Beverage Spectrum April 2010

April 22, 2010

JUST REMOVE WATER How powders became the next hot beverage trend.

BIG PICKUPS How the bottled water mergers will change retailing.

RTD COFFEE Seattle’s Best?

Starbucks.

NEW SPACE FOR KIDS’ BEVERAGES From school to shelf.

SET THE STAGE FOR A

SUMMER OF PROFITS OFFER YOUR SHOPPERS THE EXCITEMENT OF UNEXPECTED MUSIC REWARDS AND EXPERIENCES ALL SUMMER LONG

Heineken

LIFTS THE ENTIRE IMPORT SEGMENT WHEN ON FEATURE AND DISPLAY.1

Heineken is the

NO. 1 EUROPEAN LAGER IN GROCERY,

FIVE TIMES BIGGER THAN THE NEXT EUROPEAN LAGER COMPETITOR.2

MILLIONS OF PRIZES

IN SPECIAL-EDITION PACKS WILL STOP SHOPPERS IN THEIR TRACKS!

1 2

6–7% lift in cases with feature & display. Source: ACNielsen Grocery, May 17–Sept. 12, 2009.

ACNielsen Total US Grocery, 24 weeks ending 10/31/09.

©2010 Heineken USA Inc., White Plains, NY

APRIL 2010 vol.

8 :: no. 3

Columns 4 FIRST DROP An argument for BevNET Live 6 PUBLISHERS TOAST Barry misses the excitement 20 GERRY’S INSIGHTS Insights hiding in plain sight 28 BLENDED CHANNELS Looking for collaboration 22

Departments 8 BEVSCAPE BUSINESS Investment Updates 10 BEVSCAPE INNOVATION Fair Trade Grows 12 CHANNEL CHECK Mixes by the Numbers 14 NEW PRODUCTS New Leaf gets Juicy; Odwalla Helps Haiti 50 PROMO PARADE Pepsi Refresh’s Next Steps

30

Features 22 BRANDS IN TRANSITION: HINT Hint hits its stride 30 COVER STORY JUST REMOVE WATER Single serve mixes are taking off 36 STARBUCKS DOUBLES DOWN Starbucks grows Seattle’s Best 38 NEW SPACE FOR KIDS’ BRANDS From school to shelf 44 INTEGRATION NATION How mergers will affect retailers

38

Beverage Spectrum (Postal Number 024-552) is published monthly with combined issues in January/February, May/June, July/August and November/December by Beverage Spectrum Publishing, Inc., a wholly owned subsidiary of BevNET.com, Inc. 44 Pleasant Street, Suite 110, Watertown, MA 02472. Periodicals postage paid at Boston, MA and additional mailing offices.

POSTMASTER: Please send address changes to Beverage Spectrum Magazine, Subscriber Services, 44 Pleasant Street, Suite 110, Watertown, MA 02472

By Jeffrey Klineman

THE FIRST DROP

IS A NANNY STATE MARY POPPINS OR MISS HANNIGAN? IT ALL STARTED WITH JUNK food. As I write this, I’m a few days past a workus-interruptus shouting match with another commentator, Bob Messenger, who runs an online newsletter called “The Morning Cup” for food industry executives.

As the result of a back-and-forth over a study that compared the relative addictiveness of junk food and heroin, Bob and I developed an epistolary disagreement about the role of taxes and regulation in the food and beverage industry. He thinks they’re the tools of a government that exists only to perpetuate itself on the backs of consumers and industry while limiting choice and profit, while I see them as constructs that allow businesses to exist and operate without causing themselves or consumers undue harm. I don’t mind the nanny. Bob hates her.

Here’s some of my thinking: While I think a healthy skepticism is important when looking at new research, you and I are both used to seeing enough industry spin to know that the same kind of skepticism should apply – in spades – to anything thrown out by the other side….

But, again, to have a knee-jerk anti-government – and anti-science – reaction to any new study can be read as just as antibusiness as overaggressive taxation. After all, lots of research-based regulation that you might claim beheads business also allows it to flourish: research shows that saccharine causes cancer? We fight that as anti-business… until we find that we can make more off of aspartame, ace-K, and Stevia. Science indicates pesticides and antibiotics might be bad for our crops and chickens? Where’s my Whole Foods… or my Wal-Mart, for that matter?

As for these studies taking away our freedom to make our own choices, that’s also a red herring, conflating the creation 4.BEVERAGESPECTRUM.APRIL.2010

of informed choice with lack of choice. If the government took tobacco away, instead of taxing it, that’s when you’d really be losing choice. If the government took liquor away, instead of taxing it, that’s when you’d really be losing choice; it’s easy to make the tax collector the villain – until you get drop-foot from your bathtub gin. Economic effect should certainly be taken into account when making new laws or regulations – but so should social and societal impact. These things need to be balanced, and science is one of the things that informs all sides. After all, you don’t want Kraft being the sole voice in deciding what you can eat on Friday any more than you want the government – or the Church, for that matter. Do these things change with the times? Absolutely – but that’s why regulations and laws evolve as well.

I’m not saying it’s all good, or that it’s all easy. I’m just saying that if you’re scared of the nanny state, you should ask yourself who you’d rather have looking out for you: Mary Poppins, or Miss Hannigan?

Here’s some of Bob’s: Now, like I said, I’m not against research.

But, c’mon, there is so much research out there that is dubbed “inconclusive” and requiring further study, that it is often quite easy to be skeptical of the validity of a lot of these studies. I just find it peculiar that this particular study equating an addiction to junk food with an addiction to heroin, is coming out at precisely the same time that the government is cranking up its attacks on the food and beverage industry, and threatening all sorts of punitive reprisals.

As for me being “scared” of the nanny state? Damned right I’m scared of the nanny state. I’m scared of any government that wants to regulate our behavior, at home or in the free marketplace, either by laws or taxes. I’ve been to China, I’ve been to Cuba (via Jamaica), I have seen

the worse of the nanny state culture in my time, and, no, we’re nowhere near there... yet! But we are on that road when we allow government to aggressively regulate and tax decisions of choice that used to be ours to make. Take soda. If I want to drink a Coca-Cola, why should I be punished for it by paying some stupid punitive sugar tax that has nothing to do with protecting me, but everything to do with creating more tax revenues for our bloated state and federal governments? Unless you want me to believe that government really is a caring, sensitive entity that only wants to shield us from our own flaws?

Now, I don’t have the space here to repeat everything that went back and forth – and I hate that I have to boil the arguments down to a couple of paragraphs worth of excerpts apiece (you can see them all at www.morningcup.net). And I’m certainly not looking for the last word here. Bob and I don’t have anything personal going on, we’ve just got differences regarding the intent of government.

Here’s the point: there are some hotbutton issues out there on regulatory benchmarks. The FDA, FTC, Congress, they’re all sniffing around the industry, and these are going to affect the quality and composition of the products we see in the future. And while I’ve got my opinion and Bob’s got his, there’s a great opportunity for you to help refine your own during an upcoming event, BevNET Live. We’ve got a panel called Current Issues in the Beverage Business that will be filled with folks much more informed than either Bob or myself on the topics of our era. And there will be a whole lot of other very important discussions on strategy, investment, sales, marketing, and the whole scope of the business. We’d love to see all of you there, in Manhattan, on June 7 and 8. Heck, I’d even love it if Bob came, too.

Introducing New 64 oz. Honest Kids Same Great Taste, Now in a Bigger Bottle

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PUBLISHER’S TOAST

By Barry J. Nathanson www.bevspectrum.com

Barry J. Nathanson PUBLISHER

BRING BACK THE EXCITEMENT

bnathanson@bevnet.com

Jeffrey Klineman EDITOR jklineman@bevnet.com

Matt Casey ASSISTANT EDITOR mcasey@bevnet.com

SALES John McKenna ASSOCIATE PUBLISHER jmckenna@bevnet.com

Adam Stern ASSOCIATE PUBLISHER

PHOTOCREDIT: (C)CHRISTIAN PONDELLA/RED BULL PHOTOFILES

astern@bevnet.com

OVER THE YEARS A BEVERAGE launch or promotion was a thing to behold. Yes, I live in New York City, and things are done on a grand scale here.

Marketers use the city as a platform to introduce their latest and greatest hoping that the news coverage will spread throughout the land. With so much of the consumer and trade media located here, it’s a no-brainer.

I’ve seen Richard Branson’s tank navigating the streets of Manhattan trumpeting the ill-fated, long forgotten Virgin Cola. Monster Energy brought the Las Vegas Monorail and plopped it right in the heart of Times Square. We saw the re-launch of Snapple under Triarc with a parade of vintage cars carrying the resurgent Wendy back into the fold, as well as the re-re-launch under Cadbury when a melted popsicle covered Union Square in goo. I froze two winters ago when Red Bull created a snowboard ramp on the East River to banner their sponsorship of a professional snowboarding tour. Yes, it was cold, but thousands of fans shivered with me. We had concerts in Bryant Park for Gatorade’s 5 Sport Ticket promotion with the winners attending the Super Bowl, Stanley Cup, Daytona 500, World Series and the NBA Finals. This list of bold events went on and on.

6.BEVERAGESPECTRUM.APRIL.2010

I was equally impressed with the initiatives of the smaller marketers to create buzz. Even without the resources to create big time events, they generated enthusiasm and pizzazz in the marketplace. VitaminWater, SoBe, Honest Tea, Fiji Water, Rockstar, Muscle Milk and Fuze come to mind as the leading innovators of this kind. Eschewing big money debuts, they relied instead on guerilla tactics. They got bodies into the streets for sampling, and into the venues they sponsored.

This is a different time. I understand that. It is a more conservative, buttoneddown marketing world. Resources are tighter, and it is harder to garner attention on the consumer level. I implore the new generation of marketers to work with their retail and distributor/wholesaler partners to create programs. I haven’t seen the next generation of marketers make their stamp yet. The opportunity is there; things are happening in cyberspace, I understand, but to me, it hasn’t yet reached the wonder of some of the big plays. Instead, I seem to wonder what it is that’s going on.

It is incumbent upon the “big boys,” with their acquisitions, to continue to do things in grand style. As for the new entries, why not try to create excitement in order to be fulfilled and successful? I regret to say that it has been missing for a while now.

Jeff Hyde ACCOUNT EXECUTIVE jhyde@bevnet.com

ART & PRODUCTION Matthew Kennedy ART DIRECTOR Amadeu Tolentino GRAPHIC DESIGNER Natalie Iknaian GRAPHIC DESIGNER BEVERAGE SPECTRUM PUBLISHING, INC. John F. (Jack) Craven CHAIRMAN jfcraven@bevnet.com

John Craven PRESIDENT & EDITORIAL DIRECTOR jcraven@bevnet.com

ARTICLE REPRINTS FosteReprints (500 COPIES OR MORE) ph. 800-382-0808 x142

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BPA Worldwide Member, June 2007

DO YOUR PART: PLEASE RECYCLE THIS MAGAZINE

Most Valuable Player meets Most Valuable Product.

Three-time National League MVP Albert Pujols knows what the power of award-winning protein does for him.

Imagine what it can do for your sales. Especially since OhYeah! was judged the 2009 Best Tasting Nutritional Shake in America by the American Masters of Taste, as well as earning the 2009 CSNews Best New Product award. To find out more, contact Wes Strickland, VP of Sales, at 888.231.2684 or hit ohyeahnutrition.com.

BB

BEVSCAPE BUSINESS • The latest news on the brands you sell.

