Coca-Cola's Zico brand has rethought marketing approach, recruiting actress Jessica Alba as face of brand that's now being positioned more vs high-end bottled waters than the sports drinks that Zico challenged in its earlier days. Under exhortation to "Crack life open," brand is doubling media spend and broadening it beyond fitness books to lifestyle-oriented publications like People, Men's Health, Marie Claire and Real Simple. Also in mix will be double-decker bus wraps, murals and Hamptons jitney that shuttles affluent New Yorkers to beachside playground. Event mix will include likes of triathlons in Malibu, Calif, and NY, and Shape Up Summer Series. Delving into essence of product, NY Times reported, co concluded that "it really behaves and acts a lot like water, and we're really competing in that premium water space" . . . Ohio-based c-store operator Speedway LLC will expand presence from 9 states to 23, as it integrates 1,256 stores that are being acquired from Hess Corp for nearly $3 bil. Deal announced today, noted C-Store News, will leave Speedway with 2,733 company-owned stores and secure it a foothold in most parts of Northeast and Southeast. Hess had announced over a year ago that it would exit retail biz and use proceeds for exploration and production. Deal allows Hess locations to continue to sport distinctive green logo thru end of 2017 before being converted to Speedway brand . . . Red Bull is bringing to retail new camouflage-themed Camo Can as it returns for 3d year supporting Military Warriors Support Foundation and its Homes4WoundedHeroes and Homes4GoldStars program. In-and-out cans so far have helped provide 5 mortgage-free homes to wounded combat vets or their spouses.  

It's been frequent theme in discussions among new-brand owners and distributors, and certainly in BBI coverage: nominally premium or superpremium brands that show up at retail at extreme or extended price promos. Coupla keynote speakers at this week's Beverage Forum in NY separately argued that activity doesn't always betray lack of discipline among marketers: often, it's retailers' own desperate efforts to drive store traffic that's culprit behind brand-undermining activity. Observation helps explain, at least to some extent, why protestations by big bevcos that they're exercising pricing discipline so often seems belied by what's visible at retail, issue that analysts have increasingly seized upon as they try to get handle on growth prospects of biggest players in N America.

At Forum, insight surfaced in presentations by Tim Brown, newly named chmn, prexy and ceo of Nestle Waters North America, and Seth Goldman, cofounder of Coca-Cola's Honest Tea brand. (Another keynoter, PepsiCo's Al Carey, reviewed his efforts to reduce promotional swings but didn't specifically address retailers' own behavior.)

Brown's observations came during Q&A following speech, in which he was inevitably asked about casepack water seen at $3.99 or even $2.99 in stores. Been declining for 15 years, Tim allowed, and annual predictions that it can't go any lower are continually disproved. While he chalked some of that up to improving production and distribution efficiencies, it's not simply the supply side, Brown stressed: it's also caused by retailers using cheap cases of water as traffic driver. Proof: over past 3 years, retail prices have been declining at twice rate of wholesale prices. At heart of phenomenon, Tim believes, is scary 8.8% decline in store trips.

Similar question was directed Goldman's way: with prices of 99 cents, and even 69 cents, seen at retail, is Honest Tea being promoted too aggressively? After all, it's organic tea. In response, Seth insisted that co maintains "very strict" price program that allows for 6 weeklong promo windows per year featuring 10 bottles for $10. Certain retailers - "and they know who they are" - have made brand a loss leader under pressure to maintain image as best-value outlet, he argued. Besides cheapening brand, moves upset rest of co's distribution chain. "It's certainly not in our playbook, and not in the Coke playbook either," Goldman said. (That said, some in audience questioned to BBI editor whether brand should be undertaking any 10-for-10's at all.)  

