PepsiCo’s Aquafina bottled water brand has joined rush into

fizzy essence waters with canned line of lightly sweetened, flavored entries called Aquafina Sparkling. New line

breaks in 12-oz slim cans in Black Cherry Dragonfruit, Lemon Lime and Orange Grapefruit flavors, sweetened

with Fair Trade sugar and coming in at 10 calories. It’s priced at $1.19. PEP will put some marketing heft

behind subline, breaking national TV spot next month with remix of song “Come on Get Happy,” in synch with

broader “For happy bodies” hydration positioning of Aquafina line.

Tho CSDs – and Coke trademark in particular – were down, healthy

performance on noncarbs and solid pricing helped Coca-Cola beat earnings expectations in first qtr of 2016. Net

operating revenues sagged 4% to $10.28 bil, while operating income contracted 7% to $2.14 bil. Earnings per

share came in at 34 cents, slightly beating consensus. “Flat Sparkling Volumes Partially Offset by Stills to Drive

2% Global Volume Growth,” headlined Wells Fargo’s Bonnie Herzog. “Somewhat disappointing” CSD

performance, including drop in brand Coke in every region but Asia Pacific, was partly redeemed by

“impressive” 7% growth in noncarbs, netting out at 2% unit case volume growth, she wrote. In N Amer, flat

CSDs were offset by 5% growth in noncarbs, for 2% volume lift. Within CSDs, Coke trademark may have been

off, but some of slack was picked up by growing Sprite, Fanta and energy drinks. North Amer $$ figures have

become harder to read because co has shunted Coca-Cola Refreshments activities into separate div, Bottling

Investment Group, as those assets are progressively shed as part of refranchising initiative. Overseas markets like

Mexico and Japan continued strong, but KO brass acknowledged that China’s slowing economy had more severe

impact than they’d anticipated on bev segment.

KO brass said launch of new campaign dubbed “Taste the Feeling,” just kicking in, as well as advent of Summer

Olympics and Euro Cup soccer tourney should offer lift across portfolio later this spring. Challenged by JP

Morgan’s John Faucher as to whether portfolio remains too CSD-heavy, Kent pointed out that 14 of co’s 20

billion-dollar brands are noncarbs, with co continuing to make investments in promising new brands like Suja

cold-pressed juices and pursue organic growth of allied brands like Fairlife dairy items. “We’re very satisfied

with our portfolio,” he insisted. “We’ve got more work to do . . . but right now we feel our portfolio is being

transformed very well and transitioned very well.” Prexy/coo James Quincy noted that over past 15 years, still

portfolio has advanced from single-digit part of portfolio to 25%. That said, both execs said they’re hopeful

initiatives like the Taste the Feeling campaign will ignite a new round of growth for their core CSD trademark.

Coca-Cola this

morning announced another big advance in its North American refranchising initiative, bringing major bottler

Coca-Cola New England into mix for first time, assigning broad heartland territory to retired NBA player Junior

Bridgeman in further diversity move, and putting mega-beer- distributor Reyes Holdings into actual soda-

production game for first time via its year-old Great Lakes Bottling. With smattering of other territory deals

announced this morning, developments take KO about halfway to meeting target of having entire N Amer

territory with outside operators by end of next year under rubric of 21st Century Beverage Partnership Model. In

other words, it’s refranchised about two-thirds of the territories it acquired from Coca-Cola Enterprises back in

2010. There are still other shoes to drop: major player Coca-Cola Femsa of Mexico, long anticipated to have key

role in US refranchising, has yet to be heard from, and in nation’s biggest metro, money-losing NY operation

remains question mark.

On co’s earnings call this morning, chmn/ceo Muhtar Kent, asked about non-soda players being brought into mix,

said, “to insure we get the right level of diversity and of representation, we have selected some new partners in

Florida and Chicago, and a new one announced now.” It’s all part of broader effort to seek “healthy balance” of

partners. Both Troy Taylor of Coca-Cola Beverages Florida and Bridgeman are African-Americans while Reyes

Holdings would qualify as Hispanic-operated co – maybe biggest in US.

