Zevia stevia-sweetened soda line has ditched caramel coloring in favor of switching to clear liquids, while winning non-GMO accreditation . . . Dairy Queen is latest fast-food chain to remove soda items from their kids' menus, effective Sep 1, following campaign from groups including MomsRising.org. It follows similar steps by players like Burger King, Wendy's, McDonald's, Subway, Chipotle, Arby's and Panera, group noted, adding, "we aren't done yet," with other fast feeders being targeted.  

Pedialyte, long a staple kept on hand to help children bounce back from flu and viruses, has in recent years been discovered as elixir for adults, too. Pedialyte consumption has grown almost 60% since 2012 and adults now make up one-third of its sales, up from 10-15% historically, reported Wall Street Journal. "There's an underground movement in social media to drive word of mouth," said Heather Mason, evp at Abbot Laboratories. Pedialyte has had following among "serious athletes for rehydration," but now social media buzz touting its ability to help with hangovers is attracting a larger adult segment. While benefitting from expanded uses, Abbott has no plans "to change any product make-up" or its name to target adults, assured Heather. Abbott has added "adult-friendly" flavors, however, as well as larger powder packs for adults. It plans on advertising at "144 music festivals and sports events" across US this yr as well. Making inroads against Gatorade, "the more traditional adult-hydrating" bev will not be easy given a 6-pk of Pedialyte powdered sticks retails for $10.99 at Walmart vs $3.78 for 8-pk of Gatorade Thirst Quencher Powders, noted WSJ.  

Can soda brand dating back to dawn of new-age category get a 2d life in hands of avid entrepreneur? That's the bet successful vending machine operator in Calif is making with Original New York Seltzer, which just had first product run at plant that originally produced it in 1980s and seems to be garnering enthusiastic embrace from some western distributors. It pitched NIDA group of indie Northeast distributors this week, and is also seeking representation in Upper Midwest.

Revived brand is being produced at LA-area factory that originally produced it, in as near a replica of unique original package as can be managed these days: squat 10-oz glass bottle with cushiony Styrofoam label (albeit not as thick a label as on original). It's sweetened with cane sugar, tho partners plan unsweetened versions too. Initial flavor range includes such once-stalwart ONYS entries as Black Cherry, Vanilla Cream, Lemon & Lime, Peach, Root Beer and Raspberry, with Blueberry and Grape in the works. Liquid is clear, as during original go-round, flagged by mantra, "The choice is clear." Line will go out at premium price of $1.59-1.79 - comparable to Coke 20-oz in many cold boxes - with initial emphasis on grocery channel. Look of new line can be viewed at DrinkNewYorkSeltzer.com.

Launch is being undertaken by bros Ryan and Matthew Marsh who over past 2 decades have quietly built major bev vending operation on West Coast, with nearly 20K machines, in process pioneering such innovations as credit card and phone payments and cultivating burgeoning array of corporate micro-kitchens. From that platform, bros moved into copacking and marketing bevs on their own, using old J&R Bottling plant (renamed LA Bottleworks) in Montebello, Calif, where ONYS originally was produced. During heyday, Ryan Marsh noted, ONYS was produced in a dozen domestic facilities and was believed to be object of acquisition overture from Anheuser-Busch, which owner rejected. On their own, Marsh bros have been pushing Columbus canned coffee line, both for their own vending system and for outside retailers like 7-Eleven, which Ryan said now carries line in 1,800 stores.

"There are not many brands with this much passion," Ryan said of ONYS yesterday, with consumers greeting pending return in online comments with remarks such as "Christmas in April" and "like the birth of my first child." He's recruited such sales vets to cause as former SoBe, Honest Tea and Popchips exec Josh Danson, who's assembling West Coast DSD network, including Lenore in San Diego, numerous Bud houses and indie Pepsi bottlers in Pac NW. Retailers like Whole Foods have expressed interest in launch. Meanwhile, he's ramped up production to be able to ship to 20 states, in process dropping such copack clients as Jones Soda. Plant is sticking with production of another venerable brand, Dr Brown's soda line distributed on East Coast by Honickman Group, which just gave green light to launch more contemporary cane sugar version, Marsh said.

He touts as allure the simplicity of ingredient list and uncomplicated positioning in contrast to overtly functional and nutritious brands. "Over the last 20 years there have not been a lot of happy brands," is how he explains appeal. Plan is to seed brand in groceries, not c-stores, so that moms with fond recollection of brand will bring it home for their kids to experience. Crucially, he doesn't plan to overplay nostalgia angle, on grounds that would relegate line to special-occasion consumption.

