In what PepsiCo deems “logical next step” in “Power of One” initiatives, co has created new North America division that, along with Pepsi International, will report to ceo-designate Indra Nooyi.  “Our individual businesses are headed by extraordinary leaders who are doing an excellent job running their operations, yet there is unquestionably more value to be realized by approaching our consumers and retail partners as a fully integrated enterprise,” said Indra.  Similar to Pepsi Int’l structure, Pepsi will bring bev and food biz under one unit in North America, which will be run by John Compton in newly created position as ceo North America.  John has been prexy/ceo of Quaker Tropicana Gatorade (QTG) since 05 and has been with Pepsi for over 20 yrs.  Chuck Maniscalco, another Pepsi veteran, will succeed John at QTG.  Mike White continues in role as ceo of PepsiCo Int’l.  New structure “strikes the proper balance between leadership and collaboration required to generate continued growth in our North America business while maintaining the independence of the divisions which has been an instrumental part of PepsiCo’s success,” added Indra.  Move was seen as favorably by Stifel Nicolaus analyst Mark Swartzberg, who termed John “proven leader” who will “leverage scale across the North American business units.”   

Jones Soda Co said it’s signed exclusive 5-yr distribution and manufacturing deal with Ft Lauderdale-based National Beverage Corp.  Using concentrate from Jones, Nat Bev will produce 12-oz cans of Jones Soda and 16-oz cans of Jones energy drinks for entire US.  Jones will set up retailers and Nat Bev will start selling to them exclusively in 07.  Jones ceo/prexy Peter van Stolk sees opportunity to take Jones national as way to boost CSD category that has been lacking in innovation.  Terms of deal were not disclosed, but it gives Jones and instant national footprint rather than having to assemble network on its own.  Recall that Jones’ 2-yr deal with Target Stores concludes at yr-end.  

NEW PRODUCTS: Unsweetened O Water Extends into Lightly Sweetened Infused Line O Bev, co started by former Fiji sales exec Ed Slade and Nantucket Nectars co-founder Tom First, has launched its 1st line extension, O Infused Water, a lightly sweetened functional line that sports an ingredient panel with more benign-seeming ingredients like chamomile, jasmine and rosemary. New line initially is shipping in 5 sku’s packed in 17-oz panel-less plastic bottles using similar see-thru graphics to core line and priced in $1.39-1.49 – maybe a dime more than O Water. In contrast to completely unsweetened core line, these come in at about 50 calories per bottle, using cane sugar and eschewing any fructose or artificial coloring. Initial items are Energize (with ginseng, yerba mate, guarana and natural caffeine), Soothe (lavender, rosehips, chamomile and jasmine), Hydrate (electrolytes), Vitalize (vitamins A, C, E and folic acid) and Replenish (electrolytes, sodium, other ingredients). Idea is to offer functional bevs tilting more toward herbal ingredients than technical compounds, Tom told BBI. Added Ed: “We didn’t want to have an ingredient panel with 25 words that each had 18 syllables.” In adding O Infused, the execs – much like Honest Tea did by supplementing its teas with a more highly sweetened Honest Ade line of juices – hope to reach a broader demographic and crack a greater array of channels, notably c-stores that are not convinced that their customers are ready for unsweetened items. “We’re making some good progress with O but we understand that it might be a little ahead of its time” among some consumers, Tom said. “This reaches out and brings more people into the fold.” The new line is intended to go thru the same DSD network that has been assembled for O Water, including Polar Bev in New England (also an investor).