Some highlights:

Reyes Holdings Adds 6 Plants, Key Role in Setting Tech Standards for Red System Rosemont, Ill-based Reyes

has built rep as savvy operator both on food and bev sides, and while it’s never had production role in bevs, in

one stroke its Great Lakes Coca-Cola Distribution LLC becomes major bottler with acquisition of 6 plants: Alsip

and Niles, in Ill; Detroit and Grand Rapids in Mich, Eagan, Minn, and Milwaukee. Recalled that Reyes Holdings

entered picture by winning Chicago metro assignment, then expanded territory across Midwest last Oct, including

Mich, most of Wis including Milwaukee, southern Minn including Twin Cities and parts of northeast Iowa and

northern Ill adjoining core Chicago territory. Given widely acknowledged IS expertise on beer side, it’s no

surprise that Reyes takes role among 6 bottlers involved in creation of info tech services co announced today

under name CONA Services (for “Coke One North America”) that will unify processes for US bottling system

under ceo Reinhard Meister. Others in CONA, each with board seat, are Coca-Cola Beverages Florida, Coca-

Cola Consolidated, Coca-Cola United, Swire Coca-Cola USA and KO’s own bottling operation that’s being

dismantled via refranchising initiative, Coca-Cola Refreshments.

Kirin-Owned Coke Northern New England Finally Makes Debut on Refranchising Stage Coke bottler since

1977, Kirin-owned Coca-Cola of Northern New England is taking on new territory throughout New England,

including such major metros as Boston; Providence, RI, and Hartford, Conn. Included in mix are bottling plants

in Needham Hts, Mass, and Hartford. Given rep for strong performance and financial strength stemming from

ownership by Japanese brewing giant, Coke-watchers had wondered when Coke NNE would enter refranchising

mix, and some of its execs were reported to have been touring Fla sites recently, tho deal there would have

diverged from KO’s preference to have bottlers expand into contiguous territories. It operates 10 distribution

centers spread over New England and upstate NY, 6 states in all, and already has operated bottling plant in

Londonderry, NH.

Franchise Player in Hoops, Food, Bridgeman Now Takes Game to Soda Newest franchisee from outside soda

biz is Ulysses “Junior” Bridgeman, 62, who bought 3 Wendy’s franchises around Louisville, Ky, area while still

active player (mainly on Milwaukee Bucks) and developed into major restaurant franchisee under Manna Inc

banner since retiring in 1987. As some have noted over years, journeyman athlete proved more of a franchise

player in food than hoops. Now he’ll sell off those ops, including lotsa Wendy’s and Chili’s locations, to focus

exclusively on Coke responsibilities, including territory in Missouri, Ill, Kan and Neb, including St Louis and

KC. In keeping with KO’s revised strategy, he’ll get into production side too, acquiring bottling plant in Lenexa,

Kan. He’ll run new bottling co with one of his sons, Justin Bridgeman. Separately, another soda-outsider

brought into system, Troy Taylor of Tampa-based Coca-Cola Beverages Florida, who came in at same time as

Reyes, likewise is getting into bottling game. He picks up plants in Hollywood, Jacksonville, Orlando and

Tampa.

Other Deals: Corinth, Durango In 2 other preliminary deals announced this morning, Corinth Coca-Cola

Bottling Works of Corinth, Miss, picks up new territory in Missouri and Ark, and Coca-Cola of Durango-

Farmington of Durango, Colo, gets territory in Gallup, NM. Meanwhile, KO has moved on to definitive deal

with Swire Coca-Cola USA to pick up Albuquerque, NM, after earlier adding extensive territories in Southwest.

And KO closed on 4 previously announced deals involving Chesterman Co, Clark Beverage Group, Coca-Cola

Consolidated and Coca-Cola United.

In

wake of resolution of longstanding feud with founding partner that for first time forced co to conjure up audited

statements and go outside for financing, it’s new world over at Arizona Holdings Group, new parent entity for

iconic AriZona iced tea brand based in Woodbury, NY. Now it’s brought aboard Abid Rizvi as cfo, per memo

that Abid sent to his contacts. “Arizona has been a client of mine for over a decade and as they enter an exciting

growth phase, they recruited me to join the leadership team,” he wrote. Rizvi brings impressive resume that

includes extensive M&A experience should AriZona choose to consider an exit down road (or, for that matter,

should it choose to start buying other brands). He joins from RBC after runs at Jefferies Group, Sagent Advisors

and Merrill Lynch, all of those on consumer products side, after years spent on corporate finance side at cos like

McKinsey and Goldman Sachs. He holds MS and MBA degrees from MIT . . . Flush with recent $11 mil capital

raise, better-mixer player Q Drinks has recruited heavy hitter to run sales: Ted Roman, who over past 8 years

raised profile of spirits marketers William Grant & Sons, where he ran sales after earlier run at Pernod Ricard.