Interestingly, strategy bears some resemblance to one undertaken a few years with old Pop Shoppe soda brand, seeking to capitalize on fond recollections of once-broad network of outlets out west and in Canada (BBI, Nov 30 11). In hands of Canadian entrepreneur Brian Alger, relaunch strategy has sputtered and US brand rights have landed in hands of Marsh bros. With ONYS now in their hands, tho, Marsh bros are switching their emphasis from Pop Shoppe to seltzer brand, given its absence of artificials that puts it more in synch with where consumer tastes are these days, Ryan explained.  

Coca-Cola's N Amer chief Sandy Douglas talked up value of offering right package - often a smaller one - to the right consumer target as key tool in getting CSDs out of ongoing decline. Speaking with analyst Judy Hong at Goldman Sachs Global Staples pow-wow in Manhattan on Tues, prexy of Coca-Cola N Amer spoke of urgency with which KO is balancing reliance on heavily promoted 2-liter bottles and 12-oz can mulitpacks with smaller, more proprietary packs at premium price. In recent period they scored 11% volume growth at time overall CSDs were down 5%, 16% value growth vs -2%. New focus is in synch with shift away from old model keyed to gallons sold, which put emphasis on can multipacks and large bottles. New model is keyed to % of revenue, so that KO and bottlers "are linked at the hip."

Meanwhile, consumers have proved "clear as a bell" in wanting smaller packages, utility and brand specialness, in contrast to old model where Coke essentially asked them, "how would you like your larger package?" "The clarity with which consumers are communicating to us that they want smaller packages is overwhelming," he said, with purchase intent from mothers for smaller 100-calorie can 25% higher than for conventional 12-oz cans. They can offer it as reward or treat and it gets finished, not wasted; it's also in synch with consumers' health & wellness priorities these days. Results so far have left KO brass confident that gains should continue for a while, building on packs that are still single-digit part of mix. "I think we have many years to go, assuming we stay disciplined," he said.

Dairy Move Encouraging So Far, but Co Expects Long Build Asked about Fairlife higher-protein milk item offered via partnership with Select Milk Producers, Douglas said it's "off to a great start" with "very strong retail reaction" and consumer trial ahead of expectations. Co is hitting its distribution targets, with "well over 50% availability" to date, aiming to be placed in value-added part of cooler, not alongside conventional milks. Still, it's new brand, and KO anticipates it will require several years of nurturing, in manner of new Simply Orange brand years back. In discussing project, Douglas offered tip of hat to Coke's Venturing & Emerging Brands group, which cultivated tie to dairy farmers that led to launch.  

Coca-Cola Bottling Co Consolidated, Coke's biggest indy US bottler, will dramatically expand its franchise territory with addition of such major metros as Washington DC/Baltimore; Richmond and Norfolk, Va; Cincinnati, Ohio, and Indianapolis, Ind. KO and COKE still need to move from non-binding letter of intent announced today to definitive agreement, but closings could begin as early as this fall.

Consolidated deal announced this morning along with smaller deal ceding territory in Miss to beer/soda house Clark Beverage Group, comes as another sign that Coca-Cola is making good on promise to Wall Street of accelerating refranchising initiative, moving distribution from Coca-Cola Refreshments back to indie bottlers, albeit under completely rewritten set of terms from days when Coca-Cola Enterprises handled most N Amer distribution. Just on Tues, reviewing refranchising progress at Goldman Sachs Consumer Staples conference in NY (story below), Coca-Cola N Amer prexy Sandy Douglas had promised that "there's more coming."

Bottlers' Manufacturing Future Not Resolved Still a question mark, apparently, is to what extent expanding Coke Consolidated and other bottlers will reduce or end their production role as KO seeks to move to system, dubbed 21st Century Beverage Partnership Model, where it produces its products and ships finished goods to its distribution partners like Coke Consolidated. That seems to be general condition for new territories, and in related 8-K filing, bottler noted that it and CCR "are currently discussing a mutually agreeable finished goods supply agreement for the Additional Territories, and the Company anticipates that the contractual arrangements will be generally consistent with the product supply agreements the Company has for the Completed Phase Territories (that is, those in earlier, smaller refranchising moves) with such enhancements and refinements as are mutually agreed to by the parties. These may include production asset ownership and manufacturing rights for the Company under mutually satisfactory agreements." Asked whether it's possible that outcome could be reduction or even complete withdrawal from mfg by COKE, investor relations vp Lauren Steele told BBI, "there's a lot of discussion on that issue" and nothing's been finalized.

