Has Starbucks’ view of Fizzio evolved from its in-store craft-soda brand to being more of a system to support other brands as well?  That’s possible conjecture with launch last week in some Canadian stores of Teavana-branded sodas, produced on Starbucks’ proprietary Fizzio systems, even as Fizzio-branded sodas haven’t yet moved beyond Sunbelt.  Teavana Sparkling Tea Juices, available in 196 stores in Toronto and Vancouver, combine freshly brewed Teavana Iced Tea with real fruit juice from concentrate and carbonation, in 2 flavors: Sparkling Black Tea Tangerine (with tangerine, mandarin orange and peach) and Sparkling Passion Tango Tea Pineapple (with accents of hibiscus and rose hips).

It makes for interesting storyline for Fizzio Handcrafted Soda brand that receives essentially no discussion any more from Starbucks brass on quarterly earnings calls.  After burst of attention behind Fizzio intro a year and a half ago, SBUX execs in recent quarters have been far more talkative about their other non-coffee entries like Evolution Fresh juices and Teavana teas.  To date, Fizzio remains confined to Sunbelt region, in 3,500 Starbucks-owned stores; as reported here, planned launch in co’s home market of Seattle last summer was aborted, with baristas there telling visiting BBI editor that recently installed equipment had been abruptly yanked out.  However, co added Fizzio to 600 licensed store locations this summer, all of them in Sunbelt, a Starbucks rep said today.  In all the stores, it’s believed, the Fizzio systems are available to carbonate other Starbucks drinks, including Iced Tea and Starbucks Refreshers energy drinks, at cost of 50 cents.

Still, if SBUX is taking it slow on moving Fizzio beyond Sunbelt in US, it’s been growing entry overseas.  It added Singapore, South Korea and several cities in China last summer, and more recently expanded Fizzio to 450 Starbucks stores in Mexico, in Ginger Ale and Lemon Ale flavors.  

Starbucks launched Fizzio in 3 flavors – Ginger Ale, Spiced Root Beer and Lemon Ale – and this summer swapped out the Spiced Root Beer for a new Orange Cream Soda, described as blending tangy orange and creamy vanilla enhanced with floral accents, for light, fragrant finish.

FDA has pushed back requirement that chain restaurants display calorie counts on menus by a year, to Dec 1, 2016.  Delay was in response to chain operators who requested time to train workers, install menus and menu boards and upgrade software to more efficiently display the info, ABC News reported.  Rule will apply to chains of 20 units or more . . . Groping for an efficient way to produce Nestea and Poland Spring in can format, Nestle Waters North America has turned to longtime distribution and copacking partner Polar Beverages via joint venture called Polar Strategic Ventures effective next week and covering eastern US.  New unit will be run by NWNA vet Jeff Weston as coo, reporting both to NWNA ceo Tim Brown and to Polar prexy/ceo Ralph Crowley . . . Reed’s has entered RBI, northwestern Ark distributor that also carries such indie brands as Calypso Lemonade, Redline and Xyience energy drinks, Texas Tea and Kill Cliff functional drinks.  Operated by same family that runs 18-store Reasor supermarket chain there, RBI is picking up Reed’s and Virgil’s craft sodas.

Youthful founders of tea-based Owl’s Brew mixer line have shown incredible knack for garnering media attention and winning just about every product award available within trade – most recently, a Sofi award at Fancy Food Show for their newest flavor, White & Vine.   Count as latest media win extensive profile today in NY Times biz section, which details journey from 2013 launch to $400K in sales in 2014 and anticipated $1.7 mil this yr, per co-founder Jeannie Ripps.  Jeannie and partner Maria Littlefield have lofty projections of reaching $11.2 mil in sales by 2018 and $18 mil by 2020.  Owl’s Brew mixers, which offer advantage of working well with both white and dark spirits as well as beer and other accompaniments, are now available at 1,200 retailers, and Jeannie expects that to reach 6,500 in next 5 yrs. Besides scoring space at high-end retailers such as Whole Foods Market, Williams-Sonoma, Fairway Market and in big chain Bed, Bath and Beyond, as well as Total Wine and BevMo liquor chains, Owl’s Brew has also scored presence at 22 Loews Hotel & Resorts.  Owl’s Tree “hit the nail on the head,” said Mark Weiss, Loews svp of food/bev sales.  “It’s right on the money with this particular timeline of mixology and crafted drinks.”  Owl’s Brew, which retails for $10 per 8-oz bottle or $17 for 32 oz, comes in 4 flavors: Coca-Lada, Pink & Black, The Classic and White & Vine.  “If Owl’s Brew continues on its current growth path, investors speculate that it could appear on the takeover radar of a beverage giant,” wrote Times.  (Recall that Diageo purchased earlier alt-mixer brand, Stirrings.)  “We’re focused on growing our brand, hitting our sales number every year and growing smart – not too fast – but growing fast enough that we’re still the first movers in the tea cocktail set,” said Maria. 

