Dr Pepper Snapple Group scored 4% net sales gain to $1.45 mil in year's inaugural qtr, and operating income edged up 4% to $270 mil. At heavily CSD-weighted co, case sales rose 3%, with CSDs up 3% and noncarbs like Snapple up 5%. Flagship Dr Pepper brand sagged 1% on continued declines on diet side, but so-called Core 4 CSDs collectively rose 4%, highlighted by 13% gain on Canada Dry. Schweppes rode sparkling water and ginger ale to 8% gain and Mexican bottled water import Penafiel soared 20% on distribution gains. On noncarb side, Snapple rose 5%, and would have done better were it not for co's de-emphasis of value packs in recent quarters. Motts was off 1% but Clamato climbed 20%. What co now classes as allied "water" brands were up 9%: Fiji imported water, Bai-5 coffeefruit-based bevs and Vita Coco coconut water. Hawaiian Punch grew 7% as it drew interest from moms with new pouched line, but line will be money loser until it's deemed to be clear enough winner to justify investment in DPS' own production capability, said cfo Marty Ellen.

Showdown between Ten, Stevia Lines in Lower-Calorie Realm DPS brass doesn't volunteer much these days on performance of 10-calorie Ten platform, much-supported initiative that's been widely perceived as underachiever, tho when asked today ceo Young said co is "still very supportive." Still, stevia-sweetened natural CSD line has just rolled out, moving into regional grocery marques like HEB, Jewell and Hy-Vee, who will partner with co on 4-month sampling initiative, and "we will be watching what they do as they roll out," Larry said, in rare acknowledgement that Ten's days may be numbered. "We'll see which one the consumer really wants." Co should have better feel for that by 3d trimester, he said.

Bai-5 Investment No Big Deal, CEO Says Tho DPS' $15 mil investment in Bai Brands at rich multiple last week turned lotsa heads among bev entrepreneurs and private-equity shops (BBI, Apr 16), Young pooh-poohed significance, saying, "What you saw us do in Bai is what do in our other allied-brand partnerships," terming it move "to solidify our partnership" as brand grows and pipeline fills with appealing innovations. "So we made a small investment as we would like to have in all these partnerships," Larry said. Still, it's understood that in past, any such equity stakes in emerging brands it distributes were given to co in exchange for access to network; word is DPS did at least once make low-ball offer for Vita Coco, which declined and eventually garnered rich multiple from Red Bull operator in China. Among Big 3 soda cos, DPS is by far most exposed to CSDs, some 80% of total volume, so this is at least modest gesture at diversification.  

Like its archrival Coca-Cola, PepsiCo delivered fundamentally solid Q1, reporting 4.4% rise in organic revenue growth. But strengthening dollar translated that into net revenue decline of 3% to $12.22 bil, while operating income slipped 1% to $1.8 bil. In crucial PepsiCo Americas Beverages segment, flat top line at $4.43 bil disguised 2% rise in organic revenues, despite 1% volume hit. That revenue rise was comprised of 1% noncarb gain and 3% pricing gain, offsetting 2% CSD decline. In region profits rose 9% to $468 mil. Co also is performing well in overseas markets, including Russia, despite geopolitical and economic issues, and Mexico, despite implementation of sugar tax a year ago. But Brazil biz, tho weathering economic slowdown and political turmoil so far, bears watching down road, chmn/ceo Indra Nooyi indicated.

Earnings announcement offered less detail than usual on individual brand and region dynamics (sparing detail actually drew compliment from one analyst, on earnings-release-heavy day), and in her remarks, ceo Nooyi focused mainly on couple of key recent themes: benefits of more rational pricing environment, which yielded "consistent positive price realization across the portfolio," and virtues of maintaining diversified food/bev co. And at time some on Wall Street have questioned why Big 3 soda players are still so reliant on CSDs, Indra noted that soft drinks comprise less than 25% of total revenue mix, colas less than 15%. In key N Amer territory, ceo claimed share gains in sports drinks (Gatorade) and RTD teas (mainly Lipton), noting impact of innovations such as sleek, ergonomically designed new 28-oz Gatorade bottle that has contributed to double-digit sales growth in regions that have converted to new pack. Co continues to build wellness portfolio, with items like chia extensions of Naked Juice and Tropicana Farmstand Green veggie blend. (PAB chief Al Carey offered deeper dive into innovation pipeline at this week's Beverage Forum in Chicago - story below.)

