Beverage Spectrum May-June 2009 by BevNET.com

JUNE 26, 2009

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Beverage Spectrum

MAY–JUNE 2009 vol.

7 :: no. 4

Columns 8 FIRST DROP Stevia: The Sweet Mystery of Summer

10 PUBLISHERS TOAST BevNET Live 2009: The Day We Connected

Digital Proofing Bar

28 GERRY’S INSIGHTS Coke’s VEB Shows Signs it can Pick a Winner

Departments 8

12 BEVSCAPE BUSINESS Beer Brand Investment Strategies 16 BEVSCAPE INNOVATION Coke’s new “PlantBottle” 20 CHANNEL CHECK Energy Shot Rankings 22 NEW PRODUCTS Gosling’s Brands a Mixer 64 PROMO PARADE Air Guitar, Boone’s Farm Style

Features

SWOP

30 BEVNET LIVE 2009 COVERAGE Experience Speaks to Entrepreneurs Panel: Distributors Speak Out 40 COVER STORY RED BULL: BACK IN THE HERD, BUT READY TO BUST OUT Has the brand discovered too late that it must adapt as well as lead? 54 STOPPING SODA’S SLIDE The strategy in the trenches.

Category Focus 48 ENERGY DRINKS: ALL GROWN UP Red Bull still leads, but its main competition now comes from Coke and Pepsi allies. 40 COVER PHOTO: (c)Getty Images/ Red Bull Photofiles direct dial fax

Beth Guthrie

58 SPORTS DRINKS: VARIETY GETS A SPORTING CHANCE Protein, coconut water, and caffeine are making their way into the sports drink assortment. Are you ready?

410.464.5407 410.464.5410

Beverage Spectrum (Postal Number 024-552) is published monthly with combined issues in January/February, cell phone May/June, July/August and November/December by Beverage Spectrum Publishing, Inc., a wholly owned 443.326.4832 subsidiary of BevNET.com, Inc. 44 Pleasant Street, Suite 110, Watertown, MA 02472. Periodicals postage paid at Boston, MA and additional mailing offices. Outloud, LLC POSTMASTER: Please address changes Mt.send Washington Mill to Beverage Spectrum Magazine, Subscriber Services, 44 Pleasant Street, Suite Watertown, MA 02472 1405110, Forge Avenue

Suite 200 Baltimore, MD 21209

MAY–JUNE.09.BEVERAGESPECTRUM.7

THE FIRST DROP

By Jeffrey Klineman

STEVIA: SWEET MYSTERY OF SUMMER How did it become so big, so fast? EVERY SUMMER it feels like the beverage industry must answer a few tough questions about its future. Last year, for example, environmental concerns seemed to cast the long shadow, pushing bottled water onto the back burner for both Coca-Cola Co. and PepsiCo. The vacuum created by the widespread cut-over of vitaminwater into the Coke system created a number of vacancies in the ranks of independent distributors. While that has created opportunities for marketers like Function, Muscle Milk, Steaz, and many others, many of the independents in what was once considered the “glaceau network” have yet to find a permanent solution. This year, the big puzzler is a sweet one: can major beverage companies successfully incorporate the new stevia-derived “natural” sweetener Rebaudioside-A into their products? So far introductions have not yet taken on a mainstream feel. While major brands like vitaminwater and SoBe Lifewater have launched low-calorie versions, and there is a Reb-A-sweetened version of Sprite knocking about in trials, the biggest media-backed rollout of a Reb-A product is a reduced-calorie version of Tropicana orange juice. Introductions have been measured, and with good reason. No one wants a repeat of spectacular consumer goods flops on the order of Olestra, Premier cigarettes, or New Coke. But things have ramped up, both on the consumer education front and from a new product standpoint -- Coke brought Odwalla’s juice drinks into play. Big Red is launching an AllSport Zero, and Sambazon has rolled out a diet energy drink.For large product marketing companies, there is no such thing as an absence of hype. In the absence of a major innovation, Reb-A has fast ascended from one of a variety of possible new, natural sweeteners like lo han guo and agave syrup to become a potential cure for the obesity-related ills 8.BEVERAGESPECTRUM.MAY–JUNE.09

Budding prospects for stevia?

One must wonder whether Reb-A has become this summer’s blockbuster by default or decree. of the entire beverage business. At the recent IFT conference, ingredient companies displayed incorporation methods for Reb-A left and right. No less a light than Massimo d’Amore, the Capo of PepsiCo’s North American Beverage Unit, has touted its potential across his company’s entire spectrum of beverages. Coke has been willing to risk possibly undercutting its own prize purchase, glaceau – itself long marketed as a healthy product – by using Reb-A as the sweetener in a reduced-calorie version of vitaminwater, before glaceau has been fully integrated into its new parent company’s corporate DNA. This is happening even though some industry observers believe the rise of Reb-A has a forced feel, as if that hype vacuum is just grabbing the biggest thing it can find. The hype probably isn’t due to some unreasonable outlay required to develop the stuff, considering the bizarre array of past products that have been granted the FDA’s Generally Recognized as Safe (GRAS) status (basically a stamp the means “not subject to being relegated to supplement

shelves”). So it’s pretty obvious that the risk in developing Reb-A before it received GRAS approval, while requiring some work on the part of the marketers and folks like Cargill and Merisant, didn’t require a R&D budget anywhere near pharmaceutical company proportions. And a bigger hurdle remains -- Reb-A’s lack of compatibility with certain flavors, including mainstream colas. To wit: with very few exceptions, the natural products companies, themselves no strangers to incorporating nontraditional sweeteners, have largely been shy about even tinkering with stevia; while there has been some pickup with the introduction of Reb-A, at least one major natural foods marketer has called it impossible to work with. But here we are, on the cusp of summer, with a broad array of Reb-A breakouts about to hit the shelves. Perhaps the reason is that Reb-A has crossed major hurdles with regard to flavor compatibility, something that earlier Stevia products weren’t able to do. Given the number of different companies who are about to use it, there may be something to that. But questions about the pace of innovation remain. And one must wonder whether Reb-A has become this summer’s blockbuster by default or by decree. Should they really be encouraging the same kind of hype they threw around with regard to Splenda a few years ago (something that most companies would rather not live through again), or is this product just an experimental stalking horse for the potential consumer acceptance of a myriad of new natural sweeteners and reducedcalorie products (which might be a nice use, indeed)? It seems unfair to answer a question with still more questions. But before the big thirsts of the season start to offer us some answers, that’s all we’ve got. That, and a whole bunch of ten-calorie products to sample. So stay tuned.

Nestlé® Pure Life® is now the #1 bottled water brand in the U.S.*

Nestlé® Pure Life® Purified Water is committed to being a leader in health and wellness, and as the fastest-growing brand in the liquid refreshment beverage category,**

we’re just getting started.

EMBRACE THE PURE LIFE™ *Source: Beverage Marketing Corporation 2009. Includes retail PET, retail bulk, home and office delivery, vending, domestic sparkling and imports; excludes flavored and enhanced water. **Nestlé Pure Life experienced a +19.4% change between 2007 and 2008 Source: Beverage Marketing Corporation 2009 ©2009 Nestlé Waters North America Inc.

nwna14708

PUBLISHER’S TOAST

By Barry J. Nathanson

BEVNET LIVE: THE DAY WE CONNECTED I WRITE TODAY about a seminal event that crystallized why I love what I do. In May, our BevNET/ Beverage Spectrum team hosted a terrific conference at the Essex House in New York City. Our meeting, the BevNET Live Entrepreneur and Innovation Forum, brought together some of the most talented, articulate and passionate marketers, distributors, ingredient and packaging suppliers, along with the investment community to talk about beverages. Our speaker roster was outstanding. In a down economy, more than 200 people strong spent an insightful

their process. We addressed the concept and formulation of launches, what works, and why. It was very interesting to hear how the investment community determines their support of a potential or fledging brand. We heard retail perspectives, as well. The growing importance of function and efficacy on the brands we launch and the impact of government regulation on the industry were consistent topics that bridged many of the sessions. But what I heard the most through all of these procedural panels and speakers was a determination to forge ahead

PUBLISHER Barry J. Nathanson bnathanson@bevnet.com EDITOR Jeffrey Klineman jklineman@bevnet.com ASSOCIATE PUBLISHER John McKenna jmckenna@bevnet.com ART DIRECTOR Matthew Kennedy mkennedy@bevnet.com GRAPHIC DESIGNER Amadeu Tolentino atolentino@bevnet.com ASSISTANT EDITOR Matt Casey mcasey@bevnet.com ASSOCIATE PUBLISHER Adam Stern astern@bevnet.com JR. DESIGNER Natalie Iknaian niknaian@bevnet.com SUBSCRIPTION INQUIRIES Adam Stern astern@bevnet.com 617-715-9679 ONLINE RENEWALS & CHANGES www.bevspectrum.com/subscribe ARTICLE REPRINTS (500 copies or more) FosteReprints 800-382-0808 x142

BevNET Live: Palpable energy in the air. day discussing every aspect that goes into the marketing of the brands. You’ll have the opportunity to read, see, hear, and discuss the event in our pages and on BevNET.com in this issue and in the coming weeks. But I wanted to give my own thoughts. Our industry is an exciting, dynamic one. The creativity of the people involved and the innovative nature of many of the products we sell are among the chief components that make the beverage industry an enjoyable place to spend a career. The personalities of the players in the marketplace hold a special place in my heart. I consider myself lucky to be able to write about this great profession. We went deep: we covered how a distributor makes their decision on which brands to take on, and they didn’t hold back when critiquing brands or describing 10.BEVERAGESPECTRUM.MAY–JUNE.09

through these tough economic times. It was a constant, inspirational theme for me. And the character of the industry – its attractiveness to creative, resilient people came clear in a session on exit strategies of founders of brands that have been acquired. It was fascinating, candid and quite humorous. I could go on and on about the content of the day. But my most important takeaway, again, stems from the friendship and kinship that all the attendees shared for each other. It was a great day to reconnect with old buddies and make new connections and relationships. Our industry is a special one. Events like this bring out the best in beverage marketing. We were glad to be a conduit for bringing the industry together – and we look forward to hosting future events to keep contributing to that togetherness.

BEVERAGE SPECTRUM PUBLISHING INC. CHAIRMAN John F. (Jack) Craven jfcraven@bevnet.com PRESIDENT AND EDITORIAL DIRECTOR John Craven jcraven@bevnet.com EDITORIAL 44 Pleasant Street, Suite 110 Watertown, MA 02472 ph. 617-715-9670 fax 617-715-9671 ADVERTISING 1123 Broadway, Suite 210 New York, NY 10010 ph. 212-647-0501 fax 212-647-0565

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

Beer Company Investing: Smart, or Skunky?

1947 2004 flagship brands. “As a result of the large transactions, such as InBev’s purchase of Anheuser-Busch, what you will see is a chance to acquire non-core assets as a result of the amount of leverage that was required,” Meyer said. Even so, Meyer said that the credit markets need to loosen up before there will be any action. John Bello, no stranger to selling non-alcohol brands, Regardless of the ecosaid he once tried to retool Rheingold, a classic New nomic forecast, some York-based beer brand. He invested in promotion and investors are wary. Shereven brought back the Miss Rhinegold contest. But brooke Capital’s John Belin the end the effort failed. lo, no stranger to selling non-alcohol brands, said he once tried to retool Rheingold, a classic with Pabst, people identified with PBR as a New York-based beer brand. He invested quality non-commercial brew. But, Jacobi in promotion and even brought back the said, that kind of product is hard to nurture Miss Rhinegold contest. But in the end the and does not lend itself to investors – many effort failed. of whom, he said, are likely to repackage, aggressively market, and, in the process, alienate customers who want the familiar “Investers are driven by spread sheets, margins, all that comfort of an old time beer brand. “Investors are driven by spread sheets, financial stuff...Consumers can be driven by tradition, margins, all that financial stuff,” Jacobi emotion, heritage and belief systems.” –Tim Jacobi said. “Consumers can be driven by tradition, emotion, heritage and belief systems. Now, however, Bello feels that if there is If you mix those two, I think you lose as once-languishing Blue Ribbon beer label, we wondered at the potential for rolling untapped value in an older brand, it lies in an investor.” Jacobi added that the appeal to invesup some long-ignored traditional American broader marketing and improved distribution, not in brand investment. tors may be limited because there have not beer brands. Bello called the idea of reviving traditional been any really big beer revivals. MSNBC Matthew Meyer, a senior VP at the firecently reported that despite innovative nancial consulting firm, Deloitte, said he beer brands “nostalgia on a fool’s errand.” Tim Jacobi, the brand manager for Pabst marketing and the combined distribution thought that conditions were favorable for investment in traditional beer brands. He Blue Ribbon until 2007, agrees with Bello, of the Miller and Coors networks, Miller pointed to recent declines in the price of saying that old beer brands lack the poten- High Life accounts for only 14 percent of important commodities such as hops and tial for big investor reward. Jacobi, who Miller’s overall sales. “Miller High Life is the biggest success grain that could make beer production presided over the PBR brand during the period that the beaten down working-man’s story,” Jacobi said. “And it isn’t really all more profitable. Additionally, according to Meyer, con- beer underwent a stunning resurgence, said that big.” • solidation within the industry is forcing that, “old brands aren’t a winning horse.” He found that when he was working large conglomerates to spin off their nonAre investors ogling the beer industry like they used to with soft drinks? Private equity group KPS Capital Partners, LP recently created North American Breweries as a portfolio company to invest in the beer market, and so far they have bought Labatt USA, the U.S. distributor for the classic Canadian beer brand, from Anheuser-Busch InBev. They also purchased High Falls Brewing Company, which includes the Genesee and Dundee brands. Combine the creation of North American Breweries with growing speculation that efficiency-seeking AB/InBev might next put Pennsylvania warhorse Rolling Rock on the auction block, and we started to wonder if the industry wasn’t looking at a redux of the period around the year 2000, when outside investors scooped up non-alcohol brands like Naked Juice and Snapple, then retooled them for sale to bigger beverage companies. Given the way some of those transactions have shaped the industry, and the success that Pabst found in rebuilding the

12.BEVERAGESPECTRUM.MAY–JUNE.09

2004 RHEINGOLD IMAGE BY NEIL POWELL OF POWELL

At least one group is getting in the game. By Mike West

The NEW

Take a walk on the wild side!

