Beer Marketer's Insights

Beer Marketer's Insights

If anyone needed convincing that social media has become key battlefield in bev wars these days, past week offered 3 storylines to show it. Rivals Gatorade and Body Armor jockeyed for position to exploit cramping incident during NBA finals of Powerade endorser LeBron James, even as consumers' vituperation at stevia-based reformulation of Vitaminwater seemed to continue unabated. Meanwhile, new Go N'Syde brand looks to be garnering rich harvest of social media publicity thanks to appearance in NY yesterday afternoon by Mariah Carey on behalf of her Butterfly entry (BBI, Mar 21 and Jun 3).

Cramping incident in overheated arena, which took James out of key stage of game 1 and contributed to Heat loss (tho they bounced back in game 2), drew spirited response on Twitter from Gatorade, which has been positioning itself as way to "Beat the heat" and noted that "we were waiting on the sidelines, but he prefers to drink something else," reference to James' Powerade endorsement. Spotting opportunity, isotonic insurgent Body Armor tweeted game image that seemed to show superstar drinking from 20-oz bottle of Lemon-Lime Gatorade after all, drawing 500 retweets, including one from sports journalist/sports drink expert Darren Rovell to his 500K followers, per Body Armor marketing dir Mike Fedele in email to troops. And Body Armor's 3d-largest shareholder, Kobe Bryant, took to Twitter and Instagram to tell his followers that league shouldn't force athletes to drink Gatorade. Kobe's comment quickly drew 22K comments on Instagram and 1,500 Twitter re-tweets. Gatorade later apologized for incident and deleted offending tweets from its page, Chicago Tribune reported. "Our apologies for our response to fans' tweets during last night's Heat vs Spurs game," its statement read. "We got caught up in the heat of the battle. As a longtime partner of the Miami Heat, we support the entire team." Far as we can tell, Powerade itself has remained silent during maneuvering, as has James.

Meanwhile, Go N'Syde got its bev-as-augmented-reality-window strategy off to strong start with event at NY's St Regis Hotel in which Mariah Carey intro'd her new Butterfly sku, drawing broad coverage on entertainment and lifestyle sites. Quite a few seemed to focus as much on elusive diva's exposed lacy bra and red heels as on new brand and its ability to serve as smartphone-activated window into augmented-reality network that will be curated by Carey and her allies, but it all made for blast of awareness for brand that's only on-shelf in Walgreens/Duane Reade so far. As for Vitaminwater reformulation furor on Facebook, reported here last week (BBI, Jun 5), barrage of criticism continued from seemingly broad array of users, some of whom claim to drink a case per week or more, to no apparent response from Glaceau or its parent Coca-Cola. Too early to say whether backlash represents vociferous minority of loyalists or broader issue for brand that's been trying anxiously to reverse sales slide.  
After backing off ambitious capital raise as still premature, essence water marketer Hint is moving instead to pull in coupla million as bridge financing until it can better seed 3 well-received new flavors and restaged Hint Fizz line while getting bottom line closer to break-even.

Tho word has circulated about book circulated by Hint seeking $10-20 mil in new capital, co-founder Theo Goldin told BBI that SF-based co now has backed off effort that commenced 6 months ago to build sales momentum and shore up financials in manner that might bring better valuation next year. In meantime, co is moving to upgrade letter of credit and pull in coupla mil in bridge capital.

At time book was circulating, some had bridled at losses said to be in $1-2 mil range on sales in $10-15 mil range, as well as mgmt turnover that had seen cfo and sales chief depart, which some took as reflection of difficulty integrating skilled outsiders into co operated by wife-and-husband founding team of Kara and Theo Goldin. (Theo has since picked up sales role himself.) More recently, tho, brand seems to be developing momentum, even as mgrs back away from frequent 10-for-$10 promos that in past drained margins but didn't do as much as anticipated to lift top line. Overall environment may be better, too, after burst of sweetened zero-calorie brands a year or two ago caused trade and consumer distraction; these days, unsweetened lines of iced tea and other categories are performing well, suggesting more consumers are coming around to Hint proposition of flavor but no sweetener of any kind.

Three newest flavors in core noncarb line - Blood Orange, Peach and Crisp Apple - have become top performers even with limited availability, Theo reported. In natural-food stores tracked by SPINS, Hint has become fastest-growing brand in enhanced/flavored water segment, up 30% over 4 weeks ended in mid-May. Meanwhile, addition of plastic-bottle version of carbonated Hint Fizz - buttressing original longneck glass bottle - has performed on par with top noncarb flavors. Takeup in key market of NY has been so strong that co has been sparing in rolling out new pack to other markets, tho it's edged into part of New England recently. Such retailers as Safeway (in its naturally focused stores), Shop Rite and Whole Foods' Northeast region have authorized plastic-bottle Fizz. Co will showcase new items at upcoming Fancy Food Show in NY.

