Recently concluded BevNet Live conference, in focusing on entrepreneurial end of bev biz, is naturally ebullient setting. But even the cockeyed optimists these days seem to be reciting go-slow mantra, arguing it's important to grow region by region, channel by channel, rather than undertaking capital-burning landgrabs in financial environment still marked by austerity. "No shortcuts," warned former Coke exec Udaiyan Jatar, now running Atlanta-based consultancy Blue Earth Network, in typical remark from podium. "Those who take a slow, organic route often are greater successes."

Certainly, those representing capital side were emphatic on that point. There's more money than ever before out there, assured Partnership Capital Growth Advisors' Brent Knudsen, "but people have gotten really smart and profitability really does matter," regardless of economic environment. First Beverage Capital's Bill Anderson offered 2 key lessons. First, "you can't spend your way to prosperity." Don't fall for ruse that ebidta doesn't matter, that it's all about growth. Second, Bill wants to see "comprehensive, well-thought-out distribution plan." That seldom means national landgrab - more likely "own your (core) market and go deep. We're not a big fan of going thin and wide." First Beverage's key bev investment, Activate, tho well funded, has adopted region-by-region approach that only has brand in western states so far. Go-slow approach didn't stop India's Tata from making significant commitment a few weeks ago.

Advice ladled out at Santa Monica, Calif, conference serves as restorative to heady days a few years back when bevcos like Glaceau and Fuze were hellbent on topline growth, ignoring profitability in interest of exit to deep-pocketed strategic. Until bubble burst, that thin-and-wide strategy stood them in good stead. In current environment, tho, private equity folks "are keyed in and locked in on capital efficiency," said John Burns, principal of $300 mil Highland Consumer Fund who in past year stepped in to run fund's Mix1 holding. To Andy Whitman of 2X Consumer Products, only 2 metrics really matter: same-store sales growth and velocity. He's less impressed with brands that are in 5K retail doors than those playing very successfully in 200 doors. Buy the scanner data, he urged, so you know where your brand ranks on those factors before you talk to capital people. Another key predictor: gross margin. If those are stuck in hi 20s/low 30s, co likely won't be able to support needed infrastructure to grow, Andy warned.

Reformed Big Spenders Tout Capital Efficiency Even cos once associated with hyperaggressive expansion are singing from new hymnal, judging by BevNet presentations. At FRS, which has spent tens of millions on Internet ads and TV spots, "biggest reculturization" since he came in as ceo, said Carl Sweat, is that topline growth is not all that counts. Indeed, cost savings implemented over past year allowed co to add $5 mil to marketing budget, he said. Ditto Function Brands' Dayton Miller, which went out at initial valuation believed to be in $100 mil range and epitomized landgrab mentality in wake of Coke purchase of Vitaminwater. After big capital burn that's seen valuation dwindle to fraction of initial figure, Dayton's spent past coupla years narrowing product emphasis to a few specific functions that resonate best with consumers: "It was a question of the ROI with the marketing dollars we were spending," he told conference attendees. Then there's Jones Soda, which once suffered from "major bout of ADD" that saw explosion of entries in organics, teas, energy and functionals, said new ceo Bill Meissner. That's just been trimmed back to coupla carbonated lines in soda and energy.

Realistically, cos aren't necessarily expected to operate in black while building biz, but at least they need to keep losses narrow enough so that prospect of future profitability doesn't seem like mirage. "We were never robustly profitable," confided Honest Tea's Goldman, who expects Coca-Cola to pick up full control of co in Feb. But co managed to get "close to break-even once in a while to show that the business was sound."

"The world has changed," said New Leaf Brands founder and longtime bev exec Eric Skae, who during aggressive growth phase signed about 150 DSD shops but has lately struggled to fund enough production to grow top line to potential. Expansion requires more capital today than 10-12 years ago, so it had better be spent judiciously, Eric advised.

Picking One's Spots - Carefully Numerous BevNet speakers homed in on tradeoffs of making limited capital go a long way. Some advice referred to fundamentals of how co operates: Switch Beverage's Maura Mottolese is careful not to hire big-bevco vets who won't be willing to share hotel rooms or hand out in-store samples, while Honest Tea's Seth Goldman noted that it wasn't so long ago that co was dumpster diving for furniture. At sales/marketing level - what channels to serve, what inducements to offer - tradeoffs can be tuff to make but are necessary. Schools channel can be complicated to serve, warned Switch Beverages' Maura Mottolese, "but the velocity can be mind-blowing" - as high as 50 cases per week - which makes it worthwhile.