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BB Energy Shots: Huge Growth, Tiny Footprint. Energy shots are the fastest-growing part of the energy drink category and are stealing the momentum from their bigger – in package size – rivals, according to Consumer Edge Research founder Bill Pecoriello. In fact, the largest energy shot brand, Living Essentials’ 5-Hour Energy, now grabs nearly one out of every ten dollars spent on energy drinks in the convenience store channel, according to a category analysis by Beverage Digest. The upshot, if you will? Energy shots are taking share and usage occasions away from energy drinks, according to Pecoriello. The total energy market is still growing – up 4.7 percent over the 12 weeks ending May 17, according to Pecoriello’s data

its Monster Hitman. 5-Hour’s lasting legacy could be as a new major beverage player – or it could be one that gets swallowed up quickly by a huge offer from a bigger company, Pecoriello projected. “Using past history as a barometer, an independent or ‘new’ player should be able to sustain itself in this sub-segment,” he wrote. “Red Bull and Hansen were both relatively non-existent in US beverage before the creation of the energy drink segment.” •

from Information Resources Inc. – but the growth has shifted. Energy shots grew by 84.5 percent during that period, while energy drinks slipped by 0.8 percent. Overall, energy shots now account for 11 percent of the energy market and the big brands have yet to make a serious impact on the sub-segment. Living Essentials’ 5-Hour Energy still owns 78 percent of the category, followed by NVE Pharmaceuticals’ Stacker 2: 6 Hour Power with 7 percent. Hansen has made the biggest impact of the beverage players to flood into the category, with

An Interview with the Kool-Aid Man. Oh Yeah! We just couldn’t resist the chance to talk to the big guy... By Matt Casey The Kool-Aid man, that big, smiley, wall-destroying pitch-man for powdered beverage mixes, recently sat down for an interview with Beverage Spectrum. At least, we think he sat. We conducted the interview by email. Typing usually involves sitting, but the physics of a bipedal pitcher sitting in an office chair are a bit... questionable. “Why the Kool-Aid Man? Well, he’s responsible for his product’s continued popularity – one that has seen something of a resurgence with the growth of single-serve powder packs. Additionally, he became part of the advertising industry’s Ad Icon Walk of Fame in May. Since his neverflagging public profile and the occasional ad and cameo (he’s constantly busting in on the Family Guy) continue to make Kool-Aid Man an irreplaceable part of the public consciousness, we thought it best to grab him right after getting his Walk of Fame laurels. Beverage Spectrum: Do you have doors in

your house, or just a large hole in each wall?

14.BEVERAGESPECTRUM.MAY–JUNE.09

Kool-Aid Man: We have standard entry-

ways in my place. Although I previously suffered from “door-a-phobia,” I’m delighted to announce that I’ve overcome the condition and we’ve plastered up all the misshapen methods of egress I’d previously used. BS: How often have you burst through a wall into an awkward situation? What’s the worst you’ve seen, and what do you usually do about it? KAM: There were definitely some embarrassing moments, like the time I accidentally crashed into a therapy session with a two-liter friend I won’t name. The poor guy was just opening up about his not being able to run the distance! BS: In one commercial, you help apprehend a pair of bank robbers. Did you ever consider a career in crime fighting? KAM: Like most red-suited American boys, I wanted to be a law enforcement officer in my youth. But I just couldn’t overcome the instinct to yell “Oh, Yeah!” every time

Kool Aid Man – always in great shape, especially if that shape is...round. I was about to make an arrest. It made it impossible to sneak up on felons. BS: You have become something of a popculture touchstone in recent years. How do you feel about being parodied by Family Guy, Dane Cook, and numerous amateurs on YouTube? KAM: How can you criticize a thirst for fun! After all, didn’t someone once say that imitation is the sincerest form of flattery? That’s the way I have to look at it - it’s not in my nature to be angry with anyone. •

BEVSCAPE INNOVATION • Product development & marketing news

Stopping Stones

Sweet News for Aspartame

New CSD study boosts kidney claims.

Aspartame has no effect on apetite or food intake, according to a recent research review.

CSDs, which have been demonized in the public health debate for everything from containing too much sugar to containing artificial sweeteners, recently received an unexpected public image boost. Dr. Brian Eisner told a meeting of the American Urological Association that some diet sodas may help prevent the formation of kidney stones. Dr. Eisner found that some CSDs contain relatively high amounts of the alkalis citrate and malate, which help counter the formation of kidney stones. Fruit-ﬂavored sodas had the most alkalis, with Diet Sunkist and Diet 7 Up ranking the highest, while cola ﬂavored beverages had the least. “This study suggests that people with stone disease who do not drink soda may benefit from moderate consumption,” said AUA spokesperson Anthony Y Smith. Sugar-sweetened beverages may also offer the same benefits, since they contain the same alkalis. But, Dr Eisner said, the study focused on diet sodas “because we wanted to be able to recommend something that was healthier for our patients.” •

The evaluation, as it was posted on the American Dietetic Association’s Evidence Analysis Library web site, found that – contrary to rumor – aspartame does not create a “rebound” effect that heightens appetite or leads to increased food consumption. The review also concluded that using aspartame in the context of a reduced calorie diet does not affect weight, and may be associated with increased weight loss. The committee evaluated peer-reviewed research from the scientific literature and concluded that aspartame consumption is not associated with adverse effects in the general population. •

Dasani’s Green Plastic Bottles to drop emissions. The Coca-Cola Company unveiled a new plastic bottle that’s made partially from plants. The new package – called the “PlantBottle” – uses 30 percent plant-based material, is fully recyclable, has a lower reliance on non-renewable resources – like oil – and reduces carbon emissions compared with standard PET bottles, according to Coke. The PlantBottle is made through a process that turns sugar cane and molasses into a component for PET plastic, but the company is exploring other plant materials for future generations of the PlantBottle. According to a life-cycle analysis conducted by

16.BEVERAGESPECTRUM.MAY–JUNE.09

Imperial College London, the PlantBottle reduces carbon emissions by up to 25 percent. Unlike other plant-based plastics, it can be processed through existing manufacturing and recycling facilities without contaminating traditional PET. Coca-Cola North America will pilot the PlantBottle with Dasani and sparkling brands in select markets later this year and with vitaminwater in 2010. The bottles will be identified through on-package messages and in-store point of sale displays. Webbased communications will also highlight the bottles’ environmental benefits. •

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Innovation Briefs

Brands thriving on the margins. Now is a bad time to be a mid-tier brand, according to recent research from Information Resources, Inc. IRI reports that value brands grew two percent and premium brands receded just over one percent. But mid-tier brands? They fell by three percent. The economy has helped boost value brands, IRI reported, but it’s also played a role in cushioning upper-tier brands. Consumers have turned to what IRI called “sophisticated splurging.” They’re holding tight to their cherished health and wellness premium brands, but buying them at value outlets like Target or Walmart instead of traditional grocery or convenience stores. Adding to that trend, IRI said, retailers have dramatically increased the sophistication of their store brands to include highend options. “These findings remind us that shoppers often act in unpredictable ways,” said Thom Blischok, president of IRI Consulting and Innovation. The trend may be short lived – or, at least, poised to end soon – according to recent data from Nielsen. Poll data taken in April showed that consumers plan to start allowing them-

Little Room: Store brands, “little indulgences” are squeezing mid-tier brands. selves “some of those little indulgences.” They will, however, continue to focus on financial responsibility while transitioning back to mainstream retailers, according to Nielsen’s vice president of global consumer insights, James Russo. One lasting effect, according to Nielsen. The majority of consumers will continue to save by reducing gas and electricity use, or at least keeping an eye on their bill. That could result in continued light traffic at the beverage stronghold of gas station convenience stores. •

Shopping Focus Point out why you’re using the ingredient – don’t just say it’s there Looking for ways to energize your brand? One hot one continues to be shrinking it down. Smaller portions – 100 calories or fewer – remain one of the best ways to keep your product in play, even among waistline watchers, according to a recent report from Mintel. And beverage marketers are catching on – with “100 calorie packs” continuing to make inroads on store shelves, the Coca-Cola Co. is rotating it into its shelf sets with greater frequency, as well. (For more on that, check out page 20.) Meanwhile, consumers looking for functional brands are also getting better at discerning between functionality and ingredients. A report tracking high-profile functional food failures noted that one of the biggest shortcomings common to brands that didn’t achieve liftoff was the marketers’ use of an ingredient as a main point of difference. According to Failures in Functional Foods and What They Reveal About Success, consumers “buy products only for the benefit to them personally, not because of the ingredient used.” 18.BEVERAGESPECTRUM.MAY–JUNE.09

WILD Flavors, Inc. has developed an acid-stable, naturally-derived blue color additive for use in food and beverage applications. This revolutionary product complements WILD’s full line of Colors from Nature with a brilliant blue color. WILD has also increased its portfolio of Taste Modification Technologies with systems and solutions that address mouthfeel, masking, sweet enhancement, and blocking of bitterness that improve the taste profile of foods and beverages containing Stevia extracts. By rounding out the ﬂavor profiles and masking the Stevia taste profile issues, these ingredients and blends improve the finished product while enhancing Stevia’s sweetening properties.

Cargill has developed flavor solutions for rebiana based on recently patented ground-breaking technology. The technology simultaneously measures comprehensive cellular-level taste responses and uses it in developing new flavor systems for rebiana in food and beverage applications. The new flavor solutions are ideally suited for cereal, yogurt, ice cream, confectionary and various beverage applications including carbonated soft drinks and flavored water that benefit from a natural, reduced calorie product positioning.

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

SPOTLIGHT CATEGORY

ENERGY SHOTS 52 Weeks through 4/18/2009

Brand

As this chart indicates, it pays to be the first into the pool. But with other big brands slower on the draw and Red Bull just rolling out the big guns, next year’s picture may be quite different. Regardless, it looks like 5-Hour Energy is the clear category leader, not just in brands but with three of the top 4 SKUs, as well.

Sales $

5-Hour Energy

$77,042,711

Stacker 2

$12,915,978

Redline

$5,268,153

Rockstar

$973,579

Spike

$724,720

Xtreme Energy

$479,089

NOS

$462,382

BDI Marketing

$460,498

Full Throttle

$411,160

Kickers

$321,234

Shawn Cotten’s X-treme N.R.G.

$298,512

Ephrine Plus

$244,934

Nitro 2 Go

$222,615

Peptime 357 Magnum

$220,680

SOURCE: A.C. Nielsen via Major Convenience Channels

MINTEL

New Non-Alcoholic Beverages Tracked in the US by Sub-Category

MC CORNER

March and April showed some thaw, but the pace of new product introductions continues to lag far behind that of 2008. Sub-Category

March 2008

March 2009

April 2008

April 2009

May 2008

TOPLINE CATEGORY

VOLUME

52 Weeks through 5/17/2009 May 2009

BEER $8,807,776,000

Beverage Concentrates

Beverage Mixes

Carbonated Soft Drinks

Coffee

Energy Drinks

Fruit/Flavoured Still Drinks

Juice

Malt & Other Hot Beverages

Meal Replacements & Other Drinks

BOTTLED JUICES

4.6%

$3,827,589,000

0.5%

BOTTLED WATER

-5.9%

$4,939,556,000

ENERGY DRINKS

$988,876,200

7.8%

SPORTS DRINKS

-4.4%

Nectars

RTD (Iced) Coffee

RTD (Iced) Tea

Sports Drinks

Tea

Water

SOURCE: Mintel Global New Products Database (GNPD)

20.BEVERAGESPECTRUM.MAY–JUNE.09

$1,654,111,000

TEA/COFFEE

-2.7%

$1,383,288,000 SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart.

SPORTS DRINKS Brand

HOT! Powerade Zero Dollar Sales

Change vs. year earlier

Aquafina

$407,811,600

-16.3%

Glaceau Vitaminwater

$395,385,500

-12.2%

Dasani

$391,810,800

-11.5%

Poland Spring

$266,532,500

-0.9%

Arrowhead

$162,713,500

-10.2%

172.0%

Propel

$154,535,300

-25.2%

Deer Park

$140,843,300

-2.0%

Nestle Pure Life

$122,583,000

-1.6%

Ozarka

$107,136,100

-1.4%

$241,258,900

-4.1%

Gatorade G2

$177,505,500

186.6%

Gatorade Frost

$122,726,800

-12.0%

Gatorade All Stars

$122,244,500

-8.7%

Gatorade Rain

$80,260,300

-45.7%

Gatorade Tiger

$55,717,580

-10.7%

Gatorade Fierce

$52,766,490

-37.8%

Powerade Zero

$44,383,780

2,608.7%

Gatorade X Factor

$38,546,330

-48.0%

NOT! Gatorade X Factor

HOT! Doubleshot Dollar Sales

Change vs. year earlier

Red Bull

$360,666,400

Monster Rockstar Amp

$31,806,650

2.3%

Doubleshot

$23,934,360

75,689,836.4%

Java Monster

$23,241,030

86.4%

Monster XXL

$18,588,050

10.3%

SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart. 52 Weeks through 5/17/09

RTD TEA Brand

NOT! Propel

HOT! Private Label Dollar Sales

Change vs. year earlier

0.4%

AriZona

$306,139,400

6.1%

$144,877,700

9.7%

Lipton

$228,781,200

-3.4%

$92,056,340

-6.0%

Snapple

$108,432,600

-9.6%

Diet Snapple

$82,051,370

-11.3%

Lipton Brisk

$81,168,020

-5.5%

Nestea

$62,172,430

-3.3%

Diet Lipton

$60,053,410

14.2%

Lipton Pureleaf

$38,459,720

-0.3%

Private Label

$25,297,660

89.5%

Diet Nestea

$17,538,650

0.5%

Full Throttle

$18,444,840

-26.1%

NOS

$13,754,020

64.1%

Amp Overdrive

$13,562,180

16.5%

SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart. 52 Weeks through 5/17/09

RTD COFFEE Brand

Change vs. year earlier

4.6%

Powerade

Brand

Dollar Sales

$721,527,600

$559,088,600

ENERGY DRINKS

Brand

HOT! Private Label

Private Label

Gatorade

SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart. 52 Weeks through 5/17/09

CONVENIENCE/PET STILL WATER

NOT! Full Throttle

HOT! Emmi Dollar Sales

Change vs. year earlier

Frappucino

$177,795,500

-8.0%

SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart. 52 Weeks through 5/17/09

DOMESTIC BEER Brand

Bud Light

NOT! Diet Snapple

HOT! Bud Light Lime Dollar Sales

$1,413,297,000

Change vs. year earlier

6.0%

Doubleshot

$22,022,630

-13.9%

Coors Light

$686,222,300

9.4%

Doubleshot Light

$8,847,633

-20.0%

Miller Lite

$685,068,200

-0.6%

Starbucks Cappucino

$2,437,488

-82.2%

Budweiser

$665,701,800

0.2%

Private Label

$2,411,060

14.8%

Natural Light

$282,527,700

5.8%

Emmi

$1,017,129

393.6%

Michelob Ultra Light

$208,913,000

4.6%

Cinnabon

$892,578

-55.6%

Busch Light

$208,080,900

6.9%

Godiva Belgian Blends

$747,446

-89.1%

Miller High Life

$178,478,300

10.0%

Caffe d’Vita

$362,862

-6.3%

Busch

$161,117,600

8.7%

Community Cappucino

$350,662

105.9%

Bud Light Lime

$137,353,600

1,883.9%

SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart. 52 Weeks through 5/17/09

NOT! Godiva Blends

SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart. 52 Weeks through 5/17/09

NOT! Miller Lite

MAY–JUNE.09.BEVERAGESPECTRUM.21

NEW PRODUCTS • The newest options for cooler and shelf.

