Beer Marketer's Insights

Beer Marketer's Insights

Tho many eyes have been on Anheuser-Busch's pending foray into RTD teas via its partnership with Starbucks' Teavana brand, another strategic also is ready to enter fray: fruit spread and coffee marketer JM Smucker, via partnership with respected artisanal tea maker Numi. Smucker, whose main plays in bevs have been RW Knudsen and Santa Cruz Organic brands, will debut 5-flavor, glass-bottle line of Numi-branded organic teas at upcoming Fancy Food Show in SF late this month, using launch as platform to develop DSD presence that can support other products down the line, too. Numi RTD launch thus will serve as "a bridge to DSD," said Ahmed Rahim, who cofounded Oakland, Calif-based Numi with his sister Reem in 1999. The name Numi is reference to dried lime drink they consumed as kids in Iraq.

At least in foodie precincts in cities like NY, LA and Seattle, items like pour-over coffee and matcha green tea have been comin' on strong at cafes and teahouses over past coupla years. Is this the year that cascara, the skin of the coffee fruit, joins the club? It's getting big lift this winter with entry of Starbucks into realm, offering Cascara Latte in its stores starting Tues. (Rewards members get sneak peak starting tomorrow.) Starbucks item combines espresso with steamed milk and cascara syrup, topped with velvety foam and a sprinkle of cascara topping made with cascara syrup and cane sugar, in image of coffee bean, per SBUX description. "We are taking the fruit of the coffee cherry to give our latte a subtle, lightly sweet flavor," said R&D staffer Erin Marinan. The lattes had been conjured up last Sep at co's Seattle Roastery during Barista Innovation Challenge and graduated to menu at showcase retail venue for fall.

Honest Tea co-founder/ceo Seth Goldman moved on a year ago. Now, 2 of oldest hands remaining at Coca-Cola-owned organic tea brand have exited, headed to Q Drinks mixer co backed by Seth's cofounder Barry Nalebuff. Melanie Knitzer, who put in 18 years at Honest Tea and its parent within Coke, incubator VEB, counted as tea marketer's 3d hire, while Becca Ray this month would have cleared a decade there, as regional sales mgr. Melanie steps into Q Drinks as evp for retail sales while Becca is dir of retail sales - west. After uncommonly patient buildup spanning a decade, Brooklyn-based co founded by ceo Jordan Silbert landed $11 mil investment from First Beverage Group last Mar (BBI, Mar 9) and began building senior staff to hit the gas, including recruiting spirits vet Ted Roman as evp sales for liquor channel and Devin Wilson as vp marketing (BBI, Apr 18). Knitzer spent early part of her career at specialty foods importers, while Ray spent a decade at Frontier Natural Products Co-op before notching another decade at Honest Tea/Coke.

Keurig Green Mountain's Keurig Kold home soda-making system, which found itself an orphan once Coca-Cola relinquished its stake in co, is finding a new life: this time at heart of home alcoholic bev system to be co-developed with beer giant Anheuser-Busch InBev. ABI said it's set joint venture with Keurig - now owned by coffee giant JAB - to devise system that plays in beer, spirits, cocktails and mixers, with North America the target market. Named ceo is Nathaniel Davis, 18-year vet of ABI and predecessor co Anheuser-Busch, who's been serving as global vp for innovation & development. R&D will be carried out at locations in Mass and Vermont by team comprised of Keurig and ABI employees that may exceed 50 individuals. Tho focused mainly on alc side, deal is interesting because it salvages some upside for Keurig Kold system that had sucked in tens of millions in development costs (including via acquisition of rival Bevyz system) before being abandoned by JAB as new owner. It also unites ABI with Starbucks rival JAB at time that ABI has also teamed with Starbucks on soon-launching RTD iced tea line under Teavana brand; SBUX and JAB increasingly have become direct rivals, as JAB builds third-wave roasters like Stumptown and Intelligentsia and SBUX scrambles to keep up via its Reserve sub-brand. Not least, it shows wide-ranging directions ABI is willing to go as it pursues disruptive technologies via its in-house efforts, its Zx Ventures fund and now this joint venture. "We look forward to combining our capabilities and technologies to deliver innovation for consumers," said Keurig Green Mountain ceo Bob Gamgort, who stepped into role last May following career at likes of M&M/Mars, Major League Baseball Properties and Pinnacle Foods. "We can't wait to get started," Davis said in statement issued today heralding deal.

