For those looking to build premium emerging brands, it's been elephant in room for past few years: frenetic 10-for-$10 discounting promulgated by Vitaminwater and other mainstream noncarbs, which has made it hard for early-stage brands to maintain premium positioning. That merited panel at last week's BevNet Live conference in Santa Monica, at which trio of premium bev marketers offered insights on how they're navigating terrain. Panelists were Jim Hoagland, vp sales/marketing at Teas' Tea marketer Ito En; Dave Minnick, vp sales/marketing at organic juice and coconut water purveyor Purity Organic, and Karma Culture ceo CJ Rapp, who's behind cap-dispensed brand under Karma name.

Both Ito En's Hoagland and Karma's Rapp were clear on tradeoffs involved in doing those deals. Jim cited "tremendous pressure" from retailers to bring more promo money to table by funding brands at 10-for-$10, acquiescence which leads to spiral of brand switching and less loyalty by consumers. Far better for premium brand marketers to get their consumers to focus on emotional and functional benefits of the brand than on the price, he said. Ditto from CJ: "It's tough out there, no question," given enhanced promo activity and displays won by brands that engage in 10-for-$10 gambit, but those that succumb to pressure leave consumer with impression that "you're not delivering on your promise." Rapp noted, tho, that while Sparkling Ice has enjoyed phenomenal growth as result of frequent 10-for-$10 deals, it's more permissible for brand marketed as refreshment than for those marketed for functionality. Purity's Minnick noted also that steep discounts in chains can alienate other key retail channels. They undermine efforts to cultivate up-and-down-street retailers, who're likely to say, "I can buy it at Kroger for less than from you. Why should I buy from you?" And they may alienate "influencer" retailers, who don't want to carry item their customers see at 67 cents at Kroger. Ever walked away from retailer over issue, panelists were asked. Yes, replied both Minnick and Hoagland.

Still, not all categories have been equally affected, and Minnick noted that Purity Organic has been sheltered to some extent from phenomenon on both sides of its biz. It gets a certain amount of insulation by dint of being organic product, he noted. In addition, coconut water segment is showing "good price integrity" to date, even as newer juice brands (many of them cold-pressed) are moving juice category pricing up, not down. (Hoagland demurred a bit on that, noting that he sees some organic and Fair Trade brands "at $1 and even less.") Another segment that has admirably held onto its price premium, albeit one that Purity doesn't play in, has been energy drinks, which have used enhanced margins to support their aggressive marketing activities, Dave noted. (Tho during panel attendee sitting next to BBI editor displayed cell phone pic of 10-for-$10 deal on Rockstar at Albertsons store in Colo.)

So how to navigate? At Ito En, Hoagland said he usually promotes teas at 2 for $3 or 4 for $5; if retailer wants to go deeper than that for special events, then he asks for contribution from retailer in form of lower margins. But co doesn't do 10-for-$10s very often, he contended. By contrast, he cited 67-cent Honest Tea price spotted at Kroger: "I think that's a fairly deep discount that hurts your brand equity."

Minnick noted that steep discounts sometimes can be effective in generating trial among new consumer segment you're trying to develop, tho Rapp worried that "it's really a hard thing to come back from if it doesn't work."

Minnick also offered some assurance that perhaps clouds might be lifting on phenomenon. Even in youthful exec's 6-7 years in the biz so far, he said, he's noticed cycle of retailers focusing on margin initially, then switching to more intense focus on volume, and now switching back to concern with margin.  

Functional brand Body Armor appears to have cleared away key obstacle to unobstructed focus on igniting brand's growth: it's settled litigation filed by athletic apparel marketer Under Armour, which had claimed bev brand appropriated uncomfortable degree of Under Armour's brand ID, from stickman figure to stable of athlete endorsers. Body Armor founder Lance Collins signaled milestone early this morning in memo to staff in which he deemed himself and co-owner Mike Repole "proud and ecstatic" to have reached Sat settlement on dispute, which he'd previously acknowledged was exacting a steep cost in resources - enough, say, to have brought on another 50 brand ambassadors last summer. Memo offers no indication of settlement terms, indicating only, "We fought hard to defend our Trademark and have secured our objectives in this dispute." As earlier noted, in months since suit was filed, Body Armor has engaged in successive rebranding efforts that have downplayed or deleted some of more contentious elements of BA brand, including stick man figure. "We now can now move into 2014 with tremendous momentum to focus on building the next MEGA brand," says memo, which seems to have been distributed by Lance but is signed by both him and Mike. "Our goal is to be the #1 player in the Isotonic and Enhanced Water categories. This Settlement is another example how when we work together and fight hard anything can happen!"  

