Organic Valley co-op has been making striking gains in broadening availability of its

RTD entries in conventional channels, enlisting likes of Target, CVS and 7-Eleven. Recall that Wis-based co-op

launched assault on RTD market with Organic Fuel and Organic Balance protein-enhanced shakes, then has

buttressed those with Good to Go chuggable organic milks, which debuted at last fall’s NACS c-store show and

just shipped a month ago in 11-oz PET bottles. They’re all shelf-stable entries well suited to conventional

retailers and c-stores’ supply chains. Organic Fuel, with hefty load of 26 g of protein, launched its 4-packs

nationally in Target stores last mo via chainwide special, said Lewis Goldstein, vp of brand marketing. On drug

side, Organic Valley has gotten both Good to Go flavors (white and chocolate milk) into estimated 500 CVS

stores, along with both flavors of Fuel and both flavors of Balance, which contains lesser 16 g of protein. Also in

mix at CVS is Tetrapaks of kids’ white and chocolate milk. Brands also are making headway in c-store channel.

Both Good to Go flavors and both Fuel flavors are available chainwide in Midwest’s Holiday chain, and those

entries also have cracked 2,500+ 7-Eleven stores so far, having been pitched to entire network at recent internal

expo hosted by Tex-based retailer. (Co also has launched test in all West Coast 7-Elevens of Mighty Bar,

nutrition bar using 100% grass-fed organic meat that’s pitched as alternative to Epic or Tanka bars.) And 12-unit

cases of Organic Balance are being tested in several Costco warehouse club stores in Calif.

Count Philadelphia-based La

Colombe as latest 3d-wave coffee roaster to step up participation in RTD side of cold-brewed segment. Co has

teamed with local Crown canning operation to devise 9-oz canned Draft Latte that employs patented process

using nitrous oxide and special food-grade valve dubbed “Innovalve” to offer “true, fresh-poured latte texture,”

per Philly.com account. “The milk feels frothed, the coffee tastes unbitter. It’s also not highly sweetened,

because the new process leaves the drink requiring less sugar.” The cans, with white background against which

chain’s dove icon is placed, will go out at affordable price of $10 per 4-pack starting next week at co’s

Philadelphia cafes and online, moving soon to David Chang’s Maple delivery service, Whole Foods stores and

other retailers. Front panel describes it as containing “frothed milk” and “cold pressed espresso.” Move comes as

founder Todd Carmichael, flush with investment from Chobani Yogurt founder Hamdi Ulukaya, has been

planning significant expansion jag. Typically for Carmichael initiatives, launch has drawn burst of coverage not

just at foodie journals but likes of Fast Company.

In a move that some outside co

view as paving way for fuller alignment with core investor Coca-Cola, Monster Beverage said it’s reached

definitive agreement to acquire its longtime flavor supplier American Fruits & Flavors, thereby locking in

intellectual property associated with flavor of core energy brand, so-called “green can.” MNST said it’s paying

$690 mil for AFF, which was founded in 1962 by Fred Farago and maintains operations in Pacoima and LA.

Since mid-1990s, AFF has ridden Monster connection from position as regional Southern Calif flavor house to

point where energy drink co represented 87% of its 2015 revenues. With AFF not likely to be doing more than

$200 mil in revs, acquisition wouldn’t seem to be cheap and may have been driven by sense that minority investor

and distribution partner Coca-Cola prefers to be sure that core IP is in tight control before it moves to more

significant stake in MNST. Still, Morgan Stanley’s Dara Mohsenian argued that multiple is reasonable enough

within ingredient realm; “Usually we are not in favor of vertical integration; part of the attractiveness of the

MNST business model is that they outsource manufacturing, distribution, flavors, etc (driving high return on

invested capital) but in this case they are getting the flavor business for a reasonable multiple (well below other

public ingredient comps) and the deal will be earnings-accretive.” MNST’s alignment with KO also suggests

AFF – which has no overseas operations – may be able to ride that affiliation to better support Monster brand’s

global growth.