Tho sales chief and DPS vet Rich Schuttenhelm moved on a few months ago - no reason was given but some said he felt he was being micromanaged - Hint has retooled approach by elevating other staffers and bringing back former natl account mgr Glenn Roberts as biz development mgr. In his short time back, Roberts has opened up perhaps 20 university campuses, while food-service specialists on each coast have made headway in that underdeveloped channel, say, by bringing on The Melt chain for Fizz in SF and LA lately, Goldin said.

Goldin emphasized that co is determined to be sparing in its outlays as it works to attain break-even status. A proposed experiment in paid media has been put off as requiring too much in resources and focus for uncertain return, even as DrinkHint.com Web site was retooled 3 weeks ago to offer less lifestyle branding in favor of overt effort to sell cases directly to consumers. (As former AOLers, Goldins have been unusually receptive to online channel as meaningful sales driver in bevs.) Efforts such as concerted push in Giant Eagle with distributor Buckeye seem more cost-effective means of raising brand presence than marketing gambits, and co also is tinkering with more creative ways to leverage POP.

Tho some trade partners have speculated that core investors such as Verlinvest have been frustrated by inability of seasoned outside execs to carve out sustainable role alongside assertive wife-and-husband cofounders, no changes at top are anticipated, and Kara Goldin continues to display extraordinary knack for garnering media coverage as face of brand, on platforms ranging from ABC News to Bloomberg TV and Fortune. No comment from Verlinvest on capital raise or other issues connected to Hint brand.  
Dutch co Avantium, which is working on all-renewable alternative to PET bottle, closed on $50 mil financing round that included Swire Pacific, Coca-Cola, Danone, ALPLA and the existing shareholders Sofinnova Partners, Capricorn Venture Partners, ING Corporate Investments, Aescap Venture, Navitas Capital, Aster Capital and De Hoge Dennen Capital, BiofuelsDigest.com reported. Proceeds will be used to complete industrial validation of its PEF material and finalize engineering and design of first commercial-scale plant, newsletter reported. PEF molecule is claimed to offer lower permeability of oxygen, carbon-dioxide and water and enhanced ability to withstand heat. The technology offers "promising pathway for supporting both our efforts to commercialize renewable, plant-based plastics and develop unique properties for packaging to drive new growth," said Yu Shi, dir of next-gen materials & sustainability research at Coca-Cola . . . Nestle's Nesquik brand has forged multi-tier alliance with youth sports orgs US Youth Soccer and AYSO Soccer, including supporting instructional videos by Hall of Famer Alexi Lalas and women's pro Sydney Leroux on those orgs' Web sites. Nesquik also is teaming with soccer pros and coaches to position milk line as recovery bev with ideal 3:1 ratio of carbs to protein . . . Oakland, Calif-based Numi Organic Tea is jumping aboard turmeric trend with release of loose tea line called Turmeric Tea. It debuts in 4 sku's: Three Roots (with ginger and sweet licorice), Golden Tonic (lemon verbena and dried lime), Fields of Gold (chamomile, and lemon myrtle) and Amber Sun (rooibos, vanilla beans and hint of cinnamon)  
Ingredient Marketplace earlier this week in NY brought back as speaker a familiar figure, Dr Daniel Fabricant, who'd appeared there a year earlier as dir of the Dietary Supplement Programs div of Food & Drug Administration. This time, tho, he was back with industry he previously regulated, as ceo and exec dir of Natural Products Assn, which he rejoined in Apr after 3+ years at FDA. Before heading off to the agency he'd served as regulatory affairs vp at NPA. In presentation at edge of show floor in Javits Center, he joked that it was pleasant to once more be analyzing regulatory arcana before befuddled-looking group.

Tho most of presentation indeed was an alphabet soup of regs and procedures that marketers need to be aware of in their dealings with agency - RPM, GMPs, AERs and so on - Fabricant offered some general insights into regulatory dance. For one, from experience, he knows "agency responds to political pressure," so marketers should be mindful of political currents. And with Congress gridlocked according to party lines, he expects more "legislation by fiat" as Obama Administration resorts to rulemaking process, as it did in EPA carbon regs handed down earlier in week. He also worried out loud about eventual departure of such long-term allies to supplement biz as Sen Orrin Hatch, warning that anticipated rise to influential positions of lawmakers such as Al Franken could prove risky to NPA interests if the assn and its allies don't step up efforts to support them and open up dialogue.

