NY beer house SKI is continuing to expand its Ralph & Charlie's juice line, adding Apple Orange Carrot and Papaya Orange Pineapple flavors and looking to build distribution footprint up and down East Coast. New entries are launching into core NY market served by SKI, a distributor of Harpoon and other beers, as well as NJ (via Nash and High Grade) and Detroit (via Intrastate), picking up 700 customers in first 2 weeks, said sales chief Paul Catalano. They bring line to 11 flavors now, 6 of them carrot-based. With SKI serving broad range of retail customers, from inner-city bodegas to gourmet markets, it's tuned Ralph & Charlie's to be approachably priced and positioned, but to employ glass bottles and formulas with limited added sugar that offer upscale cues. To date brand has made limited forays beyond East Coast, with Detroit proving strong market, and brand also established in Atlanta/Savannah via Savannah Distributing and Ariz via small shop called Blue Luna. Paul said co is holding off on pushing into W Coast for now, but is seeking to build DSD footprint in Conn, southern NJ, Penn, RI and perhaps Fla. Co also is prepping first multiserve bottle, most likely 33-oz PET bottle that can go out in $2.19-2.59 price range.

Story on daily e-letter of Convenience Store News on 7-Eleven's lagging effort to move to 100%-franchised model offers intriguing glimpse of what key source in story, an unidentified former employee, deems to be rivalry between staid, more established one-third of current franchisees and more ambitious, up-and-coming one-third that's "made up of very aggressive marketers who are pro-7-Eleven and support the company's efforts to change, specifically 7-Eleven's push around fresh food." Story helps explain sometimes warring signals that bev marketers receive as they try to move innovative products into c-store chain that has heralded that as priority.

Per story, older franchisee tier is generally content to operate single store reliant on old staples like cigarettes, while younger tier is more attuned to efforts to refresh culture and interested in operating multiple units, as 7-Eleven prefers new franchisees to do these days. Middle tier is "on the bubble. They're not real productive, but they could be with the right influence," as ex-employee put it. "While it's not uncommon in any franchise system to have varying levels of franchisees, the challenge for 7-Eleven is that its old school group is very vocal and influential in the retailer's franchisee community, according to the former employee. 'They wield a lot of power in the organization and the old school is now negatively influencing the middle third.'" According to CSNews.com story, what many franchisees over the years have criticized as heavy-handed tactics by 7-Eleven, as occasionally reported in BBI, reflected efforts to instill new culture. "The company was put in a position of how do we move these operators to not just rely on cigarettes but embrace food, beverages, new business development and private-label products," the former employee noted. "The tactics employed is what's causing the problems with the franchisees." Story notes that ceo Joe DePinto has lately assured store operators that co is now in more of listening mode, "overhauling its corporate culture to one of 'servant leadership' that supports the stores and franchisees." As for push to be 100%-franchised, which was supposed to be concluded by 2013 but stands at just 75% now, 7-Eleven rep said that's still the goal but was a sidetracked as co stepped up pace of new-store openings. Story can be accessed at http://www.csnews.com/industry-news-and-trends/special-features/7-eleven-faces-some-delays-road-franchising  

Telephone poll of 1,000 voters in California found 74% in favor of warning labels on sugary drinks, reported San Jose Mercury News. Poll commissioned by health care org called The California Endowment asked voters if they would approve of a label that read: "Studies show that daily consumption of sodas and other sugary drinks contributes to diabetes, obesity and tooth decay." Survey also asked about putting tax on sodas, and that was supported by 67%. Report notes that over past 3 yrs, same poll has found tax support in "mid to high 60s" each time, yet tax initiatives have failed by wide margins on election day in both Richmond and El Monte in recent years.  

