Honest Tea has deepened its “Refreshingly Honest” ad campaign this year, putting greater emphasis on ingredient story, even as it launches first paid media behind its fast-growing Honest Kids subline.  For core tea brand, co is mustering images like PET bottle of Honey Green Tea flavor with teabag label, dripping honeycomb and mint sprigs dangling from under sealed lid, flagging presence of real ingredients inside.  Honest Kids creative features imagery calculated to appeal both to kids and their moms, such as duck created from intricately carved apple slices (for Apply Ever After flavor).  That’s intended to flag presence of real apples in item.  Bethesda, Md-based unit of Coca-Cola is making out-of-home buys in expected key markets like NY, LA, San Diego, Chicago, Boston, Baltimore/DC, Miami, SF, Portland (Ore), Seattle and Philadelphia, but also in smaller markets Denver, Sacramento, Minneapolis, Hartford, Conn, and Tampa, Fla.  Visuals were developed with Lambesis agency, and media buy placed by Noble People (formerly Ikon3).  Related online video leg to campaign will materialize in late summer or early fall.

Move comes as brand is back calculating different cities’ Honesty Index on basis of tea displays left unattended in public spaces, this time in 28 cities around country, a bit scaled back from last year.  As last year, displays include both core teas and Honest Kids juices for $1, on the honor system.  Results are due Aug 25.  And co is mustering huge displays of its multiserve Fair Trade-certified Honest Lemonade at Whole Foods, returning to exclusive program that’s anticipated this year to sell out before Aug is out, founder/ceo Seth Goldman told BBI.

CSD volume fell 3.5% last 4 wks thru Jul 25, per Nielsen all-outlet data (incl gas and c-stores) reported by Morgan Stanley’s Dara Mohsenian.  Decline accelerated from -2.9% previous 12 wks but avg prices edged up to +5.7% for 4-wk period.  Avg price increases were higher for PepsiCo and Dr Pepper Snapple CSDs but lower for Coca-Cola brands.  Coca-Cola CSD volume was off 3.9% last 4 wks with avg price gain of 3.9% (vs +4.8% previous 12 wks).  PepsiCo trends worsened to -6.3% last 4 wks (vs -5.1% for 12 wks) as its avg price increased to +4.5%.  DPS volume was off 2.6%, double its 12-wk decline, as avg prices went up from +2.2% for 12 wks to +3.5% in latest month.  Private-label CSD volume slipped 3.8% with avg 3% price increase for 4 wks.

Energy Volume Accelerates on Lower Avg Prices   Pattern was reversed for energy drinks, where deceleration in pricing seemed to stimulate volume.  Total category volume rose 9.6% in all-outlet data last 4 wks, up from 8.9% gain prior 12 wks.  Avg prices in category slowed tho to +0.9%, down from +1.5% for 12 wks.  Red Bull volume gains slowed to +5.2% (vs 7% gain for 12 wks) even while avg price increase of +4.6% was in line with 12-wk avg.  Monster Energy volume gain increased to +11.7% last 4 wks (up from +10.9% for 12 wks) on avg price decline of 0.9%. With avg 2% price drop, Rockstar continued to rack up double-digit gains, +22.3%, last 4 wks, +15.9% for 12 wks.  PEP energy brands (Amp) improved to 5.3% gain over last 4 wks with solid 8.4% avg price increase.  Coca-Cola energy brands (NOS, Full Throttle), now part of MNST, were down 6.1% last 4 wks even on avg price drop of 9.1%.   

Powerade Gains Lift Sports Drinks   Sports drink volume improved to 4.7% gain last 4 wks, up from 3.3% gain pace previous 12 wks.  Avg prices were relatively unchanged at +1.4%.  Gatorade volume increased 4.7% last 4 wks, nearly matching 4.9% avg for previous 12 wks.  Avg prices for Gatorade were up 1.4% in latest month, up from +1% for 12 wks.  KO’s Powerade swung from 1.7% volume drop last 12 wks to 4.3% gain last 4 wks as avg price increase was cut in half to +0.9%. 