On subject of approval process for New Dietary Ingredients (NDIs), Fabricant figures draft guide targeted to appear in 2014 may well be held up in this election year. On NDI enforcement front, he noted that agency seems not to be targeting such rote items as multivitamins but rather seems more inclined to pursue ingredients like 6-Oxo and DMAA that "are a bit more on the edge."

On genetically modified ingredients, Fabricant envisions action at federal level now that states are starting to pass their own legislation on GMO labeling. Speaking informally with BBI after talk, he said he similarly envisions movement on defining what is a "natural" food, in climate where companies are suing each other over natural claims, plaintiffs bar has jumped in, and now states are starting to mobilize efforts to define slippery term. As with GMOs, prospect of having to deal with individual state mandates should galvanize NPA members and others into more aggressive push for federal reg.  
Urban Remedy, raw food and juice player in Bay Area that boasts Cindy Crawford among its investors and endorsers, has pulled in $5 mil round of venture funding and landed Pinkberry, POM Wonderful, Jamba Juice and Popchips vet Paul Coletta as its ceo. Recall that Urban Remedy was launched by acupuncturist and nutritionist from Marin County named Neka Pasquale, whose mainly sold her foods, bevs and cleanses directly to consumers (BBI, Feb 2 13). The Series A funding was raised from so-called micro-venture-capital firm Venture51, augmenting earlier $1 mil pulled in from LA-area incubator Science Inc, and will be used in part to get Port Richmond, Calif, plant up and running. Among its regional rivals, the more retail-focused Project Juice has First Beverage Group as key financial backer as race to grow in segment accelerates.  
Retooled Skinny Water has hit market starting in co's Philadelphia hq area, as Skinny Nutritional team that bought co out of bankruptcy takes another crack at building brand presumed to resonate with skinny-obsessed consumers. Under investor Mark Turnbull and longstanding ceo Michael Salaman, co has moved from previous generic-looking straight-walled PET bottle to full-wrap 16-oz bottle that tapers at middle, appropriately for brand positioning. It just hit DC/Phila markets worked by Honickman Group's Delaware Valley and Potomac operations, with its Canada Dry of NY operation set to receive rebranded line next week. Co is sticking with its top 4 flavors of Acai Grape Blueberry, Goji Black Cherry, Raspberry Pomegranate and Orange Cranberry Tangerine, using zero-cal sweetener blend of sucralose and ace-K. Formula's been slightly tweaked to dial up full, fruity flavor.

In contrast to earlier plan, which focused heavily on chains, often at 10 for $10 promo price, new plan calls for focus via DSD on up-and-down-street (UDS) market, at more elevated price point supported by elegant pack. In UDS channel, they're aiming to go out in $1.79-1.89 range promoted at 2 for $3. In chains, they're aiming at $1.49-1.69 promoted at 4 for $5. Co is claiming to hold retail authorizations at Supervalu Acme, Wakefern Shop Rites, Wegmans and A&P Pathmark, but have lost one key account, Ahold. Thru ups and downs of past year they've retained presence in such NY chains as Fairway, King's, King Cullen and Waldbaum's.

Turnbull and Salaman spoke to BBI this morning on way to meeting at Canada Dry distrib in Asbury Park, NJ, as they look to fill a few voids around margins of Honickman territory. NY relaunch will extend thru Jun, and then co will target Conn north to Boston later this year. Turnbull credited focus on UDS channel to Honickmans, as offering means to slower but more stable, sustainable growth, at better price point. "We're fortunate the Honickman Group kept our brand alive and continued to support us," he said. And Salaman vowed to stick with DSD-only approach, hopefully better supported by new pricing structure. "We really are 100% DSD," he stressed. "I don't believe you can do it both ways." Behind scenes, meanwhile, co continues to develop new flavors and entries in other categories for which it holds Skinny trademark, with some of results to emerge in next coupla quarters.  
PepsiCo is undertaking another of its sporadic efforts to reinvigorate its neglected SoBe new-age brand, this time by hearkening back to its surfing roots under new slogan "Go Flavorfully" and bringing back the famous SoBe Love Buses. Key to new campaign is signing of surfing pro Sebastian "Seabass" Zietz as brand ambassador, restoring tie to sport that brand has previously supported via sponsorship of Eastern Surfing Assn and such tours as Bank of the West US Open of Surfing in Huntington Beach, Calif. The customized 1960s Love Buses will undertake sampling initiatives in Denver, Phoenix and Southern Calif. New effort is intended to re-establish "the open-minded and bold SoBe roots in surfing," said brand marketing dir Linda Lagos.    
Is Vitaminwater's move to natural sweetening system featuring stevia misfiring among its brand loyalists? As revamped entries bleed into market side by side with existing ones, some users are up in arms on Facebook, inveighing against new flavor note with lots of harsh rhetoric, among the milder of which is "bad as saccharine." Tho posters' identities are always hard to verify, complaints seem to coming from both male and female consumers, across broad range of ages and geographic regions - tho of course posters comprise tiny fraction of brand's 4 mil Facebook fans. In intensity, backlash is reminiscent of outrage that greeted move by Vitaminwater's owner, Coca-Cola, to restage Odwalla in smaller bottles several years back. Unlike that episode, tho, KO doesn't seem to be engaging in dialogue on issue with complainers. As earlier reported, restage swaps existing sweetener blend of crystalline fructose and cane sugar for cane sugar/stevia leaf extract blend, both formulations coming in at 120 calories per 20-oz bottle. New versions drop metallicized labels and add "naturally sweetened" to front panel. If Facebook uproar is being reflected in market, too, it would represent first crisis to be faced by new Glaceau svp Shane Grant, who moved down from Coke post in Canada in recent months to take helm in NY of declining brand.

