Beer Marketer's Insights
Coca-Cola has added its first new flavor to the mother ship, its core Coca-Cola brand, in over a decade with launch of Orange Vanilla and Orange Vanilla Zero Sugar. They hit store shelves later this month, Coke announced today. The move comes as another sign of ceo James Quincey’s determination to shake things up. Back in 2017, KO added Georgia Peach and California Raspberry to cane-sugar-sweetened version of Coke, but that’s glass-bottle superpremium line that’s barely a blip in overall Coca-Cola CSD sales . . . Red Bull is expanding its flavored “editions” with Peach Edition (peach-nectarine flavor) and Pear Edition Sugarfree in 12-oz cans . . . Townshend’s Tea has promoted its Brew Dr Kombucha’s Strawberry Basil flavor from summer seasonal to year-round status, bringing it back later this month in 14-oz and 32-oz glass bottles and in 4-packs of 12-oz cans.
Saying it wants to get it right, Dunkin’ Brands has eased off a bit on both the rollout of its Next Gen stores and the marketing behind chain’s upgraded espresso-bev platform. On investor call yesterday, Dunkin’ brass maintained that Next Gen format, with cleaner look, lineup of draft handles and more prominent pickup area for online orders, has generally been well-received by franchisees, with initially anticipated test of 50 stores expanded to 130. But it decided to hold off on rollout while working with franchisees to engineer further costs out of stores to avoid having to do a future reset. At this point, Dunkin’ is finalizing mix of equipment and components for its supply chain group to take out to bid at producers. That’s imminent and Next Gen will “shortly” be released to entire system. More broadly, co is expecting that net new store openings will come in at lower end of 200-250 annual target, as co not only holds back on releasing Next Gen but also tilts focus to bigger units with drivethru’s rather than limited-service units.
As for espresso push, which required installation of new equipment in 9K restaurants and training of 100K staffers, co intentionally lightened up media plan ahead of launch so to be sure quality was there at acceptable throughput times for customers who patronize chain for service “at the speed of Dunkin’.” Lending further element of caution was that rollout was occurring during hectic holiday period. So far all signs are positive, with no impact detected on speed, 10 weeks into rollout, Dunkin’s top brass said. Espresso launch is intended to fulfill multiple mandates: to bring in younger consumers, build afternoon biz and get Dunkin’s share of brand-switchers. By offering comparable quality to leading premium purveyors at lower price and faster service, co has built espresso biz 35% so far. Among initiatives it’s used to build trial have been $2 cappuccinos and lattes during afternoon happy hours.
Revive Kombucha is flashin’ back to the Sixties via local campaign in Bay Area copies of Rolling Stone that uses LSD blotter paper to urge consumers to “Expand Your Tongue’s Mind.” Campaign reported by MediaPost is running in 26K copies sold in SF area, printed via vegetable ink but eschewing any actual LSD. It’s inaugural effort behind Peet’s Coffee-controlled brand from agency TDA Boulder. “Revive’s flavor profile is completely outside the category norm, and this seemed like a great way to start that conversation rolling,” exec creative dir Jonathan Schoenberg told MediaPost. The ads use each perforated tab to herald different flavor of the kombucha, from Original Cola to Turmeric Ginger Citrus. The campaign also includes wild postings in nabes like Haight-Ashbury. Different execution will go live in Southern Calif later this year. As reported, Petaluma-based Revive dialed back on national expansion in order to double down on Calif market, where it enjoys competitive advantage of riding on Peet’s Coldcraft refrigerated DSD fleet, alongside co’s cold-brewed coffees and other items (BBI, Oct 24).
PRESS CLIPS: Tech Entrepreneur Lovett Was Heading into Wine Biz before Kombucha Came Calling North Bay Biz Jnl offers intriguing personal look at Revive cofounder Sean Lovett, raised in Chicago amid family of tech entrepreneurs who headed in that direction with his older brother, building and selling co called Integrated Data Services, before moving to Calif to lay groundwork for plan to enter wine biz via property in India that the family of his wife and Revive cofounder Rebekah Lovett owned in India. But he was turned onto kombucha by Rebekah, a Whole Foods employee, and their wine ambitions were put on hold. Article details frustrations they had obtaining bank financing after deciding that they weren’t ready to bring on outside investors, and initiation of Peet’s relationship. Article notes that they’ve scaled back from 50+ employees in 2016 to 20 now in interest of “building an efficient, sustainable and profitable business,” as Sean put it. Article can be read here.
