Beverage Spectrum June 2006

JUNE 2006

// ALSO THIS ISSUE // A NEW

WORLD OF BEER

HIT THE BARS

TO HELP YOUR SALES PUBLISHED BY

JUNE 2006

vol.

4 // no. 5

6TCFG 7R 6Q .WZWT[ .KIJV 6QFC[ 44

&GOCPF (QT #HHQTFCDNG .WZWT[ +U )TQYKPI (CUV Consumers increasingly want to treat themselves to small indulgences. Within beverages, they want to trade up to better quality products that are lighter in taste and texture.

Cover Story

28 // THE SHARKS ARE CIRCLING Will Red Bull get bitten?

Features

28

44 // GLOBE-SPANNING SUDS In search of the next Mexico 52 // FANCY FOODS PREVIEW Summer beverage sampling in

Beer industry trends show a great opportunity for Luxury Light beers.

• Total beer category sales are up 2%* • Import segment sales are up 10.6%* • Light beer accounts for almost 50% of beer category volume*

Departments

Manhattan

8 // BEVSCAPE Celebrating Cheerwine // Açai

54 // LEARNING AT THE BAR

shortage in the works?

What off-premise retailers should learn from the bar business

16 // CHANNEL CHECK Alterna-dairy is foaming 20 // NEW PRODUCTS

2TQ¿V (TQO 6JG +ORQTV /CTIKPU 6JCV *GKPGMGP 2TGOKWO .KIJV &GNKXGTU

Vodka with a new kind of kick

With the momentum of a $70 million marketing campaign behind it, your consumers are sure to be asking for Heineken Premium Light.

Don’t miss out — order now.

FMI: Smiles all around in Chicago

Columns

4 // THE FIRST DROP Hear that voice again...

56 // CONVENTION SCRAPBOOK 6 // PUBLISHER’S TOAST Barry goes to Iceland 58 // PROMOTION PARADE Win a bar! Bill Walton did...

14 // GERRY’S INSIGHTS How Red Bull will keep its wings

*ACNielsen YTD 4/29/06

66 // DRINK THINK

28

Where should you put the Jones Soda Candy?

www.heinekenlight.com Enjoy Heineken Light Responsibly ©2006 Heineken USA Inc., White Plains, NY

JUNE

2006

\\ BEVERAGE SPECTRUM

s the “Voice of Beverage Retailing,” we get a lot of calls from the fine folks in the mainstream news media to discuss all things beverages. Despite our heavy workload – jeez, is it ever hard working your way through milkshake samples – we like to make time to enlighten these folks.

Lately, all these reporters seem to be calling us to talk about energy drinks, as if they’ve just discovered them for the first time. What are these drinks, they’ll ask us. How do they work? Why do the kids like them so? What’s a KMX? And we tell them – they’re sweet, they’ve got caffeine, and they’ve got great, creative names like “LongJack” or “Blue Ox” or “Clamato Energia.”

Once we tell them about all the great, creative names of these products, and all the great things that are put in them to keep you awake, and how some people mix ‘em with booze, they finally ask us to play doctor. There’s a short pause, a brief shuffling of notes, and then they ask us: aren’t these things dangerous to the kids?

Well, shoot. We’re the Voice of Beverage Retailing. Not its physician.

But we can say that in the past year

BEVERAGE SPECTRUM // JUNE

at th

THE FIRST DROP

v oice ag r a e ain H

or two, we’ve sampled a lot of energy drinks, and they haven’t harmed us a bit, except for the fact that they keep us awake long enough to keep writing, which is like work, which we’re allergic to, and so might cause itching.

Now, we can’t vouch for the safety of drinking booze and lots of sugar and caffeine all at once, and we make that clear, while once again stating that this is a market that’s huge, and is here to stay. And we also tell them we don’t know whether milk thistle really cleans out your liver or whether 1,000 percent of your RDA of B vitamins is better than 100 percent.

There’s a lot of things we don’t know for certain, in fact, and that leads us to this month’s cover story, on page 28, which says that it looks like Red Bull might not be the category-killer we’ve all thought it was for so long.

What does that mean for retailers?

That’s the kind of question we can answer with certainty: it means that the energy drink category will be in flux for some time. It means that there’s competition in the category, and that because of that competition, prices are going to come down, and that when they do, you need to have a good plan for the category in place to help preserve the energy drink dollars you’re already used to getting.

No one believes Red Bull is going away, and it still might be your best sell-

2006

er, and a premium priced one, at that.

But there are other brands out there, and many of them are getting stronger.

The whole category is maturing, and if you let your shelf sets mature with it, you’ll always be a step ahead of the competition. And the reporters.

Speaking of reporters, they’ve also been writing about other things lately, as well, like the fact that imported beer is still selling, even though the rest of the category is on the ropes, and so we’ve done some reporting on that ourselves starting on page 44. We also hear from Michael, a nightclub developer who’s got some retailing advice, and we see what’s going down at the Fancy Foods Show in Manhattan next month. So sit down, enjoy your favorite energy drink, and read away.

PUBLISHER’S TOAST

ICELAND

A Greater

Appreciation

REYKJAVIK

hat do you get when you bring together a retailer, a distributor, a marketer and a certain beverage publishing executive, and then ship them off to Iceland?

Well, the answer for me was hours of consideration, treks to aquifers, tours of co-packing facilities and an endless series of peeks into Icelandic stores.

To set the scene, I recently took my friends at Iceland Springs up on a longextended offer to visit their source.

They, and the entire country, are very proud of their water and their ecology.

After spending my time there, I can see why. Purity does count, and from what I saw, they should be proud.

What they shouldn’t be proud of is retailing, Icelandic-style.

After spending some time there, I realized just how good we have it here in terms of store design, layout, product selection and variety.

I was taken aback by how little choice there was, even in the affluent city of Reykjavík. My new distributor friend Steve and I hit a pair of grocery stores, a handful of c-stores, and a few that were equivalent to up-anddown-the-street joints. At all of them, the selection was minimal: just some Coke and Pepsi products and a few marginal local brands.

Nothing was bannered, the pricing was inconsistent, and the shelves were scantily stocked, as if they had been raided by Vikings right before an expedition. Point-of-sale? Non-existent, except for some handwritten signage We saw one energy drink (a local one), a few fruit drinks, and a single

BEVERAGE SPECTRUM // JUNE

sports drink. Functionals were just a pipe dream. There were no end caps, and no coolers at the registers for impulse buys. In other words, there was no excitement! I felt I’d been sent back in time of beverage retailing circa the 1980’s.

The store personnel spoke of poor inventory control, tracking and stocking. All the things we pride ourselves on were eluding these retailers.

Harry, my retailer companion, couldn’t believe how low on the priority list the beverage category was to these stores.

Obviously, margins that we covet here are unimportant over there. They couldn’t see the value of beverages to their businesses.

The trip gave me a greater appreciation of beverage retailing in America.

We are the standard that everyone should be measured against. While we get caught in the everyday muck and mire, it is important to take time to step back and look at all you’ve accomplished. With Independence Day coming up, make sure you wish upon at least one bottle rocket that you won’t ever have to run a store in Iceland.

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EDITORIAL 1 Mifflin Place Suite 300 Cambridge, MA 02138 ph. 617-715-9670 fax 617-715-9671

PUBLISHER

Barry J. Nathanson bnathanson@bevspectrum.com EDITORIAL DIRECTOR

John Craven craven@bevnet.com EDITOR

Jeffrey Klineman jklineman@bevnet.com ASSOCIATE PUBLISHER

John McKenna mckenna@bevnet.com ART DIRECTOR

Matthew Kennedy mkennedy@bevnet.com PRODUCTION MANAGER

Adam Stern astern@bevnet.com

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Adam Stern astern@bevnet.com 617-715-9679 ARTICLE REPRINTS

500 copies or more FosteReprints Kelly Ganz kganz@fostereprints.com 800-382-0808 x142 BEVERAGE SPECTRUM PUBLISHING INC. CHAIRMAN & CEO

John F. (Jack) Craven jack@bevnet.com PRESIDENT

John Craven craven@bevnet.com

Barry J. Nathanson,

2006

Publisher

Beverage Spectrum is published 9 times a year by Beverage Spectrum Publishing, Inc. Beverage Spectrum Publishing, Inc. is a wholly owned subsidiary of BevNET.com, Inc., 1 Mifflin Place, Suite 300, Cambridge, MA 02138

BEVSCAPE

WHAT’S HAPPENING ACROSS BEVERAGES

SNAPPLE TAKES TO THE AIRWAVES CHEERWINE’S NEW VINTAGE Southern icon Cheerwine has unveiled new bottles and cans that emphasize its position as the nation’s original cherry soda.

Family-owned by Carolina Beverage Corp., since its inception, Cheerwine has been around since 1917, meaning it hit the scene just before Prohibition.

The new cans feature three cherries and sparkling bubbles, all designed to draw attention to a brand that has recently expanded to 20 states in the South, Northeast and Midwest.

The brand might be old, but it’s tech-savvy: the new marketing push includes a revamped Cheerwine web site.

The tagline for the new Cheerwine packaging? “Cherry Different – It’s time to zag.”

“We want consumers to think of the Cheerwine Brand as truly cherry inspired, a non-traditional brand with a unique cherry delivery,” said Tom Barbitta, marketing head of Carolina Beverages. “Our ‘time to zag’ line communicates to consumers that Cheerwine is a change of pace beverage when they are ready to ‘zag’ away from mundane sodas.”

Snapple recently took Manhattan. But why should it stop there? It simply headed East to take Boston, as well.

After spending last year getting acclimated as the official beverage of the Big Apple, Snapple is spending the month of June this year as the official sponsor of WFNX, a Boston radio station.

The “Summer Free for All” is being held to the exclusion of all other advertisers, and will also be accompanied by piles of free tickets and product giveaways when the temperature exceeds 85 degrees in downtown Boston’s Copley Square.

WFNX is part of the Phoenix Media Group – the same group that owns the stalwart countercultural “alt-weekly” Boston Phoenix. The paper has plans to cross promote the sponsorship. We’ve heard of selling out to the Man, guys, but selling out to the Snapple Lady?

STRAWBERRY PASSION FRUIT

Real taste appeal.

ONE MORE REASON TO BUY A HYBRID CAR Kooky as he seems sometimes, President George W. Bush has been on the wagon for years. But there’s at least one collection of folks who wish he wasn’t: the manufacturers of Kentucky bourbon.

A report published recently in OnEarth magazine has suggested that the heattrapping pollution that causes global warming might also make it impossible for Kentucky’s distilleries to keep squeezing out its signature booze.

According to the story, bourbon pulls its taste and color from the inside of charred oak barrels, expanding into the oak during the summer months and leaving as things cool down in the winter, but global warming threatens the

BLUEBERRY POMEGRANATE

temperature variations that take place during the seasons.

The three-degree Fahrenheit temperature increase that experts predict for Kentucky in the coming years means less variation between summer and winter – and less movement of the bourbon as it ages inside its barrels.

We guarantee that this particular issue would have been higher on Bush’s list if he were still boozing. And it might have swung the 2000 election to Al Gore, as well, if he’d only mentioned this: the same threat to Kentucky’s booze industry could hurt his own home state of Tennessee, which makes Jack Daniels and George Dickel Tennessee whiskeys in the same oak barrels.

File under: hot toddy.

Pure sales appeal.

This is PEELS–the refreshingly unique alcohol beverage made with real fruit juice.

Available in a variety of flavors, PEELS is lightly carbonated, with the slightly sweet taste of freshly peeled fruit and can be enjoyed chilled, straight up, over ice, mixed or frozen.

PEELS is the beverage for discerning females looking for a new taste experience. This bold new product contains 100% natural ingredients–free of preservatives and artificial flavors, 5% alcohol per 10 oz. serving, and is available in single flavor 4-pack bottles and variety pack.

For more information on this and other innovative new products, contact your AnheuserBusch sales representative and visit us at www.beerprofitguide.com.

Discover the incremental sales appeal of PEELS. ENJOYPEELS.COM

© 2006 The Peels Beverage Company, Peels Flavored Malt Beverage (Flavored Beer in TX), Baldwinsville, NY

BEVERAGE SPECTRUM // JUNE

2006

PEAR LEMON

BEVSCAPE LATTE IMBROGLIO CONTINUES: Manufacturer Cooperates with FDA, Recalls Cans

By Jeffrey Klineman A company that played a key role in the manufacture of selfheating coffee drinks licensed by celebrity chef Wolfgang Puck has voluntarily recalled those products in cooperation with the U.S. Food and Drug Administration.

Lakeside Foods Inc., the company charged with filling and sealing the self heating Wolfgang Puck Latte line, as well as three other self-heating beverage and food brands, issued the recall on June 8, withdrawing the products from circulation in 31 states and requesting that consumers return any product they had recently purchased in exchange for a full refund.

The company conducted the recall because some of its cans may have been contaminated with “spoilage organisms or harmful bacteria due to seal leakage,” according to a statement released by Lakeside.

The recall was the result of leaky cans, rather than issues with the heating function, according to an FDA spokesman.

The recall was another in a series of setbacks for the self-heating product concept, released to great fanfare last spring because of its association with Puck. It came on the heels of an investigative report by Beverage Spectrum/ BevNET detailing problems consumers have had with the self-heating cans. According to that report, BrandSource, the company licensed by Wolfgang Puck to market the lattes on the celebrity chef’s behalf, requested that retailers remove the products from their shelves because consumers had complained of the presence of heating materials in the coffee itself, spoilage, and melting.

Lakeside is a subcontractor of OnTech, the company that claims to have spent $24 million to develop and market the self-heating technology. Sonoco, a packaging manufacturer, produced the cans according to OnTech’s specifications, and then Lakeside filled and sealed them.

BrandSource, whose president, Robert Groux, had contracted with OnTech to manufacture the cans on behalf of his partnership with Wolfgang Puck, has been involved in litigation with OnTech, Lakeside and Sonoco since earlier this spring. OnTech and its subcontractors claim BrandSource failed to pay for product, while BrandSource alleged that the product manufactured by the OnTech group was defective.

Having a recall emanate from the manufacturing group “absolutely supports our side of the lawsuit,” said Mark Miles, the attorney for BrandSource. “OnTech continues to argue there are no problems with this product. For them to continue to keep their heads in the sand is potentially harmful to the American consumer.”

