The giant Reyes Holdings, largest beer wholesaler, is dramatically increasing territory within which it will distribute Coca-Cola soft drinks, expanding its recently opened Chicago-area footprint to include entire state of Mich, most of Wis including Milwaukee, southern Minn including Minneapolis and parts of northeast Iowa and northern Ill that are adjacent to Chicago. That was among trio of deals announced by KO this morning, including expansion of small footprint operated by new partner in north Fla and expansion of small bottler operating in southeast Iowa. All told, newly disclosed moves would expand refranchising program to account for 30% of US volume, keeping co on track to have moved half its volume out to indie operators by 2017, KO noted. The 3 new deals are non-binding letters of intent, on terms that aren't being disclosed. KO only mentions rights for sale and distribution of its brands, not production, as has been case in recent deals with major established Coke bottlers Consolidated, United and Swire in conjunction with newly established National Product Supply System.

BBI has heard that Reyes has suffered some teething pains bringing on Chicago, to point where local observers say they've seen U-Haul trucks making Coke deliveries as temporary expedient to keep customers adequately served. Dan Doheny, chmn of Great Lakes Coca-Cola Distribution, confirmed as much in statement to BBI, saying, "The overall Chicago transition has gone very well, but there are some opportunities for us that we are eager to apply the learnings from with the next transition. Yes, we acquired a very old fleet and we immediately placed a large order for new equipment with our new tractors just starting to arrive this month. We are committed to continuing to invest in Chicago and other territories for a number of years to turn short-term hiccups into long-term value for Coke, our customers and employees."

Still, new deal seems to confirm its commitment to becoming bigger player in NA biz, at least under conditions in which it holds franchise protection. This territory expansion will add 34 distribution centers and depots to its infrastructure mix. "We really like this business," cofounder/co-chmn Jude Reyes told BBI. "Our distribution expertise and deep local knowledge complement The Coca-Cola Company's industry-leading and innovative portfolio," Jude noted in statement, in synch with KO's mantra of melding national scale and local agility in refranchising scheme. As noted earlier here, Reyes has been biggest holdout among beer distributors in not making commitment to carrying NAs, on grounds that include flight risk of emerging brands that move into orbit of major soft drink houses, a risk that's averted as KO franchisee. Reyes clan has been broadly recognized for their outstanding execution on beer side as MillerCoors wholesaler, and they play adeptly in other realms, serving as biggest distributor to McDonald's restaurant chain and operating broadline foodservice network, Reinhart.

The smaller deals announced this morning involve another recently formed distributor, Tampa-based Coca-Cola Beverages Florida, which garners extra territory in north Fla including Brevard, Daytona, Jacksonville, Gainesville and Orlando, as well as Atlantic, Iowa-based Atlantic Coca-Cola Bottling, assuming new territory near its southeastern Iowa base including Cedar Rapids and Quad Cities, western Ill and northeastern Missouri. "We continue the evolution of our US operations as 2 of our newest partners, Great Lakes Coca-Cola and Coca-Cola Beverages Florida, are granted additional territory, and Atlantic Coca-Cola expands its footprint," said Coca-Cola N Amer prexy Sandy Douglas.

Meanwhile, KO has advanced to stage of reaching definitive agreements with Coca-Cola Bottling Company United, Swire Coca-Cola USA, Coca-Cola Bottling Company High Country and Ozarks Coca-Cola Bottling Co for territories announced this spring, and with Coca-Cola Bottling Co Consolidated for some of territories announced then, with deals variously anticipated to close this year or next.

Coca-Cola continued to ride strong price realization to revenue gains in face of continued declines in its core CSDs in its 3d qtr. It reported 3% rise in organic revenue growth, thanks to slight lift in Coke trademark and strong gains on noncarb side. Nominally, revenues were off 5% to $11.43 bil, but that was due to 8% currency hit and other special factors. Operating income sagged 12% to $2.4 bil. For 9 mos, revenues are off 2% to $34.29 bil and oper inc down 13% to $7.21 bil. But underlying "organic" fundamentals were mainly in positive terrain. Results "were in line with our expectations and reflect the continued execution of our strategic initiatives to restore momentum, which are beginning to take hold across our global business," said chmn/ceo Muhtar Kent.

