Voters in Wash State approved initiative 1107, which eliminates tax on soda and candy that state lawmakers had imposed in April. American Bev Assn spent "more than $16 million" fighting tax and "sending a message to other state governments seeking to increase beverage taxes as a means to balancing their budgets," noted NACS online report. 

Starbucks closed out record 2010 for its biz as its net income soared 86% to $278.9 mil, or $0.37 per share, in 4th qtr, up from $150 mil or $0.20 per share in 09. Revenues jumped 17.2% to $2.84 bil as store traffic in US rose 5% and customers spent avg 2% more on each visit. Traffic in int'l stores increased 4% with avg spend up 3%. "I believe that fiscal 2010 will prove to be a defining year in Starbucks history, topped off by record fourth quarter and full year financial and operating results," said founder/chmn Howard Schultz. For full yr, revs reached $10.7 bil and oper income more than doubled, shooting up from $562 mil to $1.4 bil.

Sales of Via instant coffee continue to gain momentum, with sales "more than 80% incremental to the original product line," noted Howard. He also mentioned on conf call that early results on flavored VIA, intro'd at North Amer stores in Sep, "are even more encouraging." SBUX is "equally excited" about its superpremium Starbucks Reserve, which intro'd in around 700 stores in 4th qtr. Rollout of Galapagos coffee "was nothing short of overwhelming," boasted Howard, noting that it "completely sold out" at $25 per pound.

Starbucks Card biz is proving to be big positive as well. Howard sez co loaded "more than $1.5 billion" on cards in 2010, up 20% for year, and Starbucks Cards are now used for 1 of every 5 purchases. Around 2 mil customers joined program, with 1.25 mil reaching "gold level," meaning they make at least 30% of purchases with card. Investors reacted positively to solid qtr as shares set a new 52-wk high yesterday of $30, and increased to $30.52 in after hours trading. Hard to believe not long ago many believed roaster's best days were behind it, and it was about to become roadkill for McDonald's.

Starbucks Splittin' with Kraft on Grocery Segment SBUX said it informed Kraft a mo ago that it plans to discontinue 12-yr-old alliance that employed food giant to get roaster's grocery items into stores. Co declined to offer further details, saying "details and timing around any transition will be subject to further private dialogue." No apparent implications for other key alliance, with PepsiCo on RTD side.  

How earnest is Cott about reclaiming once-clouded rep as reliable private-label partner to major retailers? Quite a bit, judging by evidence provided by ceo Jerry Fowden in relating Q3 results: to fill surging PL demand once Walmart deep discounts on Coke and Pepsi brands had run their course, co resorted even to outside copackers to restore service levels, in process exacting $1.5-2 mil hit in logistical costs that helped take bite out of gross margin. "High service levels are key to our business and retail partners, and this was an investment I was happy to make," Jerry told shareholders on Thurs conference call, after describing how work was shifted among all Cott's US and Canadian facilities and even coupla outside contractors. Effort, tho costly, allowed co to quickly restore 98-99% service levels it strives for with big customers, he said.

For qtr, revenue rose to $491 mil from $405 mil, including $80 mil from newly acquired juice producer Cliffstar. Operating income surged 36% to $37 mil but was down 14% to $23 mil once adjustments relating to Cliffstar deal are included. Revenue increase was driven by higher volumes in N Amer (+4%,), Mexico and Royal Crown Int'l as well as shift in mix to booming energy drinks and isotonics in UK, where overall volume declined. In UK, Cott has been in process of converting CSD lines to higher-margin energy and sports drinks, which grew double-digits for period.

Deutsche Bank's Marc Greenberg termed operating results "solid," noting that core biz "largely met or exceeded our forecasts," notably N Amer biz that grew 4% vs DB's -3% forecast, and integration process for CliffStar is proceeding in orderly manner. As for CliffStar, UBS' Kaumil Gajrawala views it as providing long-term opportunities thanks to greater fragmentation of juice market vs CSDs, where 2 players control 70% of market. It takes dozen juice players to get to 70% and Cott should be able to win share, he figures.

Cott Hit New-Biz Target of 20 Mil Cases In q&a, Jerry said co hit 2010 target of 20 mil cases of new biz, including wins in water, mixes and seltzer category in US and designation as exclusive supplier to 1 of Big 5 cash-and-carry chains in UK, not just with CSDs but with energy drinks. With integration of Cliffstar now top priority, Jerry said he won't be disclosing target for 2011. (Similarly, with Cliffstar results to be consolidated, he won't break out CSD biz any longer.)

