BMI Archives Entry
This one almost crept under our radar: Teas' Tea marketer Ito En appears to be taking significant step both into coffee realm and in buttressing presence on foodservice side with pending acquisition of Tex-based coffee roaster Distant Lands Trading. In deal announced only in co's home Japan market over holiday period, Ito En will pay about 10 bil yen, or $82 mil, via complex transaction dubbed "reverse triangular merger" and place DLT under umbrella of Brooklyn-based Ito En North America. DLT generated $668K in operating profit on $161 mil in sales for fiscal year ended last Sep, per Nikkei news service. Deal went to contract Dec 25 for anticipated closing in Feb but doesn't seem to have drawn any US coverage yet.
Deal seems significant on several fronts. Tho Ito En is key player in well-developed RTD coffee segment in Japan, it hasn't owned or operated its own coffee plantations in the way its extensive tea gardens support RTD tea biz. So this offers vertical integration, at time North American unit has just moved into RTD coffee segment itself via brand called Jay Street. DLT operates 6 farms and 2 processing mills in Costa Rica, including flagship Hacienda La Minita; newer mill in Colombia, and pair of roasteries in US. Its founder/ceo Bill McAlpin is highly respected grower who seems to have won over coffee cognoscenti about pod format's suitability to high-end coffee via La Minita K-Cup, which uses surgical-grade material that's slow to release but allows greater transfer of flavor oils, yielding "coffee nirvana," per one blogger.
Further, at time premium tea players are making strong push into foodservice segment that's viewed as ripe for upgrade, DLT brings broad reach into corporate foodservice and quick-serve restaurants. Over nearly 2 decades it's provided coffee served at Panera Bread eateries as that chain has grown dramatically, and also provides bagged coffee and single-serve cups sold in groceries under Panera name. Others at premium end of tea biz, such as organic brand Honest Tea, have been pushing hard to boost foodservice presence, with Honest Tea undertaking tests at chains like Wendy's. Not least, technical capabilities of Distant Lands will enable Ito En to diversify its range of formats considerably beyond familiar square-footprint PET bottles that dominate its offerings.
Contacted today, N Amer coo Jim Hoagland said he wasn't at liberty yet to discuss transaction in detail, and in any case not all details are set yet. But he confirmed those are benefits deal brings to Ito En. "There's a lot of growth opportunity on coffee side," he said, and DLT addition will put it on par with tea side in enjoying benefits of vertical integration. No word yet on whether McAlpin will stay on following closing. English-language press release posted on Ito En's Japanese Web site seems to have been hastily translated from Japanese and is sometimes hard to decipher, but it appears to indicate that owners of DLT are PE shop Centre Partners, entity called Doc Allen & Son that's owned by Bill and Carole McAlpin, and 51 other shareholders. It offers diagram to explain details of reverse triangular merger that we won't try to summarize here.
One of "Storylines to Watch" for 2015 last issue dealing with Honest Tea noted challenge of being folded in under new Coke structure with co's other teas and its waters and coffees. However, tho Honest Tea no longer maintains its own sales force, it does work thru consolidated sales force of Coke incubation arm VEB, along with other VEB brands Zico Coconut Water and Illy coffees, rather than broader KO sales force. VEB sales team is led by Chuck Muth, who previously led Honest Tea's DSD and warehouse sales force. "That team will continue to push our products, even as the day-to-day management of that part of our business shifts to the Water, Tea & Coffee team," noted Honest Tea ceo Seth Goldman.
Kickstarter campaign launched by Fred Water handily beat $50K target, bringing in $205K as 4,623 backers in 60 countries purchased 6,397 of refillable stainless steel water bottles offered by marketer of plastic-flask-packed bottled water. As reported (BBI, Nov 25), month-long campaign had enlisted colorful array of entertainers and athletes for video humorously flogging development of reusable flask, capped by cameo of Lil Wayne. Effort was intended to stoke interest in co's new "more water, less sugar" message and raise awareness of core brand, too. Campaign "allowed us to connect with fans in a new way and establish a dialogue with those who share the same guiding principles we have as a company, and its success is proof positive that we're on the right track in terms of mission and product," said cofounder/ceo Adam Gayner.
