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The cooler doors, often found along the perimeters of the store, are one of the biggest traffic areas in a convenience store. Retailers work hard to keep these cold boxes stocked and attractive because the profit potential is great year-round.
However, during the summer months — May to August — the cooler often becomes the center of attention. "Packaged beverages is really one of our strongest categories," said Beth Barron, category manager at One Stop Express Inc., a 19-store chain in Plano, Texas. "We see huge increases in the summer."
It's during this time that manufacturers release new and exciting products, and innovative promotions often take place. "Typically, customers see new products in the cooler between Memorial Day and Labor Day," said Andy Steele, Starz convenience store coordinator for Shell Oil Products US. Major promotions usually accompany these launches. This year, Snapple teamed with a few retailers to give away a car, Steele reported.
But what happens when September rolls around? What can retailers do from fall through spring to keep sales momentum at the cooler? Savvy retailers get creative.
One of the ways to keep the cooler profitable all year is to run promotions. Whether it's running a simple sale or taking a more elaborate approach, c-store retailers going the extra mile are seeing results from their efforts.
"We have a beverage promotion in place every month, whether it's a can of soda or an energy drink," said Barron. "We use this to generate excitement during the slower months."
Barron also times her product promotions around seasonal events. "We often have promotions around juices in the fall for back-to-school season," she noted.
Partnering with Coca-Cola, One Stop Express also offers promotions on a larger scale. The company has local Texas radio stations broadcast live at their stores, giving away prizes to customers. Coca-Cola sponsors the events, which are done throughout the year.
"We've done it three times in the past year, and we usually see an increase in traffic from listeners coming in to get prizes, and they usually buy a beverage while they are there," explained Barron. "Especially if it is one of the more popular radio stations, like one of the Top 40. We partner with Coca-Cola by letting it happen at our site."
Similar to One Stop, Fas Mart Convenience Stores, a 140-store operator based in Mechanicsville, Va., also runs promotions throughout the year, and has found offering two 20-ounce sodas for $2 to be the most effective promotion at their stores, according to Russ Quick, marketing manager at Fas Mart.
"We used to do the 'two-fers' quarterly, but now we do it twice quarterly, alternating between Pepsi and Coke," said Quick. "We see between a 30 and 40 percent lift from this promotion. We see significant lifts because it drives the consumer to purchase more than one bottle to save money — usually around 20 percent."
Due to the large increase in sales, and the continued success of this approach, the chain has incorporated the strategy into its yearly plans, Quick reported. During the months in which a CSD promotion is not running, the company focuses on other categories, including energy drinks and isotonic beverages, taking the same approach.
"The best promotions are the bundled promotions because they drive incremental growth," said Quick. "For example, on Red Bull, we will do three for $5. For Gatorade, we'll do a two-for-$3 deal on a 32-ounce. This is a great deal as opposed to the customer buying one for $1.99."
In addition to promotions, another way to profit from the beverage cooler year-round is to take advantage of opportunistic buys. In other words, when manufacturers offer promotional prices, retailers buy extra stock to sell at regular price once the promotion is over. This is the approach Fas Mart uses when dealing with Coke and Pepsi during its quarterly promotions. It seems simple enough, but according to Quick, many retailers do not take advantage of the opportunity.
"Most people don't do this because it is difficult," said Quick. "It requires you to stock excess inventory — you can have cases piled up to the ceiling for a couple of weeks until you go through it. But we always go through it in a couple of weeks, and we make more money because we sell it at full retail. We usually buy two to three weeks of extra inventory to sell once the promotion is over to maximize our cost."
Another savvy move Quick makes in the cooler is to separate water from other beverage contracts. Typically with large manufacturers, if you are carrying their CSD products, the contracts require retailers to carry their water brands as well, according to Quick.
"We broke away from that, and now we make an 80 percent profit on our third-tier water brand, and that is almost unheard of," he explained. "Even on Aquafina I am making almost 70 percent." FasMart carries Aquafina, Deer Park and Nestle Pure Life waters, and left Dasani because the "penny profit" didn't meet the company's criteria, said Quick.
"Retailers need to realize there is the ability out there to break off water from their contracts. I am reversing roles on Coke and Pepsi, saying 'I need to make X, so your retail needs to be X,'" he explained. "We used to only make 40 or 45 percent on water, and now we've pretty much doubled our profitability in the past two years."