Energy drink volume rose 12.2% in convenience stores for 4 wks thru Sep 28, per Nielsen data reported by Wells Fargo Securities’ Bonnie Herzog.  That was first double-digit volume gain this yr, and was “largely driven” by Monster, she noted.  Some of that was accomplished on pricing, tho: avg price was down 4.4% vs -3.2% avg last 12 wks.  Monster volume surged 13.9% on 3.7% price drop while Red Bull gained 8.1% on small price gain (+0.3%).  Rockstar showed “significant improvement” as volume jumped 12.7% for 4 wks vs -0.3% over broader 12-wk period.  Also, Coca-Cola “continues to perform well based on ongoing strength and recovery of NOS,” noted Bonnie, even with Full Throttle in doldrums.  KO energy volume surged 10.6% on 2.3% price drop for 4 wks.  PepsiCo energy volume (mainly Amp) fell 13% on 2.5% price drop, even as co lately has talked up successes of alternative energy platforms like Starbucks Refreshers and Kickstart.  DPS continues to struggle with its Venom line: volume plunged 26.6% despite 3.5% avg price decline over last 4 wks. 

CSDs Still Sluggish   CSD volume sank 4.8% for last 4 wks in c-stores (vs -4% last 12 wks) but pricing was up solid 5.2%.  KO volume slipped 2.1% on avg price increase of 4.2%.  “KO again seemed to manage its price architecture best, as it was the only major manufacturer that had positive sales growth this period,” wrote Bonnie.  PEP volume dropped 9.3% on 8.5% price hike while DPS volume slipped 1.8% on 1.4% price increase.

Monster Beverage’s Peace Tea line will be making some strategic departures for 2014, moving away from such rigid reliance on 99-cent prepricing of its 23-oz cans and adding more direct role of MNST staffers to balance what had been near-exclusive reliance on distribution partner Coca-Cola Refreshments for sales calls.

Speaking at brand’s 1960s-evoking booth at NACS c-store show, brand mgr Ginger Conrad indicated that MNST will try to coax some more ardent execution from CCR by moving away in 2014 from its exclusive reliance on 99-cent prepriced cans, which were intended to counter segment leader AriZona but have sapped motivation of Coke partner and retailers because of lower margins.  (MNST had acknowledged this as issue from start, but plan had been to use low-price, high-velocity prepriced 23-oz cans to establish brand, then balance mix with more profitable 20-oz PET bottles and the like.)  In conference calls with investors in recent qtrs, MNST chmn/ceo Rodney Sacks has moved from lamenting slow progress on line to barely mentioning brand at all, tho in conversation with Conrad it was clear co continues to have high hopes for peace-symbol-emblazoned line.  New moves seem intended to dial up peace and love between partners on brand.  Thus, direct ship partner QuikTrip has been confident enough of brand’s pulling power to go out with non-prepriced cans at $1.49.

Tho co will continue to rely heavily on CCR, Ginger also said co will “take some calls back” to Monster staff in coming year.  And word among staffers at NACS booths for Monster Energy, Hubert’s Lemonade and Peace Tea was that co will do more to leverage its retailer clout by incorporating both Peace and Hubert’s lines into rebate programs that have been limited to powerful Monster Energy brand to date.

New in Peace Tea flavor mix are Georgia Peach, which certainly oughta be familiar to Coke bottlers, and Sno-Berry, white-tea-and-blueberry blend that’s intended to appeal to 13-to-19 age cohort the way Razzleberry already has.  (Ginger said white tea content won’t be overly stressed.)  Brand has debuted at Walmart a 64-oz multiserve PET pack shaped like a beer growler (tho it calls it a “jug” so it won’t get flack for selling it to youngsters).  And it continues to tinker with fridge pack as configuration with takehome potential.

On marketing side, brand will look to establish more consistent in-store promo presence for 2014, said Conrad, who’s been on Peace since Jan after career spent partly on brands like Burton snowboards, Patagonia outer wear and Salomon skis.  Co also will establish YouTube channel for brand, with involvement of such allies as country/pop star Arabella Jones, who often touted her love of brand on Warped tour and in other venues this year.