10

BEVERAGE SPECTRUM // JUNE

2006

These cans show defective seals, according to BrandSource CEO Robert Groux.

Jonathan Weisz, the president of OnTech, refused to comment for this story. Last month, he issued a statement through a public relations firm that reports of a recall were “incorrect and irresponsible” and that OnTech and its manufacturing partners had not been aware of any manufacturing problems.

Ironically, OnTech’s own brand of self-heating coffees, Hillside, was also on the list of recalled products, along with soups made on behalf of Las Vegas-based prepared foods purveyor Chef Jay, as well as one other company, Beaumont Gold.

A “self-heating hotline” set up at Lakeside referred media calls to a spokesman at Fleishman-Hillard, a public relations firm.

“The primary idea was to focus on customer satisfaction and pull it back,” said Fleishman’s John Spellich, who represents Lakeside. “It would be premature to assess how the sealing issue happened.”

Puck spokesman Robbie Vorhaus said the chef’s company was continuing an investigation into problems with the products; he said it was rapidly approaching a swift conclusion.

“We’re still trying to figure this all out,” Vorhaus said.

“There’s a lot of finger pointing, and we’re trying to understand what really is the issue here. Everyone seems to feel it’s someone else’s responsibility. We feel it’s the licensee’s responsibility to deal with this.”

Self-Heating Latte cans returned to BrandSource.

CONFERENCE CALENDAR

BEVSCAPE

AÇAI YOU LATER?

FLOUR, SALT, COLA Coke is going to be the next hot ingredient – if Coke has anything to do with it, that is. Here’s the famous CSD being measured out by Chef Rudy Speckhamp one of the flavor alchemists with the Culinary Institute of America, which has joined with Coca-Cola North America to develop new on-premise, non-alcoholic mixed drinks using Coke products. Drinks like the Fresca Pomegranate, Coca-Cola Spice and Sprite Orange Bubbly premiered at the National Restaurant Association’s Restaurant and Hotel-Motel Show last month, and are expected to appear soon on menus near you.

Lately, it’s seemed as if everyone’s trying to manufacture products with açai, the Amazon’s hot-antioxidantof-the-moment, putting the little berry into drinks ranging from sodas and juices to energy drinks and teas.

Well, apparently that’s created a bit of a pipeline issue, as a brief – as of now – reduction in the açai berry supply has knocked off at least one product, Naked Juice’s Purple Machine.

According to Tony Xanthos of Frutzzo, a company with ties to the Brazilian communities where much of the world’s Açai is harvested, the supply isn’t the problem, it’s the diplomatic arrangements that can cut into companies’ abilities to package and export the stuff to the U.S. Regardless, if the Purple Machine grinds to a permanent halt, it could be a scary sign for many companies who have staked their future on the tiny berry.

JULY 23-25 International Food Distributors Association Sales and Marketing Conference and Truck Driving Championship Naples, Fla. JULY 23-25 North and South Carolina National Soft Drink Association Meeting Asheville, N.C. AUG. 5-9 International Sweetener Symposium Asheville, N.C. AUG. 23-25 International Aluminum Congress Sao Paulo, Brazil JULY 2006

EXECUTIVE MOVES Jack F. Callahan, Jr. has joined Dean Foods as Executive Vice President and Chief Financial Officer. Most recently, he was Senior Vice President of Corporate Strategy and Development at PepsiCo, Inc. Bravo Foods announced that Jack Shea had been named Director of Business Development for Allied Brands. Shea will be responsible for the development and sales of all non-dairy beverages including teas and flavored waters.

PepsiCo hired beer industry veteran Victor Melendez as Vice President of Product Innovation. Melendez was previously in charge of InBev’s roster of European brands.

The board of Cott Corporation appointed Brent Willis as President, Chief Executive Officer and a member of the Board of Directors. Most recently, Mr. Willis was Zone President, InBev Asia Pacific.

Caballo Negro has announced that Thomas Neely had been hired as CEO. Thomas has 13 years experience in the beverage industry, the last nine with Heineken USA, dealing with sales and sales management of distributors and national chains.

Rudy Beverage, Inc. hired Mark Duffy as the new vice president of National Foodservice Accounts. Duffy has more than 20 years of beverage and foodservice industry experience, including 17 years with the Coca-Cola Co.

Icelandic Water Holdings ehf, the bottler of Icelandic Glacial spring water, has named Ragnar Birgisson as the company’s new chief executive officer. With that appointment, former CEO Patrick Racz became the company’s chief operating officer. From 1996 to 2004, Birgisson, a beverage industry veteran, was managing director of Skifan ehf - the largest entertainment company in Iceland.

John Esposito, former president and chief executive of Moet Hennessy USA, has taken the position of president and chief executive of Bacardi U.S.A. Esposito will also hold the same titles for the North American Region, overseeing Puerto Rico and Canada. Esposito, 58, replaced Eduardo Sardiña, who retired after 33 years at Bacardi and more than a decade in charge of the liquor company’s North American region.

WITH LIBERTY AND LAWSUITS FOR ALL Last month, it was the great PepsiCo/Energy Brands litigation over the near-exact copying of vitaminwater by SoBe Life Water. This month, the health and welfare folks are filing suits of their own, against the two remaining beverage biggies, Cadbury Schweppes and the Coca-Cola Co. The Center for Science in the Public Interest (CSPI), a Washington, D.C.-based activist organization, announced it was taking on Cadbury-Schweppes after that company announced it had switched 7-Up to an all-natural formulation. The battle will center on whether high-fructose corn syrup, one of the ingredients Cadbury claims is now all-natural in the lemon-lime drink, can actually be considered all-natural.

The ubiquitous sweetener “isn’t something you could cook up from a bushel of corn in your kitchen,” said CSPI executive director Michael Jacobson.

12

BEVERAGE SPECTRUM // JUNE

2006

If CSPI wins, the litigation could land other companies in hot water, because this isn’t the first time HFCS has been listed as a natural ingredient.

Coke, meanwhile, is fending off a challenge from the State of California alleging the company uses lead-based paint on bottle labels imported from California. In April, PepsiCo settled a similar suit, agreeing to start using lead-free labels in products it imports from Mexico.

On the other hand, at least one court action paid off pretty well for Coke, at least in terms of publicity: the company announced it would let an Australian man who had been shot five times while filling one of its vending machines keep a $560,000 workers’ compensation payment that had been overturned by the courts.

AUGUST 2006

JUNE

2006

\\ BEVERAGE SPECTRUM

13

GERRY’S INSIGHTS

RED BULL: Narrow Box, or PINE BOX? s the energy drink king about to be dethroned? It’s a question of great significance across the beverage spectrum now that even the cola giants are committing a lot of their margin ambitions to this still-small segment.

Before I offer my two cents, I should offer a disclosure: Like many other beverage observers, after watching the North American launch of Red Bull in 1997, I went to the next InterBev trade show to witness dozens of 8 oz. wannabe brands jostling for retailers’ attention, and drew the obvious conclusion: Red Bull had a nice thing going, but it was only a matter of time before the market was saturated, the losers started giving away product, and margins crashed. Nearly a decade later, it still hasn’t happened. So, like many others, I have been proved dead wrong on the category’s future at least once in the past. Fortunately, I’ve still got a column.

So I’ll start with the obvious: It seems to be turning into a segmentation game. Lower-calorie extensions are well-entrenched by now, and what began as an 8 oz. category has now entered 16 oz. and 12 oz. sizes, as well as warm multi-packs aimed at takehome consumption.

There’s also a lot of targeting going on at what are perceived to be promising demographic or psychographic groups. Things get fuzzier here. I don’t have the space – or the intelligence – to explain some of these strategies, but some early returns are in. Private-label brands launched by the likes of 7-Eleven and AM/PM don’t appear to have fared well. Since 7-Eleven has fared well in other private-label endeavors,

this suggests that energy drinks – like beer – may prove impregnable to store brands, something that bodes well for the category. The jury is still out on energy drinks targeted directly at women under brands ranging from Go Girl to Tab Energy. Since mainstream energy drinks often take a macho positioning, that might seem to be an untapped opportunity, but it’s not clear yet that blatant skirt-chasing is the way to get there.

If I were a betting man (meaning I would have lost a bundle already – see above), I’d put my money on marketers who exploit concerns about the ingredients of conventional energy drinks. Some entries claim to avoid the peak-and-crash phenomenon of the dominant brands, others are based on healthy – or healthy-sounding – ingredients. Although quite a few have been visible at recent trade shows, they run up against a key contradiction in the category. Just as products that “taste better” than Red Bull often founder over some consumers’ conviction that if it tastes really good it can’t possibly work, arguing too strenuously that your energy drink is healthier could raise similar suspicions.

But there is a new product I’m excited about: AriZona Green Tea Energy, which the company has had trouble keeping in stock in its initial three test markets. I think it could prove a winner because it taps into the excitement over green tea, is built off AriZona’s equity on the iced-tea side, and doesn’t pander: it’s got gorgeous packaging that adopts the distinctive cherry-blossom theme of the green tea, but sports a color scheme that doesn’t feminize

Don’t just live, Thri e. ™

®

can V8 Beverages and ®

the can too much. With word on the street that the entrepreneurs behind Inko’s White teas are readying a whitetea energy drink for summer, Ener-Teas could be a popular new strategy.

But back to Red Bull. In the face of all these challenges, it could seem to be locked into a narrow box, relying as it does on a single formulation in a single size. But guess what? A narrow box need not look like a coffin. Look at Corona beer, which, like Red Bull, has never extended its core brand beyond a lighter entry, and is loath to tinker with its packaging, marketing or positioning. Corona has thrived letting the other guys knock each other out trying to be the next “vacation in a bottle.”

Maybe the other energy drinks will wear themselves out trying, like Red Bull, to grow wings.

Drive Sales

Profits!

V8 Beverages continue to provide the vegetable nutrition to help your customers thrive. And with 7% growth for V8 100% Vegetable Juice at convenience stores in 2005*, customers have proven that they want smarter, healthier beverage choices.

Here’s what’s new that will drive sales and profits for you.

• V8 Beverages total media spending is +38% in 2005/2006 with an impactful, vegetable nutrition message.

• V8 Splash® Juice Drink has optimized the flavor of its top two varieties, Tropical Blend and Berry Blend, while still remaining an excellent source of antioxidant vitamins A, C, and E. • Introducing New V8® V.Fusion™ Juice, a surprisingly delicious way to get a full serving of vegetables and a full serving of fruit in every 8oz. glass t . Available in three 12oz. varieties: Strawberry Banana, Tropical Orange and Peach Mango...all 100% juice.

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

Nobody delivers great-tasting, nutritious beverages like V8!

For more information contact George Loesch, Vice President National Sales, C-Store/SSB at 856-802-1506.

*Source: IRI, Unit Sales Total U.S. Convenience Store, Regular V8 100% Vegetable Juice, 52 Weeks Ending 8/28/05

14

BEVERAGE SPECTRUM // JUNE

2006

Channel Check

june 2006

SPOTLIGHT CATEGORY

DAIRY ALTERNATIVES 52 Weeks ending 5/21/2006 leading brands From almond to soy, you just can’t ignore milk substitutes.

They’re a category that’s growing around healthy living initiatives like women’s health and lactose intolerance, probiotics, and lately, taste, as well, as indicated by the fast growth of Lifeway’s Kefir products.Those soy proteins are also being used to power up refrigerated milkshakes, as both Odwalla and Naked shakes are climbing the rankings.

The big Nesquik bunny still dominates, though.

SOURCE: Information Resources Inc.Total food/drug/mass excluding Wal-Mart Refrigerated Milkshakes/ Non-Dairy Drinks