Branford, Conn-based trio of entrepreneurs is looking to attack enhanced-water segment with new brand called Trimino Protein Infused Water. Operating as Miami Bay Beverage Co, brand founders seeking refreshing but fortifying alternative to soft drinks first sought to launch sparkling protein bev but found formulation challenges too daunting and have gone now with still formulation. Line packed in 16-oz full-wrap PET bottles sports 7 g of whey protein, array of B vitamins and clocks in at just 20 calories per bottle via sweetener blend of ace-K and sucralose. (Co has stevia-sweetened versions ready to go too.) Initial flavor range is Peach, Mixed Berry, Strawberry Lemonade and Coconut Pineapple. Trimino brand name refers to 3 core benefits (whey protein, B vitamins and lack of sugar or caffeine) plus presence of amino acids. Its founders are ceo Peter Dacey (a founder of DNA sequencing giant Life Sciences Corp), coo Casey Hoban (private equity vet) and chmn/cmo Robert Leary (retired healthcare software exec). Only bev connection among trio is Hoban's role as member of turnaround financing team for Vermont Hard Cider. Co just completed 2d round of financing, about $1 mil from 3 founders and couple of outside investors including unidentified Morgan Stanley investment banker.
Unlike most established protein brands, Trimino doesn't target athletes, tho it's happy to see interest developing among groups like triathletes seeking post-race recovery drink. Rather, it's going after active adults and dieters looking for nutritional upgrade in their bevs. Going with moderate 7 g amount of protein also allows for greater emphasis on flavor and refreshment, in contrast to rivals like Protein2O, whose enhanced water sports 15 g of protein. Brand started modestly in Conn via self-distribution to about 200 retail accounts, from IGA stores to hockey rinks and CrossFit gyms. More recently, it's moved into chains like Roche Bros and Big Y. It's been going out at $2.49 and up, but Leary said price at Big Y, $2.25 per bottle (promoted at 2 for $4) reps where partners aim to take brand for off-premise channel. They've tiptoed into DSD starting with Farrell in Vt and enlisted specialists to work corporate accounts, with Corporate Essentials in Manhattan and Crystal Rock outside boro. A pair of Dallas-based entrepreneurs who approached Miami Bay have been assigned Trimino for heartland markets, enlisting small DSD shops in Tex and entering Casey's General Store c-store chain in Midwest. On marketing side, co will leverage recent alliance with obesity-fighting Phit America, non-profit org that promotes grassroots sports programs. Brand info at DrinkTrimino.com.
American consumers are becoming more familiar with green juices, with spinach their favorite ingredient. So concludes survey commissioned by Starbucks' Evolution Fresh cold-pressed juice brand, which is pushing its greens items as consumers try to make good on their New Year's health resolutions. Online survey of 1,000 US adults 18 or older conducted by Wakefield Research found that 43% of them claim to have tried green juice. Some 58% named spinach as most important ingredient to have in bottle of green juice, survey noted. And overwhelming majority are label readers where this segment is concerned: 86% want to know what's in bottle first. More than one-third are savvy about segment judging by label priorities: low sugar content (38%), seeing green veggie listed as first ingredient (36%) and seeing that bottle contains more veggies than fruits (34%). Margin of error was about 3%.
Dr Pepper Snapple and Keurig announced deal which will bolster # of brands offered in upcoming Keurig Cold home bev dispenser. With Coca-Cola already in fold as participant and investor, Keurig added 2d of Big 3 soda makers as it preps to compete with SodaStream. DPS deal "could put pressure on PepsiCo," which is testing drinks with SodaStream "but hasn't said it plans to expand the agreement" so far, noted Wall Street Journal. Deal is "a positive for GMCR," figures Goldman Sachs' Judy Hong. "This reinforces GMCR's ability to successfully partner with brands of scale even for the Cold platform." She also sees deal as a "vote of confidence" for "future prospects" of at-home cold drink dispenser biz.
Starbucks enjoyed another great holiday season at cash register, announcing that 1 in 7 Americans received gift card from coffee giant this past month. That translates to "nearly 46 million" SBUX cards, up from 40 mil from last yr, noted Fortune mag. More than $1.1 billion "were loaded on the company's cards in the US and Canada throughout the most recent holiday season," a rep told mag. SBUX cards prove popular once again with last-minute shoppers as "nearly 2.5 million" cards were activated on Christmas Eve. Meanwhile, not everything ran smoothly for SBUX over holidays, as blog 24.7 Wall Street reports that like many other cos looking to move excess inventory, SBUX is offering some of its Christmas coffees at 50%-off online. Christmas Roast Blond, for example, is available at $7.48 per lb vs usual retail price of $14.95. "The 'End of the Year' sales at Starbucks show that even the most successful company can get caught with unwanted products," noted blog. That's no revelation of course: BBI has often seen co moving out bagged coffee at hot prices at Target chain.
Functional player Hydro One Premium Beverages has enlisted biz development firm run by former Coke exec called Carvalho & Associates International to help plot next stage of growth. Charleston, SC-based co was vague about CAI's specific mandate except to say it would serve as partner for strategic development. Tho Atlanta-based CAI, founded by longtime Coke exec Ricardo Carvalho, started out primarily as Latin American consultant for clients like Coca-Cola and its bottlers, it's since broadened its activities to M&A, capital raising and marketing, throughout Western Hemisphere, and includes among its associates former CCE ceo Brian Dyson. It lists past and present clients as including likes of Wendy's, AT&T, UPS and various Coke-affiliated entities. For its part, Hydro One has built slowly for a decade as functional line with entries like Rev-D, which last year won patent for its Cinnulin PF functional cinnamon extract, and Bode Sport and True Green Tea. Its founder, Sammy Nasrollahi, is former soccer pro.