Talking Rain prexy/ceo Kevin Klock offered some additional insights into strategy behind Sparkling Ice juggernaut, detailing how co bet big on NY, LA and Chicago last year with view to building unassailable position before well-heeled rivals could get foothold, and spread media bounty with view as much to protecting secondary intellectual property (overall look and feel of brand) and showing retailers that it would support brand as to wooing consumers. Effort to "protect flanks" in top 3 metros is paying off, Kevin noted, with brand scanning as #1 single-serve water in food/drug/mass channels in NY and Chicago by late summer, with LA likely to hit that mark soon, too. Media buy includes lotsa outdoor and TV ad called "Dive In" showing fruit-encasing ice cube swirling thru brightly colored liquids associated with brand.    As earlier reported, co has recently completed assemblage of complete DSD map, some 252 houses all told, covering every county in US now from just 20% of market a year ago. That should help brand better pursue c-stores, where most of biz is but Ice has only 5% penetration so far. Foodservice is another nearly untouched opportunity. Brand also is assembling team to build brand overseas, starting in so-called first-use countries like S Korea where it's important to establish presence before local rivals rip off your IP. Klock offered these thoughts at last week's BevNet Live conference in NY.

Brand is scanning at $326 mil in 52-week IRI data, with half-bil at retail in view by fall if current growth rates continue. Its lemonade subline scored $50 mil in retail sales in first year and ranked as #1 shelf-stable lemonade line within 6 months (that's by IRI classification - other lemonade players argue that, with just a smidgen of juice in it, Ice's lemonade subline isn't really lemonade at all). That effort "showed we can line-extend," Kevin noted. Brand now maintains 17 flavors, and any thought to "rationalizing" slower sellers has been dismissed by fact that newer entries so far have all proved incremental to biz. Co research shows that Ice's lighter yet more flavorful liquid makes it hard for customers to go back to drinking colas - tho Ice won't hesitate to launch its own cola flavor once it's able to get flavor right. Typically, new flavor is 2 years in development. Ice is now operating 8 distribution centers, putting product within 2 days of every major customer. Klock showed no signs of being discomfited by growing competition, either. Latest 4-week data show Ice to be 400% bigger than all rivals combined, including efforts from Coke and Pepsi, despite their intensive price promotions.

With Talking Rain having tested market by circulating book on co over past year without any takers so far, Klock inevitably was asked about exit. As always, he insisted his team is "focused on growing our business and being a large-scale business."  

BevNet Live panel last week offered deep dive into oft-overlooked financing vehicle, so-called family office where wealthy individuals park their cash seeking longer-term investments. Epitomized in bevs by cos like Verlinvest, steward of Stella Artois beer fortune that's made bets on brands like Vitaminwater, Vita Coco coconut water and Hint essence water, family offices offer some unique attributes that can be appealing to bev entrepreneurs seeking longer-term, but agile, financial partners. And, as Verlinvest dir Franklin Isacson noted, there seems to have been a shift from PE funds toward direct investment by entrepreneurs who recognize the value their partner can add, retain more control over governance and avoid paying fees. By contrast, since 09 downturn, there's been some disappointment in hedge funds.

In contrast to defined terms, perhaps 10 years, of private equity funds that need to cash out investment and return money to limited partners, family offices can take longer view - after all, if co exits investment, money will simply need to be deployed elsewhere. Range of investments is typically wider, noted Silverwood Partners managing dir Mike Burgmaier: real estate often is in mix, family offices are more apt to pursue pet projects of family, and they may not be as locked into investment minimums of several mil as PE guys are. Mike said he's working on deals as low as $200K for FO clients.

New Ground Ventures advisor Jeremy Friedman offered some other features: typically, there's single key decision-maker (unless it's multi-family office), FOs very often have specific knowledge of domain you're playing in, and can move pretty quickly (tho that can be offset by distractions of their pet projects). Less tangible is sense that you're part of the family, treated as a peer, given longer-term emphasis. And, Jeremy argued, industry experience can be more important in FO situation because you need to do a lot with a little, given that the family is not spending somebody else's money (the limited partners in PE situation) but its own. On valuation front, family may demand potential discount today in return for longer-term flexibility you garner.