Overall case volume increase of 3% was comprised of 2% gain in CSDs and 6% gain in noncarbs, with co citing iced tea (up 4%), sports drinks (+5%) and packaged water (+11%) as particular bright spots in still bevs. Coke trademark was up 1%, thanks to 1% lift in Coca-Cola brand and 8% growth in Coke Zero, offset by Diet Coke's slippage of 8%. Sprite and Fanta enjoyed growth in low single digits. Concentrate sales were flat, and price/mix rose 3%.

All geographic reporting groups were up except Asia Pacific, down 1%. In core N Amer market, which accounts for about half of total biz, revenues rose 1% to $5.64 bil, but oper inc fell 10% to $681 mil. Volume edged up 1% thanks to 7% surge in noncarbs, offsetting 1% decline in CSDs. Expanded distribution of Monster Energy contributed a point of growth. Price/mix was up 3%, in line with global #. As has been pattern in recent qtrs, co offered no further color on performance of specific trademarks in N Amer in earnings release or prepared remarks, and analysts on conference call didn't ask about them. Notes to statement indicate that KO took $38 mil impairment charge in period to its Glaceau unit, mainly because of exchange rate fluctuations that affected value of asset.

On conference call - the first for newly installed prexy/coo James Quincey - KO brass showed uncommon attention to brands in newer segments, heralding closing of Monster Beverage transaction, launch of Keurig Kold home-dispensing platform and move into protein drinks in China via acquisition of China Culiangwang Beverage Holdings, deal which recently received regulatory approval. Chmn/ceo Kent also heralded investment and distribution deal with Suja, the San Diego-based maker of cold-pressed juice using high-pressure processing (HPP) - tho like many who're new to space, he stumbled over phrasing, initially referring to it as cold-pressured juice company before correcting that to cold-pressed. Coke and Goldman Sachs' merchant banking unit recently plowed $150 mil into Suja for stake just shy of half.

Dwight Richmond, highly influential natural-bev buyer in his role as global grocery purchasing coordinator at Whole Foods, indeed has resigned as of Fri (BBI, Oct 16), with memo traffic indicating he's relocating to NC to be closer to wife Carrie's parents and will be doing some consulting, per some of memo traffic surrounding surprise move. Still no clear reason why he left post in which he was responsible for 70+ categories accounting for revenues exceeding $3 bil. Among other departures from reorganizing natural foods retailer are Ana Yoo, Southern Calif grocery buyer, who's segued to Thrive online grocery store that's previously recruited other Whole Foods staffers. Also departing are Jennie Poe, Southwest grocery buyer, who's moved on to vp slot at Sir Kensington's condiment co, and David McCormick, Rocky Mountain grocery coordinator, off to join Jackson's Honest. Buyer Matt Jimenez will be helping Errol Schweitzer managed national buying at Whole Foods until 2 new national buyers are hired. Whole Foods also will be adding another data analyst and promo specialist . . . Slip of the finger in story last week updating events at VPX mistakenly listed Brian Armstrong, new supplements sales chief, as vet of GAS; it should have read EAS, the familiar unit of Abbott Nutrition.

