Beer Marketer's Insights
Randy Ornstein, who took key – and highly visible – role implementing Anheuser-Busch InBev’s Beyond Beer strategy, has abruptly departed co, leaving wholesalers and other trade partners wondering whether shift in direction may be coming for constantly evolving strategy. Ornstein, analytics-oriented exec who’d segued from working at giant scale for many years on brewer’s Walmart biz to fostering broad-based incubation spanning – and often blurring – alc and non-alc lines, departed yesterday, as first reported by Beer Business Daily. The exit seemed to take many by surprise, coming as co is in the thick of sensitive activities on Beyond Beer front, including negotiating so-called Pestalozzi Street contract for wine & spirits that’s raised hackles among some wholesalers. Randy, who took highly visible role promoting co’s innovation initiatives at forums like BevNet Live and Beverage Digest Future Smarts, was laying low today and not saying much about why he left or what might be next, aside from describing Beyond Beer gig to BBI as “an amazing run. I loved it.” Nor was ABI saying much so far, tho we understand successor should be named soon. Departure comes at time of flux at ABI, where David Kamenetsky, chief strategy and external affairs officer, will leave at end of Jun after barely 2 and a half years in role. Commns vp Gemma Hart and govt affairs vp Doug Bailey have also left in past coupla months, as our sibling newsletter Insights Express reported.
Our contacts outside ABI have often wondered about scattershot-seeming pattern of co’s various launches and acquisitions, but that seemed to be in keeping with ABI brass’ notion of disruption as requiring that co immerse itself in intriguing segments, regardless of their immediate scale or relevance to beer network, just to have seat at table as new trends emerge. That brought offbeat items like Canvas bevs made from spent grains, colonial-style Up Mountain Switchel and cap-dispensed GoLive Probiotics that, tho not Bud-truck-ready, gave lie to notion that big CPG players are capable only of tepid me-too offerings in their innovation efforts. On NA front, ABI seems to be enjoying genuine success with superpremium Teavana RTD tea brand that was personal project of Ornstein in partnership with Starbucks, while longtime NA partner Icelandic Glacial seems to be receiving greater attention – and concomitant growth – from Bud network. But acquired Hiball clean-energy brand has nowhere lived up to expectations, at time that indie ABI wholesalers seem more intent on adding performance energy brands like Bang and C4, prompting new owner to kill Hiball’s ancillary Alta Palla sparklers brand and refocus effort. So it remains to be seen whether the heady activity stoked by Ornstein ultimately will move the needle on sales growth, but ABI certainly has attacked challenge in energetic, unaccustomed fashion over past coupla years.
Wells Fargo’s Bonnie Herzog has been among the skeptics over Monster prospects, but lately she’s come around to favoring stock, at least for short term, in part on effective launch of Bang challenger Reign. She likes the repurchase trends on brand, and unlike some of her c-store contacts cited above, approves of the BOGO activity as likely to accelerate momentum. Not least, she anticipates that MNST annual meeting this Thurs will yield additional favorable info on Reign trends, along with upbeat projections of overall margins and international growth . . . “La Croix’s Era as the Coolest Seltzer in America Is Over,” headlines Vox in typical take on sparkling water brand’s accelerating declines, following widely cited Guggenheim Partners report that described National Beverage icon as “effectively in free fall.” After analyst Laurent Grandet wrote that brand “has gone from bad to worse to disastrous in a relatively short period of time,” lotsa media that not long ago were marveling at grip that La Croix has on younger consumers were pronouncing its great run over in face of challengers like Bubly, Topo Chico, Polar, Spindrift and even CBD-infused sparkling waters. “It’s hardly a mystery why,” Vox opined. “There are seemingly limitless options for seltzer now, and most of them aren’t from companies battling scandal after scandal,” a reference to class action suits over La Croix ingredients and sexual harassment suit vs ceo by pair of pilots of corporate jet.