Ted comes in as evp sales, with responsibility for liquor channel, while 3-person team remains in place to work

grocery side, said Q founder Jordan Silbert. A coupla new hires to work under Ted are due to start next week,

one from a spirits house and the other from another NA brand that sells thru liquor channel. Jordan said he was

well familiar with Ted’s capabilities after having collaborated on sales/marketing programs with Grant’s

Hendricks Gin brand. He termed hiring “transformative for us – it’s a league we weren’t playing in. We’ve been

fighting for 10 years to have someone like this.” No recruiter was used in making hire. Aside from Union Beer

in NY, Q moves thru major spirits houses including Young’s Market in Calif, Republic National in Ga and

Breakthrough in Midwest.

Pea-protein play called Ripple Foods in Bay Area that’s drawn lotsa capital and anticipation looks like it’s hitting

Whole Foods, with newly updated website showing 4-sku subline in striking 48-oz curvy-shouldered bottles that

position items as “nutritious, plant-based milk” and “Dairy-free. As it should be.” New line offering 8 g of

yellow-pea- based protein per 8-oz serving and 50% more calcium than milk will be hitting retail in Original,

Original Unsweetened, Vanilla and Chocolate flavors, in creamy milk-like texture but boosted with yellow pea’s

trove of protein and fiber. Based in Emeryville, Calif, Ripple (name refers to favorable ripple effect it hopes to

have) was formed by Amyris cofounder Neil Renninger and Method cofounder Adam Lowry to ease burden on

planet of animal-based nutrition while offering potent protein upgrade over surging dairy alternative milks made

from almonds, cashews and the like. On BBI visit in Jan, Neil and Adam offered tastes of formulation, which

duly was indistinguishable from cow’s milk, and said they were targeting Apr launch at Whole Foods (BBI, Jan

26). Co drew considerable buzz after it raised $13.6 mil in Series A round and drew interest from astute food-

trend watchers like Honest Tea cofounder Seth Goldman. We’ve reached out to Neil recently but not heard back

so far; more details on products and launch plan as we learn them.

Remember when fiber-rich oat-based drinks were going to be next big thing?

Turned out a flurry of new entrants under names like Oatworks, Sneaky Pete’s and Simpli largely sputtered out,

victims of burden of convincing consumers that ingredient familiar from morning oatmeal can be pleasant to

drink and, perhaps, of their own widely varying approaches. Now Simpli shake, which vanished over a year ago,

is being reborn with new protein-enhanced recipe and new brand name, Nothing But Real, that’s intended to be

flexible enough to support potential extensions into snacks and other categories, at time oatmeal biz is seeing

resurgence in hands of indie marketers of single-serve items. Shelf-stable Nothing But Real is made with whole-

grain oats, water and 7 g of pure pea protein, and contains no carrageenan, gums or other stabilizers. (With 1 g of

protein from the oats, that comes to 8 g per bottle.) It’s sweetened with combo of maple syrup, agave syrup and

monk fruit. Package copy heralds that it’s vegan and non-GMO, and contains no dairy, soy or artificial

ingredients. It’s packed in 12-oz full-wrap PET bottle that likely will be priced around $3.99. It’s launching in

Chocolate flavor, with lack of masking agents helping to yield rich aftertaste that helps carry satiety burden of

bev. Launch plan also is being worked out, as partners gauge interest from retailers and distributors, with DSD

likely to be in the mix at some point. Brand is being produced by Steuben Foods in upstate NY.

Pending launch reps comeback attempt by Fla-based husband and wife team of Helena and Mika Manninen, who

suffered ugly split with prior partner (whom they’re suing) a coupla years ago, and then embarked on painstaking

effort to patch things up with trade partners. As result, no bridges were burned, they assert. These days they’re

backed by LA-based producer Morris Paulson, a colleague of Mika’s from his days plying cinematographer’s

craft. As producer of big-grossing horror flick Devil Inside, Paulson has enlisted film’s breakout star, Simon

Quarterman, to flog Nothing But Natural when he’s back on radar this fall in HBO’s Westworld series, which

also stars Anthony Hopkins. After recovering from Simpli debacle, Manninens used Kickstarter to help ignite

new plan.