'Good for You' Takes on Many Colors These Days to Changing Consumer Analyst who revisited co's old nomenclature of "fun for you," "good for you" and "better for you" brands drew interesting observation from ceo about difficulty of navigating consumer preferences these days. "I've never seen the consumer as confused as today," she offered (quickly noting that she meant that as neutral statement, not value judgment), veering from preference for diet drinks to current view of real sugar as good for you, and venturing into organic, non-GMO items that may contain high fat and sugar content. That makes it hard to determine what consumers, particularly millennials, view as good-for-you these days, she said. So Pepsi is becoming more flexible in how it navigates realm, developing various "corridors" based on fruits/veggies, protein, grains and carbs. "So we're going through a little change in our thinking," she said. "But our portfolio is balanced and can flex in either direction."  

Warring cofounders of AriZona Iced Tea have marked another step along way to resolving their long-running feud, reaching preliminary agreement on plan for Don Vultaggio to buy out 50% stake held by his partner John Ferolito, Wall St Jnl reported. Deal still requires final court approval, which could come as early as next week. As part of proposed settlement, AriZona would cover Ferolito's legal fees, paper reported.  

Tho some CPG ceo's lately have been lamenting inability of marketing to move the dial much any more, that wasn't tone emanating from Coca-Cola today. On earnings call this morning, ceo Muhtar Kent cited 9% growth of Coca-Cola trademark in weak Chinese economy thanks to Chinese New Year's activation, even as sparkling chief Katie Bayne outlined to Beverage Forum audience how hoopla surrounding 100th anniversary of iconic contour bottle is starting to re-energize brand in much of world.

Speaking at Beverage Forum in Chicago, Katie offered details of Coke's use of "networked marketing" - forcing its global network of agencies to collaborate - to celebrate 100th anniversary of iconic contour bottle in 140 countries. On conference call, ceo Kent said initiative already has provided sales lift in South Africa, Australia and Latin America.

Efforts are occurring on variety of fronts, most of them hitting US this qtr. Iconic bottle was created by Root Bottle Co of Terre Haute, Ind, a century ago in keeping with Coke mandate at time to create package that could be recognized by touch alone that would be identified even when encountered shattered on the ground. Building on that foundation, which fits neatly within price-realization strategy of emphasizing highly profitable single-serve packs, co is broadening expressions of contour bottle. Aluminum version has tripled availability and now on-the-go PET version has rolled across Europe, in smaller size than classic 20-oz single-serve pack that KO now recognizes was simply too big and too pricy for many consumers or occasions. And foodservice channel is getting new glass, (which rolled into McDonald's restaurants in 22 Asian countries over past week) along with plastic tumbler whose cavity has look of inverted contour bottle. Co also will be sampling some 30 mil of bottles around world, including 6 mil in US. And an art bottle tour structured like soccer trophy tours and Olympic flame tours will herald artists like Andy Warhol who've employed Coke iconography in their work.

Media is deriving from efforts of 5 "networked" agencies deemed among best performers on brand over past decade: Ogilvy & Mather Paris, Wieden & Kennedy Portland, McCann Madrid, Sid Lee Canada, For People UK. Strategy is to harness event to drive deeper emotional connections to Coca-Cola. Mix includes out-of-home effort employing such themes as "Tastes happiest at exactly 3 degrees" (37 degrees Fahrenheit) and "Icy Glass, Warm Heart." Another campaign features celebs that Coke bottle has "kissed" over decades, using photos of Marilyn Monroe drinking contour bottle (from set of Gentlemen Prefer Blondes in 1953), Elvis (at NY session in which he recorded Hound Dog and Don't Be Cruel in 1956) and Ray Charles. TV spots are gravitating to more efficient 15- and 30-second spots under rubrics like "Bubbles that rise to any occasion," via W&K effort. Pair of longer "story-telling" commercials are airing all around world. Key consideration in all these efforts is "shareability" via social media among coveted Millennial generation, she said.

