So much for smooth transition of Starbucks' packaged coffee biz. Kraft Foods yesterday filed for preliminary injunction in US Dist Court in NYC to stop SBUX from "attempting to unilaterally end the strategic partnership." Kraft reaffirms its partnership "provides Kraft with the exclusive rights for sales, marketing and distribution of Starbucks roast and ground coffee in grocery and other retail outlets." SBUX alleged breach of contract and terminated deal Nov 4, saying it will shift distribution to new partner Acosta on Mar 1. Kraft sez its agreement with SBUX entitles it to "sufficient time" to execute "orderly transition," as well as fair mkt value, "plus" premium of "up to 35%" of value. However, "instead of executing its rights under the contract to buy back the business, Starbucks has chosen a remarkably aggressive strategy that publicly disparages our achievements, interferes with our customer relations and threatens to harm Kraft," said evp/gen counsel Marc Firestone. Kraft claims SBUX actions "violates Kraft's rights under the agreement and prejudges the outcome of an arbitration in which they will face compelling facts against them. Kraft said it rejected offer of $750 mil to end agreement earlier this year. That's about half of estimated value, per analyst estimates (BBI, Nov 30). SBUX told Wall St Journal it feels agreement has been legitimately terminated and continues to make plans to take over its packaged coffee biz next Mar. 

At sold-out BevNet Live conference that kicked off yesterday in Santa Monica, Calif, it was hard to attend presentation at which word "authenticity" wasn't bandied about at some point. For speakers there, it was omnibus way of explaining range of developments in bev environment these days, from how to reach consumers who've grown skeptical of overweaning claims of some brands to why retailer buyers no longer look to big bevcos for innovation. Indeed, in past year, use of phrase as underpinning for strategies has become almost hackneyed, noted consultant Jim Tonkin, of Healthy Brand Builders, who nevertheless believes that, properly harnessed, it can offer key lift to new brand during challenging time.

Authenticity often came up as reason natural-foods channel - tho still relatively small, and sometimes slippery platform from which to leap to mainstream grocers - still is outstanding venue in which new brand can establish bona fides. Word-of-mouth grapevine is particularly potent in that channel, several speakers noted. That's where "authentic evangelists" lurk, noted Guayaki yerba mate founder David Carr. Put another way, it's channel "that will sniff out the imposters right away," said Perry Abbenante, former senior global dir of grocery at Whole Foods. He noted that Whole Foods, as first chain to sell brands like GT's Kombucha, Honest Tea, Sambazon and Guayaki, functions as "authentication and influencer class of trade" that gives it importance beyond actual volume.

FRS is among bevcos that has ardently bought into notion of only working with endorsers who are true believers in product - say, LA Lakers' Derek Fisher, who approached co after becoming ardent user on his own. Carl Sweat, ceo, said he quickly realized on arriving at FRS that that was core piece of athletic team strategy: that pro teams aren't given quercetin-based product to use but buy it themselves - and not at deep discounts either. Slide of team-sports users included likes of Lakers, Dodgers, Mets, Spurs, Timberwolves, Braves and Red Sox. Next, "authentic storytelling" will be key part of marketing program under recently recruited marketing chief Deepak Masand (story below). Tho FRS has been airing TV ads, among conventional media it employs, it's not surprising that Facebook and other social media are key part of mix in allowing enthusiasts to talk up brand to one another, per Sweat.

Similarly, Kathy Lund, former Coke exec who's now marketing vp at Bioenergy Life Science, said she made sure that Olympic athletes enlisted to flog co's ribose products guarantee "authenticity of use," with contractual requirement that they use it. Olympic athletes seem particularly suited to ingredient marketed as pure and natural, she said, and video of female athlete posted on Youtube went viral on weekend that she won 2 medals during Winter Olympics.

For some presenters, authenticity seems to mean being willing to narrow brand focus to discrete group of consumers that can be more thoroughly engaged. "To be everything to everyone doesn't really make sense any more," said Brent Knudsen, managing partner at Partnership Capital Growth Advisors, whose investments have included Hint Water, Naked Juice, Function Drinks and Adina Holistics.