Monster Energy Adds Zero Ultra Red, Muscle Monster Strawberry; Will Put Foot on Nascar Pedal in ’14 Monster Energy extended its wildly popular Zero Ultra line with a Red sku (raspberry flavor).  It’s also ready to make big push behind protein-saturated Muscle Monster, which adds a Strawberry flavor.  Recall that brand launched at awkward time, off-cycle, so it’s only attained 17% ACV so far, tho Emelie Tirre, svp sales for N Amer, said it’s attaining high velocities and significant volume in military accounts, where core Monster line has always done well.  Monster execs weren’t inclined this year to offer details on promo calendar for coming year, but word is it will be very Nascar-focused.

Hubert’s Goes Low-Cal; Launches Bottle Cap Program    Hubert’s Lemonade made its foray into lower-calorie segment with 10-calorie line debuting in Original, Blackberry, Mango and Strawberry flavors.  To make identity unmistakable, label features distinctive lemonhead figure holding up placard that states “Diet.”  Sweetener is blend of stevia, erythritol and monk fruit.  To build marketing momentum, brand is about to inaugurate bottle cap program that offers branded t-shirts and other swag, just as sibling Monster Energy brand has done for years with great success, said svp Tom Hicks.

Calypso Lemonade maker King Juice offered revamped Teamonade tea-based subline and added a Limeade subline while trying to put behind it a 2013 that left a lot of potential sales on table when new production line suffered delays in getting up and running.

Milwaukee co is going big on Limeade subline, with 6 flavors out gate: Natural, Coconut Colada, Pineapple Peach, Pink Guava, Sweet Cherry and Tangerine.  It uses co’s standard straight-walled 20-oz glass bottle and touts its use of “real lime bits.”  As for Teamonade line – Calypso’s take on half-and-half – distribs made it clear it wasn’t clicking, so it’s gotten new label that gives it more of a family resemblance to core lemonades, adds brand’s new slogan “taste of the islands” and gets brown cap to demarcate it from yellow-capped lemonades and green-capped limeades. 

Co is concluding a 2013 that saw brand plateau after several outstanding growth years, with more-recent entrants like Hubert’s Lemonade and Cabana picking up some share, in part, wholesalers have complained, because Calypso itself wasn’t able to fill its demand and didn’t commit enough resources to supporting growth, even as Monster Beverage has thrown lotsa manpower at its Hubert’s entry.

In discussion at brand’s NACS booth, prexy Tim Kezman acknowledged difficulties of current year, saying 3d production line anticipated to be on-stream by late Feb didn’t start up until late May after conveyor co was late with delivery.  That stretched out lead times to as long as 8-9 weeks.  “You can’t treat distributors like that,” Kezman said.  Throw in miserable weather and Calypso likely will finish only slightly up for year.  Under circumstances, “I consider that a win,” Tim said.

It was all that, rather than reluctance to put his foot on the pedal, that left King Juice doing little to support demand in form of regional sales staff or retail promos.  By time production was moving into balance, it was too late to program distributor support and meet window for creating retailer promos.  But Tim will add staff for 2014.  “I recognize that’s an area that needs to be looked at,” he said.

Kezman also was asked about rumor that’s been circulating for months that pair of ex-Anheuser-Busch execs, believed to be Dave Peacock and Evan Athanas, have teamed with private-equity partner to coax Kezman into selling all or part of brand, tho rumbling has died down recently.  Tim wouldn’t discuss any specific conversations that may have occurred, but was emphatic in saying no deal is afoot.  King Juice, of course, was primarily a copacker, until broad and rapid success of Calypso made it as much a marketer.

One subline that won’t be getting any emphasis are pair of sucralose-sweetened sku’s in lemonade line, in place for a decade and not doing much biz.  While lotsa rivals are moving lower-calorie lemonades into market (see Hubert’s item below), Kezman said he simply isn’t prepared to make taste compromises, and his experiments to date with sweeteners like stevia haven’t dissuaded him.  That’s not lemonade in his book, Tim said.