CSD prices were up avg 4.3% in IRI all-channel data last 4 wks thru Dec 28, as reported by Morgan Stanley's Dara Mohsenian. That's down a bit from +4.7% gain prior 4 wks but up from +3.8% last 12 wks and increase of 1.9% for CSD prices last 52 wks. CSD volume was off 3.1% last 4 wks vs 2.5% decline last 12 wks and 2.2% drop over 52 wks. Pricing was solid for both regular (+4.5%) and diet (+3.7%) brands while volume for regular CSDs was off 1.7% vs 6.3% drop for low-cal brands. Avg prices increased for each of the top-3 suppliers tho each lost volume. Coca-Cola avg price up 5.4% with 3% volume drop last 4 wks. That's in line with 12-wk trends. KO volume was off 1.4% last 52 wks in all-channel data with avg price gain of 2.5%. PepsiCo avg price accelerated to +4.1% with 4.2% volume drop last 4 wks. Over last 52 wks, PEP volume slipped 2.1% with avg price gain of 1.6%. Dr Pepper Snapple avg prices edged up to +3.2% last 4 wks with 1.3% volume drop, similar to 12-wk volume trend. Over 52 wks, DPS CSDs were off 1.2% with modest 0.7% price increase in all-channel stores. Private-label brands lost volume (-4.9%) despite 1.5% price cut last 4 wks. Private-label volume dropped 8.4% with avg 2% price decrease over 52 wks.
Energy Still on a Roll, Gains Accelerated in Dec Big question has been whether energy category will maintain momentum in new year. On that score, category showed encouraging momentum in final month of 2014, rising 8.7% for 4 wks thru Dec 28 on flat pricing, per IRI datea. That's up from 5.8% gain over last 12 wks and 5% increase for category over 52 wks. With small price decrease of -0.6%, Monster Beverage outperformed with volume jump of 13.4% last 4 wks. That's up from 8.2% volume gain over last 12 and 52 wks for MNST in all-channel data. Red Bull volume gain accelerated to +8% with avg price increase of 0.9% last 4 wks. Red Bull gained 6% with flat pricing in these stores over last 52 wks. Rockstar slipped 1.8% with a small (-0.5%) avg price drop last 4 wks. That's half Rockstar volume decline rate last 12 wks. Rockstar volume still up 1% with a 2.7% price drop over last 52 wks. Coca-Cola energy brands (Full Throttle and NOS) remained hot. Volume surged 22.1% with 3.3% price increase last 4 wks. KO energy brands gained 16.2% last 52 wks with positive pricing too (+2%). PepsiCo energy brands (Amp) were still struggling, off 4.8% despite avg price drop of 2% last 4 wks. PEP energy volume was off 5.9% on 4.4% price drop in all-channel data over last 52 wks.
Sports Drink Finish Year on High Note Sports drinks volume increased 5.9% with avg 3.7% price increase in all-channel data last 4 wks thru Dec 28. That's up from avg 3.9% volume gain prior 12 wks and 1% gain for category last 52 wks. Gatorade maintained its gain pace, up 7.3% last 4 wks even as its avg prices edged higher to +3.2%. Gatorade volume was up 2.9% for 52 wks with avg 2.2% price increase. Rate of avg price increase for Powerade was almost cut by half to +2.8% last 4 wks vs 12-wk trend which helped lift volume from drop of 4.7% last 12 wks to 2.7% gain in latest month. For 52 wks in all-channel stores, Powerade volume was off 3.9% with 2.8% price increase.
Water Prices Up Pricing in bottled water segment improved quite a bit as 2014 came to a close. Category pricing up 0.5% last 4 wks thru Dec 28 vs 2.7% decline for 52 wks. Volume was up 8.9% in latest month, ahead of 52-wk gain pace of 8.3% in all-channel data. Discounting pace on Coca-Cola bottled waters picked up in Dec to lift volume. KO knocked water prices down 3.3% in Dec (vs +1.5% prior 12 wks) and was rewarded with volume gain of 16%. That's double 12-wk avg increase. Nestle Waters volume up 6.3% on avg 1.3% price drop last 4 wks. PepsiCo gained 6.4% with avg 2.7% price drop last 4 wks. Private-label brands gained double-digits, up 11.7% with slight price decline of 0.1% last 4 wks. Private-label volume increased 9.3% on 1.8% price cut for 52 wks.