His brand may still be modest-sized, but by now Maurice Hakim must be counted as a bev survivor: after launching his Tea42 brand in mid-90s and beating a tactical retreat in recent years, the former tea merchant is embarked on a capital raising effort with a view to re-establishing his brand as a broadly available, mainstream-oriented gourmet tea. Fla-based Hakim, whose dad Clement was major tea importer, is looking to raise amount exceeding $1 mil - he wouldn't specific precise target - to fund expansion of tea beyond its small base in Northeast, as well as to grow its year-old Mr Mo's lemonade line and to continue to build private-label biz that numbers among its clients the Earth Fare chain. Maurice said he goes beyond flavor range of his branded line to meet retailers' requirements.

Tea42 (pronounced "tea for two") goes out in conventional Snapple-style widemouth 16-oz glass bottle in such organic-certified flavors as English Breakfast, with calorie range of 40 to 60 calories per 8-oz serving. Mr Mo's, which sports Hubert's- and Calypso-style whimsical cartoon imagery of lemons on label, goes out not just in Mo'st Apeeling and Half & Half flavors but blends such as Strawberry, Mango and Blackberry. (Maurice is the "Mo," of course.) Maurice's main DSD partner lately has been G Housen's North Country Naturals unit servicing parts of Vt, NH and western Mass. Co is now bringing aboard natural/organic specialist McMahon Foods to service NY metro. And it's close to landing unidentified major retailer on West Coast as a direct account as it seeks to build biz there.

Hakim said he couldn't discuss private-label biz in detail, except to confirm that Earth Fare - which knew him via Haddon House connection - is among key customers. He believes the teas' success on private-label side suggests that, perhaps with further branding and distribution tweaks, they should do well under Tea42 brand, too, once line attains broader availability.  

Bev banker and consultant Christopher Reynolds, who'd exited segment for a while to focus on alternative energy realm, has returned via role as vp sales and marketing for Summit Beverage Group, struggling copacker in western corner of Va that's been on recovery trail under new owner Geoff Soares (BBI, May 10). Former Pepsi plant had been acquired by partners Roger Catarino and Jack Tally, who under First Fruits name assembled roster of clients such as GNC LiveWell, Neuro, TeaNy and Function, with portion of proceeds going to Christian mission work. But many clients fled because of low yields and other continuing problems, and Catarino departed before Soares took over; by now, Tally has also left co. Newly arrived to post, Reynolds demurred on offering broader update for now. As reported, former RC Cola prexy John Carson has been offering bev newcomer Soares industry-specific advice as he navigates turnaround . . . After apparently flirting with coupla bevcos for next gig, former Honest Tea marketing chief Peter Kaye has opted for opportunity outside our biz, taking newly created post of cmo at Nu-Tek Food Science. Hopkins, Minn-based co aims to improve worldwide heart health through sodium reduction and healthier salt use by producing natural, potassium-based salt that tastes like familiar table salt but contains up to 70% less sodium. "Following my enjoyable experience as head of marketing at Honest Tea, focused on using lower sugar, organic, and fair trade ingredients, I am highly motivated to now focus my energy on salt reduction in food, given its fundamental connection to improving heart health," Peter explained to BBI in New Year's email.  

For the most part, bevcos once again put up solid gains in stock market for investors in 2013. Coca-Cola stock price rose 14% in 2013, improving upon the prior year's 3.6% gain, when its stock had a 2-for-1 split. Garnering new respect from Wall Street (amid anticipation of major structural realignment this year), PepsiCo shares surged 21% following much more modest gains of 3% in 2012 and 1% in 2011. DPS shares rose 10.3% last yr, just off slightly from 12% the previous yr. Monster Beverage Corp stock ended a tumultuous 2013 up 28.3% as it faced increased regulatory scrutiny and legal wrangles over its marketing to younger consumers. That was almost double its 14.7% gain in 2012 and left it with a market capitalization of $11 bil - perhaps too rich for those seen as likeliest strategic buyers. Cott Corp shares edged up just +0.4% in 2013 following a 28.3% runup in 2012 as aggressive promotions by branded CSD players put a hurt on its private-label biz and prompted an acceleration of its efforts to move into safer havens like energy drinks and teas. Reed's stock price managed to gain another 40.5% to $7.98 in 2013 after it had surged over 400% last yr when it rode wave of interest in its big bet on kombucha. Jones Soda, tho priced at just 48 cents per share, is still up a solid 60% over its 2012 performance close at 30 cents per share as a new ceo has squeezed out costs and now turned her attention to generating growth again.  

