PepsiCo is taking over as official non-alc bev at Buffalo Wild Wings chain - coveted for its young male crowd and allegiance to football - and letting sometimes skeptical investment world know that deal reflects power of PEP's melding of snacks and bevs. BWW is "one of the nation's hottest restaurant chains" and bev deal provides PepsiCo other opportunities as well with its snack brands, noted NY Times, to whom announcement looked to have been leaked by PEP and which gave it prominent play fronting biz section. "You've got to get in the door with great beverages. But what this partnership does is give Buffalo Wild Wings a full access pass to all the PepsiCo has to offer," as NYT quoted Kirk Tanner, prexy of PEP's foodservice op. Down the line that could mean "a Dorito-crusted wing or a Mountain Dew Cocktail," speculated NYT. Sports-centric theme at BWW "fits rather neatly with some of PepsiCo's products" and endorsements, and gives PEP access to key demographic of young men, "who also tend to be the biggest drinkers of Mountain Dew." Terms of deal weren't disclosed. Sally Smith, ceo of BWW, expressed no dissatisfaction with relationship with incumbent Coca-Cola, whose contract was ending. "We had poured Coca-Cola for a number of years, and together with our franchisees, we thought it was important to go out and have a look at what the options are," she said. In official release that went out afterwards, chmn/ceo Indra Nooyi reiterated, "We see tremendous opportunities to leverage PepsiCo's diverse food and beverage portfolio in ways that benefit both companies through exciting new innovations, unique consumer engagement programs, and powerful brand activations tied to sports and entertainment." Take that, Power of One skeptics!  

Most observers expected establishment of cap-dispensed bev segment to be arduous undertaking, and stresses became more apparent this week at category leader Activate: investor and former Disney chief Michael Eisner, who'd taken hands-on role since departure of ceo Dan Holland a year ago, is elevating his son Anders, who co-created brand, to prexy job, and father-son duo apparently are moving to buy out stake held by India's Tata Group. Change, which is believed to include some layoffs, includes exit of current prexy Reza Mirza, a former Nestle Waters exec, and move of Craig Berger into dual roles of cfo and coo. In statement to BBI, Anders said he's buying co back from existing investors after strong year of distribution announcements and growth, and described change as follows: "I am excited to take Activate back to our roots of a small business with an entrepreneurial spirit. As we look forward into the new year, we are going to hit the pavement hard with increased opportunities for sales and growth," including new products and distribution deals. In his stint, Mirza had worked alongside the senior Eisner to narrow focus of brand, exiting territories like Southeast while finally pushing into Northeast, where cap-dispensed rivals like Karma and 989 On Demand had already established foothold. Anders had created brand with Burke Eiteljorg, who has since left co.  

Coca-Cola suggested it's on a mission to get refranchising of North American bottling operations done fast with surprise reorg that moves Coca-Cola Refreshments bottling arm into Bottling Investments Group - internally dubbed "hospital ward" - that serves as way station for operations being prepped for return to outside ownership. Effective Jan 1, Coca-Cola Americas div is dissolved and integrated North America biz is divvied into Coca-Cola North America marketing/production arm and Coca-Cola Refreshments bottling arm. Latin America Group, led by group prexy Brian Smith, becomes part of Coca-Cola International. In other words, "the Americas division is being eliminated with all that is not North America moving into International," as Stifel Nicolaus' Mark Swartzberg put it. In biggest surprise of revamp, Coca-Cola Americas prexy Steve Cahillane is exiting co, after being on some observers' short list of execs with shot at eventually succeeding Muhtar Kent as KO's ceo.

Recall that in contrast to rival PepsiCo, which had touted acquisition of bottlers as resulting in superior go-to-market system, KO had never stopped touting franchise model as effective one, apparently following in PEP move to buy its bottlers with view to ousting Coca-Cola Enterprises as N Amer partner, rewriting rules to reclaim certain channels and mfg responsibility, then refranchising territory to more-preferred partners. Those talks already are well under way with 5 incumbent bottlers (other partners could come into picture, too), so new move sets stage for acceleration of program. By now, PEP too has moved to refranchise N Amer bottling system, with announcements anticipated early in coming year.