At Goldman conference on Tues, Douglas noted that KO is "working collaboratively" to figure out who manufactures, acknowledging that many of most effective packaging ideas have come from bottler level. "That makes sense - they're close to the market," he said. Overriding objective, tho, is "to run a nationally organized product supply system with lowest cost." Other aspects of new partnership model include invasion fees to bottlers for items like casepack water that KO ships directly to retail customers, system that was generally verboten under older system.

KO's Douglas: Refranchising Initiative Has Yielded Immediate Gains in All but 1 Market At conference, coupla days before today's announcement, Douglas assured listeners that KO is "picking up the pace" of initiative, and rated it slightly ahead of schedule for transitions in Chicago and central Fla, with recently announced letters of representing another 5% of US volume "and more coming." By end of year, he predicted, some 15% of US bottle/can volume (or 20% of volume handled by CCE formerly) will be back in indie hands.

He described himself as "incredibly confident" in refranchising strategy, noting that, despite era of retail consolidation, in each of 50 states, KO's high per-capita market is more than double its low per-capita market, reflecting the power of motivated, agile bottler. "You would have thought that in an age of big retail that would have narrowed, but it hasn't actually," he said. Still, in moving to unified IT system and procurement system, KO has devised "new and proprietary model for those scale issues." So far, initiative is bearing out expectation: with only single exception, in rural area with some special consideration, co has picked up speed and growth where it's picked up new bottlers, reflecting "tremendous energy" of new or expanded franchisees.

Territories Being Added; Smaller Entities Welcome in Mix Latest agreement adds territories located within Delaware, DC, Ill, Ind, Ky, Md, NC, Ohio, Penn, Va and W Va, including such key metros as Baltimore; Alexandria, Norfolk and Richmond, Va; Cincinnati, Columbus and Dayton, Ohio; Indianapolis, Ind, and Washington, DC. As reported, earlier, now-completed transaction ceded parts of Tenn surrounding Knoxville, parts of Ky surrounding Louisville and Lexington, and Ind area around Evansville. Together, new territories position COKE for "long-term success and strategic influence in the US Coca-Cola system," said chmn/ceo Frank Harrison. They're also in synch with new plan's preference for "more rational and contiguous operating territories."

Tho majority of refranchising deals have involved big cos - including newcomer to Coke system, biggest beer distrib, Reyes Beverage Group - KO isn't excluding smaller players from strategy. At time Reyes deal was announced for Chicago metro, it gave small central-Fla territory to entrepreneur who's consulted for Coke, and in latest announcement, modest-size Clark Beverage Group gets some territory in Miss. Clark is wholesaler operating in Ky and Miss with range of alc and NA brands including MillerCoors beers, Coke sodas and Dr Pepper. Douglas emphasized point in announcement, saying he's seeking "highly capable partners of all sizes that have consistently invested for growth." He noted that COKE was regarded as deserving of broader role because it's "a partner that has proven success, taken a generational view and consistently invested in capabilities and leadership."  

Quebec-based juice co Lassonde Industries reported 34.2% sales increase to $327.7 mil in Q1, thanks to acquisition last summer of Long Island-based Apple & Eve, which scored $62.5 mil in sales. Excluding A&E, Lassonde's sales rose 8.6%. A&E's $3.3 mil in operating profit helped grow total co's profit to $17 mil; without A&E profit would have been slightly down. Chmn/ceo Paul Lassonde credited A&E with cushioning blow of weakening Canadian dollar, which has raised raw materials costs. "Thanks to the growing significance of our US operations, we were able to meet our financial targets against this challenging backdrop," he said . . . 10-Q report issued by big bottler Coca-Cola Consolidated indicates that kids-oriented Tum-E Yummies brand that reps most successful entry devised by its BYB incubator unit contract in sales to Coca-Cola Refreshments, to $4.9 mil from $5.4 mil a year earlier. Report doesn't seem to list sales by Coke Consolidated in its own territory or by other indie bottlers, so it's possible brand still grew overall in qtr.  

