BMI Archives Entry
05/12/2016
Reed's Shares Ebb on Another Rev Decrease in Q1; Revamped LA Plant May Not Go Live This Year
On positive side, demand for core Reed's and Virgil's CSD brands seems to remain robust, with Stater Bros the latest grocery chain to take in brands. Recall that last year, even as co suffered production glitches at its own LA plant, its longtime East Coast copacker went down in Aug. New copacker on East Coast meant to pick up slack suffered issues coming on line, so co was forced to recruit 3d copacker as backup to the backup. So Reed's went into triage mode, steering most line time to core Reed's soda, then to Virgil's, then Culture Club and private-label kombucha while suspending promo activities. The outages cost it estimated $5 mil in lost sales. Reed's brand, stinted the least and out of stock only 3-4 weeks, managed 5.3% uptick in sales in Q1. But Virgil's, out of stock for 6-8 weeks, slumped 11% (tho its core Root Beer sku, given production priority, eked out 1% gain). Kombucha, out of stock 12 weeks, fell 17%. Sideline segment, Reed's ginger candies, plunged 30% on separate issue, Calif state lawsuit that forced ginger and plum candy producers to find different suppliers after lead was detected in items. With core bev brands back in availability, natural-foods broadliner UNFI has embraced them and is readying email blast to its 60K customers spreading the news. But retailer Harris Teeter dropped brands, and other distributors and retailers have been slower to restock, portending extended process of reclaiming lost presence. "It was severe," Chris allowed, "but there's a lot of love here."
No Chance LA Revamp Will Go Live before End of Nov Founder Reed continues to wax ebullient about prospects for realigned mfg setup under coo Mark Beaton, former Dr Pepper Snapple exec. After pain of past year, it's moved from having 2 plants a year ago - one on each coast, including its own in LA - to 4 now. Realigned East Coast copackers should bring $150K in monthly savings.
Upside also should be big at LA plant, which has received $3.5-4M investment in new equipment and another $750K-$1 mil in soft costs. Upgrade will allow it to run 3X faster and save up to $75-100K per month in labor and other costs. That's why word that co won't do cutover until end of Nov at earliest prompted disbelief from some investors. Why put off saving $250K per qtr in favor of low-margin private-label biz, one wanted to know. "You are making Dan (Miles) the cfo so happy with your questions," Chris responded. Issue arose when West Coast private-label customers told co they wanted to double their orders. REED had right to say no in favor of finding time to schedule the two 2-week closures needed to install new line, but ceo figured those are important relationships to maintain and, in any case, potential $80K in monthly cost savings from new line is a wash against 80K cases of private-label output at $4 gross profit per case. "I'll always take more business with an economic wash," he said.
Bag in Box Initiative Should Yield Revenue This Year On last night's extended conference call, ceo Reed continued to tout prospects of all-natural bag-in-box format co has been aggressively pushing as potentially explosive growth engine as food chains move away from preservative-laden conventional CSDs. National restaurant chains have been playing with prototypes and co is demo'ing system aggressively at trade shows. When investor asked directly, "any revenue at all on fountain this year?" Reed responded, "I believe there has to be."
Kombucha Restage in Works Reed also avowed intention to continue effort behind kombucha, once touted as major opportunity but proving to be a struggle even before production snags took it out of market. Since custom-designed glass bottle with concave sides has aggravated production issues, one investor wanted to know why co doesn't switch to less distinctive but more producible package, of type it uses for private-label kombucha it makes. "Our sales manager loves you for that, Thomas," Reed replied, saying planned relaunch may include bottle revamp. "You just pushed it a little more," he said.
Doing $8 Mil Biz thru Beer Houses Exec also remains bullish about prospects that rebuilt DSD network brings to growth prospects up and down the street. In NY, partner Manhattan Beer is doing $1 mil year, figure that can dramatically increase, he believes. All told, co is doing about $8 mil thru Anheuser-Busch and MillerCoors networks, but that eventually can grow to $50-100 mil range as brand rides wave of consumer interest in craft sodas, he believes.