Cos didn’t release financials of privately held AFF beyond noting that it has grown at an 8% rate the past 4 years,

derives 87% of its revenues from Monster and generated $87 mil of adjusted operating income last year, which

MNST vice chmn Hilton Schlosberg said should make deal accretive to MNST’s earnings. Deal is anticipated to

close this qtr. It’s not clear what implications are for clients that represent other 13% of AFF’s revenue stream,

tho any loss of that biz presumably is offset by raft of new energy brands that have entered Monster portfolio via

its deal with Coke. Nor is it clear what implications may be for other flavor houses that work with MNST,

including Wild, whose extensive global operations had seemed to put it in good position to ride co’s global

expansion. Monster Bev was advised in transaction by Barclay, which earlier played key role in putting Coke

transaction together, while AFF was advised by Lazard.

Transaction “provides Monster a unique opportunity to leverage new flavor technologies and differentiate

ourselves from our largest competitors who do not have these capabilities,” MNST chmn/ceo Rodney Sacks said

in statement.

Deal caught Wall Street watchers by surprise, considering that, despite its considerable war chest, MNST has not

made more than trivial acquisitions in past, despite past avowals from top mgmt that they were in the hunt for

diversifying deals. RBC’s Nik Modi, who admitted to being initially perplexed by deal, said one way to view

multiple is that “essentially, MNST paid $690 mil to cut out $87 mil in annual costs, and could leverage this

platform for international use at a much more financially accretive manner than through a third-party provider.”

Rejiggering of Starbucks rewards program

may leave some customers wanting to venti while others just want to vent. Seattle roaster said it’s changing way

its loyalty program awards points and, thereby, free coffees. Currently, SBUX customers earn points based on #

of transactions, but that will now change to amount of money spent. Customers must earn 125 stars for free

purchase, at 2 stars per dollar. So for customers who stop in for $2 cup of regular joe, it will now take 31 visits vs

24 previously to earn free purchase, per AP calculations. Obviously, upgrading to venti side will hasten process –

as will opting for latte instead. Those who routinely spend bigger bucks on higher-price items will be rewarded

earlier. New rewards system is also meant to improve waiting times at stores since under old rewards system

some customers gamed system by ringing up multiple transactions for separate items to rack up points, per report.

Seattle roaster insisted it’s not that big a change. A “small minority” of customers will earn points at a slower

pace under new guidelines, said Matthew Ryan, chief strategy officer.

Looking to

further accelerate uptake of iced tea subline within its Sparkling Ice brand, Talking Rain has reskinned packs,

swapping murky black background for more vibrant palette that’s better fit with rest of line. Old label “didn’t

represent what the brand is about,” ceo Kevin Klock told BBI. It was too dark and staid to convey sense of

refreshment and fun that Ice reps, and didn’t really communicate that the tea is carbonated, either. New look is

more colorful, with more effervescent feel: deep purple and red for Raspberry flavor, rainbow-like effect for Half

& Half in which green hue at bottom of bottle segues into yellow further up barrel and then orange. Another

issue: tho Ice marketing team designed original label to stand out in tea sections, where it hoped to make

incursion, often enough the teas have ended up shelved with core Ice entries, where they’ve come across as bit of

a disconnect. New labels are filtering into market now. Line is branded as an “iced tea beverage” that’s “made

with real brewed tea.”

That said, Klock said tea subline performed well enough in first year, grabbing about 45% grocery ACV –

testimony, Kevin noted, to strength and commitment of brand’s extensive DSD network. And while some

wholesalers said their other tea suppliers had bridled at them picking up tea line from Sparkling Ice, Klock termed

that a “non-issue,” reiterating: “It shows the power of the brand and our network.” Tho co has new innovations in

pipeline, Klock said keys to continued growth in 2016 will be to finally get deserved amount of shelf space for

core brand while continuing to build teas and 8-oz cans.