Sweet Leaf buys Tradewinds With the approval of the high-end, organic player Sweet Leaf Tea Co. to purchase the mainstream tea company Tradewinds, the private equity group Catterton Partners is taking steps to insure a large payout when the time comes for Nestle to finally buy out Sweet Leaf Tea from its investment partners.

Coming hot on the heels of the departure of founder and CEO Clayton Christopher, the Tradewinds acquisition allows Sweet Leaf to add positive sales numbers to its bottom line as it attempts to reach revenue goals that will ultimately lead to a large payoff for investors through a Nestle purchase. The Tradewinds brand is a big, profitable player in Midwest U.S. mainstream channels, and its positive cash flow will also help decrease the debt load for Sweet Leaf as the upstart organic tea company battles to broaden its reach via more mainstream This unlikely marriage will let Sweet Leaf pursue a dual-brand strategy. supermarket and national DSD accounts.

With Tradewinds’ own strengths factored in – it sells to mainstream grocery, Wal-Mart, Trader Joe’s, and other large accounts – the acquisition allows Sweet Leaf – which has fought to escape its original natural channel distribution – to conduct a “dual-brand strategy,” according to a source close to the deal. •

Investment Update

The FRS Company announced that it has received $23.1 million in its latest financing round led by Oak Investment Partners, LLC, an early investor in The FRS Company. The additional financing allows the company to expand its sales infrastructure by hiring beverage industry veterans and exploring distribution opportunities throughout the U.S. and internationally. The company will also continue to support its marketing efforts, such as the recently launched national television advertising campaigns featuring seven-time Tour de France champion Lance Armstrong and four-time NBA championship player Derek Fisher.

Diet Grows as CSD Decline Slows

Diet sodas now account for 30 percent of the CSD category.

8.BEVERAGESPECTRUM.APRIL.2010

Sales of carbonated soft drinks declined in 2009, but at a lower rate than they have been recently, according to new data from Beverage Digest.

BD showed that North American CSD volumes declined by about 9.4 billion cases, or 2.1 percent, compared to a nearly 3 percent drop in 2008.

Pepsi Beverages Company chief executive Eric Foss predicted that CSD sales will return to low single digit growth in 2011, but consumer preferences within the category may be shifting. Dr Pepper Snapple Group grew its volume by 4.8 percent, according to BD, while PepsiCo and the Coca-Cola Co. lost 5 percent and 3.9 percent, respectively.

Additionally, only two of the top ten CSD brands – Diet Mtn Dew and Diet Dr Pepper – increased their volumes.

Fast-growing Coke Zero sold 116 million cases, approaching the 167 million sold by Diet Dr. Pepper, and BD reports that diet beverages now account for 30 percent of the CSD category.

The overall liquid refreshment beverages market has also slipped, with Coke losing 3.1 percent of its volume and PepsiCo down by 7.5 percent. DPSG, however, grew total LRB volumes by 3.3 percent on the strength of its CSD sales. •

Adina for Life, Inc. announced the completion of a $14 million round of equity financing lead by CIC Partners.

The Dallas, TX-based investment group includes former PepsiCo Chairman and CEO Roger Enrico, and Michael Rawlings, former President at Pizza Hut, Inc. Other investor partners include Sherbrooke Capital, Pacific Community Ventures, Good Capital, and Seraph Capital-all investors in previous rounds, as well as many of Adina's distributor partners.

Adina for Life said this newest round of investment capital will bolster national distribution of Adina Holistics. •

4/10

P

U SIGN

6/1 BY 0

This summer, milk is pouring on the sales and joining forces with Post® Cereals. It’s our July/August Back to School Breakfast Promotion, reminding Moms that a nutritious breakfast helps kids “Unlock Their Potential.” There’ll be an FSI driving consumers in-store for joint savings on the purchase of milk and Post Cereals, along with POS materials. Plus, an online trivia game will give consumers the chance to win instant-win prizes. To sign up or learn more, call your processor or ADA representative, or call the MilkPEP Hotline at 800-945-MILK.

© 2010 America’s Milk Processors. got milk?® is a registered trademark of the California Milk Processor Board. © 2010 Post Foods, LLC

BI

BEVSCAPE INNOVATION • Product development & marketing news

Online Effectiveness

Brand Butlers

Despite wild innovation in online marketing methods – ranging from sponsored content to corporate profiles to helpful applications – traditional banner advertisements and email newsletters remain two of the most effective ways to get consumers to buy products, according to a study performed by Psychster and AllRecipes.com.

The study tracked participants’ reactions to seven kinds of online advertising. The results paint a hazy picture for how to run internet campaigns.

Sponsored content promotions inspired the most consumer interaction– generating brand awareness – but sparked the least purchase intent and recommendations to friends. On balance, it was also the type of activity least likely to be perceived as an advertisement. Corporate social networking profiles were more effective when they allowed users to become fans of the brand – which also put the brand’s logo on the fan’s profile. “Give” and “get” applications, which allowed consumers to create a digital product and either keep it for themselves or give them to friends, created more engagement than banners and newsletters, but lagged in purchase intent and recommendations.

These results, Psychster said, were consistent across the two brands tested (a car company and a soup). Participants viewed each mock-up on either Facebook or AllRecipes.com pages. No ad type was so engaging that it overcame the advantage found by matching the brand to an appropriate web site. •

The next wave in advertising might be assistance.

Consumers have grown increasingly pragmatic, plugged in and fond of convenience, reported Trendwatching.com, giving marketers the opportunity to address customers’ unmet needs through lightlybranded services.

While the exploding prevalence of smartphones has led to a focus on mobile apps, marketers can also reach consumers through older technology. The United States Postal Service created an online application that uses their computer’s web camera to British retailer Tesco’s iPhone determine the right size box program can find information about to ship a shown package, and their wines based on photos.

3M offered business travelers privacy at airports in branded cubicles. In the beverage sphere, PepsiCo hosted brand-themed lounges at the South by Southwest concert festival, and British retailer Tesco gave its consumers an iPhone program that finds information about the chain’s wines by recognizing them in a photo.

The opportunities for other brands – including beverage marketers and retailers – are currently wide open, Trendwatching reported. The key with this kind of promotion, Trendwatching said, is to identify the themes of a brand, then dream up a suite of services. While most of these would focus on existing consumers (and the firm suggests using input from those consumers to develop ideas), building services that are also open to non-customers enhances the service’s ability to work as a promotional platform. •

New in Oddvertising Toronto firm AddMirror has taken digital out of home advertising to the bathroom. The company is marketing technology that places digital, back-lit, motion-activated ads in public bathroom mirrors. Meanwhile, Brand in the Hand has taken advertising to airsickness bags. The company also develops promotional sleep kits, menus, cups, napkins and in-flight announcements and other promotions targeted at air travelers.

10.BEVERAGESPECTRUM.APRIL.2010

CC

CHANNEL CHECK • What’s hot – and what’s not – in stores now.

SPOTLIGHT CATEGORY

DRINK MIXES 52 Weeks through 3/21/2010

In looking at dry mixes (and don’t forget to check out our cover story this issue) it’s easy to see that the big warhorse brands dominate: Crystal Light, Gatorade, Propel, Lipton. But the real innovation in recent years can be found in the “on the go” skus and the wider varieties available through tea, energy, and sports drink mixes. Look at single-serve in this category and you can see where the action is. The other place mix action takes place, Wal-Mart, isn’t represented here, but taking that channel into account, powders and mixes are dynamite, indeed.

SPORTS DRINK MIX Brand

Dollar Sales

Change vs. year earlier

Propel

$28,884,030

-11.3%

Gatorade

$22,823,000

-12.8%

G2 Sticks

$5,823,498

702.6% -8.6%

Gatorade Frost

$2,468,710

Propel Calcium

$577,083

N/A

Powerade

$403,191

-28.4%

ENERGY DRINK MIX Brand

Dollar Sales

Change vs. year earlier

Crystal Light On the Go

$10,242,810

62.1%

Propel

$1,809,718

N/A

Zipfizz

$939,646

-35.6%

Private Label

$752,521

197.1%

4C Totally Light 2Go

$597,388

981.0%

Zizzazz

$592,588

640.0%

INSTANT TEA MIX Brand

Dollar Sales

Change vs. year earlier

TOPLINE CATEGORY

VOLUME

52 Weeks through 3/21/2010

BEER $21,241,260,000

Crystal Light

$59,327,210

3.9%

Private Label

$53,853,990

5.2%

BOTTLED JUICES

$49,898,310

0.0%

$4,928,405,000

Lipton Crystal Light On the Go

$27,809,310

-22.5%

4C

$21,593,710

3.3%

Nestea

$11,081,850

-10.9%

Dollar Sales

Kool Aid

Change vs. year earlier

$135,160,800

2.3%

Crystal Light

$87,589,260

-2.4%

Private Label

$71,308,060

7.4%

Crystal Light On the Go

$65,470,620

-11.6%

Country Time

$44,582,990

-3.5%

Kool Aid Singles

$17,405,090

-7.4%

SOURCE: Symphony/IRI. Total food/drug/c-store/mass excluding Wal-Mart.

12.BEVERAGESPECTRUM.APRIL.2010

-2.7%

-4.6%

$7,466,643,000

ENERGY DRINKS

FRUIT DRINK MIX Brand

BOTTLED WATER

-2.5%

$5,663,570,000

4.6%

SPORTS DRINKS

-9.9%

$3,302,509,000

TEA/COFFEE $2,683,006,000

3.6%

SOURCE: Symphony/IRI Total food/drug/c-store/mass excluding Wal-Mart.

CC

CAPPUCINO/ICED COFFEE Brand

Frappuccino

HOT! PomX

Dollar Sales

Change vs. year earlier

ENERGY DRINKS Brand

HOT! Doubleshot Dollar Sales

$492,733,800

-3.5%

Red Bull

$1,929,430,000

Change vs. year earlier

4.3%

Doubleshot

$53,060,570

-16.7%

Monster

$885,709,800

9.3%

Doubleshot Light

$11,359,500

-24.4%

Rockstar

$386,899,300

-7.6%

Private Label

$3,905,108

-14.2%

NOS

$176,068,000

19.6%

Java Monster

$160,607,600

-11.1%

Doubleshot

$137,669,400

49.2%

AMP

$136,967,600

-13.4%

Monster XXL

$129,298,000

-39.0%

Full Throttle

$106,892,400

-2.3%

Monster Mega

$81,575,390

N/A

Nestle Coffee Mate

$2,657,087

N/A

Cinnabon

$2,079,291

-42.5%

Maxwell House

$1,508,990

N/A

Emmi

$1,001,928

PomX

$700,815

447.0%

Community

$496,063

43.4%

SOURCE: Symphony/IRI Total food/drug/c-store/mass excluding Wal-Mart.

52 Weeks through 3/21/10

RTD TEA Brand

1.5%

NOT! Cinnabon

HOT! AriZona Arnold Palmer Dollar Sales

Change vs. year earlier

AriZona

$587,363,500

7.6%

Lipton

$330,544,300

-7.3%

Snapple

$183,531,400

0.7%

Lipton Brisk

$172,355,200

23.2%

Lipton Pureleaf

$146,934,200

2.0%

Nestea

$116,580,300

12.6%

Diet Snapple

$110,757,600

7.5%

SOURCE: Symphony/IRI Total food/drug/c-store/mass excluding Wal-Mart.