Arguably, Coca-Cola and PepsiCo have navigated unforgiving economic and consumer environment with fair amount of dexterity, lately turning in quarterly and full-year earnings reports that keep cos well out of crisis zone, even if they slightly missed targets and have tamped down expectations for 2014. But even before activist investor Nelson Peltz yesterday reasserted his ambition of splitting PEP's bev and snack divs, commentary about both cos this week seems to have taken harder-edged tone than anything we've seen in recent years. That's particularly true for KO, which has had something of charmed run on Wall Street under chmn/ceo Muhtar Kent, who until now has been viewed fairly unquestioningly as assertive leader well up to task of delivering on his Vision 2020 growth program. Suddenly, he's being criticized for failures on innovation and other fronts even as Peltz steps up questioning of PEP's model just as co had hoped to have put issue behind it for now. Several commenters also have viewed both cos' intention to return more to cash to shareholders as tantamount to bribe to look other way from fundamental issues. "Can we distract you with some cash?" headlined Seeking Alpha commenter, referring to PEP move.

Recall, Kent's ascendancy started with a bang in 07 as he orchestrated $4.1 bil acquisition of Vitaminwater marketer Glaceau as sign of co's willingness to assertively enter non-CSD growth categories. Yet this week Bloomberg News invoked appearance last spring at KO annual meeting of Coke investor and equities savant Warren Buffett, who noted that his studies of failed cos had turned up unwarranted complacency as common factor. Implication of story was that maybe KO has entered that realm itself lately, view that's been stoked by analysts like Bernstein's Ali Dibadj, whose skepticism has been widely picked up.

Some, like Wells Fargo's Bonnie Herzog, have taken latest results at both KO and PEP as vindication of ceo Indra Nooyi's strategy. "Despite ongoing challenges in its beverage business, PEP delivered a solid quarter and full-year results in line with its 2013 goals," she wrote in wake of earnings release. "We remain positive on PEP's prospects, and believe the decision to not split off North America Beverages is the right one." Several commentators have noted that, at time that Coke's broad geographical diversity has not proved adequate hedge against travails in core market, model like Pepsi's begins to look more attractive.

Peltz, of course, isn't buying that. His Trian Fund Mgmt, which claims to hold $1.2 bil worth of PEP shares, released 31-page letter to PEP board last night making renewed argument for bev/food splitup and promising to lobby investors around idea. Updated white paper makes familiar argument that Power of One integration of snacks/bevs hasn't delivered. "We view this strategy - now described euphemistically as 'connected autonomy' - as largely responsible for a diminished PepsiCo culture and deteriorating performance," Trian claims. Other key arguments: PEP is burdened by centralized holding-company bureaucracy ($1.1 bil of unallocated corporate costs); bevs' 2d-tier status within PEP has kept best mgmt talent on snack side, and unshackling bev unit would allow it to reclaim past mantle of disruptive innovator, role in which it's been "consistently out-innovated and outmaneuvered by Coca-Cola (via Coke Zero, Simply Orange, Freestyle, PlantBottle, transition to more popular package sizes, Green Mountain partnership)." In general, standalone bevco would be forced to be more agile. "We believe the probability of productivity hitting the bottom line and sweetener technology having a material impact increases if there is a standalone management team with 'no place to hide,'" argues Peltz. He added: "As a sign of its commitment and confidence in the standalone beverage business, Trian is willing to buy additional shares and, if asked, join the Board of a newly formed beverage company to help lead it on the best path forward."

For now, at least, PEP is sticking to its plan. "PepsiCo's management and board of directors have spoken clearly on this issue and are fully aligned with our strategy outlined last week," a PEP rep told Reuters. "Our focus is on delivering results for our shareholders, not new, costly distractions that will harm shareholder interests."

Oddly, Dr Pepper Snapple Group so far has been pretty much left out of fray - oddly, because it's done far less than either KO or PEP to hedge its reliance on conventional CSDs, at time that its gambit of offering mid-calorie Ten CSD platform as a kind of placeholder until zero-cal natural sweetener emerges has been looking dicey. Still, its challenges notwithstanding, Peltz, who was involved in that spinoff from confectioner Cadbury, is happy to use DPS as example of what unleashed Pepsi bevs unit might become. DPS "has shined since it was spun off from Cadbury in 2008 (in the middle of a financial crisis) and has outmaneuvered both Coke and Pepsi over the past 5 years," he argues. "In fact, Dr Pepper Snapple grew EPS more than PepsiCo in 2013 and forecasts similar growth to PepsiCo in 2014 despite a weaker portfolio, no exposure to snacks and more exposure to North American carbonated soft drinks."

