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Managing the Beverage business

The beverage category is one of the fastest changing categories in the convenience store channel. At the same time it is one of the most important categories in generating sales, profits and customer traffic. (In the key summer months the beverage category could represent over 15% of your total store sales.)

These facts make it critically important that you understand the changes that have taken place in the category and that your store is in a position to take advantage of the sales growth and profit potential.

Some of the highlights of those changes:

  • The growth of CSD’s (Carbonated Soft Drinks) has slowed as consumers look for what they perceive are healthier alternatives. Where CSD’s represented over half of the beverage business they are now less than 45% of single-serve beverage sales.
  • Water has continued to grow and represents about 20% of beverage sales, and with hundreds of Canadian communities experiencing problems with water quality (over 1700 at last count) this growth will continue.
  • Energy drinks which have experienced explosive growth over the last few years now also account for over 20% of beverage sales. In addition, with their higher price points they account for about 30% of beverage gross margin dollars.

What this means is that if you are not adjusting your assortments and the amount of space that you allocate to each of these segments, in line with their share of the business, you are going to miss out on significant sales and profit opportunities.

The beverage category is a difficult category in that you need to balance the products you get on a direct store delivery basis with the products you get through your wholesaler. In addition, you must take an active role in the management of the category if you are going to have all of the products that your customers want.

Specifically, there are several things that you need to do to take advantage of the growth in this key category:

  • You need to assess your ability to effectively manage your assortments. If you are relying totally on coolers that are supplied by your DSD suppliers you will not have the control over the space to carry the right assortments. That may mean that you need to buy some coolers which you own and control, and reduce the number or size of the supplier’s coolers.
  • You need to think about the space that you have, how you are using it, and whether the space you have allocated to the various products accurately reflects their sales contribution. When you do this review and consider the changes you need to make remember the following;
    • You should group like products together, (all water together, all energy drinks together, etc) to better show off your selection and to make it easier for customers to find what they want.
    • Energy drinks continue to grow and are a fast growing segment in the beverage category. They will continue to grow with many new products and brands available. The key brands are still the ones supplied by Coke, Pepsi, and Red Bull. 
    • The growth in the water segment is being driven by the growth in spring water. Spring water accounts for the majority of all water sales so just relying on the water supplied by Coke & Pepsi will not be enough to allow you to capture the full sales potential. In addition, spring water is one of the most profitable products you sell in your store.
    • Your customers will be looking for the best selling brands and flavors that they know and like, so make sure you are selling what they want to buy, not what you want to sell!
    • In the warm weather consumers will more often buy larger sizes of “thirst quenching” beverages like 950ml, one litre, or 1.5 litre. Make sure your assortments and displays reflect that.
    • You will sell a lot of multi-packs, (6-pks, 8-pks, 12-pks, etc.), for people to use at home, at the cottage, while camping, etc., if you have them well displayed and well priced.

Remember, the beverage business continues to experience dramatic changes so you need to change what you are doing and how you are managing this category if you are going to take advantage of its growth potential

Hugh Large & Associates Inc.
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