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Recall Eric last year left MetaBrand, NJ consultancy he founded, and hung out shingle as BeyondBrands, encompassing not just bevs and snacks, as MetaBrand did, but broader food category, eco-fashion (realm where Zaroff has made her name), beauty care, nutraceuticals and conscious cannibis. (MetaBrand also motors on, under mgmt team of Craig Fortin and Debbie Wildrick.) Eric's doing bunch of things differently at BeyondBrands. Among them, co is taking equity in lieu of payment in some earlier-stage brands, dubbed "venture brands," approach Eric said was harder at MetaBrand, which was mainly funded by single deep-pocketed investor. Co groups clients into 3 general buckets. Venture brands are those that are either pre-revenue or in first year, and BeyondBrands usually takes equity stake for its efforts, giving its various partners chance to enjoy upside for those that break out. Emerging brands have demo'd proof of concept and are generally doing $1-10 mil in sales; they pay for services from BeyondBrands' extensive smorgasbord, including fundraising for B or C rounds leveraging consultancy's extensive network of contacts. Then there are global brands, major players that may need guidance on strategic issues like penetrating natural channel; they draw upon BeyondBrands roster that includes alums of Fortune 500 cos. That practice, which is in coupla promising discussions that may yield first client, is led by Cadbury and Nabisco vet Michael Lines, marketing expert Lee Brody and ex-Starbucks exec Vernoica Park. Schnell and Zaroff will sometimes take personal equity in co, as with Loft cannabis play or Beyond Broth bone broth, both described below.
Following are thumbnails of a few in mix. In addition, co has been working with former male model Cameron Alborzian, now Yogi Cameron, on line of 7 dietary supplements due in 2d half of year, in form of liquid tinctures dropped into water or bev. Brand name is still in development, Eric said.
Loft Tea Offers Cannabis-Based Sparkling Bevs Rich in CBD Brooklyn-based Loft is sparkling "cannabinoid infusion" that's made from hemp oils that have been made water-soluble via innovative process. It's built on organic tea base and is packed in similar glass bottle to Grown Up Soda brand, and available in trio of sku's priced at $4.29. Since it omits psychotropic components of ingredient, it's legal nationally, not just in states that have legalized cannabis. It was launched last Jun by entrepreneur from tech realm, Michael Christopher, who told Village Voice last fall that brand name flicks at loft living and work spaces in Brooklyn as well as "lofty." Some info at LoftTea.com but site hasn't been updated yet to reflect work performed with BeyondBrands.
Beyond Broth Offers Vegan Take on Bone Broths Based in Boulder, Colo, Grace's Good Food is family operation led by Grace Ventura whose initial line is Beyond Broth, powder-based organic vegan version of bone broths that have been developing avid following. Styled as "daily ritual for wellness," it's made from sweet potato, beets, carrots leeks and herbs in Immune, Vitality and Yummy Tummy sku's, offered in packets similar to those of Emergen-C, packed 30 to a box. They can be consumed alone or with noodles for ramen-style repast. Info at HealingBroth.com.
Sudden Coffee Offers Freeze-Dried Coffee, Via-Style, in Test Tubes Launched by former Helsinki barista Kalle Freese, SF-based Sudden Coffee offers superpremium instant coffee that attempts to go Starbucks' Via one better, using single-origin beans that are handcrafted into coffee, then crystallized and packed into plastic test tubes of type that are used in shooters and other bev realms. Using initial seed capital round, biz plan calls for establishing brand via online subscriptions and e-commerce, with retail biz not expected to follow for at least another year. Preliminary website is SuddenCoffee.com.