Still, if skepticism about both cos' prospects continues, don't discount chance that they may abandon some of current precepts and feel compelled to take Glaceau-style step that might be favorably received on Street as transformative - say, by making run at Monster Energy marketer Monster Beverage Corp, as some analysts have urged Coke or Pepsi to do. That's despite rhetoric from both cos in recent years that they're skeptical of need for risky, big-ticket deals to stoke their growth. With organic growth hard to come by, maybe that view changes. Or maybe Coke moves to buy a snack co, both as diversification play and to open up new DSD routes to retail? After all, there's nothing like deep anxiety - and a hound dog like Peltz breathing down your neck - to make one rethink one's core assumptions. Or in Pepsi's case, re-rethink.  

Turns out that Marley's Mellow Mood vets who reconvened last fall as Splash Beverage Group have more in their plans than just launching their own brands, such as sports drink licensed from mixed-martial arts brand Tapout: they're also hanging out shingle as incubator for already-launched brands. First client is familiar name: Hawaiian coffee-fruit-based KonaRed, which they've quickly restaged and are pushing out to dozens of DSD distributors. Splash prexy Kevin McClafferty says talks are underway with brands as large as $35 mil in sales, and he expects more such assignments soon. Here's rundown on multifaceted new player in bevs, which will have formal coming out at upcoming Natural Products Expo West in Anaheim, Calif (with show bursting at seams, Splash will be housed in basketball arena adjoining Anaheim Convention Center).

Company Claims 43 DSD Commitments to Date, with Tapout, KonaRed Most in Demand Ft Lauderdale, Fla-based co was created last year by ceo and former Red Bull North America exec Robert Nistico, who pulled in McClafferty as prexy and Lee Brody as cmo as they exited Marley's Mellow Mood marketer Viva Beverages, where they'd all previously worked, during period of retrenchment by ownership group. Other key members of brain trust include vp product development Sanjeev Javia, food scientist specializing in extreme athletes' performance needs, and sales directors Jim Rice (West region), Eileen Cassidy (Central) and Quinn Passarelli (East). Hector Rivera is vp for Latin America.

Funded by Nistico, McClafferty and unidentified angel investors, Splash started by garnering rights to launch sports drink line based on $350 mil (sales) Tapout brand of MMA apparel and accessories, key sponsor of Ultimate Fighting Championship. But it quickly found other properties available for it to take an ownership stake in - a key tenet of co, to align its own interests with those of brand partners - as well as array of already-launched brands willing to offer equity for helping hand. Co also is playing on alc-bev side, starting with flavored tequila line called Salt, and boasts some unidentified spirits execs on its board. (Since we're not Booze Business Insights, we won't belabor that part of portfolio, which will be similarly extensive to NA part.) All Splash items, both alc and NA, are all-natural. To date they've received 43 verbal commitments from DSD houses, all of which will be taking on Tapout and KonaRed, and sometimes additional Splash items. Tho contracts haven't been signed yet in many cases, they span geographic band ranging from Southwest quadrant of US to Northeast and include Haralambos and Straub in Calif, Spike in Ariz, New Age in Denver, Central Beverage and other members of Midwest Beverage Group in Heartland, and many members of NIDA alliance in Northeast. A few in other regions, such as Maletis in Ore, have been signed on, but co generally is waiting to map out Northwest and Southeast regions further down road, McClafferty said. Eventually, Splash has vision of going public, he said.

For KonaRed, Quick Revamp of Package, Addition of 2 Flavors KonaRed, which is publicly traded, comes as bit of surprise in mix, but it's representative of "shared resource" model that co hopes to take to other emerging bev brands looking to minimize SG&A while leveraging expertise and distribution and retailer ties of Splash team. Deal inked just 2 weeks ago gives Splash "significant equity stake" and N Amer distribution rights for marketer of coffee-fruit-based antioxidant drinks. Splash team has moved quickly to drop co's existing 16- and 32-oz bottles in favor of new trial-size 10.5-oz bottle that will allow brand to go out nationally at more approachable $2.29-2.49, promoted at $1.99. Tho KonaRed has played with single entry for 3 years now, Splash is immediately adding 2 flankers that blend core coffee fruit ingredient with organic green tea in one case and coconut water in other. As noted, all 43 DSD shops that have verbally committed to Splash have included KonaRed in initial mix, meaning for first time brand will have significant national exposure beyond natural and nutrition channels. KonaRed recently disclosed purchase agreement with Chicago-based Lincoln Park Capital Fund that gives equity firm opportunity to invest up to $12 mil of equity capital over next 30 months, so it's ready to make more sustained push.

