Nothing was said specifically about N America, but PepsiCo announcement on Thurs that it's spending $3.8 bil to take 66% stake in Russia's Wimm-Bill-Dan Foods made strong case that dairy biz could prove key leg of plan to grow its nutrition-oriented biz to $30 bil by 2020 - both overseas and in core N American market.

On surface, deal has direct implications only for territory - extensive one comprising 10 time zones - of eastern Europe and central Asia. Co was founded just 17 years ago with single juice brand, J7, but has grown into behemoth employing 16,000 people and operating 38 production plants, with involvement in juice, dairy and baby food sectors. WBD's products go by names like Domik v Dorevne, Chudo, Imunele, Lubimy Sad, 100% Gold Premium and Agusha. Co, which operates extensive chilled DSD distribution system, will be quickly integrated with Pepsi's own highly developed operations in Russia, one of crown jewels in co's international biz, and expand into surrounding regions.

Still, in justifying Wimm-Bill-Dan deal, at 32% premium to market value, PepsiCo brass offered strong rationale for greater presence in dairy segment in their home market, too, as they look to grow Global Nutrition Group to $30 bil from $10 bil currently. Dairy carries broad functional benefits that are "particularly relevant" to aging populations in developed markets, said PEP cfo Hugh Johnston. On separate investor and media conference calls, several top execs made much of dairy segment's "convergence" with such other categories as juice, tea, grains and fruit/nuts. And as in Russia, dairy items offer way to maximize utilization of expensive chilled-distribution systems, at time Tropicana system in US, following similar logic, just took on shelf-stable FRS line in its core East Coast region.

Key mandate of GNG is to "identify and commercialize" convergence products, said GNG ceo and chief scientific officer Mehmood Kahn. Dairy, he added, offers huge untapped opportunity to unify snacks and bevs - to "snackify" them. But PEP brass made clear they have no intention of entering dog-eat-dog commodity side of dairy biz, vowing to focus on value-added side. In emerging markets that value-add might be no more than packaged milk, but in more mature markets that means functionality, convenience and branding. Nor does co plan to build such capability from scratch; rather, it will pursue collaborations, joint ventures and acquisitions, particularly in developed markets. Acquisitions generally will be of modest, "tuck-in" variety.

In past, tho PEP was said at various times to have coveted cos like French dairy giant Danone, its direct participation in dairy side in N America has been modest, and unsuccessful, generally comprising brief forays into flavored milks, rabidly competitive segment dominated by entrenched regional dairies. Its more recent involvement in functional areas like protein drinks has bumped it up against milk space, tho key play in that realm so far - Muscle Milk line that it distributes but doesn't own - doesn't contain milk, despite name, a vulnerability PEP may be eager to correct. Nor is it clear who might be suitable dairy collaborator with PEP in this market, tho Bill Pecoriello of Consumer Edge Research has suggested that co could build good position in yogurt by partnering with Agro Farma (Chobani brand) or Fillipou Group (Fage brand).

So does WBD move presage move to step up dairy involvement in markets like US? PEP chmn/ceo Indra Nooyi demurred when she was asked by analyst, on investor call, "how broad you want to take this strategy as it relates to maybe more markets or product lines?" "More later in the first quarter of next year, when we articulate our Global Nutrition Group plan," she promised.  

New Leaf Brands eked out just 2.5% increase to $1.05 mil in net revenues in 3d qtr, while narrowing net loss from continued operations to $1.6 mil from $4.9 mil a year earlier. Thanks to cost cutting, gross margin widened to 38.4% from 27.9%. For 9 mos, revs rose 26% to $3.7 mil, with net loss narrowing to $7.8 mil from $12.6 mil. Tho period included peak summer selling season, coo Bill Sipper chalked up disappointing top line to new emphasis on conserving cash and growing horizontally within chains, following aggressive DSD rollout that sometimes saw NY-area co too stretched to produce adequate inventory. New Leaf ceo Eric Skae spoke of brand reaching "positive inflection point," and Bill noted major-chain authorizations and expansion of well-received lemonade line as signal of smoother sailing ahead. Brand has won over such new retailers as NY's Duane Reade, even as Food Emporium and D'Agostino have added lemonades to iced teas. Out west, 248 Albertsons stores are aboard as are 42 G&M c-stores. Bill said he's currently negotiating DSD representation in Fla and Tex.