A 7-Up trailer loaded with about $50K worth of Monster Energy drinks was stolen from a Dr Pepper Snapple dist center in Dallas on Mon night, reported local NBC affiliate NBCDFW.  Besides cost of Monster drinks, the trailer itself is worth another $35K, per police report.  The theft wasn’t discovered till hours after the drinks were gone, but apparently security cams spotted the brazen thief driving in and hooking the trailer up to a “white semi-cab.”  

Modjo marketer Cellutions offered what it hopes may prove decisive branding news: it’s licensed Everlast sports brand for sports drink it now markets as Modjo Hydrate Elite as well as for energy shot line.  Licensing deal, which came together days before show opened on Sun, has received encouraging reception from retailers like Giant Food, Circle K and Rouse’s, and revamped Everlast Hydrate Elite line will retain current sku lineup and UPC codes and bleed into market early next year, founder/ceo Victor Diaz told BBI.  Modjo will ride Everlast’s branching out beyond fight sports into fitness via such sponsorship and endorsement involvements as Bellator mixed martial arts circuit (where it’s involved with athletes like Jon Jones), boxing, crossfit training and even NFL (via Reggie Bush tie).  Caffeine-free energy shot will be rebranded as Everlast Natural Energy Shot.  Of course, Everlast earlier tried to move into sports drinks and energy drinks via licensing deals, in bev sector that over years has proved resistant to allure of licensing, but Diaz noted that quiet test of Everlast rebranding in handful of Fla c-stores boosted velocity and offered grounds for optimism.

Everlast deal comes as former Motorola exec Diaz, who’s self-funded effort for years now, has continued to finetune proposition.  Core Modjo for Life bev line has moved from single function (age defense) in 3 flavors to 4 functions each assigned a separate flavor: Age Defense, Immunity Defense, Heart Defense and Weight Defense.  All are tea-based now, and vie with other functional lines like Neuro and Body Armor. 

Diaz has also been staffing up a bit lately, including with addition of former Sand Dollar gm Norm Lubus as regional sales dir for core Southeast region.  Norm, who stuck with now-defunct Sand Dollar for coupla comeback attempts after it was terminated as Red Bull distributor, said he’ll bring distributor’s-eye view to relations with expanding DSD network that now numbers 40 houses.  Latest additions include St Louis-area A-B wholesalers like Grey Eagle to support Circle K as anchor retail customer in Midwest, and DPS house Dixie in Augusta, Ga, to support brand’s other Circle K region, the Southeast.  Natural-products distributor Total Wholesale Distributing in Las Vegas has enabled Modjo items to crack accounts like Wynn and MGM properties.  

PepsiCo reported third qtr that generally was in line with somewhat diminished expectations, and chmn/ceo Indra Nooyi used investor call as platform to reiterate her case that co’s current structure and strategies are on target.  Net revenue edged up 1.5% to $16.9 bil, but operating income slipped 1% to $2.78 bil.  For 9 mos, revs are up 2% to $46.3 bil.  For PepsiCo Americas Beverages, rev slipped 2% to $5.41 bil but operating income edged up 1% to $843 mil.  That left key segment down 2% to $15.1 bil in revs for 9-mo period, and profit up 4% to $2.29 bil.  Overseas, co suffered shocks in Egypt, due to political turmoil there, and in India, due to price wars.  Still, it beat earnings-per-share consensus of $1.24 by 7 cents and “our year-to-date results give us confidence in achieving our 2013 financial goals and we continue to believe that we have the right strategies in place to create long-term value for our shareholders,” declared Indra.

So-called “organic” revenue that excludes currency, restructuring costs and other extraneous issues was off 1.5% in qtr, reflecting volume decline of 4% and negative impact of concentrate shipment timing, offset by net pricing gain of 3 percentage points, PEP said.  Latin America beverage volume edged up 0.5%.   In North America, both sides of bev biz were off: CSDs by mid-single-digits and noncarbs by low-single-digits, a decline that Nooyi largely attributed to bottled-water biz that co no longer attacks aggressively because of dismal pricing.  Still, Goldman Sachs’ Judy Hong noted that weak volume performance came when co was lapping a -3% comp a year ago when Gatorade suffered from supplier issue, tho PEP also claimed some of lag was due to timing issue involving concentrate sales. 

