Beer Marketer's Insights
Honest Tea cofounder Seth Goldman and the Coke system vet he enlisted to grow it within Coca-Cola’s VEB system following brand’s acquisition are lookin’ to be sizable winners in IPO of altmeat purveyor Beyond Meat, which has gotten nod as best-performing IPO in nearly 2 decades after shares closed first day of trading last Thurs at 163% of offering price. It’s been trading at above $70 in recent days. SEC filings indicate that exec chmn Seth owned just over 1 mil shares (2.1% of total) prior to IPO, meaning on paper at least he would seem to have easily bested his Honest Tea exit. Meanwhile, chief growth officer Chuck Muth, who runs 40-person team at Beyond Meat, owned 218K shares prior to offering, 250K afterward. These figures don’t include options.
Copacker and Calypso Lemonade marketer King Juice has recruited longtime Coca-Cola Enterprises and Heineken exec Bridget Lasda to serve as chief commercial officer, as new team under private-equity owner Mason Wells continues to build its own team to run Milwaukee-based co. Her appointment, which we first spotted on LinkedIn, means end of 11-year run of div prexy Jeff Outlaw, who built extensive DSD network for brand and stewarded its entry into major grocery and mass merchandise chains. Reached earlier today after several other approaches in recent weeks had gone unanswered, Outlaw declined to comment, but later emailed statement confirming end of “an incredibly fulfilling journey,” adding: “The past year and a half being a part of the team assembled by Mason Wells has allowed me to stay affiliated with the brand I love, as well as learn from topnotch teammates. I look forward to seeing the next phase for Calypso and am excited to be pursuing other interests both inside and outside of the industry.” The teammates would include former Snapple chief Mike Weinstein, now on Calypso board, while the non-bev activities include writing hit country songs for Phil Vassar, Tim McGraw and others. (Despite his last name, he doesn’t write in “outlaw country” sub-genre, tho.)
In memo to trade partners that distributor shared with us, ceo David Klavsons said Bridget would take over responsibility for all distributors and retailers domestically and internationally while leading brand to next phase of growth. As for Jeff, he “has done an outstanding job building the distributor network and growing distribution nationally. He has supported the transition from a founder-led business to new ownership and prepared Calypso for the next phase of growth.”
Outlaw, who worked with founder Tim Kezman to build glass-bottle brand from a few thousand cases to 4 mil annually, has had diverse career that’s also included operating small beer and soda distributorships in Sun Belt. By now, Outlaw would have had to have been among last remaining execs from Kezman regime, with Mason Wells enlisting former Glanvia exec Klavsons as ceo (he was a copack customer of King Juice) and key members of Outlaw’s team including natl accts mgr Bill Stineman, marketing chief Andy Sands and field sales chief Paul Burleson all moving on by now. Thru deft flavor extensions, team under Kezman and Outlaw had turned what once was highly seasonal bev style into mainstay item, even in markets like Alaska, tho founder’s unwillingness to compromise on flavor with lower-sugar offerings has left brand a bit vulnerable to what we’ve called Great Sugar Freakout of 2018.
Dean Foods reported widened operating loss of $44.57 mil, even as financial media were reporting that co wasn’t having much luck finding a buyer. This was despite ceo Ralph Scozzafava’s argument that elements are all in place now for dairy giant to operate more effectively, with lower cost structure and reinvigorated innovation push behind its prime consumer brands, Dairy Pure and True Moo, and positive cash flow this qtr that will build thru remainder of year. As for co’s eyeing of “strategic options,” Ralph told Wall Streeters this morning that “we’ve been in conversations” with potential strategic partners, without offering more detail.
Net sales of Dallas-based co declined 9.4% to $1.80 bil. Operating income dropped $44.57 mil into the red, reversing $15.35 mil profit a year earlier. Net loss widened to $61.83 mil from $265K. Perhaps mollified by what they heard from mgmt, investors bid up shares in trading today after bashing shares by 7.7% in pre-opening trading.