Verlinvest: Likes Building New Categories, Industrialist Orientation Verlinvest dir Isacson sketched FO that moved 15 years ago to diversify its beer-focused holdings in what's now Anheuser-Busch InBev. It's got about $1 bil in assets and maintains 18 investments currently, 6 of them in bevs. (These include the NAs Vita Coco, Hint and Sambazon; cachaca player Leblon on alc side and Bevyz home-bev system.) Verlinvest likes building new categories, and views itself more as team of industrialists than financiers by trade, with hands-on expertise that may be valuable to holdings, Franklin noted. While Verlinvest is happy to harvest "soft synergies" among its holdings in areas like media buying or sharing distribution contacts, it operates on premise that individual cos are more likely to succeed by maintaining singular focus, so they operate with autonomy from one another.

Warbros Venture Partners: Just Closed 10th Bev Deal Partner John Warburg described RI-based fund created when he and bro pooled funds; they've now done 40 deals over 20 years. They typically write checks in $100-500K range during early expansion stage, when emerging co has established proof of concept and need another $1-2 mil to get to next phase and, hopefully, positive cash flow. With Spindrift deal orchestrated by Burgmaier's Silverwood Partners, Warbros recently made 10th bevco investment.  

Starbucks exec charged with building co's brands outside the cafes themselves discussed how coffee giant is looking to "up-level" disappointing bagged coffee biz in supermarkets, even as it moves aggressively to expand such newer additions to brand family as Evolution Fresh Juices, Fizzio sodas and Teavana tea.

Speaking to Beverage Forum audience on Tues, Michael Conway, SBUX's evp for global channel development, said Evolution Fresh cold-pressed juices will be available in every US café by next month, and already enjoys extensive retail presence, particularly out West. It's national within Whole Foods chain. And co continues to tweak its Teavana acquisition, adding tea bar now to 3d unit (in Beverly Hills) and establishing brand as more premium alternative to SBUX's Tazo brand. As in coffee realm, where Seattle's Best brand fills role reaching customers who prefer milder roasts more lavishly accessorized with cream and sugar than core Starbucks brand, co should be able to balance multiple tea brands, he said. Asked whether co is considering RTD version of Teavana, Conway indicated that that's likely in cards but it's too early. Focus will remain on Teavana cafes for now, he said.

On packaged coffee side, Conway said he had no doubt that wresting control of distribution from former partner Kraft was "right decision," doubling profit of what's now $1.5 bil channel-development biz. But he acknowledged that even now, in-store conversion is disappointing. To improve that metric, SBUX is experimenting with so-called "signature aisles," now in about 200 groceries, that incorporate brand's siren icon and stores' wood cues to recreate the cafes' feeling and "up-level" the grocery's coffee experience. At times, baristas are stationed at sections, doing sampling. Extending so-called "third place" experience of coffee shops (positioned as places to unwind outside home and work) is at essence of strategy. "Everything we do at retail relies on the cafes," Michael stressed. Meanwhile, co is extending its rewards program to coffee aisle, lately allowing shoppers to peel off on-pack sticker for code that allows them to accumulate loyalty stars from grocery purchase too. Already, 1 mil consumers are aboard so-called Down the Aisle program, to tune of 5 mil stars.

Tho there's no question K-Cups have put dent in bagged coffee biz, SBUX recognizes format "is here to stay" and is enthusiastically participating, maintaining differentiation via superior quality and extending in-café favorites such as Dulce de Leche to platform. By now SBUX has sold 200 mil Via instant-coffee sticks and continues to extend, lately with latte flavors that incorporate dairy and sugar, as well as Pumpkin Spice fall seasonal entry.

Tho Conway didn't offer much discussion of RTD biz, including such Pepsi-produced and -distributed items as Starbucks Iced Coffee and Starbucks Refreshers, he expressed nothing but enthusiasm for longtime RTD partner, an ally since launch of Frappuccino nearly 20 years ago. "Fantastic partner for us," said Conway, a vet of Kraft, Campbell Soup (where he worked on bevs) and Johnson & Johnson's McNeil unit.

Overseas opportunity is apparent from fact that co operates 20K cafes in 64 countries but so far has pursued channel development in just 30 countries, often with limited array of items. Offering interesting testimony to how well established bottled Frappuccino brand has become, Conway wondered whether that might not work as entry point for Starbucks in some markets, presumably even before cafes have been established.