The Manninens convened focus groups composed entirely of their key target, women age 25-50 of varying

income levels to validate several intriguing directions they’ve taken with launch. For one, upper barrel of bottle

sports Oat Chocolate & Protein in giant letters, with actual brand name relegated to bottom of barrel in lighter

face, serving as much as positioning slogan as actual brand name. That was conscious decision to make core

proposition unmistakable, at time there are few if any other oat bevs out there any more. In another departure,

creators feel strongly enough about recipe that they’ve printed ingredient list in larger-than- required typeface on

pack. Also, in contrast to oat bev marketers’ past emphasis on ingredient’s high fiber content, that’s not

significant part of messaging here, in part because of fiber’s old-folks associations. Still, there was no thought of

dropping oats from formula because of all its other benefits, including satiety induced by beta-glucan. But,

couple made clear, they’re not overly relying on focus groups for direction: those women supported coffee flavor

(which Simpli experience showed not to sell) and said they’d pay as much as $6 per bottle. Graphics can be seen

at fledgling website NothingButReal.com.

Remember when fiber-rich oat-based drinks were going to be next big thing?

Turned out a flurry of new entrants under names like Oatworks, Sneaky Pete’s and Simpli largely sputtered out,

victims of burden of convincing consumers that ingredient familiar from morning oatmeal can be pleasant to

drink and, perhaps, of their own widely varying approaches. Now Simpli shake, which vanished over a year ago,

is being reborn with new protein-enhanced recipe and new brand name, Nothing But Real, that’s intended to be

flexible enough to support potential extensions into snacks and other categories, at time oatmeal biz is seeing

resurgence in hands of indie marketers of single-serve items. Shelf-stable Nothing But Real is made with whole-

grain oats, water and 7 g of pure pea protein, and contains no carrageenan, gums or other stabilizers. (With 1 g of

protein from the oats, that comes to 8 g per bottle.) It’s sweetened with combo of maple syrup, agave syrup and

monk fruit. Package copy heralds that it’s vegan and non-GMO, and contains no dairy, soy or artificial

ingredients. It’s packed in 12-oz full-wrap PET bottle that likely will be priced around $3.99. It’s launching in

Chocolate flavor, with lack of masking agents helping to yield rich aftertaste that helps carry satiety burden of

bev. Launch plan also is being worked out, as partners gauge interest from retailers and distributors, with DSD

likely to be in the mix at some point. Brand is being produced by Steuben Foods in upstate NY.

Pending launch reps comeback attempt by Fla-based husband and wife team of Helena and Mika Manninen, who

suffered ugly split with prior partner (whom they’re suing) a coupla years ago, and then embarked on painstaking

effort to patch things up with trade partners. As result, no bridges were burned, they assert. These days they’re

backed by LA-based producer Morris Paulson, a colleague of Mika’s from his days plying cinematographer’s

craft. As producer of big-grossing horror flick Devil Inside, Paulson has enlisted film’s breakout star, Simon

Quarterman, to flog Nothing But Natural when he’s back on radar this fall in HBO’s Westworld series, which

also stars Anthony Hopkins. After recovering from Simpli debacle, Manninens used Kickstarter to help ignite

new plan.

The Manninens convened focus groups composed entirely of their key target, women age 25-50 of varying

income levels to validate several intriguing directions they’ve taken with launch. For one, upper barrel of bottle

sports Oat Chocolate & Protein in giant letters, with actual brand name relegated to bottom of barrel in lighter

face, serving as much as positioning slogan as actual brand name. That was conscious decision to make core

proposition unmistakable, at time there are few if any other oat bevs out there any more. In another departure,

creators feel strongly enough about recipe that they’ve printed ingredient list in larger-than- required typeface on

pack. Also, in contrast to oat bev marketers’ past emphasis on ingredient’s high fiber content, that’s not

significant part of messaging here, in part because of fiber’s old-folks associations. Still, there was no thought of

dropping oats from formula because of all its other benefits, including satiety induced by beta-glucan. But,

couple made clear, they’re not overly relying on focus groups for direction: those women supported coffee flavor

(which Simpli experience showed not to sell) and said they’d pay as much as $6 per bottle. Graphics can be seen

at fledgling website NothingButReal.com.