Tapout Builds on MMA Brand's Broad Presence Development chief Javia has formulated line to mimic what body excretes with perspiration during athletic performance, offering immediate cell recovery as well as hydration benefits and dash of energy. It's similar premise to what Gatorade has attempted with its G3 system, Kevin noted. In Brody's hands as cmo, brand has segued from somewhat clinical look to more in-your-face image, in brightly colored full-wrap PET bottles priced at $1.99. It launches in Wild Orange, Berry Punch and Citrus Kick flavors. "Born in the octagon and unleashed on the world," is credo of what's positioned as "advanced performance drink." Splash owns 100% of this its flagship bev line, paying royalty to Tapout, whose founders will be at Expo West to promote bev brand.

Bruce Tea Line Claimed to Originate in Kung Fu Icon's Notebooks Splash team seems to be putting its collective experience leveraging iconic figure of Bob Marley in relaxation line with its work on RTD line called Bruce Tea that sports late athlete's iconic flying-kick as visual and endorsement "Blended by Bruce Lee." That's reference to fact that recipes originated during prime of his career in handwritten notebooks of athlete, tho it's taken sustained work with Lee's daughter Shannon Lee and Allen Flavors to render ingredients palatable to general audience. Line due in time for summer will debut at Expo West in 15.2-oz glass bottles sporting nutrition (not supplement) ingredient panel at $1.99. Initial 2 flavors, both black-tea-based, are JKD with ginseng, royal jelly and honey, and Tao. Also coming is more energy-oriented canned line called Kung Fu.

Amazoo Part of Broader Tie to Brazil's Global Beverage Amazoo stems from tie to Brazil distributor Global Beverage that McClafferty fostered when he took Marley line there in wake of distributor's loss of Monster assignment to AmBev. Amazoo brand is well established in Brazil but has been Americanized by cmo Brody, who'll offer it in DSD-friendly shelf-stable aseptic box whose 250 ml size can go out at $2.99 price, promoted at 2 for $5. Unlike more established US acai brands like Sambazon, Amazoo retains acai pulp, for offering that more closely resembles acai bowls that are staple in Brazil. Brand will hit US well ahead of World Cup frenzy late this spring. Besides owning in US and partnering on worldwide distribution, Splash Beverage Group also has established div called Amazoo USA helmed by McClafferty, a former Bolthouse Farms exec, that will bring in superfruit juices and other products from its Brazilian partner.  

Mom's Organic Market, quirky operator based in Rockville, Md, is making first move beyond Md/Va area with opening later this week of store in Bryn Mawr, outside Philadelphia. It becomes 11th store in regional chain launched by Scott Nash out of his mother's garage in 1987 (hence co's name) and is still family owned and operated. Tho stores don't go in much for Whole Foods-style high finishes in décor, they've carved out distinctive niche for everyday low prices in segment where sticker shock is frequent, and for high-toned stances taken by Nash: he was among first retailers to drop plastic bags (in produce section he offers compostable bags) and to ban all items that employ licensed cartoon characters to hook kids, finding organic alternatives instead. He dropped all bottled water in 2010, instead offering customers free refills of reverse-osmosis filtered water (up to a gallon each visit, and 39 cents per gal after that). All produce is certified organic, and customers who drive electric cars to shop there can get them charged for free. Chain will match prices on packaged brands of any rival, including Whole Foods. On bev side, Mom's was key launchpad for Honest Tea brand, founded in nearby Bethesda.  

Soup and biscuit marketer Campbell Soup turned in another disappointing performance of its US Beverages unit in Q4, this time saying V8 erosion was "primarily due to the impact of the transition to a new distribution network in single-serve immediate consumption channels." That was reference to ongoing segue spanning several quarters to indie DSD houses after unraveling of long partnership with Coca-Cola bottling network - tho, surprisingly, this seemed to be first time CPB had mentioned this key change, or that analysts participating in Fri conference call had heard about it, judging by their surprised questions. All told, US Bevs suffered 3% sales decline to $176 mil and 16% earnings drop to $31 mil, with declines said to have occurred across portfolio.