Dean Foods seems to have hit a perfect storm of adversity, with milk consumption declining, a key customer – Walmart – deciding it could produce its private-label milk more cheaply itself than procuring it from DF and an explosion in demand occurring for the dairy-alternative options, a burgeoning category where DF had a strong position with WhiteWave Foods only for prior ceo to spin it off. It’s now owned by DF’s global rival Danone. Bloomberg reflected sentiment yesterday with story stating that “Analysts have been skeptical that Chief Executive Officer Ralph Scozzafava can engineer a turnaround or find a viable buyer for Dean, given the falling demand for milk, the company’s rising costs and debts that total more than $900 million.” Scozzafava put best face on situation this morning, describing “busy and productive” first qtr that yielded an adjusted loss in line with internal expectations, with sequential improvement occurring each month of Q1. “We believe we have passed the inflection point in our transformation,” he declared. But analysts’ skepticism was clear, with a couple pushing back at what they viewed as highly selective financial info that co offers each qtr.
After seeing Walmart decide to build its own plant rather than continue to procure milk from Dean, co has embarked on urgent reconfiguration of its mfg base, shuttering 7 out of 30 plants. To hedge vs pressures of private-label biz, DF has worked hard to build its Dairy Pure and True Moo as national brands, to #1 spot in white-milk and flavored-milk segments both in volume and $$. Dairy Pure holds 38 share of white-milk segment, per IRI data cited by Ralph today. Now co seems to be getting edgier with its innovations, along lines of True Moo After Dark extension that uses hero ingredients like cardamom and nutmeg or cottage-cheese-based Dairy Pure Mix-ins line that’s been extended with likes of Blackberries with Granola and Creamy Jalapeno with Tortilla Strips flavors. It’s also tilted its marketing more toward digital media to win over millennials now moving into parenthood stage. And while DF manages comprehensive DSD network (which also distributes Organic Valley items), it’s reaching beyond that to push harder into growing foodservice channel, claiming pair of key wins with unidentified casual dining and fast-food operators.
As for those proverbial strategic options, ceo emphasized several times that co is undertaking “thorough and comprehensive review and being open-minded,” meaning it will sell out if right opportunity emerges. “I think it’s fair to say we’re open-minded to look for things that advance and enhance our strategy” tho “it’s very possible we won’t do anything . . . We’ve been in conversations with some folks and we’ll leave it at that.”
Dean said in Feb that it had retained Evercore ISI and law firm Gibson Dunn & Crutcher to review options, and Bloomberg reported that turnaround specialists Alvarez & Marsal also are in the mix. News service also said debt holders are preparing to form group to hold talks with DF.
“Crossing the chasm” it’s sometimes been called in tech world: challenge of navigating from early adopters to broader constituency. In q&a with Bev Forum host Michael Bellas in Chicago last week, founder/chmn Mike Repole and his recently recruited prexy, Brent Hastie, offered absorbing glimpse into challenges of scaling a brand that already has gone further than any prior Gatorade challenger besides Powerade, but still has considerable pitfalls to navigate on way to holy grail of full exit to investor Coca-Cola. The focus now is on maintaining agility while instilling greater discipline and recruiting team equal to the different set of challenges that lie ahead. Along the way, Mike offered intriguing details about inception of brand, too. Repole/Hastie relationship dates back a decade to when Hastie took over floundering Vitaminwater brand at Coke and reached out for advice on how to get it back on track; the pair had awaited opportunity to work together again, Brent said.
By now parent co BA Nutrition is managing payroll of nearly 200 employees after recently completing pivot from KDP bottling system to Coke’s far more powerful one. So Repole surely is still feeling quite a bit of pressure. And as this article runs, owner of Repole Stable also will be coming off brief bout of depression, not having a horse in this past weekend’s Kentucky Derby after participating in 4 of last 8 derbies. Alternative to being depressed at being left out, he told audience, “is most anxious, anxiety-filled, stress-filled week.” So it’s “a no-win situation.” Knowing Mike, he bounced right back.