FLAVORED WATER Hint Inc. has announced the unveiling of four new flavors to retailers nationwide: Hibiscus Vanilla, Watermelon, Honeydew Hibiscus and Blackberry. Each 16 oz. bottle is $1.79 and can be found in fine grocery stores and retailers all over the United States. For more information, contact HINT at (646) 452-6400. AriZona Beverages has partnered with Nestlé Waters North America Inc. to create AriZona Tea Waters. This new line of low-calorie, teainfused waters is certified organic by the U.S. Department of Agriculture. AriZona Tea Waters combine Poland Spring Water with organic green tea, cane juice and fruit extracts. The result is a healthful, refreshing beverage with just 20 calories per 8 oz. serving. In addition to AriZona’s classic Green Tea, the new line includes Yumberry Green Tea, Mandarin Orange Green Tea, and Pomegranate Green tea. AriZona Tea Waters are currently available in select Northeast markets. As the product rolls out to additional markets throughout 2009, it will use other Nestlé Waters’ regionally sourced waters. The suggested retail price is $1.49 per 20 oz. PET bottle. For more information contact AriZona at (516) 812-0208. Dasani is launching DASANI essence, which offers DASANI bottled water with just a touch of fruit flavor. DASANI essence has a light, natural fruit flavor – unsweetened and without preservatives or calories - and is available in three varieties: Lime essence, Strawberry Kiwi essence, and Black Cherry essence. Packaged in stylish, recyclable 18.5 oz. single PET bottles and 16 oz. 4-packs, DASANI essence is line priced with other Dasani products. For more information call (770) 565-5440.

JUICES V8 V-Fusion 100 percent juice is introducing two new superfruit varieties: Goji Raspberry and Passionfruit Tangerine. Each 8 oz. glass provides a full serving of vegetables (1/2 cup) and a full serving of fruit (1/2 cup), plus essential antioxidant vitamins A, C and E. The addition of Goji Raspberry and Passionfruit Tangerine brings the V8 V-Fusion juice portfolio to 10 juice blends. These products are available at most grocery, mass merchandise and convenience stores nationwide. Suggested retail price ranges from $1.69 to $3.99, de-

22.BEVERAGESPECTRUM.MAY–JUNE.09

pending on the size: they are available in 46 oz. and 12 oz. bottles. For more information, call (856) 342-3717. Odwalla has introduced new Light Lemonade and Light Limeade. These new natural refreshers have half the calories and sugar of regular lemonades and limeades. With only 50 calories per serving, Odwalla’s Light Lemonade and Light Limeade combine pure-squeezed juice and TRUVIA natural sweetener to make these refreshing seasonal quenchers. Each bottle of new Light Lemonade and Light Limeade contains 100 percent of the recommended daily value of Vitamins C and E. The product is available on shelves in the refrigerated section of natural food stores, select supermarkets, and specialty outlets throughout the United States. The new beverages are available in 450 mL grab-n-go recyclable plastic bottles, as well as ½ gallon sizes. For more information, call (800) 639-2552. Boowl Americas has launched BOOWL SURPRISE in the U.S. A hot filled, all-natural kids drink with 20 percent juice, five added vitamins and no preservatives. BOOWL SURPRISE comes in four Flavors: Grape, Lemon Ice, Strawberry & Kiwi and Fruit Punch. The product has patented packaging: the 11 oz. bottle is round with a special “top hat” attached and under that “top hat” is a high quality collectable toy. For more information, call (908) 719-8926.

SPIRITS Beefeater 24, a new gin handcrafted with 12 botanicals including a rare blend of teas, will debuted in select American cities this spring. Beefeater 24 boasts a blend of natural botanicals sourced from around the world, including hand-prepared grapefruit, bitter almond, orris root and Seville orange peel. Accents of rare Japanese Sencha Tea and Chinese Green tea create a perfectly balanced, multi-layered gin. In addition to different botanicals, Beefeater 24 is “cut” earlier during distillation to retain its freshness and vitality. This means that only the heart of the distillation is used. Beefeater 24 will retail for a suggested price of $28.99. For more information, call Pernod Ricard at (914) 848-4816.

NP Seagram’s had announced the launch of Seagram’s Smooth Brazilian Rum, debuting in May. Seagram’s Rum will be available in Seagram’s Smooth Brazilian Rum (white rum) - and two new flavors; Seagram’s Citrus Flavored Rum and Seagram’s Raspberry Flavored Rum. All three offerings have been blended to provide the perfect balance of unparalleled smoothness and the unique, exotic rum character native only to Brazil. Seagram’s Original Rum will be available in 1.75L, 1.0L, 750ml, 375ml, 200ml 100ml and 50ml sizes. Seagram’s Citrus Flavored Rum and Seagram’s Raspberry Flavored Rum will be available in 1.75L, 1L, 750ml and 50ml sizes. The three rums will be line priced and will retail for a suggested price of $11.99/750 mL. Burnett’s Flavored Vodka portfolio continues to grow with the addition of the 19th flavor – Pink Lemonade. The launch of the new flavor will be supported by POS for floor displays and shelf facings, as well as sales education materials. The Burnett’s website will also provide information and appetizing drink recipes for all the flavors.Burnett’s Pink Lemonade is available in P.E.T. 1.75 L and 50 mL and glass 1L and 750mL sizes. It is bottled at 35 percent alcohol by volume. For more information, call (502) 413-0220. Hammer + Sickle vodka is now being imported from Russia and distributed by Massachusetts-based Klin Spirits. The product has been sold exclusively in the Northeast and is now expanding throughout the U.S. Hammer + Sickle is sold in 750 mL bottles for $29.99, 1 L bottles for $36.99 and 1.75 L bottles for $58.99 per bottle. For more information, call (978) 866-8770. BACARDI has launched the BACARDI Classic Cocktail Raspberry Mojito, the second addition to its ready-to-drink portfolio. This product is made with BACARDI Superior Rum, natural lime and mint flavors and an extra burst of ripened raspberries. The BACARDI Classic Cocktail Raspberry Mojito package features a distinctive translucent bottle and a sleek, sophisticated design. The 15-percent alcohol-by-volume (30 proof) ready-to-drink cocktail is available in a 750mL size as well as a 1.75L. It has a suggested retail price of $12.99 and $19.99. For more information call (212) 246-3586.

24.BEVERAGESPECTRUM.MAY–JUNE.09

POWDER MIXES Relaxity is a powdered drink mix that uses GABA to induce feelings of relaxation in consumers. It began selling in channels like Whole Foods Market in March. MSRP for a 15-count drink mix box is $19.99; for an individual packet, $1.39. For more information, call (888) 548-2256.

TEA The Pepsi-Lipton Tea Partnership has announced the launch of Lipton Sparkling Green Tea. A blend of delicious fruit flavors, green tea and lightly sparkling water, this spring Lipton Sparkling Green Tea will be available nationwide in regular Berry and both diet and regular Strawberry Kiwi. Packaged in 20 oz. PET bottles, 1.5-liter bottles and 16.9 oz. PET bottles, this product will be line-priced with other Lipton teas. For more information call (914) 253-2950. Graviola Life Tea was launched in a 16 oz. glass bottle and sold in 12/16 oz. cases during the fourth quarter of 2008 in South Florida. Graviola Life Tea is a real brewed tea made from Graviola leaves imported from Brazil. A tremendous amount of research has been done on Graviola for a wide range of potential medicinal purposes. This product has local distribution in South Florida and is servicing all classes of trade with a price to the consumer that ranges from $1.99$2.49 per bottle. For more information, call (954) 270-5309. AriZona Beverages has announced the launch of a new line of USDA certified organic iced teas. From the pure honey and cane juice that sweetens the beverages to the fruit juices and the antioxidant packed teas, each ingredient is sourced organically. The AriZona Organic Iced Tea line includes the Arizona cornerstone, Green Tea, as well as Yumberry Green Tea and Pomegranate Green tea. The organic teas are available in 20 oz. glass bottles; each organic sip can be savored at only 50 calories per serving. The AriZona Organic Iced teas will be available in the northeast this spring and rolled out nationally thereafter. The suggested retail is $1.79 per bottle. For more information, call AriZona at (516) 812-0208. ZredT, the Louisiana-based producer of ZT antioxidant-rich, organic rooibos red teas, recently debuted its line of ZT rooibos red teas. ZT is a line of organic teas made from the rooibos plant.

NP With a naturally smooth, complex flavor, every bottle of ZT is a good source of both magnesium and natural fiber, is low in calories, and contains zero caffeine and zero sugar. ZT is available in four smooth flavors: Unsweetened, Lemon, Vanilla, and Ginseng & Honey. Each ZT flavor is made from all-natural organic ingredients and flavoring including purified water, organic inulin, brewed organic rooibos tea, organic clarified brown rice syrup and natural flavors.ZT is sold in individual 16 oz. bottles in select grocery and natural food stores throughout the U.S. For more information, call (303) 442.1009. Santa Cruz Organic has introduced TeaZer organic sparkling teas. Blended with fair trade certified tea from Choice Organic Tea and Santa Cruz Organic fruit juice, each TeaZer offers just the right mix of fresh tea and real fruit taste. Lightly sweetened and conscious of calories to please any discerning drinkers, TeaZers utilize a blend of green, white and black tea for a trinity of taste. This product will be available in Lemon, Raspberry, Pear and Passion Fruit flavors. Available in 12 oz. glass bottles and sold in 4-packs for $5.49, Santa Cruz Organic TeaZers are available at Whole Foods Market starting in June. For more information, call (303) 449-2108.

CSDs Fanta Orange, the #1 fruit-flavored sparkling beverage in the U.S., will now feature 100 percent natural flavors. The entire Fanta line is also getting a new look that includes vibrant packaging with colorful illustrations and contemporary graphics. Both the new formulation and look for Fanta will roll out in the United States this month. Fanta Orange is the latest member of Coca-Cola North America’s portfolio of sparkling beverages to feature 100 percent natural flavors, joining Coca-Cola and Sprite. By summer’s end, two other members of the Fanta family will be available with 100 percent natural flavors – Fanta Apple and Fanta Grapefruit. Fanta Orange is available in multiple retail and convenience channels from large supermarkets to dollar and drug stores nationwide, in 12 oz. cans, 20 oz. bottles, 2 L bottles and multi-packs. For more information, call (404) 676-3255. Gosling’s Rum of Bermuda has joined with 127 year-old Polar Beverages of Massachu-

26.BEVERAGESPECTRUM.MAY–JUNE.09

setts to create, package and distribute what both are calling the definitive ginger beer soft drink, Gosling’s Stormy Ginger Beer. Available in 12 oz. cans to begin with, Gosling’s Ginger Beer is a refreshing, zesty soft drink by itself, as well as the perfect mate to Gosling’s Black Seal Rum. MSRP $3.49 – 3.99. For more information, call (646) 356-0200. solixir is the first line of all-natural sparkling beverages with a balanced combination of ingredients that are designed to hydrate the body and soul. solixir is a special blend of sparkling spring water, pure fruit juice, and over 1,700mg of standardized natural botanicals in each can. Flavors include: Blackberry Chamomile, Orange Maté, and Pomegranate Ginger. Each 12 oz. aluminum can has an SRP of $1.99. solixir is being sold nationally through Whole Foods Market and is distributed through UNFI. For more information call (773) 750-8288. R.W. Knudsen Family has launched Sparkling Essence, a simple combination of sparkling spring waters. Flavors include Organic Lemon, Organic Cucumber, Organic Blueberry and Organic Mint. To create a zero-calorie, flavorful drink R.W. Knudsen Family utilizes a unique process. Authentic organic ingredients are brewed in fresh spring water. The fruit is then extracted leaving only the subtle flavor of the fruit without the sugar or calories. Packaged in 10.5 oz. slim cans, sold individually and in 4-pack carriers, R.W. Knudsen Family Sparkling Essence will be available in grocers nationwide starting this month. The suggested retail price is $3.79-$3.99 per 4-pack. For more information call (303) 449-2108.

MIXERS PURISTA Mojito Premium Cocktail Mix is an all-natural blend of fresh Key lime juice, organic sugar cane juice, fresh mint leaves and filtered water. Each 750 mL bottle, when combined with an equal part white rum and two parts club soda, creates 17 6 oz. Mojitos. Other flavors include Blackberry, Margarita, and Caipirinha. Beginning May 1, 2009, cocktail enthusiasts can find PURISTA for $9.99 (750 mL) at select retail locations in California, Florida, New York, New Jersey, Texas, Illinois and Colorado. For more information call (212) 255-6717. •

GERRY’S INSIGHTS

By Gerry Khermouch

COKE’S VEB SHOWS SIGNS IT CAN PICK A WINNER COCA-COLA CO. has never lacked for energy in its efforts to wrestle with the innovation demon. In the past, though, those efforts have been futile: Never mind attempts to reverse the slide of its core sodas, even in fast-growing emerging segments, where a rising tide could make the task easier, Coke hasn’t fared very well. It has developed purportedly cutting-edge products that were rejected by consumers (Fruitopia, OK Cola), launched middle-ofthe-road knockoffs (Gold Peak), made illadvised acquisitions (Planet Java and Mad River, respectively) and fumbled licensed brands like Nestea, Godiva and Caribou (or perhaps chose the wrong licenses in the first place). The problems weren’t hard to intuit: a cumbersome bureaucracy and warring constituencies that make it difficult for fresh concepts to make it to market without fatal compromises, overkill on the marketing side preventing new brands from comfortably finding their audience, reluctance by the bottlers to make space on their trucks for niche brands that require a hand-sell. The bottlers, in fact, sometimes remind me of kids at Christmas: they clamor relentlessly for shiny new brands like Vitaminwater, Fuze and V8 but, once those brands materialize under the tree, promptly lose interest in them. We make more from Dasani in the cold box, they grumble. Is the company now writing a different script with its Venturing & Emerging Brands unit? While it’s still early, so far VEB has made several intriguing moves and no obvious miscues to my eye. In contrast to Coke’s past need to own brands it acquires, VEB has been willing to seed minority investments intended to prevent the entrepreneurs’ mojo from getting quashed by the relentless Coke bureaucracy. It’s followed Coke’s minority investment in acai bev marketer Bossa

28.BEVERAGESPECTRUM.MAY–JUNE.09

Nova with a 40 percent stake in Honest Tea, and also placed a minority bet on the New York brand incubation house launched by Planet Java’s creator under the name Brain-Twist. More startling, VEB is quite agnostic about how new brands go to market. It may have Illy Distributors: acquired 20 percent of Brain-Twist but it hasn’t strange bedfellows for Coke. forced the company to put its Slap Energy into the hands of Coke bottlers. And I find it positively shocking that the internally developed Illy Issimo line of ready-todrink coffees (via Coke’s joint venture with Italian roaster Illy) launched without any bottler involvement, starting with independent houses Big Geyser in New York and Haralambos Beverage in Los Angeles. Presumably, VEB execs had come to appreciate those distributors’ capabilities from their deft stewardship of Vitaminwater, Fuze and Honest Tea. VEB can even claim to have launched a brand that skeptics can’t deride as another day-late-and-dollar-short me-too item: The Vio carbonated dairy line that’s testing in New York (again via an independent distributor). A familiar enough genre in Asia, Vio is the first launch of a similar product in the U.S. that I’m aware of, and its aluminum bottle and subtle fruit flavors are intriguing. Though VEB mustered squadrons of samplers to hand out Vio in New York, very much in bigcompany-style, it’s been selective about its initial retail accounts, again in a manner we don’t usually associate with Coke. Of course, even a virtuosic performance in finding and incubating brands only gets VEB’s parent so far. Long term, Coke

needs big brands that can sustain its massive infrastructure. And the handoff to the bottlers remains a challenge. In the case of Glaceau, acquired for a staggering $4.2 billion, it hasn’t gone so smoothly, with the bottlers quickly reducing it to a commodity that can be seen at 10-for-$10 in supermarkets. That’s not on VEB’s watch, because the outsize acquisition didn’t go into the small-brand unit, but it seems clear VEB is doing some valuable learning on that one, too. Fuze is more of a mixed bag: it seems to be thriving, though it’s swapped a lot of indie presence for grocers and foodservice, while the licensed NOS energy line devised by Fuze Beverage prior to the acquisition has been one of the growth stars of the energy segment. (And to think some Coke bottlers had to be bullied into taking it!) Under Coke, Fuze even beat Monster, Rockstar and Red Bull into the energy shot business. That’s testimony to its leaving Fuze relatively unencumbered to pursue its destiny. And Honest Tea’s transition to the bottlers seems to be going even better, thanks to a region-by-region approach that allows Honest Tea to parachute in legions of staffers to help get each market off to a solid start. So VEB is a success, right? Not necessarily. To me, the true test may not come for several years, after it’s patiently nurtured a brand or two that have grown to scale, at a premium price, and successfully transitioned to the bottlers. Then we can nickname the unit “Very Effective Brandbuilding.” For now, though, it’s hard to fault the methodical, complacency-busting approach the crew has taken. Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twiceweekly e-newsletter covering the nonalcoholic beverage sector.