In early days known strictly as acai purveyor, Zola is building on its bigger presence in coconut water this year to build out its natural energy lines via new campaign that informs shoppers it’s “Energy from plants. Not chemicals. 100% Plant-Based Energy.” “We’ll try to own plant-based energy since nobody is dominant,” said founder/ceo Chris Cuvelier, in discussion with BBI on swing thru NY with his sales chief Eddie Pearson. The push puts brand up vs established brands like Guayaki Yerba Mate, which over 2 decades has become a potent force at retail; Hiball, backed by the resources and distribution network of Anheuser-Busch, and Runa, now owned by Vita Coco and undertaking its own push forward. (Runa was Pearson’s last stop, following long run at Boylan Bottling.)
Zola Sparkling Energy Water, unveiled last spring (BBI, Mar 5), is organic entry packed in 12-oz slim cans, containing just 10 calories and debuting in Pink Grapefruit, Blackberry Cucumber, Blood Orange and Lemon Lime flavors. It employs green tea and yerba mate to yield 120 mg of caffeine. The energy water augments another line, Hydrating Organic Energy Drink, also organic, that was unveiled in 2017 (BBI, Aug 4 2017). That line, in similar 12-oz slim cans, employs sparkling coconut water to deliver 230-290 mg of potassium and green coffee and green tea extracts to deliver 120 mg of caffeine. It’s out in Dragon Fruit, Acai Berry, Pineapple Coconut and Matcha Green Tea flavors. The acai biz still is important part of revenue mix, but much of action has shifted to puree biz at foodservice.
Tho Zola was among inaugural general-market acai plays in US, by now it’s become more familiar to consumers for its coconut water biz. The Thai-sourced water is offered in a 17.5-oz single-serve pack as well as a 1-liter screwtop that support its positioning as a sports drink compared to rival entries in less sluggable sizes or non-resealable large packs. That identity as a purveyor of plant-based hydration made extension into plant-based energy a logical one, Chris said. “So we feel we’re on track,” he said.
Having been acquired by private-equity shop KarpReilly in 2016, Cuvelier enjoys more stable existence than back when he was constantly in hunt for new capital, with Emigrant Capital as core investor. As he deepened his understanding of bev biz, Cuvelier reclaimed ceo role that he’d ceded to more seasoned exec for a while, and lately has been running marketing too. KarpReilly has encouraged strategy of pushing into big and growing categories, rather than probing intriguing niches as Zola sometimes did in past. (Its other holdings include likes of LifeAid, Koia and Iconic.)
With Pearson, Cuvelier is pursuing a subtle distribution strategy. With co having prospered taking direct-to-retailer route on coconut water, it’s reluctant to sacrifice those relationships to DSD, meaning it’s generally unwilling to offer all-channel exclusive to prospective partners, a deal-breaker for some. “So we have to be careful in choosing DSD,” Pearson said. Brand recently transitioned from Statewide in LA to Pyro in San Diego, currently its only significant DSD partner, but Cuvelier and Pearson are on road to recruit more where setup makes sense. In San Diego, they said Pyro has enjoyed success getting items into high-end cafes, military bases and other key local channels.
On marketing side, Zola boasts endorser mix with likes of big wave surfer Luca Padua, beach volleyball pro Melissa Fuchs Powell and dj Brandi Stevens. (Cuvelier himself is avid surfer.) But key focus over past year was Life Rolls On Foundation, series of surf and skate events for wheelchair athletes that was launched by Jesse Billauer, once-promising junior surfer who in 1996 got tossed onto Malibu sandbar and broke his sixth vertebrae, instantly rendering him a quadriplegic. He bounced back, becoming world champion of what’s called “adaptive surfing,” and setting annual slate of events, with Zola tagging along last year to activate 11 US events staffed by 500 volunteers. Besides undertaking heavy sampling, it set ties to retailers like Safeway, with $1 per case going to LRO. This year it will support events along West Coast and in NY/NJ area.
As Cuvelier noted, the tinkering always continues. For instance, with retailers converting more of their ambient-bev space to coolers to support growing categories like kombucha, alt-dairy and cold-brewed coffee, Zola has learned to rely more on erecting its own freestanding display units. But there’s a catch: building displays that featured both the coconut water and energy entries proved too confusing to shoppers, so co has learned to dedicate those units to one side of biz or other.