Under new structure, Coca-Cola North America (CCNA) will be led by former CCNA chief Sandy Douglas as group prexy, reporting directly to chmn/ceo Kent while continuing in role as svp and global chief customer officer. Reporting to Sandy will be North America Brands, Foodservice, Brand Commercial, Retail Sales, Research & Development, Venturing & Emerging Brands incubation unit, Strategy, Franchise Leadership & Transformation and Canadian franchise operations. Meanwhile, BIG vet Paul Mulligan comes in to run CCR, reporting to BIG prexy Irial Finan. An accountant by training, Mulligan has spent 17 years crisscrossing world in various Coke roles, currently serving as head of commercial for BIG and region dir responsible for BIG operations in Japan and Latin America. KO said its North America Enabling Functions org will continue to support both CCNA and CCR.

After a reorg last year intended to improve co's agility, latest moves leave KO "in a position to leverage this flexibility to return to a traditional company and bottling operating model in North America, which will enhance our focus on execution and accelerate the refranchising of our bottling system in our flagship market," Muhtar said. Cahillane, described as leaving to seek other opportunities, got this encomium from Kent: "Under Steve's leadership, our North America business delivered several consecutive quarters of volume and value share gains, despite operating in a very difficult economic environment the past 3 years. We wish him well." Noted Stifel's Swartzberg: "We had considered him a potential coo and ultimately a potential ceo." Mark also wondered why current CCR head Glen Water, succeeded in that role by Mulligan, isn't named in any of reorg news. "We wonder if Mr Walter is going with Mr Cahillane," speculated Swartzberg. "They worked together at InBev and both have multiple years of sales and management experience in North America beer (eg, Labatt)."

Analysts See Accelerated Refranchising, Further Cost Efficiencies Analysts generally reacted favorably to news, and KO shares were trading up today after last night's announcement, which culminated series of investor meetings earlier this week. "We believe this news is another step in an ultimate refranchising of the NA bottling business, which should be viewed favorably for Coke with incremental cost-cutting, and given a refranchising would unlock higher returns and bring able local bottling partners in to improve operations," wrote Morgan Stanley's Dara Mohsenian. "We continue to expect incremental news early next year around an initial agreement with the 5 US bottlers with whom Coke has announced it is in talks, as well as incremental cost-cutting plans." This assessment from Wells Fargo Securities' Bonnie Herzog: "We think investors will applaud the organizational change, as it effectively accelerates the refranchising of KO's bottling operations to independent bottlers; however Cahillane's sudden and unexpected departure raises questions about the rationale behind this surprising announcement." Still, "we are pleased that Ahmet Bozer and Sandy Douglas will remain an integral part of KO's leadership team and future."  

NY State attorney general Eric Schneiderman reached settlement late last week with Abbott Laboratories over advertising of its Pediasure SideKicks bevs, AP reported. Pharma co agreed to cease ads with unsubstantiated claims that sugary drinks with added vitamins and minerals "targeted nutrition" for kids' "unique needs," per report. Abbott will pay $25K fine to state. AG office began investigation after receiving complaints that ads were misleading by implying that pediatricians recommend SideKicks for healthy, thriving children. Abbott rep told AP that co is happy to resolve issue and that PediaSure SideKicks is "nutritious snack alternative for children" who may have nutritional gaps in daily diet.  