Irish cheese maker Glanbia is among cos in running to acquire Muscle Milk marketer CytoSport, Irish Independent newspaper reports. That puts it in 3-way race vs dairy co Whitewave Foods and supplement maker NBTY, at anticipated price roughly in $500 mil range, paper noted . . . To date, arguably most ardent stevia proponent has been Zevia, which has built thriving natural-soda biz on natural sweetener. But it's now joining others who think blending ingredient with monk fruit makes for more rounded, less metallic taste, by launching new sweetening system called SweetSmart that adds monk fruit as secondary sweetener to Reb A stevia component that's been augmented from 97% pure to 99% pure . . . Pair of cutting-edge brands from different bev realms are teaming up on early-year promo dubbed Better Cup of Tea. Alkaline bottled water Essentia is partnering with guayusa brand Runa on promo running Jan 6 to Feb 28 that offers grand prize of 8-day trip for 2 to Runa Guayusa plantation in Ecuador, where winners can help harvest or plant guayusa trees. Participating retailers include Whole Foods, Stop & Shop and Giant. "Essentia and Runa both have a commitment to providing health-conscious consumers with innovative beverages that support active lifestyles," said Essentia marketing/innovation vp Paul Curhan, explaining tie. "Staying hydrated and energized during winter is an ideal way to promote good health and positive energy." There's another tie between 2 brands: Essentia's new strategy chief Neil Kimberley has been key ally in getting Runa into RTD biz . . . After building following for Chocolate Pu-erh tea launched in 98, Oakland, Calif-based Numi Organic Tea is moving further into indulgence realm by offering subline named just that: Indulgent Tea. New line melds tea and cacao in 4 flavors in boxes of 12 tea bags priced at $7.99 . . . Starbucks released some pretty impressive numbers as it announced that it anticipates record purchases of its gift cards today. Co claims that "1 in every 10 American adults" got a Starbucks Card over last year's holiday season and in past 12 yrs, $16 bil has been loaded onto 450 mil cards, $4 bil of that in past yr alone.  

A few years ago, BBI coined term "functional fatigue" to describe sense that some consumers are moving away from fascination with highly engineered foods/bevs in favor of those that employ more familiar but nutrient-rich ingredients. Others seem to be drawing similar conclusions, judging by presentation from Seattle-area consumer research firm The Hartman Group, which sees consumers increasingly tilting from so-called "functional" foods to naturally or inherently nutritious foods and beverages - "traditional foods rooted in folklore as beneficial and delicious," per Melissa Abbott, Hartman's sr dir of culinary insights. As recounted by MediaPost and Supermarket News, "Americans' increasing demand for 'real,' fresh, nutrient-dense foods in general, including their snack choices . . . means that they're seeking out convenient, portable options that fall into that inherently nutritious category," per Abbott. Examples include consuming pre-boiled/pre-peeled eggs, ginger beer, nori sheets and pu-erh tea for energy-, metabolism- and health-enhancing components rather than, for instance, foods enhanced with added calcium or omega-3s, or high-caffeine-infused energy drinks, as Abbott elaborated to Supermarket News. "It's not about functional foods - that's not what consumers are interested in," she asserted. "They are looking to their snacks to provide much more of an [inherently] nutritious profile."

In presentation (click here to see it), Abbott notes that consumers are gravitating to "traditional foods rooted in folklore as beneficial and delicious," particularly those that are fermented, cured, lacto-fermented, pickled or otherwise "cultured," such as GT's Kombucha, Mother in Law's Kimchi and Chobani Yogurt. She also cites botanicals such as cinnamon (anti-inflammation), cayenne (digestion), lemon balm (relaxation), yerba mate (energy), hibiscus (immunity) and dandelion (detox).  

While San Francisco city attorney Dennis Herrera's office was doing victory dance earlier this week after Monster Bev's suit to stop his investigation was tossed, Monster responded that this battle is far from over. "In dismissing the action . . . Judge Phillips found that Mr. Herrera's lawsuit was not entirely preempted by federal law," but in decisions in other cases (Fisher vs MNST), same judge dismissed similar claims, and in this case agreed with Monster "that challenges to the safety of its energy drinks are preempted and subject to the primary jurisdiction of the FDA." Monster believes "the California state court will find in due course as that litigation proceeds, as Judge Phillips did in Fisher and in denying Herrera's challenge to the merits of Monster's lawsuit, that all claims regarding safety of its products are preempted and subject to the FDA's primary jurisdiction." Monster also believes court will find that slogans on its cans "are not actionable" and, even if they were, are backed by scientific evidence validating "performance-enhancing features" of Monster brands.  