Jamba has tapped into 5-Day Body Reset program of fitness trainer and best-selling author Harley Pasternak with new line of Super Blend Smoothies that debuts in Jamba stores on Jan 18 in trio of blends. Positioned as meal replacement, the smoothies will debut in Apples 'n Charge (apples, bananas, pumpkin seeds, Greek yogurt, milk, cinnamon and honey), PB 'n Jealous(fresh berries, peanut butter, whey protein, milk and chia) and Green Up 'n Go (cucumber, apple, spinach, grapes, Greek yogurt, pumpkin seeds and lemon juice). Pasternak's program, which relies on optimal combo of protein, fiber and healthy fats, is outlined in his best-selling book The Body Reset Diet. Following last year's relocation from Bay Area, Jamba now is based in Frisco, Tex, outside Dallas.

Looks like personal-care player Burt's Bees is now in food/bev realm. Durham, NC-based co has launched powder line called Plant-Based Protein Shakes, featuring 15 g of protein per serving from sourced from peas, rice, flaxseed, sunflower seeds and oats. The rationale: "We've been nurturing skin with nature's most powerful ingredients," in words of gm Jim Geikie. "Now we're helping to nourish the body with them." Line also includes vitamins that have been extracted from real fruits and veggies, including spinach, shiitake mushroom and strawberry. Of course, honey is used as sweetener, but it's augmented with monk fruit and stevia leaf extracts to keep calorie count down. It debuts in Daily Protein, Protein + Gut Health with Probiotics and Protein + Healthy Radiance with Antioxidant Vitamins A, C & E recipes. Line is available in tubs providing 16-18 servings priced at $29.99 for core offering and $39.99 for enhanced ones. Some seem to be available in 10-packs, too, at $29.99. Recipe are available in Vanilla and Chocolate flavors.

Pair of Brooklyn neighbors in incubation space located in former Pfizer pharma building are about to make leap into RTD bevs, principals told BBI on recent swing thru space at edge of Bedford-Stuyvesant nabe. Monfefo, which caused a stir by winning BevNet Live Showdown this past spring in NY, will be extending its ginger-shot brand into RTD space, even as it adds turmeric shot to smaller format, and chai concentrate maker Dona Chai will imminently venture almond-milk-based bottled chais into market. Pfizer bldg, tho dilapidated in inessential ways, has become de facto incubation space for range of bev players in recent years thanks to pharma-grade fittings and enticing other features, with bev ranks including likes of Kombucha Brooklyn, Brooklyn Soda Works, Green Mustache and Rawpothecary. Monfefo and Dona Chai are neighbors on 5th floor, both performing production chores in recently expanded spaces. Details:

So much for CSPI director Michael Jacobson quietly easing away from his post, as announced back in Oct. He's going out with bang now that CSPI is representing nonprofit Praxis Project in US Dist Court lawsuit filed yesterday vs Coca-Cola and American Beverage Assn that claims they've deceived consumers "about the harms of consuming Coke and other sugar-sweetened beverages," per suit. Praxis is suing under Calif Unfair Competition Law and False Advertising Law "to enjoin Coca-Cola and the ABA from engaging in false and misleading marketing of sugar-sweetened beverages," per suit. Praxis alleges that, despite KO's promise not to advertise to kids, "it has advertised to children on a massive scale." Also, "ongoing campaigns of disinformation and misrepresentation" have been used to "increase the sales of sugar-sweetened beverages, and to thwart and delay efforts of government entities to regulate sugar-sweetened beverages through warning labels, taxes and other measures designed to make consumers aware of the potential for harm." So count this as another move by soda critics to equate Big Soda with Big Tobacco.

Preparing new round of innovation at time competition in RTD tea is intensifying, Japanese tea giant Ito En is attending to basics, undertaking update of its core Teas' Tea that consolidates 3 sublines into 2 and aims to do better job cementing brand name in consumers' memories. New look, seen in photo below, features stronger lockup of tea logo and does better job of playing up fact that line for some time has been organically sourced, noted Jim Hoagland, coo of Ito En N America, in meeting yesterday at co's offices in Brooklyn's trendy Dumbo area ("down under Manhattan Bridge overpass"). Critically, co has retained horizontal color banding and square bottle that have been key brand markers, but offers better flavor registration and dials up such key on-pack messages as "Only the purest tea." Tho Ito En was pioneer in betting that Americans would gravitate to unsweetened tea, in recent years it had added slightly and more aggressively sweetened sublines as push into mainstream grocery encountered more consumers with a sweet tooth. Now Ito En is ready to head back in other direction, offering only Slightly Sweet subline, at about 20 g per serving, while either dropping more highly sweetened entries like Half & Half or reducing sugar content of them so they now qualify as Slightly Sweet. New look, which encompasses both single-serve bottles and 2-liter jugs, will debut at upcoming Fancy Food Show in SF opening late this month. Work was performed with local agency whom Jim preferred not to identify.