FLASH! PepsiCo Seen Buying Izze for $75 Mil Looks like long-rumored acquisition of Izze Bev by PepsiCo is happening: the 2 cos have struck a deal for $75 mil with view toward closing deal by early next week, said sources close to cos. Deal, if approved by Izze shareholders, would give PepsiCo a healthier soft drink for school channels where CSDs have been getting the boot out of obesity concerns. No word yet on whether the brand, which has retrenched from ambitious DSD push to primarily warehouse-delivered focus, would go thru Pepsi bottler network or thru Quaker Tropicana Gatorade div. Talks between the 2 cos had first been reported in BBI in late spring (BBI, June 30); latest word had been that negotiations had shifted from CSD unit to Quaker (BBI, Aug 18). Sale to PepsiCo likely would bring nice return to key investors Sherbrooke Capital and represent coup for chmn John Bello, who has shaken things up at altsoda marketer since quietly taking helm during summer of 05 (BBI, July 12 05). Conclusion of deal would make John a serial seller to Pepsi, given earlier sale of his SoBe Bev to soft drink giant. More details to come.

Suit by independent bottlers vs Coca-Cola over warehouse-shipping of Powerade to Wal-Mart hasn’t reached trial yet, but word is the 2 sides are groping for a settlement.  One source close to situation told BBI that stances on 2 sides have softened now that it’s become clearer that economics would not support massive shift of other brands to warehouse shipping.  Settlement could take form of Coca-Cola paying some sort of incursion fee to affected bottlers in limited instances in which warehouse channel is used … Starbucks said it will boost price of its coffees, lattes and cappuccinos by a nickel, or 1.9%, on Oct 3.  Co noted price increase, first in 2 yrs, will be across all US mkts and blamed rise in costs including fuel and energy. 

 No surprise that new energy drink with attention-getting name Cocaine is raising eyebrows and grabbing media attention.  Las Vegas-based Redux Beverages claims bev with logo “The Legal Alternative” is 350X stronger than mkt leader Red Bull, putting it in category of “superenhanced” brands like Redline.  An 8.4 oz can is packed with 280 mg of caffeine and contains 600% of recommended daily intake of B12, 300% of RDI for B6.  Other ingredients include guarana, taurine and dextrose.  Besides ingredients listed above, Cocaine contains secret “throat numbing” ingredient, to duplicate sensation from actual drug.  So far, Cocaine has made it into clubs/bars and c-stores in NYC, LA and most recently San Diego.  “We’re getting a phenomenal response,” co-founder James Kirby told ABC News.  “It’s an energy drink, and it’s a fun name.  As soon as people look at the can, they smile.”  Well, not everybody is smiling.  Joseph Califano, prexy/chmn of Nat’l Center on Addiction & Substance Abuse, said Redux Beverages should be “ashamed” of “insidious product” and he urged retailers to refuse to sell it.  A poll of AOL users found 75% of 5,600 respondents felt product was “irresponsible.”   Since entire segment is in part defined by pushing boundaries of good taste, it will be interesting to see if this one proves to have stepped over the line. 

High Court of Indian state Kerala ruled that state had no authority to impose ban on Coca-Cola and PepsiCo products after private research lab claimed they contained high pesticide levels.  In ruling, court said state gov’t “didn’t give any time to the cola companies to submit their arguments before banning their products.”  While Coca-Cola is hoping ruling will force other Indian states to reconsider bans in their regions, AP noted Kerala’s top gov’t official already vowing “to take corrective measures to reinforce the ban.”

Transition of Monster and/or its sibling brands to the Anheuser-Busch network seems to be taking longer than anticipated and has hit a few pockets of resistance among Bud wholesalers, but overall the brand continues to surge and the transition in some markets appears to have been seamless.  In NY, where brand moved from Cadbury-owned Snapple house to A-B, brand spiked 423% in 4 weeks ended Sept 9, per Nielsen scanner data reported by Goldman Sachs’ Andrew Sawyer.  That’s vs gains in area of 150% during summer.  By contrast, NorthernCalif has shown more sluggish performance, with brand up just 1% in latest period.  Overall, Hansen’s energy portfolio surged 97% in 4-week period, with 5% decline in non-Monster brands like Lost and Rumba offset by doubling of Monster itself. “Sales in the markets being transitioned were up a more moderate 30%” thanks to drag caused by Northern Calif, Andrew noted.