52 Weeks through 3/21/10

NOT! Monster XXL

ENERGY SHOTS Brand

HOT! Red Bull Dollar Sales

Change vs. year earlier

Chaser 5-Hour

$521,540,600

46.1%

Stacker2 6-Hour

$29,460,020

6.6%

Red Bull

$29,275,980

44,638,457.3%

5 Hour Energy

$24,083,680

9,918.2%

Monster Hitman

$18,957,730

168.7%

NOS

$10,083,540

-38.6%

Rockstar

$6,097,117

10.1%

$4,321,527

-60.8%

Gold Peak

$66,808,760

23.6%

Extreme Energy

Diet Lipton

$66,488,720

12.2%

Redline Power Rush

$3,589,382

114.8%

AriZona Arnold Palmer

$57,542,740

151.8%

Rock On

$3,168,504

1,146,897.3%

SOURCE: Symphony/IRI Total food/drug/c-store/mass excluding Wal-Mart.

52 Weeks through 3/21/10

IMPORT BEER Brand

Corona

NOT! Lipton

HOT! Dos Equis XX Dollar Sales

$939,167,500

Change vs. year earlier

-8.4%

SOURCE: Symphony/IRI Total food/drug/c-store/mass excluding Wal-Mart.

52 Weeks through 3/21/10

NOT! Extreme Energy

DOMESTIC BEER Brand

HOT! Keystone Light Dollar Sales

Change vs. year earlier

Bud Light

$5,050,230,000

-3.7%

$2,095,327,000

-8.8%

Heineken

$579,037,000

-10.0%

Budweiser

Modelo Especial

$250,694,700

7.4%

Coors Light

$1,788,564,000

3.1%

Tecate

$182,430,100

-4.6%

Miller Lite

$1,638,775,000

-5.0%

Corona Light

$167,038,400

-1.0%

Natural Light

$1,112,439,000

8.1%

Heineken Light

$94,522,390

-14.7%

Busch Light

$674,221,400

5.6%

Dos Equis XX

$84,788,270

28.3%

Busch

$613,095,600

3.2%

Labatt Blue

$84,262,260

-2.4%

Miller High Life

$482,284,300

3.7%

Stella Artois

$77,664,150

11.3%

Keystone Light

$453,433,900

20.4%

Newcastle

$74,506,620

1.1%

Natural Ice

$321,102,900

7.2%

SOURCE: Symphony/IRI Total food/drug/c-store/mass excluding Wal-Mart.

52 Weeks through 3/21/10

NOT! Heineken Light

SOURCE: Symphony/IRI Total food/drug/c-store/mass excluding Wal-Mart.

52 Weeks through 3/21/10

NOT! Budweiser

APRIL.2010.BEVERAGESPECTRUM.13

NP

NEW PRODUCTS •

WINE Terra FOSSIL USA will release Terra Fossil Cava Brut Reserva, produced from grapes grown in the Penedes region of northern Spain. Terra FOSSIL will also expand its portfolio throughout 2010, with the next varietals hailing from New Zealand, France and Germany. Each wine’s label features a distinct dinosaur. Suggested retail prices will range from $7.99 to 13.99, depending on the varietal and vintage. The company is building its New York market, and expanding to all fifty states. For more information, call (718) 626-7802.

BEER Pyramid Breweries announced the return of Curve Ball Blonde Ale, a crisp, clean-tasting, cold lagered ale. Accentuated with subtle herbal and spicy characteristics from Vanguard and Perle hops, this seasonal offering finishes dry and crisp. Available from April through July, Curve Ball will be offered in 12 oz. and 22 oz. bottles, 6-packs, and 12-packs.

Curve Ball will also be featured in Pyramid’s Summer Variety 12-Pack. For more information, call Pyramid at (206) 682-8322.

The 2010 Michelob Brewing Co. Spring/ Summer Sampler Pack, available nationwide beginning mid-March, includes the new Michelob Ginger Wheat, along with Shock Top Belgian White, Michelob Dunkel Weisse and Hop Hound Amber Wheat. Each sampler pack includes a flighting sheet with tasting notes and a summary of each beer’s ingredients. The sampler pack is available at grocery and convenience stores nationwide through September in 24-packs and 12-packs. For more information, call (314) 577-9928.

SPIRITS Hotel California USA is launching its ultrapremium Hotel California Tequila. The initial launch will take place in the northeast and California. The brand will be supported by trade advertising, sales promotion, and trade public relations, on-premise tastings and event marketing. MSRP is $55.99 for Anejo, $54.99 for Reposado and $49.99 for Blanco.

For more information, call Hotel California Tequila at (860) 657-4404.

14.BEVERAGESPECTRUM.APRIL.2010

The newest options for cooler and shelf.

TY KU announced the debut of TY KU Soju, a premium clear spirit comparable to vodka with less than 70 calories per serving. TY KU Soju is distilled from Japanese barley, creating a flavor profile is light and balanced with hints of citrus. It carries a suggested retail price of $32.99 for a 750 mL bottle. For more information, email contact@trytyku.com.

SMIRNOFF Vodka launched its first 100-proof flavored vodkas – Spiced Root Beer and Dark Roasted Espresso. Each combines super-premium crafted ingredients with the taste of SMIRNOFF Blue label, resulting in a crisp vodka with robust flavors and aromas. SMIRNOFF Spiced Root Beer and Dark Roasted Espresso are available nationwide at local retailers where SMIRNOFF Blue is sold in 50 mL, 375 mL, 750 mL, 1 L and 1.75 L sizes. The suggested retail price for SMIRNOFF Spiced Root Beer and Dark Roast Espresso is $16.99 per 750 mL bottle.

Prices may vary per market. For more information, call (646) 223-2019.

JUICE New Leaf Brands has added an iced-tea/lemonade blend and three lemonade flavors to complement its line of RTD teas. New Leaf’s lemonades are available in three flavors— Homemade, Black Cherry and Strawberry.

Additionally, “The Tiger,” half-iced tea / half lemonade, will debut as part of the lemonade line-up. New Leaf’s 100 percent natural lemonades are made with pure organic cane juice and contain 10 percent real fruit juice. These products will be available in 16.9 oz. glass bottles via any of New Leaf’s more than 100 distributors. MSRP on these products is between $1.48 and $1.69. For more information, please call New Leaf at (845) 365-1570.

Naked has unveiled two new vegetable-rich smoothies, Berry Veggie Machine and Orange Carrot. Berry Veggie Machine blends everything from healthy purple carrots, sweet potatoes, red beets and sweet corn to delicious cherries, strawberries and plums. Orange Carrot blends one serving of veggies and two servings of fruit in each bottle. As with all Naked Juice products, Naked’s Orange Carrot and Berry Veggie Machine contain no added sugars or preservatives.Both new Na-

NP ked Juice flavors will be available nationwide for the suggested retail price of $3.29 per 15.2 oz bottle. For more information contact Naked Juice at 310.248.6113.

Naked has also launched a pair of fruit smoothies made with coconut water to reduce calories by 35 percent, Tropical Smoothie With Coconut Water and Peach Guava Smoothie With Coconut Water. Tropical Smoothie offers a juicy blast of pineapple and mango flavor, while Peach Guava Smoothie delivers a perfectly fused combination of juicy peach and guava goodness to tantalize your taste buds! Both are excellent sources of Vitamin C, as well as other essential vitamins. Both new Naked Juice flavors will be available nationwide for the suggested retail price of $3.29 per 15.2 oz. bottle. For more information, call Naked at at 310.248.6113.

Hope Project, a large-scale, five-year initiative spearheaded by The Coca-Cola Company.

Through sales of its new flavor, Odwalla hopes to raise more than $500,000 to benefit the cause. Available in 450 mL (15.2 oz.) grab-n-go recyclable plastic bottles as well as half-gallon sizes, Haiti Hope Mango LimeAid is available in the refrigerated section of natural food stores, select supermarkets and specialty outlets throughout the United States. This product will be variably priced with other Odwalla offerings across the U.S. For more information contact Coca-Cola at (404) 676-3288.

Zola has launched two new products in its lineup of Brazilian Superfruit beverages: Zola LIGHT Açaí and Zola Açaí Daily Wellness Shot. Zola LIGHT Açaí is the world’s first low-sugar, low calorie, authentic Açaí juice. Naturally sweetened with Stevia, Zola LIGHT Açaí has 70 calories and 11 grams of sugar per serving. Zola Açaí Daily Wellness Shot is a liquid dietary supplement that provides a full dose of antioxidants in each 1 oz. shot through a unique blend of Açaí and Acerola. The Zola Daily Wellness Shot contains over 85 percent Açaí and Acerola while delivering 3,000 ORAC per ounce.

With only 20 calories and 3 grams of sugar, a one-ounce shot boasts 100 percent of an adult’s recommended daily dose of antioxidants for immune system support, heart health, anti-aging properties and a boost in energy and stamina. Zola LIGHT Açaí retails for $2.99 for 12 ounces, and Zola’s Açaí Daily Wellness Shot retails for $29.99 for 32 ounces (32 doses, $.94/dose). Both are available online through www.DrinkZola. com and www.amazon.com, and Açaí Daily Wellness Shot is available at all Vitamin World locations nationwide.

Minute Maid has launched three Minute Maid Enhanced Chilled Juices and Juice Drinks in brand new, 12 oz. single-serve bottles nationwide: Minute Maid Pomegranate Blueberry, a 100 percent fruit juice blend of 5 juices, Minute Maid Pomegranate Lemonade and Minute Maid Strawberry Kiwi flavored juice drink. Minute Maid Pomegranate Blueberry contains Omega-3/DHA and four other nutrients to help nourish the brain and body. Minute Maid Pomegranate Lemonade contains antioxidant vitamins C and E, which help support a healthy immune system.

Minute Maid Strawberry Kiwi flavored juice drink comes with Yerba Mate extract for a natural energy boost. These products carry an MSRP of $1.59. The Minute Maid Enhanced product line, including the new single-serve bottles, will be supported with an integrated marketing campaign that includes point of sale, direct consumer engagement initiatives and advertising. For more information, contact Coca-Cola at (404) 676-3288.

MIXERS

Odwalla has launched a new beverage to aid in ongoing recovery efforts in Haiti. The company has announced plans to donate 100 percent of the profit from sales of its new Haiti Hope Mango Lime-Aid to help provide training and better market access to 25,000 mango farmers in Haiti as part of a longterm investment in the country’s economic development. The contributions will aid Haiti’s recovery from January’s devastating earthquake and support the island nation’s long-term reconstruction as part of the Haiti

Proximo Spirits, Inc. has released 1800 Tequila Ultimate Mixes in Tetra Pak cartons featuring eco-friendly packaging and three new cocktail flavors - Ultimate Margarita, Mojito and Pomegranate Margarita. Each new cocktail mixer is made with natural sweeteners including Agave nectar. A “green” alternative to traditional beverage packaging, the 1800 Ultimate Mixes in Tetra Pak packages are contained in a light, carton-based package, mainly made from paper, which comes from wood, a renewable resource that

16.BEVERAGESPECTRUM.APRIL.2010

NP is responsibly replenished. These products are available nationwide in three flavors, priced at $4.99 per 1 L carton. For more information call Proximo at (212) 999-5585.

ENERGY Red Bull has launched a new 19.2 oz Red Bull Racing Team special edition can launching in April 2010. Available in Red Bull Energy Drink and Sugarfree varieties, the cans feature Red Bull Racing’s Brian Vickers and Scott Speed, respectively, and will be available through most of the NASCAR season.

The Red Bull Racing team, embarking on its fourth year of operating in the NASCAR Sprint Cup Series, will be celebrated on the 19.2 oz can for a successful 2009 campaign, which included the team’s first win and first appearance in The Chase, NASCAR‘s version of the playoffs. These products will retail at $4.49 per can. For more information, call Red Bull at (310) 460-4714.

