Beer Marketer's Insights
EXTENSIONS: Soylent Adds 2 More Flavors
Count frankendrink marketer Soylent among the legions of bevcos who play the flavor extension game: after doing well with a Coffiest extension in past year, LA-based marketer is adding Cacao and fruity Nectar flavors to the mix while retaining macronutrient profile that make its core Original sku a meal in a bottle. Recall that at their inception, it wasn’t clear whether Soylent and franken-rivals would even be venturing from powder into RTD, let alone offering array of flavors to suit core demo of coders presumed to be too busy coding to get up and get a meal and not unduly concerned about flavor component of their nutrition intake. (“Maximum nutrition with minimal effort,” is among brand credos voiced by founder Rob Rhinehart.) New sku’s are available on Soylent.com and, starting next week, Amazon.com at $37.05 per 12-bottle case for subscribers and $39 as one-time orders. Each bottle purports to offer 20% of typical consumer’s required daily nutrition.
Coca-Cola appears to have decided it’s not a venture capital firm after all. Atlanta-based bev marketer has closed its Silicon Valley-based Founders program, which since its founding in 2013 had invested in 8 startups around the world ranging from on-demand staffing specialist Wonolo to predictive analytics firm Hivery, Innovation Leader reported. Unnamed source told Innovation Leader that move signals return to focus on core biz, at time that James Quincey is preparing to succeed Muhtar Kent as ceo. A KO rep told IL that current investments will be folded into Coke’s M&A group, and that KO will no longer be making such investments in either new or current partners. David Butler, who had titled of vp of innovation & entrepreneurship, and Ross Kimbel, global dir of innovation & entrepreneurship, have both moved on.
Major bevcos failed to outperform S&P 500 (+9.5%) or Dow Jones (+13.4%) in 2016 as they had easily done in 2015, while several smaller bev players posted double-digit gains for shareholders last year. Coca-Cola’s stock price slipped 3.5% to $41.46 at end of 2016 following gains of around 2% in each of previous 2 years. PepsiCo stock price continued its deceleration in 2016, closing year with 4.7% gain to $104.63. That’s down from +5.7% in 2015, +14% in 2014, +21% in 2013. Following double-digit gains over each of last 4 years, Dr Pepper Snapple Group shares closed down 2.7% to $90.67. That’s still more than double its share price from 4 yrs ago. And as noted here before, move to acquire Bai Brands might have supported share values, after investors proved skittish on DPS after word first surfaced that Bai brand might flee DPS distribution system.
Comeback player of year may have been Sodastream, which doubled in value to $38.61 after reinventing itself as a purveyor of sparkling-water systems rather than soda systems. (SODA shares had topped out above $70 in 2013 before biz eroded and Israel-based co concluded soda is no longer the place to be.) Tho it turned in one record quarterly performance after another, Starbucks shares subsided slightly from $58.79 at beginning of year to close at $55.13. In its first full year working within Coca-Cola bottler system, Monster Energy stock price fell 10.7% on adjusted basis. Recall it had 3-1 split back in Nov. That’s down from 37.5% gain for MNST in 2015 and near 60% surge in 2014.
Cott Corp stock price gain slowed considerably last year, edging up 3.1% to $11.33 following gain of 59.7% in 2015, when co transformed its biz with acquisition of DS Waters. Campbell Soup (V8, Bolthouse Farms) posted 2d straight year of double-digit growth, with shares increasing 15% to $60.47 in 2016 following 19.4% gain in 2015. Probiotic bev marketer Lifeway Foods inched back from 40% plunge in 2015 with stock price gain of 3.7% to $11.51. Lifeway had been up 20% in 2014 to $18.53. WhiteWave Foods stock price posted solid 42.9% increase to $55.60, more than building on 11% gain in 2015, as co moves toward acquisition by French dairy-and-water giant Danone. After doubling in 2015, National Beverage gained another 14% to $51.80 last yr, mainly by riding strength of its booming La Croix sparkling water line.
Among smaller-cap beverage stocks in 2016, it was another difficult year for Reed’s, which left large amount of sales on table as it grappled with production headaches. REED shares plunged 23.8% to $4.10, 3d straight yearly decline following losses of 9% and 25.9% prior 2 yrs. But Celsius shares soared from $2 to $2.75 as Fla-based marketer of calorie-burning energy drinks scored gains in broad mix of channels and put some European growth headaches behind it. Jones Soda stock price increased 18.4% to 45 cents per share, building on 9% gain in 2015, as it cut losses and worked hard to move back into growth mode.
Wassup for 2017? Movers & Shakers Weigh In
With a potentially tumultuous new year at hand, on both the political and bev fronts, BBI reached out to some wired-in folks whose views we’ve come to respect, requesting that they offer their takes on what’s at hand. Here are some of the responses we drew, sometimes edited for clarity or brevity.