Having grown from handful of Whole Foods stores 4 years ago to claimed 25K+ points of distribution today, bottled Argo Tea line has undergone significant packaging tweak that should support big expansion in coming years, including long-awaited launch of Teappuccino dairy-based line.  Argo, recall, launched in oval-shaped glass bottle that echoed distinctive canisters used to sell loose tea in its stores.  But glass pack and its plastic oval cap have been a bear to run at high speed, and prior plastic-to-glass seal posed mold risk.  So now co has made decisive change, bringing its glass mfg from Asia to US via alliance with Owens-Illinois, which produces the custom bottles on both coasts, and switching to round cap that eliminates orientation headache in production, even tho it retains Argo-like flair.  “It looks the same on the shelf but it unlocks production” by order of magnitude, founder/ceo Arsen Avakian told BBI.  Line is filled at copackers Castle, near Pittsburgh, and Stapleton-Spence in Calif.

Chicago-based co just celebrated its 12th anniversary, during which it’s been happy to build biz 1 cup at a time, 1 customer at a time, Arsen said in recent conversation.  About 5 years ago, with foray into bottles, it became CPG biz, which now comprises biggest share of sales.  By now, Avakian claims bottled line is in 25K distribution points and ranks as fastest-growing tea brand in 52-week IRI data, generating higher $$ per facing than established brands like Lipton.  But its ACV still comes to paltry 3-4%, leaving plenty of upside.

Co has made other changes, too.  After embarking on DSD recruitment push under former Pepsi exec Joe Cugine, who’s since left co, Argo has retreated to a handful of targeted ones, such as Dora’s Naturals in NY, but learned to rely more on broadliners like UNFI, CoreMark and McLane and burgeoning set of foodservice players like Sysco and US Food Service who’ve been able to reach some up-and-down-street accounts.  On retail side, Avakian has been heartened to see brand do well in convenience stores like Quik Trip.

Tho pitching his “crazy” concoctions to Whole Foods buyer was arduous in early days, Arsen recalled, climate has changed.  Absorption of Honest Tea brand into Coca-Cola and Sweet Leaf into Nestle Waters has created void for $2+ natural tea line, and “it’s not hard to convince a category buyer who’s kind of tired of the 99 cent to $1.50 range” of teas.  Other high-end options exist, Arsen allowed, but few with Argo’s national footprint.  Among key accounts now are Whole Foods, Kroger, 7-Eleven and Walgreen.  Aside from test at Target and limited presence at Costco, co hasn’t hesitated to say no to mass accounts to protect price point at his best customers, Arsen said. 

Co will have opened about a dozen new stores by time 2015 comes to a close, tho “we’re not trying to be the Starbucks of tea,” emphasized Arsen.  Store network is mix of street locations in urban centers, on-campus “tea-osks” at colleges like William & Mary, UVA and NYU, and airport locations.  Ubiquity isn’t aim, but rather, having stores serve as “temple of the brand,” a bit like Apple or Nespresso stores, and as innovation lab to fine tune recipes that might migrate to retail a couple of years later.  Stores sell 10 mil cups of tea annually, which makes for expansive palate for experimentation.  Seasonals often emerge from Argolympics events among baristas, yielding such in-store ideas as Jasmine Tea-Mosa, using fresh orange and jasmine flavors to mimic a mimosa, or Tea-Na Colada, with chamomile, pineapple juice and coconut milk, offered as Teappuccino entry.  Seasonals that graduate from limited-time to permanent-menu status are candidates for bottled line.

On RTD side, next major launch will be Teappuccino, which co had hoped to have in market a year earlier.  “It’s been long in the making,” Arsen acknowledged, but should enjoy first production in early Aug, at dairy house Steuben Food from tea brewed at Castle, moving off-cycle into Whole Foods’ Northeast div with hopes of making Mar/Apr formal reset.  It will break in flavors like Earl Grey Vanilla Chai that have long been best-sellers in stores, then add seasonal entries like Pumpkin Chai and Chocolate Mint and, next year, entries made from dairy alternatives like coconut milk or almondmilk.  Avakian said it’s been favorably received by retailers eager for alternative to Starbucks Frappuccino hegemony.

Of course, now Starbucks is big player in tea as well as coffee, and has made it clear it’s dead set on bringing acquired Teavana brand to unquestioned tea dominance.  Avakian doesn’t doubt that RTD Teavana versions will be on the way, but professes not to be losing sleep over prospect so far.  Remember, he said, “Teavana is not a tea company but a retailer, and that will not necessarily confer an ability to become a tea company,” since co doesn’t own its own blends.  “To translate from being a retailer of dry teas into the liquid format is not trivial.”