US Energy Biz Rises 40% Off Small Base; Shots Off to Brisk Start Asked about energy biz, he termed himself "pleased" but with "long way to go" in US, where volume rose 40%+ off small base. (By contrast, more developed UK biz rose nearly 30% off base of more than 10 mil cases.) Cott is also now operating in shot segment, off new line in Columbus, Ga, and expects to top 3 mil bottles this year. Expansion is under consideration for next year. "The opportunity is still enormous and we've only scratched the surface," he said. 

Here's intriguing development: word is that PurBlu, Pittsburgh-based marketer of Give Water and Give Energy that was launched by Wharton undergrad, is deep in talks to merge with Green Shoots, newly created distribution network created by flock of former Odwalla execs based in Calif. If deal happens, tie would give Green Shoots, launched by Nat Noone, broader array of its own brands to buttress Noone Time natural soft drink, while allowing PurBlu to reduce overhead as it tries to garner traction for its cause-marketed water, healthier energy line and Potions functional shot line. No comment from the 2 cos. Recall that Green Shoots, staffed by group of longtime Odwalla vets, aims to offer another distribution channel for healthier brands lookin' to ply E and W Coasts (BBI, Jul 27).

At recent Natural Product Expo East, PurBlu continued to tinker with lines, buttressing core Give Energy line with agave/stevia-sweetened entry at 10 calories per serving, in Pear Apple Cherry and Tangerine Melon flavors. That's been launching in Mid-Atlantic region of Whole Foods, said founder/ceo Ben Lewis. Co's Give Water line got new labels that dispel some consumers' mistaken impression that it's flavored water line, while proceeding with cause effort that saw $15K go to nonprofit called Refuel Pittsburgh that collects used cooking grease from consumers (first pickup station is hand-painted oil drum at Pittsburgh Whole Foods). And Potions has tweaked pack, dropping black hue and going to straight-wall bottle, while narrowing retail focus to handful of retailers, including 400 stores operated by Sheetz c-store chain in Penn region.  

Monster Energy marketer Hansen Natural last night left analysts marveling at ability to notch another record qtr in face of stubbornly soft economy that's taken particular bite out of core c-store channel. And while some continued to worry about eroding margins as HANS expands low-end Peace Tea within mix and undertakes expensive process of building Monster Energy overseas, chmn/ceo Rodney Sacks responded that tight focus on costs allowed co to bring in consistently strong operating profit. "Based on the costs that we were able to manage, our operating income really ended up at the same percentage as this period last year," he argued. HANS shares continue to trade around high of $52, vs $34 range a year ago, and lotsa analysts have buy ratings out on stock.

For 3d qtr, net sales surged 24% to $381.5 mil, and operating income grew 16% to $107.6 mil. Strong performance came on back of Monster Energy, with DSD div net sales growing by 26.8% to $356.7 mil, while warehouse div sales actually slipped a coupla points to $24.7 mil. For 9 mos, net sales rose 15.6% to $985.3 mil and oper inc edged up 6.6% to $268 mil. (Recall that Q1 was weakened by prior-qtr's buy-in ahead of price increase.)

"Overall, the strong result reinforces our belief that Hansen can continue to grow sales at least at a high-single-digit to low-double-digit rate for the next 2-3 years, given continued US growth for Monster Energy, international expansion and innovation," wrote Stifel Nicolaus' Mark Astrachan. "Further, the company continues to generate significantly more cash flow from operations than it requires."

Asked about pricing outlook, Sacks said that item's on agenda but hike is "unlikely as of Jan 1 in the DSD system" (Monster). More likely, it will happen on warehouse side, he indicated. Not much said on call about Peace Tea except that it continues "solid" performance, recently added Diet Green and Unsweetened flavors and will intro tea/lemonade combo in 2011. Nor any discussion of domestic distribution issues; recall, Monster has maintained it's content with status quo that sees US territory split between Bud and Coke houses (BBI, Sep 9).

Context: Big 3, 5-Hour, NOS Are Sole Winners among Top 10 Rodney recited Nielsen data showing that, in all-channel data for energy/energy shot sector for past 13 weeks, Monster outgrew category 17.1% to 14.9%. Others among Big 3 likewise scored good gains, with both Red Bull and Rockstar up in 15% range. After that, NOS (Coke) was only conventional energy drink in Top 10 to grow, adding 10.2%, while Amp (Pepsi) slipped 1.3%, Full Throttle (Coke) plummeted 36.3% and No Fear (Pepsi) 42.7%. 5-Hour Energy surged another 73%. Monster share of key convenience-and-gas channel now stands at 28% vs Red Bull's 31.9%, 5-Hour's 10.6% and Rockstar's 9.7%.

