Beer Marketer's Insights
Used to be with a new soda or shelf-stable tea, you simply relied on copackers to get production done. But growth of superpremium categories like refrigerated teas and kombuchas, cold-pressed juices and high-end coffee have complicated decisions, encouraging do-it-yourself strategies by marketers who want to closely control every aspect of their brand, much as craft brewers are inclined to do on beer side. Lately we’ve spotted interesting mix of advances, delays and retreats on self-mfg fronts: Alabama-based Milo’s Tea, which has quietly built its Milo’s Sweet Tea into #1 refrigerated iced tea brand in US, appears to be in an active search for Midwest production site, with Tulsa emerging as potential target for 100K-sq-ft plant, per local report. Meanwhile, mfg expansions into Virginia by West Coast brands Humm Kombucha and Peet’s Coffee appear to have encountered substantial delays, with startups anticipated for this year pushed back to 2020 or further. And down in Austin, local sources say Daily Greens may have quietly shuttered substantial production site in East Austin built around captive HPP processing capability that we toured a few years ago (BBI, Apr 8 2015), perhaps seeking economies in what’s become challenging cold-pressed juice biz. We haven’t been able to get response from founder or core investor Great Point Brands on that, nor spot any local coverage, tho Yelp indicates tasting room attached to facility has been permanently closed.
Report in Tulsa World indicated that documents indicate that regional planning commission OKed plant approval for parties representing Milo’s Tea at 20-acre parcel in unincorporated Tulsa County where plans are to build 102K-sq-ft bldg. Milo’s administration vp Lynn Darty offered guarded statement to paper, saying “Milo’s Tea Company has experienced significant growth as more consumers demand all natural, fresh-brewed teas and lemonade like Milo’s. To support this growth, we have investigated multiple sites in the Midwest for plant expansion including Tulsa, Oklahoma.” She said co is considering various sites and has not purchased any land or begun any construction, per Tulsa World. As reported, co broke $100 mil in retail sales a coupla years ago after expanding to most parts of US besides West Coast and had been eyeing addition of 2d plant further west (Oct 31 2017).
Meanwhile, pair of companies building plants in Virginia that were slated to go live this year don’t seem to be very far along. One is Bend, Ore-based Humm Kombucha, which announced plans in 2017 to build $10 mil plant in Blue Ridge Mtn city of Roanoke, Va, to service its burgeoning East Coast biz but now is extending timeline as far out as 2021. Cofounder Jamie Danek told BBI today that new patent-pending production process inaugurated to better control alcohol and calorie levels brought additional benefit of greatly stretching capacity of Bend plant, eliminating what was once seen as pressing need to add 2d facility. So Humm likely won’t be in need of new plant “not next year or the next,” situation she said has been communicated to local and state partners who’d offered $1.8 mil incentive package to help bring 100K-sq-ft plant to city. Incentives were conditioned on construction commencing by Dec 31 and Roanoke Times reported last month that “trucks using a rock path recently dropped off building materials at a city business park and departed again, leaving construction for another day, but meeting a city deadline to get started. It was the first noticeable progress toward local, industrial-scale production of a lightly effervescent beverage called kombucha, a first for the city.”
Situation seems less clear for other major project in Virginia, massive roastery planned for Suffolk by Peet’s Coffee. Our inquiries to Peet’s dating to beginning of month about plant’s status haven’t produced any info, but deep dive into coffee-industry ambitions of local authorities in Hampton Roads by Virginian-Pilot newspaper in late Dec indicates in passing that activity has progressed only to point that “construction crews have laid the foundation of the building.” With area already boasting 355K-sq-ft Massimo Zanetti plant and lotsa import activity, local biz development types have been seeking to make area a hub for roasters and importers. Absorbing article can be read here.
Philadelphia coffee roaster La Colombe will use upcoming Natural Products Expo West to head into multiserve cold-brew segment with 42-oz entry that it claims to be first cold-filled plastic pack, even as it attempts to offer “the Arnold Palmer of coffee” with single-serve shandy line. The multiserve pack had been long in works, said La Colombe cofounder Todd Carmichael, “but we waited until we could invent the technology to fill a bottle without heating up the plastic,” he said in announcement issued by co ahead of big show. “It’s official. We have cracked that code.” It’s debuting in Brazilian Medium/Dark Roast and Colombian Light Roast. As for the 9-oz shandy line, that takes La Colombe in citrus direction pioneered by rivals like Rise Brewing , in search of what Todd termed “chuggable” coffee style that might play similar role that Arnold Palmer does in iced tea. (He argues citrus is by no means a stretch because the best high-elevation coffees have pronounced citrus notes.) New nitro-infused line employs light-roast Colombian organic beans as base, in Grapefruit flavor using real pink grapefruit juice and Cherry flavor using fruit sourced near co’s Mich production site. And joining stampede, La Colombe also will showcasing Oatmilk Draft Latte in its core canned line, which is now claimed to be in 55K pts of distribution.