In discussion, Repole freely acknowledged missing adrenaline rush of bev biz after exiting Glaceau to Coca-Cola for $4.1 bil. He’d been #2 exec there, turning founder Darius Bikoff’s vision into practical reality, in process building team that later fanned out to all kinds of successful startups, much as P&G and Gallo people used to seed broader CPG sector. “Ten years went by like 10 minutes,” Mike said. He did other things (they included acquiring and then flipping Pirate’s Booty snack brand and, less successfully, launching short-lived eatery chain in NY called Energy Kitchen). He was well aware that, for entrepreneurs, if the success rate first time around is 1%, second time it’s “zero percent.” Still velocities of bevs are unmatched, even vs snack brands like Booty. “You might go 30 days without snacks, you can’t go 3 hours without beverages,” he reasons.
Body Armor’s roots go back to dinner Repole had with fellow bev tinkerer Lance Collins, with whom he’d talked about collaborating some day. Lance, who’s had unmatched eye for trademark, showed him a pair he’d landed: Core Water and Body Armor. “I wanted nothing to do with Core water (Mike didn’t say why, but remember, he’d already built Smartwater brand) and Lance went on to tremendous success” with brand, now owned by Keurig Dr Pepper. But he’d had conviction going back to 2010 that there was room for premium sports drink. (Recall, Vitaminwater recruited athlete endorsers and in many ways was marketed like sports drinks.) True, Gatorade has enjoyed “amazing run.” But it’s using same formula as at inception in 1965. So Body Armor represents more natural alternative for today’s athletes. As its TV ads concluded, “Thanks, Gatorade. We’ll take it from here.”
With Body Armor, Repole and Collins have been pursuing classic “landgrab” strategy of building aggressively ahead of demand, on national scale, in hopes that they can get brand to ignite. Of course, with their own resources and access to capital, they can sustain effort far longer than typical entrepreneur. Still, Repole says he was out-front with investors about challenge. “I let everyone know this was a 1% chance,” he said. Body Armor “would be the next billion-dollar brand or go bankrupt.” After all, 50 challengers had attempted to dethrone Gatorade over the years “and every single one has been knocked out – 2 years, $20 million gone.”
One key has been agility and fresh thinking. Brand was designed from beginning to be premium, with full shrink wrap, coconut water sourced from Indonesia and natural colors and flavors (tho it still doesn’t pass muster at Whole Foods). Flavor development has been driven by what works best with coconut water base, yielding offbeat flavors like Strawberry Banana, the top seller, that’s more familiar from new-age bevs than sports drinks. “So we are not necessarily just looking for orange and grape.” Co is agile on marketing side too: most popular TV ad during NCAA tourney resulted from mad scramble (see below). Broader idea, as Hastie noted, is to bring value back to category where dominant brands charge as little as 50-60 cents for 32-oz bottle. “From a system point of view, it’s bringing good margins back.” That also makes it easy to co-exist with Coke’s Powerade brand. “To me, we’re in the same category, but Powerade is such a value brand, we’re such a premium brand, I don’t think we really compete with them,” Repole said.
Taking over day-to-day reins from Collins, Repole had waited to launch light extension until core brand was on solid trajectory, but by now stevia- and erythritol-sweetened Body Armor Lyte is tripling in volume and building franchise, responding to consumers who want lower-calorie, lower-sugar option. By contrast, Gatorade Zero seems mainly to be cannibalizing core brand. Body Armor Sportwater extension was direct response to athlete endorsers’ requests, given that water is big part of what they drink. Name of company “is BA Sports Nutrition, not Body Armor,” Mike reminded. “It could be bars one day, protein, if it makes sense for the athlete we want to be there first.” Asked about energy, Repole demurred. “Right now we need to stay focused,” he said. “Energy plays a role for athletes” and “is in our mind, but we’re just scratching the surface here, there’s so much we can do with Lyte and Water.”
As they work to scale Body Armor from $250 mil at retail to $1 bil – the level at which KO counts new brand as true success – Repole and Hastie recognize they need to change things up. “There’s a strategy going from $250 million to $1 billion,” Mike said. During first phase, you’re playing month to month, “losing $5-10 million a year, that’s not really a good business model.” Hastie is drawing lessons in navigating that chasm by drawing on experience running Glaceau following Coke’s 2007 acquisition. By then, it was close to $1 bil, “but it wasn’t ready to be a billion-dollar business.” Working with recently hired coo Paul Lukanowski, a former Swire Coca-Cola exec, Repole and Hastie are working to bring in execs familiar with operating at that scale. Just the prior weekend, they were interviewing category management people, as they continue to personally vet every new hire. “For me, the most important thing is, when get to $1 billion, I don’t want to have to change one thing about the team,” Brent said. At least one thing has proved easier with Body Armor than during Glaceau days, Repole noted: “With Vitaminwater, we were always trying to figure out what’s the occasion, what’s the (cooler) door.” Of course, that’s straightforward proposition with sports drink directly challenging Gatorade.