Bob Burke: Tap-Tap
Natural Products Consulting LLC, Andover, Mass
The big story in 2017 will be the continued evolution of how consumers get products – that is, the rapidly shifting retail landscape that includes online/e-commerce, new formats such as Amazon Go and Amazon Fresh, Whole Foods 3-6-5, meal kits, direct-to-consumer (DTC) by brands, Uber Eats, Instacart, the expansion of Fresh Direct and PeaPod. Personally, I love going into a great store, but evidently there are vast hoards who prefer to tap-tap on their screen and it will be delivered tomorrow, or that afternoon if you are in the right zip code. The model of shipping stuff to a distributor who puts it in their warehouse and then puts it on their trucks to go out to stores isn’t going away tomorrow, but they are getting their cheese moved. Also, 2017 will bring another year of “no/less added sugar” across food and beverages. (I write this as I am awash in fine chocolate and baked goods of all kinds by well-meaning industry associates – whatever happened to “holiday spirits”?) Consumers will continue to seek out unsweetened or minimally sweetened beverages and snacks, with an emphasis on clean fresh flavors from real food. These will be expressed in sparkling and still waters, cold-brewed coffees, teas and cider vinegar drinks, and unsweetened yogurts. Protein drinks will shade towards using monk fruit and stevia rather than added sugar.
Seth Goldman: More Than Organic Cert
Co-founder & TeaEO Emeritus, Honest Tea, and innovation catalyst, Venturing & Emerging Brands, Coca-Cola
Now that organics have penetrated into virtually every beverage category, organic certification won’t be enough to gain a health or social responsibility halo: consumers and retailers will start paying more attention to other relevant claims, such as nutrition facts and other certifications, such as Fair Trade. The downsizing of containers that started in the soda category will spill over into other sweetened drink segments. One more prediction: the VEB/incubator model will spread to all established food companies, including retail, restaurants, grocery and foodservice.
Franklin Isacson: Commoditized Capital
Investment director at Verlinvest, whose holdings include Vita Coco, Hint and Sambazon
Strategics will remain very acquisitive, given the need to pivot their portfolio of brands towards the perimeter of the store and to the new consumer. With all the institutional money chasing smaller brands, money becomes increasingly commoditized and entrepreneurs will look for investors who can add value to their businesses.
Kevin Klock: Added Sugar, not Calories, the New Focus
CEO of Sparkling Ice marketer Talking Rain, Preston, Wash
We see two significant changes to the industry starting in 2017. First, the focus will start shifting away from calories and will intensify on added sugar. This will be driven by more taxing as well as brands starting to shift to the new FDA labeling requirements. The second impact could come from a ruling on the use of the word “natural.” This may limit a point of differentiation that smaller brands have been using to attack larger brands that feared the potential legal impacts [of describing themselves as natural].
Neil Kimberley: Structural Change, as CSDs Dip Below 50%
Snapple veteran and vp of strategy and brand development at Essentia Water, Bothell, Wash
The beverage industry faces the biggest structural change since the mainstreaming of diet soft drinks in the late 1980s, or the expansion of Snapple in the 1990s. Traditional soda is now below 50% of retail beverage sales. Retailers understand this change and are more receptive than ever to new ideas. This is creating opportunities for growth. And there are many interesting products and categories offering great alternatives – including water, flavored sparkling water, cold-brewed coffee, premium teas and the new wave of protein beverages. Change = Opportunity.
Eric Schnell: Ditching ‘Old-School Chemistry in a Lab’
Co-founder, BeyondBrands incubator
2017 is going to be the year of greatest effort on behalf of brands to create “clean labeling” in beverage formulation as never seen before. As an extreme example, brands want flavors now to actually come from “the real ingredients themselves,” not what a flavor producer can manufacture in an extract or syrup. That certainly changes the game for most all flavor houses, which only use their own extracts as the reason to take on formulation projects. These brands are now searching for “master beverage formulators” that don’t make revenue off selling flavors – old-school chemistry in a lab – but instead are paid for their expertise on supply chain knowledge, culinary expertise and formulation skills.
Jerry Reda: Slow-and-Steady Wins
COO of Big Geyser, NY distributor whose diverse NA portfolio includes Monster Energy, Sparkling Ice, BodyArmor, Core, Essentia, Hint, Muscle Milk and other bevs
Understate and overperform. Satisfy the needs of your customers 7/24/365 days. Continually ask your customers what you can do to better service their needs. Service, service, service and more service. Too many people rush for the quick sale when slow-and-steady wins the race – it’s a marathon, not a sprint, as our ceo Lewis Hershkowitz often reminds our team. Retailers and distributors are faced with rising costs, with the minimum wage increasing. Manufacturers, retailers and distributors must plan better, work closer together to deliver value-added services that reduce out-of-stocks and deliver more efficiency at the store/customer level. At Big Geyser, if our customers do not say we are their #1 beverage distributor in the markets that we serve, then we have to work even harder to gain their trust and support.