Monster marketer Hansen Natural put out terse update on Tues noting, as earlier reported in BBI, that Monster has segued to Bud houses in “almost the entire state of Florida; southern Nevada, including Las Vegas; northern California; metro New York, including the 5 boroughs and Long Island; Hawaii; and a portion of Colorado, including Denver.”  A day earlier, at meeting with A-B distributors at National Beer Wholesalers Assn convention in Orlando, Fla, on Mon, A-B execs acknowledged that transition has been more tortuous than anticipated.  (More from convention in next issue of BBI.)  Note that May 9 announcement of alliance called for Monster to transition in some markets – anticipated to amount to half of country after a year’s time – while ancillary brands Lost and Rumba were to transition immediately in all markets.  A separate deal for the on-premise biz was to be handled per a 3d contract that still has not been worked out. 

The disconnect between plans for Monster and non-Monster brands has been at heart of some snags.  While Bud wholesalers in Southern Calif have seemed content to pick up ancillary brands without firm commitment as to when they might see Monster, that has not been true in Southwest, sources said.  With incumbent Monster distributors Kalil and Cadbury Bottling Group (BG) retaining a seeming lock on the brand, Bud wholesalers in those territories have bridled at picking up the ancillary brands but not the crown jewel.  Not only have those brands performed indifferently, but carrying them in portfolio would hinder efforts to pick up more-effective brands, the wholesalers have argued.  Word is that, for now at least, A-B and Hansen have back-burnered the issue in that region.  At same time, word is that some distribs in Texas have also declined to sell Monster on-premise if they can’t have it in other channels, too.  Similar snags may have arisen in other markets, too.  Except in a few cases where an A-B wholesaler already had segment pioneer Red Bull, BBI has not heard of any instances where an A-B house has outright rejected the torridly performing Monster brand.

Parsing the scanner data, Goldman’s Sawyer observed that “underlying strength in the co’s energy portfolio remains very strong, with sales excluding the transition markets up 110%.”  But “we were disappointed with the modest ongoing declines for Lost and Rumba sales this month as were hoping to see evidence that the Anheuser-Busch transition had been completed.”  The star among transition markets is NY, where $ sales for Hansen energy portfolio were up 423% (albeit on price cut of 13%).  In Fla, where growth had slipped to 8% in initial phase of transition, it rebounded to 69% in latest period ended Sep 9.  But in Denver, $ growth has slowed from about 100% earlier in yr to 30% in latest period.  And in Northern Calif, a strong Rockstar market where Monster growth had hovered at 50% range before transition to Bud, Hansen energy portfolio grew just 1% in latest period.  Bottom line, tho: “Hansen is delivering sales growth consistent with our forecasts despite the drag from distribution transitions,” Sawyer wrote.

Emigrant Bank’s VC arm, which just acquired controlling stake in Jolt Cola marketer Wet Planet (BBI, Aug 18), appears to have concluded investment in Zola Acai, marketer of RTD bevs based on Brazil’s high-antioxidant acai berry.  At time of Jolt deal, NY-based Emigrant Capital had been reported in BBI to be eyeing acai space but identity of target was unclear.  Deal adds RTD acai player founded by fruit consultant Chris Cuvelier to portfolio that already includes smoothie chain Robeks, which was early adopter of acai, as well as altsoda marketer Boylan.  Key players in acai space, each with distinctive approach, include refrigerated brand Sambazon, which offers aseptically packed smoothies blended with other fruits; Bossa Nova, shelf-stable filtered product packed in glass bottles, and Zola, whose 11-oz aseptic packs are completely unfiltered and do not cut the acai with other fruits.  (Brand motto: “The power is in the pulp.”)  Deal caps frenetic period for Emigrant, which also just acquired Next Protein, marketer of whey-protein-based Detour bars, and has been assembling good-for-you food/bev portfolio.  Emigrant exec said it was premature to comment on any deal, but Emigrant’s Web site now lists both Detour and Zola among portfolio holdings, so it seems that deal is done.  No details on financial terms or Zola retail volume.