Keeping to Beverage Business Insights’ new-year’s tradition, we reprise some resolutions for entrepreneurs trying to navigate the shoals of an increasingly complex and perilous bev biz. These are inevitably subjective to some extent: tho in recent years the go-big-or-go-home “landgrab” strategy had encountered greater skepticism, the outsize buyout won by Bai Brands from Dr Pepper Snapple Group, as well as progress of other big-thinking brands like Body Armor and Core Water, are standing as testimony to the effectiveness, at least in a few cases, of the strategy that reached its apogee in Coca-Cola’s $4.1 bil takeout of Glaceau nearly a decade ago. As always we credit the insights to you, our readers, who've communicated your hard-won knowledge over countless channels from staticky cellphone calls to craft beer barstools.

It’s better to be slightly starved of capital than over-endowed. Having not-quite-enough capital forces you to focus on key priorities and let distractions go. By contrast, too much capital almost inevitably fosters waste. Besides, once retailers, distributors and prospective new hires know you have the dough, their hands come out. So try to keep the round modest. Don't let the institutional guys talk you up by too many millions. Don’t necessarily go for the highest enterprise valuation you can land – that could come back to bite you if things don’t go entirely according to plan. And better to find your funding from people who can offer more than just a check to help you grow your biz.

Make your mistakes off-Broadway. There's much to be said for foregoing a national landgrab in favor of starting small, in a market or two, preferably including your backyard. By staying contained in a single region or channel, you can figure out what makes your brand tick, while staying out of the spotlight and not getting tarred as a failure while you work out the inevitable kinks. You'll burn through less capital and less credibility if you make your mistakes locally, not nationally. And capital providers will notice: by now, they’ve learned to focus as much on velocity growth within your chosen channels as on the overall top line.

Learn to say no. "Getting to Yes" may be the name of an evergreen negotiation handbook, but "getting to no" is a better ambition for bev entrepreneurs to harbor. Learn to say no to big distributors you won't be able to adequately support, and to retail chains where you may get lost on a bottom shelf and endlessly chiseled for pricing concessions. Tho audacious moves into the likes of Walmart or Costco seem to have worked out well for some intrepid bevcos, such as Vita Coco, the annals of troubled bevcos are filled with those who outran their coverage. That said, recognizing this pitfall, retailers like Kroger, Safeway, Target and even Walmart have been making it easier to enter their stores at a more organic rate, in a highly encouraging development for innovative brands. Let’s hope they stick with those programs. Oh, and always bear in mind that every retailer is intensely paranoid about some other rival – so if they’re really important to you, you might have to say no to the other guy, or at least offer a different product or package. For Whole Foods, for instance, that paranoia extends to HEB’s Central Market imprint in Texas and Trader Joe’s just about anywhere else.

Don't be overawed by the big systems. The Coke, Pepsi, Dr Pepper Snapple and beer systems are finely tuned engines for moving high-volume, high-velocity products at affordable price points through the chains. That doesn't mean they're right for you. Big systems seem to work best for big brands, or at least those with a clear path to mainstream acceptance. For smaller, premium brands, their default reflex, at the least sign of resistance, is to hit the 10-for-$10 button (or worse). Even if you do partner with one, try to maintain flexibility over what distribution option you employ in a given market until you're further along. That said, DPS has stepped up its focus on its so-called allied brands, and its rivals Coke and Pepsi are recognizing they need to do better in emerging segments, including refrigerated ones. As a corollary: don't be so dazzled by the resumes of big-company vets. Their credentials may be only remotely relevant to your own needs - unless your overarching strategic aim is to cook up those 10-for-$10 deals with large-format retailers.

