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Will the Bubbles Rise Again?

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Sales in the long-established carbonated drinks segment have been flat to slightly down over the past five years, according to Mintel, a leading market research company. During 2003-08, Mintel estimates the regular soda segment lost 15.6 million consumers age 18 and over, and the diet soda segment only added half as many, or 7.8 million adult consumers.

The Chicago-based research company also found 34 percent of all adults who purchase beverages started drinking more water and fewer carbonated beverages to manage weight or other health conditions such as diabetes compared to 2006, as outlined in its "America's Changing Drinking Habits" report (February 2009).

Specifically in the convenience-store channel, dollar sales in carbonated soft drinks were down 1.9 percent (to more than $8.3 billion), while unit volume declined 5.5 percent (to more than 5.5 billion) for the 52 weeks ending Dec. 27, 2008, according to Nielsen Co. Scantrack data. Nevertheless, the category is still the largest in packaged drinks -- more than twice as large in dollar sales and more than three times as large in unit sales as the next-largest subsegment, alternative drinks -- and c-stores have certainly not written carbonated soft drinks (CSD) off.

However, many recently downsized the cooler doors devoted to CSDs -- several have gone from three doors to two, including some of the 12 stores operated by Arguindegui Oil Co. in Laredo, Texas.

"We basically have a Coke-dominant door and a Pepsi-dominant door, and anything new that gets brought into the category has to be worked into that existing space," said buyer Jaime Fuentes. "The door that took a hit was taken over by things like Gatorade, VitaminWater and Sobe. We saw a lot of customers move on from traditional carbonated sodas to a lot more flavored teas, bottled water, calorie-free enhanced water and juice drinks. A lot more of that is going out of the stores now."

Core Strength
The CSD category seems to be having success reverting back to its core. In January 2009, both Coca-Cola and Pepsi launched new advertising campaigns for their base brands, and Pepsi went a step further with a logo and packaging redesign "intended, in part, to strengthen and simplify the brand's presence on the shelf," according to Mintel.

Many convenience stores said they would not be unhappy if the category's line-extension proliferation started to taper off.

"I know you have to do a little of that to stay competitive, but the problem right now is there are just so many flavors," said Edy Diaz, general buyer and supervisor for Petroleum Sales with 11 stores in Greenbrae, Calif.

Phyllis Simpler, operations manager and buyer for Medford, Ore.-based Minute Market, with 13 stores, tried a lot of the new Coke and Pepsi products, and "Pepsi used to have a new flavor every month or a new line of products, but I didn't see any real upswing in sales with them," she said. "Their best sales with us still end up being in the packages we've always sold -- the classics, the original recipes."

Fuentes found with Vanilla Coke, for example, "nobody bought it. They reinvented the wheel, but they wasted money on the latest and greatest. People buy regular Coke all year long -- there's no need to mess it up."

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