ChugaChaga Gets Brand Refresh Ahead of June Launch Based in upstate NY, ChugaChaga founders Luke Evans, Marc Iskandar and Adam Kaiser, all University of Albany alums, are looking to ride mushroom trend with what they claim is first organic, 100% wild-harvested bev based on nutrient-rich chaga shroom. (The so-called "tree tea" made appearance at BevNet Live showdown in Santa Monica, Calif, last Dec - BBI, Jan 6.) Brand, whose name plays on "chug a chaga," retained BeyondBrands for refresh, with results likely to be seen next month when co launches 3 sku's in rethought package that's similar to Runa's RTD bottle. Chaga, fungus which grows on birch trees, is often described as "diamond of the forest" and "king of medicinal mushrooms" for its rich antioxidant and melanin content. Co is undertaking capital raise ahead of launch. Some info at ChugaChaga.com, tho new packs haven't been posted yet.
Forest Tea Offers Ecuadoran Take on Horchata in RTD Form Forest Tea is RTD line based on Ecuadoran version of horchata drink that's popular among Hispanics. It contains blend of 20 herbs, in flavorful, pinkish-red liquid, offered in 3 sku's packed in 16-oz bottle. Brand will break in LA via Hispanic-oriented DSD distributor, Schnell said.
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Earnings report came as Dean announced it signed deal to purchase Friendly's Ice Cream manufacturing and retail biz for $155 mil in cash. Dean will also acquire Friendly's trademark, but deal doesn't include Friendly's eateries, which will continue to be operated by Sun Capital Partners, which will license use of trademark from Dean. "Friendly's ice cream strongly resonates with consumers throughout the Northeast," said Gregg. "Very similar to the traditions shared by consumers who grew up enjoying our existing regional milk and ice cream brands, such as Mayfield or Dean's," he added. Friendly's ice creams are currently distributed in 8K retail locations, doing $166 mil in sales in 2015. Friendly's retail biz has doubled in sales over past 5 yrs, noted AP.
Among individual brands' performance, DEAN brass said flavored milk segment continued strong, with True Moo up nearly 1% and co's private-label entries rising strongly. Dairy Pure national brand continues to make progress, and in early days innovations like lactose-free milk are faring well, they said.
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Within Americas div, plant-based segment, which includes brands like Silk, So Delicious and Vega, scored gain in high-single-digits excluding acquisition; with Vega, sales shot up by double digits. In sign that efforts to push such new lines of biz as shelf-stable line targeting impulse channel are garnering some traction, co said its away-from-home biz shot up 20%. WWAV coo Blaine McPeak said co was pleased to see consumers will to pay increasing premium for plant-based alternatives over conventional dairy milk, moving from 60-70% premium a year or so ago to 80% last year and past 90% in Q1.
Premium dairy segment, including Horizon Organic milk, rose 16% in sales, high single digits excluding Wallaby acqn. And coffee creamers/bevs, including huge Int'l Delight brand, was up 10%, with lotsa action afoot, including new ad campaign and effort to offer upgraded items like Simply Pure, with label sporting short list of just 5 natural ingredients.
Earthbound Farms, which offers organic salads, fruits and veggies, was flat due to SAP installation issues that caused unit to fail to meet some delivery commitments and cost it shelf space at grocers. Despite glitches, Engels said he remains convinced that it was good acquisition to make, given ability to serve as platform to scale up biz in store perimeter and extend beyond salads. (Recall unit is viewed within WWAV as highly synergistic with Austin-based juice play Daily Greens in which co holds minority stake.) Still, he warned that it will be laborious process to reclaim the lost shelf space.
Tho WhiteWave has suddenly emerged as player in shelf-stable bevs, launching dairy alternatives and cold-brewed coffee and embarking on search for DSD distribution in some markets, no color was offered on effort beyond comment that away-from-home segment is growing quickly.
New Tack in China: Broader Product Range, Broader Range of Prices WhiteWave is rejiggering its foray into China using lessons from test markets last year. After launching with just nut-based portfolio at very premium price positioning, it's augmented portfolio with nut- and soy-based items at lower, but still premium, price point that have rolled out to broader geographic area 3 weeks ago. And in current qtr WWAV will launch suite of purely soy-based products at more traditional price points. Engles credited distribution partner with being highly engaged, but acknowledged that co is still "in process of figuring out how to crack the code." But he promised investors co would continue to do so in financially disciplined way.