Slotting or other retailer inducements? Tho often viewed as fact of life, panelists expressed skepticism on those. When he first pitched his local Whole Foods in Bethesda, Md, Honest Tea co-founder Seth Goldman didn't know enough to realize that buyer's request for free case per store wasn't unreasonable. So he turned them down, but still got into stores. Even a dozen years later, he's still wary of slotting. "I don't think it's something an early-stage entrepreneur should be spending money on," he said. New Leaf's Skae demurred that it's mandatory for some retailers. Still, "if you can't make money on it, don't do it," Eric advised.

Ditto for discounting. You can't rule it out entirely - after all, it's good way to get trial, Seth noted. "Once a quarter we do something, maybe for a week," he said. But "long-term, you've got to make sure there's a brand there, not a commodity." It's dilemma Switch's Mottolese has become familiar with as competition in schools channel has intensified and rivals "are doing crazy things on price." Her bottom line: "You need to promote sometimes . . . but if it's not sustainable, don't get involved."

Meissner's Message: How to Keep It Tight Here are a few rules of thumb from SoBe, Fuze and Talking Rain vet Bill Meissner, who jumped onto hot seat at Jones Soda a few mos ago: Identify a footprint you can drive results thru. If you're in hi-growth vertical channel, stay there. Don't run marketing events in areas where you don't have true on-shelf availability. Be leery of expansion for expansion's sake. "Do you really need to be national?" Bill asked. And don't be overly captivated by prospect of moving brand thru big distribution network. "The big systems work great - if you're big."  

In quest of greater profitability, Rexam has confirmed that it may sell its bev- and specialty-closures businesses. Co "is examining options for the beverage and specialty closures businesses," rep confirmed to Bloomberg after initial report by Plasticsnews.com. "One option of which is the sale." Bank of America Merrill Lynch analyst Ross Gilardi termed operations "weakest link in its plastics portfolio" . . . In response to Federal Trade Commission charges of deceptive advertising, Dannon Co agreed to drop certain health claims from marketing for Activia and DanActive probiotic yogurts. Groupe Danone unit also will pay $21 mil to settle with 39 states that have been working with FTC, in what AP described as largest multi-state attorney general consumer protection settlement ever reached with food maker. Recall that FTC had challenged Dannon, via high-profile campaign starring likes of Jamie Lee Curtis, for making unsubstantiated claims that DanActive helps prevent colds and flu, and that single daily serving of Activia relieves temporary irregularity and helps speed intestinal transit time. "These types of misleading claims are enough to give consumers indigestion," said FTC chairman Jon Leibowitz.  

The nonprofit group Save the Children, which had been pushing for a soda tax as part of its Campaign for Healthy Kids to fight obesity, quietly backed off that position this fall, reported NY Times. While supporting soda tax efforts in Miss, NM, Wash State as well as Philly and Wash DC, group was also "seeking a major grant from Coca-Cola to help finance the health and education programs" it runs in US and internationally, noted Times. In Oct, Save the Children "surprised" activists that it would no longer be supporting soda tax efforts. Besides ongoing talks with KO, group received $5 mil grant from PepsiCo. While decision frustrated tax supporters, Carloyn Miles, coo of Save the Children, insisted grant had no influence on its decision. "We looked at and said, 'Is this something we should be out there doing and does this fit with the way that Save the Children works?'" Coke and Pepsi reps told paper they did not ask group to change its position on tax, but critics are not swayed. Save the Children's policy shift is "a significant loss, especially at a time when the American Beverage Association has just shown that their resources are unlimited," lamented Jon Gould, dep dir of Children's Alliance, based in Seattle. "It would be a shame if there were a quid pro quo and the groups felt pressure to oppose something like a soda tax," added Kelly Brownell, dir of Rudd Center for Food Policy & Obesity at Yale Univ. Save the Children was awarded $3.5 mil grant from Robert Wood Johnson Foundation in 09 to fight childhood obesity by improving school lunch offerings and improving health education. But, Times pointed out, "local activists" in many states started to use grant money "to push for a soda tax."  