Campbell Soup seems to have taken another step back from aggressive venture strategy inaugurated by prior ceo Denise Morrison, selling Habit personalized nutrition play to its Seattle-based rival Viome. Terms were undisclosed in announcement, so it’s unclear whether CPB, as sole outside investor in Habit, profited from investment. Marketer of soups, snacks and V8 bevs had little to show for investments when juice gadget maker Juicero, in 2017, and then meal kit service Chef’d last summer abruptly closed their doors.
CBD store in Burlington, Vt, called Ceres Natural Remedies has acquired maple water marketer Tretap with view of collaborating on line of hemp-derived CBD infused bevs, effort that will get under way this qtr. Ceres makes its own CBD items from Vermont-grown hemp while operating stores in Burlington and Middlebury and drive-thru in Brattleboro. Transaction, for undisclosed terms, continues pattern (albeit on small scale this time) of cannabis players reaching out for expertise to established bevcos as they prepare consumer-oriented bev lines . . . Count NY as latest jurisdiction to crack down on proliferating CBD foods/bevs, sending health inspectors to several restaurants to inform operators that city has inaugurated embargo on such items, both in restaurants and at retail. Surveying this and other actions, Greenberg Traurig regulatory expert Justin Prochnow reiterated his view that “it is going to be a rollercoaster ride in 2019 regarding CBD.” In note to clients, he reminded them that “it has been our opinion that the most likely source of action in the near future, if any, regarding CBD products is likely to come, not from the FDA, but from individual state Departments of Health and/or Agriculture or other local agencies. Actions over the last week have proven that out.” As BBI reported recently, FDA itself has also been active in such actions.
Dunn’s River Brands, the Fireman Capital-funded incubator, continues to build out DSD network for its reinvigorated Sweet Leaf Tea brand, while bringing aboard Coca-Cola and Dr Pepper Snapple Group vet Brent Chism as vp of marketing, effective this past Mon, for portfolio that also includes Tradewinds Iced Tea and Temple Turmeric. In separate development, ceo Bill Meissner confirmed to BBI that co has sold former Tradewinds plant in Carlisle, Ohio: transaction quietly made last Oct was to copacking giant Refresco, which will continue to produce the teas for Dunn’s River. Recall that Dunn’s River acquired Sweet Leaf, Tradewinds and the production facility from Nestle Waters North America in late 2017 after bottled-water and home-delivery giant bailed from iced tea sector it struggled to master. NWNA’s flagship Nestea brand partnered with Brands Within Reach after long-running alliance with Coca-Cola dissolved several years back. Refresco, of course, has been on expansion jag via acquisition of Cott plant network and other moves.
New marketing chief Chism takes over duties that had been handled on interim basis by Mike Joyce, who’ll continue on specific projects, Meissner told us. Brent brings years of experience in noncarbs from DPS, where he most recently served as senior dir of content & brand marketing for tea & juice drinks, portfolio that included likes of Snapple, Nantucket Nectars and Hawaiian Punch. Earlier in career he worked at P&G, Hallmark Cards and Coca-Cola. He left KDP in Nov. Based in Dallas like DPS, Dunn’s River has enjoyed benefit of being able to fish in deep pool of seasoned bev execs, many cut loose from DPS following acquisition by Keurig Green Mountain. Recall that restage of Sweet Leaf Tea that contemporized label and broadened low- and no-sugar options was masterminded by former marketing exec Lee Brody, who departed co for unexplained reasons shortly after project was concluded.
On distribution front, co signed former Sweet Leaf Tea distributor Haralambos in LA, joining array of other former partners like Lenore (in San Diego) and Odom in Pac NW who’re optimistic about prospects for restaged brand.
Tapping into ingredient that’s made a lot of trend lists for new year, PepsiCo is adding hibiscus subline that’s “blooming with flavor,” per TV ad, to its premium Pure Leaf Tea brand. A response to consumer requests for caffeine-free entries, the herbal teas are hitting shelves in 3 flavors – Mango Hibiscus, Peach Hibiscus and Cherry Hibiscus – that are moderately sweetened, coming in at 100-110 calories per 18.5-oz plastic bottle. They’re priced at $1.99, as well as in 6-packs of half-liter bottles at $6.29, with the Lemonade and Mango flavors also available in a 59-oz multiserve jug. Not stopping there, Pepsi’s also adding a hibiscus sku to its superpremium 14-oz glass-bottle Pure Leaf Teahouse Collection. That entry, Organic Hibiscus Tea Passionfruit & Pineapple, comes in at a lesser 70 calories per bottle and is priced at $2.59. As noted, hibiscus has been trending as hot ingredient on numerous watch lists for past year or two, and brings benefit of holding high appeal among Hispanics who recognize ingredient from traditional jamaica aguas frescas. Perhaps taking a tea leaf from Honest Tea’s featuring of founder Seth Goldman ambling thru Indian tea gardens, TV ad for Peach Hibiscus flavor that broke this week depicts Pure Leaf “tea master” Amy Tran wandering thru outdoor market purchasing peaches and admiring hibiscus plants, then formulating recipe in garden setting.
