NEW YORK -- Coming to a convenience store near you this summer: smaller single-serving Coke and Pepsi products with a smaller price.
Rising ingredient and packaging costs have pushed the price of the standard 20-ounce bottle as high as $1.49 and put off consumers feeling pinched by gas prices.
"Bottlers are being hit because of the economy and higher gas prices, and they need to take action to improve their highest-margin channel," says Bill Pecoriello, Morgan Stanley beverage analyst.
While soft-drink volume was down 4.8% in the first quarter, says tracker Nielsen, it fell 5.2% in convenience stores, where the 20-ounce has been king since 1993.
That hits bottlers where it hurts. Single-serving bottles account for about 50% of their profits. They now are testing 12- and 16-ounce containers at prices as low as 99 cents in hopes of reviving growth.
"A smaller package at a lower price point could help create a greater number of sales transactions," says John Sicher, editor of beverage tracker and newsletter Beverage Digest.
•In 1,700 convenience stores in North Carolina and Virginia, Coca-Cola Bottling Co. Consolidated, Coke's second-biggest bottler, has yanked 20-ounce Coke and Diet Coke from coolers and replaced them with 16-ounce bottles for 99 cents and 24-ounce bottles for $1.49 for the really thirsty.
•Early this summer, Coca-Cola Enterprises, Coke's KO biggest bottler, will try 16-ounce cans and contoured bottles in different markets. Marked 99 cents, they'll be offered in portable coolers in aisles or adjacent to the big coolers.
The aim is to offer Coke products "at a great price in a difficult time," says Brian Wynne, vice president, business development for CCE.
•By Memorial Day, Pepsi Bottling Group, Pepsi's PEP top bottler, will test sales of Pepsi and Diet Pepsi in 12-ounce and 16-ounce bottles in different markets for 99 cents.
It's a way to offer "desirable prices" in a tough economy, says Jeff Dahncke, spokesman for the bottling group.
Notably not on board yet with yanking 20-ouncers is convenience giant 7-Eleven, which has declined to sell Coke's smaller sizes for 99 cents. The chain's strategy has been to cut cooler space for 20-ounce soft drinks by 25% to 50% in the past three years to open space for faster-growing beverages.
"We're focusing our sales and assortment efforts on growing categories like flavored and enhanced waters and energy and energy coffee drinks," says Todd Patrick, who oversees 7-Eleven's non-alcoholic beverage business.
It plans to address price resistance this summer with discounts on those drinks driving business.
Even if new single-serving sizes catch on, it may not mean the end of the 20-ounce bottles, or that smaller is what drinkers want. Arizona Iced Tea has successfully sold 99-cent, 23-ounce cans in coolers alongside its 20-ounce plastic and glass bottles. The can remains a top seller. Says Francie Patton, an Arizona spokeswoman, "There's no better value in today's economy."