Beer Marketer's Insights
In humbling denouement to now-renounced strategy of playing in burgeoning refrigerated-food space, Campbell Soup said it’s unloading its Bolthouse Farms cold juice biz to LA-based PE shop Butterfly Equity for $510 mil – about one-third the $1.55 bil price it paid just 7 years earlier to acquire it. Butterfly partner Jeff Dunn, who ran Bolthouse during its headiest growth days, will be restored to ceo role at co that employs about 2,200 at facilities in Bakersfield, Calif; Hodgkins, Ill; Wheatley, Ont, and Prosser, Wash. Deal is anticipated to close this summer.
In annals of failed bev deals, Bolthouse acquisition may not rate as bad as $1.5 bil in equity that Quaker Oats expunged from Snapple before unloading iced-tea brand for $300 mil to Nelson Peltz turnaround team (which restored all the lost value in a few years), but it similarly reflects the operational subtleties that can undermine what seems like convincing strategy on the surface. In Snapple’s case, it was Quaker’s inability to recognize the benefits of DSD and need for constant innovation, while in Campbell Soup’s view it was the vagaries of managing carrot crop cycles and other fundamentals at Bolthouse, at time then-ceo Denise Morrison recognized need to balance co’s shelf-stable soup and snack brands with entries playing in groceries’ perimeter aisles. Including some smaller and similarly divested units like Garden Fresh Gourmet, the Campbell Fresh unit anchored by Bolthouse Farms did $970 mil in sales in fiscal 2018, meaning the purchase price is less than 1X multiple, in a segment that’s not only operationally complex but also suffering from consumers’ increasing skittishness about sugar, even in products that may be nutritionally dense, as many of Bolthouse’s are. But it boasts robust distribution network and presence in higher-value segments like plant-based protein, making risk worthwhile to Butterfly brass. “We are thrilled to partner with a vertically integrated produce and fresh food leader with a history as rich as Bolthouse Farms, and we believe the company’s future is very bright especially given the continued rise of plant-based food in the diet of today’s consumer,” said cofounder Adam Waglay.
Move gets Dunn back to position running Bolthouse, where he’d thrived earlier in career. He’d had 7-year run at Coca-Cola before seguing to ceo of Ubiquity Brands for 2 years and then landing at then-independent Bolthouse, where as ceo over 6+ years he offered stiff challenge to Naked and Odwalla and drew Campbell’s notice. He stayed course there for several more years, taking spot running Campbell Fresh unit built around Bolthouse deal with additions like Garden Fresh Gourmet. But things unraveled at Bolthouse, with crises ranging from protein shake recall to customers alienated by substandard carrots CPB tried to sell them after disappointing crop. Eased out of Bolthouse in favor of team shipped in from CPB hq in Camden, NJ, Dunn pivoted to running Juicero, Internet-aligned countertop juice-making gizmo in which held CPB held minority stake via its Acre Venture Partners fund that he’d cofounded. That proved famously short-lived role, as struggling co unraveled after media reports that you could get same results squeezing its juice packets with your bare hands as with high-tech device costing $400. The snafus cost Morrison her job and new mgmt team has since swung back to center-store focus with acquisition of Snyder’s-Lance snack co, deal that Morrison initiated in her waning days at co.
Butterfly Equity, founded by former KKR partner Waglay and ex-Riot Games exec Dustin Beck, has focus on what it styles seed-to-fork restaurants, agriculture & aquaculture, food/bev products and food distribution. So far, Butterfly has invested in restaurant concepts under names Modern Market and Lemonade, along with Pacific Aquaculture, Mexican bass-farming co. It numbers among its partners several with deep restaurant experience such as former Olive Garden and Nestle exec Larry Kurzweil.
Riff, the cold-brewed coffee play out of Bend, Ore, is making a geographic leap from rainy Oregon to balmy Arizona, thanks to landing berth at Hensley Beverage, big Bud house that’s done very well by NAs over the years. Hensley has picked up brand’s core lineup of Off the Cuff, Paint the Town, Arm in Arm and lower-caffeine Southpaw flavors, all of them featuring only coffee and water with no sugar or creamer. Line goes out in 10.5-oz glass bottles, 20-liter kegs in regular and nitro formats, and bag-in-box.
