Retailers concur that size really does matter, at least with respect to the overpopulated soft-drink segment.In a category that has experienced relatively flat sales in most markets over the past several years, it was the emergence of a different size option that made cola start to move off the shelves again at Heinen's Fine Foods, Warrensville, Ohio, according to Les Gyerman, direct-store-delivery

Retailers concur that size really does matter, at least with respect to the overpopulated soft-drink segment.

In a category that has experienced relatively flat sales in most markets over the past several years, it was the emergence of a different size option that made cola start to move off the shelves again at Heinen's Fine Foods, Warrensville, Ohio, according to Les Gyerman, direct-store-delivery buyer.

"Most recently, we are up a small percent [in sales] from last year due to Pepsi and Coke coming out with the new eight-ounce size," Gyerman told SN. "It's really benefiting us because we have an older clientele, and that [size] product is also great for kids. To me, it was a bonus that they did this."

He recently started carrying a larger pack of 18 eight-ounce cans from Pepsi. Gyerman said it was too soon to get a handle on exact sales figures for this latest addition to his soda set, but feels "we're going to do really well with it. I think that's really going to help our whole category."

Size is also very important to Big Y shoppers: 12-pack cans are currently the best sellers at the Springfield, Mass.-based chain.

"The size has to satisfy many different users -- the 12-ounce can for the traveler, the new eight-ounce can for the kids, the two-liter for the fridge, [and] 500-milliliter six-packs for the 'serious' travelers," said Peter Dudis, director of grocery operations.

Multi-pack plastic bottles are where the action is at K-VA-T Food Stores in Abingdon, Va., but price has about as much to do with sales as size, according to Rick Kelly, category manager of beverages. As he sees it, the rising costs coming from soft-drink manufacturers, particularly within the can segment, have steered his shoppers toward the plastic bottle multi-packs in an attempt to get more bubble for the buck.

"[Rising costs have] brought about a much broader package mix within the soft-drink category. The manufacturers have forced the everyday business in the category to be directed to the plastic, multi-pack packages due to cost increases in cans, which has not made them a good everyday value to the consumer. Canned packages have become primarily volume-driven for ad," Kelly said.

K-VA-T recently started directing shoppers to compare options based on fluid-ounce content through in-store signs, he said. For example, he is promoting both a six-pack 24-ounce and a 12-pack 12-ounce as containing 144 ounces in total.

No matter how it is presented to consumers, the soft-drink category across all channels could certainly use a little shaking up. New York-based Beverage Marketing Corp. reported that sales of carbonated soft drinks in the United States only increased by 0.4% in 2003. Per capita consumption dropped for the fifth consecutive year, from 54.2 gallons in 2002 to 53.8 gallons in 2003.

Carbonated soft-drink manufacturers have felt the sting of lagging sales for years and have responded in turn, launching new product after new product. The most recent rollouts from the two leaders in the cola wars, Pepsi's Edge and Coca-Cola's C2, attempt to address the needs of low-carb dieters by containing less sugar than most colas, and perhaps offer a glimpse at the future of colas.

"The soft-drink category is entering an era of functional innovation. The mid-calorie colas are prime examples of this innovation," said Gary Hemphill, BMC's senior vice president. "Gone are the days when innovation was solely defined by new flavored line extensions. Increasingly, we will see innovation responding to consumer trends of health and wellness."

Whether or not these new concoctions have long-term market potential seems to be the question on everyone's mind. Opinions vary about as much as the selections found in today's supermarket soda aisle, but most agree that line extensions are a necessary evil.

"Obviously, all new products are not created equal, but new product launches are absolutely essential to the continued growth of this category," a spokesman from Cheshire, Conn.-based Bozzuto's, a wholesaler serving about 700 retailers.

K-VA-T's Kelly told SN that while interest in new line extensions sometimes begins to die out at about the six-month mark, he thinks Coke and Pepsi may be on to something this go-around based on the popularity of low-carb dieting.

"Due to the conversion of a lot of people to those lifestyles now, they have as good a chance as any of the recent new flavors and extensions that have come out in a long time," Kelly said.

On the other hand, Heinen's Gyerman doesn't think consumers' preferences will be radically altered by the new line extensions of their favorite stalwarts. Yet he will continue to stock them as long as the interest remains.

"There's no doubt in my mind, you've got to bring in the new items. Just the interest of the consumer [leads them to] come out and try it. Let's be there. Let's have it. If it dies down after six months and nobody is buying it, then we can discontinue it," he said. "Let's face it. A consumer is going to try it and then go right back and drink what they've always been drinking: their Coke, their Pepsi and their diet. Those are the strong ones in our stores. Most of [our] sales are coming from those [stockkeeping units]."

Indeed, Coke and Pepsi still represent the leaders of the cola pack, with Coca-Cola Co. capturing a 44% share of market volume in 2003, according to Beverage Marketing Corp. (See chart on Page 40.) PepsiCo followed with 32.1% of the market last year. Of the top 10 best-selling brands in 2003, Coca-Cola Classic was the leader in terms of millions of 192-ounce cases sold, followed by Pepsi, Diet Coke, Mountain Dew, Sprite, Dr Pepper, Diet Pepsi, Caffeine Free Diet Coke, Sierra Mist and 7UP.