Overall bev sales rose an estimated 4.6% over Memorial Day weekend, based on survey of retailers representing about 15K c-stores across US by Wells Fargo Securities. That’s up from +3.4% gain over Memorial Day weekend 2018. “We sense that sunny skies & happy consumers brightened the mood of our c-store retailer contacts,” figures sr analyst Bonnie Herzog, who conducts survey, as “strong consumer sentiment” and “favorable weather” were flagged as traffic drivers. Non-alc bev sales increased estimated 4.7% over holiday weekend, per survey, with energy drinks leading way, up 8.4%, followed by bottled water (+7.2%), sports drinks (+5.3%), iced teas (+4.8%). Total CSDs edged up mere 0.8%. “Retailers were very upbeat about Red Bull, Bang and other emerging energy brands,” while “Monster underperformed the category” over the holiday, wrote Bonnie, tho she’s not letting that stall her recently upbeat mood on co (see below). MNST sales were up estimated 2% compared to 6.8% gain for Red Bull and +12.6% for emerging energy brands, led by Bang. Rockstar was off estimated 1.1%. Survey found several positives for MNST’s Bang Energy fighter, Reign, as nearly 67% of retailers indicated they were seeing “either moderate or very strong repeat purchases.” Also, “execution appears to be strong out of the gate,” noted Bonnie, “as nearly 90% of our retailers indicated that Reign has consistently been in-stock.” Another good sign for Reign: “74% of retailers” expect MNST’s BOGO promo for the brand to drive incremental sales. For most respondents, the BOGO seems to be running for month of Jun, tho there are exceptions, and considerable mix of opinion as to whether aggressive discounting is way to go for new superpremium entry, as discussed below. We should note that buyers’ comments, presented in raw form (that we’ve cleaned up a bit for grammar and spelling here) represent trove of in-the-trenches info, tho particular chains or regions are not identified.
As for the largest suppliers, Wells Fargo calculated from retailer reports that Coca-Cola sales were up 3.5% in c-stores over Memorial Day holiday, ahead of +2.7% gain for PepsiCo and 2.5% gain for Keurig Dr Pepper.
Strong Execution Stoke Reign Sell-In, but Bang Seems Unscathed; Some C-Store Operators Criticize Heavy Reliance on Price Actions The Bang/Reign faceoff seems to have been point of particular interest to Herzog, and to Wall Streeters in general, and survey explores battle in which Reign’s strong early sell-in and velocity so far don’t seem to be coming at expense of rival. “For a new product introduction it has done very well. Not to the level of Bang but doing well,” said one retailer. For most part, after lacking motivation to do right by earlier Monster launches, Coke system seems to have embraced Reign, meaning it’s not leaving sales on table due to out-of-stocks and other glitches. “Coke distributors were incentivized into stocking up. Best Monster rollout as far as in-stocks go,” reported c-store exec.
But counterargument could be gleaned from quite a few comments that aggressive promos are dumbing down what should be lucrative, exciting new segment. “The Reign BOGO is driving trial, but may be negatively impacting category basket and margin,” wrote one retailer. This from another: “It is driving sales but harming our register rings and GP (gross profit). They are running scared and dropping price rather than create marketing programs that create pull. Does Monster even have a real marketing plan aside from dropping price? C4, Celsius and Uptime are showing up more and more in key marketing and SELLING.” Similar skepticism from this retailer: “Monster had a so-called price increase and now they are promoting BOGOs and at levels they did not do before the price increase, it is one giant shell game.” (It should be noted, tho, that that’s in part because Red Bull didn’t follow increase.) And this: “This should be a premium product and discounting it that drastic right out of the gates is not the direction the brand should take.” One retailer said chain is abandoning BOGO because it’s unnecessary: “Currently have pulled back on BOGO and changed to Buy Two Get One, since it is doing so well.” Another lamented: “It is an act of desperation: quality has no competition and BOGOs are all part of the Monster deck of cards that will eventually implode. They are channel loading Reign and Monster and this will all catch up to them.”
Despite Reign’s strong start, there are many positives shared about hot Bang brand, which has also been running BOGO in much of US. “The surprise that everyone is talking about is Bang Energy. It hasn’t been since Body Armor’s release that a product has come out of the gate with such velocity and growth,” wrote a retailer. “Bang 2-for-1 promo is rocking the category. Reign isn't doing terrible but far behind Bang,” said another.