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Exclusive content from the beverage event of the year.

EXPERIENCE SPEAKS TO ENTREPRENEURS Energy brands, distribution, and ﬁnancing are still going strong.

ITH AN ENERGY that put the lie to bad news about the economy, BevNET Live 2009 took the next generation of beverage entrepreneurs and innovators through a curriculum and networking bonanza that stretched from the basics of distribution and marketing deep into theoretical models of investment and trend analysis.

For further coverage of BevNET Live, including audio and video, visit www.bevnetlive.com.

CJ Rapp and Tom First, founders of innovative brands, helped show entrepreneurs the way. Harnessing the combined wisdom and experience of panelists, speakers and BevNET’s own staff, the event highlighted fast-growing categories and warned of the dangerous practices of me-too products, unsupported marketing and poor brand propositions. It also let the pioneers of established brands speak about the elements of growing a great brand. “It always does start, for the brand, with what’s in the bottle,” said Tom First, speaking from his position as both a founder of Nantucket Nectars and an entrepreneur making a second run with enhanced water product owater. “We weren’t stubborn about what we had other than trying to make the product great.” BevNET Live’s panels served as an inspirational flashpoint for marketers looking to take emerging or regional products to the next level of retail distribution. But they also gave any observer a picture of an industry in flux. Jolt Cola founder CJ Rapp warned marketers to be wary of a growing gap between brands that try to work their way into independent stores and small chains and those “red and blue” Coke and Pepsi distributors who are supported by their much larger

30.BEVERAGESPECTRUM.MAY–JUNE.09

suppliers. With shrinking resources in between, Rapp warned, emerging marketers need to be crafty. “The big brands, they can react, they can execute, and they do so well,” Rapp said. “The small brands can get pushed around a little bit.” To battle their way into the independent system, he suggested smaller marketers support each other – even sharing resources like back office operations. Marketers interested in expanding their footprint through the addition of investors were able to find a lot more encouragement than they may have anticipated, as a financial panel indicated that money was getting ready to leave the sidelines after a few slow quarters. “All I have is a checkbook,” said SoBe founder and Sherbrooke investor John Bello. “We’ve got money in our checking account, and we’re willing to invest in a couple of things: great concepts that are timely, that are forward thinking, and great teams that are passionate about winning and are willing to pay the price.” Amongst the crowd of more than 200, it appeared that several were eager to be the next ones to step up and start paying it.

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DISTRIBUTION PANEL: Distributors speak out

HE BEVERAGE INDUSTRY is still coming to terms with the consolidation of the Coca-Cola and PepsiCo bottler networks in the mid-1990s. While it created opportunities for many new brands to crack the shelves of independent distributors, it also vastly reduced the number of those distributors with whom they could work. Still, the system has given rise to many successful brands, many of which were able to take advantage of burgeoning growth in the convenience and natural foods channels to scoot around the roadblocks presented by Coke-only or Pepsi-only distribution houses. Supplying that growth has been a creative, dogged, and highly confusing network of the remaining independent distributors – four of whom BevNET brought together to speak with Beverage Spectrum Publisher Barry Nathanson and columnist Gerry Khermouch during BevNET Live on May 14. What follows is an edited transcript of the panel conversation. The panelists included Steve Gress, President of New York-based Exclusive Beverage; Tom Lebon, Owner of Colorado’s New Age Beverages; Gerry Martin,

VP of Marketing, Worcester, Mass.-based Polar Beverages and Guy Battaglia, VP, High Grade Beverage Co. in New Jersey. Nathanson moderated the panel. “Distribution, when I first started, was an afterthought,” Nathanson said. “You dealt with the major marketers. There were only a certain amount of brands. It was a very easy, simple job to do. Over the years the business has evolved to the point where distribution is the be-all, end-all for the hundreds of marketers who have come out. In the old days there were dozens,

one of you said earlier “I could speak for an hour on that.” Steve Gress: The first thing I look for is

if it fits our portfolio or not: we specialize in organic upscale and healthy beverages. And what we look for in the company is that our expectations are in line, that they can support us with ‘feet on the street’ -that’s about it. Tom Lebon: I think that one of our major

criteria is the person behind the brand and

“Really we look at the personality, the passion, and the pull through – whether or not the brand is relevant, or can be relevant, that’s key.” – Gerry Martin but now these people are all looking for a place to put their product. So the role of the distributor has taken a disproportionate amount of importance. So this session and this whole talk today you are going to hear about is what it takes today to really get your product out there.” Barry Nathanson: What are your major

criteria for choosing a brand? I know that

Distributors in a row: From L–R: Gerry Martin, Tom Lebon, Steve Gress, Guy Battaglia.

the experience that they have. To us that is everything. Because if a person comes in that doesn’t have experience in the business, it takes too much for a distributor to focus and teach that person everything about that beverage category. So it really is the people behind the brand, their experience and reputation. BN: But if you find that you have an affinity for a person, because we know that our business is people-oriented, will you go that extra mile to help that person and walk them through more than you would when you dismiss another brand? TL: Definitely. If you know that they’ve got

the experience, you’re going to go along with them, because it’s like two people working together as one. Then there are guys out there who have the experience but bring in a brand that you know is going to be gone in two years. So at the same time, if it’s a person who is just bringing in a brand to grow it and sell it then you have to make sure the paperwork is right on both sides to get the deal done. BN: Gerry, what’s your magic criteria? Gerry Martin: Like the rest of the fellows

here, really there are a good ten of them. But really we look at the personality, the

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passion, and the pull through – whether or not the brand is relevant, or can be relevant, that’s key. We need to know that when I put it in front of a buyer that this is something that is going to make the difference. That a consumer will reach for a Crunk instead of a Monster, or a Venom, instead of a Monster does nothing for the retailer. If Venom or Crunk will bring a consumer into the store, that’s the difference, that’s the pull factor. Guy Battaglia: I agree with everything

that everyone has said up here. When we look at brands, we look in stages. Number one, within a category, is it something that we have? If it is, does it seem like something that is better than what we have? But this business is pretty simple. Does it taste good? Does it look good? That’s a big part of the battle. And then we will always examine whether the supplier has the funding available to take it to the next stage in developing a brand. Because we can get it out there, but if he can’t do anything to communicate or try to promote the brand, then it’s not going to go anywhere.

of the hardest markets out there. Ninety percent of it is relationships. You send the supply rep. out there cold into the market and they won’t get the time of day. We offer our relationships, our people, we encourage ride-alongs, we encourage area blitzes. Our relationships help get it on the shelf. That’s our responsibility. TL: I that as a distributor you’ve got to stick

behind a brand that you believe in and stay with it. You’ve got to stick with the brand, you can’t just give up on it. GB: I always tell our guys that it’s our job to make sure that when the new supplier comes in, first of all that we don’t embarrass ourselves. New suppliers tend to come

itself is really a big battle with the retailer, to make sure that at the very least they are putting up a point of sale that helps bring attention to the brand. BN: How have you changed your con-

tract policies and terms in the aftermath of brands you developed pulling out, ie Vitamin Water, Muscle Milk, Monster? Have you changed your philosophy and legally changed the way you do business? GB: Absolutely. There’s a couple ways of looking at it. I know that Gerry (Khermouch) had brought up that some distributors are angry, and they certainly have every right to be. And they are looking for perpetual agreements. Personally, I think if

BN: If the brand owner is responsible for

demand creation, selling, marketing, advertising, then what brand-building components does the distributor have responsibility for? GM: I think that I mentioned the push or the pull factor, we are responsible for the push. We are putting over a hundred sales reps out there. I’m putting my key account people, who are contacting and have a relationship with every channel, out there. Again, from the Polar perspective, we do 95 percent of the private label in the Northeast. We have someone in-house at every supermarket. We know when resets are happening when their not. We do private label for a number of the convenience stores. So relationship is key. We fight every day to be relevant, and we do so with relationships. (Our accounts) deal with the same people every day, and that helps. BN: Steve, how do you do it in such an ultra

competitive market, in New York City? SG: Well I couldn’t agree more. This is one

36.BEVERAGESPECTRUM.MAY–JUNE.09

Beverage Spectrum’s Barry Nathanson moderates the Distributor Panel. in here and offer all kinds of incentives and free goods and do whatever they have to do to get it into the market. So we try not to embarrass ourselves by just taking your money and not doing the right things. It’s always been our focus that we do the push. We talk about pushes, it’s to try to be consistent with delivery, try to be consistent with pricing, to try to make sure you’re hitting the right price point. And that in

suppliers are willing to give you perpetual than I’m not going to have that much faith in that brand. But I think what we’ve been trying to at least move towards in our discussion with suppliers is fair market value. In the beer business it’s common. The conversation that I have with suppliers is that I never count anybody’s money. I understand that at some point in time, if your brand is big enough, that the big guys

are going to come in and give you a ridiculously stupid number. But my conversation is that on your way out, you pay me my fair value for what I did for your brand that got you to the point where now you are going to get paid all this money. I think it’s important that suppliers come around to realize that. TL: Like vitaminwater -- we grew it for

seven or eight years and, right at its peak, when it’s starting to grow, you lose it to one of the big guys. It’s hard to take that when you’ve worked with them for so many years. You have to adjust your plan because if you loss 50,000 cases a month, you have to restructure. Sure, there’s a payout, but then you have to put that back into your company and into your people to keep your company alive.

TL: I feel some of the companies were, yes.

And it does help you for a time period. We depend on new brands, new innovations. We depend on people like you guys who are creating new brands to come to us with new brands so that we can grow and replace the vitaminwaters and Monsters. Without companies like you guys we wouldn’t be in business. So the distributors depend on new brands. I try to never turn down looking at a brand. GM: I agree. We’ve lived through a vary-

ing degree of buyouts from SoBe and Izze and Rock Star and Monster and vitaminwater and Fuze and probably eight to ten

contracts these days. I think a lot of it has to do with when you sit down. If you’re up front and honest that you know that in most instances the endgame is for that brand to sell. That’s just what it is. We try so that on the front end we are doing our part and that we are protected on the back end. And if we are doing our part the brand owner is usually more than happy on the back end. GB: I think that there are more distribution companies that, like Polar and New Age and us, who are coming out with our own products to keep our distributors alive because we can’t depend on other products

“We try not to embarass ourselves by just taking your money and not doing the right things.” –Guy Battaglia

BN: Does the payout give you enough time

to recover from it? Obviously, it’s a sensitive subject. You can never compensate for losing a 50,000-case a month brand. But were they fair with you?

different ones where we feel we have done a nice job of being a part of the success, the regional success and a bigger piece. So obviously it has changed the way we look at

C on c

staying around with us. But I think one of the things that suppliers need to understand is that there is a lot of money involved in supporting this stuff. You have to think

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about a cooler. A cooler is a thousand dollars. Truck decals, you get a decal on a truck and it might last 4 or 5 years but it is $3000 to $4000 to put a truck decal on a truck. There’s so much stuff that you need to promote a brand correctly. And if you don’t come to the distributors with all that we can’t promote it correctly. You can’t depend on us to buy it all for you.

UNFI with a small upcharge and to Whole Foods. So it’s a benefit to us and to the supplier usually.

SG: I used to be an attorney. (laughs). GM: What we do is, if a brand belongs with

UNFI we’ll tell them up front that they

“The distributors depend on new brands.” –Tom Lebon

BN: Do you exclude beverages already

in the natural distribution channels? Do people who made their foothold in, say, UNFI, and want to expand, are you hesitant to take on those brands or do you embrace them? TL: I guess for me, Colorado being a

healthy state, we try to work with UNFI and Whole Foods and stuff. We’ll bring in a healthy product, we’ll sell directly to Whole Foods and UNFI because for the small brands coming in it’s going to cost them a fortune to ship three or four pallets to UNFI. Instead it helps us as a distributor to move through product and order new truck loads if we can also sell to

tences. What is the worst thing a marketer can say to you?

aren’t mainstream enough and direct them to go there if they came to us first. If the brand is in part of its growth stage with UNFI or a Whole Foods-type of distributor network what we do is require that they make that divorce before we bring them on. We’ll ask them that if that is part of their general scheme and plan because that is one of the things that we’ll require. We know that it’s in scale and that every channel makes a lot of sense. If it’s only going to sell in that channel that it should stay in that channel. BN: I have a question that each of you can

answer in maybe one sentence of two sen-

GB: Here are the two things that make the hair on the back of my neck stand up. The first, which hasn’t been said as often as it used to be, is “it flies off the shelf.” That’s the first one. But the new one is that “I love this business and I have no desire to get out of it.” That’s the one that turns me off immediately. GM: Mine is re-launch. It really comes

down to there is a history there. It’s either re-launch or no-brainer. Because as you walk through the no-brainers, you realize that there was not a lot of thought put behind the questions that makes it a no-brainer. TL: I agree, just some one who is brand

new in the business. And you are their first distributor out there. It’s tough to walk somebody through that when they don’t know the category. •

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RED BULL BACK IN THE HERD, BUT READY TO BUST OUT For more than a decade, Red Bull has staked its business on selling one beverage product. Now, it has released two new lines in less than a year and retooled its marketing strategy. But has the brand discovered too late that that it must adapt as well as lead? By Matt Casey

40.BEVERAGESPECTRUM.MAYâ&#x20AC;&#x201C;JUNE.09

IT STARTED AS ONE product, in one flavor, in one package size. Little has changed since then, but to call Red Bull just an energy drink company today would be a disservice to the brand.