Go Fast Sports & Beverage Company has launched a pair of “hybrid” energy beverages designed to lessen calorie and sugar content with the use of Stevia, while pro-

viding enhanced benefits to the consumer with ingredients such as coconut water and antioxidant-rich tea blends. Both Go Fast Coconut Energy and Go Fast Energy Tea showcase eye-catching graphics on their 16 oz. can packaging using Eyeris, Ball Corporation’s proprietary, enhanced printing technology. Go Fast Coconut Energy, the first in the hybrid line-up, enhances the original awardwinning Go Fast Energy Drink with coconut water and Stevia, providing a smooth, sustained energy kick, great taste and all the benefits of the pure, unripe coconut including the electrolytes sodium, potassium and magnesium, to aid in rehydration. Go Fast Energy Tea combines Go Fast’s original energy and herbal blend with a combination of white, black and green teas. Both products contain only 50 calories and 13 grams of carbohydrates per 8 oz. serving, and carry an MSRP of $2.49 per can. For more information, call Go Fast at 208 860-5353.

TEA Honest Tea has launched a pair of new Honest Kombucha varieties, Maqui Berry Grapefruit and Apple Jasmine. Both are

APRIL.2010.BEVERAGESPECTRUM.17

NP lightly sparkling, fermented tea beverages combining organic, Fair Trade Certified tea, raw, live, probiotic cultures and a touch of organic cane sugar. The maqui berry grapefruit blend introduces a new fruit to American palates – the maqui berry – a dark, highantioxidant fruit from the Patagonia region of South America. Honest Kombucha, also in its original three varieties, Berry Hibiscus, Lemon Ginger and Peach Mango, is available at a suggested retail price of $3.49 – $3.99 at natural foods stores nationwide. The drink has 7 grams of sugar and 35 calories per 8 oz. serving. For more information contact Honest Tea at (301) 760-4833.

CSD HiBix Corporation has launched a brand new OOBA line of lightly sweetened sparkling hibiscus beverages that are now only 95 calories per 12.5 oz. bottle, and will retail for as low as $1.79. All six flavors, Original, Blackberry, Key Lime, Orange, Kiwi and Pineapple are made with five 100 percent all-natural ingredients.OOBA is available nationwide,

18.BEVERAGESPECTRUM.APRIL.2010

with national distribution growing steadily.

For more information please call HiBix at (925) 225-0800.

Waialua Soda Works has launched its newest flavor, KonaRed, and re-introduced its entire line as 100 percent natural. KonaRed is sourced from the Hawaiian coffee fruit grown on prestigious family farms famous for their pristine growing conditions and natural farming techniques, and offers an extraordinary level of desirable nutrients and antioxidants. Founded in 2003, the company is headquartered on the North Shore of Oahu and offers six all flavors: Pineapple, Mango, Root Beer, Vanilla Cream, Lilikoi (passion fruit), and KonaRed. In addition to the local KonaRed™ ingredient, Waialua Soda Works uses Maui Brand cane sugar, vanilla grown on the Big Island, and honey from Kauai. The retail price is $5.50 for a 4-pack.

Waialua Soda Works is available at Whole Foods Market West Coast, BevMo!, HEB in Texas, and other fine retailers and locations throughout the US. For more information, call (808) 778-1017. •

By Gerry Khermouch

GERRY’S INSIGHTS

INSIGHTS CAN BE HIDDEN IN PLAIN SIGHT SOMEWHERE AROUND A decade ago, someone gave my kids an inflated, spherical object that, we were told, is called a “soccer ball.” We were in front of our home trying to figure out how the thing worked when a teenage neighbor of ours sauntered by and observed, “Your daughter has a good foot. You should sign her up in AYSO.” “What’s AYSO?” I asked. She looked at me like I had two heads:Had I never noticed the couple of hundred kids in colorful jerseys who amble past our building every weekend on the way to youth soccer games in the park right across the street? AYSO. For someone who’s become quite the soccer enthusiast since then, I look back on that episode with amazement and not a little embarrassment. Sure enough, every fall and spring weekend, our block is invaded by soccer-ball-wielding little ninjas. How could I have ever missed it?

The answer, of course, is that you can completely miss things with no relevance to you, but the sooner you realize they’re out there the sooner you can start using them to your benefit. So keep that in mind when venturing into new beverage arenas, where your own powers of observation are likeliest to fail you, where you may find yourself unable to make crucial – if elementary – distinctions among brands because you simply haven’t seen what’s out there in plain sight.

Lately, Gatorade executives have been describing how, after talking to 10,000 consumers, they learned that athletes prefer separate formulations for before, during and after their workout. Even granting the Gatorade people an interest in concocting a good back story for their new brands, it seems a bit much for them to refer to this as a key “insight.” The evidence has been right on the shelf in nutrition stores for years (not to mention within Gatorade’s own programs for college athletes).

The same issue comes up a lot when beer guys get into craft beers or 20.BEVERAGESPECTRUM.APRIL.2010

non-alcoholic beverages. They think they’re steeped in all aspects of the beverage trade as they meet with retailers, poke their heads into store coolers and read magazines like this one. Time and again, though, they reveal that they’re failing to absorb enough information, or the right information, to navigate these segments.

Take the distribution alliance that Monster Energy inked with AnheuserBusch back in 2006. In some markets, A-B wholesalers ended up getting secondary Monster Energy brands such as Lost and Rumba, not the core greencan. I had some odd encounters at the time with old Bud hands – ones I’ve long known to be among the sharpest operators in the wholesaler network – who nevertheless sounded clueless when the discussion turned to NAs. “We’re getting Monster,” I recall one telling me. “Well, not Monster, but Lost, which I’m sure will be good, too.” That’s like saying, “Well, not Bud Light, but Schlitz, which I’m sure will be good, too.” Once in the category, of course, it didn’t take long for them to recognize the limitations of their perceptions.

It’s a difficult problem, though there are a few things one can do. As with any new language or culture, an immersion course is never a bad idea. Put executives in a situation where they can’t afford to ignore these segments because they’ve been put at the center of their jobs.

In my limited contacts with the people at Coca-Cola’s Venturing & Emerging Brands unit, I’ve been impressed at how quickly they’ve climbed the learning curve. These are folks who, judging by my initial contacts when they first came upon the scene, started out having no idea what things like yerba mate were.

Within six months, they seemed already to know way more than I’ve picked up in 15 years of watching these emerging segments. (OK, that’s not saying much.)

If you’re going for a new area, make it a point to frequent other sections of the

store or classes of retail than you normally would. That philosophy seems to have stood the business’ best innovators in good stead. AriZona Iced Tea’s Don Vultaggio seems to have plucked some great beverage packaging ideas out of visits to the steak sauce and salad dressing aisles. Or recall the ascent of Neville Isdell to CEO of Coke a few years ago: Many observers initially wrote him off as too much a member of the old guard to serve as an effective change agent. Isdell recognized that too – or came to recognize it soon enough. Speaking to a Wall Street Journal reporter after a year or so in the job, he described his routine this way: “I wander around places. About every couple of months I wander around the likes of Whole Foods. I’m looking at what other people are doing. I’m looking at what is new that may or may not have an attractiveness.” You can be sure that, judging by Coke’s long futility on the innovation side, not too many of its execs had prowled the likes of Whole Foods in the past.

Most of all, it’s important to learn to rely on people who’ve been there, done that. Though having served a long time as a Coke exec, in his first months as ceo of FRS, Carl Sweat seems to be on the right track by reaching out to new-age veterans for key sales posts within the maker of quercetin-based drinks and supplements.

And I continue to believe that the single most important thing a beer wholesaler venturing into craft beers or NAs can do is to hire a craft or NA veteran to help assemble a portfolio that makes sense.

All these things can help polish the old specs so you begin to see more of what’s hiding out there in plain sight. Which beats getting run over by a gaggle of cleat-wearing preadolescents, any day.

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twiceweekly e-newsletter covering the nonalcoholic beverage sector.

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BRANDS IN TRANSITION

HINT

BACK IN BLACKBERRY

by Matt Casey

HINT ESSENCE WATER HAS drawn a lot of attention with its packaging. The brand’s founders, husband and wife team Theo and Kara Goldin, chose a clear plastic label and a clear PET bottle to demonstrate the purity of their (also clear) beverage. Distributors liked it; packaging designers liked it, and reviews highlighted that striking appearance as a strong point in the brand’s favor.

But those clear labels almost killed the brand. Despite industry appreciation for their bold and unique choice, according to the founders, the package failed on the shelf. What looked great in expertly lit photos and in the hands of buyers at trade shows appeared muddy and difficult to read against cluttered beige backdrops.

So, the Goldins recently scrapped the clear look in exchange for a basic, opaque white wrap.

“Those packages really make it pull off the warm shelf much better than it did,” Goldin said. “The improvement is kind of astonishing.”

That about-face on packaging represents just one of several changes aimed at improving the brand’s resonance with consumers instead of “experts.” Hint also conducted an SKU rationalization that killed several flavors that captured 22.BEVERAGESPECTRUM.APRIL.2010

retailer and distributor attention in favor of consumer favorites like Watermelon and Mango-Grapefruit. If it sounds like the brand is getting simpler, it is, but it has also shed deadweight. With a crew of veterans added to its sales roster, Theo Goldin said the brand has found its center and is starting to catch on.

Goldin said Hint first tested the full line of new labels in New York, where the company already needed to alter its package to fit new deposit regulations.

Following that change, Goldin said his retail sales – during the winter, amid an economic downturn – spiked as high as they had during the previous summer.

With that rising velocity, Goldin said, his retailers gave Hint displays and increased shelf space. He’s hoping for this summer’s sales to be “completely out of control.”

If it happens, part of that summer surge could come from Starbucks. The coffee chain added Hint’s Blackberry to its coolers in March following a trial at the chain’s now defunct “Wall of Wellness” pilot program. The plan would have made the chain something of a depot for innovative beverages, but board members killed the Wall of Wellness – which would have rolled out additional coolers to 1,000-plus locations – because they believed it would

have diluted the chain’s coffee-centric reputation. Hint survived that scrapped experiment and will now get one coveted facing in the chain’s limited cooler space – an even more valuable piece of real estate now that it’s such a limited commodity.

Goldin called the Starbucks deal “gigantic,” but Tom Keeney, Hint’s vice president of sales (and a former glaceau salesman) said he viewed it as a starting line. Not only will the placement put Hint in an environment where its consumers congregate and feel safe, but Keeney said slinging the Starbucks name has helped him when negotiating distribution deals and retail authorizations.

The placement also encapsulates Hint’s newfound sense of focus. When the company recently trimmed its offerings, designating six surviving SKUs as the brand’s core, it firmly established Blackberry as its flagship. In addition to its prominent placement, Disney used Hint Blackberry as a promotional platform for its animated film, The Princess and the Frog. Hint and Disney collaborated to create limited-time packaging for the flavor, which also served as the brand’s first test for its now-opaque labels. The blackberry emphasis has allowed the brand to grow by shrinking its offerings After years of introducing new varieties, the line-up featured some flavors that proved too esoteric for mainstream consumers, particularly given the brand’s lack of sweetener.

Now, when speaking to new distributors, Keeney steers them toward Hint’s core six.

Satwant Gill, president of 5 Star Beverage in San Diego, said he recently added those SKUs after watching the brand gain momentum in the natural foods channel.

The product fits his customers, he said, as West Coast consumers have become dutiful label readers.

“A lot of them drink plain water, [but] would rather have a hint of flavor,” he said. “It’s just like going into any upscale restaurant and getting plain water. You get

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HINT

BRANDS IN TRANSITION

a twist of lime in there.”

Gill began placing Hint at stores up and down the street at the beginning of the year. So far, he said, the product has shown better-than-expected sales.