Former college hoops coach and recruiter named Yanni Hufnagel has been pushing out RTD organic lemon infusion called Lemon Perfect Cold Press Lemon Water that attempts to offer functionality of Suja and flavor of Bai, at approachable price of $2.49. So far, LA-based entrepreneur claims to have raised over $5 mil from array of high-profile investors including Creative Artists Agency execs, NBA stars like Blake Griffin and Spencer Dinwiddie and C4 creator Doss Cunningham. He’s prepping his first flavor extensions as co gets ready to move beyond LA base reached via DSD partner LA Distributing. Next stop: NY, Hufnagel’s hometown, via Rainforest Distributing, targeting Jun 1 launch.
The product packed in tall straightwall 12-oz plastic bottles is made via HPP process using organic lemons sourced in Southern Calif and sweetened with erythritol/stevia blend. So far it’s out only in Just Lemon flavor but additional entries on way include Blueberry Acai, Pineapple Coconut, Strawberry Acai, Dragonfruit Mango and Watermelon Lime, per website at LemonPerfect.com. It’s carried by regional natural grocers like Bristol Farms, Erewhon and Lazy Acres. Core message is that's it bright-tasting, clean hydration option with bevy of naturally occurring antioxidants and electrolytes.
The fast-talking Hufnagel, who grew up playing lacrosse in NY’s affluent Scarsdale suburb, spent decade as itinerant college hoops coach and recruiter, starting as student mgr at Cornell and moving on to summer internship with NJ Nets and stops as assistant at Oklahoma (where he worked with Blake Griffin), Harvard (Jeremy Lin and Wesley Saunders), Vanderbilt, UC Berkeley (where he helped recruit Jaylen Brown and Ivan Rabb) and Nevada/Reno. Along way he was cited as top recruiter by likes of ESPN and CBS News. In followup call Mon to quick intro at Expo West last month, Yanni chalked up that rep to being “very authentic” in convincing prospects and their families that “nobody on the planet would work harder” to make them successful – skill set he says is proving highly relevant in pitching retail buyers these days.
It was while coaching at Nev that friend showed him manuscript of book he was writing on ketogenic diet that prompted Hufnagel to begin squeezing half a lemon into water every morning. Seeking more convenient RTD option, he dropped by Reno’s sole Whole Foods store but only found Suja’s Lemon Love sku, steeped with cayenne and costing $6 per bottle - $42 per week if Yanni maintained daily ritual. Meanwhile, “my players and me were swilling Bai in the locker room,” so notion hit of melding Suja Lemon Love functionality with Bai flavor impact into approachably priced bev. “Everybody loves lemonade,” he figures, but not with tons of sugar. So Hufnagel moved back in with his parents and spent next 6 months teaching himself about lemons and building CPG brands. Resulting entry, Lemon Perfect, “provides the same experience without sacrificing the functional integrity,” coming in at 5 calories and no sugar. It goes out at $2.49 in cold box aside cold-pressed drinks that these days command $4 and up. He’s just as happy to see Lemon Perfect merchandised alongside Bai and Core Organic, priced within 25 cents of those brands.
Hufnagel says he’s raised about $5 mil so far via seed round last year and bridge convertible note in recent weeks, with Series A due for pricing later this month. He’s sole full-time employee but claims impressive arsenal of investors so far. They include Jordan Schultz, son of former Starbucks ceo and presidential aspirant Howard Schultz, and Critical Mass Group’s Dan Morad and Rob Alshuler, who’ve been involved in brands like Rise Brewing, OWYN, Yerbae and Flying Embers and helped Lemon Perfect map out SoCal launch. Among athletes in mix are Piston’s Griffin, Nets’ Dinwiddie, Trail Blazers’ Meyers Leonard, Warriors’ Damian Jones and Lakers’ Josh Hart. Also in are Yanni’s former boss at Berkeley, Cuonzo Martin, now coaching Missouri, and Cal women’s basketball coach Lindsay Gottlieb. Michael Levin, co-head of CAA Sports, and top CAA agent Kevin Huvane should also be able to open doors. And Austin-based VC firm LivWell Ventures, vehicle of Nutrabolt owner Doss Cunningham, is partner; Doss, of course, has been riding substantial momentum lately with his C4 performance energy brand. Among advisors is Soylent sales chief Melody Conner and PointState Capital’s Zach Schreiber.