Tho not strictly his bailiwick, Conway drew questions about some activities that are limited to cafes so far. Experiment with beer and wine in Starbucks cafes by now has extended to 30 locations in 5 markets, with focus on locally produced wines and craft beers, he said. Fizzio sodas that are crafted in cafes are rolling out across Sun Belt markets this summer, in Spiced Root Beer, Ginger Ale and Lemonade flavors.  

With cold-brewed coffee, cold-pressed juice and kombucha all showing signs of breaking out, it can be viewed as the "last mile" issue that's often obsession of folks in telecom biz: how to get the refrigerated products to high-velocity retailers like c-stores and delis. Stumptown Coffee is latest to take contrarian approach to challenge, enlisting beer houses in Pacific Northwest and LA metro to get job done - even though neither operates refrigerated fleet. Portland, Ore-based coffee roaster has enlisted LA's Straub Distributing as DSD partner in test behind Stumptown's cold-brewed coffee (both in kegs and single-serve bottles) as well as its whole-bean coffee, another contrarian move. And it's brought aboard DSD powerhouse Columbia Distributing in Pacific NW behind its kegged and bottled cold-brew. All this at time that cold-brewed line is making surprising headway into mainstream accounts, lately including all Fred Meyer groceries and all Plaid Pantry c-stores in Pac NW.

Encountered at Beverage Forum in NY yesterday, Stumptown prexy Joth Ricci said LA test stemmed from challenge of servicing Whole Foods' 45 stores in Southern Calif. He found receptive ears at Bud house Straub Distributing, particularly its gm, Rick Sweeney, who's familiar with new-concept hurly-burly from coupla years spent on Pre prebiotic brand. Tho cold-brewed coffee has short shelf life and Stumptown insists on custom-roasting its whole beans for each individual retail account, distrib agreed to give it a shot, concluding that plastic-wrapping pallets of cold-brew would be sufficient to protect iced coffee on its journey to retail shelf, while tossing whole-bean coffee atop beer kegs and cases would help with squeezing more product into each truckload, easing perennial cube-out issue.

Recall that pair of beer houses in NY have recently taken on refrigerated kombuchas: Manhattan Beer with Reed's Culture Club kombucha and Phoenix Beehive with Kombucha Brooklyn. Beer network has knowledgeable, sympathetic allies at Stumptown: Ricci once ran Columbia Distributing, and his vp sales since last fall, Marty Wall, had long run at Widmer Bros and Craft Brewers Alliance.

Meanwhile, early signs are favorable for Stumptown Cold Brew Coffee with Milk offered in Pac NW via alliance with regional dairy producer Sunshine Dairy Foods. It's packed in 1-pint gabletop carton in black and gold hues, and chases opportunity witnessed by Ricci's team when they'd see most buyers of bottled cold-brew line in Stumptown stores add milk and sugar to pristine coffee item. In first 60 days, new line quickly leapfrogged stubby-bottle entry in sales - but stubby bottles kept growin' briskly too, Joth noted, relieving any concern about cannibalization. Concept calls for Stumptown to find other dairy partners as it extends concept to new parts of US.

Lots more coverage from both BevNet Live and Beverage Forum in upcoming issues, readers!  

PepsiCo Americas Beverages ceo Al Carey used appearance at Beverage Forum in NY yesterday to systematically rebut frequent gibes directed co's way that it's failing on innovation, needs to separate snacks and soda biz, and has seeded employee ranks with mediocre, me-too folks. Along way, he indicated that soft drink producers under American Beverage Assn are launching campaign to combat consumers' notion that artificially sweetened sodas are bad for them, and flagged intensification of co's flirtation with CSDs sweetened with real sugar, via limited-time Pepsi offering due in 3-4 weeks in Regular, Cherry and Vanilla flavors. And in unusual move in soft drink biz where execs generally refer to rivals obliquely (if at all), blunt-talking exec singled out Coca-Cola by name for innovating new sizes of glass packs and cans, which Pepsi now has tooling and copacker relationships to produce, too. "Great job," he said of KO effort, that's helping lift price per ounce extracted from consumers. (A 12-oz glass bottle of Pepsi gets $1.14 on avg and 7.5-oz can 65 cents, vs 30-35 cents for 12-oz can sold via multipack, he noted.) Minicans, up 25% so far this year, are offering needed lift to sugared CSDs, he said.

