket sales are up. "That seems to indicate that people are buying beer for at-home consumption" rather than drinking in bars or restaurants, he says.

Rollouts of non-alcoholic beers show just how sensitive brewers are to the increased moderation of consumers. Anheuser - Busch has introduced a nonalcoholic beer, O'Doul's, and Miller has come out with Sharp's. Melody Keith, a buyer-merchandiser for Marketplace Foods, Virginia Beach, Va., says both are "doing pretty well. I think there's a market for non-alcohol beers. It's an untapped segment."

Lucey of Waldbaum's says the segment "has always been a little sleepy. With the introduction of Sharp's there's been quite a surge in no-alcohol beers. Miller is having some difficulty keeping the pipeline full."

Super-market sales in the wine segment barely advanced last year, registering a gain of just 1.35%. Coolers, declining during the past two years, may have stabilized in the first quarter of 1990. Mark Taxel, executive vice president for marketing, Seagram Beverage Co., says the company's cooler volume in supermarkets climbed 18 % for the quarter.

Seagram and Gallo's Bartles & Jaymes each hold 43 % of the cooler market, according to industry observers. Says Taxel, "We've really seen a consolidation around the two brands. " Miller gave up on the cooler market altogether, withdrawing its Matilda Bay line.

While supermarket sales of wine vary from state to state and market to market, some upscale chain stores feature wine departments that rival any independent wine store for variety and price. A Piggly Wiggly store in Charleston, S.C., for example, carries hundreds of varieties of wine with prices as high as $30 per bottle. Yet the wines that appear to be the most popular continue to be varietals such as white Zinfandel and white Grenache, say retailers.


The coffee industry is running hot and cold: At the same time that the traditionally fierce competition among the leading brands of ground coffee continues unabated, manufacturers are testing or rolling out products such as canned coffee and iced cappucino to be sold from dairy cases.

The surge of activity m the cold segment is the industry's attempt to cash in on the growing popularity of cold, sweet beverages such as soft drinks and to fight long-term declines in coffee consumption.

As would be expected, supermarket sales of coffee have been flat or declining in recent years, reflecting the downturn in consumption. But, in an unexpected deviation from the trend, supermarket sales of ground and whole bean coffee rose a modest 2.15 % in 1989.

A drop in the retail price of ground coffee may have triggered the increase, say industry observers. Figures from the Bureau of Labor Statistics show that the price of I pound of roasted coffee started to decrease after an international quota agreement expired in July 1989. During that month, the average retail on one pound of roasted coffee was $3.22. By April of this year, the price had dropped to $2.88, says the bureau.

The rise in supermarket sales also corresponds with the findings of the International Coffee Organization's Coffee Drinking Study-Winter, 1989, which reported that per capita consumption had increased 5 %.

But observers and analysts say these developments are not substantive enough for them to predict any extended improvement in coffee sales. Discussing the increased consumption reported in the winter drinking study, George Boecklin, president of the National Coffee Association, says, "We don't know whether it's a statistical anomaly or whether it's for real. We'll have to wait another year to see."

Meanwhile, the two big brands of ground coffee-Procter & Gamble's Folgers and General Foods USA's Maxwell House-continue to slug it out for the market lead. Analysts generally agree that Folgers has held a slight lead since overtaking Maxwell House a couple of years ago.

Huge numbers of coupons and widespread price slashing characterize the fierce competition for market share, say retailers. A merchandising director for a supermarket chain says that coffee has become a commodity item, which perpetuates manufacturers' price-cutting tactics. "The old laws of supply and demand don't seem to count anymore, " he says. "It's more a matter of manipulation and greed."

However, there are signs that the manufacturers may be trying to get away from deep discounting. Fortune magazine recently reported that the battle between Procter & Gamble and General Foods was costing both manufacturers profits. Ross Nixon, merchandising manager for Dahl's Foods, Des Moines, Iowa, notes that the leading manufacturers recently announced price increases. Yet, says Nixon, manufacturers "are always going to have to deal pretty heavily because coffee is a flat-todeclining category. Sometimes they raise the basic price but then they deal more than ever."