Under New Marketing Chief Masand, FRS Will Push 'Authentic Storytelling'; Kid Who Climbed Everest FRS will look to tap into enthusiasm and persuasiveness of most ardent users in future marketing plans, embarking on campaign of "authentic storytelling" under new marketing chief Deepak Masand. People who get it about quercetin brand "become a bit maniacal," said ceo Carl Sweat. So to push message out, Bay Area co plans to capture stories of some users - notably 13-yr-old boy who became youngest to climb Mt Everest. In true FRS fashion, co knew nothing about his exploits until seeing image on CNN of boy wearing FRS t-shirt. That's when initial approach was made. "He's heading to Antarctica in January and we'll be with him," said Carl. It's presumed TV spot will be created out of footage, tho Carl wasn't ready to confirm yet. Masand, newly aboard as cmo, brings breadth of experience relevant to FRS objectives, said Sweat, having worked on bev brands like 7 Up and Sierra Mist, done e-commerce work at Visa (FRS is top Internet-marketing spender) and had other jobs at cos ranging from Kraft to entrepreneurial ventures. 

With coconut water winning consumer acceptance beyond even expectations of some participants, PepsiCo and Catterton Partners have raised their bets on ONE Coconut Water, pumping in additional round of capital to raise their combined stake to majority of LA-based co. Rodrigo Veloso, who co-founded co with wife Emilie Fritz Veloso, confirmed moves to BBI at BevNet Live conference in Santa Monica, Calif, yesterday, saying they reflected fact that strategy is humming nicely enough for PEP to feel comfortable making ONE its main bet in surging segment. Even as it allied itself with ONE (initially via an overture by its then-independent bottler Pepsi Bottling Group), PEP has continued to make other moves in segment, purchasing Brazil's Amacoco and launching coconut waters under Naked Juice emblem. This would seem to confirm that PEP views ONE as its main horse now. Tho brand has retained such indie distributors as Manhattan Beer in NY, it already had committed to making Pepsi network exclusive vehicle for brand's expansion into other parts of country. Confirmation of tighter tie to PEP comes just as rival Zico, in another nod to broadening acceptance of category, deemed brand ready for Coke systems in both LA and Boston markets (BBI, Dec 3).

At show Rodrigo and Emilie accepted BevNet award for best children's product, their recently intro'd ONE Kids, and Rodrigo said key part of product strategy going forward will be to explore use of coconut water as ingredient. "I have no doubt that coconut water has a role to play in almost every segment of non-alcoholic beverages," he said.  

Fiji Water confirmed it would pay 15-cents-per-liter levy on water it extracts from Fiji acquifer, moments after last BBI went out predicting it was backing off from stance that saw it halt production and threaten to bolt market (BBI, Nov 30). But it's apparently not ready yet to detail how big cost hike will affect wholesale, retail and consumer pricing. "Business as usual," is all Roll Int'l rep would tell BBI y'day. Co has reopened facility and brought back employees after 2-day standoff with gov't.  

Bai is continuing deliberate expansion in Northeast, signing Atlas as latest DSD shop, joining other New England houses Great State, G Housen, Rogo, B&E and Tomasetti. Brand founder Ben Weiss also said line has landed Turkey Hill chain in Penn and Ohio for Feb, portending possible DSD push into those states too. It's got new flavor coming on in Bai-5 lower-cal subline, pomegranate, and is close to hiring cmo, who will be tasked with telling more about antioxidant-rich coffee berry that's at heart of brand's formulations. Tho still tiny, brand has sparked interest in channel for good flavors, sharp packaging and go-slow approach, with former NBA star and senator Bill Bradley among investors. Ben said he expected to announce further investments in coming mos . . . Cellutions LLC said its Modjo for Life anti-aging bev and Modjo Synergy Natural Hangover Tablets have been picked up for distribution by select GNC nutrition stores. Separately, Sunrise, Fla-based co has received patent approval for Synergy, capping process that began with Jul 06 filing. Patent issued by US Patent & Trademark Office covers "Composition including Superoxide Dismutase and Prickly-Pear Cactus for Minimizing and Preventing Hangovers" . . .  