"We're now working with predominantly convenience store customers not only to secure the V8 distribution we had, but to expand it," said ceo Denise Morrison of transition that had been anticipated for better part of a year among bev watchers and which went into effect on Jan 1. Denise acknowledged that V8 suffered from "wind-down" of Coke system once it became clear a coupla quarters ago that partners were going their separate ways. Her evp/cfo, Craig Owens, noted that Coke breakup offers chance to go to distributors and retailers with both V8 and Bolthouse brands on joint basis, opportunity "that we didn't really have under the Coke agreement." As noted in BBI in recent months, handful of distributors with refrigerated capacity, including some ice cream or dairy houses, have moved to pick up both good-for-you brands for their territories (BBI, Sep 25 and Nov 15).

In contrast to US Bevs, Bolthouse & Foodservice unit continued to be reliable growth generator, with Q4 sales rising 2% to $359 mil and operating earnings advancing 20% to $36 mil. Foodservice side was weak, dragged down by soup, but 6% sales gain on Bolthouse side was driven by double-digit gains in premium refrigerated bevs and salad dressings, and lesser growth in carrots. Morrison expects strong performance to continue, boosted by unit's plans "to launch an exciting suite of innovative new beverages and salad dressings this spring."  

Celsius Holdings, which has carefully meted out its marketing spending to minutely targetable items like Pandora digital radio, has taken plunge into NASCAR. On Fri, Fla-based marketer of Celsius "negative calorie" drinks and chews said it's become official energy drink of TriStar Motorsports for 2014 NASCAR Nationwide Series season, and associate sponsor on TriStar's #10, #14, #44 and #91 Toyota Camrys. Then, yesterday, it announced partnership with TriStar driver Blake Koch for 2014 Nationwide Series, adding charismatic young driver who's known for off-track activities such as participating in Ironman and Tri-Athlete triathlons and also has big following in faith-based community. Twin moves ally brand with motor sport that's been aiming to align itself with healthier lifestyles.

Moves might seem to mark divergence from strategy of ceo Gerry David, who's dialed back marketing spend of prior ceo in favor of carefully targeted digital radio and the like. But Gerry told BBI that alliances were acquired on terms that, while he can't disclose them, were simply too good to pass up, given 70 mil audience reached by NASCAR, which has been working hard to broaden its appeal among females, a key Celsius constituency. "The deal was so exceptional there was no way I could walk away from it," he said.

Thru 33 races of Nationwide Series, Celsius will be continually restocked in barrel coolers in pits, which should garner it lotsa eyeballs among fans on site and in TV coverage. Brand logo will appear on TriStar cars and on fire suit and hat of Koch, who says he's been Celsius consumer since 09, using it on both race days and triathlon training days. Brand will also be involved in contest associated with car touting Hollywood super-producer Mark Burnett's forthcoming Son of God flick at Daytona next week, garnering shoutouts on social media reaching upwards of 500K fans who're anticipated to enter for chance to hang in pits during race.  

A new statewide tax in Illinois would add a penny per ounce to price of packaged sugared soft drinks "along with the syrups and powders used to flavor them," reported Herald & Review. "We as a state need to do a better job of educating the public and children in particular about this issue and the health risks," said state Sen Mattie Hunter, who's backing bill. Opposition is already lining up. "This tax adds $2.88 to a (24-pack) case of soda," pointed out Mark Denzler, veep of Ill Manufacturers Assn. "It's nearly a 50% increase in the cost of it. So folks that are scrambling to buy groceries are going to have it even harder." Report notes that similar soft drink tax proposals in Ill have been non-starters with state lawmakers so far . . . Center for Science in Public Interest, whose celeb targets in recent months have included AriZona endorser Shaq O'Neal and SodaStream endorser Scarlett Johansson, has got former Olympic figure skating Michelle Kwan in its sights now. She was appointed to President's Council on Fitness, Nutrition & Sports in 2010, but last summer signed on as one of Coca-Cola's "Four-Packs" of "active, living ambassadors" to work Sochi Games. On KO's Web site, rabble-rouser notes, she's seen holding bottle of "non-diet Coke"; together, they're described as "2 of the most refreshing things on ice." Contends CSPI: "The dual roles for the 5-time world champion skater cannot be reconciled, since Coca-Cola and the President's Council communicate opposing messages when it comes to sugar drinks."  