Whole Foods Market Inc said yesterday it's going to stop selling Chobani yogurts in Jan "to make room for smaller, exclusive brands, especially those that are organic or don't contain genetically modified ingredients," per report in Wall Street Journal. In move that's drawn extensive media coverage, while Whole Foods has "challenged" its suppliers to create non-GMO yogurts and "at this time, Chobani has chosen a different business model," said grocer. While Chobani, which helped jumpstart Greek yogurt boom in US, markets its products as natural but has been targeted by anti-GMO groups for using milk from cows fed GMO grain, noted WSJ. GMO-free milk simply isn't available in needed quantities, founder/ceo Hamdi Ulukaya protested to WSJ. As for Whole Foods ouster, he added: "Of course I would love to be available everywhere, but it won't hurt our business."  

Riding Sparkling Ice juggernaut that shows no sign of slowing, Talking Rain is adding production capacity, feet on street and broader range of marketing activities for 2014 while hoping to coax retailers into conferring greater shelf space on zero-calorie, Splenda-sweetened sparkling water brand during non-promo periods. But it's staying mum on ongoing effort to shop co that doesn't seem to have drawn serious bid so far.

In wide-ranging interview, ceo Kevin Klock noted that, in 4th year of renewed attention, 23-year-old brand surged from $200 mil at retail to $300 mil in barely 6 months, per IRI data. Scanner data shows its year-old Lemonade subline already has leapfrogged former category leader Minute Maid and is ahead of Calypso and Hubert's brands by 2 to 1, he noted. Given that growth, most challenging issues have occurred behind scenes as his team has dramatically dialed up production and copacking capabilities, buttressed ERP system and added staff so that they're not "chasing their tails" preventing out-of-stocks. Those issues should finally be behind them in 2014, Kevin said. Preston, Wash-based co has inaugurated new offices, moved from 3 to 4 regions to better align with key retail partners, and added sales vp to handle increasingly important Northeast region. Staff exceeds 240 now, with 65 new positions to be filled in 2014.

Klock frankly addressed one area of concern among Ice proponents: frequent discounting to 10-for-$10 range that may tarnish premium allure of brand while no doubt complicating finances of Talking Rain itself. Could it be that Ice has become so coveted a traffic driver that retailers simply can't be weaned from frequent price promos? "It is a traffic driver, and that's a challenge," Kevin allowed. Paradox is that, even when it's not on deal, Ice moves briskly enough to warrant more shelf space, he argued. Problem, then, is that when retailers dial back space during non-promo periods, brand suffers frequent out-of-stocks. That explanation also is implicit rejoinder to those who claim Ice only sells well on deal: by Klock's argument, any sales slowdown reflects lack of inventory, not consumer pull issue. Klock also observed drily that, compared to entries like Pepsi's Aquafina Flavor Splash that have been seen at 50 cents almost from start, "10-for-10 is pretty premium."

On marketing front in 2014, Ice is tying into Outback Bowl and Orange Bowl while extending alliance with Rose Bowl beyond big game to full stadium sponsorship, including pouring rights and signage during plethora of events there from UCLA game to soccer matches. Brand also is launching 2d year of Ladies Professional Golf Assn partnership, upping activation after initial learning year for range of 13 tourneys. On cause marketing front, Ice is expanding race sponsorships with Susan G Komen Race for the Cure to 15 events from 13 and devoting share of proceeds from Grapefruit-flavored Ice to breast cancer group under moniker Sip Pink for the Cure. Other key cause platform continues to be Children's Miracle Network. Note that even going back coupla decades to Talking Rain's days as strictly regional player in Pac NW, cause efforts have been key part of mix.

Measured media such as TV and billboards will continue to be in mix via "Bold Side of Water" slogan, tho effort may be dialed back a bit as co diversifies platforms. Klock noted that many rivals are riding in Ice's wake via positioning their own knockoffs as "bold" or "adventurous" but gap in sales still is widening. Even entries from major players already are being discontinued from retail chains, judging both by in-field reports and from declining ACV in syndicated data. Some retailers are bailing on their private-label entries too.

On distribution side, co expects to have closed remaining DSD voids by early Jan, with quite a few Bud houses entering the mix lately. Among key distributors are Big Geyser (NY), Haralambos and Lenore (Southern Calif), Honickman Group (Mid-Atlantic), Central Beverage (Chicago), Buckeye (Ohio) and numerous members of Northeast Independent Distributors Assn in Northeast. Some biz continues to be direct-to-retail, Kevin allowed, "but when we can shift to DSD we do" to harness brand's high-velocity potential.