At compact expo area attached to BevNet Live conference in Santa Monica this week, Amcor Rigid Plastics was touting forthcoming new program called UpStart that aims to ease barriers to small and emerging brands getting the right packaging solutions. "Scalable bottle solutions" plan due in Feb/Mar timeframe will demand lower minimum runs of brands, in part by adopting new machines that require fewer molds, said Amcor staffer Marisa Ayala. For brands looking for more economical solution to need to customize panel-less PET bottle that has become default choice for many brands, co will offer semi-customization option in which, say, proprietary mold must be cut for top third of bottle but lower 2 sections employ standard mold sections. Idea is to allow new customers to start with smaller runs employing stock bottle and grow with Amcor rather than having to migrate among suppliers as brand develops, Ayala noted. Besides startups, program also targets larger cos that need to muster small runs for promotional bottles or market tests, she said. Amcor's network of 4 regional facilities in Penn, Iowa, Calif and Va also facilitates staged growth of new brands that might start as regional brands before moving to broader geographic presence.  

Tho some Calif beer houses enjoying flush times with craft brews have been standoffish toward NA brands, that may be about to change now that many have agreed to pick up distribution of Jarritos Mexican sodas from importer Novamex, prexy of Bud/Red Bull house ME Fox told BevNet audience. As craft segment has blossomed, some of ME Fox's beer peers have closed their doors to NAs, complicating efforts to offer solid regional coverage and avoid issues like transshipping, said Terence Fox, prexy of family-owned biz that's maintained stable of non-Red Bull NAs. But agreement by 8-10 Calif beer houses to pick up Jarritos as of Dec 1 (following failed experiment by brand in state's Dr Pepper Snapple Group network - BBI, Oct 28) means those houses now are in NAs in a big way and will be looking to bring in other brands.

Tho family-owned ME Fox has been around since 1965 and engaged with NAs since mid-1970s, mgrs there still have sense of "somewhat feeling our way around the dark" amid ever-changing segment, Terence acknowledged. Co does 3.2 mil case-equivalents of beer from suppliers like Anheuser-Busch, Crown, Diageo/Guinness and Sierra Nevada, about 575K cases of Red Bull and another 175K cases of non-RB NAs after selling off Snapple and AriZona brands a few years ago. Current NAs include Nesquik, Hint, Voss. ME Fox serves all of Santa Clara County with its NAs but Red Bull footprint extends to San Mateo County, too. Footprint includes affluent Silicon Valley toward north and west but also Hispanic/blue collar demo. Given its strong Mexican heritage, Jarritos is viewed as key addition that could bring 200K cases - "game changer for us" in that part of portfolio, Fox figures. That kind of volume should be enough for other beer houses to rebuild NAs around, as noted.

In BevNet presentation Fox offered "how-to" for working beer system in NorCal. Safeway is major retailer, of course, but of increasing importance in Fox's Silicon Valley territory are non-trad customers among tech community such as Facebook, Apple, Google, LinkedIn and eBay, some served directly, others via sub-distributors. Google "may want your appendages and organs," but you'll do tremendous volume there, Terence promised. In those microkitchens, "if it's not subsidized, it's free," eliminating liability of superpremium brands in most other retailers. More and more of these accounts are getting licenses to sell alcohol, too.

Fox advised would-be NA suppliers to maintain realistic awareness of pressures and motivations of shops like his. They're under increasing pressure to maintain focus on core suppliers, particularly A-B. They prefer all-channel exclusivity rather than carve-outs for some channels or retailers. (Unlike in other parts of country, tho, Whole Foods won't accept DSD deliveries for NAs in his territory, so that's frustrating fact of life given high volume of beer ME Fox delivers to retailer.) Profitability and quick turns are more important than ever in territory with soaring fuel, warehouse and unionized labor costs, and one in which thriving craft beers offer $12-16 per case margin simply for dropping a few 6-packs on shelves, vs smaller margins for more arduous merchandising of single glass bottles of many NAs. As for interactions with wholesaler, Fox said bluntly that co wants "no needy girlfriends - keep in mind where you fall in the pecking order" at house that does 95% of its biz from beer and Red Bull. That applied to NA supplier who proposed crew drive for Jul 4 holiday, period when co draws 12-15% of its annual revenues. Not gonna happen, Terence advised. No mention by Fox of Red Bull move to open its company-owned Southern Calif distributor to Evian water (story above).