“Lift & shift.” To some urbanites, phrase may conjure tactic of pickpockets and petty thieves to immediately transfer their haul to confederate, so they’re clean if fingered and apprehended. To Coca-Cola these days, tho, it’s at heart of innovation strategy, of taking items that work in one market and, with suitable tweaks, using them as growth platform in other regions. In presentation to Wall Street analysts assembled in Boca Raton, Fla, this morning, KO chmn/ceo James Quincey showed how transplanted Fuze Tea brand has proved to be deft replacement for Nestea in Europe after Nestle alliance was unwound, while also indicating that co plans to move quickly into RTD realm with newly acquired Costa Coffee roaster and café chain. He promised “rollout later this year of the ready-to-drink Costa brand,” first time we’ve heard that timeframe. Accompanying slide qualified that RTDs will debut “in select markets” that were unidentified and perhaps haven’t yet been chosen. As recently reported, KO lately is deep in successful coffee brands, to point that it’s put on hold plans to debut RTD line called Far Coast (BBI, Feb 12). There has been broad expectation that KO may view US as fertile market into which to launch Costa entries as complement to licensed brands like Dunkin’ and McCafe and partly owned brands like those offered by its Monster Beverage ally, with lure of controlling brand equity and capturing full margin. As recently noted, it seems KO’s Honest Tea unit also is on brink of intro’ing coffee line in US that’s found success in Europe – example of US brand that was lifted into Europe, where innovation spawned for that market is now being lifted back to home market.
In presentation to Consumer Analysts Group of NY, which BBI monitored via webcast, James pointed to success of Fuze in Europe as example of how potent lift-&-shift process can be. With Nestle alliance unraveling, KO intro’d Fuze to 28 markets a year ago, on Jan 1. By now it’s market leader in 11 European markets. Similarly, James noted, Smartwater brand has entered 23 countries since 2018 and has helped build profitable bottled-water biz that commands 3X the price point of mainstream water. He allowed that not every lift-&-shift foray has been as successful. After joining with some bottlers in acquisition of Latin America’s AdeS plant-based bevco, that brand’s soy-based drinks were brought to Europe, but what he dubbed “version 1.0” only resonated with some packages in some places. That “learning process” will facilitate next evolution, version 2.0.
CCEP Bullish on Costa, Coke Energy; Gambled and Won with Smaller Fuze Pkg Sizes In its own earnings call last week and CAGNY presentation this week, Coke bottler Coca-Cola European Partners expressed enthusiasm for Fuze inroads as well as prospects of Coke Energy extension and RTD and foodservice potential of Costa Coffee acquisition. On latter, ceo Damian Paul Gammell didn’t offer timeframe, saying “I’d expect as we go through 2019, and as the Coke company firms up and communicates its plans, we’ll be able to give you a further update on Costa later in the year.” However, CCEP has already benefited from deal by getting its soft drinks into Costa’s own stores, he noted. On Coke Energy, he styled that “really interesting proposition for the world’s best beverage to look at getting into a category that we already participate in, but is growing really double-digit year-on-year.” (But he emphasized that relationship is strong with Monster Beverage, which has bridled at notion of Coke offering energy extension under its own brand and initiated arbitration proceeding.) As for Fuze, Gammell indicated that part of lift-&-shift success stemmed from bet on smaller pkg size than was norm for category. “So we went with the 400-ml versus 0.5-liter and a 1.25 versus the industry standard 1.5. That gave us a chance to innovate, protect margin and, as it turned out, offer package sizes that fit better with consumer needs.”
Keurig Dr Pepper will vacate longtime Dr Pepper Snapple Group hq in Plano, Tex, and relocate team to build-to-suit leased facility in nearby Frisco that overlooks Dallas Cowboys’ practice facility, maintaining Dallas-area presence as joint corporate hq with offices of former Keurig Green Mountain co in Burlington, Mass. “We are excited to upgrade our Texas co-headquarters location to support the needs of our vibrant business, including enhanced technology capabilities and space to increase collaboration,” said KDP chmn/ceo Bob Gamgort.