Latest entrant into booming hard soda space is upstate NY brewer with extensive prior experience on soft drink side. Venerable FX Matt Brewing, based in Utica, NY, is turning expertise from its Saranac 1888 soft drink line to use in debuting hard soda brand called Jed's Hard in similar range of flavors, including Root Beer, Orange Cream and Black Cherry Cream. Prexy Fred Matt insists launch of 5.9% ABV line, which reprises name of hard lemonade the co debuted years ago, was driven by requests from fans of co's soft drink line. "I can't tell you how many times people have called or come up to me and referenced our award-winning root beer, asking when we plan on releasing our own hard root beer," he said. "And we're feeling like we can make a really strong impact on the category. We're starting from a great base, our Saranac 1888 soft drink line that people know and love, and we took our time to get the Jed's Hard line of products right" - for instance, requiring 43 attempts on Root Beer sku before recipe was deemed right. The new hard sodas are being distributed in 21 states, mainly in east but including Calif and Colo, a rep indicated. She said the sodas are out in 22 flavors in 15 states, all in east with exception of Calif and Colo.

 Vibrant array of dairy-based offerings at recent NACS c-store show in Las Vegas was enlivened by pair of brands from Jamaica, NY-based Steuben Foods, corporate affiliate of Elmurst Dairy as well as of Dora's Naturals distributor in NY. Steuben also unveiled brand-new Horchata line. On non-dairy side it ventured a Banana Water playing on underrated nutritional efficacy of familiar fruit.

On dairy side, co has revamped its licensed Cold Stone Creamery Milkshakers line, indulgence line that's now been clad in more upscale-looking full-wrap PET 12-oz bottle in flavor range that's been expanded to Simply Vanilla, Simply Strawberry, Chocolate Fudge Brownie and Coffee Caramel Dream. Tho they're all made from lowfat milk, there's no denying they're "rich, indulgent beverages," per sales materials, coming in at 260-300 calories per 8-oz serving. So far that line is going out to retail either direct or via broadliners, with no DSD in mix.

Steuben also sampled pair of newer brands, both under Elmhurst Brands name. The dairy one is Horchata line sporting Mexican-themed label and made from milk, rice, cinnamon and vanilla, at 140 calories per 10-oz bottle. Line has garnered solid reception at retail, shipping to Hy-Vee and 7-Eleven and quickly winning commitments from HEB, Jewel, Big Y and Roche Bros.

Also under Elmhurst name but without dairy component is Banana Water, which reps attempt to bridge coconut water and Vitaminwater segments, per regl sales mgr Mark Woleben. It blends banana juice, and its high potassium content, with other juices (just below 20% juice content in all) to offer Original, Passion Fruit and Mango flavor range, in 12-oz PET bottles decorated with image of fruits and water splash. They come in at 70 calories per bottle. Since launch in Jun it's moved into Hy-Vee, Jewel, HEB and Hinans chains, and has commitment from Kroger for Feb.

 Non-alc bev sales rose an estimated 4.8% in Q3, reported Well Fargo Securities' Bonnie Herzog, based on her survey of buyers representing 15K+ c-store locations across US. Retailers reported that growth was driven by energy (+9.1%), bottled water (+8.9%), sports drinks (+6.5%) and iced tea (+5.2%) during Q3. Another big help was drop in gas prices. "Not surprisingly, 100% indicated lower gas prices are having a favorable impact on beverage sales," noted Bonnie, with retailers pleased that the declines "put more discretionary dollars into consumers' hands." Also, trading up continued in Q3, with retailers reporting "sustainable move to more indulgent and premium offerings." Retailers reported promo levels "were down from Q2, not surprising given the promotional growth lap from last year," wrote Bonnie. Tho lower than Q2, promo levels remained "broadly in line with historical averages." Respondents cited KO 12-packs and PowerAde as being heavily discounted during qtr.

Deep 12-Pk Discounts for KO CSDs Coca-Cola sales were up estimated 5% in Q3, based on survey, with noted "deep discounting" on 12-pks and for Powerade, "which we suspect contributed to solid overall volume growth," said Bonnie. The "Share a Coke" campaign continued to help drive sales growth but that impact is moderating with nearly 70% of respondents believing it's only generating a "modest favorable impact." Retailers think KO's alliance with MNST "will be a win for Coke" as "we anticipate them 'leveraging' Monster space and funding to gain distribution in other sub-categories where they don't have a prominent item."