Dollar Sales

Change vs. year earlier

Share of Market

Category Total

$64,823,640

-5.0%

100%

Nestle Nesquik

$17,954,590

32.5%

27.7%

Hersheys Milkshake

$11,557,470

-30.5%

Rice Dream

$8,059,345

Hersheys

$6,207,861

Odwalla Super Protein

$4,416,535

Kerns Aguas Frescas

$2,749,119

Private Label

Refrigerated Kefir/ Milk Substitutes

Dollar Sales

Change vs. year earlier

Share of Market

Category Total

$1,962,252,601

0.8%

100%

Silk

$1,596,013,941

0.4%

68.3%

27.7%

8th Continent

$1,205,993,993

4.7%

13.7%

19.8%

12.4%

Private Label

$809,076,247

1.0%

6.4%

-35.2%

9.6%

Hood Carb Countdown

$732,431,563

5.0%

4.8%

141.3%

6.8%

Lifeway

$596,096,622

4.5%

2.3%

-1.1%

4.2%

Meyenberg

$604,373,128

3.5%

1.7%

$2,684,492

-17.8%

4.1%

Organic Valley

$369,028,902

-6.0%

0.5%

Deans Choco Riffic

$1,501,870

-13.0

2.3%

Vitamite

$273,698,011

0.2%

0.4%

Shamrock Farms

$1,365,285

677.7%

2.1%

Sun Soy

$232,300,060

8.7%

0.4%

Don Jose

$1,265,812

-0.4%

2.0%

Farmland Skim Plus

$1,074,036

4,252.0%

0.3%

Rich N Chocolate

$1,077,477

5.2%

1.7%

Helios

$953,980

45.9%

0.2%

Borden Milk Products

$882,452

10.1%

1.4%

Soy Dream

$828,431

-63.9%

0.2%

Naked Foods Juice

$743,343

650.8%

1.1%

Zen Don

$519,443

6.3%

0.1%

Cacique

$738,770

17.2%

1.1%

Periwinkle

$373,128

17.1%

0.1%

T G Lee

$534,324

9.6%

0.8%

Sunrich

$357,856

N/A

0.1%

TOPLINE CATEGORY

VOLUME

52 Weeks ending 5/21/2006

CSD’s $14,274,899,290 +3.3%

ENERGY DRINKS $519,466,800 +56.4%

BOTTLED WATER $4,213,985,000 +17.9%

SPORTS DRINKS $1,487,639,000 +20.1%

BEER $8,727,263,232 +1.3%

TEA/COFFEE $1,016,221,000 +22.0%

BOTTLED JUICES $3,457,717,000 -0.7% 16

BEVERAGE SPECTRUM // JUNE

2006

SOURCE: Information Resources Inc.Total food/drug/mass excluding Wal-Mart

Channel Check

june 2006

CSD’s

Dollar Sales

Change vs. year earlier

1.2%

Red Bull

$245,472,900

30.8%

Pepsi

$1,587,208,592

0.2%

Monster Energy

$62,534,700

155.4%

Diet Coke

$1,206,075,774

4.5%

Rockstar

$54,554,290

85.7%

Diet Pepsi

$805,610,278

0.8%

Full Throttle

$31,941,400

333.2%

Mountain Dew

$730,228,014

4.6%

SoBe No Fear

$25,953,390

104.6%

Dr Pepper

$595,171,127

4.4%

Amp

$21,373,530

28.7%

Sprite

$605,810,745

3.9%

SoBe Adrenaline Rush

$20,895,730

17.4%

Caffeine Free Diet Coke

$367,351,523

-6.0%

Tab Energy

$4,557,488

N/A

Diet Dr Pepper

$273,446,790

0.3%

SoBe Lean

$4,473,661

723.3%

Diet Mountain Dew

$232,3830,676

8.5%

Rip It

$3,923,812

132.2%

52 Weeks through 5/20/06

Change vs. year earlier

Heading Up: Full Throttle

52 Weeks through 5/21/06 SOURCE: Information Resources Inc.Total food/drug/mass excluding Wal-Mart

ICED TEA

Dollar Sales

AriZona

$238,017,200

40.3%

Aquafina

$449,671,000

18.2%

Snapple

$101,027,000

8.0%

Private Label

$416,432,000

24.3%

Diet Snapple

$87,337,320

7.6%

Dasani

$370,079,100

24.7%

Lipton

$86,360,220

279.7%

Poland Spring

$217,927,000

26.2%

Lipton Brisk Tea

$78,501,100

-4.6%

Propel

$193,264,700

28.4%

Nestea Cool

$50,212,360

-23.0%

Dannon

$162,137,900

14.4%

Lipton Iced Tea

$44,038,420

9.2%

Arrowhead

$154,155,800

19.4%

Private Label

$29,059,640

15.7%

Deer Park

$118,987,900

30.0%

Nestea

$15,305,710

24.4%

Glaceau vitaminwater

$100,286,900

181.2%

SoBe

$15,230,320

16.1%

Ozarka

$84,784,380

27.3%

Heading Up: Lipton

CONVENIENCE/PET STILL WATER

Dollar Sales

52 Weeks through 5/21/06 SOURCE: Information Resources Inc.Total food/drug/mass excluding Wal-Mart

Heading Up: Glaceau vitaminwater

ICED COFFEE

Dollar Sales

BEER

Frappuccino

$166,717,400

Doubleshot Wolfgang Puck

Change vs. year earlier

Change vs. year earlier

52 Weeks through 5/21/06 SOURCE: Information Resources Inc.Total food/drug/mass excluding Wal-Mart

Dollar Sales

Change vs. year earlier

18.5%

Bud Light

$1,341,382,656

0.5%

$26,979,280

35.1%

Budweiser

$787,788,224

-7.4%

$5,520,751

156.7%

Miller Lite

$712,836,608

0.9%

Bolthouse

$1,507,631

N/A

Coors Light

$601,844,352

2.9%

Private Label

Corona Extra

$465,060,000

10.5%

Heineken

$286,935,168

9.5%

Natural Light

$285,302,624

-0.7%

Michelob Ultra Light

$210,287,440

-15.6%

Busch Light

$203,143,168

3.1%

Miller Genuine Draft

$179,737,280

-9.5%

$1,172,740

17.0%

Kahlua

$828,081

2.7%

Doubleshot

$628,228

N/A

Havana

$369,354

-25.5%

Caffe D Vita

$214,851

11.2%

Starbucks

$204,925

N/A

Heading Up: Wolfgang Puck

52 Weeks through 5/21/06 SOURCE: Information Resources Inc.Total food/drug/mass excluding Wal-Mart

2006

Change vs. year earlier

$1,960,823,594

SOURCE: AC Nielsen/Citigroup Total U.S. food/drug/mass

BEVERAGE SPECTRUM // JUNE

Dollar Sales

Coca-Cola Classic

Heading Up: Diet Mountain Dew

18

ENERGY DRINKS

Heading Up: Corona

52 Weeks through 5/21/06 SOURCE: Information Resources Inc.Total food/drug/mass excluding Wal-Mart

JUNE

2006

\\ BEVERAGE SPECTRUM

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NEW PRODUCTS csd’s smoothies

bottled water coffee

CSD’s Hansen Beverage Company has launched Hansen’s Green Tea Sodas, a new line of luxury CSD’s that combine the benefits and taste of green tea with several unique flavors. The sodas have all-natural flavors with no artificial colors, no preservatives, no caffeine and no sodium. Diet Hansen’s Green Tea Sodas are sweetened with Splenda.

Available flavors are lemon mint, tangerine, pomegranate and ginger, with diet versions available in lemon mint, tangerine and ginger. Hansen’s Green Tea Sodas are sold in 4-packs of 16 oz. cans, with a suggested retail price of $2.99. The new line of sodas will be supported by a nationwide print advertising campaign, an FSI campaign in key markets, TV product placement, instore coupon dispensers and marketing materials and other Hansen’s brand promotions and sponsorships.

PepsiCo’s Sierra Mist is launching its first limited-time-only offering with Sierra Mist Cranberry Splash, the crisp lemon-lime soft drink flavored with a hint of cranberry.

Sierra Mist Cranberry Splash will be available for eight weeks, beginning in November, in packaging that will reflect the spirit of the holiday season. Supported with national television and radio advertising, Sierra Mist Cranberry Splash will be available in 20 oz. and two-liter bottles as well as 12-packs of 12 oz. cans.

From the Coca-Cola Co. comes a relaunched Sprite with a new packaging design that features the familiar silver, green and blue colors as well as the Sprite brand name and bubbles. The updated imagery is enhanced by the inclusion of a new “S” brand icon that will be featured on all packaging and marketing elements. The brand re-launch began in May. From Wet Planet Beverages comes Jolt Silver, the newest addition to Jolt’s line of high-powered liquids. Jolt Silver is a delicious lemon-lime flavor with a crisp bite.

20

BEVERAGE SPECTRUM // JUNE

2006

spirits beer

wine juice

malt beveages

Packaged in Jolt’s re-sealable aluminum Battery Bottle, the product is available nationwide. Jolt has also launched its newest national campaign by coining the phrase, “The Caffeine Machine.” For more information on Jolt Silver, call (585) 381-3560. Jolt Silver will retail for between $1.99 and $2.50 per can.

Smoothies SoyBlendz, a non-dairy smoothie made from soybeans, has switched its packaging from glass to PET plastic bottles. The 10 oz. bottles hold one of four flavors: Mixed Berry Medley, Mango/Orange Dream, Orange Citrus Splash, and Strawberry/Banana Blast.

MSRP is $1.99. For more information, call (818) 345-4900.

Bottled Water Here’s a bottled water that you know is just for kids, because it’s called Kids Only Bottled Water. This product is bottled water that features licensed popular characters like Superman, Spider-Man and Scooby-Doo. The product will be available in August in 8 oz. and 16 oz. plastic bottles. MSRP for a 6pack of small bottles is $3.79 and for the big ones, $3.99; a 4-pack of the big ones is $2.99.

For more information, call (201) 222-9118.

Coffee Available in Original and French Vanilla flavors, Froid gourmet coffee beverages are served in unique unbreakable and shelf-stable 11 oz. plastic bottles. Coffee lovers can expect a rich and creamy coffee beverage without any artificial or chemical additives, using organic certified ingredients. For more information about Froid, call 866-46-FROID. The legendary taste and smell of Cinnabon has been captured in a can - in four great tasting coffee drinks: Cinnabon Vanilla Latte, Carmel Nut Latte, Espresso & Cream, and Mocha Latte. While consumers in se-

lected markets in the Southeast have had a sneak preview, coffee-cravers in the rest of the nation will soon be able to share in the experience. ByB Brands has acquired the licensing rights for Cinnabon coffee drinks, and will achieve national distribution over the next 12 months. For more information, call (404) 705-2046.

Spirits Absolut Vodka has launched Absolut Ruby Red, its 8th flavored extension to its core vodka line. Ruby Red has a complex, floral aroma with notes of natural grapefruit. The flavor is smooth and zesty, and, coupled with a crisp and refreshing taste, stems from notes of Grapefruit peel. It comes in the traditional Absolut frosted bottle, and is available nationwide. For more information, call (212) 641-8720.

Buenos dias to Cuervo Flavored Tequilas, a new selection of premium tequilas with hints of orange, lime and tropical fruit flavors. Each flavor is a proprietary blend of premium silver-styled tequilas combined with natural fruit flavors. The launch is supported by an integrated marketing effort that includes promotions and special events, public relations, merchandising, and sampling.

They are available nationally in grocery, liquor, club and drug stores. The product will be available this month in multiple sizes with the 750 ml bottle retailing for approximately $16.99 to $18.99 (depending on the market).

For flavored Cuervo, call (212) 590-0263.

America’s very first proprietary premium liqueur is riding into the glasses of bar goers in cities nationwide this month. Redcliff was developed with a unique flavor profile based in the All-American flavor of cola with distinct hits of vanilla, spices and other mysteri-

ous ingredients. It is bottled in a signature, western-styled flask with vivid label artwork and is currently available in California, Nevada, Arizona, New Mexico, Texas, Oklahoma, Colorado, Massachusetts, New Jersey, New York, Florida and Illinois. For more information, call (310) 456-7151.

Marking the first time a Mexican-owned tequila maker has joined with a Frenchowned company in a tequila partnership, La Certeza will be available to American tequila consumers in select markets beginning on June 1, and introduced across the nation by the end of 2006. Available in three varieties: Blanco (SRP $40), Reposado (SRP $45) and Añejo (SRP $60), La Certeza has a softer and lighter taste profile than its counterparts.

This month, p.i.n.k., the first 80-proof super-premium vodka flawlessly infused with caffeine and guarana, hits store shelves.

Made from the finest handcrafted vodka from Holland, p.i.n.k. contains a flavorless caffeine and guarana formula that does not disrupt the vodka’s exceptional quality. Southern Wine & Spirits is distributing p.i.n.k. with a suggested retail price for a 750 ml bottle of approximately $40. For more information, go to www.perfectpartyspirit.com.

St. Pauli Girl Beer is unveiling dynamic new package graphics to increase the brand’s consumer appeal with 25 to 34-year-old male imported beer drinkers. The new packaging features the St. Pauli Girl icon with her hair down for the first time in the brand’s history and will hit retail beginning in June 2006. The St. Pauli Girl packaging was last redesigned in 2003, when the Girl icon was taken from a full-body image to the current waist-high image. The most dramatic

From May 3 to press time; to see reviews, log on to www.BevNET.com

HOOAH! Soldier Fuel Water Joe Hansens Natural Green Tea Mouth of the South Energy Drink Featuring Jimmy Heart KaBoom Infinite Energy

Daily’s combines great tasting RTD cocktails and a convenient upscale package for a clear new product winner in 2006!

Beer

BevNet.com

NEW DRINK REVIEWS

Great taste and Convenience...

What a concept.

Celsius Buzz Monkey Energy Drink Ming Tea POM Tea Cha Dao Tea Naked Juice: New Flavors

Honest Tea Unsweetened Clearly Canadian E4B 100% Fruit Puree Samurai Energy Tea Lipton White Tea

Daily’s new Ready to Drink Chilled Cocktails — the perfect product and look for your consumers.

— Lets consumers draw ice cold cocktails right from the fridge.

— Ready to serve - alcohol is in it!

— Upscale 1.75L packaging draws attention, encourages impulse purchase — Great tasting - made with real fruit and all natural flavors — Flavor-lock tap locks out air, locks in Daily’s fresh fruit flavor — Available in four flavors - Margarita, Cosmopolitan, Mangotini and Appletini

Great Concept + Great Taste + Great Package = Increased Sales 22

BEVERAGE SPECTRUM // JUNE

2006

®

For more information about Daily’s Ready to Drink line of cocktails, call 1 800-245-2929 x6113 Please Drink Responsibly © 2006 American Beverage Corporation, Verona, PA 15147

change occurred in 1998, when The Girl was changed from a brunette to a blonde.

St. Pauli Girl is available in all standard beer sizes, only now in blond, with her hair down.

For more information on St. Pauli Girl, visit www.stpauligirl.com.

Samuel Adams is celebrating the first American brewers by proudly introducing the Brewer Patriot Collection. With four full-flavored brews, each as distinct and authentic as the next, Samuel Adams is paying tribute to our founding fathers who were also brewers. The Collection includes Traditional Ginger Honey Ale, James Madison Dark Wheat Ale, George Washington Porter and 1790 Root Beer Brew, four brews that combine the styles and ingredients of the colonial era with the quality and craftsmanship beer enthusiasts have come to expect from the Samuel Adams brewers. The Samuel Adams Brewer Patriot Collection will be available in select specialty beer stores beginning in June 2006, for a suggested retail price of $9.99. The Collection includes the four beers, each in a 12 oz. bottle. For more information, call (617) 368-5199.

One of the country’s first organic beer brands is being made in Burlington, Mass.

Peak Organic features a refreshing, delicious taste and comes in three flavors: Pale Ale, complex and hoppy; Nut Brown Ale, smooth with a nutty finish; and Amber Ale, lively with a subtle roasted character. Peak Organic Brewing Company was launched in the fall, with product being bottled in Portland, Maine, and glass bottles and six-packs ($7.99) have been available in the Northeast since earlier this spring. For more information, call (781) 648-7157.

Wine Velocity International, Inc. has started distribution of two new Sirromet wines, Seven Scenes Range and Reef Range in the Texas market (Dallas, Houston and Austin); Tennessee and Kentucky are to follow soon.

These wines will be available nationwide as Velocity continues to launch in new markets. The suggested retail price for the Reef range is $9.99 and for the Seven Scenes range is $29.99. For more information,

24

BEVERAGE SPECTRUM // JUNE

2006

call (615) 238-2328.