It's better to underplay than overplay your nutritional claims. We're in an era of heightened regulatory scrutiny and class-action litigation and, given the excesses of the recent past, can't really claim it's undeserved. So you're better off underplaying your nutritional and functional claims than overplaying them - that can only increase the likelihood of unwanted attention from regulators and sleazy lawyers, and won't do as much as you think to impress jaundiced consumers. The advent soon of more rigorous labeling requirements will put a further premium on clarity and forthrightness, in a manner that should play to the strength of those brands that have truly got the goods. As a corollary, think hard during your inception phase about whether you want to offer an ingeniously engineered functional drink. An increasing number of consumers, particularly younger ones, respond more to drinks with a minimal ingredient list, none of them sounding like a chemical.

Think strategically about the strategics. If your main game plan is to launch your product, fake it for a few years and get taken out by Coke, Pepsi or DPS at a nice premium, then you shouldn't be in this biz. Figure you're going to be in the game for a while, and think of strategics as cos that offer real help in staying in the game. That might mean less easily defined partners, from overseas firms like Tata and Asahi to family funds like Verlinvest and Emil Capital to well-connected incubators like Coke-affiliated LA Libations, not just KO, PEP and Nestle. There’s an argument to be made that, soon enough, the beer systems will be upping their game in non-alc bevs, starting with Anheuser-Busch via its rollout with Starbucks of Teavana teas and its inauguration of a venture arm scouring all segments for promising ideas. Look at Vita Coco again: tied into DPS’ distribution system, everyone thought it was in a box regarding an exit, but conjured up a Red Bull billionaire in China as a substantial investor and prime partner to ignite a new round of growth in a promising region. Fast-growing Celsius found its own Chinese billionaire to help fund its growth. There are more of those players out there.

Stop pounding on the DSD guys already. True, some DSD distributors are grasping, whining, endlessly finagling operatives. (We at BBI are sympathetic, because our parents wangled us higher grades that way when we were kids.) Maybe they really aren't right for your brand, at least at the earliest stage of development or in the channels you're targeting. Fine. It's worth keeping in mind, tho, that there haven't been any shelf-stable brands that have achieved megasuccess without going through the DSD network during their prime growth phase. So pick a limited # of DSD partners - maybe just one - make sure you're on the same page, and see if it can work for you. Like democracy or America's Got Talent, it's sloppy and occasionally unsightly, but nobody's found a better way. Or perhaps look at it this way: as frustrating as this system can be to work in, plenty of marketers in promising refrigerated segments like cold-pressed juice, cold-brewed coffee and kombucha wish they had a tier like that to draw upon and are hoping more of these DSD players venture into refrigerated distribution. Oh, and about this craft beer mania we’re all marveling at: the mania finally seems to have reached the point of subsiding, and more far-sighted beer wholesalers will soon enough find themselves less dismissive of NAs as a leg to the stool.

Stand for something, from the start. We don't buy that old saw that certain categories - tea, coconut water, energy - are tapped out, with no room for new entrants. Nor does innovation have to mean employing some earth-shattering new ingredient that sounds like a by-product from an oil refinery. As existing brands move through their life cycle, there's room for reasonably straightforward brands to emerge, even without a lot of bells and whistles – often, as noted above, offering a fresher, cleaner take on the category. But that only works if your brand stands for something, right from the outset. Trying to paste on values or personality down the line is way harder, and less likely to be convincing to consumers. Having that “story” adds excitement and meaning to brands ranging from Honest Tea to Runa and Mamma Chia. It’s even better if the story is true.

If you haven’t yet, read Mission in a Bottle. That’s the graphic-novel-style treatment of the rise of Honest Tea, with a level of detail and frankness that we’d never encountered elsewhere – down to how many cents each label cost. Cofounders Seth Goldman and Barry Nalebuff offer an unvarnished primer on what it takes to build a bev biz, including frank discussions of their many missteps along the way. If you’re far enough along to regard yourself as an insider by now, you can also play the parlor game of identifying the faces (without names attached) that pop up in tough encounters portrayed in some panels. Way to use the novel format to innovative effect! Other salutary new year’s reads? Zico founder Mark Rampolla’s stirring High-Hanging Fruit: Build Something Great by Going Where No One Else Will offers a close-up of the human side of being a bev entrepreneur, while including its shares of bev-war hijinks. And you could do worse than reading former journalist Steve Hindy’s often-gripping account of his launching of Brooklyn Brewing, Beer School, back in the years before “Brooklyn” became a synonym for hip, artisanal and cutting-edge.