Total bev sales were up estimated 2.9% in Q4, based on Wells Fargo Securities survey of execs representing about 23,000 c-stores across US. While results were “still solid,” sr analyst Bonnie Herzog noted that was “below very strong +4.3% in Q3.” “Across non-alcoholic beverage manufacturers, sales growth almost universally moderated in Q4,” with non-alc bevs’ 3.4% sales gain in Q4 lagging the 5.8% gain of Q3. Red Bull “was the exception,” as co “appears to be benefitting” from MNST’s price hike, and nearly 60% of retailers surveyed said Red Bull sales have accelerated (more on energy segment below). Retailers said lower gas prices were still helping drive sales but cited poor weather and slow unit sales as downers. Promo activity overall was found to be “significantly more rational,” up just 0.5% vs yr ago and down from +1.8% in Q3 and +3.3% in Q2, noted Bonnie. For full year 2019, survey found 80% of retailers expecting NA bev pricing to “either rise modestly (<3%) or rise significantly (>3%)” compared to 90% in Q3 survey. Here are other nuggets from Bonnie’s survey, a quarterly trove of insights coming directly from operators of key impulse channel.
Kudos for KO’s Body Armor Move Coca-Cola sales “were up a somewhat muted +2.5% in Q4,” wrote Bonnie. That’s down substantially from +4.6% in Q3 survey, likely attributed to KO’s pricing actions. While retailers’ sentiments on KO “were generally mixed,” Bonnie added, “we remain bullish on KO” given “upbeat commentary” about several brands in KO’s portfolio, and Body Armor in particular, “which retailers are still very upbeat about.” On debit side, some retailers believe KO has taken eye off the ball in bottled water with Smartwater sparkling and high-pH extensions, at time “Essentia and Core are putting large amounts of pressure on Coke.” Only about one-third of retailers indicated they’ve heard plans from KO about bringing Costa coffees to US, and just under one-third of them said they would stock it on their shelves. (Of course, things like recipes, pkg, pricing would have something to do with their ultimate decision.)
Zero Helped Gatorade but is it Enough? PepsiCo sales “were down a disappointing -0.7% in Q4” based on survey, noted Bonnie. That’s down from +2.8% in Q3 survey and reflects “concerns about core Gatorade products & broader bev portfolio,” she added. While one retailer cited Gatorade Zero for driving sales increases and helping Gatorade finish ahead in 2018, another had dire take. “Gatorade is in large trouble and people inside know it and are talking about it. They allowed Body Armor to gain momentum and now Body Armor is UNSTOPPABLE.” Retailers expect PEP sales to grow just 0.4% in c-stores for full yr 2019.
Inventory Issues for KDP Draw Ire Keurig Dr Pepper sales were up estimated 3.3% in Q4 survey, “solid but nonetheless below a surprisingly strong +4.8% in Q3,” per Bonnie. No surprise that some retailers called loss of Fiji and Body Armor brands “key negatives.” Survey found retailers “were at a loss” as to what KDP “can do to improve its distribution network, a key initiative of the newly combined company’s management team,” noted Bonnie. View from one c-store operator: “KDP has made a major step backwards. They have always had inefficiencies and it has gotten worse” (prompting Herzog to wonder out loud why KDP doesn’t explore refranchising). “Poor communications” and “poor inventory levels” were other concerns cited by the c-store operators. They expect KDP sales to grow 2.1% in 2019.