Imported from Sweden for the first time is Nordic Lights, a wine-based low-carb, lowcalorie, refreshing Chiller with a 4.75 percent alcohol content. Nordic Lights is initially being offered in Scandinavia’s two most popular flavors, pear and apple. After taste tests in Louisville, Washington D.C., Chicago, St. Louis, and Denver, Nordic Lights is preparing for a nationwide expansion. For additional information call (303) 815-4685.

The 20th vintage of Marilyn Merlot hits the market this month. According to vintners, this 2004 vintage promises to be both the finest and most collectible wine of the series. Entirely grown in California’s Napa Valley, it is a blend of 90 percent Merlot and 10 percent Cabernet Sauvignon. The suggested retail price of Marilyn Merlot 2004 is $26. Royalties from sales are distributed to The Lee Strasberg Theatre Institute in New York and Los Angeles and to the Anna Freud Centre in London. For more information, call (415) 717-7595.

Juice

a regular juice drink. The light, refreshing beverage comes in four flavors: pomegranate blueberry, orange tangerine, cranberry raspberry and pink grapefruit. Available in a single-serve, 16.9 oz. proprietary plastic bottle with a distinctive “bubble” design embossed into the packaging, the product launches in October.

From R.W. Knudsen comes a new vegetable juice drink, Organic Low Sodium Very Veggie. It contains no added salt, and 100 percent juice including tomatoes, carrots, celery, lemon juice and bell peppers, with only 70 calories per 8 oz. serving. Suggested retail price is $2.99 for a 32 oz. bottle. For more information, call (413) 582-7079.

Malt Beverages The folks at mike’s hard lemonade think they have found a way to create a unique, neutral malt base that is tasteless and odorless and that does not have the “burn” or alcohol taste that comes from spirits. The result is the creation of mike-arita, the first true margarita flavored cocktail, and mike’s hard

FROZEN lemonade, the first frozen lemonade cocktail product, both of which are the first such products available in the beer aisle.

The mike-arita is 9.9 percent alcohol by volume and mike’s hard FROZEN lemonade is 11.9 percent alcohol by volume. Distribution will be taking place throughout the summer with a national broadcast campaign about to commence. For more information, call (212) 404-6619. A 4-pack of the mike-arita will retail for $8.99. A 750 ml. bottle is $7.99 and a 1.75 L bottle is $14.99.

United Brands Company has unveiled a new look for 3SUM, an energy malternative that infuses 6 percent triple-filtered clear malt with fresh-fruit flavors and a combination of caffeine, ginseng, and taurine. 3SUM comes in four varieties: Original, Apple, Watermelon and Tropical. 3SUM can now be found in convenience stores, nightclubs, and casinos in 22 states. The drink comes in two sizes: 8.3 oz and 16 oz. For more information, call (866) 891-3SUM or visit www.3sumdrink.com.

From Kagome come two new dramatic and tasteful additions: Golden Peach Garden and Burgundy Berry Blossom. Both blended 100 percent juice varieties contain a precise mix of 50 percent vegetable and 50 percent fruit juice without added sugar, artificial additives, preservatives or genetically engineered ingredients. Kagome juices can be found in natural food stores nationwide (11.5 oz. bottle $1.99 / 30 oz. bottle $3.59).

Each 8 oz. glass provides a full serving of vegetables and a full serving of fruits. For more info, call (727) 848- 1618.

Fuze Beverage, LLC is introducing a new line of Vitalize non-carbonated beverages, designed to generate inner strength and nourish the body. Fuze Vitalize is available in 18 oz. glass bottles in three flavors: Blackberry Grape, Orange Mango and Fruit Punch.

The MSRP is $1.49 and the product will ship starting May 2006.

PepsiCo is rolling out Dole Sparklers, an invigorating, low-sugar sparkling juice, made with real fruit, B-complex vitamins and 50 percent less sugar and calories than

JUNE

2006

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BevNET.com’s VIEW

e’re in the middle of a major shift in the beverage industry – something that will have a major impact on every category. What I’m talking about is a shift from beverages that are focused on refreshment to those that are focused on functionality.

Don’t get me wrong – beverages have always had functionality. Be it the sugar or caffeine, there’s something in there that impacts the consumer’s physical or mental state. However, to date this idea has been left out of the marketing of most products outside of the sports drink or energy drink segments. When it comes to soft drinks, those days will soon be gone. Over the past decade, consumers have wised up, and they want to drink better. CSDs are viewed as empty calories and childhood obesity is a concern. People are not going to stop drinking soft drinks, but they are going to try to make sure that they get something out of the product at the same time.

This transition is going to have a big impact on the energy drink category as we know it today. “Energy” is likely to evolve into more of an attribute among a larger lineup of functional characteristics that make up a brand. Airforce Nutrisoda and Glaceau’s vitaminwater are two brands that are already doing this. While it’s still a niche concept in the 8 and 16 ounce energy drink segment, it does make a lot of sense, as energy is just one of many functions that a beverage can perform.

The big question for the industry is what will happen to Pepsi, Coke, and CSAB, big companies whose core brands don’t yet offer functionality. Trying hard to tread water in the US market, these brands are taking the biggest beating from this shift. Don’t be fooled

26

BEVERAGE SPECTRUM // JUNE

The

Functional BeverageRevolution the other hand, has no energy drink and only a handful of functional products, all of which are extensions to other, non-functional brands. This means that it’s still anyone’s game to step in and lead the way.

At the distribution and retail levels, though, this is pretty scary. To be ahead of the curve, you’ll have to roll the dice a bit, looking for the companies that have potential but don’t yet have a proven track record. Of course, introductions from companies like Red Bull, Hansen Natural, and Glaceau are probably pretty safe, but they still don’t compare to Coke or Pepsi brands.

In any event, it’s time to start accepting that the good old days of high sugar, high calorie non-functional soft drinks are coming to an end. Again, don’t be fooled by flavor extensions or new diet versions. These products are defensive introductions designed to squeeze sales out of existing customers – but other customers are still fleeing to other brands that you need to start carrying.

by the boost in diet sales either – the shift to diet is just a stopgap while other functional options are fleshed out.

The big guys haven’t embraced this functional shift yet. Coke and Pepsi have a limited, but growing, portfolio of functional beverages. Cadbury Schweppes Americas Beverages, on

2006

John Craven is the founder of beverage-industry watchdog The BevNET.com, based in Cambridge, Mass. The BevNET.com’s goal is to test nonalcoholic beverages — primarily soft drinks — and to provide a written critique of each one on its Web site.

With more than 1,100 reviews posted since 1996, The BevNET.com has become an internationally recognized resource for beverage industry professionals.

F

or those of you convinced there will never be an energy drink more popular than Red Bull, here is one word: Snapple.

the are

by Jeffrey Klineman

28

BEVERAGE SPECTRUM // JUNE

2006

You recall this fine brand, do you not? It was just a decade ago – or a millennium, depending on your point of view – that Snapple was the top selling ready-to-drink tea in the country. As a brand, its sales grew from $23.6 million in 1989 to $516 million in 1993.

And Snapple, with a leading position in both teas and juice drinks, hadn’t just created a beverage category, it had created a kingdom: New Age Beverages, the shelf sets from whence other non-CSD categories soon would sprout.

Snapple also created a media presence as memorable as any of those offered by the cola giants, its Lilliputian Wendy The Snapple Lady hopping from network to network with her ever-present charm and good will. Wendy had more than wings, she had a hand-truck loaded with product, and that, along with its first-comer status as an alternative to traditional sodas, gave the brand massive appeal.

So where is Snapple now? Well, after being bought and sold multiple times, it’s just another label in the Cadbury Schweppes stable, one that’s fighting other brands for share in the markets it invented, wrestling with strong competitors like Arizona, Nestea and Lipton for consumers in a mature category that, just a decade ago – or a millennium – seemed limitless.

Which brings us back to Red Bull, the high-flying, privately held Austrian company that brought energy drinks, packaged in their mysterious slim cans, to the U.S., grew its business by focusing on-premise and in c-stores (two of the places where Snapple found success early on, as well), and seemed to have the energy drink game won by the time the mainstream companies realized it was being played.

Well, guess what? The beverage casino’s whales have waddled up to the table, and now the game has really begun.

Powered by portfolios of drinks that seek to take Red Bull’s share off in bites and nibbles, both the Coca-Cola Co. and PepsiCo have developed potent collections of drinks that are giving them a stronger presence at retail.

Meanwhile, the growth of Hansen’s Monster brand from natural food market elf to Wall Street Ogre presents a strong challenge to Red Bull, especially now that it has opened new routes to market via a distribution alliance with megabrewer Anheuser-Busch.

“There’s always been competition,” says Curt Quimby, the purchasing manager at New Hampshire’s Amoskeag Beverages, which handles Red Bull. “But the people with deeper pockets are out there. The competition’s intensified.”

Could we one day see a convenience store without Red Bull? Well, no.

Coke, Pepsi and Hansen present the kind of well-financed challenge to Red Bull that, particularly as the category matures, will likely leave the Bull sharing the barn, fighting for feed alongside the rest of the energy drink animals. For retailers, the time has come to consider other energy drinks as conceivable category leaders in their stores, because the time might not be far off when another brand assumes that leadership.

The numbers say Red Bull is slipping. Just two years ago, more than half the energy drinks sold in U.S. convenience stores came from Red Bull, and its sales were more than the next four products combined. But in just the last year, Red Bull lost more than 11 points of share, and now sits at just 34 percent of the market.

The category is still growing at a massive rate, to more than $2 billion this year, and Red Bull is still growing, as well, but there are other brands that are growing much faster, and their bases are no longer deceptively small. The competition owns big slices of the market, including the biggest share, 16 oz. cans, while Red Bull may have stuck to the slim can too long, leaving it out of step with the rest of the market.

“It’s a situation I don’t envy at all,” says Geoff Bremmer, thee newly-anointed brand manager for Monster. “Red Bull is out there selling eight ounces for two bucks, but the 16 oz. is taking over, along with 24-ouncers and 4-packs.”

Dan Ginsberg, Red Bull’s executive Vice President, downplays his brand’s diluted market share.

“We are developing an industry category that others are joining,” Ginsberg says. “Movement by other players onto the scene really just validates the category.”

For Monster, there’s been a whole lot of validation in the past year: it has gained eight share points – with lower market penetration than Red Bull – and now has a tidy 19 percent of the market. And that doesn’t count Monster’s sub-brands, Lost, Khaos, Rumba, and Joker, all of which, along with the main label, stand to gain share from the A-B arrangement.

Additionally, Monster will eventually make inroads on-premise through A-B distributors’ connections to bars and restaurants. Red Bull’s early success was sown in bars and fertilized with vodka, and it has a strong hold in many areas. But the juice in Monster’s Khaos formulation, for example, gives it the potential to be a much more conventional mixer.

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2006

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“On-premise, it’s much harder because (bars) usually only handle one brand,” Bremmer says. “But given our line of products, we have more to offer than the one flavor Red Bull has. That’s part of the strategy.”

There are chinks in the armor of Red Bull’s distribution system, according to those who work up and down the street.

“We pay attention to the bars,” says Andrea V. Burckhard, general manager of Performance Beverages, which distributes The Beast. “Red Bull hasn’t had to do that in a while. We hear it from owners all the time, that they’ve become complacent, and arrogant.”

Meanwhile, Coke, which fumbled the ball early on with the late, unlamented KMX, has finally cobbled together a lineup that is connecting with consumers. Last year, it bolted on popular independents thirdplace brand Rockstar and launched a new go-to label, Full Throttle, which is gaining traction and share as the fourth-place product. Coke has also started marketing to women via its throwback hit TaB Energy and rounds out its portfolio with the energy/soda hybrid Vault. Taken all together, it doesn’t add up to a dominant brand – but it does give the company’s distributors some credibility when they attempt to convince retailers to devote shelf space to its energy products.

“Red Bull historically has been known as a company that doesn’t offer deals,” says Joey Cannata, the Vice President of Sales for Rockstar.

“I think they do now more. And I think convenience stores now have more leverage over Red Bull than they did in the past because of Rockstar and Coke.”

PepsiCo has had similar success building its strength through a portfolio, centering most of it around the more liberal SoBe brand, where

30

BEVERAGE SPECTRUM // JUNE

2006

No Fear and Adrenaline Rush are both known quantities, along with its two Mountain Dew-flavored energy drinks, AMP and MDX. The company has snagged a tie-in with this summer’s Superman Returns and, like Coke, is sitting on around 15 percent of the market.

That doesn’t mean they’re crowing about it, however: when asked about PepsiCo’s chances to catch Red Bull, all SoBe VP Tom Smallhorn would allow is that “with increased investment, innovation and the alignment of Pepsi’s powerful distribution system, anything is possible.”

What’s more likely is that what had been an air attack, with smaller brands parachuting into new regions simply as alternatives to both Red Bull and bigger companies, has pretty much turned into a distributionoriented ground game.Once, an energy drink simply needed a catchy name and a slim can to grab attention; now, with the bigger companies able to offer discounts and merchandising, it’s harder for new brands to gain shelf space. The former outsiders, Red Bull, Rockstar, and Monster are now part of the mainstream.

“The secret’s out,” Bremmer says. “Everyone realizes how well the category is doing, and with CSD’s in a declining position, it’s no secret

to the bigger players how important energy drinks are.”

And that realization could result in a washout of weaker brands, the ones that don’t have a point of difference that makes them sustainable, according to Gary Hemphill, managing director of Beverage Marketing Corp.

“The key distributors have the brands they want to have,” Hemphill says. “At this point, it’s much harder to get entry than it was a few years ago.”

That doesn’t mean that retailers should turn a blind eye to newer brands – in fact, if a Red Bull or a Hansen’s were to hit a major roadblock, a different brand might have the potential to soak up the share left over for die-hard energy drink fans.

And niche plays remain important, as well, be they value brands like National Beverage’s Rip It or drinks that cater to a specific constituency, such as Pimp Juice or NOS. According to Hemphill, for Monster and Rockstar, and the Coke and Pepsi brands, the big point of difference has been size: if Red Bull’s slim can gave the category its mystique, the other four have

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decided that consumers would prefer the same amount of mystique – but twice the liquid – at the same price point. Given the growth of tall cans into the majority of the category, it seems to have worked pretty well.