Not least, KO has commissioned filmmaker Matthew Miele to produce documentary on Coke due for release on Nov date of 100th anniversary of bottle. He's getting full access to Coke archives, Katie said.  

Coca-Cola, whose moderate progress on refranchising push has aroused some concern on Wall Street, unveiled big new batch of deals with 7 bottlers, including 4 who're getting first taste of program. The deals amount to about 5% of domestic bottle and can volume, KO ceo Muhtar Kent said this morning. The 3 bottlers garnering further expansion of their territory are Coca-Cola Bottling Co High Country, Coca-Cola Bottling Co United and Swire Coca-Cola USA. The 4 bottlers participating for first time in program are Atlantic Coca-Cola Bottling Co, Chesterman Co, Odom Corp and Ozarks Coca-Cola Bottling Co. All deals, KO advised, are subject to reaching of definitive agreement. KO dubs program 21st Century Beverage Partnership Model, reflecting substantially different terms than prior to co's acquisition of CCE. (One key difference: bottlers no longer will actually be performing actual bottling operations in new territories but rather will purchase finished products from Coke.)

The new territories, KO noted, generally border the bottlers' existing territories, in keeping with efficiency goals of refranchising program. Swire assumes new territory in Arizona, including Phoenix and Tucson, giving it entire state and expanding overall US population served from 11.2 mil to 17.5 mil potential consumers. Swire had earlier won expanded territories such as Denver and Colorado Springs, Colo. A unit of Swire Pacific, Swire operates 2 plants in Salt Lake City and Fruitland, Ida, and 29 sales centers serving portions of 13 western states ranging from Wash State south to Ariz, and from Calif east to Neb.

High Country is gaining territory in SD, ND (including Fargo and Bismarck) and Minn. United assumes more territory in Louisiana, including New Orleans and Shreveport, as well as Tallahassee, Fla. Atlantic gains territory in Iowa and southern Minn. Chesterman assumes territory in Neb and western Iowa, including Omaha and Lincoln. Odom gets territory in Hawaii including Oahu, Hawaii, Kauai and Molokai. Ozarks wins territory in Missouri, northern Ark and southeast Kan.

Meanwhile, franchising deals with beer powerhouse Reyes Group in Chicago and smaller transaction with Troy Taylor in Fla are slated to close in Q2, slightly ahead of sked, ceo Muhtar Kent said this morning on conference call. The pair of territories account for about 5% of domestic volume.  

Closing of Coca-Cola/Monster Beverage transaction has slipped again, tho there doesn't seem to be much nail-biting occurring on either side yet as regulatory process drags on. On Q1 earnings call this morning, KO cfo Kathy Waller said anticipated closing of investment and brand swap with MNST in early Q2 now has been pushed back, to "latter half" of qtr, "as the parties work to satisfy a contractual closing consideration." In response to later question, she reassured Street that, "there is no issue there . . . Basically, it's just the regulatory process that we have to go through."

Timing of closing is of interest in part because accompanying shift of distribution of Monster brands from Bud network to Coca-Cola bottling system in half of US is already well under way, with MNST ceo Rodney Sacks estimating at yesterday's Beverage Forum in Chicago that as of early Apr some 80% of volume has transitioned by now. Though there have been some hiccups along way, transition has generally been seamless, Rodney said.

Still, Monster is out on bit of a limb in making distribution transition without final assurance that financial transaction will close, but there's no sign of any significant obstacle. Rodney told BBI that one issue is Coke is still working to complete audit of performance of its energy brand portfolio in various global markets. But antitrust clearances have been received. Delay in deal's closing is holding up transfer of Coke energy brands to Monster Beverage and transfer of Monster's non-energy brands to Coke.  