 Retailers in Baltimore complained this week that - just as they feared - the city's 2-cent tax per container on bevs has hurt sales, reported Baltimore Sun. One grocer, Rob Santoni, said his sales have fallen 3% and foot traffic at his store has dropped by 600 customers a wk since tax was implemented in late July. "They've taken away that competitive edge," said Santoni. He decided to absorb tax and keep his bev prices flat but claimed word of tax this summer drove customers to shop over border in Baltimore County anyway. Another retailer that passed tax hike along to customers said bev sales dropped 7%, noting that "it's quite surprising how many customers actually talk about it." While retailers are asking council to repeal tax, even discussing matter at this point is "utterly absurd," claimed mayoral spokesman Ryan O'Doherty. The bev tax will expire in 3 yrs and "it's a tax that I don't think a lot of people have felt because we put in exceptions for milk, juice and larger containers," he argued. So far "the tariff has not generated the revenue that city officials anticipated," wrote Sun. Tho city had projected $5.8 mil in proceeds for yr, less than stellar results from first couple of mos have prompted downward revaluation of 9%, noted paper. Bottle tax revs were down 18% in Aug and 6% in Sep after tax began. O'Doherty sez lower tax rev figures can be attributed to complications in implementing tax, promising that city will get more aggressive with distributors and stores to make sure all taxes are paid.

At its investor conference this week, Starbucks laid out its growth strategy going forward with focus on expansion in China, opening smaller cafes and "being choosier" when and where it opens them, and expanding its packaged good biz by unwinding distribution agreement with Kraft. SBUX plans to up its presence in China to 1,500 stores in next 5 yrs. That implies "200 add per year, and therefore 50% or more of international growth per year," figures Deutsche Bank's Marc Greenberg. That would make China SBUX' 2d largest market behind US. As co expands in China, one of "major challenges" will be to "avoid 'faddishness,'" cautioned Marc. But he added that SBUX is helped internationally "by localizing menus, much like the most successful companies in our beverage coverage, and through rapid innovation." On domestic side, "happily, we saw sparse evidence of the purely store-based growth metrics and simple demographic cases (ie low penetration for growth)," wrote Marc.

"One of the bigger surprises" of conference, Marc noted, "was the forcefulness with which management is targeting CPG to fully exploit its brand in this underdeveloped channel." Success of selling VIA through retailers "has imbued management with confidence to cut out the middle man, and take full control of the economics," he added. SBUX and Kraft have just entered arbitration but SBUX has already announced Acosta (distributor of VIA) will expand its role as distribution partner. Kraft rep told AP at this point "the companies' dispute centers on how Starbucks will take over Kraft's responsibilities and end the contract." Depending on arbitration, SBUX could pay anywhere from over $1.2 bil to Kraft if contract is found to be perpetual, or somewhere in range of "less than $300 million," if it's agreed alliance was actually due to expire in 2014, Bernstein analyst Sara Senatore told Reuters. Meanwhile, there's been some speculation that acquisition of Peet's could provide further boost to packaged biz, tho no evidence SBUX has approached Bay Area co.  

Celsius Holdings, which has failed to garner explosive lift in sales from uncommonly aggressive marketing spend behind its fitness drinks, has become latest bevco to retreat to more grassroots-oriented approach to building biz, saying it's now going to focus not so much on growth but on near-term profitability. Move comes after most recent quarterly results shocked investors and prompted plunge in shares (BBI, Nov 12), prompting rethinking of strategy and layoff yesterday of perhaps 20% of staff. In statement, Fla co said "board has asked management, and management concurs, to develop a plan going forward that will not focus on growth but will focus on right-sizing operations with a view to achieving profitability in the near term." In practical terms, that means that instead of seeking $5-10 mil of new capital for 2011, co will count only on current cash reserves and $2 mil credit line to operate. It's still retaining Zenith Int'l to solicit smaller amount, $2-4 mil, to support "incremental marketing," but it's not counting on that coming in. CELH board has established special committee to oversee Zenith's pursuit of strategic alternatives as well as to monitor new operating approach.

In interview this morning, founder/ceo Steve Haley was frank in describing gamble on intensified ad spending that didn't succeed in driving sales enough to justify expenditure: "We spent a lot of time and money trying to push sales faster than most beverages have done, in ways most beverages have not done." Tho co has spent most heavily on direct-response TV ads that will now be withdrawn, at least in short term, Steve said it was $2 mil newspaper spend that proved most misguided. That budget - higher than Kellogg spends on medium - "didn't do anything but make us look terrible," he confessed. So did aggressive couponing blitz, which caused net revenues to appear to have actually declined after co switched accounting methods to deduct coupon expense from gross revenue line. "We were chasing a topline growth that maybe was unattainable," Steve said. Core investor Carl DeSantis, with aggressive marketing orientation and Rexall Sundown fortune at his disposal, had also been enthusiastic proponent of grow-fast strategy, but is aboard with newer approach, Haley said.