To support Hint’s current growth, Keeney brought on a roster of seasoned sales staff, including fellow glaceau veterans Jason Webb and Michael Dalla and Big Geyser veteran Glenn Roberts.

Amid all that change, one thing remains constant: the Goldins’ passion to innovate. Theo Goldin said his wife frequently pitches new flavors, and the pair still spend evenings at home, injecting essences into water and seeing if they like the result. They even have an at-home process to approximate the hot-fill process. These days, Theo Goldin said he spends more time playing with spreadsheets than essences, but the couple has racked up dozens of flavors they would like to market.

“Last Saturday before we went out to dinner, Kara and I were testing out four new flavors, and you may not see them for five years, but they’re really good,” Goldin said. “It’s one of the most fun things that we do, partly because we

Hint founders Kara and Theo Goldin.

didn’t know what the heck we were doing when we started.”

And, while Goldin’s dream of an entire Hint aisle may be a stretch, he faces little in the way of direct competition.

Ayala’s Herbal Water markets a similarly sugar-free flavored water, but focuses (as the name suggests) on herbal flavors, a realm that Hint has yet to enter. The Coca-Cola Co., Inc. and PepsiCo Inc. also approached unsweetened flavors through

their Dasani and Aquafina brands, but Coke’s entry earned lackluster reviews and has unceremoniously changed packaging. PepsiCo’s entry appears to have little internal support – though PepsiCo did license (of all things) a line of Aquafina Flavor Splash lip balm. Coke and Pepsi, though, both wield large portfolios and have recently been occupied with modifying their relationships with their bottlers.

Hint, meanwhile focuses on essence water.

“This is all that we do,” Goldin said.

“We put unbelievable amounts of time into developing the capability to do what we do.”

Keeney likened Hint’s current position to one once occupied by his former employer, glaceau, which talked about enhanced waters for years before it really became a category.

“It’s a very difficult process to create a new category,” Keeney said.

And harder still when the would-be category leader lists from one idea to the next. But, with its newfound focus and alliances with both Disney and Starbucks, Hint stands a chance at carving out an enduring space for essence waters. •

Adobe Springs Water Company Adobe Springs is the largest supplier of bulk mineral water to the bottling industry in the United States, with a TDS of 435 mg per liter. Adobe Springs’ healthful magnesium content of 110 mg per liter is more than the combined magnesium content of the top-20-sales bottled waters in the US. Adobe Springs tastes great, and has been marketed as “Noah’s Spring Water” since 1992.

The Adobe Springs are conveniently located 19 miles off I-5 in Central California.

New clients welcomed, as we have plenty of water.

Call Paul Mason, Owner Tel: (408) 897-3023 Email: paulmason@MgWater.com Adobe Springs Water Co. LLC 19000 Del Puerto Canyon Road Patterson, CA 95363

24.BEVERAGESPECTRUM.MARCH.2010 adobesprings_spectrum_half.indd 1

3/8/10 8:37 AM

By Debbie Wildrick

BLENDED CHANNELS

FORGET COOPERATION LET’S TALK COLLABORATION Once upon a time, beverage suppliers sold products they made to retailers, and retailers decided what went on their shelves.

Now, it’s time for them to make those decisions together.

RETAILERS KNOW THEY NEED to keep consumers shopping at their outlets. Suppliers understand the importance of being category managers. They have learned that it’s sometimes as important for them to help retailers drive overall category volume as it is to build their own brands.

It’s a way of working together that has been productive, but lately, I’ve started thinking that it’s not enough. I’ve started exploring a new idea for retailers and suppliers: Collaborative Innovation. It makes retailers and marketers partners in growing our businesses through targeted products and programs they develop together.

I had the opportunity to discuss Collaborative Innovation with Kalypso, an innovation-oriented consulting company.

In a white paper titled “Best Practices in Collaborative Innovation” the group pointed out ways retailers and suppliers can use this method to please the consumer and gain greater market share.

It’s a way to fight uncertainty in sales outlooks by using consumer insights to create new products that increase our engagement with our consumers, the authors say.

“Retailers are hungry for total solutions that are driven by shopper insights that impact the category, department and the entire store,” said Helayne Angelus, a principal with the firm. “To the degree that a manufacturer can really maximize the shopper insights along with a process and metrics that are agreed upon and easy to execute, they will win with the retailers.”

So let’s see how it works on the ground through the example of Shadow Beverages, a new company staffed by industry veterans who recently worked with Ironclad Gloves and Quik Trip to establish a brand presence that would enhance the 28.BEVERAGESPECTRUM.APRIL.2010

overall beverage category as well as target an untapped consumer base.

Shadow developed a beverage, Ironclad Energy + Hydration, based on the successful Ironclad brand name using research from Ironclad Glove consumers – frequently workers on construction job sites. Shadow and Quik Trip understood that the Ironclad consumer was also a core Quik Trip consumer, and they launched a promotion that offered an Ironclad work glove – with a real $15-$20 value – that could be awarded with just a modest purchase hurdle, six cans of Ironclad Energy + Hydration at a $2.39 ring. So the net spend of $14.34 brought a $15 value to the consumer.

“The merchandising targets a core consumer with an authentic brand that drives a strong basket ring for the retailer and provides a great value to the consumer,” says Mike Joyce, the VP of Marketing at Shadow Beverages.

While I was working at 7-Eleven, I had many opportunities to partner with the big beverage companies like Coca-Cola on unique all-store merchandising programs.

But today, retailers want and need even more than merchandising in their store, they need product innovation. Kalypso’s consensus was that the increasing diversity of shoppers requires changing retail and product experience. Retailers need to differentiate based on the experiences consumers have of their stores.

To Angelus and her co-worker, Mike Friedman, that need can be addressed with changes in product offerings that are actually enough to change the entire retail environment.

It’s a neat idea, but can we get it done?

Can we all, regardless of our size, play a part in the necessary innovation in

today’s marketplace? I believe the answer is “yes” to both questions.

For many retailers, beverages are a destination category. Developing a strategy for collaborative innovation – one of Kalypso’s key recommendations – means that retailers and marketers alike must look at the beverage category jointly for opportunities including brand, products, and shopper experience. At 7-Eleven, we once tested a change to the vault, adding a colder portion to suggest that we had the coldest beer in town. When I took on a project to change the way the consumer shopped proprietary beverages, I pulled together a team of partners both internally and externally, from beverages and fresh food, as well as merchandising, marketing, store planning, and external brand partners like a coffee roaster and fountain partner. By getting together teams that had traditionally not talked to each other or worked together, you can collaboratively build new products enough to change the feel of a store.

2010 looks to be the “new normal” in so many ways. We’re coming out of the economic issues we’ve suffered over the past couple of years, we have a more diverse demographic shopper than we’ve ever had, and they’ve made some real changes in their habits. It’s becoming apparent that we’re going to have to work together to implement our own changes to meet theirs.

Debbie Wildrick, the SVP of Sales and Marketing for Equa Water Corporation, is a sales executive and channel strategy specialist in the CPG industry. The former Senior Director of Vault and Proprietary Beverages at 7-Eleven, Inc., she has extensive experience in retailer, supplier, and technology aspects of the consumer packaged goods business.

, e r o m . d r n e a d e w r o o p M a e k a t s consumer n a m e n i l k y by jeffre

The hottest beverage in stores right now might not be a beverage at all – and no, we’re not wading into the whole energy shot debate here, even though their growth is as much of a move toward nontraditional drink formats as this one – we’re talking about single-serve powdered drink mixes.

Buoyed by their own low price and the even lower price of the waterneeded to complete the equation, as well as by new formats that put them in sleekly attractive, easy-to-use single-serve sleeves – also called stick packs – mixes are now firmly in the mix.

Not that beverage makers are complaining, particularly those whose products are as much about function as they are about flavor.

30.BEVERAGESPECTRUM.APRIL.2010

“If you’ve built a function, being in ‘solids’ lets you do so many more things,” said Steve Haley, the CEO of Celsius, a fastgrowing “fat-burning” beverage that has launched a powdered line of its functional drink mix in CSD and tea flavors. “For us, being in the functional beverage world, you’ve built a refreshment brand, but you need to keep delivering the functionality, and you’re evolving the delivery system.”

Not only that, but companies are also

coming to realize that it’s an efficient evolution, as well. Beverage companies have long been aware that there is a lot of efficiency to be gained by taking out the water, fizzy or otherwise. Both Coke and Pepsi, for example, were, until the recent purchase of their bottling arms, basically syrup suppliers for CCE and PBG. But now a growing number of beverage companies have decided that a major strategic beverage initiative will be in, as one wag called it, “pre-beverage products.”

And many more are seeing their existing mix sales take off, as well. Crystal Light, for example, has doubled its sales since 2004, according to Mary Garris, a Senior Associate Brand Manager.

And it’s not just Crystal Light. Tablets and Powders are growing – not just in terms of profitability, but also product variety. Mintel reported that in the past 12 months there have been 131 new drink mix introductions, outpacing previous hot categories like tea (112) and energy drinks (111). Powdered Drink Mixes were actually the only segment of the juice market that grew as the economy fell apart between 2006 and 2008, according to the consumer products tracking firm; energy drink mixes tripled during that time, albeit off a much smaller base.

The category recently passed $1 billion in sales – and there is a lot more coming, as a result of the growth of one particular channel: the World Wide Web. “Stick packs are a major part of our grocery business,” said Andy Burger, the senior buyer for consumable products at online retailing giant Amazon.com. How big a part? He estimated about 15 percent of Amazon’s entire grocery business was coming through powders and mixes.

What makes powders a potent product for Amazon is similar to what makes them a preferred choice for marketers and consumers alike – their light weight and small form factor mean they’re easily shipped, stocked, and carried. They also don’t take up much room in the warehouse and they’re environmentally friendly when compared to their fully-realized counterparts – Crystal Light, for example, estimates the switch from single-serve mini-tubs to stick packs saved about 250 tons of packaging annually.

But the stick pack isn’t just a boost to the powder business. With the right prod-

Crystal Light has doubled its sales since 2004, according to Mary Garris, a Senior Associate Brand Manager. With more than $10 million in sales last year, they have the best selling energy drink mix.

uct mix, powders and their more traditional analogs are able to take off as well.

“Marketed effectively, it’s not just seen as a greener product. It allows us to build brand equity for a preexisting line,” David Sackler, the founder of Trimwater, said of his most recent brand, Calibr8. Launched with the backing of Cal Ripken Jr., (#8 in your programs) Sackler believes the new product could be a hit everywhere from the school store to the soccer field.

Still, the key to growing a good powder brand seems to be having it join forces with a liquid product, which is considered

an easier entry point to a brand.

Drinks are a great advertising medium for a function,” says Celsius’ Haley. “Start with the RTD, cold, and you can evolve to the other systems.”

It’s a methodology that appears to have helped functional brand FRS, which recently pulled in a whopping $23 million investment for a brand that is still mostly sold online, and dry. Go to a conference or a sampling event, however, and chances are the FRS you sample will have come out of a bottle.

Meanwhile, other liquids are trying to

Product variety in the drink mix category continues to grow. Mintel reported that in the past 12 months there have been 131 new drink mix introductions, outpacing previous hot categories like tea (112) and energy drinks (111).

APRIL.2010.BEVERAGESPECTRUM.31

RoaringLionEnergyDrink.com

Crystal Light’s Pure Fitness “on-the-go” sleeves aim to give Gatorade Natural and vitaminwater zero a run for their money.

extend their reach through powders. In addition to a new generation of sports drinks, powdered beverages are reaching into the same areas of functionality as beverages. For a long time, there have been powdered energy drinks and colas like Zipfizz, but recently probiotics makers Goodbelly and Pre extended their lines into stick-packs. Meanwhile, up-andcoming company PhD, which had started out in powders with the reservoir cap, has similarly moved into sachets.

