BevNet Live attendees in Santa Monica, Calif, last week heard from buyer who brings new bev brands onto shelves of 7-Eleven c-store chain and from dir of new 7-Ventures team who's out to make investments in new brands and technologies.

Julie Whittle, category mgr for soft drinks and energy/nutritional bevs, offered topline view of retailer that operates 10K stores in North America (8K of them in US), about 85% of total owned by outside franchisees. Quality and growing private-label segment are heavy focuses, Julie said. Among 3 key initiatives for 2014, one is snacking opportunities, including bevs as energy-sustaining or meal replacement alternatives. Another is energy, both conventional lines that are c-store mainstays but also innovative approaches that might reach the numerous households that still don't participate in category. Hybrids melding energy with coffee, juice or other ingredients have worked out well, as have lighter, more refreshing, zero-calorie entries, Whittle indicated. Another key question: "What does natural energy look like?" Third key initiative involves building on morning occasions already stoked by chain's heavy coffee biz.

Execs at 7-Eleven prefer to be approached via LinkedIn, Whittle noted. Retailer is open to both national and regional launches - latter can be for brands with regional focus or just starting small on way to anticipated national rollout. Co maintains 6-8 sales planning cycles in course of year, meaning there are many opportunities to enter vs some retailers' limited schematic cycles. Still, spring/summer is best period for new approaches, she said. Both corporate and franchisees closely monitor performance, she advised, and brand had better start turning quickly. Offering chance for chain to be first with item or to have best version or exclusive on it - under familiar "first/best/only" rubric - obviously improves odds. In pitching co, Julie said, brand marketers should be clear on how they're different, how they participate in burgeoning consumer trends, and where precisely they fit within category at time of blurring boundaries. They should also be clear on ability to meet production demands if brand is success, and outline what marketing and digital assets they boast that can be leveraged by chain. Not least, it's important that distribution mix correlates with preferred route of chain.

Raja Doddala, vp of portfolio investment for 7-Ventures LLC, offered general view of what retailer hopes to accomplish with recently created unit, which has concluded 2 unidentified transactions so far. Mission encompasses discovery of new categories, technologies and biz models. Given observation that much innovation flows from smaller partners rather than larger, established cos, idea is to invite those emerging brands "to innovate with us" so that 7-Eleven is able to stay ahead of where market is going - say, in area like cold-pressed juices within bev category, or new model like RedBox created with DVD rentals. Timeline is 3-4 years out, and Doddala is not operating under mandate to have certain # of transactions completed within specific time frame. 7-Ventures is focused not on initial seed or angel rounds but rather series of A and B rounds. Its preference, tho, is not to lead round but to partner with conventional venture capital firm. Tho other retailers like Safeway, Starbucks and Amazon have equity ventures going, too, Doddala professed to take comfort from expanding ranks, noting that it helps accomplish fundamental goal of creating more open environment within which entrepreneurs work.  

Americans' penchant for ingesting supplementary vitamins and minerals has proved strong springboard over years for such enhanced-water and functional plays as Vitaminwater, but respected medical journal now has pulled out all stops to end practice. "Enough Is Enough: Stop Wasting Money on Vitamin and Mineral Supplements," screams title in Annals of Internal Medicine, which gathered 2 new studies and review of existing research to conclude that "most mineral and vitamin supplements have no clear benefit, might even be harmful in well-nourished adults, and should not be used for chronic disease prevention," per article summary. "Despite sobering evidence of no benefit or possible harm, use of multivitamin supplements increased among US adults from 30% between 1988 to 1994 to 39% between 2003 and 2006, while overall use of dietary supplements increased from 42% to 53%," journal's editorial stated. Since "no substantial health benefits" can be proved from use of multivitamins, "the message is simple: Most supplements do not prevent chronic disease or death, their use is not justified, and they should be avoided." Journal is arm of Amer College of Physicians.

Not surprisingly, issue drew vehement response from trade groups representing supplement makers and natural food marketers. "It's no secret that many consumers in this country don't get the recommended nutrients from their diet alone, and multivitamin and mineral supplements are an affordable alternative," exec dir of Natural Products Assn asserted to Wall St Journal. And this from vp at supplement lobbyist Council for Responsible Nutrition, speaking to USA Today: "While those in the ivory tower may say that people just need to eat their sardines and salads, in the real world there are nutrient gaps." Several neutral parties seemed a bit surprised at sweeping veto by journal. Harvard prof Francine Grodstein, who led study involving male physicians, told Wall St Jnl "she wasn't ready to write off vitamins to the same extent as the editorial writers. Longer studies or trials in less highly educated populations with poorer diets could yield different results."  