Repole hasn’t disguised his ambitions. “I’ve been saying since 2012 we’ll be #1 by 2025, if not 2025 it could be earlier, it could be 2024,” he told Bev Forum audience. Asked what key to success has been, he said without hesitation, surrounding himself with great people. I’m sure there are a lot of very interesting stories about working for Mike Repole.” (BBI readers: buy BBI editor a beer, and he’ll tell you a few!) Bev entrepreneurs should be ready to “dedicate 20 hours a day, 7 days a week, with no vacation time” and put “personal life on hold for a number of years,” he said. Even that brings “very small shot” at succeeding. (His credo seems to be reflected in name of his investment vehicle, Driven Capital, and in now-retired horse called Outwork that was sired by another Repole Stable horse, Derby winner Uncle Mo.)
Luck/Trout Disco Spot Was Quick Drive to the Hole for Slamdunk Most popular Body Armor ad during NCAA hoops tournament featured disco battle between Andrew Luck and Mike Trout, in keeping with campaign’s theme that Gatorade represents old-fashioned view of world. “Andrew Luck and Mike Trout wouldn’t get into an outdated disco battle,” narrator intones as the pair try to outdo one another’s moves, “so why would they choose an outdated sports drink?” Turns out, marketing chief Michael Fedele reflected today, that execution wasn’t even anticipated to air until later in the spring. But Fedele supervised shooting of ad on Fri Mar 8, team edited it that weekend for unveiling to Repole and Hastie. “We collectively made the final decision to run the spot on March 12 and launched it Mar 20!” Fedele told us today. Ad was immediately trending on Twitter and was picked up by 17 different news and sports talk TV shows, he said. That’s how nimble cos operate, Fedele said.
With coconut water now having moved into decline, it’s been time for more radical innovation effort by coconut water category pioneer and leader Vita Coco. Some of seeds could be seen last year via series of small-scale tests of entries geared to recruiting newer, younger consumers. With all of them having clicked, Vita Coco this year is ready to go national with coconut-puree-infused Pressed entry in core Tetra Pak format, PET-packed version of coconut water that tested in 7-Eleven and canned sparkling entry that seemed to click both in Kroger and up-and-down-street in NY. “2018 was testing things for 2019,” as cofounder/ceo Mike Kirban summarized situation to BBI visitor on Fri. Onslaught of new products is requiring DSD partners to add as many as 18-19 new pallet positions in their warehouses, Mike noted. But wait, as late-night telemarketers say, there’s more. Coming down pike, too, will be hemp-infused line, one of first from established bevco. Throw in a packaging refresh, and it’s been period of intense activity behind scenes for NY-based co, which manages its marketing mainly internally via expanding apparatus run by former Red Bull exec Jane Prior that’s grown to even include media-buying activities.
Also in the mix has been effort to build momentum for acquired Runa guayusa brand and, as Mike revealed, to also internally create new brands in other categories to build out parent co All Market into broad-based bevco. Kirban wouldn’t disclose any details of forthcoming new brand, except to say we’ll be hearing about it in about 3 weeks. It’s result of realization that co likely should have moved more quickly into adjacent areas rather than sticking so narrowly to coconut water, Kirban indicated. Now All Market will rely for growth not just on coconut water but “a combination of M&A and new-to-the-world brands from Jane and her innovation team.” All told, Kirban is confident All Market will grow by double-digits this year as innovations on multiple fronts garner traction.