Beauty beverages, like Nestle’s Glowelle and newcomer Noah’s Naturals, are taking skin health inside the packet, while with the launch of Relaxity last year, there is even, yes, a relaxation drink.

Even Starbucks’ Via, a new line of justadd-hot-water packets of instant coffee

seems to be inspired by the growth of the powdered single-serve market.

Meanwhile, Crystal Light, the warhorse of the market, has started to play up its functional characteristics as part of what has turned into a massive run for the brand. With the release of Crystal Light’s Pure Fitness in its “on-the-go” sleeves, the company is giving Gatorade Natural and vitaminwater zero a run for their money, with a stevia-sweetened electrolyte drink. And the best selling energy mix? Also Crystal Light, which sold more than $10 million of its Energy-On-The-Go packets last year – not counting Wal-Mart, a major player in the Crystal Light demographic.

In December, Crystal Light marshaled a major media campaign behind its products, offering consumers the notion that its consumers drank more water.

“It’s a way for consumers to really get it,” said Neil Kimberley, a beverage consultant and strategist. “It’s cheap, convenient, portable, and that’s the simple biggest driver.”

Those factors also give functional beverage marketers a bit more leeway with powders, Kimberley adds. While consumers might expect more developed flavors from “wet” products, with mixes, he says, “as a consumer I think you’re willing to make the tradeoff because you’re saving money.”

At a time when consumers are still focused on that kind of saving dynamic, and investors and marketers are, as well, maybe that tradeoff will actually end up being more of a takeoff. •

BRAND NEWS The Perfect * Red Bull Alternative * Roaring Lion and RedBull are registered trademarks of RLED, LLC and Red Bull North America, Inc. respectively.

32.BEVERAGESPECTRUM.APRIL.2010

AriZona Beverages. AriZona recently added an Arnold Palmer Half Iced Tea and Half Lemonade flavor to its Tea Stix line. Each iced tea lemonade stick contains only 5 calories and can be added to either a 16 oz. or 20 oz. bottle of water.

ZYM. ZYM announced that it is now carried In the Chicago-area

at more than 60 locations, including all Sports Authority stores (which carries ZYM at 400+ locations nationwide,) Performance Bike, Kozy’s Cyclery, Erewhon, and the East Bank Club. The brand is also now available throughout Europe, the UK, New Zealand, Australia, and South America.

BRAND NEWS: POWDERS Vitalize Labs. EBOOST debuted on QVC Tuesday, March 16. The EBOOST Daily Health and Energy Effervescent Powder.

The brand also added a new flavor: acaipomegranate.

and specialty grocery retailers like QFC and Haggen Top Foods. U – natural hydration, NUUN’s sister product, added new accounts such as Whole Foods in the Southwest and Rocky Mountain regions. The brand also added a Cucumber Mint flavor.

CLICKco LLC. In March, CLICKco launched

its new flavor, CLICK Vanilla Latte. CLICK is a powdered drink that comes in a 16 oz., 14 serving-canister. Europa Sports Products distributes CLICK Mocha and Vanilla Latte in all regions nationwide. CLICK can be found on Amazon.com, Drugstore.com, Bodybuilding. com, Netrition.com and Vitacost.com. CLICK is also available in specialty retail stores and rolled out at GNC stores in April.

Kraft Foods. Kool-Aid introduced Fun Fizz

drink drops that quickly bubble and sparkle into a non-carbonated beverage. Fun Fizz is a sugar-free, five-calorie beverage. Fun Fizz drops fit into the opening of a standard water bottle and were formulated to flavor eight ounces of water each.

PepPod. PepPod recently introduced Power Powder, an all-natural, vegan, gluten-free health boost with 1000 mg of vitamin C, five B vitamins, minerals, electrolytes, green tea extract, ginseng and quercetin.

Encaff Products. Dan Leonardi, President

of Encaff Products Inc., recently developed a partnership with Canadian distribution company QPro. The company is also revamping its marketing campaign to appeal more to women and focusing on its top two retail partners: Casey’s General Stores in the Midwest and Duane Reade in New York City.

EQ Labs, Inc. EQ Smart Energy Drink added three new flavors of its effervescent energy tablet. Consumers will now be able to choose from EQ’s original flavor as well as strawberry, apple (called Mo’s Apple), and lemon lime.

EQ Labs also collaborated with its packaging manufacturers to develop biodegradable packets and tubes.

The FRS Company. The FRS Company announced that Carl Sweat, a former Coca-Cola North America executive, has been named Chief Executive Officer. Prior to joining FRS, Sweat served as Senior Vice President at Starbucks, overseeing the Global Beverage unit.

Previously, Mr. Sweat spent 22 years at CocaCola North America, most recently serving as the President and General Manager of FUZE Beverage LLC. Celsius, Inc. Celsius “On-the-Go” Berry Fla-

vored Powder Sticks, winner of BevNet’s 2009 Best New Powder award, is seeing rapid acceptance by retailers, especially those that currently carry Celsius. Existing retailers that have recently added Celsius to their sets are Ralphs, Meijers, Vitamin Shoppe, Harris Teeter, military exchanges, and leading on line retailers such as Amazon.com. Recent clinical studies on Celsius show when consumed fifteen minutes prior to exercise, Celsius reduces body fat, increases lean muscle, burns calories, and provides lasting energy.

Kraft. Crystal Light introduced Crystal Light

Pure Fitness in March. It contains no artificial sweeteners, flavors or preservatives, has just 15 calories per serving and is available in three flavors: Grape, Strawberry Kiwi, and Lemon Lime. Crystal Light Pure Fitness is a naturally sweetened and contains electrolytes.

Starbucks. Added a decaf Decaf Italian Roast to its line of Via instant coffees. The line debuted early last year, and is available at Starbucks cafes, on United Airlines flights and in Target, Costco, REI, Office Depot and Barnes & Noble stores.

NUUN & Company. NUUN & Company recently installed Dave Mutzel as president and allowed former CEO Tim Moxey to work on brand development. The brand has been recently introduced in 250 selected mainstream

PepsiCo. PepsiCo added Propel Powder Packets with Calcium. The packets deliver calcium, antioxidants and B-vitamins in three flavors: Cherry Lime, Citrus Punch and Lemonade.

34.BEVERAGESPECTRUM.APRIL.2010

CATEGORY REPORT: RTD COFFEE

STARBUCKS DOUBLES DOWN

By Matt Casey THERE’S A NEW BEAN IN THE RTD COFFEE grinder, but it’s plucked from the same bush as the category leader. Starbucks, in partnership with PepsiCo, released a threeflavor Seattle’s Best Coffee line in 8 oz. slim cans early this year.

At a suggested price of $1.49 each and $4.99 per four-pack, Seattle’s Best represents a value-priced alternative to Starbucks’ main RTD offerings. It also likely represents the biggest move in RTD coffee since Monster and Rockstar dueled over who had the idea for coffee/energy hybrids first.

Despite the valiant efforts of a handful of companies, the RTD coffee category has remained Starbucks’ arena. The brand has kept a Gatorade-like dominance over the field while other brands have scavenged for the giant’s leavings. In the twelve months ending Feb. 21, RTD coffee slipped by 8 percent in supermarkets, drugstores, gas stations, convenience stores and mass market retailers excluding Wal-Mart, according to Symphony/IRI Group. Starbucks slipped with the category, but increased its market share. Frappucino now accounts for 86.3 percent of RTD coffee sales, with Doubleshot picking up another 9.3 percent. While those numbers exclude coffee/energy hybrids, and top hybrid performer Java Monster actually posted sales 22 percent higher than Doubleshot, Frappucino remains the undisputed owner of ready to drink coffee.

The category has proved such a difficult challenge that David Blosser, an account manager with Coca-Cola Enterprises, said The Coca-Cola Co., Inc. has prepared to quietly admit defeat if its joint venture with Illy fails. The beverage giant already scrapped earlier coffee ventures with Godiva and Caribou Coffee, but cut a different path with Illy issimo by initially incubating it with New York distributor Big Geyser. So far, the brand has gotten a steady start. It currently places as the 11th best selling RTD coffee line nationally, but, in such a top-heavy category, that rank amounts to less than $400,000 in sales and a 0.07 percent share.

Hansen, whose recently-unchanged Java Monster line slipped by 11 percent, brought a fresh idea to the coffee energy category by debuting X-Presso. X-Presso’s 6.75 oz. can includes a nitrous oxide-dispensing widget (a la Guinness) that gives the drink a foamy head reminiscent of a barista’s handiwork.

Meanwhile a handful of smaller brands doggedly pursue success in the shadow of their larger rivals. Shock Coffee claims to have more than tripled its sales in some stores last year, and 80year coffee stalwart Café Bustelo aimed at a younger generation by promoting its 8 oz. RTD coffee at South by Southwest and other concert events. Adina, which launched into the coffee/energy field two years ago with big aims, has regrouped with reduced expectations and a narrowed line. Following the departure of co36.BEVERAGESPECTRUM.APRIL.2010

founder Greg Steltenpohl, the one-time juice brand renamed its 8 oz. “Natural Highs” as “Barista Brews.” The restage backed the product away from its earlier energy claims and slashed its flavor offerings to two SKUs. Despite those efforts, Starbucks still reigns supreme, and, by rolling out a value option, the Goliath brand is taking aim at its own leavings. If the category wasn’t already tough enough for smaller brands, it just got tougher. Eventually, Starbucks could falter. Sports drink colossus Gatorade finally has – but it took 40 years. If challengers want to wait for Starbucks to stumble, they’ll at least have plenty of coffee to drink in the mean time. •

BRAND NEWS Whynatte. As of March, Whynatte Latte

is available at the 30 largest RaceTrac locations in Georgia. Whynatte has future plans to move into the chain’s 30 smaller stores in that state. The brand also signed with United Distributors in November.

Shock Coffee. Shock Coffee introduced a 15 oz. package to supplement its 8 oz. option.

Travel Centers of America added the 15 oz. variety to their Iced Coffee set in June and saw a 245 percent increase in sales over the prior year. Other chains, like C.N. Brown – Big Apple stores in Maine, saw similar results.

SoloBrew Corporation. SoloBrew Corp. launched French Press To-Go. The French Press To-Go is a disposable single-serve French Press unit pre-packaged with coffee in a spring-action filter plunger. Just add hot water, give the spring plunger a few pumps and in 2 to 4 minutes, enjoy a freshly brewed cup of gourmet coffee.

Adina For Life. Adina rebranded its 8 oz.

slim can coffee offerings as Barista Brews and

reduced its offerings to two flavors: Double XXPRESSO and Mocha Madness. Adina will be marketing the line as a coffee product instead of a coffee/energy hybrid.

North American Beverage Company.

In 2009, Havana Cappuccino changed its distribution model, appointing food wholesalers to distribute the brand. For grocery sales, Havana appointed Kehe/Tree of Life Foods, MDI Wholesale, UNFI, DPI, and Wakefern. For convenience stores, Havana appointed McLane, Liberty Distribution Co., H.T. Hackney Distribution, CoreMark, TSN Distribution, L.J. Zucca, J.T. Davenport & Son, Charles C. Parks Co., SouthCo, Long Wholesale Andalusia Distributing and Coastal Wholesalers.