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Tho N Amer prexy John Sheppard had abruptly departed a few weeks ago after only short stint, co has wasted no time in trying to restore momentum here, replacing Sheppard with Doug Pritchard, who'd doubled household penetration in Canada to 2% in less than 6 months, and breaking new national TV effort. That campaign, which broke last Thurs, is dubbed "Love your water" and eschews past pyrotechnics in favor of plain-spoken argument that SodaStream fosters healthy hydration. "Want to drink more water?" asks voiceover in 15-second ad depicting healthy-looking family. "With SodaStream, you turn plain water into sparkling water, in seconds. And because it's so delicious, you'll drink 43% more water every day." Media plan is getting heavier weight in high-indexing markets SF, Seattle, Minneapolis and NY, as well as in some low-indexing markets to see whether it moves needle, Birnbaum indicated.
As part of relaunch effort being overseen now by Pritchard, co is rebuilding US retail presence, say, by doubling space at 200 Target stores; launching test within Whole Foods stores in Conn, Maine and Boston to exploit health & wellness positioning, and expanding range of systems at unnamed key account from 2 to 3 for this holiday season. It's also working to make CO2 cartridge exchanges easier for consumers, going live with Fizz Concierge concept with partner UPS in some areas of Penn and NJ, and planning home delivery in NYC by end of qtr. Tho co has pulled back from Walmart presence, it's opened up gas-only distribution at 350 stores that once carried whole system.
After expensive misfires with Super Bowl and other ad forays in past years, there are signs co is building a rhythm in its marketing. Touching video titled "Island of Peace" depicts Israelis and Palestinians working side by side in harmony and, often, affection at co's plant in Israel, and has drawn 35 mil views so far, Birnbaum claims. And spoof released on April Fool's Day called "Heavy Bubbles" features Icelandic giant Thor Bjornsson, the strongest man on earth and familiar figure from Game of Thrones, memorably demonstrating of the absurdity of carrying home bottled water, which he schleps in dumbbell-shaped plastic bottles as body-building regimen. "You can become stronger just by carrying it home from the supermarket," he advises viewers. Faux-tagline: "Heavy Bubbles: Sparkling water that makes you sweat." (Longer version segues to explicit pitch for SodaStream and concludes with exhortation, "F--- plastic bottles.") By now "Heavy Bubbles" has drawn more than 50 mil views "without a dollar of media investment," ceo Birnbaum exulted. (Both videos, as well as "Love your water," can be viewed here: http://www.sodastream.com/video/ )
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05/06/2016
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Canada Pure is packed in 15-oz PET bottles with tapered necks, promising "the taste of something real," per on-pack copy. It comes in Lemon Lime, Triple Berry, Black Cherry and Orange Twist flavors, sweetened with cane sugar and coming in at 50 calories per 8-oz serving. But it's cold-filled, meaning it won't pass muster in natural retailers. It employs municipal water source. Drouillard is aiming to capture price a bit above that of Sparkling Ice, which similarly was longstanding entry of Pacific Northwest regional player Talking Rain that ignited nationally in updated version given greater focus. Canada Pure will be backed by social media efforts under slogan, "Dare to be real." Tho they prefer to stay in background, owners come out of telecom biz, Scott indicated. Brand info at CanadaPure.com.
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Since much of sales jump was result of sell-in of new 7-Select line created for c-store giant 7-Eleven, question is whether it will sell thru to maintain momentum. Cue termed launch "flawlessly executed" but said she's constrained by retailer from saying anything about performance. Meanwhile, she said core Jones Soda line continues to log progress, tho co offered no info on how much it grew in earnings release, conference call or 8-K filing. "It remains the engine and we're pleased with the progress and momentum" at time consumers are gravitating toward CSDs with better ingredients and unique personality, is all she said. It continues to be backed by initiatives like Caps for Gear swag promo and has added Snapchat to social media mix. JSDA also claims to be happy with feedback on Italian-inspired canned Lemoncocco line, which has gotten formula tweak. On last night's earnings call, tho, Cue resisted shareholder's exhortation to step it up, saying co would continue with disciplined, deliberate expansion, which began in endemic Italian-oriented retail and distribution channels.