While other independent beverage companies have aimed to be the next Honest Tea or AriZona, Red Bull has styled itself more broadly, in the fashion of Virgin. Through a complex array of license and ownership agreements, Richard Branson’s erratic lifestyle brand has moved from a music label to a marketer of mobile phones, soft drinks, an airline, even a hot air balloon service. Red Bull, which makes a point of owning its endeavors, has yet to add internet florists or comic book companies to its portfolio (though it does now have a magazine, the Red Bulletin), but variations of its crashing bulls logo have appeared on everything from an international breakdancing competition to a record label to a disparate collection of sports franchises. But, after two decades of growing the brand into sports and entertainment realms, Red Bull has returned to its core: beverages. In the last two years, while still pushing its freewheeling ethos into evermore diverse cultural pockets, it has tinkered with its packaging, retooled its retail strategy and even shrugged off a fierce resistance to brand extensions to roll out two new beverage lines. Red Bull has always intimated that its actions take place according to a grand design, but a survey of the competitive landscape makes it clear that external factors have likely played a key role in forcing the company’s hand. Its energy drink isn’t the only big player in the game anymore – in fact, since the emergence of Monster Energy, it doesn’t even sell the most product, although it continues to pull in the most cash. And while it’s built a strong U.S. distribution system, its biggest rivals, Monster and Rockstar, have struck deals with CocaCola and Pepsi. For a brand that resisted adding so much as a new can size, having to vary product lines represents a big change. And with change – particularly the involuntary kind – comes the risk of failure. Already, there have been grumbles from distributors and retailers that the company waited too long, and that the kinds of products it has rolled out have yet to make a big splash. At the Formula 1 Grand Prix of Spain, Sebastian Vettel flew the Red Bull colors as part of a stepped up highspeed marketing campaign.

PHOTO (c)GETTY IMAGES/RED BULL PHOTOFILES

Still, the brand is familiar with risk, from staking its marketing on a stable of adrenaline-fueled athletes to its non-traditional, guerilla entrance to the U.S. market. It is the marketing of risk that brought it to prominence, and the company is sticking with it. “As a principle, we feel that it is worthwhile to take everything into question, to bypass traditionally strategies and mainstream activities and to focus on finding alternative concepts,” said founder Dietrich Mateschitz, in a recent e-mail interview. Now, as the energy drink category matures and Red Bull strains to adapt, the company will find out if its insistence on playing on the edge will pay off. Given the big returns Mateschitz has received on past wagers, it’s probably not a good idea to bet against his new game.

SIMPLY COLA The beverage world did a collective doubletake last year when Red Bull announced the launch of a new, non-energy product: Red Bull Simply Cola. The premium offering, packaged in 8 and 12 oz. slim cans that can cost more than a 20 oz. Coke or Pepsi, boasts an all-natural formula and bears almost nothing in common with Red Bull’s core product. Sure, the cola packs slightly more caffeine (in this case, derived from coffee beans) than a mainline cola, but far less than an energy drink. The move drew skepticism from beverage industry insiders – with one distributor saying it could either be product of the year or “shuffled off to Big Lots” – and continues to be defined by sharply divided opinions. Despite an unveiling that sent members of Red Bull’s “Air Force” diving off the roof of MGM Grand’s Signature Tower, even some of Red Bull’s self-identified fans aren’t convinced. Christina Mayrhofer and Jake Justice both list themselves as fans of the brand on Facebook. Both said they were excited when they heard about the product. Now, Mayrhofer says Simply Cola is her new favorite beverage, but according to Justice, “the flavor just didn’t do it for me.” Why the company chose a natural cola remains a bit of a mystery. Red Bull’s promotional materials claim that Mateschitz’s dream of the cola extend back to the same time that he conceptualized Red Bull. But that was before CSDs began their highly MAY–JUNE.09.BEVERAGESPECTRUM.41

publicized decline. So why now? Asked in a recent email interview what drove the decision, Red Bull spokeswoman Patrice Radden would only answer with a question of her own. “Why not?” she said. “It’s an attractive, established, rather large category.” Unfortunately, that nonchalance seems to have spilled over into the consumer side of the equation. The on-premise, late-night success that helped fuel the energy drink’s growth has not worked as well for Simply Cola. According to Las Vegas-based night club promoter Rob Castillas, Red Bull unsuccessfully pushed the new product as an up-sell in Vegas night clubs. For $2, club goers could substitute Simply Cola for whatever the club had on the soda gun. “The consumers they tried to push it to didn’t like it,” Castillas said. The product has also had trouble in the traditional beverage stronghold of convenience stores. Dana Sump, the beverage manager for the 1,400-plus location Casey’s General Store chain, has stocked Red Bull Simply Cola in each of his stores – even giving the product as much as a full shelf. “I’m not seeing a ton of sales on it,” Sump said. Sump plans to give the product a fair shake – up to an 8-month trial – but, he said, he “might have to go back to Red Bull and have the conversation they don’t want to have.” Casey’s is based in Iowa, certainly not the sweet-spot for a premium, all-natural CSD, but Simply Cola also found a spotty reception in New England, a region with a high concentration of premium consumers. In one small-format convenience store in Boston’s working-class neighborhood of Dorchester, Simply Cola arrived with a branded barrel cooler placed just feet from the cash register. A few weeks later, the cooler was gone. So was Red Bull Simply Cola. According to Rob Scoble, the Red Bull Off-Premise Manager for Auburn, Mass.based Atlas Distributing, the cola is sticking in about half of his Red Bull accounts – mostly in affluent areas. At around $1.50, “It’s a high price point for the 12 oz. can,” Scoble said. Nevertheless, Scoble said the sales numbers were good for a new product, and “It

42.BEVERAGESPECTRUM.MAY–JUNE.09

is selling through” in the stores that give it “the visibility that it needs.” But, he added, retailers expected it to fly out of the store like its caffeine charged predecessor. Scoble said he’s more excited by Red Bull’s second new product, Red Bull Energy Shot. The two SKU line packs the caffeine of an 8.3 oz Red Bull into a slim-can-shaped 2 oz. bottle. Red Bull has yet to complete its national rollout, but the shot Red Bull’s product line extensions. has received overIMAGES COURTESY OF Energy shots and Simply Cola. RED BULL NORTH AMERICA whelmingly positive reviews. The product also has the advantages example, he noted that Red Bull formerly of playing to Red Bull’s strength – energy reserved price breaks only for retailers that – and entering a more favorable market set aside several shelves for Red Bull prodenvironment. Simply Cola amounts to an ucts. Now the company sets those discount ambitious, but small, entry into a large, benchmarks much lower, and has rolled mature market dominated by corporate out a two for $4 pricing plan on 8.3 oz titans Coke and Pepsi. The shot, on the cans – a discount from the suggested price other hand, enters a small, but quickly ma- of $2.19. Sump said that plan has been so turing category with only one proven suc- successful that about 40 percent of the 8.3 cess story: 5-Hour Energy. oz. Red Bulls sold in Casey’s General Stores “Red Bull is a great, globally recognized sell in multiples. brand. They have powerful distribution “[Red Bull is] beginning to realize that and are going to be a fierce competitor,” they need to adapt to their consumers... said Carl Sperber, vice president of market- instead of setting standards,” Scoble said. ing for Living Essentials, maker of 5-Hour “They realize that they’re not the only Energy. “[But] NOS, Full Throttle, Rock game in town anymore. Once you reach Star, Amp and Monster have all found it your peak, you need to do something to hard to gain traction in the shot market. I take that peak to the next peak.” don’t know if Red Bull will be able to overAnd finally, they’re starting to seriously come the problems those other big brands chase that other peak, the 16 oz. package. have experienced.” Shortly after announcing its energy shot, Red Bull started shipping its 16 oz. SKUs in new packages. The new cans, taller and COMPETITIVE ENVIRONMENT slimmer than their predecessors, echo the While Red Bull has been playing with proportions of the company’s ubiquitous new products, it has also made other 8.3 oz. can, uniting the entire line under a changes to its core line, and to the way it similar packaging aesthetic. does business. It’s an important change because Red Giving ground to distributors and retail- Bull has yet to make major inroads on the ers, Scoble said the company has relented 16 oz. side, where Rockster and Monster somewhat on space demands. By way of have climbed to the top of the cooler.

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Rockstar and Monster may have chewed into Red Bull’s market share, but, Red Bull has an important advantage: it’s what people think of when they think of energy drinks. YouGov is a company that measures the public’s perception of brands across the

spectrum of packaged goods: in its most recent data, measured via a “Brandindex” poll, 53.2 percent of male consumers between the ages of 18 and 34 had Red Bull on their minds – far ahead of Rockstar, at 33.9 percent, and Monster, at 23.3. Among female consumers, Red Bull had – 37.6

percent – ahead of Rockstar’s 21.6 and Monster’s 19.8. “Red Bull is far ahead of these competitors in the amount of noise that it’s generating,” said Ted Marzilli, YouGov’s senior vice president of Brandindex. And if there’s one thing that Red Bull has always relied on, it’s that ability to generate noise.

BIG AIR, BIG EVENTS

Inside Red Bull North America headquarters, Santa Monica, CA.

PHOTOS COURTESY OF RED BULL NORTH AMERICA

As part of their unusual marketing, Red Bull athlete Robbie Maddison jumped his motorcycle onto the Arch de Triumph replica in Las Vegas.

PHOTO (c)CHRIS TEDESCO/RED BULL PHOTOFILES

44.BEVERAGESPECTRUM.MAY–JUNE.09

To that end, Red Bull has made an effort to raise the profile of its athletes and events while better integrating them with the brand. The company has long hosted the curious: soap-box derby races and the infamous “Flugtag,” where competitors hurl themselves and their home-made flying machines off a pier. Now the brand has raised the stakes, creating big, flashy events with television airtime. In February, Red Bull built a nine-story snowboard ramp in Manhattan’s East River Park and offered a $100,000 purse to 16 of the world’s best snowboarders, including Olympic gold medalist Shaun White. The event aired on NBC, and showed worldclass athletes dressed in Red Bull gear hurtling through the frigid New York night to land on an A-shaped mound – bearing Red Bull’s logo – and then scraping to a halt in front of a Red Bull banner. Other publicity stunts, like the live “New Year No Limits” event on ESPN featuring motocross rider Robbie Maddison jumping the Arc De Triomphe in front of Las Vegas’ Paris Casino, have taken on new life as TV commercials. Whether it’s Maddison peeling off his Red Bull branded-helmet, looking into the camera and declaring “Welcome to my world, the world of Red Bull,” or triumphant break-dancer Ronnie Abaldonado, surfer Ian Walsh or Red Bull Air Race pilot Kirby Chambliss, Red Bull’s internal editing team is trying to integrate its otherwise scattershot promotional ventures into a bold campaign that differs greatly from the squiggly, enigmatic animated commercials on which the brand previously relied. In addition to moving their athletes to the fore, they’ve also added mainstream talent. The brand has long sponsored athletes in fringe sports, giving them small

The top four selling SKUs in the category are 5-Hour Energy® Berry 5-Hour Energy +$8.3 million/month 154% from one year ago

Extra Strength 5-Hour Energy +$4.1 million/month 1706% from one year ago

Lemon-Lime 5-Hour Energy +$3.3 million/month 140% from one year ago

Orange 5-Hour Energy +$3.0 million/month 629% from one year ago

Do your stores carry all four?

No other energy shot brand sells as well, advertises as much or has the brand preference of 5-Hour Energy. Not even close.

Nielsen c-store data – four weeks ending 3/21/09.

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amounts of money to continue doing their thing – albeit while wearing Red Bull gear. But, earlier this year, Red Bull signed a sponsorship deal with Reggie Bush, running back for the New Orleans Saints and Red Bull’s first athlete in one of America’s top four professional sports leagues.

AWAY FROM THE FRINGE That move came as little surprise to Vik Venkatraman, a former New York-based Red Bull brand manager and the founder of Star Power 100 percent Starfruit Juice. Venkatraman served with the brand from 2005 to 2006, and said he watched it strain

Another one of Red Bull’s nontradional marketing events, the Red Bull Air Race held their 2009 world championships in San Diego, CA.

PHOTO (c)GARTH MILAN/ RED BULL PHOTOFILES

ADULTS 18 - 34 MOVING AVERAGE 20 DAYS 66 COCA-COLA

PEPSI

RED BULL

SCORE

7/9/2008 -22

11/12/2007

2/5/2009

3/13/2008

-44 7/2/2007

2/15/2008

10/2/2008 DATE

As this graph from BrandIndex shows, Red Bull still trails Coke and Pepsi in consumer perception of the brand, but has generated positive “buzz” for itself more often than not.

46.BEVERAGESPECTRUM.MAY–JUNE.09

5/20/2009

to edge into the mainstream while keeping its personality intact. During his time with Red Bull, he said, the brand agonized over the addition of 16 oz. cans. Monster, Rockstar and Full Throttle had proven that the larger packages worked – so well, in fact, that they rapidly eroded Red Bull’s market share – but Red Bull pegged part of its identity to its smaller packaging. “[The company spent] at least eight months to a year trying to figure out whether they should do this thing or not – how to do it in a way that would make the most sense,” Venkatraman said. In Venkatraman’s view, having a small number of total products – at the time, two formulations in two can sizes – allowed Red Bull to have the kind of focus “that you can’t have when you have 10 SKUs to think about.” Because the brand didn’t have to explain an array of flavors or functions, it could focus on building Red Bull cars, dispatching guerilla sampling teams, assembling its stable of athletes and sports franchises and creating its unique array of airborne events. Nevertheless, while it did that, flavors and functions became high priorities for many consumers. Ticket prices and prize purses may pay back the company’s investment in its soccer and NASCAR teams, but Red Bull has spent considerable time and money crafting impressive (and sometimes bizarre) spectacles that don’t create a visible revenue stream. In the case of Red Bull Big Tunes, the company’s contest for music producers, Red Bull even paid to air the competition on BET. Those endeavors build the brand’s image, Radden argues, and it’s hard to argue that they don’t. But after all that effort to turn Red Bull into a lifestyle instead of just a beverage, the company has come to the grips that there are choices out there when it comes to both. After years of promoting the lifestyle, it’s coming to grips with the importance of the beverage. Maybe it’s found that you can’t have one without the other. •

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CATEGORY REPORT: ENERGY DRINKS

ENERGY DRINKS: ALL GROWN UP Red Bull still leads, but its main competition now comes from Coke and Pepsi allies. By Matt Casey THE ENERGY DRINK CATEGORY IS NO LONGER “maturing.” More than ten years in, with annual growth, from emerging metrics, down to a stately 4 percent, and three brands swallowing up 2/3 to 3/4 of the market, it’s fair, now, to call the once young and explosive category “mature.” Red Bull (see Red Bull Back in the Herd, but Ready to Bust Out, pg. 40), the top seller by dollar-value, still maintains its network of independent distributors, but other big sellers have sorted themselves into Coke and Pepsi camps. Monster, the top seller by volume, currently pushes its product through the CocaCola and Budweiser systems; number-three player Rockstar gets its product to stores on the same trucks as Pepsi and Mountain Dew. Even in the quadrant of the energy drink market not owned by those three brands, the biggest players claim some affiliation with the big houses. Amp, Pepsi’s in-house invention, tops the also-rans followed by Coke-baby Full Throttle, Pepsi-ally Starbucks’ Doubleshot, and NOS, a subsidiary of FUZE, itself a subsidiary of Coca-Cola. For independent brands, that means the already-difficult task of building a successful business in the energy drink segment has gotten harder. Not only do they have to formulate an innovative product, build a brand identity, and scavenge customers, they have to do so while in direct competition with the world’s two most powerful beverage distribution networks. Under those conditions, the number of private brands has fallen. BevNET’s 2008 energy drink guide listed 228 energy brands. The 2009 guide lists about half that number, a reflection of the growing number of entrepreneurs that have discovered that the energy drink gold rush is over. But even in that environment, there are still some strong independent players. Jolt and Go Girl, in particular, posted high enough sales to make it on IRI’s leader board, and brands like BAWLS and Redline have carved out enduring or growing niches for themselves. Though those brands continue to find room to live and expand around the edges, the age of the entrepreneur as king of the energy category may be over. Still, there’s opportunity for retailers to sell smart, well-run independent brands that have the potential to keep growing. Their ongoing ability to survive proves that they’ve hooked an enduring segment of the populace, and those customers may follow the product into your store.