All Market, of course, is indie co that boasts Verlinvest and China’s Reignwood as key investors and moves most of its product via distribution ally Keurig Dr Pepper, which is not an equity holder. As Coca-Cola’s Zico continues to lose ground, Vita Coco keeps winning share, but in category that’s moved into decline, its premium status undermined by private-label and value brands that have proliferated at retail. It’s made for ongoing strategic challenge, softened by fact that Vita Coco operates profitably, pays a dividend and hasn't had to raise capital for years. Here’s rundown on activity emanating from loftlike space near NY’s Union Square.
Pressed: It’s the Coconut Taste, Stupid; ‘Impossible to Hate’ So far, the biggest outright success has been Pressed – “on fire,” Mike said when BBI visited on Fri. Pressed is bringing in younger, more Caucasian consumers to balance significant tilt brand has had with Hispanics and Asians for whom coconut water has long been a familiar ingredient. It’s done so by adding dose of coconut puree to recipe to dramatically dial up flavor most consumers identify as coconut, going out in core Tetra Pak box emblazoned with slogan heralding “coconut taste, coconut water benefits.” It’s 98% coconut water and goes out at same frontline price, $2.69 per half-liter box, as core Tetra line.
Why does that seem to have worked? Behind fast-growing new line has been simple, belated observation: tho coconut water category may now be in decline, coconut as a flavor has never been more popular, from favorite La Croix flavor among millennials to Bai’s Molokai Coconut flavor. In other words, “it took us 15 years to figure out that consumers wish our products tasted more like coconut!” Mike marveled. Recall that most coconut water marketers have long been resigned to assumption that ingredient’s polarizing flavor will exclude sizable portion of consumer population from developing an affinity for category. So simple step of dialing up the coconut flavor seems to have resolved issue.
So promising is Pressed, both in sales and in establishing a halo around entire brand, that Vita Coco now regards it as full-fledged platform and will build its entire summer marketing campaign around subline, including digital/social effort augmented by regional TV and out-of-home in select markets. It’s due to break in Jun. While Kirban wasn’t ready to discuss premise, it no doubt will seek memorable way to express theme that’s begun to emerge on POS materials that new entry is “Impossible to hate.”
‘Make It Taste Like Weed,’ Was Edict for Hemp-Infused Bev; Likely to Go Outside KDP for Initial DSD Distribution Vita Coco Infused with Hemp represents evolution of concept that was teased a few weeks ago at Natural Products West as CBD item (BBI, Mar 11). Tho it’s still in development, it’s “broad spectrum” hemp brand using 20 mg of core ingredient from credible supplier whom Kirban wasn’t ready to ID yet, at time there’s widespread suspicion about caliber of some ingredients at center of bev launches. And in contrarian move, at time many new entrants are formulated like sparkling water, Kirban demanded that staff “make it taste like weed” – not in sense of bong water, but with earthier, more functional-seeming flavor. It will go out at $4.99 per 11-oz can in initial flavor range of Cloved Orange, Cardamom Lemon and Ginger Apple. It contains 49 calories (4 g of sugar) per serving. Asked about distribution plan, Mike cited significant regional DSD partners that will build solid presence up-&-down-street in key markets. He wasn’t ready to identify them, but they almost certainly wouldn’t seem to include internal KDP bottling operations, given significant legal and regulatory uncertainty still surrounding segment. “A calculated risk,” Mike allowed, acknowledging that underpinned move away from citing CBD on package. As noted, this makes Vita Coco one of most significant established bevcos to enter nascent segment.
Runa Rolls Out Thru KDP, Adds Polar; Enlists Subway Dancers to Emphasize It’s ‘New Energy, Please’ It’s hard to recall that guayusa-based Runa brand launched by pair of Brown Univ grads once commanded lotsa excitement as potential challenger to yerba mate pioneer Guayaki and vanguard of natural-energy movement. But after raising in range of $30-40 mil in growth capital, brand’s founders have moved on, its biz as supplier to other tea cos has withered away and natural energy as a category has yet to decisively ignite. So finding further capital proved difficult – clear case of “investor fatigue,” as Kirban, who was a personal investor, put it. Still, “I think they were on to something,” tho expense of building out supply chain wasn’t supported by brand growing fast enough on consumer side. By now, emphasis at Runa has tilted toward canned sparkling energy line rather than noncarb energy entries and glass-bottle teas.