Thomas Kemper Sodas continues to refine its distribution map, now consolidating its LA territory with Haralambos Beverage while aligning primarily with Anheuser-Busch houses in Northern Calif. Haralambos gets brand that had been served by now-defunct Prestige and by Energized. In NorCal, brand will exit DBI on Jan 1 in favor of Bud houses like Matagrano in SF and ME Fox in San Jose, as well as non-Bud house Saccani in Sacramento. As reported, brand earlier exited giant Columbia Distributing in Wash/Ore, in belief it was important to get brand into smaller shops that might place more focus on key non-grocery accounts (BBI, Oct 5). It's realigning network as it preps push behind new stevia-sweetened canned line, too (BBI, Dec 14).  

Tiny marketer of energy brand called Hammer's Redneck Punch is claimin' to have been abused by Hansen Natural Corp, which launched Monster Hammer X-presso Monster item despite being denied trademark of "Hammer" name. Tampa, Fla-based Double Blue Jay Corp said it trademarked Hammer's Redneck Punch and began distributing it in Jun 08 only to see Monster and distribution partner Coca-Cola Enterprises go ahead with Monster Hammer launch. When cos refused request to drop item, Double Blue Jay said it had no choice but to sue them; Hansen has counter-sued Double Blue Jay to cancel trademark and parties are currently awaiting court date, per Double Blue Jay. HANS has been involved in litigation on multiple fronts, from challenging 5-Hour Energy over claims to breakup with athlete mgmt co Crown Sports.  

It's counterintuitive kids-drink play that seems to be working so far: tho offering no concessions on sweetness, flavor or color, Wat-aah brand is building sales both in and out of schools and steadily expanding distribution. Fortified-water line, which looks to capture kids' attention with insouciant branding capped by amusingly annoying yelling-kid image on label, has added Dora's Naturals in NY, Beverage Network of Md, Atlas and Great State in New England and Mussetter and 7 Up Chino in northern Calif, said Bob Sipper, whose Managing Brands consultancy has been advising 3 NY-based founders, none of them from bev sector.

On retail side, Wat-aah has signed Whole Foods' South and South Pacific divs, and is in hunt for LA distributor. Also in mix are Albertson's Southwest district, plus ShopRite, Bloom's and Food Lion. In NY, it just signed Internet delivery service FreshDirect. To service schools it's signed US Foods and is now in 543 schools in 18 states, Bob said. Line currently consists of sku's called Brain, Power, Body and Energy and will be augmented with 2 more functions in Mar, without compromising no-sweetener, no-flavor stance. Recall that healthier-kids-bevs has been notoriously challenging segment that's undone lotsa entrepreneurs. Wat-aah founders, mainly from ad biz, hope to do with aggressive branding and slight nutrient fortification what others have failed to master with colorful, sweetened lines, sip caps and other ploys. 

Cell-nique creator Dan Ratner, who's previously cited appeal of rolling up other natural brands into his co, may be about to bag his first addition: struggling hibiscus-bev marketer Ooba. Dan confirmed recent rumors of discussions with Calif-based co, saying he's signed letter of intent for stock-only transaction that he hopes will close Dec 31. He declined to offer further details, saying he didn't want to get ahead of himself, but said he's also signed letter of intent for pricier transaction on food side, natural-food co that did $4.6 mil in sales in 09. He needs to raise financing for that deal but hopes that will happen in time for Jan/Feb closing. If both transactions happen, he'd be managing co with $6 mil in annual sales. Ratner said strategy holds out prospect of better utilizing field staff, even if different store buyers are involved. His own Cell-nique launched in 05 as pricey but nutrient-rich supergreens line that seems to have carved out solid niche, while Ooba was launched by former pharma exec John-David Enright, who holds rights to some of clinical research supporting ingredient's benefits. Tho Ooba has landed potent Manhattan Beer as NY distributor (whose owner is believed to own stake), Enright has been scrambling in recent mos to bring in more capital to maintain operations. Not clear yet what his new role would be.

Despite counterculture demeanor, Dan is no stranger to the big time, having earlier had healthcare-related posts at GE Capital and ABN-Amro Bank; he's currently ceo of healthcare play Physicians Capital Corp. But "it's more fun to be in health food than healthcare," he joked.  