With lemonade sector growing, co is expanding 6-sku line with first diet entries, in Lemonade and Half & Half flavors. Both boast 5% juice content and Splenda, after co concluded that stevia wasn't adequate for co that makes claim that "It Just Tastes Better." As reported, it's scrapped prior theme, "Official Beverage of Taste," as too complicated, and enlisted NFLer Steve Smith as endorser.  

After recently having been downsized out of Hansen Natural, Snapple vet Bill Kuschman has quickly resurfaced in that most challenging of all bev businesses these days: bottled water. Bill's signed on as genl sales mgr of Nirvana Springs, upstate NY bottler that had produced bottled water for Snapple back in his days running sales for co's NY distribution arm. Kuschman told BBI his mandate is to capitalize on unusually pristine source in Adirondack Mountains and line's updated packaging to get brand out in Northeast quadrant of US. He's already brought on Crossmark to work chains and hopes to also enlist DSD houses to reach other channels. Family-owned bottler is based in Forestport, NY, and run by Darya Rafizadeh. It's been lightweighting its bottles, is planning new contour pack for mid-2011 and improves its green profile by getting most of its energy by burning wood, Bill said. It's also eyeing move into other healthy products. Cost structure enables it to vie in severely margin-challenged segment, Bill maintained. "We'll be right out there with Poland Spring," he declared. "We plan to be aggressive and go after everybody." Kuschman, based in White Plains, NY, had nearly decade-long run at Snapple Distributing Inc and was recruited to Hansen at time it had cut Monster Energy brand over to Bud house from SDI in NY to improve focus. He later segued to other Hansen brands like natural sodas and enhanced water . . . Carol Moseley Braun, former US senator and ambassador to New Zealand, has thrown her hat into ring of Chicago mayoral race, reentering political world after run as founder of Ambassador Organics, marketer of biodynamic teas and coffees . . . NY Times review of career of purchaser of PBS-distributed Nightly Business Report, Mykalai Kontilai, turned up not just lotsa unpaid bills to others in media biz but also fling in mixed martial arts that saw Kontilai and partner Gary Ferrell turn up on payroll of Xyience, which hoped they'd find ways to make its Xenergy energy drink a sponsor of public TV. Tho Kontilai said the 2 quit after not getting paid, paper reported that he did introduce co to firm, AA Capital Partners, which invested $23 mil in Xyience and rewarded him with 2 mil shares.  

If Starbucks efforts to cancel its distribution agreement with Kraft for its packaged coffees fails, "it may end up buying the business from Kraft," reported Wall St Jnl. Conservative estimate by Edward Aaron of RBC Capital Markets puts price tag around $1.5 bil, and on top of that, "Starbucks would then need to invest millions of dollars in a distribution business of its own," noted WSJ. Kraft contends deal, which was renewed in 04, never expires, so SBUX has been looking for reasons to terminate. In Oct 5 letter, SBUX warned Kraft "of failing to properly market" its packaged coffees and said Kraft hadn't "maintained appropriate displays inside grocery stores," per WSJ. On Nov 5, co sent 2d letter stating that, since Kraft had failed to fix problems, SBUX was justified in ending deal in Mar 2011. "Undercutting Starbuck's claim is that the business has grown to $500 million in annual sales, from just $50 million in 1998," noted paper, which also cited cfo Troy Alstead's comments back in April in which he praised Kraft's "world-class" manufacturing and R&D. Stay tuned. 

Honest Tea's decision to exit kombucha segment - shortly after unveiling restaged glass-bottle line - appears to have been driven by fear that regulatory agency TTB is about to adopt hard line on fermented tea bevs that effectively would treat most unpasteurized "raw" products as alcoholic bevs. In letter signed by sales vp Melanie Knitzer notifying retail customers of decision, Bethesda, Md-based co explains that "our understanding from the TTB is that in the near future any product that has the potential to increase in alcohol during its lifetime is expected to be labeled and regulated as an alcoholic beverage." She adds: "the evolving regulatory environment has led us to conclude that we will no longer be part of this exciting, but ultimately challenging, category." Honest Tea ceo Seth Goldman declined to comment further, except to say decision did not involve Coca-Cola, which owns 40% of Honest Tea and is expected to exercise option to purchase rest of co in Feb. BBI had speculated skittishness at KO may have been factor in decision to withdraw (BBI, Nov 18).