48.BEVERAGESPECTRUM.MAY–JUNE.09

Brand

Dollar Sales

Change vs. year earlier

Red Bull

$360,666,400

0.4%

Monster Energy

$144,877,700

9.7%

Rockstar

$92,056,340

-6.0%

Amp

$31,806,650

2.3%

Doubleshot

$23,934,360

75,689,836.4%

Java Monster

$23,241,030

86.4%

Monster XXL

$18,588,050

10.3%

Full Throttle

$18,444,840

-26.1%

NOS

$13,754,020

64.1%

Amp Overdrive

$13,562,180

16.5%

Rockstar Juiced

$9,900,636

-24.4%

Private Label

$9,830,481

4.4%

SoBe No Fear

$9,657,705

-54.0%

Full Throttle Blue Demon

$8,703,029

-29.2%

AMP Sugar Free

$8,456,112

215.0%

Monster Khaos

$7,759,453

-4.8%

Rockstar Roasted

$7,287,461

217.0%

AMP Relaunch

$6,929,738

594.8

Venom

$6,231,678

20,905.4%

Monster

$5,426,874

32.3%

AMP Elevate

$5,281,485

512.6%

SoBe Adrenaline Rush

$5,117,730

-59.3%

AMP Traction

$4,976,640

507.1%

Monster M80

$4,927,069

101.0%

Monster Assault

$4,853,301

-14.1%

Rockstar Punched

$4,490,790

173.3%

Glaceau Vitamin Energy

$3,700,667

25.3%

Jolt

$3,465,486

13.8%

Full Throttle Fury

$2,719,689

-52.7%

Go Girl

$2,527,852

12.2%

SOURCE: Information Resources Inc. Total food/drug/mass excluding Wal-Mart. 52 Weeks through 5/17/09

CATEGORY REPORT: ENERGY DRINKS

BRAND NEWS Arrow Productions. Adult novelty distribu-

tor East Coast News signed a deal with Arrow Productions to provide exclusive distribution of the company’s Deep Throat Energy Drink to adult stores. Arrow has a promotion program offers retailers that buy 50 cases a free Deep Throat Energy Drink fridge that the retailer is not required to return. XO Energy Beverage Corp. XO’s 6 oz. ener-

gy drinks are now made in the U.S.A., Kosher “OU” and have a 24-month shelf life.

Can” consumer program, allowing Talon drinkers to submit their personal motto for possible inclusion on Talon cans. Talon’s first motto was “Stay Sharp!” DNA Beverage Corporation. DNA EN-

ERGY DRINK recently formed a subsidiary distribution company known as Grass Roots Beverage to distribute DNA throughout Florida. The brand will be available in the MidWest by mid-summer.

has re-positioned its Zafi Ultralight and Zafi Pumped Premium Energy Drinks into the energy mixer market with a new marketing slogan that reads: Zafi, ‘The Perfect Energy Mixer.’

Sex Drive Energy Drink. Sex Drive signed distribution agreements with 7-Eleven and HT Hackney in February. The brand also added new distribution in Atlanta, and expanded DSD operations in South Carolina in April. The brand also ran a promotional event at the Kentucky Derby.

DD Beverage Co. DD Beverage Co. secured

XL Energy Drink Corp. XL Energy Drink

a partnership with 7-Eleven Pacific Northwest Group to sell Beaver Buzz and Beaver Natural Soda in these US 7-Eleven stores as of June 22, 2009.

has redesigned its Sugar Free can. XL’s original flavor is now available in six-packs of 8.4 oz. cans.

Zaﬁ Beverages, Inc. Zafi Beverages, Inc.

Police Fuel. Police Fuel announced that it will donate a portion of its proceeds to the National Law Enforcement Officers Memorial Fund in support of efforts to create the first ever National Law Enforcement Museum.

The CL-ONE Corp. CL-ONE will launch a Quad-Pack this summer, backed by a “Get one free promo” allowing consumers to pick up four-pack for the price three cans. Power Trip Beverages. Power Trip recently

rhino’s energy GmbH. rhino’s announced an agreement with 7-Eleven for distribution in all East Coast states aside from New York and Florida.

signed on as a sponsor of the hip-hop/pop band City of God. PTB also became a sponsor of the Excalibur Cricket Club of Northern New Jersey, and can be seen in several films this summer, including the new Van Wilder film, and the new Fox Television series “GLEE.”

Bigg Juice Industries inc. Bigg Juice Industries Ltd launched RELOAD in March with a master distributor based in Vermont.

Anthracyte,

LIVE Energy, Inc. Starting April 2009, LIVE NATURAL ENERGY DRINK is now sold at HEB Texas through Kehe Distribution. Fluid Motion Beverage Inc. Vixen Energy,

going into its 4th year, has expanded its distribution into Western Canada. Fluid Motion Beverage Inc. Talon Energy

launched its “Get your Motto on a Talon 50.BEVERAGESPECTRUM.MAY–JUNE.09

LLC. Anthracyte, LLC announced a Fruit Punch version of its Ephedra Energy Tea. The New Fruit Punch Ephedra Tea is genuine Ephedra and Green Tea.

Go Fast Sports & Beverage Co. Go Fast

Sports and Beverage Company released the two new flavors, GFTea and Z17, and a 16 oz. can size in the 4th quarter of 2008. GFTea is an energy drink flavored with black, white and green teas and tea catechins. Z17 carries an extra kick!

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Receive free samples by participating in the Lion’s Challenge™ at: www.roaringlionenergydrink.com. Use the Advertising Code: BEVJUNE * Roaring Lion, the Lion’s head symbol and Lion’s Challenge are respectively a registered and common law trademarks owned by RLED, LLC used in connection with energy drinks.

CATEGORY REPORT: ENERGY DRINKS Fuzzee Bee Beverage Co. ZUN BRAIN

Johnny Fountain Beverage Innovators.

BOOSTING ENERGY is out of R&D and has launched in the Boulder Colorado region. ZUN ROCK-IT-WOMAN! the new functional beverage for women is also planned for an estimated release sometime before the end of 2009.

Johnny Fountain Beverage Innovators entered into a distribution deal with High 5 distributors of New York City. Powerball Energized Juice is also in the midst of a marketing campaign using social networking sites and a sampling team that cruises the nightlife scene.

Hunid Racks LLC. Within the last year, Hunid

Impulse Energy USA. Impulse Energy introduced Impulse Extreme Energy Sugar Free in 16 oz. cans.

Racks has hit Cleveland and Columbus, Ohio, Kansas City, Nebraska, Denver, and Portland. The brand has also started sales in New Jersey, Philadelphia, Delaware and Hawaii. Rubyy Energy Drink. Rubyy is introducing

Diet Rubyy this summer. The new product, packaged in matte white, re-sealable, aluminum bottles, is slated to hit shelves mid-June in Bevmo! and Famima stores.

Xtreme Beverage Corp. Xtreme Beverage

recently introduced Big Ol’ Trucker energy juice, and is promoting the brand with an iPhone game, Maze Craze Trucker. NERD Beverage Corp. Dr. Pepper distributors

recently agreed to distribute NERD in Brownwood, Temple, Tyler, and Mason Texas.

1in3Trinity. In the past year, 1in3Trinity has

signed endorsement deals with five-time NFL Pro Bowler Guy McIntyre, Saints player Olaniyi Sobomehin, NASCAR driver Morgan Shepherd and Grammy-nominated Christian rock band SONICFLOOd. 1in3Trinity also signed a distribution agreement with Tree of Life.

Game Juice Inc. Game Juice selected Da-

vid Fonseca of FYI Studio to develop its cutting-edge label design and branding campaign. Game Juice is also announced that it will be donating a portion of its proceeds to Dream in Green – a non-profit foundation dedicated to empowering energy education and conservation.

RLED, LLC. Roaring Lion Energy Drink an-

nounced its new Sugarfree line. Roaring Lion Sugarfree is offered in 1 gallon boxes and 16 oz., re-sealable bottles. Vecordia Group, Inc. Through Vecordia’s own distribution and an arrangement with R & R Vending, LLC, Blue Storm is now available at over 1,000 stores across the Washington, DC Metropolitan Area. Additionally, Vecordia came to a distribution arrangement with Hillway Services, LLC to cover the Gulf Coast Region of Texas. Vecordia is offering a “Buy 3 Get 1 FREE” case pack promotions to new distributors and stores throughout the summer. Nor-Cal Beverage Co. Go Girl Energy Drinks

introduced a new flavor in February - Go Girl Bliss. Go Girl Bliss is a non-carbonated peach tea that is sweetened with agave and brewed with yerba maté tea. It’s only 35 calories, and a portion of the proceeds is donated to benefit breast cancer research & awareness. Go Girl Energy Drinks also unveiled a newly redesigned www.gogirlenergy.com.

52.BEVERAGESPECTRUM.MAY–JUNE.09

GURU Beverage Co. GURU Beverage Co an-

nounced a product collaboration with Kanye West, to create a new product inspired by his own personal artistic vision. The new product is expected to launch later this year in the U.S. and Canada. The announcement coincided with the launch of a marketing campaign dubbed “Clean Energy for Dirty Minds.” Marquis Platinum Inc. Marquis Platinum

Vitality Drink signed with Innovative Trading Services Limited, UK, who will be the distributor of Marquis Platinum throughout Europe. US Premium Brands. US Premium Brands recently announced Fuel High Octane Energy Supplement. Each 16 oz. can of Fuel High Octane Energy Supplement contains 240 mg of Caffeine and 200mg of L-Carnitine and is packed with B Vitamins. Amplexo. Amplexo’s all natural energy drink Vá, recently added Vá Lite. The company has also prepaed a launch in Mexico and reached an agreement with Nuestro Pueblo Distribu-

tors to explore new distribution channels for Vá and Vá Lite in North and South America. Wave Energy Drink, LLC. Wave Energy re-

cently entered the market. The Wave lineup includes a Sugar Free version, and will be rolling out nationwide this year. Franchise distributor opportunities are currently available across the country. Visit tastethewave.com if you are interested in becoming a distributor or would like to learn more. XYIENCE. XYIENCE recently launched Xtreme Xenergy, which packs more B12 vitamins and slightly more caffeine than the original, in a black 16 oz. can. Xtreme is sugar- and calorie –free, with minimal carbohydrates. Wholesale Outlet. Wholesale Outlet Speed

Zone pre-priced, 99 cent energy drink recently hired a new director of business development to spearhead Speed Zone marketing. Rage Liquid Energy. Rage Liquid Energy is

now available nationally at 7-Eleven Canada.

Wet Planet Beverages. Jolt Energy Drink se-

cured placement at AM/PM and Circle K locations following the July, 2008 introduction of its 16 oz., resealable cap-can. AriZona Beverages. AriZona Beverages has

been sampling its 16 oz. All City NRG as well as Caution Energy and Low-Carb Caution Energy (in both 8.3 and 16 oz. sizes). The products were present at the Hollywood Reporter Lounge during the Sundance Film Festival, Project Pintura International Graffiti Conference in Orlando, Fla., and Nice Collective & GenArt Time Machine-Men’s and Women’s Fall 2009 collection at the Angel Orensanz Foundation in New York during fashion week. Hobarama, LLC. High-caffeine soda BAWLS Guarana has won new partnerships with several chains including Jewel-Osco, Fred Meyer and Wilson Farms. The new alliances spotlight the brand’s most popular flavors - BAWLS Guarana and BAWLS G33K B33R, named BevNET’s “Best Energy Drink” of 2008.

XS Energy. XS Energy recently launched a 12 oz. version of its flagship Cranberry-Grape flavor as well as injecting itself into the fastgrowing 2 oz. energy shot category. Hansen Natural Corp. Hansen has signed a contract with the Coca-Cola Company in October to distribute Monster Energy Drinks through the Coke distribution system. PepsiCo. In the last year, PepsiCo’s Amp Energy added a Green Tea flavor, a Black Tea flavor, Lightning (a lemonade flavor), and Tradin’ Paint, a limited time orange, lime and berry flavor promoted with help from NASCAR driver Dale Earnhardt Jr. Red Bull GMBH. Following the debut of Red Bull Energy Shot, Red Bull introduced taller, slimmer 16 oz. cans that echo the proportions of the brand’s original 8.3 oz. can. Rockstar. Rockstar in February ended its

relationship with distributor Coca-Cola Enterprises in favor of signing a distribution agreement with PepsiCo. The agreement puts Rockstar in PepsiCo’s three largest distributors: Pepsi Bottling Group, PepsiAmericas and Pepsi Bottling Ventures.

MAY–JUNE.09.BEVERAGESPECTRUM.53

st pping the strategy in the trenches by jeffrey klineman hink you aren’t getting any respect at work? It could be worse: you could be a Pepsi. From a strategic point of view, the CSD has become the offensive lineman of the soft drink category, carrying the heavy loads of occupying shelf space and grinding out profits, while superstar wide receivers like energy drinks and enhanced waters catch flashy share gains and great publicity despite much smaller bodies of work. Coke and Pepsi might be icons, among the most recognizable trademarks in the world, but these days, they sure aren’t glamorous.

Not so long ago, being a CSD was a respectable job, at least, but now, they’ve become the pariahs of the soft drink category, derided as much for their lack of nutritional value as their dropping share of stomach. Sodas aren’t even sodas at the Coca-Cola Co. anymore – they’re part of the Sparkling Beverage Group. CSD consumption dropped by 3 percent in the U.S. last year, and to some extend that was a victory: it was nowhere as low as some had expected. So it’s hard to believe, given the amount of flack they take, but the CSD remains the center of the soft drink business,

PepsiCo Inc. CEO Indra Nooyi (left) and Coca-Cola CEO Muhtar Kent (right) both believe they can get their respctive CSD brands moving upwards.

