Beer Marketer's Insights
How coronavirus plays out in bev biz over longer term is hard to read and, frankly, a bit scary as with all other aspects of economic activity. In short term, tho, it's providing a boom to marketers with entries positioned as immunity-boosting as well as staples like bottled water that have been getting cleaned off retailers' shelves in flurry of panic buying in recent days. (Essentia and Icelandic Glacial are among brands we've heard from that are scrambling to keep up with demand.) Shelf-stable and frozen foods also have been beneficiaries, and grocery delivery services are humming in cities where consumers want to minimize store visits. In gesture toward looming recession, GrubHub said it would temporarily suspend up to $100 mil in commissions from indie restaurants and other delivery services are coming under pressure to make similar concessions, issue that's sure to rise in importance as smaller cos struggle to weather flatlining of economy. At store level, Trader Joe's has suspended all food & bev sampling, while foodservice chains like Starbucks have been assuring customers that they've established careful protocols to protect safety, but acknowledging it's fluid situation and not ruling out store closures. In NY last night, eateries we checked from Starbucks to Shake Shack were quiet but not deserted, while grocers like Trader Joe's and Whole Foods were approaching pantry-loading pandemonium. On earnings calls this week, the bevcos Celsius Holdings and Reed's were citing business as usual so far, but readily acknowledging that later quarters are on opaque side.
Icelandic Glacial, which was early to move to carbon neutrality, is upping its green bona fides with plan to move to 50% rPET in its packaging by next year. It's also diversifying from plastic with move to add bag-in-box and aluminum can options, all to be produced at expanded production site at the water's source at Iceland's Olfus Springs. And it's taking another crack at flavored sparkling segment, this time going to far reaches of the world for essences in 5-sku lineup in revamped pack with greater shelf presence.
Reed's Inc reported another sluggish period in Q4 but claimed strong progress on turning corner on production snafus and seeding promising new entries like Reed's Really Real Ginger Ale, wellness shots and alcoholic mules that represent key growth opportunities. For Q4, net sales dropped 26% to $7.15 mil from prior-year sales level that had been boosted by $2.2 mil from discontinued private-label biz and non-core brands like Culture Club Kombucha. Excluding those items, sales would have been down lesser 4%. Core-brand sales were flat as 6% gain in Virgil's-branded items were offset by comparable decline in Reed's-branded items, which came later to market with brand revamp and zero-sugar and other innovations, then suffered during production breakdown last year. Operating loss widened 6.7% to $3.5 mil. For full year, net sales dropped 11.2% to $33.82 mil and operating loss widened by 17% to $14.86 mil.
Keurig Dr Pepper has placed a longtime JAB ally Mauricio Leyva in newly created post of prexy for international and biz development, making him pivotal role on strategic partnerships and M&A, among other activities. Reporting to chmn/ceo Bob Gamgort, he'll also be responsible for KDP's Canadian and Mexican biz units as co tries to build out its overseas biz, still a small share of overall revenues. Leyva most recently served as senior adviser to JAB Holding, supporting its global bev and coffee team, KDP said in announcement. JAB, of course, is controlling shareholder of KDP. Prior to JAB, Leyva was ceo of Mexican dairy giant Grupo Lala, after holding senior exec posts at brewing cos AB InBev, Grupo Modelo and SABMiller.
SF-based probiotics player ZBiotics, whose scientifically derived hangover preventive we profiled just last month (BBI, Feb 6), has pulled in $2.3 mil seed financing round led by technology-oriented venture fund Oyster Ventures. The new capital, which brings total raised to $5.7 mil, will be used to broaden product suite to include other functions and to build team and broaden sales presence. As we'd recently reported, ZBiotics team has exploited declines in cost of gene sequencing to devise elixir called ZBiotics Probiotic Drink that breaks down the acetyldehyde that's a toxic byproduct of alcohol consumption, first in what its cofounder/coo Stephen Lamb promised us would be broad suite of functions. Incubator/mfr MetaBrand in Edison, NJ, helped with formulation and production of that entry, the cos confirmed to us. Tho Lamb wasn't ready yet to identify future sku's, website said, "We started with alcohol, and now we're working on other challenges, like dairy, radiation, and lead-contaminated water" via new generation of "transparent, responsible and people-first genetic engineering." ZBiotics is led by founding scientist/ceo Zack Abbott, the "Z" in corporate name. Oyster Ventures' website lists 48 portfolio cos including a few that impinge on food/bev space such as B-box, which makes "intelligent robotic systems that serve awesome food," and Postmates delivery service.