As has often been the case since Nooyi found her “Power of One” food/bev strategy challenged by skeptics such as investor Nelson Peltz, she used conference call this morning to deliver strong defense of what she termed “well-architected” brand portfolio that has been spinning of successful innovations such as Mountain Dew Kickstart, Starbucks Iced Coffee and Lipton Pure Leaf Tea, all on track for $100 mil in sales their first year.  PEP will continue to manage biz as a portfolio and seek sustained growth rather than reacting to pricing incursions by rivals.  Tho CSDs rep just 40% of overall N Amer bev biz these days (vs more than half a decade ago), co will manage segment in “responsible and sustainable way,” meaning profitably.  As has often been case in recent quarters, PEP brass offered little brand-specific color, tho Nooyi noted that Morning Kickstart entry should significantly exceed $100 mil in sales in first year, and will be expanded into evening occasion early next year.

Volume decline in noncarbs seemed to spook some analysts, since that’s supposed to be more promising side of biz, even at time of continued economic stress.  Asked by one if there were any bright spots, Nooyi claimed several: Share gains by Gatorade franchise that’s been successfully repositioned as sports nutrition brand, strong reception of both single-serve and multiserve packs of Lipton Pure Leaf Tea, recovery in chilled juices on back of base Tropicana brand and its Farmstand fruit-veggie blend and stevia-sweetened Trop 50 extension.  “The real challenge is in the packaged-water business” in which Pepsi is no longer investing, she said, since doing so no longer creates value over time.

Tho prodded by analysts, PEP brass didn’t offer any new info on ongoing review of structural options, except to repeat that they’re analyzing full range of options from joint ventures to split of food and bev sides.  But Nooyi indicated she continues to eye spinoff possibility skeptically, noting that N Amer bevs unit “houses some of our most important global brands” and she would not undertake restructuring that would jeopardize co overall.

Nor did she have any specific progress to report on research into all-natural sweeteners, reminding listeners that co has set no launch date, tho it is on track to offer some products by 2014 as part of its quest for “significant disruptive innovation.”  Co won’t rush a product to market until it tastes great, she vowed.

Sunny Delight Beverage had uncommon emphasis on new brands at its NACS booth, devoting sampling efforts to Sparkling Ice challenger Sparkling Fruit2O and to prepriced, big-can juice line called Veryfine Chill.  Fruit2O by now has been covered extensively in BBI (BBI, Aug 28) but sales chief Russ Mills noted that initial reception in Northeast has been strong enough to warrant national rollout.  As for Veryfine Chill line, it’s offered in 23-oz big cans prepriced at $1, in 6 straight-ahead flavors each containing 5% juice: Berry Lemonade, Fruit Punch, Orangeade, Strawberry Kiwi, Watermelon and Grapeade.  Brand had shipped in Apr to handful of members of Northeast Independent Distributors Assn, many of whom have done well with shelf-stable Sunny Delight drinks, and other houses such as Honickman’s Canada Dry Delaware Valley and Red River in La.  With change of can supplier it’s shortly seguing to bolder, brighter graphic look, noted associate brand mgr Ed Klene.  Tho brand employs combo of corn syrup and sucralose to come in at just 100 calories per 23-oz can – considerably lower than rival brands like AriZona – Ed noted that calorie counting isn’t necessarily top priority of core demo, so it’s not played up on package graphics. 

Teas’ Tea marketer Ito En North America, which has watched for a decade as the Brooklyn nabe where it’s based has gotten trendier and trendier, is appropriating the Jay Street name from its address for line of RTD coffees.  New line launches in Mocha, Latte and Vanilla flavors in Ito En’s distinctive square-profile half-liter plastic bottles, sporting graphic cues intended to signal urban roots, such as rooftop water tank and ironwork gate.  It’s formulated from medium-roasted coffee, cane sugar and skim milk, and clocks in at 90 calories per serving.  SRP is $1.99-2.49.  It will be soon be flagged with non-GMO certification from GMO Project.