Modest Innovation Palette Includes Noncarb Monster Rehab; Mainly 'Tweaks,' CEO Acknowledges On call, Rodney discussed extensive array of new products in pipeline for Q4 and early 2011 but in defending ability of co to manage effort acknowledged that some "really are small tweaks." Perhaps biggest departure is noncarb Monster Rehab, with electrolytes & other supplements aimed at restoring as well as recharging bodies; tho Monster execs often deride rival Rockstar for mimicking them, this entry seems to knock off Rockstar Recovery line that has proved sleeper hit for #3 player (BBI, Jul 20).

Among other new entries, M3 offers "superconcentrate" version of Monster in 5-oz glass bottle. Lotsa restaging going on for weaker performers. Coffee/energy pioneer Java Monster, which got clobbered once Pepsi/Starbucks launched Double Shot, will drop 5 flavors and add 3 looking to get in sweeter zone with retailers/consumers. X-Presso Monster will move from 8-oz to 12-oz slim can and add Midnight sku to improve on-shelf visibility. Widget-based Nitrous Energy will be repo'd to play up extra-strength formulation rather than focusing mainly on use of nitrous technology, and will add sibling entry Black Ice at zero calories.

These come on heels of Q3 intros like "well-received" Absolutely Zero, Monster Energy Import Light and Dub Edition that broaden sku range and hence shelf visibility in 18.6-oz Ball Resealable End can. And of course, Monster is trying again in shot segment, this time with 2-oz Worx entry in Original and Extra Strength versions that target Coke network. (Not much analysis from Rodney on that one; reaction on street has been that branding is uncharacteristically bland for co, prompting some speculation that edgier version, perhaps based on name's drug connotations, may have been vetoed by Coke and/or company lawyers.) Rodney did confirm heavy media expenditure behind launch, marking departure for co that to date has relied almost entirely on below-line efforts to get its brands moving. At NACS, booth staffers had pegged media effort at $20 mil (BBI, Oct 11).

Readies Push into Asia; Some Worries in Mexico Overseas, brand continues to make headway, with sales outside US (including US military) rising to $69.8 mil from $50 mil. Sales soared 51% in Canada, winning 5 points of share to 25 share. In Mexico, brand weathered disruption suffered during distribution change in Baja region to grow 8% even as Red Bull declined nearly 18%, now holding about 30 share. But there are clouds on horizon: HANS needs to work with distributor to address challenge from lower-cost Gladiator brand, while monitoring progress of proposal in Mexican legislature to levy 25% tax on energy drinks starting in 2011.

Brand made "good progress" in UK, Hungary, Czech Republic and Slovakia; launched in Germany, United Arab Emirates, Lebanon, Jordan and Tahiti, and now is breaking in Switzerland, Austria and Iceland, with Bulgaria on before year-end. Brand's also pushing forward in Central America, Caribbean, New Zealand and Brazil, and will continue to work with partner in Australia to boost share, Rodney said. Co recently started producing in Milton Keynes in UK and is eyeing additional production sites, likely in Central Europe and Southern Europe, perhaps Italy.

Asia is viewed as next big region on horizon, with Hong Kong-based vp being added to manage expansion there. Since Asia's birthplace of energy drinks, big question there is whether "we can crack the code and convert a reasonable number of users to modern or Western energy drinks," Rodney noted. Effort will take perseverance "but we see good, long-term opportunity there."  

For dinner at big pow-wow in Southern Calif last Thurs, Coast Brands adjourned attendees to Mozambique restaurant on Pacific Coast Highway not far from event venue Resort at Pelican Hill. Some diners eagerly awaited chance to ride New Leaf party bus back to resort - only to see unseasoned driver get bus stalled (along with PCH traffic) in slight dip in road at foot of restaurant entry on his way to pick up guests. "The bus event was so typical of what emerging brands go through" as they hit unpredictable dips in road, observed VEB's Matt Hughes during his presentation next morning.  