Water Volume Rises, Steady Pricing   Bottled water volume gains accelerated to +6.9% last 4 wks (up from +5.7% previous 12 wks) while avg prices edged up to +1%.  Nestle Waters volume declined further in last 4 wks to -2.2% as avg prices climbed up to +3.4% from +1.2% previous 12 wks.  Coca-Cola volume improved from +1.4% for 12 wks to 4.4% gain in latest 4 wks as avg price decline to +2.1%, half of its 12-wk pricing avg.  PepsiCo water volume was still up double-digits (+11.9%) as its avg price drop eased back to -1.8% from -5.1% drop for previous 12 wks.  Private-label volume shot up 13.7% on avg 1% price drop during last 4 wks.

Looking to ride Moscow Mule cocktail craze, Reed’s Inc has promised investors that it’s been planning alliances with prominent liquor marketers to co-promote their spirit and Reed’s recently released Extra Strong ginger beer.  This week, it revealed Absolut as one such partner, working both on-premise and off-premise accounts to promote pairing, starting in LA next month with special pricing and merchandise.  In memo to sales team, svp sales & marketing Neal Cohane noted that some restaurants and bars are going thru as many as 30 cases per week of Reed’s concocting the cocktail.  “There used to be something called Vodka & Red Bull . . . that is changing and the new callout is ‘Reed’s and Absolut Mule’!!” he exhorted.  (Of course, Red Bull has edged away from vigorously promoting vodka drinks in years since controversy over caffeinated energy drinks, tho it’s still mainstay bar call.)

Prominently featured “Upshot” analytical piece in Times this week offers view of concerned pediatrician, Aaron Carroll of Indiana Univ School of Medicine, who’s been watching some consumers turn back to sugar-sweetened bevs out of concern about safety of artificial sweeteners.  That, of course, has been behind once-startling trend that’s seeing big bevcos’ sales of diet CSDs plummet at rate far faster than their full-calorie CSDs.  Objective look at scientific evidence, Dr Carroll writes, offers clear conclusion:  “There appears to be a correlation between sugar consumption and health problems; none can be detected with artificial sweeteners.”  Piece reviews flaws in various studies over years that have purported to find dangers in artificial sweeteners, say, studies of saccharin that failed to make convincing link between occurrence of cancer in rats and danger of ingredient to humans.  Based on newer studies, govt eventually removed saccharin carcinogen list.  “But by that time, opinions were set.”  Article can be found here:

http://www.nytimes.com/2015/07/28/upshot/the-evidence-supports-artificial-sweeteners-over-sugar.html?_r=0

Pair of major West Coast distributors who both play significantly in NAs with Red Bull and other brands are coming together: megahouse Columbia Distributing, which dominates Ore and Wash markets, just struck deal to buy 4-mil-case Mesa Beverage Co in Northern Calif.  Deal will close Oct 31, pending supplier approval.  Portland, Ore-based Columbia, which is owned by family office Meritage, will purchase all assets of Mesa, whose owner, Ron Fowler, once owned part of Columbia too; he stayed on Columbia board, even after it sold to Meritage.  Now Ron will (re)purchase minority stake in Columbia.  “This is a significant milestone in our company’s 80-year history: it’s a great opportunity to expand our reach and grow our reach into Northern California,” said Columbia ceo Greg Christiansen.  “Our supplier partners are excited. We have the right scale, right people and right knowledge to master the complexity of our growing business.”  With completion of deal, Columbia will move 41 mil cases of beer and about 54 mil cases in total including Red Bull and NAs.  Together with Reyes Bev Group at about 67 mil cases of beer in Southern Calif, 2 megadistribs will be responsible for about 40% of non-A-B volume on West Coast, BBI sibling newsletter Insights Express calculates.  

Columbia’s NA portfolio, per its Web site, includes Red Bull, Xingtea teas and flock of Dr Pepper Snapple-owned or allied brands: Venom energy, Snapple, teas/juices, Nantucket Nectars juices, Yoohoo chocolate drinks, Sun Drop, Canada Dry and A&W sodas, Fiji Water, Neuro functional bevs.  Mesa’s listed NA brands include Red Bull, Jarrito Mexican sodas, Hubert’s Lemonade, Crystal Geyser water, Juice Squeez’r sparkling fruit drinks, Tejava tea, Voss water, Nesquik and Coffee Mate.