Other Comments: Hot Super Coffee; Kombuchas Winning Space; Consumers ‘Brush Teeth’ with Essentia Water Looking at other categories, one retailer cautioned that RTD coffee sales “are still healthy but (category) is starting to plateau.” Citing some hot up-&-comers, one retailer said Super Coffee is “growing very fast” as consumers embrace low-calorie, zero sugar proposition. “It is a MUCH healthier coffee brand that is really starting to harm Dunkin’ Donuts RTD, Starbucks, La Colombe and other sugary coffee indulgences.”
Among more comprehensive comments was this one. “We are seeing ‘Premium Energy’ change the energy drink business. Bang may be peaking as they do not have a legitimate distribution system. We are seeing large amounts (of) bright colored C4 cans being pulled from the shelves and being sold at premium profit and retails, generating greater sales and profit for retailers. Coke and Pepsi are getting hammered against Smartwater and Lifewater from Essentia Water. This lifestyle brand is gaining traction hourly, people drink it, cook with it, brush their teeth with it and love the brand. Monster is giving up shelf space for Reign and Java Monster is getting hammered by Super Coffee, one of the fastest growing coffee brands in the country.” (We’ve cleaned up spelling and grammar in citing these comments.) Another c-store exec reported that, “we added an innovation door and that seems to be where all the growth is coming from (enhanced waters, sparkling, kombucha.)”
Another c-store retailer, presumably in NY area, indicated that new franchisee Liberty Coca-Cola continues to struggle in early days. “They cannot fill the shoes of A-B or Big Geyser. Coke Liberty cannot keep Diet Coke and Smartwater on the shelves.” (That jibes with severe out-of-stocks we’ve observed from time to time.)
Keurig Dr Pepper unveiled corporate responsibility plan dubbed “Drink Well. Do Good” that addresses “urgent issue of plastic waste in the environment” and other hot-button issues. Among its new goals, it aims to reach 100% recyclable or compostable packaging by 2025, as well as 30% post-consumer recycled content by that year. By that time, KDP also aims to be sending no waste to landfills, obtaining all of its electricity from renewable sources and improving water use efficiency by 20%, among other targets. Other components of plan address coffee suppliers’ well-being and offering more lower-calorie options in its bevs . . . Nestle Waters North America’s Poland Spring brand has begun transition to use of recycled plastic (rPET) in its bottles, as it aims to hit 100% rPET across all its still water portfolio by 2022. The Stamford, Conn-based co said transition has begun with its 1-liter bottles as well as 900-ml bottles of new superpremium offering Poland Spring Origin that was unveiled in recent weeks (BBI, Apr 24). It’s part of broader initiative that NWNA recently unveiled of hitting 25% rPET across its US domestic portfolio by 2021 and doubling that by 2025.
After decade and a half building its Vita Coco brand, All Market Inc is launching its first non-coconut entry, an aluminum-bottled still and sparkling water called Ever & Ever that’s positioned as sustainability play in concert with Lonely Whale, non-govt org with whom co partnered a year ago on longer-term sustainability initiatives. Lotsa intriguing threads to this one: it jumps in on increasing backlash to single-use plastic that has bottles being banned at corporate campuses, municipal airports and other closed foodservice systems where it’s easier to control issue (BBI, Apr 22). Also, in launching with unaligned house Big Geyser in NY, it represents rare move by Vita Coco outside longtime distribution partner Keurig Dr Pepper – move likely to be echoed in Aug when All Market launches its hemp-infused Vita Coco extension, at time big CPGs like KDP are still skittish about nascent category. (AMI hasn’t yet discussed launch strategy for hemp.) And Ever & Ever launch continues diversification push that commenced with acquisition of guayusa-based energy play Runa, which was recently restaged and entered distribution system of KDP. Tho AMI is working hard to ignite new burst of growth for core coconut water platform in stagnant category via such innovations as Pressed extension and canner sparklers, it’s made no secret of desire to become more diversified innovation player (BBI, Mar 11 and May 6).