Celsius Holdings was a $75 mil co last year. Boca Raton, Fla-based marketer of energy supplements reported 2019 fiscal year in which sales jumped 43% to record $75.1 mil thanks to sequential quarterly improvements throughout year. For Q4, sales surged 64% to record $24.1 mil and on investor call this morning ceo John Fieldly said current Q1 is set to break another quarterly sales record as consumers gravitate to its lower-sugar energy entrants that co is positioning as participating in fitness segment popularized by Bang. By now Celsius has been around better part of 2 decades, but it seems finally to be finding rhythm at time energy category has proved ripe for disruption.
Serial entrepreneur Lance Collins, not long off successful sale of Core Nutrition to Keurig Dr Pepper, has quietly entered fray again with what he describes as beta test of new alkaline water brand called Zen Essentials that's about to transition to package made of plastic entirely rescued from ocean water. Vapor-distilled entry using the electrolytes and minerals calcium chloride, magnesium chloride and potassium bicarbonate to attain 9.5 pH has been visible (tho not in stock) on InstaCart site promising "Escape: Find the peace and tranquility that your body craves. Find the balance that you deserve. Most importantly find your Zen - Better Water." Asked about it earlier this week, Lance declined to say much, saying it's old product that's actually being closed out to make way for more "disruptive" pack that he won't be ready to discuss for another week or so. But we hear from several sources that new bottle is "made with 100% recycled ocean bottles," as package graphics will herald, putting him on cusp of groundbreaking solution to plastic backlash that's seen a bunch of new plays that employ aluminum bottles or Tetra Paks as alternative solutions. The earlier Zen Essentials pack, dressed in graphics with black and red cues employed by segment leader Essentia, seems to make lesser claim of being produced from 50% recycled plastic. Given Collins' stance as innovation partner of Keurig Dr Pepper, with whom he's worked with Body Armor, Core and Adrenaline Shoc brands, Zen Essentials would seem to offer bevco a play in booming alkaline water segment, but Lance insisted to us that KDP has no current involvement in project, which we'd first heard about last fall (BBI, Sep 8). We hear longtime new-age vet Bob Miller has been enlisted to cause.
The first shoe has dropped on what we've reported to be a plan by PepsiCo to acquire Rockstar Energy as a means of clearing the way for an alliance with Bang Energy. PEP announced this morning that it's entered deal to pay $3.85 bil for energy pioneer closely held by founder Russ Weiner and his family. The deal unlocks path for Pepsi to step up investment behind declining but still significant brand that it's distributed since 2009 while eliminating contract restrictions that have created conflicts with ally whenever Pepsi sought to push ahead with energy-inflected entries under other brands like Mtn Dew Kickstart and Game Fuel. Perhaps more significantly, it opens door to what we've heard is move to bring Bang Energy into blue system, via what may or may not include equity stake in owner VPX Sports and possible path to ownership of that co or brand too (BBI, Feb 19). At time, our story prompted wave of hand wringing among distributors for whom Bang has quickly become a key offering.
Bear's Fruit's squat 10-oz glass bottle with label sporting playful silhouette of bear was distinctive and so cute, we enthused recently upon arriving at kombucha maker's expanded digs in Brooklyn's Industry City makers complex. Cofounder Amy Driscoll agreed heartily, then added that that was the problem: that look undermined premium nature of liquid, which takes more than 50 days to produce via co's perfectionist approach, not to mention that the short bottle could get lost in cooler and shoppers sometimes mistook brand for kids' drink. So difficult decision was made to go to new look with taller bottle at same 10 ounces and to banish the bear to tiny image on back label. Front label now offers realistic imagery of key ingredients, as with blueberry and lavender for Blueberry Lavender flavor.
Yet another deal for Reyes Beer Division in Calif, its 2d of 2020, and again it's acquiring house with long history on NA side, Saccani Dist in Sacramento, which does about 1.5 mil cases all told. Given Reyes' well-known skepticism about NA brands in its beer houses, move may send some of those entries scurrying for alternatives, as happened with acquisition of DBI in Bay Area last fall. Earlier this year Reyes acquired 700K-case Claypool in Imperial County, which completed its footprint in Southern Calif. Saccani deal reportedly announced to employees yesterday and expected to close in mid-May, our sibling newsletter Insights Express has heard. Saccani's lead suppliers are Lagunitas and Pabst (over 1 mil cases between them), tho it reportedly also has Phusion and many, many craft suppliers.