On innovation front, Al noted that co is faring well within "at least 4" of 5 fastest-growing categories: RTD coffee (up 7.9% in Q1), energy (+5%), unflavored water (+4.5%), sports drinks (+3.9%) and RTD tea (+3.2%). It's staying ahead in coffee on strength of innovations under Starbucks brand, notably iced coffee as alternative to mainstay Frappuccino that comes in at half the calories. That generated $100 mil in first year. Lipton-branded PureLeaf tea is growing briskly (with unsweetened entry the fastest-growing) and Gatorade is in a good spot, with revived Frost subline generating $140 mil in first-year revenues and Fierce subline now re-entering mix. Al didn't say anything specific about energy, perhaps because he can't be seen as describing fast-growing Mountain Dew extension Kickstart as an energy play (because PEP's distribution contract with Rockstar precludes co from developing separate energy lines). Elsewhere in talk, tho, he noted that Kickstart generated $175 mil in revs in first year, with product proposition that includes 60% less sugar than core version, OJ content and caffeine boost that's more modest than conventional energy drinks. As for 5th category, unsweetened water, Al acknowledged that "we let that get away," but cited unspecified progress on Aquafina.

Carey didn't disguise challenges confronting CSDs, tho he took some solace from fact that declines in diet CSDs have moderated somewhat from -7% to -5% lately. To combat "negative buzz" about aspartame and other artificial sweeteners, industry will jointly launch educational campaign citing lack of credible evidence that there's anything wrong with those. Meanwhile, some innovations are bearing fruit: Pepsi Throwback, with real sugar, is up double-digits, as is Cherry Pepsi, and glass-bottle entry with real sugar doubled over past year. And co is diverting media support from other brands to Mountain Dew, where added spending provides clear lift to sales. Tho he was skeptical when Pepsi bottlers with beer interests suggested co adopt aluminum bottle, that's proved a winner for Dew, Carey said. Baja Blast flavor lifted from long Taco Bell tie is "flying" in early days, too. Al argued that PEP has handled crucial 2d year of winning innovations well, say, by adding 2 evening-oriented sku's to Kickstart and seeing that line continue to grow by double digits.

As bev mix tilts more toward lower-calorie offerings via entries like unsweetened PureLeaf tea and Starbucks Iced Coffee, co's commitment to front-label disclosure is reversing from liability to advantage, Carey declared. "Something we weren't too crazy about in the early days may end up being a positive in the long run," he said.

During address at 2-day conference sponsored by Beverage Marketing Corp and Beverage World mag, Carey stressed leverage that PEP's bev side garners by virtue of being allied with major snack and other brands, in implicit rebuttal to those calling for split-up of co. Also, in his 2 ½ years in post, he's installed A team of 13 direct reports, with turnover rate among top 100 execs down to 5% over past 14 months, Carey said, in seeming response to critics who've derided what they say has been revolving door of yes-people at PEP.  

Carbonated soft drink volume improved to -0.2% last 4 wks thru May 11 in all-channel data (including gas/c-stores), per IRI figures reported by Morgan Stanley's Dara Mohsenian. Latest 4-wk period includes benefit of Easter weekend shift this yr. That slight decline for CSDs is much better than category's 1.7% volume drop last 12 wks. Easter shift didn't help struggles of diet CSDs, which were down 7% again, in line with 12-wk drop. Regular CSDs were up 3%. Pricing remained up slightly for segment (+0.2%) over last 4 wks thanks to Coca-Cola avg price increase of 2% compared to -2.2% for PepsiCo and -1.5% for Dr Pepper Snapple. That price hike cut into KO CSD volume, which sagged 0.5% last 4 wks vs slight gain for 12 wks. PEP swung from -1.4% for previous 12 wks to +1.5% last 12 wks and DPS volume was up 3% last 4 wks vs 1.5% drop last 12 wks.