TTB rep told BBI today that its formal guidance hasn't changed from FAQ that's been posted on agency's Web site for some time, tho it's not out of question that changes are in works. Question K7, which asks about kombucha that's within 0.5 ABV guideline at time of bottling but subsequently rises, draws response that "under the law, TTB considers these products alcohol beverages and, as such, the applicable tax rate applies as does the requirement to show the health warning statement." What's unclear is whether TTB would take that view even of kombucha that's not kept refrigerated and within stated shelf life as manufacturers request; some in sector note that even cider and orange juice producers might fall afoul of interpretation like that.  

Activate Drinks completed its western-US DSD map right on schedule, signing Admiral to cover multistage region encompassing Utah, Alaska, NM, southern Idaho and Wyo. Enhanced-water brand launched in LA and had planned to have entire western US network set by year-end. Deal puts brand into distributor that handles Pepsi and/or Coors in its various divisions, with rollout commencing in old Maloof operation in NM, said Activate prexy Dan Holland. Meanwhile, brand also is making headway among chains, landing 190 Supervalu stores under Albertsons banner in Calif and Nev, and leaving only Safeway/Vons to crack among majors. Brand is in 2d mo of 4-mo test at Safeway that's going well, Dan said. What regions will it target next? That will be decided at Dec 13 board meeting, 1st at which new investor Tata will have a seat.  

Tho Fiji Water's exit on Mon from production site in Fiji in dispute with gov't over taxation has drawn lotsa attention, there's good chance Roll Int'l unit will back down in showdown. Tho co has indicated it has readied plans to resume production of iconic bottled-water brand from alternative source elsewhere in archipelago, 1 distrib told BBI that he'd been informed by Fiji sales exec this morning that 2 sides were close to resolution that would see Fiji agree to all or large portion of tax hike to 15 cents per liter from current rate well below a penny and resumption of production at Fiji site, which generates 20% of country's export revenues. Fiji Water prexy John Cochran had earlier termed tax hike untenable, but added that co remains "willing to work through this issue with the Fiji government, as it would be our preference to keep operating in Fiji." Recall that in previous run-in with Fiji gov't, Roll unit had stockpiled massive quantities of inventory outside country so as to wait out threat, only for gov't to back down. No word yet, if co has indeed agreed to tax hike, how extra cost would be passed on thru distribution chain or if it received any concessions in return. No further confirmation that resolution is close and Roll rep didn't return calls seeking comment. Roll, controlled by Stewart and Lynda Resnick, has operations ranging from POM Wonderful to Franklin Mint. 

FRS finally has set its strategy to get on retail shelves in Northeast US, riding alliance with PepsiCo in 2-pronged approach that will employ PEP's warehouse system to reach major chains and Tropicana chilled DSD system to hit local chains and influencer accounts. It's calculated gamble that quercetin-based brand will garner more attention on Trop truck than lost amid clutter on Pepsi truck.

Move fills void that's kept RTD version out of key region aside from some nutrition outlets and online sales, and offers further recognition that refrigerated DSD systems may be congenial fit for shelf-stable brands looking to get some focus in up-and-down-street trade. (On same theory, NY distrib of Odwalla and Minute Maid brands, Dora's Naturals, lately has been building shelf-stable portfolio.) Todd Gibson, vp/gm for field sales execution, told BBI that DSD launch has Trop trucks working local chains like Gristedes and Morton Williams as well as indy accounts such as Stew Leonard's, backed by marketing activity such as Times Square billboard that will stay up thru New Year's Eve bash. Former Coca-Cola North America exec Jack Vaughan has been recruited to manage DSD network up and down E Coast, while former Vitaminwater exec John Biskup has been recruited to manage chains in NY/New England. Rollout will proceed from NY north to Conn, upstate NY and Boston and south to Baltimore/Wash. Trop's chilled DSD network "is one of the untapped distribution systems in the country," said Gibson.

Recall that brand took DSD approach to launch in retail on W Coast, building significant network before inking national alliance with PEP. Among 23 western DSD shops that were aboard, 8 left after Safeway was shifted to direct deliveries; remaining 15 include Haralambos, Lenore, Spike and Pacific. Dispute over move is believed to have been factor in departure of DSD chief Rich Libonate. Meanwhile, presence in big chains has burgeoned over past 30 days from coupla facings in Safeway to presence in 8,000 grocery stores, including Hannaford Bros, ShopRite, Wegmans and Shaw's, Todd said.  