According to cmo Jane Prior, Ever & Ever came to life in just 4 months starting in mid-Jan, as part of intensive effort with agency Interesting Development, whose role in new “Impossible to hate” campaign behind Pressed we just highlighted. Ever & Ever uses reverse-osmosis water sourced from municipal systems and is going out in Ball’s 16-oz Alumi Tek bottles for $1.99 each and in 12-packs at $23.99. Widemouth, resealable bottle offers text-heavy graphics treatment in keeping with intensive messaging behind launch, informing shoppers that “This can is recyclable for all eternity.” Note that it’s by no means first entry of this kind, joining other sustainability-driven aluminum-bottle water entries like Proud Source and Path Water (BBI, Oct 4 and Oct 31). Ever & Ever is launching at retail in NY first, via indie house Big Geyser, as well as on Amazon, with other indie houses aligned with Vita Coco such as Lenore in San Diego and Columbia in Pac NW likely to be next, along with broadliner UNFI. (Prior said going outside KDP-owned bottling system, as it has in NY, hasn’t been an issue, and KDP is sure to be part of network by time brand goes national early next year.) Ever & Ever will seek to herald new “movement” called Question How You Hydrate that seeks to present sustainable alternatives to single-use plastic water bottles. That campaign is being orchestrated by Point Break Foundation and its creative agency Young Hero. Multiserve bottle is being eyed for Ever & Ever down the road. Prior, a former Red Bull exec who joined All Market a decade ago and recently was elevated to cmo, said All Market anticipates that Ever & Ever will yield a meaningful revenue stream but stressed that it’s positioned as complement to, not substitute for, refillable bottles like S’well. Website is DrinkEverAndEver.com.
As for partner Lonely Whale, it recently had big impact in highlighting devastating impact that disposable plastic straws are inflicting on sea animals, leading to outcry that has straws being limited or even banned in various cities and corporations. Together, Lonely Whale and various corporate partners including All Market will further herald broad issue with opening this Sat of pop-up Museum of Plastic in NY’s Soho nabe, illustrating “an ocean free from plastic waste and the solutions available to everyday consumers to inspire action and make a positive impact.” Prior noted that All Market partnered with Lonely Whale a year ago to address its own role in propagating single-use bev packages, in process becoming more aware of aluminum’s sustainability benefits, including high recycling rates via well-developed infrastructure. So Ever & Ever represents in some ways an “ode to aluminum,” with plans to surround it with enough storytelling to get message across.
Tho there’s case to be made for using sourced water for premium launch like this, Prior said that brings its own sustainability burden, not to mention greater logistical challenge in getting the water to copack partner, so Vita Coco instead is describing water as deriving from “infinitely renewable sources” (meaning municipal systems). As for Vita Coco brand’s own heavy reliance on Tetra Pak packages, which bring sustainability challenges of their own, particularly in downstream phase, Prior said that was among reasons partnership with Lonely Whale was forged. So like many other bevcos, it’s moved this issue up the priority list, seeking creative solutions.
Even after massive Morinda deal, New Age Beverage isn’t done with acquisitions. Latest one announced this morning brings handful of partner brands that further burnish topline while adding some key infrastructure that can support NBEV’s existing brands: Brands Within Reach, the marketing, sales & distribution agency erected over past 16 years by Danone vet Olivier Sonnois. Among client brands that BWR brings under NBEV umbrella – in synch with Denver-based co’s strategy of being one-stop shop within fastest-growing bev categories – are bottled waters Volvic and Evian (the latter in natural channel) Nestea and Illy Coffee. Terms weren’t disclosed. BWR is based in NYC suburb of Mamaroneck.
Olivier this morning phrased the deal as providing “plug-&-play infrastructure” to NBEV org that some have described to us as somewhat threadbare, while providing BWR with access to working capital to more effectively grow its partner brands. BWR has played a key role in incubating brands such as British sparkling line Belvoir, which helped inaugurate elderflower flavor craze, and Go Go Squeeze apple sauce snack. Among others currently in fold are Found sparkling bevs, St-Geron bottled water and Kusmi Tea, along with range of natural snack brands. For NBEV, revenue stream from BWR brands should take topline handily above $320 mil run rate. It owns brands like multilevel marketing play Morinda along with packaged bev brands Xingtea, Marley and CocoLibre, and operates DSD arm New Age in Denver, among other activities. Barely a coupla years ago, NBEV ceo Brent Willis had started with just an underperforming kombucha co, Bucha, doing scarcely more than $1 mil in biz.