Java in a can-cold

In addition to waging the market share war, manufacturers are also busily testing or rolling out new products. Procter & Gamble has introduced Folgers Gourmet Supreme and is testing a new "Freshness Pack" of Folgers. The coffee is pressure-packed in an amber-colored 13-ounce plastic bottle. Pressure-packing the grounds and providing a resealable cap for the bottle helps to keep the coffee fresher longer, says Wendy Jacques, a spokeswoman for the company. "The key thing consumers look for is freshness," she says.

Maxwell House is testing two products designed to be heated in microwave ovens. Maxwell House Brewed Coffee Concentrate, packaged in a plastic bottle with a cap that doubles as a measuring cup, is sold from the dairy case. Consumers mix the concentrate with water before heating it in the microwave. The retail price is $2.59 for a 12-ounce package that makes up to 20 cups. The product is being tested in Marion, Ind. Cliff Sessions, a spokesman for General Foods, says the product is doing "fair."

The second product, Maxwell House Brewed Coffee, is packaged in a 48-ounce carton. It, too, is sold from the dairy case.

But the new items attracting the most attention are iced coffee products such as Nescafe Mocha Cooler by Nestle Foods Corp. The ingredients include low-fat milk, chocolate and coffee. Packaged in a carton and sold from the refrigerated dairy case, the product is being tested in Boston, Providence, R.I., and three markets in Florida.

General Foods is said to be developing an iced cappucino product that is expected to be ready some time next year.

Boecklin of the National Coffee Association says of the cold products, "There could be an opportunity for incremental sales there. It will be interesting to see how they develop over the warm summer months. We would expect them to go up against soft drinks rather than hot coffee."

Supermarket sales of tea were flat or declining last year, continuing a pattern that has held for the past five years or so. Tea bags, the largest segment of the tea category, declined slightly; instant and liquid tea dropped 1.21 %. Decaffeinated tea leaped 7.85%, but it represents less than 1% of category sales. Herbal tea rose 5.52%.


Apple juice appears to have come through the Alar crisis unexpectedly unscathed; supermarket sales of apple juice and cider climbed 9.74 % last year despite the controversy over residues of the chemical on apples and in apple juice.

"Apple juice is strong even with all those negative comments about Alar," confirms a Midwest chain merchandiser. Apple juice in bottles is among the top three sellers in the segment, he says. Apple juice and cider account for more than 25 % of juice sales in the grocery section.

Grape juice also registered strong gains last year, up more than 13 % in supermarket sales. Altogether, sales in the the fruit juice segment climbed 7.65 %, powered, say retailers and analysts, by the continuing emphasis consumers are placing on health.

That trend, however, does not appear to have hurt the fruit drinks segment. Although it showed only a modest rise of 2.34%, retailers tell of some particular success stories, notably Tropicana Twister. Sales of that fruit drink "are beyond anybody's expectations," says Robert Masche, vice president, advertising, for Piggly Wiggly Carolina Co., Charleston Heights, S.C.

Ross Nixon, merchandising manager for Dahl's Foods, Des Moines, Iowa, says the Tropicana product "is probably the most exciting as far as movement goes, " but, "now they've taken a fairly good price hike so we'll have to see what kind of deals they do." Tropicana this spring rolled out 64-ounce bottles of four of the Twister flavors: orange-strawberry-banana; orange-raspberry; orange-cranberry; and pink grapefruit cocktail.

Ocean Spray continues to expand its franchise in the segment, say retailers. Nixon counts the company's products among his best-selling drinks. Ocean Spray added a new blend to its line last year, Cran-Strawberry.

Squeezit, a 10% juice drink packaged in a colored, squeezable plastic bottle, is performing strongly in the West and Midwest, according to retailers. Ron Rhodes, a retailer in Pittsburg, Kan., says, "We couldn't keep enough of them in the store."