Sharpshooting Online Game Offers Another Way to Leverage Durant Tie Seattle-based Talking Rain

continues to find ways to leverage its endorsement tie to NBA star Kevin Durant. Latest initiative is custom-

developed app that invites shoppers to take cellphone pic of KD standees placed in stores, which puts them into

hoops-shooting contest with Okla Thunder star, with free gear coming to those who prevail.

Dr Pepper

Snapple Group may have eased out of Alumi-Tek aluminum bottle for its slow-moving Venom energy brand, but

Pepsi’s moving into pack with Amp Energy extension called Amp Energy Boosted. New line employs regular

energy blend of Amp line but offers double the daily value of vitamin C and comes in at only 100 calories per 16-

oz bottle, thanks to sweetener blend of HFCS, sucralose and ace-K. It debuts in Mandarin Orange and Wild

Berry Cherry flavors, at SRP of $2.49. Resealable aluminum bottle is given dramatic black background, against

which are posted colorful renderings of fruits . . . Harvest Hill is keeping the innovation engine running at Juicy

Juice, now setting regional launch in Southeast of juice/tea blend called Teasers. Taking a leaf from some indie

brands – SF-based Drazil comes to mind – Stamford, Conn-based co is using decaf tea as means to cut calorie

content down by about half at time moms are suspicious about empty calories from 100% juice brands. “By

blending juice and tea, we’ve created a lower-sugar, refreshing beverage that tastes delicious,” said cmo Ilene

Bergenfeld. “Our research found that older kids are looking for more beverage variety, but most options have

sugar and/or caffeine. Juicy Juice Teasers is a beverage both moms and kids will reach for in the grocery store

aisle and at home.” Brand has launched mainly in Southeast, breaking in Publix, Food Lion and Kroger stores, as

well as some Walmart stores elsewhere in US. It’s out in 6-packs of 10-oz bottles and multiserve 64-oz bottles, in

Peach, Berry, Half & Half and Apple flavors. Launch follows last summer’s lower-sugar Juice Juice Splashers

launch as Harvest Hill works to address nutritional issues of ubiquitous kids brand . . . Entrepreneurial couple

from Australia is offering organic-certified, stevia-based, low-cal canned sparkling water line for kids under name

Giggles. It sports familiar creation story: after birth of 3d child, they sought low-cal, vitamin-enhanced drinks

they could offer in lieu of soda or sugary juices and ultimately decided to create their own. Operating as Soul

Fizz Inc out of LA, health coach Elle Kister and her husband Adrian have placed brand in few dozen retailers in

Southern Calif, including Bristol Farms, Erewhon and Mother’s Market, in 8.4-oz slim cans in Lemonlicious and

Orangerrific flavors, sweetened with stevia and erythritol to tune of 15 calories per can. SRP is $1.79. Brand was

sampled at BevNet Live conference late last year and will mark formal debut at upcoming Natural Products Expo

West in early Mar in Anaheim, Calif. Info at DrinkGiggle.com.

Swire

Coca-Cola USA, big Utah-based indie Coke bottler whose sprawling reach extends north to Idaho and parts of

Washington State, has landed key Pac NW metros Seattle, Portland, Ore, and Spokane, Wash, as KO continues

aggressive acceleration of its refranchising scheme. Per KO’s recent change of heart on retaining coldfilled

production capacity, latest territory grant includes plants in Bellevue, just outside Seattle, and in Wilsonville, near

Portland. After having earlier been granted territory in Colo, including Denver, and Ariz, including Phoenix and

Tucson, latest move “underscores the important role Swire is playing” in KO’s refranchising initiatives, said

Swire prexy/ceo Jack Pelo. Swire’s parent, Swire Pacific Ltd, is bottler for Hong Kong, Taiwan and part of

China. Meanwhile, in other news announced Fri, KO further advanced territory grant to giant beer house Reyes

Group, operating as Great Lakes Coca-Cola Distribution LLC. That unit advanced to definitive agreement on

additional territories in Wis, Minn, Ill, Mich and Iowa after earlier signing letter of intent. Reyes, of course, is

largest beer distrib in U.S. and last year became Coke’s new franchisee in Chicago, where its Chicago Beverage

Systems sells MillerCoors, imports and craft.