Sucralose Switch Having Little Impact on Diet Pepsi Sales PepsiCo bev sales were up estimated 3.9% in Q3, based on survey, which Bonnie noted is consistent with co's reported Q3 results. While getting plenty of attention by media, the switch from aspartame to sucralose for Diet Pepsi has had a "minimal impact" on sales so far, observed c-store operators. (On recent earnings call, PEP brass had said it's too early to tell whether the switch is proving a winner.) Survey found continued gains for Gatorade and Starbucks items, "as well as innovation around Mountain DewShine and Kickstart" as strong performers to offset weak CSDs. While Kickstart performs well, retailers remain split on where it should be placed, with "majority" selling it alongside CSDs while some selling it with energy drinks. (Recall that because of way its Rockstar distribution contract is written, PEP takes pains to distance Kickstart from energy category.)

DPS Up 3% Dr Pepper Snapple Group sales rose an estimated 3.2% in Q3, based on Bonnie's survey. While results "lagged its peers, we believe DPS remains well positioned heading into Q3 results given macro tailwinds in the US and strong performance from allied brands," noted Bonnie. Those allied brands include likes of Fiji, Vita Coco, Bai, Body Armor, Neuro and Hydrive.

Energy Drinks Up 9%; C-Store Retailers Anticipating 'Year of the Hard Soda' in 2016 Energy drinks gained solid 9% in Q3, with retailers reporting Red Bull had an "excellent quarter" while Monster had a "good rebound." MNST grew estimated 7.1% in Q3, based on survey, a slight decline from its Q2 gain pace, "which we attribute to MNST's recent price increase offset by improving service levels and lower out-of-stocks," wrote Bonnie. As MNST transitions over to KO distribution, fewer retailers, 2.5% vs 2.9% in Q2, are reporting out-of-stock issues. Survey also found that "retailers are not fully passing along Monster's 6% price increase," tho there's been "generally limited pushback from consumers" following price hike, she noted. Retailers anticipate 10% growth for energy category for full year 2015 and expect Red Bull will grow in 10% range while Monster will underperform with 8.4% growth.

On Alc Side, Hard Sodas Continue Arrresting Ride On alc-bev side, c-store retailers reported sales up an estimated 3.3% in Q3, led by gains for craft beer and imports along with "single sells." Paralleling situation with CSDs on non-alc side, domestic beers were "down and declining," while retailers cited the "exceptional success" of hard sodas sparked by Not Your Father's Root Beer and increasing legion of imitators. "Never seen anything like it in my years in beverage business, both on vendor and retailer side," said one operator.

"The latest study about antioxidants is terrifying," headlined Washington Post on Fri. "Scientists think they may boost cancer cells to spread faster." That got your attention? Antioxidants have been ingredient darling of food/bev world over past coupla decades for their ability to combat free radicals, leading to surge in new items employing acai, coffee fruit and other plants. Now a study from Univ of Texas Southwest Medical Center that was published last week in journal Nature has found that, while antioxidants' benefits to normal cells are unquestioned, they have worrisome effect on cancerous cells, "turbo-charging the process by which they grow and spread," as Post put it. Test involved mice given doses of N-acetylsystein (NAC), familiar ingredient to those who shop at nutrition stores, who were found to have "markedly higher levels of cancer cells in their blood, grew more tumors and the tumors were larger and more widespread" than control group of mice not given NAC. Researchers chalked up result to antioxidants' ability to reduce the "oxidative stress" that might otherwise kill cancerous cells as they travel thru body. Researcher cautioned paper that further study is needed and said cancer patients should still consume antioxidants as part of a healthy diet. But, "personally, from the results we've seen, I would avoid supplementing my diet with large amounts of antioxidants if I had cancer."