US District Court Judge Virginia Phillips ruled on Mon that San Francisco city attorney Dennis Herrera's investigation into Monster Beverage Corp marketing practices can go forward, reported AP. Judge Phillips said Herrera's suit charging MNST is violating California's Unfair Competition laws should move forward given it involves "important state interests" and city suit and investigation of MNST is not preempted by FDA regulations. "Monster Energy's federal suit was a meritless ploy to stop our state consumer protection case, and I'm grateful to the court for issuing an unequivocal dismissal," said Herrera. His office put out full-page press release celebrating judge's decision and hammering Monster, which he charges "deliberately targets children" with its marketing. He cited "evidence of actionable marketing practices" including "Monster-Army social networking community that featured children as young as 6" as well as "Monster Energy Drink Player of the Game" that would photograph a high school athlete with 4-packs of Monster brands. Herrera claimed his office was "engaged in negotiations with Monster to secure a voluntary agreement" to end some of its marketing practices when Monster "abruptly filed" countersuit.  

A few weeks ago BBI noted interesting rebranding of Kombucha Brooklyn that's moved it into consumer-friendly clear longneck glass bottles, but cofounder Eric Childs wasn't ready to do more than acknowledge shift, confirming it represents reaffirmation of co's bottle biz that earlier had been eclipsed by thriving homebrew kit biz. Other stuff was cooking, beyond the scoby "mushrooms" used to brew kombucha, but Eric wasn't ready to discuss it yet. Last night, during BBI visit to KBBK in massive former Pfizer building that's become food/bev incubator, Childs finally spilled beans on intriguing story that involves co's first outside capital raise, pair of new investor/allies who're familiar figures in altbev space and key pivot on mfg side that should make bottled production profitable for first time. Eric's ultimate goal: "We want to be the dominant East Coast kombucha," in segment whose national brands GT's, Reed's and High Country are all western-based. As reported, new bottles launched in recent weeks (BBI, Nov 26), a bit beyond anticipated Sep debut, but have quickly managed to crack such key NY retailers as Westside Market and Dean & Deluca.

In short, co founded by Childs and wife Jessica has brought in investment believed to approach or slightly exceed $100K from Honest Tea cofounder Barry Nalebuff and from Castle Co-Packing owner Brian Dworkin, putting co on way to pulling in targeted $900K to support expansion of bottled line beyond NY metro along East Coast. Tho bottled line previously was growing at rate above 20% with zero support, its losses were draining profits of homebrew kits that were exploding in popularity, leading KBBK to consider dropping RTD effort entirely (BBI, Jul 2). Now, tho, it's pivoted from expensive 16-oz jars (running 40 cents apiece) to longneck beer bottles, and with it from prior copacking partner, Artisan Beverage Co-op in Greenfield, Mass, to unidentified Montreal-area supplement fermenter, which then ships brewed kombucha to Castle Co-Packing near Pittsburgh for bottling. Eric was leary of specifying process, but recall that Castle installed carbonated line for launch of Hint Fizz essence water and has long experience in steeping whole-leaf tea for past customers like Honest Tea and Sweet Leaf Tea. Whatever KBBK's exact process, Castle would seem to be ideal copack partner.

Tho newcomers to RTD bev world, Childs and Jessica worked fortuitous connections to garner investments. Booth shared by Brooklyn-based brands at recent Fancy Food Show in NY got request for late addition: mildly alcoholic kombucha newcomer called Kombrewcha. Since he's sticking to non-alc kombucha for foreseeable future, Childs greenlighted addition and at show met Nalebuff, who's key investor in Kombrewcha. (Yale prof Nalebuff also has been investor/mentor to mixer marketer Q Brands, also based in Brooklyn.) Between Nalebuff and Gotham Brands, which KBBK retains to monitor NY retail development, connection to Dworkin was made. He's previously invested in other brands copacked at his shop, and also is member of influential Northeast Independent Distributors Assn via his operation of Pittsburgh-area DSD house called Full Circle. So twin connections to Nalebuff and Dworkin have yielded KBBK with funding, expertise, copacking solution and potential access to key DSD network (tho KBBK is refrigerated item, it doesn't usually have to go on refrigerated trucks for trip from warehouse to retailer, Eric notes).