Of course, move to indisputably natural sweetener would seem to be progressive step for brand like Vitaminwater - except that some regular users seem to be so sensitized to change that a few are insisting there must be more going on and asserting these are bad production batches. And this as Vitaminwater loses customers to surging sucralose-sweetened Sparkling Ice, posing question as to whether this sweetener upgrade is really that meaningful to many Vitaminwater users. If you want to see range of comments check out on brands' Facebook page.  
Private-label king Cott Corp took another step along path to greater diversification from CSDs and shelf-stable juices with proposed acquisition of UK's Aimia Foods (Holdings) Ltd, which does about $110 mil in annual sales and brings Cott such new formats as powdered bevs along with important foodservice and vending connections. Some 85% of Aimia's revenues derive from categories that are new to Cott, including hot chocolate, coffee, malt drinks, creamers/whiteners and cereals. Aimia also brings capability in new formats like pouches, jars, sticks, in-cup products, sachets and block-bottom bags. Purchase price includes $80 mil at closing plus adjustment for working capital, $33 mil in deferred consideration payable in Sept and earnout that will range between $13 mil and $27 mil. Stifel Nicolaus' Mark Swartzberg viewed transaction as solid step forward. "We consider the deal terms reasonable and see better-than-average odds Cott will integrate Aimia at or above targeted performance levels, because several retained Aimia managers are eligible for significant earnout-related upside and last year's $28 mil Calypso acquisition (also in the UK) is performing at least in line with plan," he wrote. That said, Swartzberg also worries about distraction integration effort will create. "Acquisitions are a common recipe for solving a given business problem, yet the prescription can be worse than the sickness," he said. "In Cott's case, North America is on track to generate less than half of the EBIT it generated 2 years ago, suggesting risk that management's M&A focus will result in unintended neglect of effective plans and actions to improve North America's outlook." Deal should be accretive to both earnings and free cash flow in first year, Cott hopes.  
Filling vacancy that's existed for more than a year now, Detroit-based Marley Beverage has named Red Bull exec Harry Bigelow as prexy/ceo of relaxation brand. Bigelow, who comes in after serving as gm/vp for Red Bull North America, joins drastically downsized co from one-time growth juggernaut under prior ceo Kevin McClafferty. Nervous about capital burn, controlling Shiffman family retook direct control and brand has had considerably lower profile in trade and before consumers. Bigelow's hiring may rep effort to reverse erosion. In 3 decades in bevs, Bigelow has worked at Gallo, PepsiCo and Diageo North America, before joining Red Bull . . . Body Armor has added another pro athlete to its endorser/investor roster: Seattle Seahawks' Richard Sherman. He'll appear in in-store ad campaign at retailers in Seattle and Portland, as well as social and digital program launching later this summer, co said . . . David Williams has been abruptly terminated as interim cfo at natural soda marketer Reed's Inc. and replaced by another for-contract cfo, Lawrence Tomsic, for monthly fee of $15K, per SEC filing from LA-based co. No reason was offered for change in initial filing, but amended one filed today clarified that termination was not for cause. Parties "agreed to a mutual separation because they were not able to agree regarding the scope of Mr Williams' duties as Interim CFO and his compensation moving forward" . . . Zhena Muzyka, who launched Zhena's Gypsy Tea before moving on last year to roles with spiritual tinge in media realm, has signed on as dir of conscious business for I Am Products, marketer of supplements and other items launched by Eric Schnell. That makes her part of 12-person team of advisors and directors, Eric told BBI. Lately Zhena's also serving as literary scout for Atria Books, which is publishing her book Life by the Cup, and also building Zhena.TV platform as purveyor of biz advice, mindfulness and how-to videos to "women in pursuit of a dream."