Coca-Cola eked out its first revenue gain in more than 2 years, edging up 1% in Q1, even as it announced a raft of new bottler refranchising deals, signaling to Wall Street that its revitalization process got off to good start in 2015. "Coke reports revenue growth for first time in 9 quarters," headlined Reuters, capturing general tone of media and analyst coverage.

For qtr, net operating revenues rose 1% to $10.71 bil. Operating income slipped 3% to $2.3 bil. Tho report later sent shares trending upward, chmn/ceo Muhtar Kent seemed careful to dampen any looming euphoria among investors, warning, "There is still much work ahead of us." Still, sparkling chief Katie Bayne told Beverage Forum in Chicago this morning that company is pleased at "solid start to our year of transformation."

In core N Amer market, volume was flat, with 2% gain in noncarbs offset by 1% decline in CSDs. But net revenues in N Amer rose 6% to $5.1 bil and operating income surged, thanks to price realization efforts that yielded 3% price mix gain and 1% transactions gain. "Simply put, more consumers are enjoying our products more often, and are increasingly choosing smaller packages including our iconic contour bottle," Kent said. There wasn't much light shed on individual brands' performance, tho KO brass was careful to emphasize that it's early days on turnaround of faltering Diet Coke brand despite recent glimmers of improvement.  

Due to fluke of timing last summer, former Coors and Pabst exec Kevin Kotecki went from thinking big - that is, participating in Pabst Brewing buyout - to thinking small, via purchases of Inko's White Tea and then Blue Buddha ayurvedic bevs. But during visit on Mon by BBI to Kevin's offices in western Chicago suburb of Willowbrook, he made it clear he's energized to find himself for first time on emerging-brand side in NAs, with more acquisitions planned, possibly soon.

Background of Deals Kotecki, whose career had taken him to Coors Brewing, Pabst Brewing and Mike's Hard Lemonade, was working with beer vet Eugene Kashper and private-equity house TSG Consumer Partners on acquisition of Pabst Brewing from family of Dean Metropoulos, on-and-off negotiation that last summer seemed to be off, perhaps for good. Kotecki had been surveying field of smaller businesses since leaving Mike's, and just as Kashper advised him to consider other initiatives in case Pabst deal wasn't revived, he heard back from Inko's bankers. So he made offer, only to hear back from Kashper that Pabst deal was back on and did he want to rejoin bidding team? "I said no, that I'd just spent half my life's savings on a little tea company," Kotecki recalled.

That set him on current path to seek further acquisitions, using his own funds on small deals like Blue Buddha, the 2d brand to come along, or tapping into investors for more ambitious deals. Each deal is structured separately, and Kevin said he's not insistent on acquiring majority equity in every brand, tho he does insist on voting control so as to maintain agility. "We've owned this company a very short time and this product (organic Inko's Tea) is already on shelf," he said by way of example. In both Inko's and Blue Buddha deals, founding entrepreneurs retain small amount of equity to participate in upside should brands break out. Core team also has equity. Kotecki continues in hunt for other brands, preferably organic ones that reach same store buyers, tho food brands are also a possibility. As for Kashper/TSG bid for Pabst, that did come together last Nov, with Kashper taking role of chmn/ceo.

Core team includes several colleagues from his alc-bev days - cmo Andy Horrow, sales chief Mike Montee - but also retained marketing exec Brooks George from Blue Buddha and production chief Alex Reist from Inko's. BBI offered recent update on Inko's via cmo Andy Horrow (BBI, Mar 31). This week's visit filled in a few more blanks on Inko's program and offered first glimpse of team's plans for Blue Buddha.

Getting Inko's Back on Radar As noted, Inko's has been given more impactful label and is being converted to organic, as way to justify premium price point and move beyond making vague "natural" claim that's increasingly targeted by class-action suits. "White Tea" has been incorporated directly into brand name to better herald unique attribute. Distribution has been building quickly on new organic sku's, and Kotecki said he only regretted that deal hadn't closed in time for new sku's enter all retailers' spring shelf sets. SRP is $1.99-2.29.