Tellingly, Red Bull itself recently started experimenting with a 16 oz. size, banking on its reputation as the gold standard for the category to sustain a $3.59 retail price – nearly a $1.50 premium over similarlysized products.

“We want to see the impact of a premium priced 16 oz. product on the overall category,” Ginsberg says. “We don’t feel that it is too late at all.”

Perhaps not, but at the same time, a double-sized Red Bull could have the effect of further diluting its own position as a unique entity.

“I don’t know what incentive a retailer has to pay more for a 16 oz. Red Bull can when they can have a Monster or Rockstar for less,” Cannata says. “If I was Red Bull, I’d focus on the eight-ouncer.

I know they’re doing well, but I think

there’s a little bit of an identity crisis for them, that they would do this.”

Ginsberg denies that Red Bull is losing sight of its core identity, however.

“It’s ‘the call’ the world over,” he says. “When people think of energy drinks, they think of Red Bull. When consumers ask for an energy drink, they ask for a Red Bull. Brands are powerful things.”

But brands are also powerful targets. Size, value and distribution issues aside, Red Bull’s chief attribute, that it delivers a “wake up!” kick via a mixture of sugar, caffeine and a variety of caffeine-like products, could place it smack in the middle of a confluence of consumer health concerns about beverages, according to Ieva Allison, the research manager for Sheetz, a growing line of convenience stores.

“I’m still not convinced this is a long-term thing,” she says of energy drinks. “When you look at the ingredients, they have so many of the same characteristics as CSD’s.”

Perversely, Red Bull’s position as the category’s standard bearer makes it the most likely target of lawsuits and negative press.

Meanwhile Hansen’s, and Rockstar, to a lesser extent, has the brand diversity to spread out the impact of health concerns to a variety of energy products – and can even duck behind its new products that use juice as an ingredient.

Even more important, with a share price that has soared to Internet bubble heights, Hansen’s has a lot of people making a lot of money on it – and that means they’re going to fight to keep the brand’s reputation strong – or dump the stock, and the company – and possibly the category — with it.

The category’s collapse isn’t likely; in fact, Hemphill predicts it will continue to grow, although not at the 80 percent growth rate it saw in 2005.

But as Allison points out, the energy growth trend could fall off in the face of others.

“Lately, there are three major trends that have converged, health, convenience and value,” she says. “Health continues to shoot off as a long-term category. Energy drinks need to be wary.”

It’s an old story: as new product categories stop gobbling massive numbers of new consumers, the major players dig in and start guarding the share they’ve won. Energy drinks are still raining new profits on retailers, distributors, and manufacturers alike. But as the torrent of

consumers dries up, Red Bull is going to find that it’s not the only big fish in the energy drink pond anymore.

They’ll see that the sharks are circling – and they’re driving delivery trucks.

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BRAND NEWS

Mouth of the South — In April, TNT Brands began releasing The Jimmy Hart Wrestling All-Stars Collection, a series of energy drinks whose premier featured Hart, the “Mouth of the South” himself. With new releases every eight to ten weeks, featuring many of the wrestling celebrities that Hart has worked with, Mouth of the South is available at participating 7Eleven stores.

Socko Energy Drinks — Socko Energy has announced two major retail agreements that will significantly increase its distribution in the U.S. and abroad. In addition, Socko Energy will expand in a new direction with the nationwide introduction of its sugar-free alternative, Socko Slim. In the U.S., Socko Energy has a pact with Circle K in nearly 600 in West Coast markets, including stores in Arizona, Colorado, Utah, Washington and Oregon. Additionally, Socko will be releasing, with wrestling icon Hulk Hogan, Hulk Energy Powered by Socko. It will be made available to retailers throughout Socko Energy’s existing and expanding distribution network in the U.S. and abroad. The traditional Socko can has been redesigned and re-branded with a specially-designed Hulk Hogan image.

Red Bull — Red Bull has expanded its interest in soccer by purchasing the New York/New Jersey MetroStars, who took the field in the 2006 Major League Soccer season as Red Bull New York. With that, the fall champion of the Austrian Bundesliga, Red Bull Salzburg, became the first organization in the history of Austrian soccer to gain a sister team in the MLS, one of the most rapidly expanding leagues in the world.

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Cascabel — In Southern California, Cascabel has entered into the vending market in approximately 4000 accounts. It is also building a presence on campus and in the bars, as Slick Willies’, in San Antonio, Tex. exclusively carries Cascabel. Cascabel has new distributors on the East Coast, and has McCarty Hull covering Texas, Kansas, Oklahoma and Colorado. The “Rattlesnake Rodeo Roundup” in Sweetwater, Tex. featured Cascabel recently.

Radioactive Energy — Radioactive Energy has emerged with a new 10.5 oz. glowing can in vibrant yellow-green and red-orange fluorescent colors. This sleek, compact can design will just about fit in your pocket. The product line will feature the same glow-in-the-dark can technology as its larger companion, the 16 oz. Both the 10.5 oz. and 16 oz. cans come in regular and sugar-free/zero-carbohydrate varieties.

PepsiCo — Pepsi’s sub-brand SoBe debuted SoBe No Fear Gold in March. The energy drink is available in convenience, supermarket, drug, and other large channels. With a unique “fantasy fruit” taste, No Fear Gold is available nationally. Also in stores is a 16-oz. AMP tall boy can.

Syzmo — Syzmo recently received final approval on the drink’s upgrade to complete USDA Organic Status. The cans are now be able to show off the USDA Seal of Approval as well as the official term “Organic Energy Drink” on the front of the can. In addition, the company is in the midst of adding a 16 oz. size.

Shark Energy — The evil Shark has recently added Choline Bitartrate, meant to aid the function of the liver and detoxification, to its ingredients. Replacing glucoronolactone, Choline Bitartrate keeps fats from accumulating in the liver, and is essential for the health of the nerves, kidneys, and liver. Currently available at Stater Bros, Food 4 Less, Jon’s Marketplace and various independent stores, the Shark is preparing to dive into select Ralph’s markets. In addition to its distribution in Los Angeles County, Shark has just closed agreements for distribution in the San Fernando Valley and Orange County.

Hiball — Hiball Energy Drink is launching new 4-pack packaging for all Hiball Energy products in July. The company recently launched naturally-flavored sparkling waters in lemon-lime,

wild berry and orange flavors. In New York, Hiball has gotten into all Gristedes, D’agostino, Morton Williams, Balducci’s and Dean and Deluca stores. Hiball is also experiencing growth in California, recently expanding distribution into Winco, Andronico’s and Nugget stores.

Hiball has also secured a test launch in Target stores in California beginning in late June.

Go Fast — Go Fast Energy Drink is introducing a brand new can design. The new design features a sleeker, cleaner look designed to match the clean and refreshing taste Go Fast’s premium ingredients provide. Also included in the new design is the Go Fast story, highlighting Go Fast’s commitment to formulating a drink for athletes to provide them with a longer, smoother and more sustained energy boost without the “jittery crash” associated with other energy drinks.

Sol Maté — Sol Maté is the world’s first organic sparkling maté healthy-energy beverage. Yerba maté naturally contains caffeine (for stimulation) and theobromine (for soothing), giving you energy without jitters. At Sol Maté, yerba maté is bottled and presented in a lightly carbonated form that is as pleasing to the palate as it is good for you. Each craft brewed batch of Sol Maté is tested to ensure consistent levels of caffeine, theobromine and antioxidants. Each bottle of Sol Maté contains the antioxidant equivalent of ½ cup of wild blueberries.

RushNet Inc. — RushNet, Inc. has introduced their new Ginseng Rush Triple Dose, a non-caffeinated herbal energy soda intended to provide a healthful and delicious alternative to caffeineladen energy drinks. Ginseng Rush Triple Dose features the same formula as the company’s original Ginseng Rush soda – which launched the first natural functional beverage and energy category in 1978 – but with a certified triple dose (15 ml. of a 1:1 extract) of Wisconsin-grown American ginseng (Panax quinquefolius) per bottle. In addition to ginseng, Ginseng Rush Triple Dose contains a proprietary blend of 23 natural flavors with a taste reminiscent of oldtime root beer, cream soda and sarsaparilla.

Phat Phruit — Phat Phruit provides drinkers the opportunity to take in 11 vitamins plus calcium, with only 40 calories per serving. Each bottle has 70 mg of caffeine, and is produced in five flavors: peach mango, raspberry limeade, pineapple orange, grape strawberry and green

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apple. The product is packed in a long-neck PET bottle, 24 per case.

Celsius — Celsius, which is billed as “the earth’s first calorie-burning soda,” has introduced two new flavors, wild berry and orange, new 4packs, and more than 40 new distribution partners across the country. Major retailers and distributors who have brought on Celsius include SuperTarget, Valero, and Circle K. Celsius has also received media coverage on NBC’s Today Show. Celsius has no carbs, no sugar, no preservatives and no high-fructose corn syrup.

Hansen Natural — In May, Hansen Natural Corporation and Anheuser-Busch Inc. agreed that certain Anheuser-Busch wholesalers will become distributors of Monster Energy and Lost energy drinks, Rumba energy juice drinks as well as an additional Hansen energy brand to be designated. Hansen will transition distribution of Monster and Lost Energy drinks and Rumba energy juice as well as an additional energy brand to select Anheuser-Busch wholesalers in markets to be designated by Hansen.

The transition began in the spring and will continue over the next year.

Kabbalah Energy — Kabbalah, supposedly the favorite energy drink of Madonna and Keanu Reeves, has introduced a new, re-sealable 1 liter package. Because it’s re-sealable, you don’t have to drink it all at once, although you can if you want to. At 33.8 fluid ounces, it is equal to four servings of other best-selling energy drinks. Kabbalah is currently distributed in many convenience stores and supermarkets all over New York City, including, but not limited to, Gristede’s grocery stores and Duane Reade pharmacies. her — Available in Regular and No Carb/No Sugar formulas, her is the first active lifestyle beverage that takes into consideration what a woman needs. In addition to the active ingredients taurine and caffeine, which are found in many of the energy drinks on the market, her is fortified with antioxidants, B vitamins, and ginseng and includes the bone-building mineral calcium. The company conducted an all-out marketing blitz throughout the Los Angeles area in May after having soft-launched the product over the previous six months. Distributed by the Miller Beer distributors of Los Angeles, her is distributed in convenience stores, women’s gyms, spas, tanning salons and hair salons. her JUNE

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tributors, Inc., DBI Distributing Inc., and others.

In the global marketplace, Who’s Your Daddy, Inc. has partnered with Tequila 30/30, the thirdlargest distributor of tequila in Mexico.

CRUNK!!! — The exclusive collaboration between the spirits industry “brand builder” Sidney Frank, creator of Grey Goose Vodka and Hip-Hop producer and recording artist Lil Jon, CRUNK!!! has reached wholesale revenues exceeding $10 million in less than two years. It is now available in a unique, industry-first 3-pack with a suggested retail price of $5.49. Infused with real pomegranate juice, CRUNK!!! Energy Drink features a sweet, tart pomegranate taste and a natural rich, red appearance without the addition of preservatives or artificial colors.

Pit Bull — Ginger Ale-flavored Pit Bull Energy Drink has debuted a new 16 oz. can with a red tab top. Recently voted “Best Tasting Energy Drink” by the San Francisco Chronicle, Pit Bull Energy Drink’s new advertising campaign is focused on “Taste.”

Jetset — Now available in 12-can fridge packs and a Silver party pack, which includes all four varieties of the product, Jetset is a West Coast product sold in Oregon, Las Vegas and Washington. The company recently introduced the Jetset party center, a free-standing “onestop shop” for house parties. The top level is reserved for liquor specials, while the lower levels are reserved for 6-packs, 12-packs, and Jetset party packs. Jetset is also creating the ultimate Jetset surf trip and the ultimate Jetset trip to Las Vegas.

Hobarama LLC — The maker of Bawls Guarana has also recently introduced Bawls Guaranexx, a sugar-free high-caffeine drink, to the fashion industry. Hobarama LLC, makers of the zero calorie high caffeine beverage, signed deals with IMG / 7th on Sixth as the official energy drink of the Sunglass Hut Miami Swim Shows.

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Jones Soda — New Jones Energy is sold exclusively through Costco. The idea behind this product was the understanding that energy drinks shouldn’t cost more then a gallon of gas. Therefore Jones Energy’s 24-pack is sold at a cost point of $18.99 which brings it to 79 cents per 16 oz. unit. And, according to the Jones Soda folks, it tastes pretty good and will give you all the energy you need.

Who’s Your Daddy — Who’s Your Daddy is available in both regular and sugar-free formulas. It is sold in several retail locations, including Circle K stores in the Southeast, and in select 7-Eleven stores located in Orange County, Calif. Who’s Your Daddy, Inc. is proud to partner with Straub Distributing Co., Golden Eagle Dis-

Liquid Lightning — Calling itself “The World’s Strongest Energy Drink,” The focus of Liquid Lightning is on product quality, strong support of local distributors, and nurturing relationships for the long-term growth of the product. Liquid Lightning produces two formulas, Regular and Sugar-Free, which contains only 5 calories with no fat or sodium. Liquid Lightning is not heat pasteurized like other energy drinks, and, according to the manufacturer, it is “made fresh in America.”

AriZona Beverages — AriZona Beverages, the category leader in ready-to-drink teas, has introduced AriZona Green Tea Energy Drink.

Available in both regular and diet, AriZona Green Tea Energy is an all-natural alternative to energy drinks now on the market. The products contain no preservatives, no artificial colors and no artificial flavors. They are lightly carbonated and are packaged in a 16 oz. can.

Distribution for the product is beginning in New York, Florida and Chicago, with plans to go national by the end of June. The suggested retail is $1.99 per can.

Pimp Juice — Nelly-backed Pimp Juice is now available in 16 oz. cans in select markets across the country. Fillmore Street Brewery is planning a strategic roll-out for its domestic and international distributors, with complete distribution slated for this fall. Containing 162 mg. of caffeine, the new 16 oz. Extra-Strength Pimp Juice is “jacked” with energy and provides double the smooth, apple-flavored taste.

Diablo — Diablo Energy Drink has an addition to the family. Diablo condensed its allnatural botanical blend and created the powerful Diablo Energy Strip. Using Guarana, Ginseng and Cranberry extracts, Diablo Energy Strips were designed to provide truly portable energy. The compact container can be easily put in a pocket or purse.