Launch makes sense given fact that, 20 years into Starbucks Frappuccino run, that Pepsi/Starbucks brand still is nearly unchallenged in RTD coffee.  Back in Japan, Ito En has long had substantial RTD coffee presence, which it augmented with recent purchase of Japanese units of Tully’s coffee chain, whose brand has been used for RTD line in that market, noted sales chief Jim Hoagland.  By contrast, Jay Street line was developed within Ito En’s US operations over past year, and will launch nationally in all channels, including c-stores, as NACS debut signaled.  Marketing exec Adam Hertel said co hopes urban look and feel will appeal to millennial consumers who’ve lately been fascinated by vibe in Brooklyn.  Hoagland cited solid interest from DSD shops in various regions.  Significant commitment to DSD on this brand would be stark contrast with toe-in-water approach of core tea brands, which are self-distributed in core NY metro and rarely rely on DSD in other areas.  But Jim said it’s early days and co is still mapping out details of distribution strategy as it gets response from market.

Thanks to 2% volume growth globally (matching year-to-date pace), Coca-Cola turned in another solid quarter in Q3, with core N Amer market outperforming expectations by several measures.  China market reversed recent weakness, but Latin America continued to offer challenging view forward.  In remarks, KO brass pooh-poohed intense Labor Day promos as just a makeup for weather-lost windows during peak summer period, and insisted they’ll do their share to continue “rational” pricing environment.  Behind scenes, they also noted, progress has been steady on plans to refranchise large portions of North American territory picked up a few years ago from Coca-Cola Enterprises.

In Q3, revenues slipped 3% to $12.03 bil, and operating income dropped 12% to $2.47 bil (tho that reverses to 8% gain after excluding currency issues and deconsolidation of Brazilian and Philippine bottling operations).  For ytd, revenues are off 2% to $35.81 bil, and oper inc off 6% to $8.12 bil.  CSDs grew 1% for qtr, 2% ytd.  Noncarbs grew 3%, cycling 10% growth a year earlier.  KO claimed 5% global volume gain in RTD teas, thanks to good gains by Gold Peak and Honest Tea in North America, Ayataka green tea in Japan and Fuze Tea across several markets.  Energy drinks also did well, with overall volume up 4%, and bottled water volume grew 5%, led by Dasani.

Wall Street watchers took generally sanguine view of results, considering weak economic environment, with Wells Fargo’s Bonnie Herzog terming them “in line with our tempered expectations.”  Still, Stifel Nicolaus’ Mark Swartzberg noted, “We think internal issues are a factor too, including a comparative lack of innovation versus other CPG category leaders.  We think this ‘innovation hurdle’ helps explain increasing reliance on price competition in North America, where price/mix was flat and retail price growth for carbonated soft drinks, per CPI data, has been down year-on-year at an increasing rate since April.” 

Noncarbs Turn in Strong Qtr in N Amer    In N Amer, net revenues slipped 1% to $5.72 bil, and oper inc dropped 3% to $803 mil.  Coca-Cola brand grew by 2%, as did total bev portfolio, cycling 2% growth a year earlier.  That left vol growth for ytd even, vs 2% during prior-year period.  CSDs came in even, with price/mix up 1% for qtr, 2% ytd, “as we remain committed to a rational price environment,” Muhtar maintained.  He said 1.5-liter and minican packs increased household base by over 1.8 mil over past year.  Co also generated 19 mil incremental cold-box transactions for year to date.  Noncarbs, up 5% overall, were area of broad claimed successes.  RTD teas grew volume by double-digits, thanks to multibrand strategy involving Gold Peak, Honest Tea and Fuze.  Juices/juice drinks grew volume by 4%, led by Simply trademark up 7%.  Bottled water was up 5% in qtr, led by Dasani.  KO claimed vol share gain in sports drinks and steady value share.  “So our revenue growth management strategies are working,” Kent declared.  No mention of Vitaminwater/Zero brands, which have been in steep decline lately.

