Beverage Distribution

The right beverage distribution partners can make or break a drink brand. The wholesale distribution industry makes things work in the economy. Distributors bring together products from many manufacturers and distribute products to many retailers. Centralized distribution reduces the number of necessary contacts between manufacturers and retailers. Beverage distributors are the fastest way to get the beverage on the shelves of major retailers...in many instances it is the only way. Some distributors have great relationships with their retailers and are able to get instant distribution into thousands of accounts provided the brand will provide the necessary marketing support the new beverage. There are thousands of distributors that represent different types of beverages—major soda and water distributors, wholesalers, beer distributors, and small distributors. Many distributors will at least evaluate the product, but the final decision will ultimately rest on a few key factors. The product must have enough margins in it so that it is profitable for both the distributor and the retailer. A distributor would favor a product with a sales history. However, at the end of the day, distributors want a product with a fast turnover that will add to their bottom line.

Private Label Beverages

Consumers have an ever-growing array of choices in the beverage aisle. The choices vary from name brands like Coke and Pepsi, to private label drinks such as Safeway Select. A 'private label' beverage brand is owned by a retailer who wishes to participate in a robust category with their own line of beverages produced at beverage manufacturing facilities. Historically, private label brands have been perceived as 'me-too' value-oriented brands which offer lower quality but better prices than 'name brands.' This perception has evolved over the years as private label offerings have significantly improved in quality and consumer satisfaction. Private label permeates virtually every beverage category in the United States. Private label beverages, also known as store or home brands, can now be found in the largest and the smallest of beverage categories. Although carbonated soft drinks remain popular, as the market has evolved and consumer tastes have shifted, retailers in private label have moved into more non-carbonated products, like bottled water and fruit beverages, as chronicled in the latest edition of Beverage Marketing Corporation's ‘Private Label Beverages and Contract Packing in the U.S.' report. Private label carbonated soft drinks, private label milk, private label bottled water and private label juices are considered prime categories for private label beverages. Branded products like Coke, Pepsi and Dr. Pepper still dominate the industry, but the vast size of the carbonated soft drink category has created an opportunity for private label brands, which are typically purchased by value-conscious consumers. For the most part, the branded company leaders have done an effective job at blunting further inroads of private label through strong marketing of their products, gaining widespread distribution, and pricing their products so that they are attractive to the mass market. The milk category has the most developed private label business and the largest. In 2007, private label account for more than 62% of U.S. fluid milk sales. Milk is the only category with more than half of its sales in private label. The greatest amount of private label milk sales are in non-/low-fat milk and whole milk. A small amount of private label sales are in flavored milks and milkshakes. The strength of brands like Coca-Cola, Pepsi, and Red Bull ensure that retailers struggle to gain a strong foothold in the lucrative carbonated and energy drink sectors. Additionally, the higher market share of flavored milk brands compared to whole milk highlights that any product category where companies have to concoct their own formulas to create a unique taste, offers an advantage to national brands over private label. While consumers may not be as brand loyal with bottled water as they are with some other categories, there are a wide number of branded waters that are experiencing solid success in the market. The success of brands varies by water type. Waters that often serve as substitutes for tap water, such as so-called retail bulk water in large packages, tend to have the greatest amount of private label. 42.5% of retail bulk water sales in supermarkets were private label a few years ago. Private label juice is solidly represented within the United States. The category is more fragmented than other established categories, thus providing an opportunity for private label because consumers may be less brand-loyal. 14.4% of shelf-stable fruit beverage sales in supermarkets were accounted for by private label in a recent sample. Once again, it is a category segment that lacks significant differentiation that offers solid returns for retailers. The branded leaders in the category have managed to withstand private label by strong branding and marketing, which, in the bottled water sector, often revolves around packaging that stands out and a promotional focus on the purity of their product. It is also notable that, like milk, branded products have great strength in the flavored water sector. A private label brand can help retailers take advantage of a robust industry segment with a high quality product that suits its customers' needs.

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