"The latest study about antioxidants is terrifying," headlined Washington Post on Fri. "Scientists think they may boost cancer cells to spread faster." That got your attention? Antioxidants have been ingredient darling of food/bev world over past coupla decades for their ability to combat free radicals, leading to surge in new items employing acai, coffee fruit and other plants. Now a study from Univ of Texas Southwest Medical Center that was published last week in journal Nature has found that, while antioxidants' benefits to normal cells are unquestioned, they have worrisome effect on cancerous cells, "turbo-charging the process by which they grow and spread," as Post put it. Test involved mice given doses of N-acetylsystein (NAC), familiar ingredient to those who shop at nutrition stores, who were found to have "markedly higher levels of cancer cells in their blood, grew more tumors and the tumors were larger and more widespread" than control group of mice not given NAC. Researchers chalked up result to antioxidants' ability to reduce the "oxidative stress" that might otherwise kill cancerous cells as they travel thru body. Researcher cautioned paper that further study is needed and said cancer patients should still consume antioxidants as part of a healthy diet. But, "personally, from the results we've seen, I would avoid supplementing my diet with large amounts of antioxidants if I had cancer."

Pair of most visible banking advisors in bev biz are hanging out their own shingle. Mike Burgmaier and Nick McCoy have departed Silverwood Partners after run of 6 years and 40+ transactions to launch their own boutique investment bank, Whipstitch Capital, that's more narrowly focused on consumer packaged goods brands associated with healthy lifestyles. While at Silverwood pair hatched major food/bev deals involving likes of KeVita, Essentia Water, Spindrift, Switch, Brad's Raw Foods and Otter Creek Brewing, but that co is also involved in technology and healthcare, and partners said they preferred to open shop where all hands on deck, including junior staffers, are involved in same space. "No independent investment bank is just in this sector," Nick noted to BBI this morning. And while segment looks easy from outside, it bring particular challenges, placing premium on shop with that as exclusive focus, he added. Operating independently should also allow partners to explore clients that are "smaller and more interesting to us," Mike said. But typical transaction will involve $5-10 mil in institutional capital via private placements or exits of cos with enterprise value of $15 mil or more. At Silverwood their range of advisors had included likes of Brad Barnhorn, Michael Hartman and Jeanne Varley, but partners said they're not quite ready to identify other members of new team.

Based in Yarmouth, Maine, near Burgmaier's home base in Portland, Whipstitch means "stitch that passes over an edge, in joining, finishing or gathering," meant as metaphor for partners' role as connectors. (Newly live Web site at WhipstitchCapital.com suggests pronunciation of "hwip-stitch" but partners probably won't hang up on potential clients who pronounce it "wip-stitch.") Web site lists bank's core focus as food/bev (including ingredients and related technology), nutritional supplements and OTC pharma, and retail/restaurants, but Mike said partners also will pursue related categories like personal care - any CPG category, it seems, that might be found exhibiting on floor of Natural Products Expo West. Tilt will be toward natural, organic and functional, Burgmaier said, at time big conglomerates are seeing their core brands in accelerating skid and have become receptive to new approaches.

Tho high multiples seen in some recent transactions have led to some questioning as to whether we've entered frothy phase, Burgmaier said he believes those multiples generally are warranted. "It's definitely a strong market, but it's all being led by the consumer . . . and the slow death of a lot of legacy brands out there. Now CPG companies are starting to feel the heat" and have embarked on ardent quest for new platforms that can grow into major platforms in future, if not necessarily in next coupla quarters.

NY Times tech columnist Farhad Manjoo yesterday described snacking culture in Silicon Valley: Square "has a gleaming coffee bar with a barista who conducts classes on the best ways to brew. On one trip to Facebook, I was treated to an otherworldly bag of popcorn. And just about every company has a refrigerator or two stocked with Hint, a subtly flavored brand of bottled water that seems to flow as freely in San Francisco as the tears of the people who were evicted to make room for the incoming software engineers." Hint brand was founded by wife-and-husband team with ties to Valley going back to their AOL days.