China Bounces Back, Latin Amer Still Soft    After recent struggles, China market grew vol by 9%, led by 8% gain in CSDs.  And India scored 6% growth, cycling double-digits of a year earlier, while increasing prices across juice brands to offset higher costs.  In India, brand Coca-Cola surged 22% for qtr.  West Germany returned to growth, up 3%.  Tho analysts wondered when once-robust and high-margin Latin American market would turn around, Kent said it’s mere timing issue, and he expects things to be back on track.  Activation vs Olympics and World Cup should offer boost across multiple global markets.

Labor Day Pricing Mania Was Just a One-Off, KO Brass Argues   Tho Kent reiterated as always in prepared remarks that industry is enjoying rational pricing environment, he was challenged on that by several analysts, who pointed to KO-led heavy promo activity surrounding Labor Day, noted here in BBI and by numerous analysts at the time.  That drew interesting response from KO brass: the activity was a belated substitute for intense promo activity usually dedicated to Memorial Day or July 4, both wiped out by atrocious weather.  But there’s been no change in strategy, and Coke will take pricing from now into 2014, they assured.

In US, KO system “remains committed to taking rational pricing and we’ve done this very well over the past 2-3 years,” argued N Amer chief Steve Cahillane.  That’s reflected in +2% price/mix in CSDs ytd, and broader trend that’s seen avg price of 8-oz Coke rise 5% from 2 years ago, 10% from 5 years ago, to 25 cents.  “But we always said we’d focus on consumer-centric pricing,” and KO did resort to price moves in Q3.  “Given that there was not much of a Fourth of July or Memorial Day, this Labor Day acted much more like a July 4 holiday,” with promo activity serving to drive incremental household penetration and attract more consumers into category.  But “there’s still plenty of room to take price” and “all of these activities set us up to take more price going into this qtr and 2014.”  He said he’s confident environment remains “very rational.”  His boss, Kent, later advised, “Don’t underestimate, we took very healthy pricing in immediate-consumption in the quarter,” too.

No Panic about Diet CSDs, Execs Assert    Tho continued decline in diet CSDs like Diet Coke has been much remarked upon, KO execs maintained they’re not spooked in least.  For starters, brand Coke is double the size of Diet Coke, and that grew 2%, Cahillane noted.  And while diets are under pressure as consumers question ingredients, Diet Coke is making headway in usage among 19-to-24 demo thanks to activation activities such as those around Taylor Swift.  Not least, Coke Zero grew 5%, thanks in part to launch of caffeine-free extension, and is increasing its relevance with young males via such programs as ongoing College Game Day promo.

Continued Behind-Scenes Progress on N Amer Refranchising   Tho some analysts wondered why it’s been quiet lately on N Amer refranchising front, KO brass assured listeners that progress is being made behind scenes, both with existing bottling partners and prospective new partners.  “We’re on target, if not a little bit ahead,” assured Kent.  Added Cahillane: “Don’t take the absence of public commentary to mean we are not making very good progress.”  He promised news in coming months.

Cap-dispensed Karma brand has moved into alkaline-water space with Karma K2O, offered in tall 25-oz PET bottle that will be priced at $1.79 and likely promoted at 2 for $3 and maybe even 4 for $5.  Tho alkaline water segment is burgeoning with new entrants, even if segment as a whole hasn’t really broken out yet, Karma cofounder CJ Rapp said brand is intended to play in broader functional-water space dominated by still-growing electrolyte-infused Smartwater, part of Coca-Cola’s Glaceau portfolio.  Tho K2O carries ordinary twist cap rather than nutrient dispenser, CJ sees it as being consistent with brand that describes itself as “wellness water” in its mission statement.  Of course, rival Activate had earlier added bottled water entries of its own.  K2O clocks in with pH of 9.0 and carries electrolytes too, a la Smartwater.

Intro comes as 5-sku core line by now is available in 23 states, mainly east of Mississippi River, with Midwest area of greatest activity as co brings on DSD houses like Mullarkey in Chicago, A-B network in Minn, MillerCoors network in W Va, and indies Intrastate in Mich and Folsom around St Louis, per cofounder Jeff Platt.  In NY it’s segued from Dora’s to Exclusive, and it’s claming strong results in Canada via Lassonde.  For 2014, plan is to go wider and deeper, Jeff said, with first line extensions planned for mid-year.