Gerry David: ‘Fit Lifestyles’ Rule
CEO of Celsius Holdings, marketer of functional energy play Celsius, Boca Raton, Fla
“Live a fit lifestyle”: This consumer mindset is not just a trend in the US, but is having a global impact. Beverages play a key role in this exploding mindset, specifically functional beverages such as non-traditional energy drinks. Products that are healthy by the nature of their ingredients, yet deliver key benefits such as energy, fat burning and calorie burning.
Anonymous: Escalating Bev Tax Battle
From a bev exec who requested anonymity because of his work affiliations
The battle between beverage tax activists and the industry is going to continue to heat up – possibly shifting toward some kind of preemptive federal action (with the Trump team siding with industry).
Boston Beer appears to be scrambling to stabilize the Truly brand. After less than 6 mos in mkt and relatively underwhelming performance, Truly Vodka Seltzer will get an entire makeover, rebranding itself as Truly Vodka Soda, co announced this morn. This better aligns brand with the "bar-call" along with "light and colorful new packaging," and "two all-new collections of single-fruit flavors." New lineup includes two industry-standard 8pks, Truly Vodka Soda Classic with mango, lime, pineapple and blueberry flavors, and Paradise pk with mango, watermelon, passionfruit and blood orange. Plus, Truly's breaking the spirits-based seltzer mold, launching new 12pk dubbed "Twist of Flavor" staring in Apr, featuring blackberry & lemon, cherry & lime, pineapple & cranberry and peach & tangerine flavors. New single-serve 24oz resealable cans are comin' soon as well (joining AB's NUTRL).
Heineken USA Revs Down Low Singles, Volume Mid-Singles in 2022; "Severe Supply Chain Disruption"
In US, Heineken net revs "declined by a low single digit" in 2022, co reported this morn, "following severe supply chain disruptions leading to a mid-single digit beer volume decline, behind the market." Yet "despite this challenging context, our innovations continue to drive growth," said co. Heineken 0.0 "grew and strengthened its position as the #1 non-alcohol beer in the market." Dos Equis building on "success" of Lime & Salt with Classic Lime Margarita and "more to come during 2023." In 4th qtr, HUSA "rebuilt inventories to restore service levels across our portfolio and prepare for the large scale launch" of Heineken Silver.
Bang Energy may be weathering its share of adversity in its home market, but that's not stopping it from continuing gradual overseas expansion. Latest addition: Chile, where it's enlisted Caso & Cia as distributor. That house will pick up Wyldin' Watermelon, Swirly Pop and Mango Bango flavors to start. Bang creator Jack Owoc, who operates as VPX Sports, termed new partnership "further proof of our positive trajectory and path to exponential growth internationally. We remain a family-owned, private company that has grown from zero revenue at its inception to over $6 billion in total sales." By now brand claims to be sold in 20 countries spanning N Amer, S Amer, Europe, Africa and Asia (via Australia presence) . . . Alkaline Water Co is continuing its gradual DSD expansion for its Alkaline88 brand, now landing beachhead in Detroit via Intrastate house, which services Wayne, Monroe, Macomb, Oakland and Washtenaw counties in SE corner of Mich . . . Planting Hope Co has landed its entire por
In the past, brand marketers pretty much kept their complaints about service levels and billing practices of broadline distributors like UNFI and KeHe to themselves - or cloaked themselves in anonymity when they did publicly comment, as in a guest comment we ran a few years ago from writer who declared that "You can't spell UNFAIR without UNFI" (BBI, Apr 13 2017). Along the way, as we've chronicled, a whole cottage industry has emerged of service providers offering to monitor and challenge unwarranted invoice deductions buried in sheafs of confusing paperwork. Lately, tho, aggrieved suppliers have been going public with a deluge of detailed case histories, including Chicago-area player called Modest Coffee that described disastrous foray into Walmart via unidentified broker and KeHe broadliner that left it with 30,000 bags that it desperately needed to unload to stay afloat (BBI, Jan 9).
Coca-Cola motored thru a strong Q4 and full year as pricing and product mix lifted topline despite stresses to business in Russia and China. Net revenues rose 7% to $10.12 bil, +15% on organic basis. For full year they rose 11% to $43 bil, +16% on organic basis. Global case volume sagged 1% for qtr but was up 5% for all of 2022. That stronger topline benefited operating margin, which held steady at 22.7% on comparable basis vs 22.1% a year earlier despite higher costs, Body Armor acquisition and higher marketing spend.
INSIGHTS turned to recently retired sr ad exec Marty Stock, to get informed, unique perspective on beer ads in the big game. Marty worked for 39 years with AB, Molson Coors and Constellation and produced over 1000 beer commercials for 42 brands. Take it away, Marty.