PepsiCo handily beat earnings expectations for 2d qtr, with co claiming enough momentum to raise its earnings guidance for full year from 7% gain to 8% gain.  Net revenue rose 5.1% but foreign exchange hit of 10% translated that into 6% decline in reported net revenues to $15.93 bil.  Operating profit was flat at $2.9 bil.  Earnings per share of $1.32 beat consensus expectation of $1.24.  “Overall a good quarter by PepsiCo with reaffirmation of the strong pricing environment in CSDs and surprising uptick in PepsiCo Americas Beverages (PAB) volumes (the first period of growth in many quarters),” wrote RBC Capital’s Nik Modi in early note, referring to 1% uptick at PAB.  Still, after early surge, PEP shares were trending down this afternoon.

At PAB, co’s core market and largest segment, net rev edged up 1% to $5.34 bil on 1% volume gain, and operating profit advanced 4% to $903 mil.  “Outstanding quarter” for region, PEP chmn/ceo Indra Nooyi proclaimed.  For 6 mos, PAB rev was up 1% to $9.77 bil and profit up 6% to $1.37 bil.  But co didn’t provide much insight into fundamentals of biz.  Unlike in past, earnings release lacked any discussion of dynamics within each key territory, including PAB, nor did execs’ prepared remarks shed any light, aside from claiming $$ share gains in sports drinks and iced tea, traditionally strong segments vs rival Coke.  Gatorade surpassed 80 share in qtr, Indra noted.  Nor was there was any breakout between performance of diet and full-cal CSDs, or CSDs and noncarbs, nor discussion of key brands like Pepsi-Cola or Tropicana or key segments like juice and energy.

That apparently will be pattern from now on.  Instead of reviewing segment #s, Nooyi said, each quarter she’ll delve into key initiatives, starting today with account of co’s efforts over past 8 years to rev innovation.  But a bit more clarity will come from slight revamping of category reporting that will result in PAB dropping Latin America biz in future quarters to focus exclusively on N Amer.  New segment will be called North American Beverages, under ceo Al Carey, while LatAm bev biz will be paired with region’s snacks biz, as PEP does in other overseas regions.

On conference call this morning, Nooyi joined chorus of food/bev execs lamenting that center store of grocery has become a challenge vs faster-growing perimeter areas, in this case with impact on Quaker Oats biz.  Some analysts also were concerned to see Frito-Lay turn in flat performance after 10 qtrs of growth, tho PEP brass ascribed that to transition to greater emphasis on price realization, just as co has been doing on bev side.

Asked about status of reformulated aspartame-free Diet Pepsi, Nooyi noted it’s due to hit shelves in late Aug.  But in sign that co may have been hearing from loyalists who don’t want change, she added, “For those who love Diet Pepsi with aspartame, we’ll figure out how to make it available online.”

Co also has announced some exec changes over past day.  Hugh Johnston, evp/cfo, adds vice chmn title, joining evp/chief scientific officer Mehmood Khan as co’s 2d vice chmn.  In process, Hugh adds responsibility for info tech operations.  Eugene Willemsen, prexy of PepsiCo Lipton partnership, segues to evp for global categories & franchise mgmt while retaining tea responsibilities.  And Brian Newman, svp/gm for global e-commerce, becomes evp for global operations.

It’s been in market barely a year now, but NY-based Happy Tree has moved out to natural and specialty/gourmet retailers in 40+ states already with its raw, organic entry in burgeoning segment, and is experimenting with its first flavor extension, Lemon.  Partners Ari Tolwin and Will Finkelstein recently concluded a friends and family capital raise, with unidentified strategic investors, and are eyeing another modest raise in coming months.  But they plan to stay selective in the amounts they bring in, the partners they choose and the path of expansion, in segment that’s conjured lotsa excitement within broader plant-based bev realm but whose ultimate potential remains far from clear.

Happy Tree was profiled here after it came in as runner-up in late-2013 BevNet Showdown (BBI, Dec 27 2013), hitting market the following Mar as first raw, organic entry in US.  By now duo are self-producing at plant in NJ, sending ingredients out for HPP processing at toller.  Juice is harvested upstate and in New England.  Brand is packed in tall 10-oz bottle similar to that of Harmless Harvest coconut water, and sports 35-day shelf life, partners said in meeting in NY last week.

Tho they’ve spread geographic footprint wide by now, they’re keying in strictly on natural and specialty channel, including such chains as Gelson’s, Bristol Farms and Whole Foods.  Partners meld broadliners like UNFI with targeted DSD houses, including Gourmet Guru in NY, Monterrey Provisions in Southern Calif and Dove in Northern Calif.