'Tude Juice, HPP line of apple juice with renegade brand positioning, has put word out to trade partners that it's winding down operations. Line's cofounders Cedric Chastenet and Andy Knowlton had recruited unidentified strategic investor from food side and been embarked on capital raise, but apparently spigot has run dry despite brands' continued growth. As noted in profile last summer (BBI, Jul 15),parent co Fresh Matters LLC procured produce from Pac NW and sought positioning at approachable price point as "honest refreshment" rather than adopting cleanse positioning of many HPP plays, leveraging memorable brand name into flavor extensions like Granny'tude and Fuji'tude.  

Celsius Holdings eked out profit for 2d qtr in row, signaling continued progress in turnaround effort of its "negative calorie" bev line under ceo Gerry David. Total revenue in first qtr grew 20% to record $4.65 mil thanks to 39% boost in overseas sales, to $3.16 mil. But domestic revenue slipped 6% to $1.49 mil, with retail off 7% and health & fitness off 13%, due to increases in promo allowances and timing of customer replenishment systems. CELH brass said indications were that actual retail sales at registers and distributors scored positive growth. Net profit came in at $213K, reversing year-earlier net loss of $703K.

It was first quarterly call since co brought in $16 mil equity investment from Asian mogul operating as Horizons Ventures and from hiphop entrepreneur Russell Simmons and his ex- wife Kimora Lee Simmons (BBI, Apr 21), tho CELH brass isn't ready yet to shed light on specific initiatives they'll undertake to help grow biz.

Finally Offering All-Natural Formulation A decade-plus into history, Celsius has finally ventured into natural products at behest of Lifetime Fitness, to which it just shipped 2 new flavors with all-natural sweeteners: noncarb Lemonade Tea and Sparkling Pineapple Lemon. New flavors don't signal any change in direction, David emphasized, but opens doors to potential retailers, notably Whole Foods, that insist on natural sweeteners. The new 2 flavors won't go into same stores as core 5 flavors.

Encouraging Signs in Target Test Celsius brand was among those in Target test of healthy-bev set, entering 20 locations mainly in Calif, where it proved #1 performer in set. Test has now been expanded to 150 locations, David indicated. Among other retailers, brand is now in close to 1K Publix locations, quite a few of which are testing new Celsius floor display that provides 2d location within store.

Seeking Alternatives to Amazon Setup Tho co has had stumbles in past on platform, Feb was record month for Amazon sales, and then Mar again. Overall, Internet sales were up 5%. Reassuringly from point of view of brand impact, Celsius draws one of Amazon's highest ratings in category, and is most reviewed brand, David noted. But shareholder question about perceived spike in price on Amazon.com last week prompted discussion that offered window into complex issues dealing with e-tailer. Structure of Celsius' deal is that Amazon purchases product directly from co, picks it up at warehouse and does all the marketing, so "therefore they are in control of the pricing," David explained. That's alternative to CELH putting the products on site itself and having to handle fulfillment, including having to itself safeguard integrity of credit card data. In Amazon's hands, pricing is changed according to algorithm, not via any human judgment. "I don't like seeing the price $18 one week, 3 weeks later $31," Gerry said, and has brought up issue, which has prompted complaints from regular consumers. So "we're looking at that issue and trying to come up with an alternative," he said.  

Dean Foods said total revenues fell 12% to $2.05 bil while continued charges related to plant closures contributed to reported income drop of $74 mil, or $0.78 per share. But adjusted earnings rose to $52 mil and EPS gain of 24 cents beat analysts' expectations of around 20 cents, per Thomson Reuters. DF shares were up 6.5% yesterday on beat. "Importantly, this marks the third consecutive quarter of sequentially improved operating results," noted ceo Gregg Tanner on conf call. Cost cuts and "comprehensive debt refinancing" have given Dean Foods a better "capital structure that is more appropriate" for co of its size and gives it flexibility to fund further strategic moves ahead. Dean reported volumes were down 3% to around 662 mil gallons in qtr. Volumes "were down across all channels," note co. Recall that it's operating now at smaller size subsequent to spinoff of WhiteWave.

Dairy Pure Will Be 'Game Changer' On positive side, Dean noted its flavored milk volume was off less than 1%, "a noticeable improvement to recent quarterly trends," said Gregg. He noted that co's successful rollout of TruMoo and TruMoo Protein brands give it proven track record that should help in national launch of Dairy Pure milk brand (BBI, May 6). Dairy Pure "is a game changer" for DF and "will reinvigorate the dairy case," declared Gregg. He believes Dairy Pure will meet several trends consumer is seeking, including "a clean label, local, fresh, protein and nutrient-packed products." He hopes Dairy Pure dispels "some myths about white milk" as well, with its "Five-Point Purity Promise." That includes farmers that pledge "not to use artificial growth hormones," testing all milk for antibiotics, continual quality control testing, using only cows fed "a healthy diet," and cold-shipping, he noted. Meanwhile, Tru Moo has grown to "$700 million brand across all channels" since launch in 2011. It is the #1 flavored milk, "nearly" 4X size of main rival Nesquik," said Gregg.  