As reported in BBI last week, Coca-Cola Bottling Co Consolidated (COKE) has released details of its new "incidence pricing" contract with its core supplier Coca-Cola. As noted (BBI, Dec 27), incidence pricing is intended to be an equitable profit management mechanism for KO and COKE that realigns incentives so that, for example, COKE is not motivated to push low-velocity but high-margin brands and packages at the expense of KO's workhorse volume items. Care to know more? Until now, that's been difficult, because the mechanism has always been shrouded in a fair amount of secrecy. But last week's SEC filing from COKE offers in its crevices what seems to be the first detailed public description of a practice that may end up having a far-reaching impact on beverages and even other segments. Longtime soft drink participant Neil Kimberley, who grappled with similar issues while at Cadbury Schweppes North America and recently accepted an exec position at Essentia Water, offers this illuminating take for BBI readers on what the COKE filing suggests:

So, why is incidence pricing important? And why should you care?

Incidence pricing is a fundamental change in how brand-owning companies and their bottlers/distributors operate - and it could have a broad impact across the industry . . . if it is effective.

To understand the importance of incidence pricing, let's take a journey back to the world before Coke, Pepsi and Dr Pepper Snapple acquired their bottling systems. In those days - pre-2007 - the parent companies sold concentrate to bottlers to make finished products. The parent companies were channel-agnostic as to where the finished products were sold because they made the same amount of profit on each concentrate unit sold.

This contrasted with bottlers who sold their products in different package sizes to different channels, where each product had a different margin. The bottlers sold lots of low-margin product in high-volume takehome channels like grocery stores as well as lower-volume but higher-margin product in immediate-consumption channels such as convenience stores.

When in harmony, this created a synergistic business model. A high-margin, low-capital parent company could focus on brand marketing, while a high-capital bottling company could make good profit by being retailer-intimate and operationally efficient. As long as CSDs were growing, the model worked well. But as CSDs declined, and bottlers were forced to seek greater return from their assets, the system became misaligned.

The parent companies needed to focus on incremental volume to boost concentrate sales - which often came in the bottler's low-margin channels: for example, like those blowout loss leaders that BBI reported upon around Labor Day this past summer. By contrast, the bottlers wanted to focus on their higher-margin channels where finished goods (say, energy drinks) were becoming more popular, and where their parent companies did not have effective entries. As bottled water, noncarbs like Snapple, Fuze & Vitaminwater and energy drinks like Red Bull & Monster took that high-margin space, CSDs became ever more reliant on those low-margin channels.

It was in response to this dynamic that Coca-Cola began to look at incidence pricing. This is a mechanism that would allow the parent company and bottler to look at who made what money and where on a given package, by channel. In effect, it offers a Panavision look at the "full-system profit."

Profit = Price to Retailer minus: - Product Cost (Concentrate + Sweetener + Packaging + Manufacturing) - Delivery Cost (Freight + Warehousing + Delivery) - Plus Retailer Promotional Support

When two independent businesses look at this, it's daunting. What is the "right" amount of profit for each partner? Are both partners being transparent about their costs? Now imagine doing this by retailer by package across an entire portfolio comprising hundreds of sku's.

For goodness' sake, it would be simpler to simply acquire the bottler - which is precisely what Coke, Pepsi and Dr Pepper Snapple did between 2006 and 2010.

But Coke - who was last to this party, and seemingly the least whole-hearted about it (after all, all the while it kept attesting to the value of the franchise model) - appears to be the first to want out. And the company believes it has an incidence system that will work.

Take a look at the letter attached to the SEC filing at http://slidesha.re/JI6hfp and a high-level process is outlined. It seems quite abstract and head-spinning. So why does it matter?

If it works, it could provide a roadmap not just for how refranchising may play out in North America, in territories beyond COKE's Southeast footprint, but also become a model that other companies - even outside bevs - can use to better align the interests of manufacturers and distributors. The shell game that is too often played out between manufacturers, distributors and retailers creates dissonance - and a constant battle for who has the upper hand in the relationship.

If the distributor seeks too much margin, the manufacturer is unable to invest in the brand; if the manufacturer seeks too much margin, that reduces the ability of the distributor to invest in sales reps and delivery capability. Right now we rely on the competitive nature of the relationship to create a win-win scenario.

It may be that incidence pricing has lessons for us all. This is one story line that will be fascinating to follow as the new year unfolds.  