PepsiCo opened earnings

report season by eking out profit gains in its first qtr despite declining sales, with innovation playing a key role in

keeping brands relevant and boosting price realization. Organic revenue rose 3.5%, highest growth in 3 years,

with 5 largest divs all reporting increases in pricing and volume growth despite “volatile and uncertain

environment,” in words of chmn/ceo Indra Nooyi. But impact of foreign exchange, deconsolidation of Venezuela

biz and other issues caused reported net revenues to slip 3% to $11.86 bil. Operating profit dropped 10% to $1.62

bil, and net income plunged 24% to $931 mil. Still, earnings per share beat Wall Street expectations, and co said

it’s sticking to forecast for rest of year despite turbulence around globe. In crucial North American Beverages

unit, revenue edged up 1.5% to $4.36 bil, and operating profit grew 7% to $485 mil. On NY Exchange today,

shares traded up this morning but had subsided by press time this afternoon.

As has been case in recent quarters, PEP offered no info on performance or prospects of individual trademarks

like Pepsi, Diet Pepsi, Mountain Dew, Gatorade, Lipton Tea or Amp Energy. Instead, brass preferred to make

more general argument that co’s emphasis on innovation and marketing is paying off, as established US brands

like Lipton Iced Tea and Naked Juice ignite in overseas markets (up 10%, 60% respectively) and more nutritious,

premium offerings gain traction. In addition, PEP’s efforts to steer consumers to higher-margin single-serve and

“alternative” multipacks by now have transitioned 6% of CSD volume out of 2-liter PET bottles and conventional

multipacks in N Amer.

And Nooyi was back to making case that large proportion of co’s products tilt toward nutrition, case she’d tried a

few years earlier with notion of a “HealthCo” within Pepsi that wasn’t fully embraced by Wall Street. This time,

she described category called “everyday nutrition” that comprises grains, fruits/veggies and items like bottled

water and unsweetened iced tea that are naturally nutritious. By now, these products comprise almost 25% of

overall portfolio and are outpacing rest of co’s items in growth. More broadly, she pointed to “guilt-free”

segment that includes those “everyday nutrition” items as well as diet bevs, those below 70 calories per serving

and low-sodium or low-fat snacks. These now comprise 45% of revenue, and larger share of ad & marketing

budget is being steered toward these products. Globally, less than 12% of PEP revenues are from Pepsi

trademark. In sum, “we feel pretty good about our portfolio transformation efforts,” Nooyi maintained.

Another priority: building foodservice channel, now 14% of revenues and outpacing other channels’ growth.

Among efforts to accelerate growth are placement this year of 20K Hello Goodness vendors throughout N Amer.

On this morning’s conference call, Nooyi and cfo Hugh Johnston asserted that pricing appears strong and

expressed confidence that their bottling partner in China, Tingyi, will weather current strains.

On pricing, tags have been growing close to 1.5% and while bev segment is just entering peak summer selling

season, “based on what we’ve seen in the market, we actually see quite a bit of discipline,” Indra said.

As for China, tho PEP took $373 mil impairment charge vs its 5% stake in Tingyi-Asahi Beverages Holding Co,

“we remain very committed to the Tingyi relationship,” Indra said. She said Tingyi has been hurt by slowdown

in Chinese economy and by operational snags as it works to improve efficiencies. But it remains leader in China

with range of production technologies, strong food/nutrition biz and signs that bev biz is recovering.

Grand Rapids, Mich,

has proved to be hotbed of craft beer brands, and now a local cold-brewed coffee player is looking to go broader,

too. As MLive blog notes, Prospectors Cold Brew Coffee has gone from incubator kitchen to supplier to Meijer,

Whole Foods, SpartanNash and Kroger in less than 2 years, prompting anticipated move to new location in

coming months as demand grows for its Fair Trade, organic brews. Cofounders David Wentworth, an online

marketer, and Eric Pearson, who runs co called Pearson Foods, drew inspiration from entries they encountered in

West Coast travels, launching line that’s grown now to include single-serve entries in Original, Extra Strength,

Almond Milk and Almond Maple varieties, as well as 16-oz concentrate offering. The single-serves are packed

in 12-oz bottles commanding $2.99. Big breakthrough, MLive said, came recently when Meijer agreed to put line

in 200+ Midwest stores. Partners say they’d like to attain national distribution.

That was fast. Proposed 2-cents- per-ounce tax on sugared bevs in

California faded away quickly and quietly this past week, reported Sacramento Bee. Realizing he didn’t have

enough votes for his Assembly Bill 2782, Richard Bloom (D-Santa Monica) pulled it even before its first

committee vote on Apr 12. That means bill “is likely done for the year, the latest setback for a protracted but

largely unsuccessful public health campaign,” noted paper. Proposed tax had united many in opposition

including Calif Chamber of Commerce, which warned Bill 2782 “threatens jobs in the beverage, retail and

restaurant industries.”