Volume Slows but Prices Rise in Energy Segment There was "weak energy drink growth" in latest all-channel data, noted Dara, as volume gain slowed to +1.2% vs 3.4% gain last 12 wks. Pricing was more solid, though, rising 1.7% last 4 wks compared to avg increase of 0.9% previous 12 wks. Monster volume was up 5% (vs 7.2% gain for 12 wks) with solid 1.9% price increase last 4 wks. Red Bull volume was up 3.6% with small (-0.3%) price drop. Rockstar slowed to 1.4% gain last 4 wks (up 4.3% for 12 wks) as avg price discounting eased to -1.7% vs 3% decline for 12 wks. PEP energy brands up double-digits again (10.9%), even with 4.5% price hike, while KO brands dropped 10.6% despite 4% price drop. Of course, PEP also benefits from distributing Rockstar in most of US, while KO benefits from distributing Monster in half of country.

Sports drink volume rose 3.3% on avg price increase of 2% last 4 wks in all-channel data. PEP's Gatorade volume rose 3.8% on 2.8% price gain while KO's Powerade gained 3% but had avg price drop of 1.5% last 4 wks. Private-label sports drinks still struggling severely, off 15.3%, in environment that's been highly promotional on branded side.

Water Chuggin' Along Bottled water volume increased 9.7% on avg price drop of 4.6% last 4 wks. Those trends are in line with category performance in all-channel stores last 12 wks. Nestle volume was up 7.9% on 3.6% price drop, while KO and PEP waters had more modest volume gains of around 2% each. KO prices were down avg 3.2% while PEP prices off steeper 5.2% last 4 wks. Private-label waters continue to outperform, with volume up 11% on avg 4.5% price drop in latest period.

Modest Tea Growth RTD tea volume was up 0.4% with avg price increase of 2.7% last 4 wks. That's down from 0.9% gain over last 12 wks for category. With its avg price up over 8% last 4 wks, PEP teas grew just 1.2%, while KO tea volume shot up 8.6% on modest 0.5% price increase. DPS teas cut dropoff pace in half to -2.2% over last 4 wks with slight (0.3%) price gain. Private-label teas improved to -0.7% volume trend vs 9% drop for 12 wks.  

Finalists for "Sofi" gourmet food award include array of bevs from grapefruit lilac water to Pok Pok restaurant's Som drinking vinegar. In cold bev category, finalists are Canada Enterprises' JinJa ginger-based elixirs (Dragon Fruit flavor); Boundary Waters' Joia All Natural Soda (Orange Jasmine & Nutmeg flavor) and Victoria's Kitchen's Almond Water (Coconut flavor). For best new product in any category, range includes 2 bev players: Blossom Water (Grapefruit Lilac flavor) and Owl's Brew tea-based mixers (Pink & Black sku). Also in mix, in vinegar category, is Pok Pok's Som, with its Thai Basil flavor. The Sofi, which stands for "specialty outstanding food innovation," will be awarded on Jun 30 during Summer Fancy Food Show at NY's Javits Center.  

PepsiCo has exercised option to extend collaboration on sweetener technology for another 2 years, to Aug 2016. That means PEP will continue to hold exclusive worldwide rights to Senomyx sweet flavor ingredients for NA bevs. Under deal, Senomyx is entitled to unspecified research funding payments over the 2 years, can reap milestone payments as it attains predetermined goals, and would receive royalties if PEP puts ingredients into production. "Senomyx's Sweet Taste Program has realized significant accomplishments during the past 4 years. We look forward to continuing to work with our valued partner PepsiCo on this successful program," said Senomyx prexy/ceo John Poyhonen. Tho PEP brass continues to express confidence that breakthrough will come in natural sweeteners that work well in CSDs, over past year or so they've stopped putting any kind of time frame on when they believe that breakthrough will arrive, at time that CSDs continue to decline.