54.BEVERAGESPECTRUM.MAY–JUNE.09

the best selling kind of drink in America, the bulwark of the beverage aisle. “We haven’t consciously taken shelf space away,” said Mike Elmer, the director of marketing for Coca-Cola of Northern New England. “Sparkling is presently not a growth category, but it’s still a big part of what we sell.” Major cultural shifts are catching up to CSDs, say analysts, as overriding concerns about health and wellness make them more of a treat than a standard, while increased choices dilute the sheer force of their ubiquity. The worst shift, however, might be generational: in the past five years, full calorie colas lost 15.6 million consumers 18 or over, according to the research group Mintel. While the diet segment added about 7.8 million, the insight is clear: people who aren’t switching to diet, and there are about 8 million of them, aren’t drinking soda. “The data is overwhelmingly showing us that consumers want to be healthier, and they don’t perceive CSD’s to be healthy,” said Krista Faron, a senior analyst at Mintel. “They have a choice to choose beverages that are better for them and they don’t see CSD’s playing that role.” It’s gotten especially bad for many line extensions that sit at the margins: accord-

ing to Pointer Media Network, which measures supermarket scan data at the cash register, 20 of the top 30 CSD brands have experiences case volume declines. But the big three in the category have all sworn to stop the slide. Last year, PepsiCo launched a massive rebranding campaign trying to tie the brand back to its strong baby-boomer, change-agent roots, and its top brass, from PepsiCo Americas CEO Massimo D’Amore to PepsiCo Inc. CEO Indra Nooyi, have all sworn they can get the company’s CSD brands moving on an upward trajectory. Coca-Cola Co. CEO Muhtar Kent has made it clear his company plans to expand its leadership position in the CSDs – although they now fall under the oh-so-healthy-sounding moniker “sparkling.” Meanwhile, in a down economy, the Dr Pepper Snapple Group has increased its marketing budget. So what’s the plan? How do these companies stop the flood of consumers leaving the category? After studying the data and doing the interviews, this is what Beverage Spectrum has found the big three are looking at strategically to keep their front lines from collapsing:

1. INTENSE FOCUS ON SHOPPER BEHAVIOR Rather than worry about the consumers who might be bleeding away from the category, the companies are taking a hard look at ways to sweeten the pot for those who stay. It’s a shift heralded by the rise of shopper marketing firms like Catalina Marketing, which, by quickly analyzing an individual shopper’s behavior, offers companies the ability to encourage brand loyalty or product trials at the point of purchase. Catalina made a splash earlier this spring by publishing a report revealing that the vaunted core consumer group for many brands comprised a much lower percentage of shoppers than had previously been imagined. While demographics and category management have long held to the 80/20 theory (80 percent of a given product’s sales are governed by 20 percent of its buyers) Catalina’s push into shopper marketing revealed that number to be much lower: even for a brand as widely consumed as Coca-Cola, just 12 percent of shoppers are responsible for 80 percent of its sales; the numbers drop to 6.5 percent

of shoppers for Diet Coke and less than 3 percent for Coke Zero. “They’ve started discounting to the loyal customer,” said Catalina analyst Trish Brynjolfsson.

Even for a brand as widely consumed as Coca-Cola, just 12 percent of shoppers are responsible for 80 percent of its sales; the numbers drop to 6.5 percent of shoppers for Diet Coke and less than 3 percent for Coke Zero. The key takeaway is that CSD companies are becoming even more cognizant of the importance of their power shoppers, who buy products consistently or in large volumes – and they are working to incentivize continued purchases by those shoppers. Catalina reports that it is seeing four times the amount of what it calls “defensive campaigns” beverage companies trying to prevent defections by analyzing shopper baskets and printing coupons and providing encouragement to key shoppers. And Coca-Cola North America may be getting into the business itself: CCNA recently announced it was launching its own deep study into shopper marketing. The end result likely won’t just be CSD-focused,

but keeping sparkling beverage shoppers happy is bound to be a priority. “They are absolutely trying to retain and grow volume with their core consumers and trying to expand consumer purchases across beverages,” said Brynjolfsson. “Simultaneously, they are trying to bring them into the Minute Maid and the Powerade families, trying to do more enterprise-wide types of shopper marketing opportunities.”

2. SHAKING UP PACKAGING It might seem like Marketing 101, but playing with package sizes and arrangements is at the heart of much of the defensive posture of CSDs. PepsiCo has, of course, changed Pepsi’s look repeatedly over a two-year period. And Kent recently claimed packaging innovation as the biggest driver of sales increases around the world. His bottlers are apparently taking that to heart. While at Coke Northern New England, for example, Elmer said the major shakeup in the CSD aisle has been the use of alternative packaging. His organization has cut back on the traditional 2 L PET bottle in favor of 8 oz. cans and 8-packs of 12 oz. bottles, both of which appeal to portion-conscious consumers. And those nonstandard packages are a double bonus, he says. “You don’t have to discount those as deeply,” Elmer said. “Consumers don’t expect the prices to be elastic, because they’re not as used to them.”

Pepsi’s newest look has been met with mixed reviews, but that might be just the kind of PR it needs to entice consumers.

MAY–JUNE.09.BEVERAGESPECTRUM.55

While Elmer might be happy he’s been able to hold the line with clever packaging, he knows he’s just grinding it out, for now. “They’re all singles and doubles,” he says. “They’re not home runs. The real wins will be around product innovation.”

3. PRODUCT INNOVATION WHERE THE CONSUMER WANTS IT Where has innovation been in CSDs? Marketers point to Coke Zero, the core cola’s diet doppelganger, which showed 14 percent volume growth last year, according to Beverage Digest. “It’s more than a brand extension,” Elmer said. “It’s giving people a reason to come back.”

Meanwhile, Dr Pepper continues to try to ride the line extension express, rolling out Dr Pepper Cherry this year; while it has shown formidable skill at keeping its franchise alive through compatible flavors, distributors would prefer more attempts at innovation that line up with the overriding health and wellness trends. Canada Dry’s Green Tea Ginger Ale or Cherry 7Up Antioxidant may both fit into those small boxes. Finally, PepsiCo is going for throwback innovation as well, launching sugar-sweetened (as opposed to high-fructose corn syrup) versions of its products in short runs. With “throwback” Pepsi and Mountain Dew rolling out this month, the company might be able to build buzz similar to its short run of Pepsi Cucumber in Japan.

sales have fallen off. But in a dropping economy, if the CSD category is going to point to itself as the big beverage companies’ life raft, it’s also going to have to show a way to bail itself out – and that means it’s going to have to play the pricing game, as well. Deutsche Bank’s beverage team of Marc Greenberg and Andrew Kieley released a report in late 2008 encouraging lower prices on single serves, identifying $0.99 as the “magic number with unmatched drawing power among consumers.” For sales growth to pulse out beyond core consum-

“Good ideas, even in declining categories, can at least help individual brands,” said Faron.

4. RIDING THE ECONOMY

Sprite Green, Cherry 7Up Antioxidant, and Dr Pepper Cherry: three attempts to bring some innovation to the struggling category. That kind of innovation isn’t going to save the CSD category, necessarily, but it’s good for Coke, notes Faron. “Good ideas, even in declining categories, can at least help individual brands,” said Faron. “One product that responds to what consumers are thinking can be the catalyst for millions of dollars in consumer response. When all of the conditions are in place and consumers are put in the middle of the equation, some products can be successful.” To that end, Coke and Pepsi are both tinkering with their new pet sweetener, stevia. While CSD attempts at the product have evolved slowly, Coke’s Sprite Green uses a stevia/sugar mix and is in test markets.

The throwback brands are interesting be- ers, to grab them as they head into convecause Pepsi isn’t pitching them as a cure for nience stores, the tactical price cuts the pair HFCS – it’s pitching them as a cure for the suggested might just be the ticket. Such a price-driven recovery wouldn’t blues, a kind of liquid meatloaf for the soul (although some analysts believe a strong be a pretty one, particularly when it comes consumer reaction would cause an expan- to profit margins. Promotions can lead to price wars, and that’s when things can resion of the Throwback program). But the negative economy has actually ally get ugly. But then again, the offensive been something of a positive for CSDs line isn’t known for its beauty or grace. It’s themselves. While CSD sales have been known for getting the job done. With the decreasing since 2005, those declines way things have been going lately, if the big were moderated somewhat this year by an companies manage to stop the volume slide economy that may have kept consumers of CSDs, to bring it in for a soft landing, away from more expensive noncarbonated that might be pretty enough, indeed. • options, according CSD sales have been declining across the board for a year, to a report from but marketers have worked hard to hold the line on price. Consumer Edge Analysts, however, believe that they might soon need to Research CEO Bill ﬁnd a lower price point. Pecoriello. In fact, CSD profitability was up 1.8 percent over the past 52 weeks, according to Catalina Marketing statistics, partially the result of strong performance by private label brands but also because the big CSD companies have held steady on – or even increased – prices as

BRAND

52 WEEKS

% CHANGE 26 WEEKS

Total CSDs

Cases Dollars

-2.8% 1.8%

-2.5% 3.3%

-0.7% 4.9%

Coca Cola

Cases Dollars

-5.7% -0.2%

-8.5% -0.1%

-7.3% 0.9%

Pepsi

Cases Dollars

-3.0% 1.1%

-5.0% 0.8%

-3.5% 2.2%

Cadbury

Cases

-2.6%

1.7%

4.4%

Dollars

4.0%

8.6%

11.8%

Private Label

Cases Dollars

7.9% 12.0%

19.4% 24.1%

24.9% 29.4%

All Other

Cases Dollars

3.3% 4.4%

8.4% 8.0%

8.1% 8.0%

SOURCE: Pointer Media Network

56.BEVERAGESPECTRUM.MAY–JUNE.09

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3. What is your primary business type? (check only one) A Convenience Store B Supermarket/Grocery C Club/Warehouse D Mass Merchandiser/Dollar E Drug Store F Liquor Store G Wine Store H Wholesaler/Distributor/Broker I Beverage Only/Beverage Specialty Store J Beverage Company K Supplier Company L Services Company X Other (please describe) 4. What is your title? (check only one) A Owner/President/CEO/COO/VP/Director B Buyer C Bottled Water D Regional/District Manager E Store Manager/Supervisor X Other (please describe) 5. Do the locations that you are responsible for sell: (check all that apply) A Carbonated soft drinks B Non-carbonated soft drinks C Bottled water D Beer E Wine F Liquor

CATEGORY REPORT: SPORTS DRINKS

VARIETY GETS A SPORTING CHANCE Protein, Coconut Water, and Caffeine are making their way into the sports drink assortment. Are you ready? By Jeffrey Klineman IT USED TO BE THAT IF YOU wanted to stock a sports drink, you had one or two choices: you had your Gatorade, your POWERade, and that was about it. As the category grew, you’d do whatever you could to keep that single cooler door stocked with the Gatorade, and you’d try to force the issue with your Coke distributor in order to get the best deal in exchange for taking on the number-two POWERade. But things are starting to change in the Sports Drink category – not in terms of major share of volume, but in an emerging set of subcategories that seems to be re-defining the way a shelf-set can be constructed, and one that is stretching the definition of the sports drink all the way from the drugstore to the dairy aisle. With protein drinks like Muscle Milk providing some of the muscle recovery elements that gym rats once extracted from tubs of whey powder, and coconut waters like Zico, O.N.E. and Vita Coco moving into the realms of the “Yoga Mom” and the intense ultramarathoner and triathlete, the category is developing more breadth. It’s even getting dehydrated a bit, as different product types are moving into the “stick pack” mixable formulation, both from the perspective of start-up PURESPORT and granddaddy Gatorade, which has even moved its fast-growing G2 formula into a pouch. What’s happening is that athletes and casual sports drink users are beginning to think about what product fits their lifestyle, opening the door to functionality not just as an idea separate from hydration, but one that is incorporated into it. The idea is that one size doesn’t fit all anymore.

58.BEVERAGESPECTRUM.MAY–JUNE.09

“We don’t really consider it a sports drink per se,” said Lee Labrada, a retired champion bodybuilder who is finding growing success with a protein drink called Lean Body on the Go. “It’s protein, and it’s in a category of its own. But it does address some of the big demographic factors that used to attract the Gatorade drinker.” Part of the reason why a sports drink customer might turn to a product like Lean Body is that the science in the sports recovery field continues to evolve, with more weight being given to the notion that protein can help aid in fluid replacement. Yet another recent study indicated the efficacy of chocolate milk as a post-workout recovery drink, for example, and that notion may bring products like Accelerade back into the fold at some point. Meanwhile, the level of expertise of the athletes themselves is broadening, so that they are able to distinguish the level of caloric intensity that they want, from lowercalorie products like G2 and owater to the protein fortified. Adding to the idea that functionality is growing to match the importance of fluid replacement is the variety of the product offerings. WheyUp has mixed protein and caffeine together into a potent gym cocktail, while even Gatorade has added the concentration-enhancing compound L-Theanine to its Gatorade Tiger line. Gatorade is an interesting test case for where the category is headed, in fact: in the past few years it has diversified into a number of lower-calorie offerings, added other compounds and, in the end, lost some sales as the economy has nosedived and consumers have migrated to other categories. It might seem like the brand is

Lee Labrada of Lean Body: maybe it isn’t a sports drink per se, but it attracts the Gatorade drinker. expanding – yet it’s also fighting for share. While other companies move in all-natural directions and look at the expanding variety of ways in which consumers seek to prepare and recover from their exertions, the company has rebranded itself with the ever-pervasive “G” symbol, taken a strong legal stand when its integrity was attacked in advertisements from Powerade, and watched as vitaminwater cups appeared in the hands of players and coaches at the NCAA men’s basketball tournament. While that’s still a long way from seeing a bucket of Muscle Milk overturned on a coach’s head after the Super Bowl, it’s enough to maybe think that customers would appreciate a little variety next to – not in place of – the big Gatorade door.

the

Functional beverages just got a whole lot more functional with the introduction of SerinAid® Disperse PS. Chemi Nutra utilized revolutionary nanotechnology in creating SerinAid® Disperse PS – the world’s first water dispersible phosphatidylserine (PS). Natural PS can help maintain and improve mental performance – as well as help mood and stress. PS can even boost exercise performance. And without Chemi Nutra’s leap in technology, the inclusion of PS in drinks was simply impossible. Memory energy and mood support are categories with tremendous opportunity – which you can seize with SerinAid® Disperse PS in your functional beverage. To learn more about SerinAid® Disperse PS, contact Chemi Nutra – the world leader in PS for healthy foods and nutritional supplements.