Hufnagel, who’s about to start staffing up, readily admits to share of hair-raising moments in short career in bevs. In fact, he aborted launch last Mar when first bottles rolling off line didn’t look at all like they did on computer screen of designer, a DTC specialist. In real life they came across as overly medicinal, a point noted to Hufnagel in frank discussion by his stevia and erythritol supplier, Pyure’s Ben Fleischer, Yanni recalled. To disappoint 40 investors – and retailers Bristol Farms and Lazy Acres, who’d authorized brand – was “a bet-the-company moment,” he recalled. Still, he pulled plug and recruited Frank Collective of Brooklyn and LA for redo. So far, all signs are good, and brand seemed to capture some buzz at Expo West. Expansion to NY is imminent and UNFI will take brand to chains outside LA and NY. More tweaks are afoot: heralding antioxidants (vitamin C) and electrolytes on front panel, and more explicitly denoting that each bottle contains half a lemon’s worth of juice.
Coca-Cola is rethinking brand architecture of recently extended Smartwater brand as it struggles to deal with incursions by Essentia and other brands, Macquarie’s Caroline Levy is reporting after working her red system contacts. Rapid addition of sparkling and then antioxidant and alkaline versions to Smartwater franchise has confused consumers, she reports, prompting Coke team to undertake packaging rethink over next 6 months that will group them as more of a family.
On innovation front, both Sprite Lymonade and Orange Vanilla Coke have moved so fast out the gate that concentrates of both are out of stock, Caroline reports. And tho it’s early days, so far she’s bullish on Monster’s new Reign performance energy extension, particularly in larger-format stores where Bang Energy is not yet a formidable presence, with Coke planning “heavy investment in large-format chains this summer in order to improve momentum in non-carbs and energy.” Big-box stores also play to Smartwater’s strength vs Essentia, she notes. Early movement of Reign has been encouraging, with repeats kicking in, Caroline reports; that jibes with our own info that initial inventory sold out in matter of days in early markets like Portland, Ore.
Just coupla days after we reported on Amazon’s struggles in private-label biz, word emerges that it’s offering entry in that toughest category of all for PL in bevs: energy drinks. Its Solimo Energy Drink, in Red and Silver flavors, both zero-sugar, is going out at aggressive price of $14.99 per 12-pack via Prime Pantry. “If you like Monster Energy’s Zero Ultra, Sugar Free Energy Drink, we invite you to try Solimo,” says online copy. Word of entry apparently prompted brief panic today among some Monster Beverage investors before shares bounced back, but odds of success would seem to be steep: after all, Amazon has struggled with PL entries in general (BBI, Apr 9) and energy category historically has been among least receptive in bevs to PL offerings, along with beer. Further, Amazon is employing same brand it uses for toilet paper, sanitary pads and other prosaic categories, in category that’s still heavily image-driven and premium.
New entry doesn’t shy away from using taurine, in energy blend that also includes ginseng and guarana, clocking in at 152 mg of caffeine. The 10-calorie items use sweetener blend of erythritol, ace-K and sucralose. As noted, Amazon has deployed Solimo brand in variety of categories, including body wash, toilet paper, drink mix powder sticks, vitamins and K-Cup compatible coffee capsules. It earlier got closer to energy drink segment with powdered vitamin item offering energy lift.