Immediately after teaming with ONE Coconut Water on RTD smoothies, Jamba Juice Co is partnering with another superfruit co, Zola, this time for line of Jamba-branded daily Superfruit 1-oz shots that will sold in Jamba Juice stores, grocery stores and other retailers starting in early 2011. New line will break in 3 flavors: Açai (antioxidant booster), Cupuaçu (vitality booster) and Acerola and Caja (vitamin C booster). Simply consume a 1-ounce shot each day to get the special functional benefits of Brazilian Superfruits . . . Attitude Drinks, Palm Beach Gardens, Fla, said it's placed its milk-based Phase III Recovery bev with Great State distributors in NH and its Blue Coast Beverages unit in Boston. Great State is picking up both the Chocolate and newly intro'd Vanilla flavors . . . Working with Blast Brand Management of Boca Raton, Fla, NBI Juiceworks has placed its Drenchers Fit n Lean Juices and Super Blend coffees and teas in Sand Dollar Distributing, former Red Bull house covering South Fla, including Miami-Dade, Broward and Palm Beach Counties.  

It's had checkered recent history, but energy brand Kronik - the one with barbed-wire motif on front panel of can - is starting to rebound in hq market of Ariz, is making Calif push via Coast Brands network and has returned to harboring national ambitions.

Brand was acquired a year ago by prexy/ceo John Gaston and evp sales/marketing Chris Wickson, who'd teamed together for 15 years in fitness realm before exiting in 08. Working with Ben Gregg as chmn and James Gabriele as evp operations, their KroniCo LLC has set about dispelling what they readily acknowledge was bad taste left in mouths of distribs and retailers by prior owners. Brand launched in 03 in Ariz had grown to 400K+ cases by 07 before running off tracks, with 08 and 09 "pretty much a disaster," John said.

His team has gone about rebuilding brand quickly, rebranding Grind sku as Vengence and adding Vengence Low Carb that's drawn in some older (age 30-40). Vengence is co's best seller in Calif. What once was Kronik Original flavor has re-emerged as Blue Citrus, with less medicinal flavor and Low Carb companion. That's best seller in Ariz. Co has been adding to flavor range with Entourage (mango-orange) and brand new Dragon Berry, both also with Low Carb siblings. On marketing front, co has sought to be bold in grass roots ploys - say, by shipping pallet of product to a frat house, rather than seeking out handful of brand ambassadors on campus.

Citing Nielsen data for Ariz, Gaston said Kronik has moved from 3% ACV to 24% and, ranked by velocity, can claim 4 of top 20 energy sku's in state, which is served by big Bud house Hensley, member of Coast network. Every other sku in top 20 is either Red Bull, Monster or Rockstar entry, they noted. Execs now are beating bushes for DSD in hope of being national next year. Brand info at kronikenergy.com  

At Coast Brands Summit, sole speaker not from Coast or its 5 suppliers was Matt Hughes, repping Coca-Cola's Venturing & Emerging Brands brand-incubation unit. Self-professed bev lifer Hughes could plausibly offer evidence he's a lot like indy distributors and bev entrepreneurs assembled in room, having started career in 79 on bottler/distrib side in white system (Cadbury), later moved to brand side via stint as coo at Jones Soda and scratched entrepreneurial itch with creation of 3 brands before becoming rare Coke outsider to join VEB at inception 3½ years back. (At VEB he's apparently played instrumental role in KO's unprecedented move to launch some brands outside bottler system, with indy or natural-food distribs instead.) Matt offered by-now-familiar outline of VEB rationale, then brand-by-brand rundown of key Coke-devised entries within VEB.

Unit's existence reflects fact that from 01 to 09, one-third of NA bev growth derived from categories that barely existed before that. Half that growth came from brands that repped 20% of volume - meaning smallest brands drove the growth. To play there, VEB seeks to create own brands, invest in promising outside brands like Honest Tea and Zico and import brands from other Coke territories, adapting them to American tastes. Any idea is run thru proprietary filter of consumer "need states."

VEB sees 4 phases to brand's development. "Experimentation" phase suffers 97% failure rate and is typically too early for KO to take an interest. "Proof of concept" stage, with 16-17% failure rate, offers better chance of sticking and is typically when VEB or venture capital firm invests. By then, it's clear "there's something going on that's working" and revenues run $10-20 mil. Third phase, "pain of growth," with failure rate in hi 20s, can prove most challenging as founders run up vs management, capital or supply-chain constraints. "Scale to win" is final stage, with brand in national distribution and on way to $1 bil in sales, benchmark KO uses to mark a true new-brand success.

In remarks to attendees and subsequent comments to BBI, Matt offered rundown on how internally devised brands are faring.