©2006 Bally Total Fitness Corp.

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Liquid Ice — Liquid Ice Energy Drink is now available in 17 states across the country and statewide in Florida, California, Montana, North Dakota and Minnesota as well as in Canada and the Caribbean. Liquid Ice has recently signed up professional paintballer Alex Lundqvist to serve as the company’s featured player for 2006 and the product will be featured in the next Greg Hastings extreme paintball video game in PS, XBOX and PSP platforms.

Rox — ROX offers four different product lines: ROX Original in 8.4 oz. cans and 20 oz. bottles, and ROX Zero in 8.4 oz. cans and 20 oz. bottles.

With re-sealable packaging, customers can reuse the product and still maintain its fresh taste.

The 20 oz. bottle is three times thicker than the standard 20 oz. Rox has also included Spanish labeling on all its product lines to further reach the booming Hispanic market.

High Performance Energy Co., Inc. — The maker of NOS High Performance Energy Drink, named after the most brand-recognized racing performance enhancement, nitrous oxide, is now available in an 11 oz. portable, lightweight, plastic re-sealable bottle. With its similarity to Nitrous Oxide System canisters, which deliver nitrous for immediate and profound increases in engine horsepower, the NOS 11 oz. plastic bottle further drafts off the brand equity associated with the Holley Performance Products brand.

Diesel — Diesel Energy Drink has launched in Philadelphia through Canada Dry Bottling of Delaware Valley. Through June, Diesel’s power can be seen in signage on the backs of I-40 route trucks in Philadelphia, as well as South New Jersey and Delaware.

Coca-Cola Co. — The Coca-Cola Co.’s TaB Energy was officially introduced on February 2nd with a star-studded premiere party at Drive-In Studios to kick-off Fashion Week. More than 500 high-fashion models, designers and A-list celebrities attended the exclusive event, surrounded by custom pink furniture. It featured DJ Sky Nellor serving up the tunes to go with an abundance of ice cold TaB Energy.

Kaboom — Kaboom Infinite Energy, an allnatural, juice-based energy drink, was recently relaunched in an 8 oz. can. Made with premium sources of smooth, clean-burning energy like guarana, green tea extract, and B-vitamins, it is

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designed to provide an unparalleled sustained lift, not a “short-lived rush then crash and burn” of the typical energy drinks. Kaboom has no preservatives and no carbonation; its refined taste comes from real fruit, pure reverse-osmosis filtered water, and essential nutrients.

Sambazon — Sambazon, the leading global marketer of the Amazon fruit açai, has announced the upcoming launch of Tribal, a new, organic Amazon energy drink made with rainforest-grown acai, yerba mate, guarana and other powerful natural ingredients. Tribal will be available in a 16 oz. can and is slated to launch nationally this fall through Natural Foods stores such as Whole Foods Market with a suggested retail price of $1.99.

Xyience — Xyience, Inc. is a complete active lifestyle brand developed to provide the healthiest, most scientifically advanced, sports nutrition and related products targeted to extreme sports and/or active life style enthusiasts. Xyience launched its first energy drink, Xenergy cran/ raspberry, a premium sugar free Xen•Xenergy drink, on May 1, 2006. Xyience is now currently in production with a Xenergy Clear flavor.

Bally Blast — Currently distributed in Bally Total Fitness Gyms, Rite Aid, on Amazon.com and via Raley’s Grocery Stores, Bally Blast has a new sugar-free version this year.

Jump Innovations — From Denver’s Jump Innovations come Sentinel Energy, Hot Pure Energy and Jump Coffee Energy Cola, a trio of energy drinks engineered to provide good taste for consumers. All brands are sugar-free and calorie-free, and are packaged in 10.5 or 12 oz. slim cans. Jump Innovations is seeking distributors.

Power Trip — Power Trip beverages are now the exclusive energy drink of PAETEC Park in Rochester, New York, a new premier sports and entertainment venue in Western New York. At the venue, the company will be sponsoring a “Power Kick” contest during soccer game halftime events. Power Trip and Power Trip 0 Beverages come in a 16 oz. can and are available in 4-packs.

The Beast — The Beast Energy Drink is now available in major grocery stores in the Southeast, with IGA, Galaxy, and Lowe’s coming on board with over 375 grocery stores. To support the brand, The Beast is launching a major radio campaign with John Boy & Billy in the

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Southeast. The Beast has also sponsored Shad Ireland, a tri-athlete, and Sean “The Beast” Fister, a three-time world record long drive golf champion.

Ronin — Now touting a fridge-dispensing 12pack for both its regular and diet 16 oz. versions, Ronin is now a preferred supplier with Sysco Corp. in Houston. The company also has a can-in-hand promotion where retailers hand a free can of Ronin to customers who have purchased competing energy drinks.

Liquid X — Recently acquired by Southwest Beverage Company, Liquid X is currently available in the Southwest, Florida and Oregon, and is finalizing deals for markets in Australia, China, Colombia and Costa Rica. Southwest is always looking to increase a great network of national and international distributors and retailers.

Source Beverages — BURN Energy Drink is being distributed throughout Northern California, the Midwest, Texas and North Carolina. With up to 48 percent more caffeine than the competition and a great citrus flavor, BURN is growing. It is available in 8.4 oz. and 16 oz. sizes.

Atomic X — Atomic X is now available in 16 oz. cans, 32 oz. pour bottles for bars, and bagin-the-box for food service, restaurants and bars. It is currently being sold in some West Coast Costco locations, and has distributors in 25 states.

Mood Beverage — Mood Beverage Corporation has launched a line of herbally-infused energy sodas, Play, Drive, and Beach Energy, that don’t have the dreaded herbal aftertaste. Mood Beverage’s line of drinks, packaged in plastic bottles, is available in Chicago, Albuquerque, Cleveland, and Myrtle Beach.

Tampico — Tampico Beverages is introducing Tampico Energy this summer. According to the manufacturer, Tampico Energy is the first fruitflavored, Hispanic-targeted energy drink from a leading beverage company with existing Hispanic brand equity. It will provide a powerful boost with a citrus taste. New Tampico Energy features an exciting can adorned with iculturally-relevant graphics including a bold, eyecatching rooster. Tampico Energy will be available in select markets beginning this July, in 16 oz. cans and cases of 24.

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Globe-Spanning 44

suds What country should your import shelf annex next?

By Laurie Russo

I

mage is everything — and your bottom line could benefit from that, because even as consumers’ thirst for beer gets duller, imported beer’s image is only getting shinier.

To retailers, the whole deal couldn’t make better sense: make more for selling less. And for consumers, the notion that they deserve something better is a given. The only people who don’t feel that way are on Prozac, and while you’re not likely to realize Eli Lilly-sized margins, you can still do pretty well selling imported beer.

For two years, while beer’s overall positive growth has slowly, but quite publicly, slipped into the negative, both import and craft sales remained resoundingly up, and their share of dollar was up even more.

Premium pricing meant that imports took in nearly 20 percent of the category’s dollar share on only 13 percent of its case sales. Industry experts expect even more share to slide to imports; a recent report from Caroline Levy, UBS Securities’ beverage analyst, suggested that convenience stores “should be eager to allocate increased shelf space to the fast-growing, higher-priced imported beer segment.”

For beer consumers, the enticement of an import comes from their ability to turn their style up a couple of notches for just a few extra bucks. “The notion of trading up is important, as for only a nominal increase in price, you’re buying a pretty big difference in stature,” says Harry Schuhmacher, editor of Beer Business Daily. “You can blame domestic brewers to a certain extent, for dumbing down advertising so much that it puts imports in stark contrast.”

BEVERAGE SPECTRUM // JUNE

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When it comes to beer, for most consumers, image plays a big role.

And if domestic beer hasn’t gotten more sophisticated, domestic tastes have – and buying an import shows the learning curve. “You’re buying a pretty big jump in sophistication for a very small change in price,” Schuhmacher adds. “It’s a big margin difference, but it’s only a dollar or two more to the consumer.”

Guess who has finally figured that one out? Yep. The big domestic beer companies.

Take Anheuser-Busch, which recently picked up multinational imports Tiger (Singapore), Grolsch (Holland), Harbin (China), and Rolling Rock (Okay, okay, it’s Latrobe, Penn., but at least they’re going for variety, as well). To Andy Geoller, VP of Alliance Brands for Anheuser-Busch, the trade-up trend is helped by the array of beer selections available.

“Today’s consumer really enjoys a wide variety of choice,” he says.

“Imports have a high-end image to consumers, so choosing an import gives them the opportunity to enhance their own image, and to sample different types of beers.”

Choosing an imported beer says “I’ve got some money to spend, I’m worldly and a little bit more sophisticated because I know a lot about different beers,” according to Goeller, who adds, “It helps to show that they know beer.”

B

rainy or Boozy?

It’s that difference, between drinking beer and knowing beer, that has the big American brewers and importers pushing more countries and more styles towards consumers, industry experts say. “We’re really able to connect consumers with their brand,” says Ken Kunze, Vice President of Marketing for Heineken USA. Maybe. Or maybe, while there’s been an increase in American taste sophistication, there’s also been a massive marketing surge to sell Corona brands around party-hearty events like Cinco de Mayo and the summer-long Jimmy Buffett tour.

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Trim: 11"

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Three of the top five-selling imports — Corona, Corona Light and Tecate — hail from South of the Border. Explains Roberto Viejo, Chief Sales and Marketing Officer, Grupo Modelo SA/Procermex, the unit responsible for US Corona/Modelo brands sales, “Mexican beers are attractive to the general market. People like the flavor; they’re lightdrinking and good-tasting. They’re also attractive to the Hispanic market—it’s a national thing for them even if they are not of Mexican origin. Our brands are Latino and both demographics can relate.”

For those companies who are trying to broaden their portfolios across the globe, Schuhmacher sounds a note of warning: “the import boom is largely a Corona boom, and if you take the Mexican beers out, the picture looks much more sober.” Indeed, while the import share has grown steadily over the past three years, the rate of growth slipped by half last year compared to that of craft beer.

Nevertheless, according to Viejo, the import “image,” is very important, even in the case of his Corona brands. “It’s good beer, and it reflects an image and a lifestyle,” he said. “And the growth of Mexican food and restaurants are also helping the trend of Mexican beer in general.”

Still, part of Mexican beer’s popularity is that American culture is increasingly more, well, Mexican. According to Kunze, whose employer imports such Mexican favorites as Tecate, Sol and Dos Equis, there are several macro-trends that have been playing out in the marketplace; it’s not just the adoption of influences like food, restaurants and music into mainstream culture, but also that “America is becoming a lot more diverse; specifically Spanish-speaking Latino and Hispanic consumers, primarily Mexican.”

Schuhmacher believes that the growth of top Mexican brands is actually being fertilized from a variety of sources. “The growth of Tecate is directly related to the increase in the Hispanic population in the U.S.,” he says, whereas “Corona and Dos Equis benefit much more from the growth in Mexican food and people vacationing in Mexico.” ast of the Border But with Mexican beer gaining so much traction, retailers must ask whether there are other nationalities’ imports whose share may grow, not so much because of consumer sophistication, but because of changing populations and cultural influences. And if so, the question is, where should retailers look?

There are contenders. Holland offers the No. 2 and No. 6 imports, Heineken and Amstel Light, as well as new A-B charge Grolsch.

Germany’s Beck’s (No. 7) and No. 14 St. Pauli Girl are perennial favorites, while the U.K. gives us Nos. 8 and 19 Guinness/Guinness Extra Stout, No. 10 Newcastle Brown and No. 15 Bass. Even Jamaica – “Hooray Beer!” – weighs in at No. 18, with Red Stripe. Fading, however, is Canada, where Labatt Blue and Molson Canadian are losing share.

Still, for real growth potential, retailers might want to look to the East. That’s where Bud’s going.

A new flow seems to be coming from Asia; according to IRI, Asian beers ended last year with a lot of momentum, up nearly 20 percent, according to IRI – and with the boys from St. Louis behind them, the Year of the Dragon could soon be on its way.

“We see Asian beers starting to grow in popularity as we see more interest in Asian culture here in the US; whether it be food, fashion,

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or interior design,” says Goeler. “We have three tremendous GERMANY Asian brands: Kirin, from Japan; Tiger, and Harbin, which is a new brand we’re bringing in from China.”

The top Chinese beer in the US, Tsingtao, is also now taking advantage of what its importer, Barton Beers, terms “sophisticated Asian cool,” debuting upscale new packaging for the summer. Harbin also has upscale packaging, its bottles housed in a unique rice paper wrapping.

And beer from the Far East, while exotic in its lack of ubiquity, nevertheless isn’t a beer snob’s brew – it’s typically a light lager, one that’s accessible enough to follow the same path of cultural integration that Mexican beer has taken.

A growing percentage of the U.S. population is Asian, as are a larger number of food trends, clothing styles, and other forms of cultural identification. Just as green teas are growing in beverage categories ranging from CSD’s to teas, so HOLLAND too might light-bodied Asian beers.

At the other end of the spectrum is Belgium, a place where beer snobs might soon move into the main stream.

Once known mainly for its fine chocolate, the tiny European country is starting to make a splash with its flavorful beer.

Belgian brands like Stella Artois, Hoegaarden, Duvel and Chimay, are gaining steam, according to Schuhmacher, because “they have a style that American palates can appreciate.

Fruity, light and refreshing.”

Indeed, with most American brewers shopping wheat beer, and other craft brewers hawking fruit-derived brews, a higher-end store would be neglectful without some Belgian brands. That goes doubly so for stores where prepared foods and cheeses are sold.

JAPAN

F

amiliar Turf Still, the beer market in America is one where growth still does not stray far from premium brands, and that means that the biggest boats to launch in the import segment aren’t going to be esoteric ones, but subbrands of well-known products.

In other words, retailers who are going for the biggest bang for their import shelf space buck might

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want to look for light versions of tried-and-true imports. Corona Light has performed exceptionally well, and Heineken Premium Light launched nationally to great fanfare earlier this year. Beck’s own Beck’s Light has surfaced to considerably less attention, but with the overall mainstreaming of those three beer brands, as well as Amstel Light, into most portfolios, even a limited import selection stands to gain incrementally through the addition of light products.