KDP Has No Love for Allied Brands, Body Armor Contends after Being Sued for Jilting It for Coke
How much does KDP love its allied brands? Speaking to investors, co has argued that it values them as useful growth tools in up-&-coming categories, but will only invest in those in which it can obtain clear path to ownership to avoid being shaken down once those brands have ridden KDP system to decent scale. (Key word: Bai.) But Body Armor parent BA Sports Nutrition, in public response to wrongful termination suit filed by KDP bottling unit over brand’s departure to Coca-Cola, seems to be going out of its way to portray KDP team led by ceo Bob Gamgort as actively antagonistic to allied brands, contending they’re “not a priority, and of no interest to KDP.” It’s odd development in transition that seemed to be done and dusted by now, with Body Armor racking up big gains via Coke system, in the process rewarding KDP as continued investor in co. Of course, some may recall that Body Armor chief Mike Repole was at receiving end of similar suit filed a decade ago by small distributors dismayed about sale of Glaceau, which he ran with founder Darius Bikoff, to Coca-Cola. So this situation is nothing new to him.
The suit filed by KDP’s American Bottling Co unit has been rejected as baseless by BA, which cites contract’s “clear and unambiguous language” indicating change of control that occurred when Keurig Green Mountain acquired Dr Pepper Snapple voided BA’s distribution deal with DPS. “Body Armor and DPSG had a good partnership, but the Keurig acquisition resulted in a clear change of control and management of the company,” BA response reads. “In fact, the majority of the DPSG senior leadership team, including then chairman and ceo Larry Young and then cfo Marty Ellen left the company and an entirely new leadership team led by Bob Gamgort, ceo of KDP, was put together.” BA statement goes on to say that “following months of numerous meetings and conversations after the acquisition with Gamgort, JAB Holding Company executive David Bell and the new KDP leadership team, Body Armor was left with the clear and unmistakable impression that Allied Brands were not a priority, and of no interest to KDP. In fact, in numerous conversations that Repole had with Gamgort, Gamgort stated that the Allied Brands were 1% of the volume of DPSG and 99% of the noise – indicating his frustration caused by the Allied Brands. Gamgort also stated to Repole that the Allied Brands were not even a part of 2019 planning.” BA statement also notes departure of another allied brand, Fiji Water, following acquisition. Of course, KDP moved quickly to prove it wasn’t broad exodus, acquiring allied partner Big Red, bringing in Evian Water as distribution-only partner and cementing ties to Core Water and its founder Lance Collins (a partner in Body Armor, too).
Neither co seems to be offering much, and we haven’t been able to track down legal papers so far, but a coupla theories seem possible, beyond legal merits of suit. One is that suit is intended by KDP to assure investors who’re nervous about brand departures like Fiji’s and Body Armor’s that KDP isn’t blithely letting its most promising brands escape. If so, BA’s pr response seems designed to demolish any such view. Or suit could be intended as signal to other allied brands that they won’t get away so easily if greener pastures beckon elsewhere.
Meanwhile, BA notes that KDP continues to benefit from brand’s torrid performance, as owner of 10% stake in co, placing it 3d in cap table behind Repole and KO. Initial investment of $26 mil by predecessor co DPS ballooned to $200 mil upon Coke’s entry as investor. And of course, KDP did receive buyout with change of distribution, to tune of $35 mil, per BA statement. “We are extremely confident that KDP will see a significant increase in the value of its investment now that Body Armor is in the Coca-Cola network,” BA says in language that may or may not be intended to sound cheeky.
‘Stupid Money’ Not a Factor This Time, It Seems BBI editor happened to be in gallery when Mike Repole was called to stand during lawsuit a decade ago by Conn distributor B&E juice vs Coca-Cola and Glaceau following KO’s $4.1 bil purchase of marketer of Vitaminwater and Smartwater brands. Indie wholesalers were aggrieved because, only months earlier, Glaceau brass had assured its wholesalers that co would be such a reliable future partner that the distributors could be rebranded as “the Glaceau network.” What about those promises, B&E lawyer wanted to know. How could co then sell out? Memorable reply from bev vet with rep for blunt honesty: “You can’t say no to stupid money.” Tho they might have made some minor concessions to get suits out of the way, Coke and its new Glaceau unit were generally viewed as having prevailed in that litigation.
RTD line called 8th Wonder Superfood Tea is offering iced tea with a boost, in quest of “earth-conscious, health-focused” elixirs. Line was launched by youthful entrepreneur named Parker Rush, just a couple of years out of college, who was juicing for cancer patients and found himself wondering why not offer lower-sugar bev that harnesses tea to superfood ingredients like ginseng or ashwaganda? Result is 4-flavor line in Snapple-style 16-oz widemouth bottles that by now have radiated out from co’s Denver base to Pac NW, Ariz and Texas.
