Beer Marketer's Insights
Despite Amazon Replenishment Lapse, Celsius Grows Sales by 65% in Q1; Int'l Now a Majority of Biz
CCE's European Strength Offset UK Weakness during Key Package Transition; Energy Drinks Rise 9%
With growth in Europe offsetting decline in Great Britain, big bottler Coca-Cola Enterprises eked out 1% gain in revenues to $1.87 bil in first qtr, and operating income soared 66% to $184 mil on tite cost containment. Overall volume was down 1.5%, with 3.5% gain on Continent (particularly France) offsetting 9% plunge in Great Britain, where co is transitioning from 2-liter straight-wall PET bottles to 1.75-liter contoured bottles in quest of better price point. Tough weather conditions aggravated UK malaise. "Cokes with Croissants but Not Fish & Chips," headlined Wells Fargo's Bonnie Herzog, pointing to disparity. In Europe, Coke-trademark brands edged up and noncarbs enjoyed growth in mid single digits. "These results in France are especially encouraging given the challenges since the excise tax increase in early 2012," noted chmn/ceo John Brock.
Decline in operating expenses of 3.5% boosted income for qtr. "Our first quarter volume performance reflects the impact of key operating strategies, including disciplined pricing and the transition to a new package in Great Britain, as well as dynamic market conditions," said Hubert Patricot, evp and prexy of European Group. "We continue to believe our solid customer relationships, excellent marketing initiatives, and ability to execute and activate at the highest levels will enable us to deliver volume growth in 2014."
Energy portfolio continued strong growth, in 9% range, with both Coke-owned brands and Monster up, tho Patricot reminded listeners they comprise just 3% of total volume. Star of CSD portfolio, Coke Zero, continued to grow at double digits, rising in all countries including Great Britain on strength of Just Add Zero campaign. But Diet Coke weakness in UK pulled overall diet portfolio down by 1.5%. Still, Brock said co expects diet portfolio to grow over course of full year, buoyed by last fall's ruling by European Food Safety Authority that aspartame is safe, which has muted critics.
On innovation front, co intro'd adult-targeted low-cal, fruit-based sparkling line called Finley in France in Mar, to positive initial response, Brock said. In UK, not only is CCE transition to 1.75-liter multiserve bottle, but it's also adding 1-liter immediate-consumption bottle along with 4-pack of 1.5-liter PET bottles that will be key among World Cup promo efforts. CCE brass acknowledged some missteps on 1.75-liter transition, noting that new pack jumped gun in moving out into market in Mar, ahead of Apr timing of campaign to communicate change to consumers. In meantime, CCE was left with less promo flexibility than Pepsi.
Turnbull is interesting choice to rescue brand, boasting successful track record in realms like telecom, mfg and software but having no consumer products experience, as he readily acknowledged. Still, he said, it's challenge his team likes to confront, and in his due diligence he was reassured by signs that brand did turn in key accounts. "Getting it to the shelf was the problem," he said.
Recall that Turnbull, working with Salaman, had been sole bidder to acquire Skinny Nutritional assets out of bankruptcy, deal which closed late last month. According to 8-K filing dated Apr 4, Skinny Nutritional prevailed with $1.5 mil bid, which required only $835K in cash after Turnbull's $132K in debtor-in-possession financing was backed out, along with promissory note of $533K coming due in 3 installments by Sep 30. Of Turnbull's cash payment, $765K went to Trim Capital LLC to secure trademarks exclusively in Skinny Nutritional's name, ending tortuous jousting of recent years. That left just $70K in till, but that will be augmented with further capital to be raised by now-private company, Mark said.
Liking what it saw in last summer's limited test, Starbucks will roll out its Fizzio handcrafted sodas to 3K stores in Sun Belt, as well as Singapore, South Korea and several cities in China this summer, Schultz indicated. Brand will launch in Ginger Ale, Spiced Root Beer and Lemon Ale flavors, with locally relevant flavors added as summer progresses. Test markets had shown line to drive afternoon traffic at stores.
Schultz also continues to be bullish on Teavana brand acquired last year. He promised that full range of Teavana-branded tea bevs, loose leaf teas and merch will be available in stores by summer, with Teavana Tea Bar concept expanded in coming months from initial units in NY and Seattle to Chicago, LA and additional NY locations. To boost brand awareness, multi-tier tie-in with Oprah Winfrey is kicking in, featuring special Teavana Oprah Chai blend offered in Starbucks and Teavana stores across US and Canada, with donations being made to Oprah Winfrey Leadership Academy Foundation. Tho SBUX brass said nothing specific about potential to offer Teavana as RTD tea brand, Schultz promised unspecified "disruptive" innovations in coming quarters.
And co confirmed that so-called Evenings program, which includes serving of wine and beer and "shareable" food plates, has been vindicated in 25 or so stores in which it has been testing in recent years and is now ready for broader rollout as way to boost traffic during evening dayparts. "Based on these results, we are no longer testing Evenings," said coo Troy Alstead, who anticipates more than 1K stores across US to offer Evenings offerings in coming years.