Swire

Coca-Cola USA, big Utah-based indie Coke bottler whose sprawling reach extends north to Idaho and parts of

Washington State, has landed key Pac NW metros Seattle, Portland, Ore, and Spokane, Wash, as KO continues

aggressive acceleration of its refranchising scheme. Per KO’s recent change of heart on retaining coldfilled

production capacity, latest territory grant includes plants in Bellevue, just outside Seattle, and in Wilsonville, near

Portland. After having earlier been granted territory in Colo, including Denver, and Ariz, including Phoenix and

Tucson, latest move “underscores the important role Swire is playing” in KO’s refranchising initiatives, said

Swire prexy/ceo Jack Pelo. Swire’s parent, Swire Pacific Ltd, is bottler for Hong Kong, Taiwan and part of

China. Meanwhile, in other news announced Fri, KO further advanced territory grant to giant beer house Reyes

Group, operating as Great Lakes Coca-Cola Distribution LLC. That unit advanced to definitive agreement on

additional territories in Wis, Minn, Ill, Mich and Iowa after earlier signing letter of intent. Reyes, of course, is

largest beer distrib in U.S. and last year became Coke’s new franchisee in Chicago, where its Chicago Beverage

Systems sells MillerCoors, imports and craft.

Count Dean Foods as latest refrigerated dairy or dairy-alternative

player to enter iced coffee space, with decision to roll out single-serve entries licensed under Caribou Coffee

name. Refrigerated line is rolling out next month after earlier tests in Minneapolis; Omaha, Neb; Des Moines,

Iowa, and Denver, in trio of flavors: Chocolate Mocha, Sea Salt Caramel and Vanilla flavors. It’s packed in 14-

oz single-serve and 32-oz multiserve PET bottles, with caps color-coded to flavor. Entry employs reduced-fat

milk and real sugar and comes in about 150 calories per 8-oz serving. Packaging from Hughes Design Group

puts Caribou brand name and whimsical logo prominently on upper part of barrel, with lower half backgrounded

with image of iced coffee with ice cubes floating on top. “Real coffee, real ingredients, real delicious,” heralds

Caribou Web site. DF brass described alliance with Caribou as “long-term partnership.”

New entries, set to roll next month, are part of innovation avalanche heralded by DF brass this morning as part of

ongoing move to do better filling their DSD trucks with higher-margin, branded items, notably TrueMoo flavored

milks and DairyPure, ambitious effort to create national milk brand. To apparent trepidation of some analysts on

Q4 earnings call this morning, DF is aggressively dialing up marketing support for initiatives, boosting ad budget

63% to $45 mil, with funds being invested primarily in those national brands. And while ceo Gregg Tanner said

he’s been kicking tires of outside bev brands that can help “fill the box up,” that’s not been fruitful effort so far.

“What we found as we have looked around is, finding national products of scale that don’t add a lot of complexity

but add a lot of synergy to our network, they’re hard to find,” he told investors this morning. “So a lot of that we

have to do internally, but we’ll continue to look externally for opportunities to fill the box up.”

TrueMoo, meanwhile, is riding overall category growth in flavored milk, on both branded and private-label sides,

adding seasonal entries and otherwise looking to boost availability. By now TrueMoo is out in range that spans

gabletop quarts in flavors like Chocolate Marshmallow and creamsicle-flavored Orange Scream as well as single-

serve protein-enhanced versions (made with lowfat milk and containing 25 g of protein per bottle) in flavors like

Chocolate and Cookies & Cream, and a Calcium Plus version (with 50% more calcium than regular milk) in 64-

oz gabletop.