Enter Vita Coco, which last spring acquired struggling brand from investors (BBI, Jun 20), taking control of both ongoing biz and trademarks as well as painstakingly built supply chain in Ecuador. No staffers were retained, with sales and back office operations folded into All Market’s and brand moving immediately into profitability. Vita Coco hasn’t disclosed terms of deal, but Mike assured that if brand turns corner “it will work out great for shareholders” (presumably including himself) via earnouts embedded in deal structure. All Market has moved quickly, launching extensive digital campaign behind brand under rubric “New energy, please” with high-energy, urban vibe thanks to casting of “It’s showtime!” subway dancers recruited via open casting call. Extensive out-of-home effort in core NY market also is in mix. With coordinated rejuvenation effort under way, Runa recently won presence in KDP’s company-owned bottling system, putting it into system in key markets like NY, LA and Fla as co’s first plant-based energy drink (BBI, Apr 8). A couple of weeks ago, KDP-aligned Polar Beverage in New England came aboard, too. Intention is to move brand quickly from near-exclusive reliance on natural channel.
Other Activities: Packaging Refresh, PET, Sparkling, Coconut Milk, Espresso, Smoothies As for the packaging refresh, which is currently bleeding out across various sublines, Kirban readily allowed it’s something he long resisted out of fear that it would result in “Trop moment” that unwittingly undercut painfully crafted vacation-on-a-beach vibe of brand. (He was referring to ill-fated – and quickly unwound – rebranding of Tropicana by PepsiCo some years back.) New graphic treatment modernizes look and makes it bolder on shelf but with retro vibe . . . PET bottles entered 7-Eleven last year as exclusive, took Vita Coco from declining to +40% there, and Tetra items happily also started growing again rather than being cannibalized. So now PET is launching across all convenience, even tho Kirban allows it’s not format he loves, on sustainability grounds . . . Canned sparkling line, a natural for distribution partner whose main stock in trade is CSDs, has headed into Walmart and Whole Foods nationally, entering most major chains via DSD network (except direct-ship customers like Kroger) . . . By now Coco Community that was intended as Vita Coco’s response to surging Harmless Harvest at refrigerated high end of market has more or less run course, Kirban acknowledged, and coconut milk item is standing pat via NY presence thru Dora’s Naturals DSD house, some regional retailers like Stew Leonard’s and Amazon.com. “Not a big focus,” he said, given more intriguing opportunities discussed above on shelf-stable side . . . Over in UK, tho, All Market has reprised its failed acquired Coco Café espresso line as Cold Brew Coffee with Coconut Milk, in both single-serve and multiserve versions, joining multiserve array of Original and Almond milks. Eventually it should make its way to US. With smoothies still a growth segment in UK, All Market is also launching smoothie line. By now Vita Coco is marketed in US, UK, France and China.
Jones Soda Stays Flat in Q1 at $2.8 Mil; 7-Select Line Softens but Contract Is Extended 2 Years
Jones Soda turned in another qtr of flat growth, notching $2.8 mil in Q1 revenues, but touted continued progress on future growth vehicles such as its fountain program and Lemoncocco Italian-style refreshers. The flat rev figure included 52% increase in fountain biz, 13% boost in Lemoncocco, offset by 18% decrease in 7-Select controlled brand offered to 7-Eleven chain as partners reduced limited-time offers in order to focus on 3 highest-velocity core skus, augmented soon by new flavor, Airheads Pineapple Cherry Blast. Partnership seems to remain healthy, with partners re-upping for another 2 years and 7-E offering full shelf to Jones line (including exclusive watermelon flavor) in resets of 700 stores in Canada. Special packs commemorating retailer’s 50th anniversary will go on shelf there in May. With acquisition a year and a half ago of 1,100-store Sunoco chain, 7-Eleven is even more promising partner with which to be aligned, as ceo Jen Cue suggested.
In qtr, gross margin weakened a bit to 20.1% from 21.7% a year earlier, and net loss widened to $796K from $469K. But Cue emphasized that seeds Seattle-based co is planting in growth segments are continuing to sprout, even as core bottled line headed into 1K+ Walmart locations late last month, all presaging a future lift in sales.
