Every retailer wants and needs to be successful selling beverages, which are proven traffic drivers, basket builders, and revenue and profit enhancers.

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Understanding shoppers creates competitive edge in beverages

February 27th, 2012
by John Carroll

Every retailer wants and needs to be successful selling beverages, which are proven traffic drivers, basket builders, and revenue and profit enhancers.

Beverages are big business because they are an important part of people’s everyday lives and well-being. They are often the centerpiece of a food consumption occasion and shopping mission. Last year nonalcoholic beverage sales were over $100 billion and grew 2%.

The potential prize for chain drug retailers is large — currently only 35% of shoppers purchase any beverage during the year within the trade class. Traditionally we have seen channels and retailers compete for shoppers’ beverage purchases using the same tactics — stack it high, sell it low.

In this time of change, however, developing a winning strategy will require drug chains (and their best suppliers) to use the competitive industry advantage of individualized shopper data to develop a keen understanding of what people want to drink combined with their shopping behavior. Gaining this insight will lead to a new and different role for beverages and the total consumables category, a role that can positively differentiate the channel by providing a unique and brand-building experience for shoppers.

Driven by seismic societal, technological and demographic shifts, consumer behavior continues to evolve. With these developments we will see changes in why, how and where people shop. Large store versus small store, specialty versus broad assortment, brick-and-mortar versus online.

Retailers will rethink how they can maximize their return on assets. This will be especially evident in food and consumables. The category will continue to grow in the drug channel, with a projected compound annual grow rate from 2012 through 2015 of 7.5% compared with total channel growth of 4%. Winning merchants will respond with changes in formats, assortment, and marketing and technology strategies.

Developing a differentiated consumables shopper solution, with beverages playing a central role, can be profitable, brand building and game changing. In order to do this we need to understand consumers’ food and beverage consumption occasions combined with their shopping mission.

This insight will lead to a good strategic foundation that results in a differentiated competitive advantage derived from better serving shoppers. Redefining the role of consumables and beverages requires a consumer-centric approach based on three steps.

• Identify the need state and occasion: Understanding why people purchase different types of beverages and where they drink these beverages is the first step in developing a solid plan. Are your customers looking for a quick burst of energy, a beverage to hydrate after a workout or a meal replacement? Are they drinking their beverage at home with their family dinner, in the car on the way to work or with a snack at school? Answering these questions requires a good understanding of your shopper combined with your best beverage suppliers’ need-state and occasion data.

• Identify the shopping mission: Missions have changed dramatically since the Great Recession. Consumers continue to look for a combination of value and convenience, and technology has helped enable smarter shoppers. Combine this with the rapid demographic shift, and we will continue to see dramatic changes in shopping ­behavior.

This behavior needs to be anticipated and quantified, which is the second step in developing a winning plan. Working with your best suppliers to develop an understanding of key consumables shopping missions is paramount.

Are consumers heading to your store on the way home to grab some key food items for dinner or to hold them over before their next trip to the grocery store? Are they pressed for time and need a quick snack and beverage between appointments? Maybe they are planning to stock up on their favorite food and beverage brands because of a hot retail price point. Or are they hungry and looking for a fresh snack or food item while they pick up their prescription?

• Provide your shopper a solution that is unique to your retail brand: The final step requires thoughtful planning and actions that are grounded in insight and focused on results. Because beverages play such an important role in most food occasions, they can be the centerpiece of a total consumables shopper solution.

Using occasion and mission insights about both your most loyal and highest-potential shoppers can lead to profitable growth and, most importantly, deeper loyalty. Developing a framework for differentiated pricing, promotional, merchandising and marketing strategies around both the immediate consumption and fill-in trips and the consumer occasions people are shopping for will allow you to work with your best partners to leverage the strength of the brands that most resonate with your best shoppers. A good strategic foundation grounded in insight makes for mutually beneficial and winning category plans.

Working with your best food and beverage suppliers to unearth these insights will become increasingly important. Leveraging the channel’s inherent strengths — proximity, shopper data, a consumer-trusted shopping experience — combined with the everyday role of beverages and food in consumers’ lives will lead to differentiated and winning shopper strategies that will drive growth and deeper loyalty for the drug channel and create deeper brand relationships for key suppliers.

John Carroll is group vice president for the drug store and value retail channels at Coca-Cola Refreshment.