“Factory of One” is personal-empowerment theme that SodaStream will be plying as it embarks on radical repositioning strategy transforming home soda maker into customizable sparkling-water facilitator.  New creative via agency Commerce House breaks in NY this weekend with 30-second TV spot as Israel-based co looks to get back on track with messages that, rather than positioning machines as preferable alternative to store-bought soda, now sets them as alternative to entire category.

Spot starts with black-and-white-heavy footage of bottling line, against voiceover declaring, “Some believe refreshment can be mass-produced from tired formulas kept in vaults, and they decide what you get.”  Spot then cuts to hunky actor activating stylish countertop Sodastream machine, saying, “Well, that doesn’t hold water with us.”  Then comes stream of colorful visuals with fruit flying amid water splashes, tidal wave near ship, water-stunt daredevil.  “We are Sodastream and it’s time to wake your water up.  Put some fizz in it, experiment, concoct, let flavors fly.”  Then it cuts to diverse trio of consumers with: “You are R&D.  You are manufacturing.  And you are a factory of one.”  Tagline: “Sodastream: sparkling waters, made by you.” 

As reported when Dallas-based Commerce House was identified as key creative shop, out-of-home ads have already gone out using slogans like “Be a sparkling water maker” (BBI, Jul 14).  That slogan, in fact, was starting point proposed by Commerce House in winning assignment, agency founder/ceo Mark Denesuk told BBI this afternoon, and subsequent effort was made “to push it into something a little more aggressive.”  He noted: “We’re in a world where mass-produced (soda) is all that’s available, when the trend is toward customization and personal empowerment,” situation that meshes perfectly with Sodastream brand promise.  He said theme was developed in close collaboration with Sodastream marketing dir Barak Orenstein and spot was shot in Israel.  While some at co who don’t speak English as first language wondered whether “factory” might carry wrong connotation, extensive testing found consumers get point and embrace it, Mark noted.  Of course, with earlier ads taking on big soda makers directly, co had previously shown it’s not afraid to make waves, and empowerment message is similarly compatible with prior directions marketer had taken.  Spot can be viewed here: https://vimeo.com/135053855

Ad is breaking in key market just ahead of Sodastream’s quarterly earnings report, this coming Wed.  In bev realm, agency Commerce House had previously worked for Zico Coconut Water and Guinness.

Orphaned by sale of its NY distributor Phoenix Beehive, Rockstar Energy has been scrambling for alternative in big market where brand has chronically struggled to win major retail presence.  (Acquiring wholesaler, Manhattan Beer, wasn’t an option because it distributes Red Bull on-premise.)  In recent weeks, tho, Rockstar has found home in Hudson Valley region north of city, at Pepsi-Cola Newburgh operation, which says it’s off to brisk start with brand.  Lately, brand’s presence in city itself has begun to grow and word on street is that powerful Honickman Group has begun to sell brand thru its Pepsi operation, tho there’s no official confirmation so far.  Twin moves would finally align brand in area with Pepsi network, which distributes brand in most of country.  In city, Rockstar had moved thru Dr Pepper Snapple’s company-owned house but, finding itself lost in shuffle of Snapple, Fiji and other brands, segued to Phoenix Beehive only to find that house sold.  Recall, Monster also had endured marginal presence via Bud and Coke operations before seguing to indie house Big Geyser, which has put it on map in big way in city . . . KehE Distributors said it’s been selected by Albertsons Cos as primary distribution partner for natural/organic, specialty and fresh items to grocer’s network of 2,200+ stores.   Employee-owned broadliner based in Naperville, Ill, said designation significantly expands its biz with Albertsons, particularly in western US, at time it’s opened new distribution center in Northern Calif and is planning upgrades to units in Portland, Ore, and Flower Mount, Tex . . . LA-based WaNu nutritionally enhanced water brand has reached agreement to distribute brand throughout Pacific NW via broadliner UNFI.  