The manufacturer is General Mills. Barry Wegener, public relations manager for the Betty Crocker division, says, "It's doing real well. We just put it on the shelves and it gets wiped out." The drink is sold in six-packs. Each bottle holds 6.75 ounces, which Wegener calls "a kid's portion in a kid-size bottle."

Procter & Gamble is building up its presence in the segment, having acquired Hawaiian Punch from Del Monte and testing a new product called PunchLine Coolers for school children. Procter & Gamble hired two joke writers to write 308 jokes to be reproduced on the PunchLine bottles. "We kid-tested the jokes," says Wendy Jacques, a spokeswoman for Procter & Gamble. "The cornier they were, the more the kids laughed." A sample: "What do turtles give each other?" Answer: "people-neck sweaters."

Aseptically packaged drinks continue to be strong sellers to the school lunch crowd and that doesn't mean only juice and juice drinks; Hershey's chocolate milk in aseptic boxes is doing a booming business, say retailers. "It's doing very well for us," says Masche of Piggly Wiggly. Fred Brown, grocery buyer for H.G. Hill stores, Nashville, Tenn., says the product is "downright surprising."


Supermarket sales of soft drinks climbed 6.35% in 1989, spurred largely by the continued boom in the diet segment, which grew 10.8%. However, the soft drink business as a whole had a less than stellar year. Volume growth slowed to 2 % after two consecutive years of 4.5 % gains, says Beverage Digest. Further, the top two sugar drinks declined slightly in volume movement.

Nevertheless, soft drinks still make a hefty contribution to the average supermarket's sales and the marketing power of the major manufacturers helps keep per capita consumption growing to record levels annually. In 1989, annual per capita consumption of soft drinks reached 46.6 gallons per person, according to Beverage Industry magazine. Ten years ago, it was 33.2 gallons per person.

Other forces shaping sales of soft drinks in supermarkets are less favorable. Deep discounting by the major manufacturers is on the wane, according to analysts and retailers. "There is less price promotion," says Michael Bellas, president of Beverage Marketing Corp., a research and consulting firm in New York City. Discounting, he says, "is not as deep and it isn't as long as it used to be. The industry is trying to cut back on the excessive amount of price promotions last year."

Rising costs for packaging and corn sweeteners are among the factors prodding manufacturers to raise prices. An executive for a wholesaler in the Midwest says cost per case for the leading colas had been $5.90 with a retail of $5.99. Now the cost per case is $5.99, but retailers continue to sell it for $5.99 "because they don't want to be the first to raise prices. The retailers are the ones taking it on the chin."

A merchandiser for a supermarket chain in the south says that one of the leading cola manufacturers "appears to be trying to drive the price up. There is less promotional activity on the 2 liters."

John Lucey, a buyer-merchandiser for Walbaum's FoodMart, Holyoke, Mass., says, "Our gross profit has declined on soft drinks, "but" discounting is still very strong in this market. I'm still looking at a 4% margin on sale items." Strong movement in 12-, 20- and 24-packs drives volume, he says.

Retailers note that during times when the national brands run at higher prices, private label and regional brands sometimes capitalize by discounting. The retail on 2-liter bottles of national brand colas has increased from 99 cents to $1.09, a wholesaler remarked. "When it gets up to $1.19 for 2 liters, 79 cents for private label looks real good."

The outlook for soft drinks remains strong, but analysts agree it will not match the industry growth of the 1980s. Consumption and population trends are likely to trim growth during the next five years, says Bellas of Beverage Marketing. The industry grew fast in the past largely because of heated pricing competition. As that competition cools, so will growth, he argues. Increased consumption of bottled water and fruit beverages, along with the aging of the U.S. population, will take their toll, too, he says.