IRI data reported by Morgan Stanley’s Bill Pecoriello shows sports drink segment is reverting to promo-driven activities after period in which prices were edging up.  Big volume gains continued for isotonics, but avg prices were down 0.6% in latest 4 wks thru Sep 10, following 1.1% cut for prior 4 wks.  Gatorade cut price 3% for 4 wks but scored 16% volume gain while Powerade dropped price 9% but scored 14% volume gain.  YTD Gatorade prices down 1.4% vs a 3.6% drop for Powerade.  In bottled water segment, prices down for 6th consecutive 4-wk period: -0.4% thru Sep 10.  That puts avg water price in supers at -1.6% YTD.  Aquafina volume soared in Jun and Jul on steep price cuts, but when avg price rose 2.2% in latest 4 wks, brand volume went flat. Contributing to slowdown was end of Aquafina promo at Kroger stores, noted Bill.  Dasani once again had big volume gain (32%) on big price drop (-15.2%).  YTD Dasani price was off avg of 16% vs 2% drop for Aquafina.  Poland Spring volume jumped 42% on 10% price cut in latest 4 wks.  Volume is up 38% YTD with price down 7%. 

CSD Volume Still Dropping    Carbonated soft drink volume was off 4.5% for 4 wks thru Sep 10, vs 4.6% decline for same 4-wk period in 05.  That puts category down 4.6% YTD.  Avg prices for CSDs were up 2.2% for latest period.  That’s lowest increase since 0.5% back in Apr.  Coca-Cola CSD volume was off 2.3% for 4 wks going vs 8% drop for yr-earlier period.  Coke’s price was up just 0.7%.  By contrast, PepsiCo CSDs enjoyed greater price realization of 3.4% but volume dropped 6.6%.  Cadbury volume slowed to 0.2% gain with prices up 0.3%.  Cadbury CSDs had been enjoying volume gains in 4% range past few mos.  Private label volume tumbled 9.3% for latest 4 wks with prices up 2%.

Juice Soft on Commodity Hikes   Juice volumes in supers “continue to be soft due to big price increases to pass on commodity inflation,” said Bill.  In latest 4 wks, juice volume dropped 8.1% vs flat performance for same period in 05.  PepsiCo brands were off 0.4% as Tropicana lost 1.5% but smaller Dole gained 7.5%.  Coca-Cola juice volume was up 4.3% with Simply Orange rolling to 68.6% gain while Minute Maid volume slipped 10.3%.  Odwalla was off 0.4%, first drop for that brand in well over a yr.

Energy Gains Still Big, tho Slower    Energy drinks volume rose 53% for 4 wks thru Sep 10 vs 69% gain for yr-earlier period.  While still big, gains for energy drinks have slowed over past few mos: +71% Apr 23; +62% May 21; +61% in late Jun and Jul; +57% Aug 13.  Red Bull volume up 18% for 4 wks thru Sep 10 vs 26% gain last yr, while Hansen Natural up 87% vs 159% gain in 05.  Coca-Cola and Rockstar jumped 86% vs 125% gain a yr ago.  So YTD, Red Bull up 22% but down 8 share while Hansen up 114% and up 5 share, and Coke/Rockstar up 97% with 5 share gain.

Teas Continue Strong Volume Gains    The RTD tea segment remains hot as well with volume up 26% for latest 4 wks vs 21% gain a yr ago.  RTD tea up 26% YTD with avg prices down 2%.  Coca-Cola teas jumped 90% in last 4 wks but avg price was cut by 38% and Coke was going against 18% volume decline a yr ago.  PepsiCo teas gained 41% for 4 wks with avg price up 1.7%.   Cadbury (Snapple) volume off 5% on 5% price gain while Ferolito, Vultaggio & Sons (AriZona) up 13% with 1.5% price drop.   So YTD, Pepsi up 55% with 6.3 share gain; Coke up 10% but down 1.7 share; Cadbury up 1% but lost 3.8 share and FV&S up 26% and held share even.