Kevin said Inko's brand was declining 20% at time of acquisition last summer, with pared-back co no longer making regular calls on retail accounts. Kotecki's crew of 5 execs has been signing on to any trade shows and tabletop events that aren't sold out, and calling on key customers to get back on radar. Most retailers who've been contacted view Inko's "as a great brand, but say they haven't heard from them," Kevin said. "And everybody is thrilled with (switch to) organic, non-GMO." Tho it hasn't received any support, Inko's canned energy drink has held its own too, tho Kotecki doesn't rule out other plays in healthier-energy space down road. With faith restored, sales had flattened out by Oct and have been on upward trajectory this year, +75% so far in April, all despite pullout from Walmart chain. Co has worked to set targets with its broker network, and broadline distributors UNFI and Kehe have increased their orders. Co maintains only small DSD presence, including likes of Crescent in NJ, group of small shops in NY and Spike in Ariz, but once brand has stabilized and plan is set, Kotecki plans to pitch beer houses with whom he's enjoyed long association on alcoholic side. While marketing initiatives are still being assembled, one component is Pandora online radio, attractive, Horrow said, because it's so targetable, minimizes waste and employs only small commercial blocks. (Pandora has been fruitful, efficient buy for other brands, notably Celsius.) Co has been driving consumers to Web site for free coupons. Top 5 markets are all in Northeast, but brand also performs well in markets like Chicago, St Louis and Ariz.

Reasons to Stay Out of Walmart BBI has often warned early-stage bevcos to be wary of Walmart blandishments. Count Inko's as another cautionary tale. As Kotecki described situation, at $1.08 everyday price, premium, expensive-to-produce brand had no biz being there, and move caused collateral damage with resentful smaller retail accounts. In any case, new buyer at Walmart had cut back brand's sku's. Kevin showed invoices where billbacks reduced payable in the thousands down to hundreds; some even veered into negative territory. "I have no axe to grind with Walmart," a good customer of Kotecki's prior brands like Coors, Pabst and Mike's Hard Lemonade. "But it's not for small brands with a premium target." So Inko's has exited chain.

Restage under Way for Blue Buddha Recall this was ayurvedic brand created under Veda name that segued to more colorful Blue Buddha brand. "Very cool idea, I love the brand, the product itself, the functional benefits," Kotecki said. But brand relied too much on Buddha imagery to carry message of brand benefits, and 14-oz glass bottle was too tall to fit anywhere but on top shelf. So Kevin's team is switching to shorter glass bottle of same size that's employed by Purity TK and, ironically, was used by now-defunct Adina ayurvedic brand, which was marketed by team that included former advisor who's helped Whalen develop her own brand. Tho brand name and Buddha image have been retained, it's adding more specific descriptor as "Organic Wellness Tea." Team also has reformulated line, unifying functions as "Vitality - Immunity - Acuity" rather than making shoppers choose between their preferred flavor and preferred function, Vitaminwater-style. They've also dropped a few "glamour ingredients," in Horrow's phrase, in favor of those with real functionality: ashwaganda, maitake mushroom and gooseberry. Each flavor is designated as being formulated "with ashwaganda." Simplified ingredient bill should ease path to become certified as organic; brand currently can only be claimed to be 98% organic because a few ingredients are not obtainable in that form. Kotecki's team is aiming for SRP of $2.99.  

Celsius Holdings has pulled in close to $16 mil from influential group of investors operating, including Hong Kong-based tycoon and hiphop entrepreneur Russell Simmons, that should open doors to dramatic step-up in global presence and digital marketing. Unsolicited investment draws into Celsius investor fold trio of heavy hitters who're influential in areas that should be useful to continued growth of negative-calorie bev.