It's garrulous group of hard-boiled DSD guys with twin rep of being tuff to deal with but also of having played instrumental role in rise of every breakout brand, from Snapple and SoBe to Vitaminwater, Fuze, Monster and Muscle Milk. Under name Northeast Independent Distributors Assn, group generally meets every other month to receive pitches from brand owners hoping to penetrate much or all of network. Getting in isn't cheap or easy: brand must first navigate brand committee and then pay $1K for privilege of pitching. For those who're deemed not ready for prime time, NIDA distribs can be unforgiving audience, terse or scathing in their judgments. Still, in Northeast market where retail remains fragmented and DSD more crucial than elsewhere, acceptance by NIDA can mean chance at real market momentum. What's it like to pitch NIDA? For latest meeting held recently in NY, pair of media types, incl BBI editor, were invited to get inside view of pitch process, on agreement that sensitive details such as case pricing, contract clauses and member deliberations be kept off record. Here's our take of process and four brands that presented that day.

Background What began as loose org of mainly Snapple distribs has expanded to more diverse group of nearly 30 houses ranging from NJ north to Me, some as far inland as Rochester, NY. As NIDA, they operate with greater structure but retain autonomy on what brands they take or reject. For marketers, group reps tempting way to garner substantial coverage in Northeast, where so many big brands were built. NIDA has been acknowledged role model for other groupings, such as Coast Brands Group, which has harnessed 30 houses near West Coast and harbors national ambitions (BBI, Jun 9 and Oct 29), as well as many states' Bud networks, which often decide en masse to take on same craft beers and NAs. NIDA members are diverse group - some beer houses, others NA-only; some eager to manage expansive portfolio of brands, others looking to keep selection tight - but increased diversity also makes it harder to win unanimity, unless you're bringing in entry from entirely new category. Otherwise, your brand may run afoul of conflicts with many houses' existing brands (unlike Bud networks, for instance, where slate is relatively clean). Other complaints: $1K fee is stiff price to pay for what may well prove fruitless pitch effort, and NIDA houses scarred by big-brand defections can be impossible in their contract demands. Yet there's waiting list of brands eager to pitch tart-tongued bunch at bi-monthly meetings, usually held at central location of Foxwoods Casino in Conn.

The Vibe Session began at 11:30 with working lunch at cozy penthouse conference room at Gansevoort Hotel, located in trendy Meatpacking District of lower Manhattan. Vibe was laid-back and casual, but all-biz at same time. Former distributor and Glaceau board member Ken Sadowsky, who serves as unpaid exec dir of NIDA, dispatched internal biz quickly, having members sign antitrust guidelines, updating them on Web site upgrade and proposing that retail chain committee be established to serve as liaison to big chains somewhat as Coast Brands is doing in its western footprint. Among more active, vocal members were Mitch Clyne, of B&E Juice in Conn, and Lewis Hershkowitz of Big Geyser (as nominal host of meeting, Lewis was buying dinner at nearby Old Homestead steakhouse that evening).

Running joke thru day was that any brand that's new to Northeast - or Western hemisphere for that matter - is likely to already be sitting in warehouse of Great State, NH/Boston operation known for willingness to take flier on stuff. At any mention of unknown brand, heads swiveled toward Great State's Ron Fournier. Got that one, Ron? Even Vivaloe aloe drink, supposedly just heading into US from Asia, turned out to have single distributor already. Yup, Great State. That prompted mock-exasperated Hershkowitz, of Big Geyser, to demand of Fournier: Is your warehouse the size of New Hampshire? For all joviality, questioning of presenters could quickly turn tough, as it did for marketer of Cheribundi cherry drink, who drew fire for unrealistic margin structure and shelf life for DSD houses' requirements. You shouldn't even be here, NIDA member chastised him.