Reed's Inc generated strong growth in its core natural sodas, offsetting plunge in kombucha sales and $10 mil mark in net revenues for first qtr. Net sales surged 19% to record $10.6 mil, thanks to 33% boost in Reed's Ginger Brew, which reps 44% of co sales and broke $5 mil for first time. Virgil's sodas, repping another one-third of total REED sales, rose 12%, and private-label biz, which reps 7% of sales, rose 23%. Other branded items were up 23%, while candy/non-core bevs were off 1%. Tho earnings release contained no mention of much promoted Culture Club Kombucha brand, 10-Q indicated it dropped 36% as result of "significant decrease in kombucha promotional spending in 2015 versus 2014, an out-of-stock period and some kombucha distributors were lost due to out-of-stock events." Filing added that co now has adequate supplies of kombucha and has regained some distributors. Operating loss widened a tad to $271K versus $220K loss a year earlier. For full year, REED continues to target $50 mil in net sales with moderate profitability.

On mgmt side, interim cfo Larry Tomcik is being succeeded on permanent basis by Dan Miles, with background that includes nearly 20 years at Pepsi Bottling and MillerCoors. Mark Costa fills newly created position of dir of operations, reporting to coo Mark Beaton, a former operations vp at Dr Pepper Snapple Group who recently came aboard. Co said Costa brings 20 years in bevs tho it's not immediately clear where.

Maintains Faith in Kombucha On conference call last night, founder/ceo Chris Reed maintained that "we're still very optimistic about kombucha," which should recover in Q2. In highly competitive retail category, he indicated REED is backing away from intense discounting, knocking promo spend by half from 12% to 6%. Its optimism stems from continuing signs of brand's strength at regional level, but "whether through our own brands or through private-label, kombucha is a big part of the future of the company," he declared.

Stronger Ginger Brew Resonates Newly intro'd strong version of Reed's Ginger Brew, with 50% more ginger, proved strong draw at recent Nightclub & Bar Show in Las Vegas, and co now is working with "some of the largest liquor companies in the US," with details TBD. Judging from initial reception, entry "may very well become our #1 sku in years to come," Reed enthused. "Why did we wait 20 years to launch a stronger version?" he added. "We were asking ourselves that for a while."

Plant Upgrade Makes Headway REED took capacity hit in Q1 as it continued to operate its LA plant even while implementing extensive makeover. Seasoned vet Beaton has tweaked plan devised by ceo himself and, with his dedicated focus, process should go considerably more smoothly now. In brief update on work, Mark said co is working with project mgmt firm CTR (Conception To Reality), which in its 2-decade history has been engaged on 125+ bev facilities across US and Canada, to implement master plan to optimize multi-building site. Some 75% of equipment has been procured, with rest due in early Jul. Increase in line speed to one line should offer 66% lift in capability by mid-Sep. Meanwhile, co has finalized terms with new copacker on East Coast, which will work at lower cost with dedicated line for Reed's products, starting next week. Co also is exploring round-the-clock warehousing to facilitate shipping flexibility.

Retail Gains Include Rite Aid Partnership Among recent retail gains, Reed's has now placed its Reed's Sonoma Sparkling brand into 4,500 Rite-Aid drug store via new partnership that will see other Reed's items moving in down road. All told, co estimates its brands have entered 1,300+ new doors in on-premise and indie accounts, and another 900+ new doors in conventional grocers.

New Day Looming for Craft Sodas? As backlash vs conventional sodas using HFCS or artificial sweeteners seems to grow, ceo Reed has been adopting triumphalist tone in talking up prospects for natural sodas. On this call, he pointed to moves by fast-casual chains like Panera Bread and Chipotle Grill to upgrade their ingredients as another milestone in acceptance of better sodas. Panera's recent listing of ingredients it plans to banish from menus "effectively says 'we won't be carrying Coke or Pepsi,'" Reed contended. That seemed to be tone also of comment from DPS refugee Beaton, the new coo, who expressed his enthusiasm for new job by noting, "I'm excited to be here, as our products are what the consumers want."