Mind you, kits remain crucial part of mix, and will continue to support RTD push. By now kits are sold in Whole Foods and William-Sonoma and on Amazon.com, offered in 4 versions starting with basic kit at $45 and running to Jun Honey kit at $80 (which replaces sugar with honey). As holidays hit, KBBK is ramping up production from 200 per week to anticipated 1K weekly, Childs said. Kits are still 60% of overall biz, tho Childs hopes to reverse ratio to 60% RTD. Besides keeping co viable so far, kits confer credibility on RTD kombucha, as does the Childs' just-released book, Kombucha!, published by Penguin's Avery imprint. But keg strategy is not yet settled: it's complicated for relatively small part of biz, so KBBK may seek DSD representation via licensed house or just put segment on hold for now. On distribution side, co has adopted mix of natural foods house Rainforest in NY, Garden Spot in outside territories from Va north to Maine, and some self-distribution. All production is being reserved for current territory, tho successful capital raise will move brand further into metros like Philadelphia, Boston, DC and possibly Chicago.

Background: Bootstrapped Effort; Booming Kits Eclipsed Bottles Five-yr-old brand sports one of more striking brand icons in nascent kombucha biz as "KBBK" enclosed within diamond, tho co also is careful to play up full Kombucha Brooklyn name so as not to lose power of Brooklyn as identifier. Former sommelier Childs has opted for highly drinkable bev that balances acidity, tannins and sweetness, in flavors like Straight Up, Blue Green Envy and Red Ginger. "Coming from the wine industry, I'm all about balance," he said. Until now the Childs had bootstrapped co, relying on own funds and cash flow to build biz (along with modest crowdsourced amount via Circle Up). While RTD line remained unprofitable, highly profitable homebrew kits mfd in Brooklyn did 10K units in first year, following far easier route to retail than tortuous process required of bevs. So-called scoby (symbiotic colony of bacteria and yeast) is grown right in R&D area within Pfizer space, and kits are assembled on-site there. (That's why Whole Foods carries kits but won't carry RTD bottles, on grounds that copacking bottles at remote site makes brand's use of "Brooklyn" misleading. Childs respects that view but protests that exhaustive search confirmed there's simply no production option available near NY.) Co recently landed $50K grant that was partly used to establish tea corner and "learning center" in Pfizer space, and Childs is experimenting with rare teas for potential in future extensions. Brand info at KombuchaBrooklyn.com.

Pfizer Bldg Now Hub for Emerging Food/Bevcos Pharma giant Pfizer was founded nearly 150 yrs ago at Bklyn site with street address 630 Flushing Ave but was ready to demolish 8-story, 575K-sq-ft bldg upon departure in 08 before local authorities interceded. Under owner Acumen Capital Partners, it's been restyled as incubator facility, luring food/bevcos like Brooklyn Soda Works, McClure's Pickles, People's Pops and Mama O's Kimchee as well as hosting film/TV shoots. Prospective tenants need to be diligent in selecting spaces, which are leased as-is and may include massive pill-making machinery or other Pfizer gear and necessitate extensive buildout. KBBK occupies former Inspection Lab, as indicated by gold-leaf lettering over internal transom window, and had to lug out big piece of gear and run in water lines to make space usable. During BBI visit, KBBK staffers were ensconced at old Pfizer workbenches assembling homebrew kits for holiday push. Tho ragged edges elsewhere in bldg show that aesthetics haven't been paramount when walls have been punched thru in past, its in-floor drainage and stainless-steel bollards are reminder that it once was state-of-art sterile facility, overkill for many current tenants. Info/pics at 630Flushing.com.  

BBI spotted plenty of heads of lettuce at NY Produce Show on Wed, but only a few heads of bevcos. Still, low-key event put on by Eastern Produce Council and Produce Business mag at city's Pier 94 offered chance to get up to date on handful of brands that work produce section:

Connecticut Currant LLC, whose Currant Affair is main play in currants after once high-flying CurrantC retrenched to single sku, has entered Whole Food stores in Northern Calif and is in discussions about heading to southern units within Golden State, too, said owner Allyn Brown. Preston, Conn-based co just intro'd 4th year-round flavor, Apple Black Currant Cider, joining Original, Cranberry and Blueberry. Line goes out at $1.79-1.99 for its single-serve 10.2-oz bottle, and also offers 53-oz multiserve. Its only experiment in DSD, running 2 years now, has been to go aboard POM Wonderful trucks in NY market, plan that's worked out well, Allyn said. Brand info at CurrantC.com . . . Red Jacket, which has cold-pressed juices via traditional rack-and-cloth technique for 55 years, is launching on West Coast, starting in Superior Grocers and Bristol Farms in Southern Calif and moving in Jan/Feb to Albertsons and Stater Bros, said gm Peter Schulick. Brand also is entering Upper Midwest region in early Jan starting with Lunds & Byerly's, which gets 30-day exclusive, followed by SuperValu's 100+ Cub stores. Back in home territory around NY, brand is launching in D'Agostino grocery chain this week and setting DSD program for Shoprite chain via Fantasy Drink. More info on brand from NY's Finger Lakes region at RedJacketOrchards.com . . . Given lotsa favorable health news behind beets, particularly among endurance athletes, UK's Love Beets firm is determined to make splash in US, tho it's gonna take a bit of tweaking. Brand launched in 8.5-oz (250-ml) bottles in Northeast stores of Whole Foods and online grocer FreshDirect, but it's already become apparent that Americans want bigger size and more upscale look to justify $3.49 price, so co will pull it back for bit of rethinking, said sales mgr Brandon Tran. It's out in Pure sku, with 99% beet juice plus lemon concentrate as stabilizer - only pure beet juice on market, Brandon believes - as well as more approachable Cherry Berry sku. In pipeline is another sku dubbed PWR Plus that's geared directly to athletes. Co, which operates in US out of sales/marketing office in Philadelphia, already is national with several non-bev sku's. Brand info at LoveBeets.com . . . Cheribundi has broadened retail footprint in Northeast, with banners such as Foodtown and Key Food coming aboard and Roche Bros expanding cherry drinks' presence . . . Campbell Soup's Bolthouse Farms showcased refrigerated V8 Harvest 100% Vegetable Juice, set for Apr launch as first collaboration between refrigerated juice purveyor Bolthouse and Campbell's shelf-stable V8 operation. New brand has been talked up by CPB ceo Denise Morrison in recent months and trickled out initially into Costco stores via special 3-pack . . . Tho some regulatory experts have been warning that denoting items as "raw" may invite class action suits, as BluePrint recently suffered (BBI, Dec 10), Raw Foods evp Paul Gregg said co feels comfortable that its Raaw flash-pasteurized juices won't find themselves in crosshairs, thanks to spelling of brand name as well as positioning that "it tastes Raaw." Paul had recently offered broader update on brand to BBI (BBI, Nov 8).  

Celsius Holdings has hired V8 and Slim Fast vet Darren Hopkins as vp of marketing. "His experience in the functional beverage/sports nutrition categories will provide Celsius the best opportunity to maximize our marketing resources," said Gerry David, prexy/ceo of Boca Raton, Fla-based co that's put such unconventional marketing initiatives as Pandora music buys at core of turnaround efforts. Hopkins' brand management experience includes General Mills, Campbell's (on V8 and V8 Splash), Rexall Sundown (Met Rx, Pure Protein) and Unilever (Slim Fast). He's also consulted on marketing strategy for Kraft Foods, Colgate, Miller Brewing, Taco Bell and PepsiCo . . . Coupla probiotic brands have made key sales hires. GoodBelly has brought aboard James Moss as vp sales, reporting to founder/ceo Alan Murray at Boulder, Colo-based co that targets digestive health market. Moss has earlier held leadership posts on consumer packaged goods and private equity sides of Buxton Co, consumer analytics and insights firm, after run as vp of marketing services for Crossmark brokerage. Earlier in career he held roles at GlaxoSmithKline and Cadbury Schweppes, predecessor co of Dr Pepper Snapple Group . . . Kombucha-like probiotic play KeVita has named as its svp sales Tim Arneson, who segues from role as vp/gm for national accounts at downsizing energy drink player FRS Co.?  

Costco exec and LA Libations brand-incubation principal had lively exchange at BevNet Live conference this week that offered several insights - a couple of 'em counterintuitive - on how warehouse club giant operates. John Eagan, vp and sr genl merchandiser for Costco Wholesale, offered guidelines for bevcos that would like to get brands into warehouse club chain and meet its $1K/week sales threshold to remain there, with LA Libations cofounder Danny Stepper offering examples from his own experience selling his own and other people's brands into Costco.