DairyPure, recall, is Dean’s somewhat controversial effort to buck price pressures of white milk segment by

creating national brand, albeit one that often is cobranded on-pack with name of regional dairy in area, say,

Garelick Farms. It’s expanded into half & half and whipping creams. This year DairyPure is being extended into

lactose-free realm. It also will step up co-promos, as with one that saw it merchandised in Walmart stores with

Mondelez’s Oreo cookies brand, with displays that proclaimed, “Oreo Makes Milk Happy.”

On call this morning, DF execs didn’t offer a lot of detail on DairyPure’s performance to date, though they

claimed recent ACV gains as several large grocery chains took on brand and good velocities, even in overall milk

environment with a lot of aggressive pricing. Research indicates that over 80% of consumers who try brand are

buying it again, they said.

Context of innovation comments was earnings call in which, like many bevcos these days, Dean saw volumes slip

but earnings rise thanks to cost-cutting and greater emphasis on price realization and premium items. Earnings

per share of 36 cents beat consensus view by 2 cents. Summarized Goldman Sachs’ Judy Hong: “Fluid milk

volumes were modestly lower (-3.6% vs our estimate of -1.2%), but lower than expected COGS (cost of goods

sold) offset a lower topline and resulted in a slightly higher EBIT/gallon of 10.2 cents vs our estimate of 10.0

cents.”

Cott Corp shares soared early today after private-label mfr eked out

surprising Q4 profit and offered evidence that it’s making headway in transitioning biz to higher-growth

categories like sparkling waters and building up contract mfg biz. “Transformation Working,” headlined Stifel’s

Mark Swartzberg, as co managed to cushion impact of declining CSDs with shift to more attractive sparkling

waters even as it continues to build contract mfg presence. Shares soared as much as 12% on earnings beat,

undoing weeks of recent erosion, tho last year shares had been on upward climb since co transformed biz by

acquiring home/office bottled-water power DS Services.

As often in past, Cott ceo Jerry Fowden took pains to note that, for all branded bevcos’ rhetoric about price

realization, that hasn’t translated to multiserve realm in mass channels, where pricing continues to be intensely

promotional. That’s particularly true for 2-liter PET bottles, “with almost all 2-liter national brands being sold for

a dollar most of the time . . . The national players remained much more price-aggressive in mass channels.” Since

that’s core pack within COT’s private-label CSD biz, it exacts toll on growth and profitability on CSD side,

leaving Cott brass uncommonly attuned to street pricing trends.

Big chunk of revenue from DS made comparability difficult, but drilling down into earnings report, “legacy North

America revenue was down a comparable 6% in 4Q, yet gross profit was up slightly to $37.5 mil, versus $36.9

mil in 4Q14, and operating income increased to $4.7 mil in the period, versus $3 mil in 4Q14,” figures Stifel’s

Swartzberg. “We see this as strong evidence the emphasis on contract manufacturing is working, particularly

since it continues a trend” seen thru all of 2015. Overall, thanks to DS impact, revenue rose 29% to $699 mil and

gross profit more than doubled to $221 mil.

Ceo Fowden reported that contract volume rose 40% in Q4, allowing co to hold overall case volumes flat despite

3% decline in private-label CSDs, -4% in shelf-stable juices. For 2015 as a whole, contract biz was up over 23

mil cases to 47 mil cases, meaning it’s taken just 2 years to approach lower end of 3-year target of 50-80 mil

contract mfg cases. The co’s revenue decline in N Amer reflected fact that contract biz pulls in lower revenue per

case (since clients own ingredients and packages) but comparable income. Indeed, COT’s gross margin rose 1.9

points to 12.5% for qtr. The goal, Fowden reiterated, is to hold North American volume “broadly stable” with

contract mfg and other bev categories offsetting CSD and shelf-stable juice declines on private-label side. So far,

that seems to be working.