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Beverage firms can seize control of retail channels: Euromonitor

By Ben Bouckley+

02-Jan-2013

A growing number of global beverage firms will follow the example of Starbucks and FEMSA in seizing control of retail channels, to boost margins and accelerate new product development, Euromonitor International predicts.

Michael Schaefer, head of consumer foodservice and soft drink research at the research firm, said in a company video that the move benefited beverage companies in particular.

They were able to “take control of the consumer experience” by building a brand using consumer interaction with the product under the best possible conditions as the touchstone, he explained.

Schaefer cited coffee retailer and manufacturer Starbucks as one example of such a move in the tea space, after its purchase of high-end US tea retailer Teavana.

FEMSA scores with Oxxo

Such a retail space foothold allowed the conglomerate to build the brand, strengthen consumer awareness and drive sales in a setting where it had full control of the buying process, he said.

“This could be key to ‘breaking’ high-end tea in the US and elsewhere,” Schaefer added.

Likewise, Sri Lankan tea company Dilmah had successfully run tea houses in New Zealand, Australia and beyond for some time, the analyst added, using them as a means of introducing people to high-end teas via sampling and encouraging them to buy.

“This has really been a global phenomenon, but perhaps the most successful instance of this has been the Oxxo convenience store in Mexico, run [since 1977] by FEMSA [Fomento Económico Mexicano], one of the largest soft drinks bottling companies in Mexico,” Schaefer said.

“Really, they’ve driven this whole new channel – previously convenience stores had not been particularly well developed in Mexico – really taking advantage of this gap in the market, while also securing thousands of new points of sale for their products.

Apple Store shows way...

Going forward, retail channel control would be increasingly important worldwide as a means of building new products and bringing them to market, Schaefer said.

“In more developed markets, retailers have become more powerful and have really invested in their own private label offerings, so it’s become harder and harder to secure shelf space,” he said.

“This [direct distribution] really cuts out the middle man. If you can build a compelling retail experience, similar to, say, the Apple Store in consumer electronics, it gives you a lot more power vis-à-vis retailers, and can also open up a whole new world in terms of NPD possibilities.”

Similarly, in emerging markets it was all about getting products in front of consumers, Schaefer said, often in rural locations with minimal modern retail penetration.

He cited the 2010 example of Nestle using a barge to deliver products to consumers living on the Amazon river in Brazil.