Over 4 wks thru Dec 22, total CSD volume increased 0.9%, per IRI data for all-channels reported by Morgan Stanley's Dara Mohsenian. He noted that trends benefitted from 4-wk timing that included Thanksgiving holiday this yr. There was lots of discounting in CSDs, with avg price down 2.8% in all channels vs -0.3% trend over 12-wk period and +0.8% for 52 wks. Regular CSD volume was up 3.8% last 4 wks vs -1.4% last 12 wks while diets improved to -5.4% for 4 wks vs 7.2% decline over 12 wks. Coca-Cola CSD volume up 2.7% with a -3.4% avg price decline over last 4 wks. PepsiCo volume increased 3% on avg 4.7% price drop last 4 wks. That's down considerably from PEP avg price dip of -0.9% previous 12 wks. Dr Pepper Snapple CSD volume was up slightly (0.2%) with a 2.2% price increase last 4 wks. Thanksgiving timing did nothing to boost fortunes of private-label brands as volume was down 13.6%, slightly worse than trend over last 12 wks.

Better Pricing in Energy Category; MNST Outperforms Again Energy drink volume increased 4.5% in all-channel data over last 4 wks, slower than 6.9% gain over last 12 wks. Pricing trends improved, tho, to +0.7% avg for last 4 wks vs -0.9% dip for 12 wks. Monster Bev Corp volume was up 12.5% with avg price decrease of 0.4% last 4 wks. Red Bull volume was up 5.8% with a slight (+0.1%) price gain for 4 wks. Rockstar slowed to 4.6% volume gain (vs 10% last 12 wks) as its avg price moderated a bit to -2.2% vs -3.9% for 12 wks. PepsiCo energy brands (notably Amp) were up 9.3% on avg price drop of 4.4% last 4 wks, while steeper avg price drop of -5.4% for Coca-Cola energy brands (NOS, Full Throttle) didn't lift volume, which still dropped 2.7%. Private-label energy volume fell 3.5% for those 4 wks despite double-digit price drop of 10.8%.

Sports Drinks Slide Consumers weren't loading up on sports drinks from Thanksgiving to weekend before Christmas, as volume slipped 2.9% for 4 wks vs 5.5% gain last 12 wks. Avg price edged up 0.1% for 4 wks, up from -0.8% for 12 wks. Gatorade volume was off 3.3% with avg price up 1.2% while Powerade volume fell 2.5% even with avg 3.1% price drop last 4 wks. Private-label losses accelerated as volume fell 17.5% on avg 3.3% price decrease.

Water Prices Still Low Bottled water volume rose 6.3% in all-channel data last 4 wks, in line with category's 12-wk trend in these stores. Avg price for waters was down 3.7% vs -2.6% over last 12 wks. Nestle Waters volume was up 3% despite slight (+0.2%) price increase. Meanwhile, Coca-Cola and PepsiCo water volume fell 2.5% and 3.3% respectively last 4 wks. KO prices were down avg of 3.5% while PEP water prices were down 5.3%. Private-label water volume was still up double-digits (+12.5) with avg price drop of 4% last 4 wks.

Tea Volume, Pricing Trends Dip RTD tea volume slipped 0.5% over last 4 wks vs 2.2% gain over 12 wks in all-channel data. Pricing was a bit weaker as well, up slight 0.7% vs 1.3% avg for 12 wks. PEP teas (incl Lipton) were up 1.3% last 4 wks (down from +4% last 12 wks) with avg 3.3% price increase. KO teas (incl Gold Peak, Fuze) were up 11% with boost from avg 4.2% price drop. DPS tea volume (Snapple) fell 5.2% last 4 wks on flat pricing.  

A pair of familiar faces from bev world are teaming up to establish $25 mil equity fund that will target early-stage bevs. Former Royal Crown, Tampico and Snapple exec John Carson and longtime Coca-Cola vet Hal Kravitz are among 4 managing partners in Intercontinental Beverage Capital, which describes itself as "middle-market advisory group in the process of establishing its private equity fund with an initial capital investment of $25 million seeding an ultimate target of $200 million of assets under management." The fund, which says it's focusing on "consumer products and beverage industries," is based in Melville, NY, hq of its apparent affiliate Stonehill Business Capital, an asset-based lender, with offices in Atlanta (where Kravitz is based) and Boca Raton, Fla (where Carson is based). Its bev focus includes both alc bevs and NAs. No immediate response to call made to John earlier this week, but some details are available at Web site set up at InBevCapital.com.