On innovation front, JSDA is bullish about Ginger Beer launch, which should play well as both mixer and refresher, and has received encouraging feedback on ongoing transition to more natural ingredient and color base. Cue indicated that core line has been segmented now into Classic and Exclusive sublines, with Classic entries like Root Beer, Cream Soda and Orange aiming to reach all-natural status by next year, while the more fun-for-you Exclusive subline in flavors like Berry Lemonade will go natural “as much as possible” without necessarily achieving totally clean status. Jones is seeking to reduce sugar content in both lineups, Cue said.
Lots more Beverage Forum coverage due in upcoming issues, readers!
Coca-Cola’s Jim Murphy just became a futurist. KO vet whose most recent assignment has been vp for strategy & venturing at co’s VEB incubation arm, is seguing on May 16 to recently established Global Ventures team as vp, global venturing and emerging growth platforms, a newly created post with mandate of serving “as a futurist who thinks beyond our current operations and investments,” per memo signed by Global Ventures prexy Jennifer Mann, to whom he’ll report. Global Ventures, of course, is unit set up to steward quasi-indie acquisitions and investments like Monster Beverage, Innocent Juice and Costa Coffee.
Murphy, a 24-yr KO vet who’s credited with having played key role in forging investment in Monster Beverage a few years back, is charged with “shaping our investment strategy in areas that are new to the company, along with coordinating our local venturing work around the world,” Jennifer’s memo indicated. He’ll also collaborate with bottlers and internal groups at KO, including M&A, strategy and marketing. Memo notes that Murphy had also been involved in transactions that brought Costa Coffee, Innocent juice co and Dirty Lemon parent Iris Nova under Coke umbrella.
Now that Coca-Cola has devolved lotta innovation leadership to local level around the globe, Murphy’s job is “to ensure we more clearly focus on connecting our existing, local efforts, while also taking a longer-term view of growth opportunities worldwide.” Hence the “futurist” role.
As for VEB, that seems to have been considerably downsized over past year or two, tho Coca-Cola North America indicated it will name a successor to former VEB prexy Scott Uzzell, who left for ceo role at Converse, “in the near future.”
Monster Beverage turned in strong first-qtr performance, with its 11.2% sales surge blowing thru Wall Street expectations in part on strength of Reign sell-in and allaying concerns among some that its biz is undergoing fundamental challenge. “With concerns about the health of the business, topline was the focus and they beat,” wrote Consumer Edge Research’s Brett Cooper. Added RBC Capital Markets’ Nik Modi: “With strong revenue delivery in the US over the past few quarters, we are hoping investors can refocus on the long-term bull case: Monster’s international opportunity.” MNST shares were soaring in early trading this morning.
Net sales surged 11.2% to $946 mil. Gain was comprised of 11.5% gain for Monster Energy segment (including newly launched Reign Total Body Fuel) to $870.4 mil and 6.9% gain for Strategic Brands segment (NOS, Full Throttle, Predator, Burn and other brands picked up from Coca-Cola) to $70.3 mil. Were it not for adverse $18.2 mil impact of foreign exchange, Monster Energy div gain would have come to 13.9%. On other hand, if you back out the $25.5 mil attributed to Reign sell-in, core Monster brand was up lesser 8.3%. Strong gains continued in overseas markets, +17.4% to $284.1 mil, albeit at tradeoff of weaker gross margin. Operating income rose 11.3% to $311.5 mil.
And new qtr is off to strong start, with chmn/ceo Rodney Sacks saying Apr sales grew by 15.6%, +18.9% on forex-adjusted basis (boosted by extra selling day). Innovations on core line like Ultra Paradise, Swiss Chocolate flavor of Java Monster and restaged and extended Dragon Tea should contribute further momentum, as will unspecified new items in queue for launch in coming months, ceo indicated. Reign is showing signs of solid acceptance by Coke bottlers and retailers, and will get further lift from buy-one, get-one promo planned for later this qtr. So even with Bang and other performance energy brands continuing to rack up big numbers, Monster’s own brisk ride should continue.