According to Morgan Stanley analyst Bill Pecoriello, Heineken Premium Light stands to gain about .3 to .4 percent of the U.S. beer market overall this year – not a large amount, but for those retailers who are selling a lot of Corona Light, certainly enough to make it worth carrying, as nearly half of its growth is expected to come at the expense of domestic light beers, which it will likely top in terms of margin.

Retailers and distributors “Really ‘get’ what the trade-up opportunity is in imported lights, that we’re going to bring them more margin by selling the same amount of beer by trading people up from domestic lights, and we’ve done it in a way that doesn’t cannibalize Heineken, or Amstel Light, for that matter,” says Kunze.

Marketing and advertising are also a factor. Corona and Heineken/ Amstel have produced some of the most consistent, iconic advertising in the industry; picking a lane and staying in it, enabling consumers to identify with the brands’ positioning without the confusion of everchanging messaging. “Our marketing is attractive; simple, unique, consistent and to-the-point,” says Viejo. “That’s what the consumer likes. You can put it to an Asian and he’ll relate to it. Our marketing is that uncomplicated.”

One other idea that retailers might want to keep in mind: a broad selection of imported beer is, in itself, an advertisement for imported beer.

To succeed in the category, retailers shouldn’t look for beers that completely emulate American-style beers. They should build a portfolio. That’s even what a big wholesaler like Anheuser-Busch, a relative newcomer to the import game, is trying to do.

“From a marketing standpoint, taking on imports is a big change for us because we’ve been so focused IRELAND on marketing domestic beer brands,” reasons Andy Goeler. Picking up a portfolio of imported brands and marketing them to American consumers, he knows, takes a different approach. “With the American lagers, visibility is very important… you’ve got a whole mix of advertising media—TV, radio, print, outdoor, internet.

As you look at import drinkers, you have to be a little bit more segmented.”

It’s less about broad media and more about targeting small slices of consumer groups. It’s an understated approach that depends on variety – again, on a detailed, broad portfolio of offerings.

“These consumers consider themselves to be connoisseurs of beer,” Goeler says. “They like to be marketed to in a way that reflects that.”

ENGLAND

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• Show Schedule • Friday, July 7

T

he 52nd annual Fancy Foods Show will be held at the Javits Center in Manhattan from July 9-11. Along with an expected 20,000 or so attendees and 2,100 booths, there will be more than 100,000 different food samples available, which can make for quite a weekend. On the beverage side, there will be many opportunities to sample high-end wines, juices, coffees, teas and other products, many of which might be the next big seller. Products like GuS and Izze have been discovered by the public at the summer show; who knows who might be next?

52nd Summer Fancy Food Show Show Days: July 9-11, 2006 Location: The Javits Center, New York City

Workshops: 9 am – 12 pm Branding on a Budget: Creating an Identity Without Breaking the Bank 9 am – 12 pm Taking Your Products to the Marketplace 10 am – 3 pm The Basics: The Business of Specialty Food 1 – 4 pm Profitable Pricing: Strategies for Setting and Adjusting Your Prices 1 – 4 pm Managing Co-Packer Relationships to Achieve Company Goals Saturday, July 8 Workshops: 9 am – 12 pm How to Recruit, Manage and Retain a Productive Staff 1 – 4 pm Marketing on the Web: What Email, Blogs and Searches Can Do Store Tours

Educational Program: July 7-11, 2006 (Educational Sessions are available at an extra charge; for pricing info, go to www. fancyfoodshows.com)

9 am – 1 pm A Chocolate Walking Tour of Lower Manhattan 9 am – 2 pm The Middle Eastern Delights of Brooklyn’s Atlantic Avenue Sunday, July 9

NASF T 52

Seminars

®

BEVERAGE SPECTRUM // JUNE

8:30 – 9:30 am State of the Specialty Food Industry 2006

2006

8:30 – 10 am Targeting the Hispanic Market: New Opportunities for Your Business 8:30 – 10 am Creating and Marketing Corporate Gift Baskets for the Holidays 4 – 5:30 pm New Flavors Ahead: Sweet & Sizzling Spices from the Global Pantry Monday, July 10 Seminars 8:30 – 10 am Cooking with Dave Lieberman: Connecting with the TwentySomething Consumer 8:30 – 10 am What’s New in Food: Trends from Around the World 3 – 5 pm The European Union Presents: The Familiar Giants and Undiscovered Gems of the European Union 5 – 8 pm City Harvest and the nasft Present: Meet the Tastemakers Tuesday, July 11 Seminars 8:30 – 10 am When, Why and How to Sell Your Business 8:30 – 10 am How to Get Noticed by the Media

• Fancy Foods Exhibitor List: Beverages • 2723 1770 3052 4200 2972 2257 114 274 3113 2456 759 866 1536 5403A 2520 430 1149 1812 1812 5039 5312 4427 1660 247 3160 5532 1362 873 5151 1567 1856 2256 636 871 2370 4455 3066 3325 1376 1812 5537 124 4813 5115 2763 3209 2757 3018 5216 2519 4874 5014 521 2649

Acque Minerali Adagio Teas Affinity Beverages, Inc Almaza Brewery Ardea Beverage Brands of Britain, LLC Cedro Azul Srl. Cibo Specialty Foods Di Iorio Eden Foods, Inc. The El Paso Chile Company Eurobubblies, Inc. European Imports Ltd. Fizzy Lizzy Fonte Margherita Frigo-Pak Gida Maddeleri San. ve Tic. A.S. Galil Importing Corp.

Gegenbauer GUNZ Warenhandels GmbH GuS - Grown-up Soda Hint, Inc. The Hain Celestial Group Honest Tea Indo-European Foods, Inc. ITO EN LTD. Izze Beverage Company Lifeway Foods, Inc. Lorina, Inc. Luvli Juices McSteven’s, Inc. Metromint Manhattan Special Bottling Corporation Nestle Specialty Foods O Beverages Orchid Island Juice Company Organic Juice USA, Inc./Elite Naturel Organic Valley Paradiso S.p.A. Peters Imports, Inc. Pfanner Hermann Getränke Gmbh Purity Organic, Inc. RPB S.A. The Republic of Tea Revolution Tea, LLC Royal Pacific Foods—The Ginger People San Pantaleo Sanfaustino/CCW Holdings Inc. Sorgente Santa Croce Skylar Haley Togni Universal Nutri- Beverage Sdn Bhd World Harbors, Inc. Yasar Dis Ticaret A.S. Zas International

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SHORT FEATURE

1. Ambiance All too often, I find off-premise operations to have an uninviting store room/ stock room sensibility. Could you imagine frequenting a bar that offered such a vanilla environment? Considering the increased sophistication of today’s consumer – and the significant competition for their attention – you need to provide an enveloping ambiance. A good store design, attractive displays, flattering lighting and appropriate recorded music (you might also consider featuring live music from time to time) can help make your store the kind of place where consumers will linger.

3. Tie-Ins with On-Premise Operators This is an obvious opportunity that you off-premise folks should definitely take better advantage of. Recognizing that bars and lounges are excellent for product trials, why don’t more of you partner up with your nearest on-

premise operators to encourage more cross-selling of both products and customers? For example, you and your local bar or lounge could share the cost of co-promoting a special price on a featured wine, set of cocktail ingredients, or beer. You could coordinate on-premise wine tastings in which customers are directed to your store if they’d like to purchase the wines that they’ve sampled, or even set up displays featuring the ingredients of your co-branded cocktail recipes.

Keep a closer eye on what we on-premise operators are doing – we’ll keep a close one on you. There’s much that we can do to our mutual benefit.

Mark Grossich is the founder of Hospitality Holdings, Inc., which owns and operates Manhattan’s most sophisticated upscale cocktail lounges including The Campbell Apartment, The Carnegie Club, The World Bar, and The Patio.

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2006

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The best tasting

A

hile the “corner liquor store” has certainly evolved beyond a simple packaged goods operation, I remain surprised that so many of them remain so disparate from their on-premise counterparts. As a longstanding owner/operator of a number of New York City’s premiere bars and cocktail lounges, I simply don’t understand why this is the case. Accordingly, here’s what I consider to be the three most important things that liquor stores could borrow from bars/lounges:

2. Knowledgeable (and Gracious) Staff As with your on-premise counterparts, this is absolutely key, but I’m disappointed to find that it’s often not the case at off-premise establishments. Your staff must be well turned out and possess compelling product knowledge of wine, spirits and, most importantly, cocktails.

In addition to knowing their products, they also need to be skillful at understanding or determining what customers want via questions or suggestions for food pairings, cocktail recipes, nonalcoholic alternatives, light, medium or full-bodied wines, and gourmet beer and mixers. With the ongoing introduction of new wines and spirits, as well as the great new waters and noncarbs, the need for training never ends.

I recommend that off-premise retailers devote a specific day and time for mandatory sales training. Just like at bars and lounges, an informed staff is imperative to developing and maintaining a strong base of customers.

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CONVENTION SCRAPBOOK

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Things to do in Chicago: Retrace steps of Blues Brothers; eat hot dogs and gyros from Five Faces; walk dog in Grant Park; hit Food Marketing Institute Show 2006, take pictures of beverage attendees in their own little area, and put ‘em in a magazine….

fmi

Daniel Wasilick, Simone Anewalt and Tom Shuman – the Brazil Gourmet team was on location and in uniform!

Lucky there was no wind, or we could’ve ended up in Michigan!

Who could be bubblier or juicier than Izze’s Heather Willison and Samantha Halfacre?

Kevin Schultz, herbalist extraordinaire.

Stacey Berg, a leader of Bud’s product development team, shows some ap-peel

Down from the mountains to guard the fort at FMI Coke’s Scott Williamson – a southern man knows his iced tea!

Erica Enders and Eric Abovich. Is everyone at Bravo named Eric?

Organic beer from Bud. How all-American can you get?

Here’s the Martinelli’s booth.

Where are the drinks?

Dig those exotic beers that Bud’s been importing

Work for CSAB, get a vintage T-Shirt!

Anna Reseker, stirring things up for Nantucket Offshore.

Welcome aboard, Ben Shojnen

Gary Hemphill of Beverage Marketing – his knowledge led some to want to elect him President of Beverages

Gerry Khermouche looks for a scoop around the O Beverages booth.

Tom First and Jimmy Seaborg stonewall him.

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PROMO PARADE Grateful Guinness Guinness is looking for the most deserving fan in the United States to receive the Ultimate Guinness Home Bar – valued at approximately $20,000 – installed in their home free-of-charge.

As of today, fans can register at www.Guinness.com, where they will be asked to construct a blueprint for their home bar through an interactive feature recently added to the site. Each contestant must also submit an explanation as to why he or she is most deserving. The competition is open to people ages 21 and older and will run through July 31, 2006. The winner, who will be selected by basketball Hall of Famer Bill Walton, will be announced shortly thereafter.

The Ultimate Guinness Home Bar comes fully equipped with a three-keg cooling unit, ideal for serving the Irish trio of Guinness Stout, Smithwick’s Ale and Harp Lager on draught. More than just the bar itself, the grand prize winner also will receive three tap handles, mirrors for the back bar, a bar table and four bar stools.

Of course, if you’re Bill Walton, you’ve already won: the former NCAA and NBA Champion and current NBA analyst recently received an exact replica of the Ultimate Guinness Home Bar that consumers will be vying for.

Corona Barton Beers is proud to present the 2006 “Visit the Tropic of Corona” promotion for both the on- and offpremise. Relaxing new graphics highlight this brand new promotion that supports Corona and Corona Light’s favorite season of the year.

For off-premise accounts, a full line of merchandising elements includes display/case cards, graphic towers, floor graphics, surfboard ceiling blaster, C-store pricing cards and base wrap. Topping off this summer celebration is a versatile palm tree case display unit sure to put cerveza lovers into a tropical state of mind. This promotion runs through the summer.

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BEVERAGE SPECTRUM // JUNE

2006

SoBe/PepsiCo SoBe No Fear has launched the Drink with Drive Giveaway.

By entering the codes found on specially-marked packages of SoBe No Fear and Sugar Free SoBe No Fear 16 oz. cans and 4-packs, consumers become eligible to win hourly, weekly, and monthly drawings of prize packs from selected partners such as No Fear, Nissan, 4-Wheel Performance Centers, Samsung, Rockford Fosgate, Sirius Satellite Radio and Revolver Magazine to help make the summer a bit cooler.

SoBe will award thousands of prizes all summer long, including four No Fear Edition Nissan Titans. For more information, visit http://www.sobenofear.com. This promotion runs through the end of August 2006.

Malibu Rum Malibu Rum is launching a new global consumer website, www.malibu-rum.com. The site features content from five of Malibu's key markets and is available in four different languages - English, French, Spanish and Chinese. The website, designed to reflect the "seriously easy going" essence of the brand, is set on the white sand beach of a Caribbean island, where LDA consumers can learn about the unique Black Rock Distillery in Barbados, tune into the Malibu TV spots, and compose their own Malibu steel drum tune!

Southern Comfort The FADER magazine, the definitive voice of emerging music, is partnering with Southern Comfort on a year-long, multi-tiered campaign that includes advertising, events and exclusive giveaways.

The highlight of the campaign is a limited edition 7" vinyl record that will be compiled especially for this campaign by the editors of The FADER. Four specially-colored records will be created, one for each season, and will be distributed to top DJs, artists and influencers. Only 500 of each disk will be produced and The FADER readers will also have a chance to win the exclusive recordings on TheFADER.com blog.

Constellation Wines U.S. – 2006 National Summer Promotions

Daily’s Daily's is running a dynamic and interactive consumer advertising campaign to help create consumer awareness and drive trials for a new product line. Daily’s new ReadyTo-Drink line is available in a 10 oz. pouch for single serve frozen cocktails right from the freezer and a 1.75 liter Bag-inBox for ice cold cocktails at the push of a button.

The campaign is designed to creatively inform consumers on the taste, quality and benefits of Daily's new products through a targeted print and internet campaign that will run this summer. The print campaign will appear in high profile national publications.

The internet component utilizes an online Yahoo banner campaign designed to drive consumers to the www.dailysgoodlife.com microsite. The microsite contains details and entry information for Daily's "Taste the Good Life" sweepstakes program where consumers can enter to win a personal shopper with a $1,000 budget; a cleaning crew to clean the winner's house; a chauffeur-driven limo for the day; a massage, and a catered dinner party.