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face="Times New Roman">Tom Lines, early investor in FRS who took sole control of quercetin-based brand after $100-mil-plus in sales/marketing efforts by prior mgmt teams failed to ignite, is taking deliberate route to relaunch, recruiting Iteration Media for consumer deep dive and brand rethink and mixologist Alex Ott to reformulate liquid, even as he gets ready to bring back Nutrisoda functional soda brand in coming weeks.
FRS, of course, is brand that became poster child for how to expend vast sums of investors' capital with little to show for it in brand awareness or sales, despite clinically based evidence that core ingredient, quercetin, carries powerful benefits. Lines, who was among those who ponied up what he said amounted to $150 mil thru numerous rounds over a decade, said he never lost faith in brand and last year claimed control via deal that calls for him to continue significant investments in line. He also controls quercetin provider Quercegen, which operates separately.
Since taking control of FRS last year, Tom has focused on stabilizing and rethinking brand, raising price 70% to $78 per month for regimen users, dropping free shipments to influencers and making plans to reformulate line with twice the quercetin level (BBI, Sep 9). Price hike scared off some users for a few months, but many came back, he said yesterday. He's fortified line with pair of items under different brand name, Q-Force. He's also brought aboard new-age vet Bob Miller to help rebuild distribution, retained social media Iteration Media to delve into makeup of current user base and recruited high-profile mixologist Ott to reformulate line. (Alex had played similar role at Mercy hangover prevention bevs a few years ago.) Iteration, whose clients have included Monster Energy, Three Olives Vodka and Under Armour, pulled some surprising insights out of deep dive, finding, to Lines' pleasant surprise, that it's got ardent cohort of younger users age 16-to-30, tilting about two-thirds male. So he's inaugurated Millennial Initiative to figure out ways to build that tie. Some have made FRS a replacement even for their morning coffee, and many drink FRS powder as hot bev like tea. Tho RTD bevs were fulcrum of effort to go big in past, they're currently smallest part of biz, but once reformulation is complete, Lines and Miller will go out to re-recruit DSD distributors and open marketing spigot. After earlier mgmt team pulled brand from DSD houses for unsuccessful move into Pepsi refrigerated system, Lines has been strenuously avowing his commitment to DSD, promising to offer partners long-term protection. "You can count on it," he avowed yesterday.
Then there's matter of brand name, FRS, which had proved unmemorable to consumers despite heavy media push, even as its full name, "free-radical scavenger," was confusing and difficult to explain. Given committed base of online buyers, there was no question of dropping FRS moniker entirely, but Lines had said he was open to replacing it for retail products, possibly with that Q-Force name (the Q stands for quercetin, and name lends itself to come-ons like "Are you on Q?"). Figuring that out was key mandate for Initiative Media. Conclusion? It's not final, but inclination is to stick with FRS, particularly after overseas partners who were polled about FRS, Q-Force and other names unanimously voted for FRS. So co hopes to figure out a way to make name stickier, perhaps with slogans like "Get the free radical before it gets you."
As for NutriSoda, recall that functional soda line was launched by ex-pharma exec in Twin Cities named Joe Heron as Airforce NutriSoda and sold to regional bottler PepsiAmericas, whose incubation effort never ignited. Joe went on to create successful Crispin hard cider brand, now owned by MillerCoors, and then brandy play. As new owner of Nutrisoda, Lines has reformulated it with Reb-D variety of stevia that overcomes aftertaste issues of natural sweetener and is putting it back into production in Jul. That too will be offered to DSD partners, as will be another venture, Lines' relaunched sugar-beet-based Black Death Vodka, once a big brand in Russia and recently pitched to US spirits houses at Las Vegas expo. So, while operating under radar, Tom has developed pretty varied portfolio.