For starters, tho Eagan is interested in early-stage brands, and exclusives on new sublines, he doesn't want to be first to carry a given brand. "I would like it pre-sold and have an image already created . . . and I just put it on the shelf at a value," he said. Indeed, if chain starts edging toward 25-30% of brand's total sales, he starts to get jittery. "I encourage them to get out and get more volume elsewhere," John said. "I don't want to own that company and I don't want to dictate to them how to run their business. It's not healthy."

Zico Coconut Water was cited as doing more than 1 mil cases of volume at chain last year (in look-ahead mode to 2014, they probably meant this year), and others that Stepper has observed on shelves at LA units have been Mamma Chia, Chia/Vie (which LA Libations handles) and Aloe Gloe (LAL's own brand). Eagan noted that chain was early adherent of refrigerated Naked Juice, Bolthouse Farms and Evolution Fresh brands, and also has done well with Sambazon acai juices, including recent cleanse offering that debuted in Costco. That said, on shelf-stable side, half of top-10 juices are Costco's own Kirkland brand.

As example of how chain will work constructively with bev brand, Stepper and Eagan noted how Aloe Gloe was faltering at only $600-700 per week per club, not enough to make cut. Costco exec suggested offering more apparent value to consumers by moving into 1-liter Tetra Pak, and that helped ignite sales to more sustainable level.

Organics are high on Costco's list, Eagan said, noting that 12% of co's 1,600 food/bev items already are organic, and chain will be augmenting push. Eagan said he personally strolls aisles of Trader Joe and Whole Foods stores every week, trying to spot what's new and worth a gamble in his stores.

In surprising exchange, Stepper readily acknowledged that he discloses his cost structure to Costco, on grounds that transparency is essential to solid relationship with operator that recognizes suppliers' need to make a profit. Costco buyers will ask you about minutiae like the cost of your bottle caps, "and if you don't know it's embarrassing," Stepper said. In any case, even without your own disclosure, Costco execs have pretty good read on what your costs are likely to be. "It's a radical idea, but it works," Stepper said of his full-disclosure stance. He aims to price fairly for both parties, and "never, ever has any Costco region in the country told me I'm making too much." Added Eagan: "If I know his costs, I don't use that as a hammer necessarily." (Hmm . . . was "necessarily" necessary?) In one case, Stepper claimed, he was able slash an input cost and promptly went back to Costco to share the savings via a lower price to the retailer.  

Another mainstream retailer seems to be striking up test to offer greater prominence to cutting-edge, premium bevs. This time it's Safeway, which is said to be prepping test in Feb of superpremium cold juices on order of Raaw, Suja and BluePrint, which would be merchandised in prominent endcap in forward position in store, area with greater visibility and traffic than produce set. Apparently nothing's finalized yet, but as things stand now, test would commence in retailer's Northern Calif and Pacific Northwest regions. Safeway joins ranks of mainstream retailers like Target and Kroger that are looking to offer greater prominence to innovative bevs.  

Energy drink volume soared 13% in convenience stores for 4 wks thru Nov 23, per Nielsen data reported by Wells Fargo Securities' Bonnie Herzog. Avg price for segment was -1.7% vs -2.9% over last 12 wks as Monster and Rockstar discounted less. Energy drinks still posted double-digit gains even though they were going against comp w/out Thanksgiving holiday this yr. Monster was best gainer once again, with volume jump of 19.3% on 1.7% price drop for the 4 wks. That's up from -3.1% pricing for MNST over last 12 wks during which volume has jumped 36%. Red Bull gained 7.4% on 0.6% price increase last 4 wks. Rockstar volume was up 14% with 2.3% avg price decrease, well below -4.7% avg over last 12 wks. Even with steeper avg price discount (-3.8%) last 4 wks, PEP energy brands lost 3.1% while Coca-Cola energy volume jumped 17% on similar pricing (-3.4%). Latest results are another strong indication that energy category "continues to recover following a weak summer," Bonnie noted, and "we are encouraged by ongoing strength" of category.

CSDs Still Struggle; Pricing Remains Solid Carbonated soft drinks continued familiar pattern of rational pricing amid declining volume. Volume fell 4% in c-stores over 4 wks thru Nov 23, slightly worse than category's 12-wk trend (-3.6%). Prices were up avg 4.3% tho, in line with 12-wk trend. Coca-Cola volume was off 3.3% with avg price up 4.3% while PepsiCo down 4.3% with avg price increase of 5.4%. Dr Pepper Snapple had steepest volume decline (6.1%) among top 3 suppliers while its avg price rose 2.8% for 4 wks vs 1.9% increase over 12-wk period.