Flavor extensions are an obvious direction for future, and lemon flavor available only in Whole Foods’ Northeast div so far has become best seller.  Also demanded by customers has been 16-oz bottle, on the way now.  To support brand, partners have recruited full-time marketing staffers in NY and on West Coast and leveraged lifestyle platforms like tennis clinic hosted by Lacoste for bloggers in NY’s Central Park, Fla yoga event sponsored by Lululemon, Atleta events, yoga fests, Catskill Chill Music Fest (in upstate NY locale where some of Happy Tree’s maple water is sourced) and Bay to Breakers footrace in SF.  Early morning Daybreaker dance parties have also proved good match, Tolwin and Finkelstein indicated. 

Rochester, NY-based couple with Greek roots has been slowly building distribution for RTD line based on anise-flavored ouzo, viewed by many as quintessential Greek tipple.  Operating as Opa Originals, Phil and Anastasia Broikos have taken it slow, moving brand gradually out from Rochester area in western NY since its launch in 2010, and finding themselves surprised at brand’s popularity outside retailers with specific Greek link.  Recently brand has entered its first Wegmans stores as well as Fairway gourmet chain in NY area.  Natural food co-ops also have proved sweet spot for brand, which goes out at $6.99 per 4-pack, $1.99 per 12-oz bottle.  Couple produce line from USDA-certified organic star anise sourced from Seattle co and brewed into tea at Amish kitchen in upstate NY.  It’s copacked at Ginseng Up, whose glass bottle it employs.  Pure cane sugar is sweetener.  Label uses blue-and-white color scheme of Greek flag and is positioned as “The original non-alcoholic ouzo flavored soda.”  Info at GreekSoda.com.

Live Soda Kombucha, whose effort to demystify kombucha by offering it in classic soda flavors like root beer and cola has won it broad distribution in Target stores, finally has made move to diversify flavor range.  At Fancy Food Show, Austin-based co unveiled pair of flavors that take it in fruitier direction more in line with other kombucha brands: Rhuberry (rhubarb and strawberry) and Blueberry (blueberry and pomegranate).  “There are only a limited number of traditional soda flavors” anyway, noted founder Trevor Ross.  Additions bring range to 8 flavors now, including Cola, Rootbeer and Pure Doctor (Dr Pepper).  By now brand has cracked such chains out west as Gelson’s, Fry’s and Fresh & Easy.  In Mid-Atlantic, it’s entered Stop & Shop, Shop Rite and Giant chains, as well as smattering of Shaw’s in New England, said sales vp Joel Skurnik.  (DSD partner in NY is Preferred.)  

Owning vending machines was “once a profitable and steady business,” but a few yrs after local and fed gov’t regulations have mostly limited offerings to items deemed to be healthy, sales have plummeted, reported NY Post. “It used to be very lucrative, but my sales are about half of what they had been,” said Butch Yamali, ceo of Dover Group, which services over 1K machines across Long Island, NY.  Half of Dover’s machines are in schools, hospitals and gov’t buildings that restrict offerings. Drop in sales “will force Dover to lay off 10% of its staff in the fall,” noted report.  Another co, Answer Vending, which has 900 machines in 500 NYC schools, has seen 50% drop in sales, said ceo Tom Murn.  “It’s more of a philanthropic initiative” after regs were put in, he quipped.  One Long Island school district has seen its vending commissions drop from $200K annually to just $2K, added Post.  Annual revs for vending machine industry are up slightly, at 0.5% per yr over last 5 yrs to $7.5 bil, with “most of the revenue” still coming from sodas and candy, per research co IbisWorld.

“Some like it cold,” proclaim ads heralding rollout of Starbucks Cold Brew, iced coffee option that’s made in-store via 20-hour steeping process and proffered in mason jars.  Rollout builds on into in 3K eastern US stores earlier in spring, and is likely to hasten awareness building of cold-coffee option that’s been familiar feature of progressive indie cafes for several years.  No word yet from SBUX on whether it plans to offer packaged version that might compete with RTD entries from likes of Stumptown, Blue Bottle, Chameleon and High Brew.  Unlike some players on RTD side, SBUX is refraining from adding sugar or milk that might obscure vibrant, rounded taste of straight cold-brew.  “Starbucks Cold Brew is served unsweetened to highlight its smooth, naturally sweet taste,” states ad copy, in explaining difference with Starbucks Iced Coffee and Iced Caffe Latte, other summer options available in stores.  To herald entry in LA, co recruited pop artist Steven Harrington to create 60 hand-painted mason jars that were to be given away to first cold-brew customers today at Beverly Hills Triangle store.  Co continues to produce drink in limited quantity each day, generally 60 cups per store.  Announcement has drawn limited coverage so far, with most media focusing on unrelated announcement about hike in coffee prices in stores.