Sonnois, who grew up helping his distributor father deliver beer and bevs on Caribbean island of Guadeloupe, spent a decade at Danone and 3 years at Hain Celestial before heading into more entrepreneurial space via branding/sales agency originally called AMI Imports. Over years it’s become reliable partner to CPG players looking to resuscitate brands like Evian, Nestea and Illy that have been neglected as part of larger portfolio within cos like Coke and Nestle Waters.
Manitoba Harvest has completed move to self-affirmed GRAS status for range of its broad-spectrum hemp extract items, including protein powders. Minneapolis-based co, which is being acquired by Tilray, and its supplier partner Hemp Oil Canada have completed process that began last Dec under FDA’s GRAS Notified scheme (GRAS stands for “generally recognized as safe”). “It was important we approach the launch of our Broad Spectrum Hemp Extract line with the same rigor around safety and efficacy standards that we apply to all our products,” said ceo Bill Chiasson.
“New lower prices,” reminds new Whole Foods flyer dated May 29 – Jun 11. What’s that mean on bev side? Some pretty aggressive prices. La Croix 12-packs are offered at 2 for $7, GT’s Enlightened, Synergy and Alive Kombucha sublines are 2 for $5, and Flow Alkaline Spring water goes for 5 half-liter boxes for $5. Honest Organic Lemonade is listed at a pair of 32-oz bottles for $4 . . . Body Armor, now moving thru Coke system, continues highly aggressive promos. BBI contact has sent pic from Publix in Fla showing dump bin featuring BOGO on Body Armor’s bigger 28-oz bottle at just $1.79, price often charged for core 16-oz bottle.
Daytrip, one of more broadly targeted, approachable cannabis plays among current wave of entries, has enlisted pair of key agencies as it gets ready to go live with its first entries on ecommerce tomorrow. After careful vetting process in which she solicited multiple bidders for each discipline, cmo Lynn Furge has settled on WPP’s SJR agency to handle pr chores while LMS will handle social media, with first finished products going out today to influencer roster to stoke buzz machine, initially behind sparkling water line with sunny California lifestyle positioning. Among extensive roster of bev clients whom LMS has serviced have been WTRMLN WTR, Core Hydration, Matchabar, High Brew Coffee and Wandering Bear Coffee. Furge also is finalizing in-market activation efforts that are likely to involve efforts like rolling skating troupes working boardwalks at summer meccas, in legal jurisdictions.
By now, co has undertaken first production run at undisclosed copacker and is set to go live online tomorrow, while continuing to assemble network of DSD partners in key metros like LA, Bay Area, Pac NW and NY. Those talks have been encouraging but there’s nothing to report quite yet, said prexy Joey Cannata. As reported, co will play in both THC and CBD bevs with plans to enter numerous other food/bev categories in coming years (BBI, Apr 8).
Another study, albeit quite small, has flagged potential heart health risks with consumption of energy drinks, following American Heart Assn study last year that found consumption could narrow blood vessels, reported MarketWatch. This most recent study included just 34 “healthy volunteers,” ages 18-41. They were asked to consume 32 ounces of energy drinks in under an hour over the course of 3 days. Study found that those who did so vs those who drank a placebo “spiked the risk of electrical disturbances in the heart for as long as 4 hours after the drinks were consumed,” according to study. Electrocardiograms found those who consumed the 32 oz in that time period had a “higher QT interval,” which if found to be either too short or long could cause heart arrhythmias, and also increased blood pressure. “The public should be aware of the impact of energy drinks on their body, especially if they have other underlying health conditions,” said lead author Sachin A. Shah, professor of pharmacy practice at Univ of the Pacific. People with either arrhythmias or high blood pressure should likely “limit or monitor their consumption,” added Shah. American Bev Assn came to defense of energy drinks, noting they “have been enjoyed by millions of people around the world for more than 30 years and are recognized by government food safety agencies worldwide . . . as safe for consumption.” Leading energy drink cos in the US “voluntarily go beyond all federal requirements when it comes to responsible labeling and marketing practices,” added ABA. That said, we should note that recent trend to highly elevated caffeine levels in some energy drinks fights assurances made years earlier by cos that they’d keep caffeine levels modest.