Through the site, consumers can also receive rebate purchase incentives and additional opportunities to enter the sweepstakes through the 'tell-a-friend" viral marketing component. The promotion runs through August 2006.

Sprite Sprite's relaunch this summer will be fueled by the Sprite "SubLYMONal" advertising campaign, which features commercials that are actually the opposite of subliminal advertising. Each spot begins with a voiceover that says, "Welcome to 'SubLYMONal' advertising. For best results, do not blink."

The commercials even indicate that they are "DVR Ready," tempting people to record and replay them to discover embedded content within. The Lymon-focused action in each ad is interrupted by flashing images and messages and each spot closes with the words, "SubLYMONal Message Complete" and the tagline "Obey."

People will be able to find special codes embedded in the commercials that can be entered at the brand's new website, www.SubLYMONal.com, to unlock exclusive content. The site allows people to actually interact with the advertising and it provides different ways for them to create their own "SubLYMONal" experiences.

• Marcus James is Asking Consumers “Care to Tango?”

Argentina is widely known for the Tango, but it is also recognized for making great wine. This summer, Marcus James is running a promotion to entice trial of the new line extensions, Riesling and White Shiraz, along with the stalwart White Zinfandel. Colorful POS materials, including a case case, case stacker, and MIR necker, will feature a Tango theme. There is a fruit punch recipe on the MIR necker, and an offer for $2 off one bottle of any Marcus James 1.5 Liter or $5 off any two.

Promotion runs June 1 through July 31, 2006.

• Rex Goliath Says “Fire Up the Grill!”

Summer has finally arrived, and Rex Goliath, the 47-pound rooster, is ready for barbecues and outdoor fun. The summer grilling theme includes brightly colored IRC neckers for $1.50 off hamburgers, and a great mail-in offer for the Rexipes recipe book. Displays include eye-catching posters, case cards, shelf talkers and an attractive rustic 4-case rack. Promotion runs through August 2006.

• Best Summer Under the Sun with Hardys Getting in the spirit of summer, Hardys offers a convenient 3 L. Box Cooler Bag to keep Hardys Stamp of Australia boxed wines cool for a beach excursion. With the purchase of any Hardys Stamp of Australia boxed wine, consumers are given an MIO for the Box Cooler Bag. Other offers to keep Hardys consumers happy in the sun include $1 off the purchase of any deli item IRC neckers and $5 off 3 L. box MIR for Hardys Stamp of Australia. Promotion runs through August 2006.

• Fresh Summer Food with Nobilo Nobilo offers consumers a way to enjoy a crisp, fresh summer with “Pure New Zealand, Pure Nobilo” summer promotions. The theme is enhanced with $2 off Seafood flow coupons. $2 off Chicken flow coupons are also available. Offers also include $6 graduated MIR on wine neckers and “Savvy with Friends” neckers, a $4 instant savings with the purchase of Regional Collection Sauvignon Blanc and either Regional Collection Chardonnay or Merlot.

Promotion runs through August 2006.

Are your shelf sets giving you headaches?

Are you having trouble deciding to stock your cooler with Red Bull or Rolling Rock, Honest Tea or Tequiza, Snapple or Sprite? Just drop us a line and you could have the next store featured in Fix My Mix! Just call (617) 715-9678 or email jklineman@bevnet.com and explain what part of your mix could use some fixin’!

We’ll come take photos of your store, look at the demographics, and talk about your goals. Then, Beverage Spectrum’s hand-picked industry experts will go to work, offering you and your store the best kind of makeover there is: a free one!

Our Experts are Standing By! 60

BEVERAGE SPECTRUM // JUNE

2006

FIXMYMIX

Catting Around

with Fix My Mix

h, New York’s Catskill Mountains: Haven for resorts with Henny Youngman as the headliner. Inspiration for Dirty Dancing. Home to the slightly confused Jeremy Peters, heir apparent to local grocery Peters Market.

Peters has an organic bent that caters to the “crunchy types” who populate the Catskills, most of whom are locals, but a good many more who are helping develop a burgeoning second home economy in the area.

But the steady flow of locals and newcomers hasn’t helped revive the beverage revenues at Peters Market, and as a result, Jeremy has turned to our retailing experts to have them help FIX his MIX. Peters Market has limited space for cold beverages, and the store keeps them in the back, all the better to draw customers through the place on their way to fight the thirsties. But the placement of the doors has its drawbacks, and Jeremy’s starting to feel them: it doesn’t leave a lot of options for those high-margin single serve buys that happen just because the beverages are in the right place at the right time. And that’s what Jeremy wants.

Jeremy’s got a nice little laundry list of items he’d like fixed up: he wants to figure out what products would be good to experiment with in the deli as a replacement for some of the weird flatbreads in front of the meat case that never seem to sell. He wants to figure out other secondary placements – like a cooler for point-of-sale purchases on the way out the door. He’s got an expansion coming of at least a few hundred square feet, and he’d like to know how he can test products for their potential in the coolers that will go into the expanded area.

But the biggest question Jeremy has is about stuff. As in, he wants more of it. “The beverage companies used to bring more décor, more merchandising stuff,” Peters says. “You don’t see

that ever anymore. I remember when I worked here as a teenager, when I went to college, we used to get all kinds of lights and Bud signs and stuff, and now we don’t get any of it.”

And that’s left him with a dearth of merchandising options. With his selection limited by his space, Peters is trying to find a hot brand – or even better, a hot category – that can ramp up his sales and hit his customers right in their crunchy, natural-foodsloving bellies.

What’s he looking for? “Well, something like another Vitaminwater would be good. Something that sells as well as that, because everybody buys it.”

Guys, know you’re not much on the product development side, but can you juice up this guy’s retail setup?

BEVERAGE SPECTRUM // JUNE

3. What is your primary business type?

(check only one) A—N Convenience Store B—N Supermarket/Grocery C—N Club/Warehouse Store D—N Mass Merchandiser/Dollar E—N Drug Store F—N Liquor Store G—N Wine Store H—N Wholesaler/Distributor/Broker I —N Beverage Only/Beverage Specialty Store X—N Other (please describe):

4. What is your title? (check only one)

Are your shelf sets giving you headaches? Are you having trouble deciding to stock your cooler with Red Bull or Rolling Rock, Honest Tea or Tequiza, Snapple or Sprite? Just drop us a line and you could have the next store featured in Fix My Mix! Just call 617.715.9678 or email jklineman@bevnet.com and explain what part of your mix could use some fixin’!

We’ll come take photos of your store, look at the demographics, and talk about your goals. Then, Beverage Spectrum’s hand-picked industry experts will go to work, offering you and your store the best kind of makeover there is: a free one!

62

715.9671 812.5820.

(617) 715-9671.

2006

A—N B—N C—N D—N E—N X—N

Owner/President/CEO/COO/VP/Director Buyer Merchandising Manager Regional/District Manager Store Manager/Supervisor Other (please describe):

5. Do the locations that you are responsible for sell: (check all that apply) A—N Carbonated soft drinks B—N Non-carbonated soft drinks C—N Bottled water D—N Beer E—N Wine F—N Liquor

BS0606 BS0506 BS03O6 BS0406

FIXMYMIX Jeremy: Two thumbs up on having figured out a way to get paid to live in one of the most beautiful parts of the country.

You tasked us with a few challenges. Here are my viewpoints on your great store: As you expand your store, how about positioning the addition as a “treasure chest” where your consumer can find and try new, unique products and offerings?

This would allow you test new items while conditioning your consumers to seek out your store because you offer beverage innovation.

Your advantage would be that you call out that treasure chest to your consumer, and you can learn more about changes in consumer purchasing patterns than the corporate giant down the street. There are many new SKUs, packages, and flavors in the pipeline to keep your treasure chest filled to the brim – which will keep your foot traffic up.

Also, since your consumer seems to have a penchant for organic, good-for-you products, why hide them next to mainstream products? Just as many grocery stores have had an organic produce section for years, you could have an organic/new age beverage section that becomes a destination for that consumer. That way they won’t have to sift through the mainstream offerings by the same manufacturer that they are not interested in anyway.

Jeremy, if your local distributor or bottler does not offer you any swag or programming, shame on them. Try developing your own programs, instead. For example, pitch a performance-based program where if you accomplish an increase of X percent over a 30 day period on Brand Y, the distributor/bottler will provide you with enhanced merchandising material. Or play hardball: the next time they come to you with a new SKU, ask them to support it properly.

I didn’t see any barrel coolers by the register that would promote instant consumption and impulse buys. That could work for soft drinks, wellness drinks or beer. Do you offer any combo meals at your deli? Not a novel idea, but a profitable one. Make sure the beverages intuitively go well with the sandwich offerings.

Thomas L. Fox is a nationally recognized leader in Category Management and National Accounts within the beverage industry. As a Partner with CM Profit Group, Tom works with suppliers and distributors to increase their market share via Category Management techniques to create “win-win” relationships with their key account customers.

Tim Jacobi is a Senior Brand Manager in charge of five key brands at the Pabst Brewing Company. He has worked in the beverage industry for 12 years, starting as a sales route driver. Tim was also a critical member of the team that managed the integration of Seagram’s into Diageo as well as the subsequent distributor alignment process.

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BEVERAGE SPECTRUM // JUNE

Jeremy: Since you’re situated up in the beautiful Catskills, we have to make sure your beverage profits climb to new heights.

Given your upcoming store expansion, and your spot as a fill-in location, you have a wonderful opportunity to take advantage of emerging beverage trends. I have a few recommendations that can take advantage of that position.

These beverage segments are growing: energy drinks, import / craft beers, water and light beers. But other than water, I did not see you represented aggressively in these growth segments. This is a major opportunity, especially in energy drinks and import / craft beers. Energy drinks tend to have a 50 to 100 percent higher price point than teas or CSD’s, and thus a significantly higher profit. These products have to be cold, too – so talk to your various vendors – they should be able to get you a refrigeration unit that can spur plenty of impulse sales.

Same with import / craft beers – they’re typically around 30 to 40 percent more profitable than domestic beers, and they’re growing faster, too. You should devote a considerable amount of space to these growing segments. Instead, you’ve allocated significant space to flavored malt beverages. FMB’s are a very profitable segment, BUT they’re not growing as fast as imports, and they’re a fraction of the size.

Also, because your consumer base is interested in organic foods, assume they want their beverage items to be of the highest quality, too. Craft beers can fill that demand. Make sure, at least, that you have 6-packs and 12-packs of Corona, Heineken, Labatt, Molson, Sam Adams, and other locallyrelevant craft brands. And don’t be afraid to build side-stack displays of these items, either. Almost half of your beer shoppers haven’t determined their brand upon entering the store. You can trade up those consumers by merchandising items more aggressively.

2006

18 % LARGER BASKETS

DRINK THINK When a Beer is

More Than Just a Beer

1

WITH SAMUEL ADAMS.

®

key

o Donald Trump has his own water and his own vodka. I guess he wants to take care of any beverage occasion you might have before The Apprecntice gets cancelled. Jones Soda is making candy and lip gloss and I just read that Budweiser is making barbecue sauces, giving beer can chicken a whole new meaning. Is there any end to brands extending themselves out of and into this mad, mad business of liquids? And how are you, Mr. or Mrs. Retailer, expected to keep up, find more space in your store and make more cash? Here are a few “filters” that will help you take a look at these new additions to and from the beverage business: THE BRAND Who in your world hasn’t had an idea for a new beverage or something that an existing brand should get behind?

We’ve all said at one point, “Man, Coke should start making ice machines” Or, “Coors should co-brand a hockey puck.”

We’ve all had an idea or two, and that comes from the perception we have for the brand we start with. So think of a brand as a human being. It has a look, a personality, and a certain tone with which it communicates to people. The

questions for you might thus be, “Are your Budweiser customers the barbecuing type?” If you step outside of our business for a second and think of these packaged goods as human, it’s sometimes a little easier to cut through the marketing-speak that comes with the vendor’s new products. In other words, would you and your customers be friends with this product?

THE PRODUCT You’d hope that whatever the vendor puts in a package would complement the brand, right? I’ve seen one too many liquids or extensions of liquid brands really fall short on the quality side. Unfortunately, when people look to extend their brands, they don’t always make certain they contract with the kind of people that believe in their brand as much as they do. Make certain you try the product outside the sales meeting with the vendor. Introduce it to a few friends that are familiar with the brand and see what they have to say.

Sometimes, we fall into a habit of using an audience of one – ourselves.

THE STORY They’ve got the cool new package, the product seems to be pretty decent, but does it match the story that you’re being told by the vendor? With all due

respect to the vendor, marketing departments sometimes communicate to focus groups and don’t necessarily have the story in the right language for your customers. I know we’re only talking about liquids and foods here, so it shouldn’t be that complicated. Take a look at the sell-sheet, the display, the point-of-sale; is all of it consistent?

Does all of it say the same thing about the brand and the product?

Mass Domestic basket 18% smaller

Import basket 15% smaller

THE SELL How are you going to allocate space for this new item? Are you going to give it incremental space, or are you swapping something out? Will the SKU assortment for that particular brand or category need to be modified? These are questions that go for the vendor as well as for you, and he doesn’t know, you shouldn’t stock it.

Because let’s face it, Beechwood charcoal takes up space.

Darrell Jursa is the founder of Liquid Intelligence, an influencer/word-of-mouth marketing agency for the beverage business. The company specializes in helping beverage companies grow profitability through new product and service development, branding and effective marketing strategies.

YOUR SHOPPING CARTS ARE ABOUT TO GROW. Facts prove customers with Samuel Adams® in their carts spend more in your store1. Make sure you are getting these customers to your store by focusing on ad mix, shelf sets, in and out of section displays and cross-promotions with other high-quality and high-margin items. Call 1-800-330-4112 to speak with a Samuel Adams® representative and see how we can grow your profits.

Take pride in your beer.

™

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BEVERAGE SPECTRUM // JUNE

2006

(1) Source – IRI data 52 weeks ending 3/20/05 comparing total grocery basket size among Samuel Adams®, imported and mass domestic beers. © 2005 The Boston Beer Company, Boston, MA.