Café Bustelo. Cafe Bustelo, an 80-year-

old brand, has reinvented itself to appeal to the young, hip, jetset consumer. The brand made appearances at major music festivals including Winter Music Conference, SXSW, Coachella, Lollapalooza and Perez Hilton’s One Night In Concerts.

The Coffee Bean & Tea Leaf. The Coffee Bean & Tea Leaf launched a new line of bottled café and tea beverages. The line of three coffee- and three tea-based drinks is made with Coffee Bean’s own coffee beans and tea leaves and slightly sweetened.

Hansen Beverage Company. Hansen introduced X-Presso Monster: Hammer in September. X-Presso’s 6.75 oz. can includes a nitrous oxide-dispensing widget that gives the drink a foamy head reminiscent of a barista’s handiwork.

Starbucks. Starbucks subsidiary Seattle’s

Best Coffee announced that it has entered the ready-to-drink coffee category with a new line of iced latte coffee drinks. Through the North American Coffee Partnership, a joint venture between Starbucks Corporation and Pepsi-Cola North America Beverages, the new ready-to-drink coffees will be available in major grocery, convenience and other retail stores, initially in the Western U.S.

APRIL.2010.BEVERAGESPECTRUM.37

New Space for Kids’ Brands

by Matt Casey The landscape for children’s beverages has changed much to the surprise even of the parties involved. The American Beverage Association, through its partnership with the William Jefferson Clinton Foundation, announced in March that drink calories shipped to schools dropped by 88 percent over the past six years. That drop included the nearcomplete removal of full-calorie sodas from school vending machines, leaving Clinton“stunned.”

While initially encouraging, those results demonstrate a challenge for kids’ beverage marketers. The drop in shipped calories accompanied a 73 percent drop in total delivered beverage volume, and the School Beverage Guidelines’ package size mandates only accounts for part of that decline.

To gain entry into that shifting channel, marketers must adhere to strict calorie and nutrition guidelines, but the payoff may be worth the challenge. Larry Belka, vice president of sales for The Switch, reported that individual schools can move a “shocking” amount of product, and, with some districts covering dozens of institutions, volume adds up quickly.

That kind of sell-through, in combination with the opportunity to build brand loyalty in young consumers, has piqued the interest of less-sweet brands normally aimed at adult consumers. Sweet Leaf Tea created 8 oz. SKUs for schools in Texas, Florida and Colorado. Inko’s also recently gained entrance to New York’s stringent school system with two white tea SKUs. Meanwhile, Rob’s Really Good, a brand so new that it focuses on just six markets, is already mulling the idea of a slim can for kids.

38.BEVERAGESPECTRUM.APRIL.2010

Inko’s and Sweet Leaf have recently launched SKUs aimed at schools and kids while Rob’s Really Good, a brand so new it focuses on just six markets, is already mulling the idea of a slim can for kids.

While those brands eye schools as a new venue, brands like The Switch are using the halls of education to fuel sales at off-premise retailers. Belka reported that grocers and c-stores stocking The Switch watch the product’s sales spike when the brand activates a nearby school. He’s also found that establishing a school presence helps him place the product in area stores.

›› Not Just Child’s Play While First Juice founder David Glasser seeks more and better placement, he’s also found himself in a skirmish with the U.S. Food and Drug administration. The FDA, which has entered a phase of heightened enforcement, sent First Juice a letter notifying the company that its claim to contain 50 percent less sugar than 100 percent apple juice isn’t approved for products aimed at children under two years old.

Glasser, passionate that babies should consume less-sweet foods to prime them for less-sweet diets, considers the regulation archaic and is currently petitioning the agency to have it stricken.

Other brands market products with similar claims, Glasser said, though he may be the only one willing to fight the FDA. Companies like Gerber and Mott’s also market 100 percent juice, he noted.

Kids’ brands working outside of school walls may benefit from non-traditional placement, said David Glasser, founder and CEO of First Juice. His toddlertargeted brand makes a home in the baby aisle, but Glasser targeted Babies ‘R Us as one of its first retail accounts. He later added placement at Diapers.com, and is currently seeking placement in juice aisles as well as grocers’ cold cases.

In one account, he said, he counted more than 200 linear feet of cold beverages for adults, but not one that could be served to a child under 5-years old. Glasser framed this as a missed opportunity both for his brand and the retailer. Putting First Juice –and other kids’ brands—in the cold case, he said, could meet the needs of thirsty moms with kids in tow and create incremental sales.

Despite his high aims, Glasser lamented that he created a high-end children’s brand on the eve of the worst fiscal crisis of his lifetime, one that has hobbled several of his competitors. Crayons, for example, has suspended its U.S. operations after the firm failed to muster a production run in February. Company founder Duncan Seay said his firm will focus on international opportunities this year with an aim to return to the U.S. in 2011. Similarly, bot, a oncekid-targeted enhanced water now aims for adults, and Wild Waters is no more.

Still, some children’s brands are thriving. Fruit 66 boasts its win at Publix, and Honest Tea’s Honest Kids recently added 64 oz. multi-serve bottles. And, there’s more to come. With school vending volumes down due to the departure of sugary sodas, marketers have space to claim. •

BRAND NEWS: KIDS’ BEVERAGES

BRAND NEWS Old Orchard Brands

Old Orchard Brands introduced a one-gallon size bottle for seven of its most popular 100 percent fruit flavors - Apple, Apple Cider, Cherry Pomegranate, Cranberry Pomegranate, Blueberry Pomegranate, Acai Pomegranate and Berry Blend. Each bottle contains 16 8 oz. servings and is available at grocery and club stores across the United States. All flavors are fortified with 100 percent of the daily requirement of vitamin C and contain no added sugars, artificial coloring or preservatives.

tory product, Organic B.R.A.T. Feel Better Drink, formulated to deliver digestive comfort and nutrition for children and adults suffering from influenza, upset stomach or dehydration.

Organic B.R.A.T. Feel Better Drinks are based on the principles of the B.R.A.T. diet (an acronym for bananas, rice, applesauce and toast).

First Juice

Envy expanded its distribution through US Foods and Sysco houses in California and throughout the Midwest and recently added placement on Amazon.com. The product also meets or exceeds school beverage guidelines.

First Juice teamed up with Wow! Wow! Wubbzy!, the Emmy Award-winning animated TV series. Beginning in April and running through August, First Juice will support the DVD release of “Wow! Wow! Wubbzy!: Wubbzy Goes Green” and the 40th anniversary of Earth Day on April 22. The cross-promotional campaign will reward consumers with a $3 rebate on the purchase of any Wubbzy DVD and specialty-marked First Juice bottles.

Xymbiot, Inc.

BYB Brands

Xymbiot, Inc. introduced ZIMBI in a flying toy bottle. The reusable bottle, when empty, can be thrown up to 100 feet. ZIMBI is sweetened with a combination of stevia and sugar and is beginning its roll out in select markets in the West and New England.

Tum-E Yummies now boasts just 50 calories per bottle and 1/3 less sugar. The brand added distribution with Coca-Cola Enterprises and converted from 24- to 12-pack cases. The line also added a new flavor, Sour-sational Raspberry.

Honest Tea

Kraft Foods

Honest Tea recently launched a 64 oz. multiserve package for Honest Kids Super Fruit Punch and Berry Berry Good Lemonade. Honest Kids 64 oz. will be available early April in Whole Foods Markets. The company also recently introduced two new pouch varieties: Appley Ever After and Super Fruit Punch.

Kool-Aid introduced Fun Fizz drink drops that quickly bubble and sparkle into a noncarbonated beverage. Fun Fizz is a sugar-free, 5 calorie beverage. Fun Fizz drops fit into the opening of a standard water bottle and were formulated to flavor eight ounces of water each.

Cutting Edge Beverages

Uncle Matt’s Organic

After a debut in Florida, H2Organics Kids Nutrient Enhanced Water is now available at Whole Foods Markets in the Southeast. Cutting Edge Beverages is supporting the new distribution with in-store demos, instant redeemable coupons, local events, and other activities focusing on health and wellness for children.

Uncle Matt’s Organic announced the debut of a new 6 oz. size of its orange juice. The new 6 oz. version of Uncle Matt’s organic pulp-free orange juice offers 90 percent of the recommended daily allowance for vitamin C.

Envy Foods

B.R.A.T Diet, LLC

B.R.A.T. Diet LLC announced its introduc-

40.BEVERAGESPECTRUM.APRIL.2010

Rockin Products, LLC

Rockin’ Water is launching a redesigned product and label. All four flavors now use a blend of pure cane sugar and stevia, and have only

BRAND NEWS: KIDS’ BEVERAGES 30 calories per 12 oz. bottle. Based on a survey of over 250 moms, the brand also increased its fiber content.

Kid Fuel

Kid Fuel gives kids the hydration they need along with essential vitamins and minerals for growing bodies. Each 8 oz. Kid Fuel bottle features a fun series of educational characters in an ergonomically proprietary sport bottle.

WAT-AAH!

WAT-AAH! has increased its distribution with UNFI nationwide along with Great States in the Northeast, Circle K in the New York Metro area and Healthy Gourmet in New Jersey and Pennsylvania. WAT-AAH! recently sponsored the 2010 New York International Children’s Film Festival.

Sportastic line. In addition to its recently released soccer ball, baseball, and basketball bottles, GT will roll out a holiday ball series which will include a 4th of July and Halloween pumpkin ball. Sportastic is currently sold nationally in 48 states.

Marble Pop

Marble Pop took part in the 2009 Anime Expo and recently updated its website with new animations, pictures, and graphics. Marble Pop will be exhibiting at the 2010 Western Foodservice & Hospitality Expo from August 14 – 16 at the Los Angeles Convention Center.

Hansen Beverage Company

Hansen Natural’s Junior Juice updated its packaging with new graphics. The back of each box now features graphics showing Clifford the Big Red Dog’s 10 Big Ideas.

GT Beverage Company

GT will add Grape and Orange flavors to its

Apple & Eve

Apple & Eve Fruitables is now available in a 46 oz. multi-serve bottle. Fruitables is distributed throughout the Northeast United States.

4U2U Brands

Fruit 66 announced placement at Publix Super Markets, Inc. and Gordon Food Service, North America’s largest family-owned foodservice distributor.

IN ZONE Brands, Inc.

IN ZONE Brands, Inc., maker of TummyTickler and BellyWashers, introduced new TummyTickler Tots, an apple juice formulated with 40 percent less-sugar for toddlers ages 1-3. TummyTickler Tots has no artificial flavors, colors or sweeteners. It comes in bottles with licensed character tops, all of which have spill-proof sippy spouts and are dishwashable, re-usable and recyclable. TummyTickler Tots are available in both 4 oz. bottles and 125 mL juice box package formats.

Inko’s LLC. Inko’s LLC, announced the distribution of two new flavors, Inko’s Blueberry and Inko’s Strawberry White Teas, in all New York City Public High School vending machines and ancillary commissaries. Inko’s created its 12 oz. can line specifically for the school market, with reduced calories and new graphics to appeal to a younger market.

42.BEVERAGESPECTRUM.APRIL.2010

INTEGRATION NATION

HOW BIG MERGERS COULD IMPACT RETAILERS.

BY MATT CASEY Leave it to The Coca-Cola Co., Inc. to move last. The world’s largest beverage company recently reinforced its reputation for lumbering like the polar bears that once populated its television commercials when it announced plans in February to acquire the majority of its North American bottling network. Arch rival PepsiCo Inc. announced a similar plan last May – so far ahead of Coke that it completed its acquisition the day after Coke’s announcement.

Coca-Cola Enterprises CEO John Brock with Coca-Cola Chairman and CEO Muhtar Kent after the announcement that The Coca-Cola Company would Acquire CCE’s North American Bottling Business.