Coming off successful restage last year, Nestle Waters North America is adding 6 more flavors to the 10 initially mustered behind revamped sparkling natural spring waters last year. Joining the unsweetened line under NWNA’s regional Poland Spring, Deer Park, Zephyrhills, Ozarka, Ice Mountain and Arrowhead brands are Ruby Red Grapefruit, Lemon Ginger, White Peach Ginger, Blood Orange Hibiscus, Orange Mango and Vanilla Flavor Twist. They’re out in 20-oz and 1-liter plastic bottles and 8-packs of 12-oz cans, La Croix-style. Effort is backed by 15-second spot heralding brand’s spring source and natural flavors.
Once a mainstay in Starbucks stores around US with simple recipe that cut high proportion of fruit juice with sparkling water, Juice Squeeze is making a comeback. It’s among trio of innovations that Crystal Geyser Water will be bringing to Natural Products Expo West in early Mar as it seeks to further diversify beyond its core bottled waters and Tejava unsweetened black tea. Also on slate are flavored extensions of its sparkling waters and organic Tejava extension into green and oolong teas called Origins.
In its new guise Juice Squeeze will be completely rethought proposition more in synch with where market has headed since its quiet discontinuance in 2016 (BBI, Jul 11 2016). It’s swapped out its old bottle for 12-oz sleek can, and hedged use of juice as sweetener with monk fruit. It’s returning in 4 flavors: Ruby Grapefruit, Mountain Raspberry, Passion Fruit Mango and Wild Berry. Sugar/calorie info wasn’t immediately available.
Tejava Origins debuts in Hojicha Green Tea and Fujian Oolong Tea, both unsweetened like core line and certified as organic by USDA. And 1977 Napa Valley Sparkling Mineral Water heralds founding date in Napa Valley of Crystal Geyser, enhancing spring’s sparkling mineral water with flavors “inspired by” area’s fruit bounty. Initial lineup is Original (unflavored), Black Currant, Lemon Zest and Chardonnay Grape.
Here’s yet another curveball, as Anheuser-Busch enters spirits biz with acquisition at a time its parent Anheuser-Busch InBev has over $100 bil in debt and folks thought it would not be doing much in way of deals. Yet A-B now adds another fast-growing tool to its “Beyond Beer” arsenal with deal to buy San Diego-based Cutwater Spirits, its “first big step” into what’s traditionally labeled spirits, as chief sales officer Brendan Whitworth told BBI’s sibling newsletter Insights Express. Sellers are founders of Ballast Point brewery who hung onto distilling arm when they sold beer operation to Constellation about 3 years ago. Two of ’em, Yuseff Cherney and Earl Kight staying on, along with several other sr mgrs. Deal expected to close this spring, subject to regulatory approvals.
Cutwater made its mark with highly regarded rye and bourbon whiskey, gin, vodka and other spirits staples, but it’s also not hesitated to blur category borders – say, with a recently released Fugu Horchata Vodka Cold Brew that melds vodka, agua fresca style and cold-brewed coffee at 12.5% ABV. Likely of particular interest to ABI was diverse line of canned cocktails that employ actual tequila or vodka rather than malt base, and include more sophisticated riff on booming spiked seltzer segment dubbed Vodka Soda that comes in at modest alc and calorie levels. “We sell a lot of cans and that’s the majority of the business,” Earl told us. Cutwater has RTD canned cocktails, led by Vodka Mule, Spicy Bloody Mary, and reformulated 99-calorie, 0g sugar Vodka Soda line. It also sells 6 NA premium mixers that, in co’s short life, already have accumulated numerous awards at spirits competitions. These include Bloody Mary mix, in spicy and mild versions, packed in 32-oz bottles and Ginger Beer, Tonic Water, Cucumber Soda Water and Grapefruit Soda Water packed in 12-oz cans.
Cutwater operates out of 50K-sq-ft plant with 250-person taproom and restaurant in San Diego’s Miramar nabe, where it also has FDA-approved food processing facility. It makes all its items on-site, notes Yuseff. Canning line goes at 350 cans per minute and arrival of tanks on order will enable it to double capacity. For now, at least, ABI is promising to “stay out of the way,” in Whitworth’s phrase, not forcing brands into its distribution system or looking at global expansion quite yet. Instead, it will confine itself to leveraging its “expertise in logistics & distribution, brand-building and packaging to scale the brand even faster,” per announcement.
The deal continues rapid, and highly unpredictable, buying spree by ABI, which since 2016 has acquired Kombrewcha hard kombucha, SpikedSeltzer, the UK-based Distiller/e-tailer Atom Group, HiBall organic energy drinks; partnered with Babe canned wine and Starbucks (on Teavana line); set research jv with cannabis co Tilray and taken stakes in likes of Owl’s Brew mixers/radler beers, Up Mountain Switchel and GoLive probiotic bevs. Altogether, recent acquisitions and partnerships show A-B’s newfound effort and willingness to disrupt adjacent categories. “We pride ourselves on thinking disruptively,” as Brendan put it.