Within generally healthy premium bottled water category, brands positioned as alkaline have been enjoying particularly explosive jump in # of entries, retail presence and sales.  With a dozen or more brands available now under names like Essentia, AquaHydrate and Eternal, there wouldn’t seem to be room for more.  But bottled water vet of several decades, Steven Nickolas, is aggressively pursuing unexploited niche: bulk packs, which drastically reduce price for consumers who’re moving to regular alkaline water regimen.

Working thru Scottsdale, Ariz-based Alkaline Water Co Inc, which was built on publicly traded shell of defunct limousine co and trades under WTER symbol, Nickolas has been quickly building distribution for brand dubbed Alkaline88, so named for its 8.8 pH.  (He’d launched line as Alkaline 84, after its 84 trace minerals, but backed off after NY Spring Water, which markets bottled water under similar name, cried foul.)  Instead of starting in natural/specialty channel like many other entries, Alkaline88 has gone straight to grocers, primarily in handled 1-gal pack that sells for $3.99-4.99 and 3-liter bottle that’s priced at $2.99 and promoted at 2 for $5.  Those are mainly shipped direct to retailers.  WTER also offers smaller packs, albeit at price below that of single-serve leaders Essentia and Aquahydrate: sports-capped 700-ml bottle at 99 cents, 1-liter bottle priced $1.50-1.75 and half-liter at 65-70 cents.  For those, Nickolas has been building selective DSD distribution where he can, including powerhouse Kalil operation in Ariz, which has been grabbing brands like Eternal and Core to fill 600K-case void left when Smartwater migrated to Coke system.  Nickolas credits Kalil execs for offering valuable help in settling on design of pack and positioning.  Brand also is in several Bud houses in Southern Calif, including Triangle and HiMark, as well as Hangar 24 Craft Distribution serving Inland Empire east of LA. 

Believing consumer awareness of pH is low outside specialty channel, Nickolas has made it point to emphasize “alkaline” in brand name and on-pack.  That seems to be resonating in early days: Nickolas claims to be doing about $1 mil in sales per month, and has entered major chains in Southwest/SoCal, such as Ralphs and Basha’s.  He said brand also seems to sell in Hispanic-oriented grocers, and it’s also entered some 7-Eleven c-stores via McLane.  One potential constraint on growth, he said, is difficulty in finding copackers.

Nickolas can tell colorful stories of his ups and downs over several decades playing in bottled water.  After starting in bevs at Bud house Foothill in Southern Calif, Nickolas first got into bottled water in Maui, Hawaii, in 1980 via distilled-water play, then segued to operations like Bottled Water Images, early proponent of character licensing on bev packs, and spent a few years trying to get unsweetened, flavorless challenger to Vitaminwater off ground but encountered difficulty rounding up adequate financing.  He did stint at Essentia in early days a decade or so ago, too.

Red Bull North America execs continue to be in high demand for big jobs outside co, with retail sales chief Brian Bousley capturing prexy’s job at resurgent Pabst.  Under new ceo Eugene Kashper, brewer has been on aggressive expansion push, nearly doubling sales force to 150 and planning another doubling next year, even as co rides hottest mainstream malt brand, Not Your Father’s Root Beer, and gooses innovation.  Prior RBNA exec to make transition to prexy job there was Kevin McAdams, at time co was owned by Dean Metropoulos and was revolving door for top execs.  Kashper, who just paid out mid-year bonus to team, is promising stability.  Brian “knows the distributor network” and “the retail landscape,” Eugene told BBI sibling letter Insights Express, and his references “incredibly positive.”  So Brian will take on more of day-to-day integration of sales, mktg and supply chain.  His Red Bull experience will be useful, since Red Bull a “pioneer” at “executing in the marketplace” and “below-the-line activity,” per Eugene.  This from Red Bull distributor:  “Very personable, easy to talk to . . . Strong on national accounts.”  Bousley worked at Diageo and Southern Wine before arriving at RBNA in 2010.  No immediate word on who’s replacing him at RBNA. 