Sokenbicha VEB has high hopes for unsweetened Japanese tea brought in from Japan unit and launched exclusively in Whole Foods 4 weeks ago. "We think it can play really big in the US landscape," Matt offered. Basis of product is Japanese concept of "kampo," herbal remedies based on traditional Chinese medicine, but product was substantially tweaked for US without compromising essence. KO partnered with Honso, largest kampo house in Japan, for reformulation work, bringing in 5 sku's, each with functional play. In concession to perceived American preferences, only 2 of them are barley-based (vs all sku's in Japan, where Sokenbicha is major brand).

Illy Issimo Effort to challenge hegemony of Pepsi/Starbucks RTD coffees was developed in alliance with Italian high-end roaster Illy and launched in 3 sku's 20 mos ago in NY via indy distrib Big Geyser, adding LA's Haralambos Beverage more recently. Lately it's expanded from those beach-heads, adding San Diego (via Bud hosue Markstein), Northern Calif (also primarily via Bud network) and markets contiguous to NY, Matt told BBI. VEB moved to above-the-line marketing starting in NY last summer, in key gathering spots like Union Square, and now has broken billboard and bus ads in LA. Brand has moved even more mainstream with effort in Ralph's grocery chain, where it's on ad now. VEB is prepared for slow build, but Hughes noted "nice traction" in most established market, NY.

Cascal Sparkling, all-natural Cascal line is European import in sense that R&D originated there, even tho actual product hadn't launched there. (As earlier noted in BBI, R&D in France was undertaken to counter fermented Bionade sparkling line that's made big splash in Europe.) Line is double-fermented, then pasteurized (meaning it won't experience alcohol problems recently seen in kombuchas) at small craft brewery in NC. It's expanded from 3 sku's to 5, having just added Ripe Rouge and Fine Dark - latter "more like a Guinness" in taste. Brand launched exclusively in Whole Foods via natural food distributor UNFI (with way paved by $150K donation to chain's Whole Planet Foundation). More recently it's added Fresh Market and Earth Fare chains, and is ready to experiment on-premise.

It's also just inaugurated substantial changes to bottle. Most strikingly, it's dropped pryoff cap in favor of twistoff, in what Matt said was pragmatic concession to grab-and-go biz within Whole Foods. While that's viewed as key sampling opportunity among lunchtime crowd, customers were driving staffers crazy with requests for help in popping off top. Tho brand had hoped to emulate craft beers and imported bevs with elegant pop-off cap, "pryoff didn't work," Matt allowed. (Tho BBI notes some pretty good wines have moved to twistoff caps in recent years.) To retain sense of sophistication, brand has added elegant metallic tamper band.

Krushka & Bochka Kvass, Vio Not much detail offered on recently launched Krushka & Bochka Kvass, based on traditional Russian bev home-brewed from day-old rye bread. Coke's kvass is #3-selling Coke product in Russia and line launched in US in early summer in Whole Foods. And nothing at all said about Vio during presentation. Asked why later, Matt said that brand has proved a conundrum. A sparkling dairy-based drink of type that's rare in US but common enough in Asia, it's been hard to get learning on it, "but we're sticking with it," he said. Line packed in catchy aluminum bottle has garnered much sampling activity in NY.  

After beating back publicly traded Amcon in nasty ownership battle, Trinity Springs co-founder Mark Johnson had hoped to get back in bottled water game, reviving brand that once was leading brand in natural channel. But resources to support relaunch have proved hard to come by, merger announced a year ago with Wyo-based Global Resource Partners didn't pan out and co has now retained WaterBank of Albuquerque, NM, to seek stock or asset sale.

Bill Turner, principal of WaterBank, who said he'd done some of original work on geothermal source in Paradise, Ida, back in 92, said brand hasn't been active in recent years but facilities have remained intact under stewardship of Mark Johnson, who'd teamed with Jock Bell to launch Trinity Springs in 90. Trinity Springs maintains global ISO registration and certification and currently has permit from State of Idaho to bottle 258 million gals per year, with potential to increase that #, he said.

Recall that at one point, thanks to purity of source, high alkalinity and other features, Trinity Springs outsold likes of Fiji and Evian in natural channel, and planned move into enhanced water at time Vitaminwater was taking off seemed to draw enthusiastic response from natural-food retail buyers at Expo West in 05. But things unraveled in wake of effort by Amcon to take control of co and opportunity was lost. Details on sale at waterbank.com.