Flavor range expanded this fall with Strawberry Watermelon addition to core line, Mango Lemonade and Peach Lemonade additions to Lemonade subline, and Cherry Limeade. Tho flavor portfolio is broad now, additions still aren't cannibalizing older entries, and unusually broad array of flavors are cited by consumers as their fave, rather than any flavor dominating. So 80-20 rule seems suspended so far. "We have no flavor that's not growing, which is really stunning," noted Klock, so he won't be phasing any older ones out. Sixpacks are growing, and co has launched 12-packs after seeing some retailers selling full 12-unit cases to ardent fans. But there are no plans for multiserve packs, partly because they would compound pricing issues.

One area Klock wouldn't go is Talking Rain's efforts to gauge interest among prospective purchasers of co. Rabobank has been circulating book but word on street is strategic CSD players are wary of brand that seems to be taking big bite out their diet CSDs, while many tire kickers worry that price promos have weakened co's financials. That said, Ice is hottest brand in years, and has dynamics that seem to be good fit with non-CSD bevcos such as Nestle Waters or even privately held AriZona Iced Tea. So deal certainly can't be ruled out. It seems Rabobank is also exploring other options that would allow owning family to take some money off table, including potential IPO. "We're focused on the business now" is all Klock would say when issue was brought up. And in truth, harnessing that growth does seem to be more than full-time job.  

From start, natural-foods entrepreneur Eric Schnell has spoken of adding investment component to his expanding MetaBrand brand incubation empire. That final key piece has now come together: NJ-based MetaBrand is teaming with LA-based 6Pacific Group's 6Pacific Capital unit and unidentified private investment group to establish capital provider called MetaFund that will make investments of all magnitudes across range of naturally oriented products and technologies, including burgeoning high-pressure processing (HPP) realm. It's "last big piece" of MetaBrand puzzle, Eric told BBI this morning.

Partnership already is off and running: it's closing on low-6-figure investment in year-old cold-press juice maker We Juice Well (WeJuiceWell.com) with locations in Jersey City, NJ; Carpinteria, Calif, and Montecito, Calif, whose core angel investor is Whole Foods co-ceo Walter Robb. It's also made $500K investment in Schnell's own I Am co, which markets natural shots and other items under I Am Enlightened name. Tho those are small deals, there's no cap on # or size of transactions, Eric assured: idea is to offer discipline of private equity realm, thanks to 6Pacific's role, combined with agility of angel realm - "kind of angel private equity, with the smarts and credibility of the private-equity guys but the mindset of an angel investor," he said. MetaFund will explore such non-CPG realms as bricks-and-mortar HPP shops and may also buy entire cos as opportunities arise. But all have to be what he terms "natural-channel-friendly businesses." MetaFund will also co-invest with other private investors and PE groups.

Partner 6Pacific, with offices in LA, NY, Toronto and Costa Rica, is itself undergoing change: it's now focusing entirely on equity space and exiting advisory biz, with determination of future of that arm of co to be announced in new year. 6Pacific team is led by Tariq Afghan, managing dir and head of equity investments, supported by team of 7 operating partners. Creation of MetaFund "will allow us to deepen our resource base, expand our investment mandate, and receive additional support from a renowned investor group," Tariq said in statement. "This new positioning will enable us to invest behind recent advancements in technology and science that can be applied to consumer products." On bev side, 6Pacific has been previously involved in Steaz Tea marketer Healthy Beverage, which Schnell cofounded, as well as Green Mountain Coffee Roasters, Oregon Chai, Mighty Leaf Tea and private-label juice maker Cliffstar. As for other key participant in Meta Fund, Eric was hesitant to disclose his identity except to confirm it's same Europe-based billionaire and philanthropist who's core investor in MetaBrand itself. If MetaFund brings solid ideas his way, there's little limit on investments it can make, Eric averred.

Identity of 6Pacific as MetaBrand partner isn't a shock, as it's played prominent role in supplement space that is Schnell's bailiwick (it sold New Chapter to Procter & Gamble last year), and its operating partners include Eric's wife Marci Zaroff, who's high-profile natural products figure on fiber/apparel side. 6Pacific's other partners include likes of former Nestle M&A exec Steve Allen and Nestle and Oregon Chai vet Sean Ryan.

As one advantage of partnership, Schnell noted, MetaBrand work with extensive roster of early-stage brands should enhance deal flow, and it will offer MetaBrand full menu of support services - from product formulation and supplement production to branding and distribution development - to outside brands that win investment. We Juice Well has been MetaBrand client, as have been such bev brands as Runa Guayusa, Blue Buddha ayurvedic drinks, Marley relaxation bevs and FitPro protein drinks. At time of extensive MetaBrand profile in BBI last summer (BBI, Aug 23), co already boasted 20 active clients.