Reed’s Grosses $16.2 Mil in Share Offering
Demand proved brisk for Reed’s Inc share offering, with investors scarfing up full amount and overallotment, grossing $16.2 mil for boutique soda co before fees and expenses are deducted. Investors purchased the 7.7 mil shares plus another 1 mil in overallotment at $2.10 per share. Roth Capital Partners managed offering.
Might Argo Tea represent a way for MillerCoors to up its game in non-alcoholic bevs and muster a response to Anheuser-Busch InBev’s fast-growing Teavana RTD collaboration with Starbucks? That seems to be a topic of discussion between the 2 Chicago-based companies as restaging Argo Tea seeks capital infusion and new plan after informal collab on some cobranded stores with JAB restaurant units didn’t turn into more substantial partnership and operator of teahouses and RTD entries found itself with dwindling resources, key staff departures and founder lately focusing more on newer venture called Cooler Screens. It’s difficult to rate chances that alliance will pan out from what might still be exploratory stage of discussions; call to Pete Popovich, who’s running Argo, hasn’t been returned, while MillerCoors rep said he couldn't comment on rumor.
Recall that founder Arsen Avakian had quietly exited from running Argo in order to focus on Cooler Screens venture putting electronic displays on bev coolers, tho some say tell us he’s still quite active behind scenes (BBI, Sep 21). His longtime lieutenant Popovich, former Pepsi exec who’s been running the day-to-day, suggested to BBI last fall that new source of financing may be on horizon that would allow co to restore production and address out-of-stocks. As for Avakian’s Cooler Screens venture, that’s been lately moving forward with tests in Walgreens in several cities including Chicago and NY with client roster that includes Coke, Pepsi and Red Bull (BBI, Feb 12). Meanwhile, in face of challenging beer trends, MillerCoors has dipped toe in NA waters via minority stake in Bhakti Chai and outright acquisition of Clearly Kombucha. But Bhakti, with mix of refrigerated and shelf-stable items, seems over past year to have retreated considerably from retail to focus on foodservice, while refrigerated Clearly line isn’t suited to MillerCoors wholesalers’ ambient beer trucks. So brewer’s NA involvements so far haven’t been very relevant to its wholesaler network. By contrast, shelf-stable Argo RTDs would provide straightforward selling proposition for the wholesalers, in popular tea category where ABI’s well-crafted Teavana entry has been making waves at high end.
Tho there was speculation among some bev watchers that PepsiCo might have gotten a steal on Muscle Milk marketer CytoSport, turns out bev giant paid about what it would have had it moved on brand during initial rounds of bidding 5-6 years ago. Divesting owner Hormel Foods disclosed this morning that purchase price is $465 mil, subject to closing adjustments, for brand that notched $300 mil in sales last year, at operating margins “slightly below total company operating margins.” At time deal was announced in Jul 2014, purchase price was listed as $450 mil (BBI, Jul 1 2014). PepsiCo, of course, has been longtime distribution partner of Muscle Milk and other CytoSport brands, and had been considered logical buyer at time co and its equity investors were first shopping it. But Hormel emerged as dark horse, with its then-ceo Jeffrey Ettinger telling Bloomberg News: “This acquisition builds upon our strength in protein but also allows us to diversify our product portfolio,” pushing Hormel “further into the realm of portable protein-rich items” and winning access to retailers like GNC and c-stores.
In statement this morning and on conference call discussing Q1 earnings results, Hormel brass made no reference to problems that bedeviled unit as recently as a year ago, instead focusing on progress they’d made on innovation side via plant-based Evolve line and protein bars, as well as broader presence they built in food, drug and mass merchandisers and capturing of cost synergies. They also seemed to question rationale for purchase as helping Hormel get more of its other items into c-stores, accomplishment that’s happening anyway as c-stores tilt more to selling meals. Nor did they mention another key rationale for purchase, capturing protein-consumption occasions of on-the-go consumers who stash their meals in a car cupholder or gym bag. “We did everything we thought we would do when we acquired the company,” said chmn, prexy and ceo Jim Snee during q&a this morning. “The key takeaway for us is we didn’t have control of that biggest part of the supply chain, DSD distribution and manufacturing on the supply side, so we couldn’t control our destiny,” he said. “We have nothing to apologize for, we feel really good about the business, how we ran it when we had it.” Earlier in call, in response to question, he’d indicated Hormel intends to remain “very very active” in M&A, just not in bevs, focusing instead on foodservice-related opportunity, domestic grocery brands and other areas.