(BBI editor recently delved into branding conundrums like FRS' in his monthly BevNet column, which can be found here: http://www.bevnet.com/magazine/issue/2016/a-brand-by-any-other-name )
FRS, of course, is brand that became poster child for how to expend vast sums of investors' capital with little to show for it in brand awareness or sales, despite clinically based evidence that core ingredient, quercetin, carries powerful benefits. Lines, who was among those who ponied up what he said amounted to $150 mil thru numerous rounds over a decade, said he never lost faith in brand and last year claimed control via deal that calls for him to continue significant investments in line. He also controls quercetin provider Quercegen, which operates separately.
Since taking control of FRS last year, Tom has focused on stabilizing and rethinking brand, raising price 70% to $78 per month for regimen users, dropping free shipments to influencers and making plans to reformulate line with twice the quercetin level (BBI, Sep 9). Price hike scared off some users for a few months, but many came back, he said yesterday. He's fortified line with pair of items under different brand name, Q-Force. He's also brought aboard new-age vet Bob Miller to help rebuild distribution, retained social media Iteration Media to delve into makeup of current user base and recruited high-profile mixologist Ott to reformulate line. (Alex had played similar role at Mercy hangover prevention bevs a few years ago.) Iteration, whose clients have included Monster Energy, Three Olives Vodka and Under Armour, pulled some surprising insights out of deep dive, finding, to Lines' pleasant surprise, that it's got ardent cohort of younger users age 16-to-30, tilting about two-thirds male. So he's inaugurated Millennial Initiative to figure out ways to build that tie. Some have made FRS a replacement even for their morning coffee, and many drink FRS powder as hot bev like tea. Tho RTD bevs were fulcrum of effort to go big in past, they're currently smallest part of biz, but once reformulation is complete, Lines and Miller will go out to re-recruit DSD distributors and open marketing spigot. After earlier mgmt team pulled brand from DSD houses for unsuccessful move into Pepsi refrigerated system, Lines has been strenuously avowing his commitment to DSD, promising to offer partners long-term protection. "You can count on it," he avowed yesterday.
Then there's matter of brand name, FRS, which had proved unmemorable to consumers despite heavy media push, even as its full name, "free-radical scavenger," was confusing and difficult to explain. Given committed base of online buyers, there was no question of dropping FRS moniker entirely, but Lines had said he was open to replacing it for retail products, possibly with that Q-Force name (the Q stands for quercetin, and name lends itself to come-ons like "Are you on Q?"). Figuring that out was key mandate for Initiative Media. Conclusion? It's not final, but inclination is to stick with FRS, particularly after overseas partners who were polled about FRS, Q-Force and other names unanimously voted for FRS. So co hopes to figure out a way to make name stickier, perhaps with slogans like "Get the free radical before it gets you."
As for NutriSoda, recall that functional soda line was launched by ex-pharma exec in Twin Cities named Joe Heron as Airforce NutriSoda and sold to regional bottler PepsiAmericas, whose incubation effort never ignited. Joe went on to create successful Crispin hard cider brand, now owned by MillerCoors, and then brandy play. As new owner of Nutrisoda, Lines has reformulated it with Reb-D variety of stevia that overcomes aftertaste issues of natural sweetener and is putting it back into production in Jul. That too will be offered to DSD partners, as will be another venture, Lines' relaunched sugar-beet-based Black Death Vodka, once a big brand in Russia and recently pitched to US spirits houses at Las Vegas expo. So, while operating under radar, Tom has developed pretty varied portfolio.
(BBI editor recently delved into branding conundrums like FRS' in his monthly BevNet column, which can be found here: http://www.bevnet.com/magazine/issue/2016/a-brand-by-any-other-name )
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