44.BEVERAGESPECTRUM.APRIL.2010

Bringing

natural flavors into focus.

Robertet Flavors is a closely-held multinational company whose vision is long-term and whose technologies are focused on the flavors and scents that nature always intended. For all of your flavor needs, call Robertet at 732-981-8300, or send an email to Solutions@RobertetUSA.com.

TECHNOLOGY • CREATIVITY • INNOVATION

INTEGRATION NATION

But, while Coke may lumber like a bear, it also has the strength of one. Its move to vertically integrate its bottling, manufacturing and marketing operations seals the end of the franchise bottler model that has reigned for the last decade and signals potentially seismic changes for consumers, independent bottlers and retailers.

Coke, like PepsiCo and Dr Pepper Snapple Group before it, boasted that integrating its operations would save it hundreds of millions of dollars. But the acquisition’s potential benefits extend beyond finances.

Integration has allowed PepsiCo to cross-promote and deliver both snack and beverage products like Pepsi Max Cease Fire with Doritos 1st, 2nd, and 3rd Degree Burn flavors.

Both Coke and PepsiCo noted that their new alignments could simplify retailer relations, and PepsiCo echoed DPSG when the company said it expected greater agility when handling newly developed and acquired brands. All of this could transform the landscape for both ordinary sodas and innovative brands alike. In the long run, this new era of bottling integration may yield to a dynamic where each of the big three embraces a different model.

But in the near term, retailers and the rest of the beverage industry will find them-

46.BEVERAGESPECTRUM.APRIL.2010

selves in the unenviable position of having to wrestle with three massive marketer/ bottler hybrids.

Wayne Johnson, president and general manager of Johnson Distributing in Wisconsin, said he expects Coke and Pepsi’s integration to make his job harder.

His firm deals primarily in beer, but also handles soft drinks. With the big guys “taking out one whole tier of the distribution system,” he expects their prices to drop by as much as a dollar per case, further squeezing his premium-priced brands.

Johnson said he’ll continue to compete through strong independent brands and niche products – he recently added drank relaxation drink – but noted that every brand he distributes could follow the same path as SoBe, Monster and FUZE. In the long term, Johnson said, the emerging dynamic of top-to-bottom integration could seriously reduce his involvement in the non-alcoholic beverage sector.

What Johnson takes for bad news, Bill Eichorn, a beverage category manager for the Big Y supermarket chain in southern New England, said he welcomes. Like Johnson, Eichorn expects soda prices to fall. He also welcomed the opportunity to negotiate solely with Coke and Pepsi instead of also haggling with their bottlers – as long as how they distribute the product doesn’t change. He fears, though that they could “forget about smaller companies.”

That’s something that Coke and Pepsi will have to be careful about, said Kaumil Gajrawala, an equity analyst with UBS Investment bank. Gajrawala, who has watched the beverage sector since 2002, said regional bottlers have had a stronger history of serving regional chains, often through not requiring minimum order sizes.

And he had more bad news for retailers. While he expects Coke and Pepsi to use their top to bottom integration to quicken negotiations and streamline product delivery, he said he also expects them to use it to force higher prices.

With salary and operation costs streaming from central offices, Gajrawala said, Coke and Pepsi will enjoy greater

strength when dealing with retailers’ last resort on pricing disputes: delistings.

In November, Coke and Costco engaged in an unusually public battle when the wholesaler dismissed Coke from its shelves and informed customers that Coke wouldn’t meet Costco’s commitment to deliver bargains. The standoff lingered until December, when the two sides came to an agreement with no clear winner.

Gajrawala said Coke may be able to endure a similar fight longer once it owns its bottlers.

While pricing may be a top goal (Gajrawala noted that “CSDs have lagged inflation for much of the past 20 years”), he expects Coke and Pepsi to make immediate changes in how beverages get to stores. He expects them to meet with retailers and work out the best plan to get product from the bottler to the shelf.

Not every beverage product needs to go through direct store distribution, Gajrawala noted, a sentiment that Pepsi Beverage Company chief executive Eric Foss echoed during a recent conference call.

During the same call, Foss and PepsiCo CEO Indra Nooyi boasted the “Power of One” that PepsiCo would wield as a result of the merger. The integration, they said, will allow PepsiCo to dynamically crosspromote and deliver both snack and beverage products. For example, the company recently paired Pepsi Max with Doritos by creating a “Cease Fire” lime flavor of Max and co-promoting it with 1st, 2nd and 3rd Degree Burn Doritos flavors. On a less visible side, CEO Indra Nooyi noted that the company recently accommodated a retailer’s request for a snack and beverage shipment in less than 24 hours, when it could have taken weeks in the past.

“We’re creating the industry’s fastest, most flexible and most efficient food-andbeverage system. We’ll have the ability to more quickly implement and execute marketplace programs, and we’ll be especially well positioned to capture emerging growth opportunities,” said Larry Jabbonsky, Pepsi-Cola North America Beverages’ vice president of communications.

Gajrawala noted that the same scale,

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INTEGRATION NATION

properly focused, could allow the Red and Blue systems to better incubate new brands, a problem area for both companies in the recent past. While PepsiCo scored RTD coffee dominance through its partnership with Starbucks, and Coke Zero surged by 20 percent to 116 million cases in 2009, both companies have suffered a number of flat national launches.

PepsiCo’s list of stumbles and false-starts includes SoBe sublines Adrenaline Rush and No Fear as well as earlier incarnations of Amp Energy. The company even scrapped an Amp energy shot recently because it failed to capture public attention.

Coke has so far avoided extolling the virtues of brand building under an integrated system. Instead, Coke CEO Muhtar Kent and Coca-Cola Enterprises CEO John Brock have kept their focus on nuts and bolts details. Kent and Brock have touted the $350 million in savings expected over the next four years. The pair also said they believed they can increase Coke’s sparkling beverage sales in the U.S. The company has increased sparkling beverage consumption in other developed countries, Brock noted, so why not domestically?

Coke’s silence might have something to do with the stage of the deal, Gajrawala

business. Gajrawala noted that difference would reflect the organizations’ divergent goals. Coke, he said, wants to be a global marketing organization, while PepsiCo will press its advantage by combining beverage and snack marketing.

In the mean time, DPSG may be the quiet winner in its rivals’ consolidations.

The number-three player in the beverage field held distribution agreements with Coke and Pepsi’s bottlers, and their mergers triggered new rounds of negotiations. Already, one new contract resulted in PepsiCo paying DPSG $900 million for the right to continue distributing Dr Pepper and other brands. Gajrawala expects Coke to fork over a similar payment, and noted that the new contracts may have also given DPSG the opportunity to demand more attention for its brands. Additionally, he said, DPSG, with its limited saturation and national distribution, has a lot of “runway” to sell more product in North America, which is still the most profitable market in the world. DPSG even managed to grow its CSD sales by 4.8 percent in 2009, according to a recent survey from Beverage Digest, while Coke and PepsiCo saw declines of 3.9 and 5 percent, respectively.

Ultimately, the era of near-total bottler integration could be short lived, with each of the big three beverage producers favoring slightly different models, but its effects will likely be long lasting. Coke, Pepsi and DPSG could emerge from the other side of this episode with higher pricing and profitability on CSDs as well as greater agility in getting new products to the market. As each plays to its strengths, the new alignment could also result in greater parity. •

DPSG may be the quiet winner in its rivals’ consolidations. According to a recent Beverage Digest survey, they managed to grow CSD sales by 4.8 percent in 2009 while Coke and PepsiCo saw declines of 3.9 and 5 percent, respectively.

The Coca-Cola Co. tripped over Surge and, later, Vault energy soda lines and saw partnerships with Godiva and Caribou Coffee fizzle as it tried to replicate PepsiCo’s pattern for RTD coffee success.

Under the franchise system, Gajrawala said, Coke and Pepsi needed to execute big launches, otherwise the economies of scale didn’t work. Additionally, large bottling systems like CCE could only give a product a few months to prove itself. Through vertical integration, Foss said PepsiCo will be able to test and tinker with brands in individual markets to see if they fit its DSD or warehouse systems. Gajrawala said this process could take years per brand, allowing the big companies to absorb small-scale losses to craft new products that resonate with the public.

48.BEVERAGESPECTRUM.APRIL.2010

said. PepsiCo has already completed its $7.8 billion bottler acquisition, while Coke only recently announced its own merger plan. The larger beverage marketer has also had to deal with Wall Street whiplash.

Kent and other top brass at Coke argued for months that they would stand by the franchise bottler model, but claimed upon announcing the deal that it had been in the works for over a year. That sudden about face, reported the Atlanta Journal-Constitution, may have hurt Coke’s credibility with Wall Street analysts – though it has yet to hurt the firm’s share prices.

The ultimate outcome of these mergers may differ by company. While PepsiCo has trumpeted its “Power of One,” CocaCola executives have already murmured in the press about again leaving the bottling

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PROMOTIONS, EVENTS, AND SPECIALS FOR THE INDUSTRY

Refreshing Grants

The first Pepsi Refresh Grant recipients – who developed the 32 ideas voted most likely to move our communities forward – have been awarded $1.3 million from the Pepsi Refresh Project. Winning proposals ranged from improving the energy efficiency of school buses to promoting financial literacy among high school students.

In January, the Pepsi Refresh Project invited individuals and organizations to submit “shovel-ready” ideas that would positively impact their communities. From February 1 through February 28, Americans voted for their favorite ideas at www.refresheverything. com. In total, the Pepsi Refresh Project awarded two $250,000, ten $50,000, ten $25,000 and ten $5,000 grants.

In 2010, the Pepsi Refresh Project will give away more than $20 million. Each month, Pepsi will award up to $1.3 million in grants to the ideas with the most votes. Pepsi will accept up to 1,000 new ideas every month, and the public decides who wins.

Dos Cervezas For Cinco Dos Equis and Cerveza Tecate announced its ‘Cinco ways to Celebrate’ retail and on-premise program running in April and May. Playing off the Dos Equis popular ‘Most Interesting Man’ campaign and Tecate ‘Con Character’ campaign, the ‘Cinco ways to celebrate’ program offers consumers the following five themes to elevate their party experience: Musica (create your own Cinco dance club) Outdoor Cantina (turn your backyard into a Cinco bash), Mysterioso (wear disguises to your Cinco celebration), Fiesta De Luna (host the after Cinco party) and The Great Feast (feast like it’s your last).

Each theme suggestion includes party tips such as themed playlist suggestions, easy recipe ideas and a checklist of essentials.

At retail, POS materials, pole toppers and mass display units with display enhancers including branded fire pits, coolers and wood crates will help create in-store destinations. Tear pads and text-in promotion codes will guide consumers to recipes and party tips. Relevant cross merchandising offers with a variety of Cinco style party foods will encourage consumers to serve Dos Equis and Tecate.

On-premise, Dos Equis will provide table tents, coasters, view finders and posters to convey the voice of the brand in addition to giveaways including branded compass key chains and necklaces.

Red Bull Goes Big(ger) Red Bull announced it will launch its own online television station. Every hour on the hour, Red Bull TV will air content from all over the world, with a fresh selection of new programming broadcast every day.

The channel will likely feature content on Red Bull Stratos, a challenge through which

50.BEVERAGESPECTRUM.APRIL.2010

skydiver Felix Baumgartner will break the record for highest and fastest free fall in human history. In March, Red Bull unveiled the space suit – the first built by David Clark Company for a non-governmental space program – in which Baumgartner will attempt the jump sometime this year.

PHOTOCREDIT: (C)LUKE AIKINS/RED BULL PHOTOFILES

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