NACS: Natural Brands Aim for Growth in C-Stores

By Max Rothman

Just as the often quirkier and healthier wave of natural products has influenced the mainstream grocery channel, several beverage brand representatives said at the NACS show in Atlanta that they’re beginning to sense a similar shift in the convenience store channel. It’s why they attended the show in the first place.

These brands hope to spearhead what they believe is the gradually changing inventory of C-stores, and they did so in the halls of the Georgia International Convention Center, tucked between rows of companies peddling e-cigarettes and microwaveable fried chicken.

“I hope that eventually the beef jerky and energy drink kind of mentality will start to diminish,” said Adam Hertel, ITO EN’s vice president of grocery and natural sales.

ITO EN, a Japanese company which has its U.S. base in Brooklyn, N.Y., currently has very limited distribution in C-stores, with some placement in the Northeast and parts of California. However, Hertel said that this could change with the launch of Jay Street Coffee, a new line of ready-to-drink coffee, and a more concerted effort to spread its existing lines of teas products.

Since opening in Brooklyn in 2001, ITO EN has worked toward becoming more than just a tea company, Hertel said. The line of coffees, which comes in a 16.9 oz. PET bottle in flavors of Latte, Vanilla and Mocha, contains 500 mL per serving and has a mass suggested retail price (MSRP) in C-stores of $1.99 to $2.49.

Hertel said that because RTD coffee by Starbucks has a 70 to 75 percent market share in the food, drug, mass and grocery channels, there’s white space in the category. He also said that illy, which partners with The Coca-Cola Co., Inc., aims for a more upscale, European consumer.

“We don’t compete with Starbucks, we just think that we can be different,” he said. “We can ride this urban, kind of industrial vibe and connect with the millennial consumer.”

While the changing face of convenience stores may not happen in Arkansas or Texas this year, Hertel said, he has already seen the Whole Foods influence in C-stores of Southern California and New York. He said that consumers are beginning to show a willingness to pay a premium for something other than CSDs or energy drinks.

“Eventually there’s going to be a convergence, I think, where the convenience channel can’t keep ignoring or pushing away brands like us,” he said.

Jack Belsito, the CEO of VOSS, an upscale water company, also believes that C-store consumers are beginning to look for more premium products. He said that in the U.S., VOSS has been in Sheetz stores for about five to six years and Sunoco, Circle K, Xtra Mart and Cumberland Farms for about four to five years. In Norway, where the water is sourced, VOSS has placements in 7-Eleven and Deli de Luca, a Norwegian c-store chain.

Consumers may have to cough up an extra quarter or two to buy VOSS instead of other luxury waters, but they don’t seem to mind when looking for a treat, Belsito said. The company markets VOSS as affordable luxury; an idea that he said is catching on with more and more C-store shoppers who like the idea of being a VOSS drinker.

“We think we can occupy in the channel the treat occasion for the category,” Belsito said.

Meanwhile, another water company hopped onto the NACS train at the last minute. Balance Water CEO Martin Chalk said the company had taken advantage of an opening on the show floor and had accepted an offer from the NACS organization to buy the space because his products had begun to pick up steam in some convenience stores and he wanted to increase the brand’s presence in the channel.

“We’ve been getting real interest lately through NIDA (Northeast Independent Distributors Association),” Chalk said. “We started doing route rides and so many of their accounts were in convenience stores.”

The water brand uses flavorless flower essences to promote various functional effects — an idea that Chalk said was in keeping with the desire of convenience stores to present the brand as a 24-hour beverage solution.

“Work, rest, play,” he said. “We’ve been banging on functional and non-flavored for a long time and convenience wants to attract more female customers.”

Ayala’s Herbal Water, which launched its eccentric line of cold teas at this summer’s Fancy Foods Show in New York, is currently eyeing c-store chains and projects initial placements in the second quarter of 2014. David Tavitian, Ayala’s director of sales, said that he believes in the brand’s future in C-stores because consumers will be interested in the brand’s unique flavor profiles. Ayala’s teas come in four flavors: Rooibos Cinnamon Rose Petal, Nutmeg Cacao Nibs Cardamom, Chamomile Bergamot Vanilla and Peppermint Melissa (lemon balm) Spearmint.

“The teas, they add diversity to the coolers, the cases,” Tavitian said. “All of our flavors are really unique. We’re not a me-too beverage company.”

Tavitian said that these flavors, which are popular at restaurants for their uplifting, refreshing characteristics, are typically found in the hot tea category. This point of differentiation compounds with his belief that C-store consumers are ready for something different. These teas are organic, naturally caffeinated, calorie-free and don’t use artificial sweeteners or substitutes.

“We feel like consumers are looking for a unique, healthier option compared to AriZona or Honest,” Tavitian said.

BevNET editor-in-chief Jeffrey Klineman contributed to this report.

Source: Beverages