Whole Foods announced first sites for streamlined, tech-enhanced new format it’s launching, 365 by Whole Foods Market, with view to capturing time-pressed millennials who’re spooked by Whole Foods’ rep for high prices.  Tho co hasn’t revealed much yet about look and feel of new concept, most assume it’s in part effort to counter inroads of Spartan-but-fun rival Trader Joe’s.  Initial 5 stores are going into LA; Santa Monica, Calif; Portland, Ore; Houston, and Bellevue, Wash, all areas already well served by core format, with view to better leveraging existing awareness, staff and infrastructure, co disclosed on earnings call last night.  Co is targeting up to 5 more openings in 2d half of 2016 with plans to double total in 2017.  Core 365 store will be 25-30K sq ft, vs 40-50K sq ft for conventional Whole Foods store.  Co hasn’t yet given any clues as to how extensive product selection will be in various categories, how heavy a role private label will play, etc.  All told, WF operates 422 units in 41 states and 3 countries, and envisions 500 by 2017 and 1,200 eventually in US.

Whole Foods brass seemed most enthusiastic about unit planned for trendy Silver Lake area of LA.  That one is going into shell of what was originally intended to be conventional WF store, with late switch made to jumpstart program in nabe that boasts several compelling alternatives to Whole Foods, per co-ceo Walter Robb.  Robb on Silver Lake:  “It’s a super-cool neighborhood . . . We feel it's a very knowledgeable core customer that understands Whole Foods.  We also think that there's a variety of other stores right inside that market that we can compete with very well, and it's also with our 365 brand, we see that size store that's in Silver Lake actually fits within that brand.”  Tho footprint is a bit too large for 365 format, Whole Foods execs are considering Friends of Whole Foods concept that would fill extra space by leasing it to local suppliers to enhance neighborhood feel of stores, per evp operations David Lannon.  In addition, “we’re probably going to be able to still sneak a wine bar in there,” Robb said.  New 365 banner is run by WF exec Jeff Tunas as prexy.

Despite what apparently will be drastically lower prices, Mackey calculates co will get better return on invested capital (ROIC) with 365 format thanks to significantly reduced capital investments and lower labor cost, given need for fewer specialists among staff.   “If we get anything close to what Whole Foods Market sales per square foot are in our new stores, the 365 stores are going to be incredibly profitable and with very high ROICs, even with reduced gross margins,” he said.

NY Overcharging Scandal Levied National Impact on Sales   Details were revealed during conference call in which Whole Foods brass defended weak 3d qtr whose results sent shares skittering down.  Co laid some of blame on scandal in which surprise inspections by NY authorities found retailer to be short-weighting items and overcharging.  “Comps dropped sharply in week 11, after our New York City weights and measures audit received national media attention, and averaged just 0.4% for the last two weeks of the quarter,” said Robb, per Thomson StreetEvents transcript.  “We have seen a slight improvement in trends 4th quarter to date; however, comps are still well below our 2.5% average for the 19 weeks prior to the negative publicity.”  Emphasized evp/cfo Glenda Flanagan: “The impact was really felt across the whole country, not (just) New York City.”

Here was take of always outspoken Whole Foods founder/co-ceo John Mackey:  “We don't think our track record is any different than any other supermarket.  We’re not sure why Whole Foods was singled out for this attention.  We don’t know why the media ran wild with this.  Our error rates are very small.”  WF brass said they’re retraining staffers, enhancing guarantees to shoppers and beefing up 3d-party audit processes to rebuild trust.

Among key metrics in qtr, gross margins decreased 66 basis points in qtr as WF worked to move prices down, starting with produce in selected markets within 5 regions.  It’s also undertaken the pricing adjustments in some grocery categories, meat and seafood.  Combo of weak comps, narrower margin and other issues sent shares skittering downward today, at time investors have been nervous about chain’s ability to hold its own vs general grocers and mass merchandisers who’re stepping up natural/organic presence.   They’ll surely be inspecting Silver Lake store when it opens to determine whether 365 concept can be a game-changer.  The number 365 is WF’s private-label brand, of course.