Web site indicates IBC is seeking investments in cos with revenues ranging from $7.5 mil to $100 mil, positive operating cash flow, enterprise value between $5 mil and $250 mil, and willing to have IBC actively engaged in managing co. Initially, it's perusing N Amer targets, both private and public, and hopes those lead to international opportunities down road.

Carson, former prexy of Cadbury Schweppes North America (predecessor co to Dr Pepper Snapple Group) serves as IBC chmn. Tho nominally retired, John has kept active hand in biz, lately via involvement in turnaround of Va copacker now called Summit. Kravitz had enjoyed varied 30-year career within Coca-Cola system, most recently serving dual role as svp of franchise and commercial operations for KO's Glaceau div and dir of customer governance in Coca-Cola North America's Franchise Relations Group. Earlier, as prexy of Glaceau, he was face of co following acquisition by KO and led integration into parent co. He previously held varied roles within KO's biggest bottler in N Amer, Coca-Cola Enterprises. Bringing expertise on alc-bev side is John Devonport, who brings 27 years with Guinness, followed by role as importer of niche beers and spirits via his Bespoke Brands LLC and spring water via his Fine Beverage Inc. Fourth key member of brain trust is Stephen Horgan, former Coca-Cola, Coors and Miller exec who'd set up broad-ranging Atlanta-based co called Brand Aspirations that targeted food/bev and logistics acquisitions (BBI, Feb 9 2011). Among IBC's advisors are former NY Gov David Paterson as well as Stonehill Business Capital chmn William Hayde and his cofounder Joseph Messina. That co specializes in alternative financing vehicles such as asset-based loans.  

Making first appearance on NY entertainment institution Saturday Night Live just days before he exits from 3d term, Mayor Mike Bloomberg was asked what he planned to do after leaving office. His answer: "Fulfilling a lifelong dream of enjoying a small soda on a nonsmoking beach."  

Hangover preventive marketer Mercy Nutraceuticals is adding Mercy Hangover Prevention Chewable Tablets to mix - "just in time for New Year's Eve," co notes. Formulated similarly to canned versions of Mercy, new 5-calorie chews come 2 per pack, with the pair said to counter negative effects of 3-5 alcoholic drinks. Tablets retail for $33 per 12-pack case.  

After slow start, Reed's Inc continues to pick up momentum in building retail footprint for its Culture Club Kombucha line, lately adding key chains in 2 corners of country. It's gotten 4 of its 8 flavors into 204-unit Ingles Markets chain in Southeast. Over in Pacific Northwest, LA-based co has also won entry for 4 flavors throughout 32-unit Haggen Food & Pharmacy chain, under Haggen and Top Food & Drug banners.  

Steve Torres, vet of NY altbev scene, says he's making headway with brand called Hey Mama that offers RTD version of organic herbal tea elixirs that have long targeted pre- and postnatal moms. Serial entrepreneur Steve, who earlier worked opposite end of bev scale with canned Powerball energy line, teamed with herbalists to devise pair of sku's that target expectant moms' prenatal condition: Lemon Glow, formulated from red raspberry leaf, nettle leaf and rooibos (red) tea to purportedly tone uterus and prepare womb for delivery, and Minty Morning, which eases morning sickness via blend of peppermint leaf, ginger root powder and rooibos tea. They're in 12-oz glass bottles tagged "Teas for Moms to Be" and clock in at 25-30 calories per 8-oz serving via cane sugar as sweetener. Also in mix, so as to hold onto customers after they've given birth, is postnatal Pom Berry Baby made from fenugreek seed, fennel seed and chamomile flower tops. That's flagged on-label as "Tea for Mommies" and clocks in at 70 cals per serving. Unit price for now is $3.49-3.99 tho Torres hopes to move price lower. Production launched at small copacker in Poughkeepsie, NY.

So far line is shipping via Amazon and other online platforms to receptive consumers in markets like Calif, Tex and Fla, and has cracked about 150 NYC retail accounts, including Morton Williams grocers, Westside Market and Garden of Eden gourmet stores and indie pharmacies, where it can find itself shelves in baby aisle or bev cooler. In early stages, at least, Steve will keep his retail distribution to Northeast. He's working social media channels to reach expectant moms and plans to make quarterly donations to Save the Children. Recall that Torres once operated NY distributor High Five, partly as vehicle to distribute Powerball; when both ran into trouble, he sold out to Brooklyn Bottling and its North Shore distribution arm, remaining there for a spell while prepping Hey Mama launch. Brand info is at TeaForMomsToBe.com. Recall too that BBI recently profiled another co targeting same demo under Healthy Mama corporate moniker and Boost It Up brand name (BBI, Nov 19).