On conference call late yesterday afternoon, Sacks was restrained in his remarks about Reign, saying “initial results have been positive” and warning that it’s early days, with brand in only half the accts that carry Bang. Too early to say which brands are taking share from which brands, he said in response to question. Vice chmn/prexy Hilton Schlosberg went a bit further in saying Reign “exceeded our expectations.” Hilton said buy one get one deal was part of original launch plan rather than response to anything co has encountered in market.
Far from pooh-poohing performance energy segment, Sacks in his comments seemed to acknowledge it’s for real, with retailers increasingly treating it as separate subset in space allocation decisions. “Most retailers are agreed that there should be additional space allocated to this high-performance category, it is a profitable category for the retailers, it is a higher ring,” and Monster anticipates more space being dedicated to it, Rodney said. “We believe overall we’ll end up with increased shelf space.”
As for another point of recent concern among Wall Streeters – that last Nov’s 4% price hike isn’t sticking after Red Bull failed to match it –MNST brass indicated that things have been more or less working out according to plan, without need to offset frontline hike with increasing promos. Pressed by analyst, Schlosberg allowed that “we are watching the market and watching Red Bull carefully and will make adjustments if we think it will have a long-term impact. But the majority of Red Bull’s growth is actually coming from innovation.” (In refreshing contrast to execs at most major cos, Hilton had no problem referring to Red Bull by name, not once using euphemism like “our main competitor.”)
No comments from Sacks and Schlosberg, or questions from analysts, about Coke relationship, at time partners have been proceeding thru arbitration over KO’s launch of Coke-branded energy play in overseas markets (they’d originally indicated they expected resolution by Apr), nor of approaching deadline for KO to up its equity stake in MNST on pain of losing board seat. First-qtr termination expenses came to $10.7 mil, most or all of that presumably going to Kalil in Ariz and Big Geyser in NY, last non-Coke distribs in US to be dropped in favor of red system. Interestingly, tho Coke just acquired UK’s Costa Coffee and is making plans to use that as platform for RTD entries, Sacks indicated he sees continued promise for Monster’s own coffee lines in Europe, with plans to expand Espresso line on Continent and to potentially launch other coffee items into UK market.
Reuben Canada, former patent attorney who took left turn into bev space with award-winning ginger elixir called Jin+Ja that might be viewed as early entrant in non-alc cocktail space, died on Apr 24 at 41 in his family home of Lithonia, Ga. “He lost his battle with mental health issues and committed suicide,” per announcement posted by his family on MenaFN biz news site. Tho Jin+Ja remains modest in size, charismatic Canada drew broad attention in winning Specialty Food Assn’s first national “My Story My Ad” contest, as well as via CNBC and USA Today profiles, and he also won Sofi and other awards for complex Jin+Ja recipes.
Leading up to cannabis bev legalization in Canada later this year, Moosehead Breweries, one of country’s oldest breweries, has entered into definitive agreement with Sproutly Canada “to form an exclusive joint venture to develop, produce and market non-alcoholic cannabis-infused beverages in Canada,” cos announced earlier this week. Deal is structured as 50/50 equity ownership to be run by Moosehead supply chain vp Matthew Oland as ceo. (Matthew is member of ownership family at Moosehead, but before joining family biz he spent 15 years at Canadian operations of Heinz, Colgate Palmolive and Smucker, his LinkedIn page shows.) Moosehead has exclusive rights to Sproutly’s “proprietary, naturally produced water soluble cannabinoids” for 5 yrs with ability to extend another 2 yrs. Brewer is to provide “R&D, operations, procurement, finance and distribution” help in developing “clear cannabis beverage that is much easier and faster to formulate than its competitors.”
As our sibling publication Craft Brew News noted, Moosehead has been around for 150+ years and 6 generations of family ownership under the Olands, selling over 5.8 mil cases (over 420K bbls) of beer per yr in Canada, US and 15 other countries, per release. Recall, Moosehead distributes Boston Beer (Sam Adams) products in Canada as well. But like so many other brewers, Moosehead is lookin’ beyond beer in this next phase. Co feels it’s “uniquely positioned to be a leader in the cannabis beverage category,” said Moosehead ceo Andrew Oland. “We are very selective about new business opportunities,” yet “after a significant amount of due diligence on Sproutly’s APP technology . . . vs other competitive technologies, we are excited to announce this joint venture.”