MNST Price Hikes Helping Red Bull; Bang Still on Fire; Missing the Bud Guys Monster Energy sales were up estimated 7.3% in Q4, down from +9.8% in Q3 survey, while Red Bull sales gain pegged at +6.6%, up a notch from +6.5% in Q3. Solid sales gains for both top energy players compared to soft drink suppliers in c-stores. “As expected, Red Bull appears to be benefitting from MSNT’s pricing actions,” noted Bonnie, with around 60% of retailers indicating they’ve seen an increase in Red Bull sales while “nearly 45%” said they’ve seen a deceleration in MSNT volume growth after price hikes. That’s “up significantly” from 28% of retailers who said MNST sales had slowed in Nov 2018 survey, added Bonnie. Also, 85% of retailers agree with Red Bull’s strategy to not raise prices and nearly 45% indicated Red Bull is looking to increase its promo activity. “That said, less than 25% of retailers see the potential for stepped-up Red Bull promos as a potential negative for the category,” wrote Bonnie. Meanwhile, 25% of retailers said MNST has been running promos to offset its price hikes. Another positive for Red Bull: over 50% of retailers named co as most innovative in non-alc sector in Q4, “with several retailers” citing its Winter edition as “well-received innovation” during qtr.
As noted in yesterday’s issue, Bang is still on a tear with $$ sales up 837% to $315 mil for 52 wks, per Nielsen, and survey found retailers remain wary as to whether MNST’s Reign brand will slow it down. In this survey, 88% of retailers indicated they carry or plan to carry Bang energy drink, up from 78% in Nov ’18 survey. Also, about 80% of retailers plan on giving shelf space to MNST’s Reign brand, tho sometimes finding space by cutting back other Monster/NOS/Full Throttle facings. Further, “some expressed concern” that it’s simply a knockoff of Bang. “Monster has been Bang’s best promoter. They made the mistake of bringing attention to Bang,” said one retailer. Survey also addressed MNST issues with KO system. Only 21% of retailers felt KO’s planned move into energy segment under Coke brand was a good move, and some questioned whether it made strategic sense to have conflict with MNST. On other hand, some see MNST as being boxed in, locked into Coke distribution network but with no clear exit. They draw comparison to more recent deals, like Body Armor’s, that offer owners a defined path to ownership. Among the harsher assessments was this one: “Bang is the future Monsters sales management team and creative teams best days are behind them. They are complacent and not as hungry as they were and that stems from weak sales leadership. People are jumping ship like crazy from that company.”
And this nugget will make beer guys happy: “Perhaps hindsight is indeed 20-20,” wrote Bonnie, as “nearly 70% of retailers believe that Monster should have stayed with Anheuser-Busch, and only 33% believe Monster is better off with Coca-Cola today.” (BBI has certainly heard that sentiment expressed by some within Monster as well.) Now, still-aggrieved Bud wholesalers “are taking on Bang. They HATE Monster and know where the bodies are buried.” Another plus for A-B distribs is that 80% of retailers plan on giving Celsius fitness drinks more shelf space and 67% anticipate sales to accelerate under new distribution deals with independent Bud and Pepsi houses.
Looking ahead, c-store retailers anticipate energy segment growth of 7.8% in 2019, with Monster Energy and Red Bull each growing sales around 6.1%.
Some Hot Spots: Essentia, Spindrift, Cold-Brew, Kombucha Asked what are sweet spots on innovation side, Essentia frequently came up, and so did Spindrift. “Kombucha is becoming the Millennial and Gen X soft drink,” as one respondent put it. And cold-brewed coffee seems to be generating some early momentum in convenience channel.
Lately we’ve been warning that coast is by no means clear on CBD biz, despite passage of Farm Bill that removed hemp-based CBD as prohibited Schedule 1 drug. As we reported late last month, FDA raided copackers of Dirty Lemon’s CBD bev entry (agency didn’t find anything, as Dirty Lemon already had moved on from item, as it had announced – BBI, Jan 21) and we heard there may have been simultaneous raids elsewhere in Calif from agency that doesn’t regard ingredient as “generally recognized as safe” for human consumption. Edibles shop in Southwest also got unplanned visit from authorities (BBI, Jan 25). Latest evidence comes from Maine, where Portland Press Herald (in piece picked up by AP) reports that health inspectors from state’s Dept of Health & Human Services have been ordering stores to remove all foods, tinctures and capsules that contain CBD from their shelves, on grounds that “CBD is an unapproved food additive that federal authorities do not recognize as safe.” “Inspectors have told Maine business owners they can still sell CBD products that can be smoked, vaped, worn as a patch or applied as a lotion,” AP story reports. “Medical marijuana patients can still buy oral CBDs from licensed caregivers or dispensaries.”