TV ads, paid for by Ax the Bev Tax Coalition “backed by the American Beverage Association” will urge Philadelphia residents to push city council members to reverse controversial 1.5-cent-per-oz tax pushed thru by Mayor Jim Kenney, per Philadelphia Tribune. Group will run ads at cost of $408K over next 2 weeks as mayor faces 2 primary challengers who are against the tax. “The best way right now to repeal the tax is for City Council members to understand from their constituents that the tax isn’t needed and hurts Philadelphia’s working families,” said Anna Adams-Sarthou, a spokesperson for ATBT Coalition. Kenney’s campaign is using the ads for its own fund raising purposes, urging donors help him fight back against Big Soda. Recall that city council members all facing primary elections later this month agreed to study economic impact of tax (BBI Mar 28).
Laird Superfood of Sisters, Ore, has expanded its Instafuel line with a matcha entry called Matcha Instafuel that pairs Laird Superfood Original Creamer with powdered green tea, adding L-theanine and EGCG from the tea to the creamer’s MCTs. At time matcha is gaining popularity, idea was to offer easy and affordable way to make matcha lattes. It’s priced at $13.99 per 8-oz bag and $23.99 per 16-oz bag . . . Plant-based protein player Aloha has launched a hybrid entry that melds its protein base made from peas and rice with hydration-enhancing electrolytes, gut-health-fostering prebiotics and MCT oil from coconuts. New line offers 18 g of protein but just 5 g of coconut sugar, in Chocolate Sea Salt, Coconut and Vanilla flavors. It’s certified as organic . . . Fairlife is testing a meal replacement shake called Fairlife Nutrition Plan at BJ’s club stores in Northeast, Mid-Atlantic and Southeast regions, blending Fairlife’s ultrafiltered milk with real cocoa. Each 11.5-oz bottle contains 30 g of dairy protein but just 2 g of sugar, along with 8 vitamins and minerals. As with Fairlife milks, it’s high in calcium but contains no gluten, thanks to filtration process. At BJ’s, it’s going out at $16.66 per 12-pack. Future plans include addition of Vanilla flavor and expansion to other retail channels, at time Chicago-based co is embarked on major production capacity expansion (BBI, Apr 9) . . . Mushroom marketer Four Sigmatic – launched by four fungi-loving Finnish “fun guys” – has made move from powders to liquid format with addition of Mushroom Focus Shots incorporating 1,500 mg of lion’s mane mushrooms, 250 mg of rhodiola and 200 mg each of guayusa and rose hips, with pineapple flavor. Labeled as organic dietary supplement, it’s out in 6-packs of 2.5-oz bottles. The guayusa offers 40 mg caffeine hit.
FOLO UP: Essentia Eyes Broad Buy for New Campaign, from Billboard Music Awards to NFL Draft
Essentia Water formally announced its new campaign dubbed “It Might As Well Be You,” saying media mix will include 60-, 30-, 15- and 6-second spots airing on broadcast, digital and social channels thru fall, as well as over 10 films for digital/social content, experiential and 131 out-of-home placements. The TV campaign, as described here Fri (BBI, Aug 5), features range of overachievers – including KC Chiefs’ Patrick Mahomes – who’re seen to “follow their passion through better hydration,” as cmo Karyn Abrahamson put it. She added that “the message is personal, empowering and demonstrates what Essentia and our core consumer both value: the power of resilience.” Ads broke this week and will air during tentpole events like Billboard Music Awards and first day of NFL Draft. The Bothell, Wash-based alkaline water co said campaign was created with lead creative agency Droga5 and directed by young filmmaker and photog Matt Lambert, who’s made name for himself in part by LGBT-related projects. As reported Fri, other overachievers featured in videos are hiphop violinist Ezinma, fashion designer Danielle Guizio and chef Julian Rodarte. Of course, campaign believed to be budgeted in tens of millions contrasts sharply with lower-key marketing efforts being undertaken by crosstown rival Sparkling Ice, as outlined above.