Toll Free: 866.907.0400 / Phone: 651.407.0400 Fax: 651.407.0509 / www.cheminutra.com

CATEGORY REPORT: SPORTS DRINKS

BRAND NEWS Zico. ZICO Coconut Water recently signed a deal with Worcester-based Polar Beverages to distribute its products throughout the region. It was also named “Hot Sports Drink” for ’09 by Men’s Fitness magazine as part of its annual “Hot Stuff” list. According to the magazine, ZICO is ideal for athletes who need to maintain peak performance during workouts and avoid muscle cramps and dehydration. It also mentioned ZICO as a great cocktail mixer with rum or vodka. CytoSport. Independent bottling company G&J Pepsi-Cola has recently entered an agreement with CytoSport to distribute Muscle Milk 14-ounce ready-to-drink beverages throughout G and J Territory. This new partnership will broaden the availability of Muscle Milk nutritional shakes throughout Ohio and Kentucky. Available in Original, Light and 100-Calorie Light formulas, Muscle Milk® provides lactose-free, high-protein nutritional shakes that supply active individuals with 20 vitamins and minerals plus a complete dosage of “healthy fats” to promote lean muscle growth, efficient calorie burning, fast recovery from exercise and healthy, sustained energy on-the-go. Whey Up. WheyUP has added a new flavor,

Grape Punch. WheyUP combines the muscle building properties of whey protein with energy, providing both the energy to go to the gym and the protein to build muscle in one drink. WheyUP was the Official Sports Drink of the Arizona Rattlers (arena football) and the title sponsor for Rage in the Cage (local MMA fighting) in 2008. Clif. Clif, the leader in all-natural and organic energy bars has created a refreshing new bottled sport drink, CLIF Quench, a clear sport drink made with only all-natural and organic ingredients. CLIF Quench contains no artificial colors, flavors, sweeteners and preservatives. And staying true to the company’s journey toward sustainability, CLIF Quench comes in the most planet-friendly bottle of its kind. CLIF Quench will be available in four refresh-

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ing flavors: Fruit Punch, Lime-Ade, Orange and Strawberry Citrus. Starting in June, the 16 oz. bottles will be sold in natural food and grocery stores nationwide, as well as online. FUBAR. FUBAR’s Health ‘n Hydration for-

mula was originally designed by Special Ops Soldiers for Elite Warriors and world class athletes. This unique health beverage was specifically created for those who require hydration at the cellular level under the most brutal conditions. Each bottle of FUBAR contains a proprietary blend of 100 percent pure coconut water, whey protein, isotonic electrolytes, vitamins, minerals, invert cane sugar and guarana tea extract. Vita Coco. Vita Coco, the original coconut water brand and one of the fastest growing lifestyle beverages in the nation, recently introduced a new 500 ml size with a resealable cap, available in stores in May 2009. Cultivating a loyal following from health conscious athletes and celebrities including rock band Fall Out Boy and actress Rebecca Romijn, the brand will soon begin to explore a greater presence in gyms and vending machines. The introduction of the new size follows the recent introduction of a new flavor, Açaí & Pomegranate, in February. EB Performance. EB Performance LLC, makers of the popular PB & Whey Protein Bites, will introduce its new Whey Juice ready-to-drink (RTD) protein beverage in mid-to-late summer. Whey Juice will launch in Florida Whole Foods Stores and comes in three innovative flavors including: Triple Tea (Red-Black-Green), Triple Fruit (Strawberry-Blueberry-Banana) and Triple Anti-Ox (Cranberry-Apple-Acai). Each bottle contains 15 grams of the highest quality whey protein isolate, three grams of prebiotic fiber and is sweetened with organic agave nectar. Whey Juice contains no artificial flavors, sweeteners or colors and is preservative-free. Cera Products. Cera Products Inc. announces a new ready-to-drink CeraSport EX1. This

CATEGORY REPORT: SPORTS DRINKS product has no added simple sugars or fruit juices; it contains only Cera’s patented blend of rice syrup, essential electrolytes and flavors. A gluten-free product, CeraSport EX1 has a unique carbohydrate base which provides quick and sustained hydration without causing cramping. Cera Products Inc. proudly sponsors 2007 World Champion Mirinda Carfrae, and three-time Ironman Champion Chris McDonald. The new CeraSport EX1 ready-to-drink comes in two flavors, orange and lime. It is packaged in an environmentally friendly 8.45 oz. box. OhYeah! With the addition of three new flavors, OhYeah!’s 14 oz. ready–to–drink shakes are now available in five flavors. Each milkshake-like flavor delivers 32 grams of premium whey protein with only 3 grams of sugar, is lactose-free, and contains minimal fat. OhYeah is aimed at extreme athletes, carb-conscious dieters or consumers wanting to maintain lean muscle mass. Big Red. Big Red recently launched ALL

SPORT Naturally Zero, the first ever major sports drink to be both specifically formulated for the physical demands of intense exercise and sweetened with stevia, a natural sweetener with zero calories. ALL SPORT is also excited to be the official sports drink of the elite Junior Cycling team, All Sport-Team Swift, as well as the PGA stars John Daly and Bubba Watson, baseball’s Toronto Blue Jays and Hockey’s Trenton Devils. Krank’d. Krank’d 7-in-1 Body Fuel is a tasty,

precise blend of amino acids, vitamins, minerals, electrolytes and carbohydrates to fuel mind and body, quench thirst and provide an anytime boost for anyone. The four Krank’d fruit flavors have just 37 calories per 16.9 oz. bottle. Krank’d has a new look, packaging and marketing materials to enhance shelf appeal and incentives and introductory offers are available to new distribution partners. PepsiCo. PepsiCo’s Gatorade line has recently

added two new brand extensions, G2 powder packs and Gatorade Tiger Focus. G2 powder packs allow consumers to mix the powder with two cups of cold water for on-the-go enjoyment. Gatorade Tiger Focus and has Ltheanine (an amino acid naturally found in tea) which, along with carbohydrates and functional sports drink hydration, helps promote 62.BEVERAGESPECTRUM.MAY–JUNE.09

mental focus. The reformulation was inspired by Tiger Woods’ legendary mental toughness, and the product was designed to help athletes stay at the top of their game, both physically and mentally. Gatorade Tiger Focus has half the calories and 25 percent more electrolytes compared to Gatorade Thirst Quencher. owater. owater continues to revolutionize the

sports drink with its three lines of healthy, natural electrolyte drinks: infused owater, unsweetened owater and sport owater. This spring, owater has invited hundreds of their athletic fans to participate in the marketing of the brand by incorporating their images and inspirational stories on to owater labels, on the owater website and in the company’s advertising. owater will continue to share new stories throughout the year, and will tie local in-store promotions and events to these athletes. EAS. EAS has a new shake that just hit the

market in April. New EAS Myoplex Strength Formula shakes from Abbott Nutrition provide a convenient, delicious way for fitness enthusiasts to get needed protein, carbohydrates, vitamins and minerals following vigorous activity or a workout. EAS Myoplex shakes are now available with a contemporary new 14 oz. re-closable plastic bottle. In addition, the EAS brand has made sports nutrition even more convenient by expanding their distribution to include the coolers of select convenience stores, beginning in May 2009. EAS Myoplex Strength Formula shakes are low in fat are available in Chocolate Cream, Vanilla Cream, Strawberry Cream and Banana Cream. All of the flavors feature 25 grams of high-quality protein, carbohydrates and a mix of 23 vitamins and minerals. AquaGenus. AquaGenus has announced the launch of AquaHydrate, the first high-performance sports water designed for ultimate hydration. AquaHydrate is made by enhancing ultra-pure water with three of the most widely acclaimed hydration-boosting and recovery technologies - alkaline pH of 9, ionic minerals, and micro-clustering - all combined for the first time in a premium bottle water. AquaGenus also announced an exclusive agreement with Trace Minerals Research (TMR) -- a leader in the natural foods movement -- to include their all-natural, ionic minerals in AquaHydrate.

Dr. Tim’s. Dr. Tim’s has launched an all-nat-

ural sport beverage, ISO-5. This product uses certified-organic coconut water, and no artificial sweeteners, HFCS or artificial colors. The product now comes in a 12 oz. bottle. ISO-5 is launching in Bally Total Fitness, Harmon’s, Select Albertsons, and other fine retailers. Hydro One. Joint Health is a patent pending,

all natural, low calorie formula in the Hydro One portfolio of functional beverages that has been specifically development by scientists to help support joint health and provide the necessary building blocks of cartilage. Joint health has been formulated with the active consumer in mind and is packed with the 1500 mg of glucosamine and 1200 mg of chondroitin sulfate. This great testing beverage also contains the vitamins and nutrients necessary to help protect cells from oxidative damage, help decrease joint pain and stiffness, and help improve stiffness and joint mobility.

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Combine Drinks, Inc. The very competitive

category of sports drinks is getting set to add yet another player, Combine Drinks, Inc. is set to introduce a brand that will compete with the current market leaders: Combine Sports Drink. The name Combine refers to athletic combines held in all sports, including football, basketball, soccer, baseball, volleyball, hockey and even golf. Most noted of all combines is the annual NFL Combine which makes reference to the NFL draft. With a tagline of “We Re-hydrate The Nation,” Combine products will be available in four different new flavors in stores in July.

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PROMO PARADE Red Stag Red Stag by Jim Beam, the cherry-infused offspring of Jim Beam Bourbon, announced that it will partner with Kid Rock as the headline sponsor of Kid Rock’s 2009 Rock N’ Rebels Tour, which will hit 25 cities across North America this Summer. Kid Rock kicked off the Red Stag by Jim Beam partnership on June 14, when the Detroit native served as Grand Marshal of the NASCAR Sprint Cup Series LifeLock 400 race at Michigan International Speedway. Through their support of Operation Homefront, a non-profit organization that provides assistance to America’s military veterans returning home to their families, Red Stag and Kid Rock will help fund emergency aid, moving assistance, computer programs and care packages in local chapters throughout the country. Red Stag by Jim Beam is scheduled to launch in June. The Rock n’ Rebels Tour is scheduled to kick off June 26 in West Palm Beach, FL. Throughout the summer (and where legal), Red Stag by Jim Beam will offer legal purchase age consumers in select markets access to a free, exclusive Kid

Rock download, as well as opportunities for VIP passes, access to post-show meetand-greets, and Red Stag by Jim Beam merchandise. Red Stag By Jim Beam will also give consumers a chance to enter the “Call of the Wild” sweepstakes, which will grant one winner and three friends an all-access weekend to see Kid Rock perform live in

Box Your Friends Black Box Wines, the 3 L boxed wine, is launching the “You Got Boxed” contest to challenge fans to let their friends know quality wines can come from a box. For a chance to win, consumers secretly serve guests Black Box Wines and film their reaction to discovering the source. Once the tasting is complete, they submit their video at YouGotBoxed.com for the chance to win a $10,000 prize. Fans are then invited to vote online for their favorite 2-minute video. The contest launched June 1, 2009 and ends November 30, 2009. Each month a winner will be awarded $2,000, and the $10,000 grand prize winner will be chosen from the six monthly winners. To view official contest rules and enter the contest, visit YouGotBoxed.com.

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Las Vegas, among other prizes. The sweepstakes runs from July 6, 2009 to August 31, 2009 and will be available through mobile text messaging (SMS) as well as online at www.TheRedStag.com. Entry into the sweepstakes can also be found at www.jimbeam.com, as well as on Facebook through the Red Stag and Jim Beam fan pages.

O, You owater introduced a new packaging and advertising campaign featuring athletes from around the U.S., including many of owater’s employees. Each of the new owater labels features illustrations of the athletes, including well-known personalities like professional baseball player Jacoby Ellsbury and football players Steve Young and Brent Jones, but most of the labels’ subjects are of less widely-known – including amateurs and owater staffers. The athlete’s stories and illustrated images will appear on owater labels, on owater.com and in the company’s advertising. The grassroots campaign is being launched in conjunction with expanded distribution of the company’s healthy sports drinks in several key U.S. markets, including at national retailers like Whole Foods and restaurant chain Au Bon Pain.

Odwalla Plants Trees Odwalla has made helping the environment just a little easier. With the ease of a mouse click, the Plant a Tree program allows consumers to choose one of 11 state park systems where they would like Odwalla to plant a tree. The brand is donating $100,000 worth of trees to be planted in state parks in California, New York, Florida, Pennsylvania, Colorado, Utah, Ohio, Texas, Maryland, Michigan and Virginia in support of reforestation and planting initiatives. Visitors to www.parkvisitor.com/odwalla can make a donation by choosing their preferred state. No contribution or registration is required. The Odwalla Plant a Tree program runs from May 27, 2009 through December 31, 2009. The species of trees donated will vary by region and will be planted in fall 2009 and early 2010.

Heineken Blok Party Heineken and Heineken Light will be throwing a “Blok” Party for a lucky winner this Labor Day. Beginning in June, consumers can enter Heineken’s sweepstakes to win one of two grand prizes that includes live entertainment, topnotch catering, and interactive leisure sports for the ultimate “Blok” Party. Heineken will offer mass displays for liquor stores and cross merchandising offers for grocery and convenience stores. The program will run June through August in retail outlets throughout the country.

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PROMO PARADE Rock Out With Your Cork Out

NESTEA in CTRL

NESTEA and NBC Universal Digital Studio announced the production of an original webisode series, “CTRL.” The series is based on the Sundance award-winning short film, “CTRL Z,” which screened at the film festival in 2008. “CTRL” stars Tony Hale as Stuart, a mistreated office worker who suddenly discovers that, with the aid of NESTEA and its “Liquid Awesomeness,” he has the ability to manipulate the reality of his office by using his computer. His newfound abilities include the power to rewind time, move objects, become invisible and read people’s minds. The ten-webisode series will be distributed this summer across a number of platforms including NBC.com, USANetwork.com, Hulu.com, mobile video on demand and gaming consoles. Additionally, users will find a dedicated website which will showcase the “CTRL” installments, branded games, photo galleries, character bios and a blog kept by the lead character.

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2009

US AIR

GUITAR CHAMPIONSHIPS Pepsi’s Drink Up, Rock Out Contest Pepsi, MTV and MTV Games, announced a multiplatform “Drink Up, Rock Out” promotion that will give away thousands of Rock Band music tracks and games. The promotion will include prizes and the opportunity to participate in the Pepsi Rock Band music video contest, the winner of which will be awarded an MTV Video Music Awards Moonman. The summer promotion begins June 2 and continues through the MTV Video Music Awards. Fans can enter under-the-cap codes at www.PepsiRockBand.com for a chance to win prizes. MTV and Pepsi will give away a Rock Band 2 Special Edition bundle every hour and thousands of Rock Band downloadable tracks each day. Additionally, fans can enter a weekly sweepstakes for opportunities to win a trip to a Harrah’s Entertainment property, Xbox 360 Consoles and other prizes. Rock Band groups can also win an MTV Moonman by entering their own Rock Band music video at www.PepsiRockBand.com, where bands and fans will be able to view, rate and vote on their favorite Rock Band music videos. The “Drink Up and Rock Out” summer program will also include promotion across MTV Networks channels, including MTV, MTV2, mtvU, VH1, CMT, Spike, COMEDY CENTRAL, TV Land and Nick at Nite.

IMAGE COURTESY OF WWW.360SYNC.COM

Boone’s Farm wine has sponsored the US Air Guitar Championships. The 25-city tour, running from May 27 to June 27, helped launch Boones’ latest variety of value-priced wine, Sunshine Pink, and will send one lucky competitor to vie for the title of world’s best air guitarist. One winner from each city will be brought to a yet-to-be-revealed city in August to compete in the US Air Guitar Finals for the crown of US Air Guitar Champion. The 2009 US Champ will then be sent to Oulu, Finland to represent the USA in the Air Guitar World Championships, where he or she will compete against national air guitar champions from all around the world, including last year’s US and World champion Hot Lixx Hulahan.

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