Of course, contracts are issue - Fox allowed that, if it's really powerful brand, he'll settle for less preferable deal, but then won't be so willing to pony up for support. Craft brands' performance, he noted, stands as sign of what motivated DSD distributor can do. Buyout of one times gross profit he referred to as "use and abuse." Judging by the 10-12 NA deals he's negotiated over past 2 years, he noted drily, "I think you're all using the same attorney because they're all one-sided."  

"Raw" may be about to join "natural" as bev descriptors that are frequent target of class action suits, regulatory attorney Justin Prochnow warned audience at BevNet Live conference in Santa Monica, Calif, this week. Speaking in wake of suit vs BluePrint over use of term to describe items produced via high-pressure processing, Greenberg Traurig attorney stressed key distinction between phrases like "fresh" that are explicitly defined under federal regs, and those like "raw" and "natural" that receive vaguer treatment. In other words, if food/bev item whose processing hasn't changed it from natural condition is labeled as "fresh," marketer should be on safe ground, because it's compliant with specific reg. That's not case for descriptors that are only vaguely defined in federal regs. That's been the case with "natural," issue in several suits brought by plaintiffs bar, and now it's proving to be case with "raw," as in case of suit vs Hain Celestial's BluePrint line contending that HPP processing changes item enough for it to be misleading to term it raw. (Suit was filed in NY but claims fall under both NY and Calif law, setting stage for possible challenges in other jurisdictions.) So it's incumbent on bev marketers to "be very specific about what you mean by 'natural' or 'raw,'" Prochnow advised.

Other Advice from Prochnow: Claims, Caffeine, Social Media Making case for careful attention to labeling reqmts, Justin noted that marketer that lists specific calorie count rather than rounding it off to nearest 5 calories may not draw flak from regulators, but it will draw closer scrutiny. "The feds will wonder what else you don't know," he offered . . . On caffeine issue, Prochnow reminded listeners that ingredient is only "generally recognized as safe" (GRAS) when used in soda products, so you need to do your own GRAS report if using caffeine in a different bev segment . . . Prochnow also urged marketers to stay away from making disease claims - advice that can be murkier than it seems to follow at time social media looms so large. Prochnow referred to marketer that received letter from FDA for re-tweeting consumer's disease comment. Another co that "liked" consumer's social media comment on how product was keeping cancer at bay was viewed by feds to be offering endorsement of disease claim . . . Among ingredients that lately have been drawing stepped-up scrutiny from feds are African mango, green coffee berry extract and raspberry ketones.  

Aspartame, which has been focus of health risk concerns in some studies, and blamed for some of drop in diet soda sales in US, got stamp of approval from European Food Safety Authority (EFSA), reported Reuters. After what EFSA described as "one of the most comprehensive risk assessments of aspartame ever undertaken," it concluded under current consumption levels it does not pose a health risk. Findings "will be seen as a victory" for co's like Coca-Cola, which took out ads defending the sweetener this past summer. Not everyone is in agreement with EFSA decision however as Reuters noted some food safety regulators are questioning "data gaps" in this decision.  

Prices on 2-liter sodas are way too low at Walmart, assessed Bernstein Research's Ali Dibadj after getting "guided tour" of co's holiday shelf set in Northeast. "We were disappointed to see prominently displayed 2-liter bottles of Coca-Cola CSDs on sale for $1," said Ali. "Again, our view is that lower pricing is deleterious for the category as volume declines are not price-driven but driven by health and wellness concerns." To be fair, Ali noted that price cuts are not just from KO, as there were discounted 24-packs of Pepsi and Coke displayed and "the most aggressive driver of price competition" he viewed on tour was Walmart's own private-label water.