PepsiCo continues to tinker with structure following sweeping acquisition of top 2 bottlers, realigning N Amer bev biz to adjust P&L responsibilities divided between Pepsi Beverages Co chief Eric Foss and PepsiCo Beverages Americas chief Massimo d'Amore. Eric now obtains P&L responsibility for North American CSDs and most noncarbs that move thru bottling system, Beverage Digest reported, citing internal memo. Massimo retains P&L responsibility for Gatorade, Tropicana and Latin American bevs, as well as marketing/innovation for CSDs/noncarbs. Tom Bené, who's run CSDs/noncarbs, segues to prexy of foodservice unit, which has been integrated with cold- and hotfill operations, and reports to Foss, newsletter reported. Mikel Durham, who's been svp on foodservice side while running Naked and Izze, segues to svp/chief innovation officer for foodservice biz, reporting to Massimo. In revamped role, d'Amore becomes senior contact point for indie bottlers. 

CSD volume slipped 0.4% in 4 wks thru Nov 28 in F/D/Mx/C-stores, performing much better than 12-wk decline of 1.6%, reported Consumer Edge Research's Bill Pecoriello. That's best performance for CSDs in these stores in 9 mos but consisted of haves and have-nots. "Looking at trends for the latest 4 weeks" vs 12-wk trends shows "performance worsening for PEP and DPS and improving for KO & PL," noted Bill. Coca-Cola CSD volume edged up 0.6% for 4 wks vs 2% drop over last 12 wks. Avg price increase for Coke brands was 1%. Meanwhile PepsiCo volume fell 0.8% with avg price up 1.8%. PEP CSDs off 0.6% for 12 wks. Dr Pepper Snapple CSD volume declined 2% for 4 wks with avg price 1.8% higher, while private-label brands rose 2.7% (vs flat performance last 12 wks) on avg prices up 1.8%.

Energy drink volumes gains "decelerated" in the latest 4 weeks "from the mid-teen growth seen in prior months," Bill reported. Energy drinks were up 9.7% in F/D/Mx/C-stores last 4 wks vs 14.6% gain over last 12 wks. Red Bull slowed to 9.9% gain pace for 4 wks vs 15.5% for 12 wks. Avg Red Bull price down 0.3% for both the 4- and 12-wk periods. Hansen Natural volume up 13.6% last 4 wks, slightly off 17.5% pace over 12 wks. Avg price on HANS off 0.2% for 4 wks vs 0.7% gain for 12 wks. Energy shot leader Living Essentials (5-Hour) got 48.2% volume boost last 4 wks on 1.6% price gain. Living Essentials up 54% for 12 wks. Rockstar Int'l volume slowed to 18% gain last 4 wks (vs 24.5% for 12 wks) with avg price down 1.3%. That's much lower than avg 2.6% price drop for Rockstar over 12 wks. PepsiCo and Coca-Cola energy brands continued to struggle, down 2% and 10.6% respectively for 4 wks. KO brands were down despite avg 5.7% price drop while PEP avg price was 1.1% higher.  

GlaxoSmithKline, continuing to diversify from reliance on pharma, is buying protein drink co Maxinutrition for $256 mil from Darwin Private Equity and folding it into consumer healthcare biz that includes Lucozade sports drinks and Horlicks franchises. "It fits beautifully with the Lucozade business," Glaxo ceo Andrew Witty told Reuters. "If you think about GSK now, we have a carbohydrates nutrition business with Lucozade, we have a calcium micronutrients business which is Horlicks, and now we have a protein nutritional business." Maxinutrition's product lineup includes Maximuscle for weight-trainers as well as Maxifuel and Maxitone. Recall that Glaxo has been mulling launch of Lucozade into US tho it hasn't given green light yet . . . Dr Pepper Snapple Group promoted execs involved in research and community affairs to evp level. Effective Jan 1, David Thomas is evp of R&D, reflecting work relocating R&D facilities from Conn to corporate hq in Plano, Tex, while Tina Barry becomes evp of corporate affairs, reflecting efforts to play up flavor strength of DPS as well as its sustainability efforts. Both continue to report to prexy/ceo Larry Young . . . Pepsi will be official bev provider at new Legoland Florida amusement park, reported The Ledger. Under terms of multi-year deal, Pepsi brands including Mt Dew, Gatorade, Aquafina, Tropicana and Dole juices will be sold exclusively at park scheduled to open by Oct 2011. Pepsi will also provide funds to be used towards regional marketing campaigns to promote opening.