Coca-Cola chmn/ceo Muhtar Kent pledged to work to "restore momentum" to co after turbulent global economy, poor weather and challenges to CSDs led to softer 4th qtr, particularly in core North American market. Tho earnings per share of 46 cents were in line with analysts' expectations, "quality was low, as below-the-profit-line items added 2 cents," noted Morgan Stanley's Dara Mohsenian. "Soft end to soft year," headlined RBC Capital's Nik Modi as KO shares trended downward, off 4% by mid-afternoon. For his part, Kent defended "sound financial results even in a challenging environment," but promised to get back on track this year to meeting long-term financial targets that co has deemed 2020 Vision. He'll get there in part by accelerating bottler refranchising program, saying further announcements are imminent - which some believe may include Coca-Cola FEMSA as new US franchisee. He's also extending productivity initiative by another $1 bil thru 2016, with savings to be applied mainly to media spend.

Refranchising Accelerating; Hint That FEMSA May Be in Mix? A few days after rival PepsiCo said unequivocally it won't refranchise N Amer bottling ops (BBI, Feb 13), KO chief indicated that he's going in opposite direction, moving to "expedite" plan set in motion in Oct 2010. At time, co established 4- to 5-year timeframe to commence refranchising activities, and "2014 is the fourth year," Muhtar reminded listeners today. As plan garnered traction, KO last Apr had set moves to refranchise some territory to 5 bottlers situated in Southeast and South Central parts of US: Coca-Cola Bottling Co Consolidated, Coca-Cola Bottling Co United, Swire Coca-Cola USA, Coca-Cola Bottling Co High Country and Corinth Coca-Cola Bottling Works (BBI, Apr 16). On today's call, Kent said one of those transitions has seamlessly occurred and other 4 deals are "well along" and should happen later in year. Intriguingly, Kent also said co will imminently announce new bottling partnerships "whose ownership represents the diversity of customers we serve." That could be veiled nod to Mexican power Coca-Cola FEMSA, which has set sights on SW quadrant of US with heavy Mexican-American population base. BBI contact says FEMSA lately has had teams visiting facilities in San Diego area and otherwise assessing Southern Calif market, so that seems to be strong possibility.

Softer Revenue, but Noncarbs Were Strong In Q4, net operating revenues eased 4% to $11.04 bil. Worldwide volume edged up 1%, off from 3% consensus view. Operating income sagged 4% to $2.11 bil. For full year, revenues were off 2% to $46.85 bil, while operating income sagged 5% to $10.23 bil. In crucial N Amer market, which accounts for more than half of total co revenues (excluding KO-owned bottlers), sales were flat at $5.27 bil in 4th qtr. Volume was off 1%, vs analysts' consensus view that it would edge up 0.9%, with 2% sparkling-bev decline attributed mainly to weakness in Diet Coke brand. By contrast, buoyed by strong performers like Powerade, Simply, Gold Peak and Smartwater, noncarb volume rose 5%. Operating income nominally was flat at $557 mil, but was down 12% excluding impact of currency fluctuations, "reflecting softer volume trends, especially in sparkling beverages, and the timing of certain operating expenses," KO said. "2013 was a challenging year and I'm not satisfied with our overall performance," allowed Kent, tho he took solace in continued claimed gains in volume and value share. Citing new mgmt team that's seen Sandy Douglas replace Steve Cahillane in top role, Muhtar said Coke stands "steadfast in our commitment to building long-term value in our flagship market."

'Rational Pricing' Is Goal Rivals may see bit of a disconnect there given KO's role as aggressor on promos during key holiday periods in past year, but Kent again avowed that as market leader, Coca-Cola has interest in maintaining "rational pricing" and will be expecting to achieve its volume gains this year with positive price/mix. Echoed N Amer leader Sandy Douglas: "Key element of American growth is getting our pricing."