"The core of the business, the cash cow in the business for years, has been the colas of the world," said Mel Korn, vice chairman at Saatchi and Saatchi X, a New York-based consulting firm. "When you get down to it -- let's be frank -- there are two companies that have had the bulk of this business."

Yet Korn pointed out that regional taste preferences come into play, and can alter the accuracy of a new soda's popularity. What's favored in one region may not have a dedicated consumer base elsewhere in the country.

"Regions of the country will vary. In the South, colas will hold up stronger. When you get down to it, the guts of this thing is coming down to where the consumer is. They are the boss and, therefore, what they say needs to be reflected in the categories and the brands that are in those stores."

In that scenario, K-VA-T stores are situated among a population that favors Mountain Dew, according to Kelly. To that end, "the Code Red and even the LiveWire have been the biggest success stories in recent years as far as new flavor extensions," he said, adding that one can tell a product is successful by the number of different packages the bottler develops for it. "Sierra Mist, although it's doing well here, isn't one of the things that just took off. It's holding its own, but has not been a huge blowout," Kelly said.

Mountain Dew LiveWire has also experienced great success among Bozzuto's clientele, according to the spokesman. "[It] is one of the best new carbonated soft drinks we've seen. The timing of the launch and the quality of the advertising set this one apart from many of the others," he said.

With the amount of advertising dollars spent by the big brands on nationwide campaigns, consumers are certainly always in the know about what the market has to offer. The retailers SN spoke with also admitted to promoting the category on a weekly basis in-store, with two national brands and a private label on the regular roster.

Heinen's features soda in its weekly ad. If something special or unique has come into the store, it is featured in the ad's center spread. Big Y said it promotes either on price or under a chain-specific deal. Mixing things up seems to be the best approach to dealing with the promotion and selection of the always-in-flux assortment, observers said.

"Today's consumers are variety seekers. Retailers can best capitalize on this by offering a broad assortment of products in a range of package sizes," Beverage Marketing's Hemphill said.

Space Is the Case

The carbonated soft-drink category has largely become one big line extension, a trend that often leaves retailers with the burden of having to stock a growing amount of product within a static amount of shelf space.

"Lack of space is the biggest challenge we face, and there's little hope that this will change anytime soon," said a spokesman for Bozzuto's, a Cheshire, Conn.-based wholesaler serving close to 700 retailers.

Secondary displays throughout the store have become a necessity.

"We encourage our customers to use secondary displays. Given the expandable consumption of the CSD category, the more contact points a retailer can create between consumers and the category, the greater the sales will be," the spokesman said. "When possible, we try to include all line extensions into existing CSD sets. The DSD [direct-store-delivery] distributors in our area have shown themselves to be very good at policing their own lines and evaluating what is the most effective use of the available shelf space."

Working with manufacturers to get a heads-up on what products will be entering the market also helps alleviate some of the merchandising pressure, Les Gyerman, DSD buyer at Heinen's Fine Foods, Warrensville Heights, Ohio, told SN.

In Gyerman's stores, an average of 46 feet is devoted to the carbonated beverage section. Knowing what products will be coming out ahead of time gives him time to review the items he already has to determine which ones can be dropped.

"We do have a small area, but we have sodas on sale every week, and we have planograms already set up on the shelving and we say, 'This is a new item. This one is coming out. This one is going in.' Sometimes it might take a store a little longer because they might have some backstock. I also look at the different flavors: Do I really need five root beers? I can streamline it that way."

Leading U.S. Carbonated Soft-Drink Companies, 2002-2003

Companies: Millions of 192-oz.: Cases*, 2002; Millions of 192-oz.: Cases*, 2003; Share of Volume 2002; Share of Volume 2003; % Change 2002/03; Share Change 2002/03

Coca-Cola Co.: 4,487.3; 4,478.3; 44.3%; 44.0%; -0.2%; -0.3

PepsiCo Inc.: 3,207.7; 3,264.5; 31.7%; 32.1%; 1.8%; 0.4

Dr Pepper/7Up: 1,515.5; 1,452.1; 15.0%; 14.3%; -4.2%; -0.7

Cott Corp.; 413.3; 465.3; 4.1%; 4.6%; 12.6%; 0.5

National Beverage: 233.5; 244.0; 2.3%; 2.4%; 4.5%; 0.1

Big Red: 27.0; 27.0; 0.3%; 0.3%; 0.0%; 0.0

Monarch: 11.7; 12.3; 0.1%; 0.1%; 5.0%; 0.0

Carolina Beverage: 5.1; 5.3; 0.1%; 0.1%; 4.0%; 0.0

Subtotal: 9,901.1; 9,948.8; 97.7%; 97.8%; 0.5%; 0.1

All Others: 233.6; 223.5; 2.3%; 2.2%; -4.3%; -0.1

Total: 10,134.7; 10,172.3; 100.0%; 100.0%; 0.4%; -----

*Includes diet and regular carbonated soft-drink volume

Source: Beverage Marketing Corp.