Haley blamed missteps partly on unusual success co scored in moving from 6K retail doors to 33K doors in less than 6 mos this year. That encouraged co to extrapolate sales from its most venerable accounts, Vitamin Shoppe and Hannaford Bros, both aboard 3 years, to project $25 mil in 2010 sales. That in turn made it easier to justify marketing spend, but lack of DSD support in many of those markets and generally slow acceptance cycle of new bevs caused sales to come in considerably short of target. For 9 mos, sales have totaled just $8.2 mil. Hence another lesson: solid DSD partners are crucial, on order of Coast Brands network recently recruited out West and NIDA group of wholesalers in Northeast. On marketing front, co will employ more disciplined approach to couponing and sampling, and go back to earlier strategy of "cheap PR," as when it used to induce local radio hosts to undertake weight-loss regimens using Celsius. DR TV has proved it can be very effective - but not at spend rate CELH can afford at this stage of its growth, Steve noted. At some point down line, co would hope to get back to more aggressive growth strategy.  

Fortified by further capital from key investor Emigrant Capital, Zola Acai has strengthened its top management following departure several mos ago of its ceo while setting 2011 plan that calls for profitable growth primarily from existing retail partners.

As reported (BBI, Nov 12), SF-based co has brought in as coo Matt Collins, who'd held similar role at another SF co, Metro Mint. Chris had been wrestling with how to fill role of exited ceo Felix Maez when Matt, who lives nearby on Calif coast and occasionally surfs with Cuvelier, approached him about slot there. It became clear Collins could be go-to guy "who runs guts of the business efficiently and passionately," Chris said, as founder focuses on product development. That's crucial role as co looks to add 10 points to margins and grow profitably in 2011. Co believes it can double sales mainly via better execution at retail customers it's already got, while deliberately expanding DSD test, building Costco biz and advancing recently struck alliance with smoothie operator Jamba Juice. Recall that DSD test, via Denver's New Age, began when Safeway stores there authorized cutover to DSD; now co is also cutting over King Sooper. Cuvelier sees big upside there: after all, Safeway does double velocity of King Sooper, but King Sooper has quadruple its share in Colo. Co is moving more aggressively to expand footprint on E Coast, lately signing on 1,000+ stores in Food Town, D'Agostino and Food Lion chains.

On marketing side, co cuts in new package look early next year that dials up appetite appeal, in synch with move away from abstract promises and more fundamental focus on taste and benefits. It's also playing up advantage of being shelf-stable and greater value of its 12-oz pack vs several rivals' 10-oz packs. It just brought on former Mix1 exec Sue Bushacher as vp sales for west, and is seeking merchandisers and other street-level staffers on both coasts of US. Svp sales Craig Decker now handles national accts and is point person on Jamba alliance for which Chris is developing 3 superfruit-based supplements that launch next spring both in Jamba stores and grocers. Jamba-branded line comprises acai-based antioxidant booster, acerola-caja vitamin C booster and cupuacu-pomegranate vitality booster and will say "powered by Zola" on back panel. In addition, co next month will launch test at unidentified major retailer of caja-mango sku as it continues to explore potential of other superfruits in mix.

Tho Emigrant has continued to support co, Zola has retained Mike Burgmaier of Silverwood Partners to seek out strategic allies who might be able to help co grow faster and explore new channels. (The pair will do presentation on capital raising at upcoming BevNet Live conference in Santa Monica, Calif, on Mon.) But it will continue to take parsimonious stance on marketing spend: no paid media, such as print ads, are anywhere on horizon. "Too static," Cuvelier said, in conveying flavor of acai and superfruit entries.  

Coconut water Zico has terminated 2 of its biggest distributors, Haralambos Beverage and Polar Distributing, in favor of going with Coke system, it was learned at presstime. Coke is a minority investor in LA-based co. Gerry Martin, marketing vp at Polar, confirmed move in New England, offering philosophical take that "it's a reflection on the nice job our sales force did to make it an attractive proposition for Coke." No immediate confirmation from Haralambos in LA. Both houses have long played instrumental roles in building new age brands like Snapple, SoBe and Vitaminwater. To date, Zico has taken deliberate path to working Coke connection, moving into Odwalla refrigerated system in Bay Area this summer and in fall signing on Coke shops in Philadelphia and South Fla (BBI, Oct 15) but also signing on new unaligned house Central in Chicago (BBI, Jul 16 and Oct 15). It's not immediately clear whether brand's going on bottler trucks or Odwalla trucks in those markets; more as we learn it.