Neuro Aims for 100% DSD Footprint by 2012 This functional brand has drawn sizable buzz among NIDA members despite sticking to western US so far because of rich founding couple, upscale packs and wide-ranging functions such as Sleep, Trim, Bliss, Gasm, Sun. Brand launched in Haralambos in LA and now has moved as far east as Tex in contiguous footprint, with sole eastern outpost being Honickman's Canada Dry NY operation in NY, sales dir Ken Tenace explained. It's garnered comprehensive DSD coverage in each of western states it's in so far, and is aiming for 100% DSD coverage in US by 2012, he said. Day-to-day is being run by former Red Bull ceo Dan Ginsberg, who's recruited former Red Bull, Glaceau and Fuze execs for all key roles. Brand, which goes on shelf at $2.49-2.59 per bottle, has been given strong support. College reps don't just get free product but $400 per mo. It's heavied up on events like NY Fashion Week. Initial paid media, under tagline "It's all about me," broke in LA and NY. So far, Neuro Sonic and Neuro Gasm have proved to be top 2 sku's.

Cheribundi Positions Cherries as 'America's Superfruit' Cherry Pharm pitched Cheribundi line, which plays up health benefits of cherries in easing joint pain, etc. Presenters Brian Ross, ceo, and sales vp Ted Fisher positioned it as "America's superfruit," created using proprietary process developed at Cornell Univ's technology farm. So far teams at schools like LSU, Okla State, Texas and Boston College are using it, as are some pro football and hockey teams, and it's gotten into chains like Wegmans, Whole Foods, Hannaford Bros, Roche Bros and King Kullen. At some stores it's merchandised in produce section but co prefers juice set. Core line has been buttressed by stevia-sweetened Skinny Cherry, at just 90 calories per 8-oz bottle. Product's taste drew mixed reviews from NIDA members, but biggest rebukes came over $1.99 SRP that was deemed completely unrealistic given margins that NIDA members work off, and 120-day shelf life. Given these serious limitations, Cherry Pharm execs are simply pitching wrong people, Big Geyser's Hershkowitz offered.

Vivaloe Offers Fresh-Cut Aloe One presenter was familiar face: former Snapple exec Donna Bimbo, who's working overseas ties she developed building that brand's international biz. She's been involved mainly with Taiwan bevs, including Noyu line of teas and intriguing aloe drink called Vivaloe. Latter is offered in 4 sku's and made from fresh-cut aloe vera and fruit juice, sweetened with honey and cane sugar, and eschews gels employed by many other manufacturers. It's packed in half-liter bottles with square footprint similar to Ito En's Teas' Tea line from Japan. Brand's got 4 demo people in NY lined up to support. Donna also showed Noyu ("of joy") line of functional teas, fruit-infused teas and pure unsweetened teas, and Ty Nant and Tau bottled waters from Wales, familiar brands to most NIDA distributors.

Hansen Restages Vidration, Pushes Hubert's Lemonade Hansen Natural has bifurcated portfolio, developing brands like Monster and Peace Tea for Coke and Bud networks and others, pitched here, for all-other network. Sales dir Tommy Brown ran down group of restaged and new brands. These include Hansen 16-oz natural sodas, which have dropped preprice and swapped out flavors like Kiwi Strawberry and Pomegranate for Ginger Ale and Root Beer. Also in mix is Vidration cold-fill enhanced water, which recently exited market for 3 mos while undergoing substantial revision to address issues like weak panel that couldn't support weight when stacked. In new guise, brand has bolder, cleaner look and "0 calories" stamped on cap but remains geared to get on shelf at 99 cents per 20-oz bottle. Publix chain already is aboard, Tommy indicated. He also offered rundown of recently launched Hubert's Lemonade (oddly, some noted, with reference to Coke's Simply brand but not fast-growing Calypso that's captured everyone's imagination), Admiral Tea (half the calories of AriZona and not prepriced), Hansen Energy (original player in segment) and Energy Pro.  

Beverage Digest reported on Friday that Rockstar is exploring a sale among options for the energy co and has retained Goldman Sachs to assist review of "strategic options." Most of speculation focuses on PepsiCo and DPS, since it's distributed mainly thru Pepsi system and DPS has need for nat'l energy brand in its portfolio. Rockstar development "is likely to increase speculation of an acquisition of market leader Hansen Natural, particularly given the scarcity value of a brand taking share of a growing category," noted Stifel Nicolaus analysts Mark Astrachan and Mark Swartzberg. While they report "no knowledge of any discussions," they believe HANS continues to be "an attractive takeout candidate as significant value would be unlocked if the company were acquired by a public" bev co that owns its own distrib system.