Growth in the diet segment is illustrated by the performances of diet Coke, Diet Pepsi and Caffeine Free diet Coke. Each registered double-digit volume growth, reports Beverage Industry. Lucey of Waldbaum's, says diet colas make up approximately 50% of soft drink sales for the company's 34 stores in Connecticut and Massachusetts. In addition, "The caffeine-free segment is growing very strongly." Leading performers outside the cola segment include Mountain Dew, Sprite and Dr Pepper, say industry observers.

Among new products are two that are being tested by Pepsi-Cola. Pepsi A. M., which contains more caffeine than regular Pepsi, "is for people who don't drink coffee," says Paul Duffley, vice president, trade development, Pepsi-Cola USA. It is being tested in Waterloo, Iowa.

The other product, Mountain Dew Sport, is in test in San Diego, Philadelphia and Minnesota. Similar in flavor to regular Mountain Dew, but with lighter carbonation, Mountain Dew Sport is designed to compete with Gatorade, which dominates the sports drink segment. Mountain Dew Sport contains Vitamin C and electrolytes. "After a workout, it will replenish sodium and potassium chloride," says a Pepsi-Cola spokeswoman.

Bottled water sales for 1989 advanced by a robust 16.8%, continuing a pattern that has held for several years. But that pattern is sure to be broken when figures are tallied for 1990, because of the worldwide recall of Perrier, the brand that built the segment.

Kim E. Jeffery, senior vice president of sales and marketing for Perrier Group, says sales of Perrier came to $120 minion in 1989; for 1990, he estimates sales will drop to between $80 million and $90 million. By the end of 1991, Perrier hopes to have, recovered 85 % of its sales-that is, approximately $96 million.

Jeffery's confidence stems from research indicating that 80% of Perrier consumers believe the company acted responsibly once it learned that trace amounts of the toxic chemical benzene had been found in some bottles.

Research also showed that 83 % of Perrier consumers said they would probably purchase the product, now labeled "Nouvelle Production," when it returns to store shelves. There will also be another change on the label: The description "naturally sparkling," will be removed to comply with a request by the Federal Food and Drug Administration. "We agreed to do it, but we don't agree with the FDA," says Jeffery.

The FDA says that because the water and carbon dioxide are taken from the ground separately, the description is unfounded. Jeffery says the gas and water come from the same spring in Vergeze, France. The gas is under the water; left untouched, it would seep upward and mix with the water, he says. But Perrier draws the gas out of the ground separately from the water, purifies the gas, then adds it to the water.

Jeffery insists there is no basis for the FDA's ruling, pointing out that the administration has no established definition of natural." There appears to be little chance that the spat with the FDA will become a consumer issue, says Jeffery. "There's very low consumer awareness of the fact that it happened," and Perrier does not plan to address it through advertising or public relations.

A more pressing problem, in Jeffery's view, is refilling the distribution pipeline with Perrier. "We'll be short of product for a long time. It will be the end of the year till retailers have the inventory and the flavors fully supplied."

Perrier is spending $25 million on the relaunch, which started at the beginning of May. "We're going right to the consumer with a coupon for a free bottle of Perrier," says Jeffery. A retailer received this news with something less than enthusiasm. "It's going to take more than a free bottle" to win back consumers, she says.

While Perrier has been absent, many retailers stocked other brands of water by Perrier, such as Arrowhead or Poland Spring, according to Jeffery. "Our other brands were up more than the competition because our brands are bigger. "

Jeffery says some retailers told Perrier they would reserve shelf space for Perrier when it returned. He adds, "We haven't been asked for slotting allowances by one retailer."

Time will tell whether Perrier can recover its previous sales level. Retailers expressed a variety of opinions on the subject. A buyer-merchandiser for a chain in Virginia says, "It'll be interesting to see what happens. From what I understand, they're not going to be making any deals, which I think is going to hurt them."
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Title Annotation:1990 Supermarket Sales Manual
Author:Bennett, Stephen
Publication:Progressive Grocer
Date:Jul 1, 1990
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