Hong Kong-based entrepreneur Li Ka-Shing, via his Horizon Ventures, is leading investor in cos like Facebook and Spotify, but also is involved with health/beauty retailer AS Watsons (with 15K stores in Europe and Asia) and Canadian C&G chain. Simmons, a vet of apparel cos like Phat Pharm and other ventures, 19 in all currently, recently entered digital marketing realm via formation of trio of cos that should be able to assist Celius in stepping up those efforts. And Simmons' former wife Kimora Lee Simmons, now married to Goldman Sachs vice chmn for Asia, Tim Leissner, counts among her ventures such fashion, entertainment, technology and consumer goods cos as eponymous designer fashion line and Codage. "We were not even looking for money - they came to us," Celsius ceo Gerry David told BBI this morning. Influx of $15.95 mil dilutes core investor Carl De Santis, former Rexall Sundown exec who came to CELH's rescue a few years ago, to below 50% control despite his having recently converted some CELH debt he held to equity, but he remains co's largest investor, Gerry said. Investment group includes unnamed others who bring needed skills and connections to CELH, David said. "These are not passive investors." Asked whether Li tie presages push into China, Gerry replied: "Logically that makes sense," as does intensification of brand's activities in Europe.  

Gains in energy drink, bottled water and sports drinks categories helped fuel "strong" sales gain of 6.4% in Q1, estimated Well Fargo Securities' Bonnie Herzog based on results of bank's survey of 15,000+ c-store locations. Lower gas prices were seen as a big key to solid growth with one retailer noting that customers not only "had more money to spend," but extra cash also allowed "a lot of trade-up as they could 'afford' premium brands" and also had increased basket sizes per trip. "Looking out to the rest of the year, our retailers project mid-single beverage sales to continue in 2015," said Bonnie. Pricing was up around 2% overall in c-stores in Q1 ("led by KO, PEP and Red Bull") with retailers reporting that promotional activity was "down slightly" compared to Q4 2014, "and slightly below last year's level of promotions" in Q1, per report. An exception was Monster Energy, with "majority of retailers" reporting they saw "strong promos" on co's brands in Q1.

Solid Energy Gains Energy drinks were up an estimated 8.5% in c-stores in Q1 based on retailer survey. That high-single-digit gain tho was a "sequential decline from Q4 when sales were up 8.7%," noted Bonnie. She also pointed out, "for first time in our survey's history," bottled water had strongest sales gain, up 9.3% in qtr. Sports drinks up an estimated 7.5% as "it appears health and wellness trend remains strong."

Flat MNST Pricing Monster volume rose an estimated 9% based on c-store retailers "with minimal net pricing growth, as Monster-funded promos kept net retail pricing flat," said Bonnie. Some retailers are still concerned about possible out of stocks during switchover to KO, and survey also found "several retailers have taken advantage of favorable buy-in options from legacy Anheuser Busch distributors as they deplete their Monster inventory," she added.

Solid Q1 for KO; More Retailers Open to Fairlife Based on survey responses, Bonnie estimates Coca-Cola volume up a solid 4.1% with avg price gain of 2.5% in Q1. "Our retailers consistently called out Smartwater as a leading contributor to growth along with new package innovation," for KO, she noted. KO's smaller pkg sizes though were seen as underperformers by c-store operators, with one remarking, "smaller packages are just a trade down." On brighter note, c-store operators think KO's Fairlife milk is an "excellent product" but are concerned about high price. In Q4 2014, 66.7% of c-store retailers said they "don't carry Fairlife and never will," but that fell to 33.3% in Q1 while 66.7% now said while they don't carry it yet they will soon.

Solid PEP Results; Vita Coco, Bai5 Bright Spots for DPS PepsiCo volume rose an estimated 4.1% with avg pricing gain of 2.2%, based on survey. Gatorade sales "were very strong in the quarter" for PEP, following solid performance in Q4 14. Dr Pepper Snapple volume "was up a modest +0.6%" and avg prices were up just 0.7%, noted Bonnie. "Several retailers" felt DPS's "c-store focus has declined," but "most" retailers however "are generally encouraged" by its "allied-brand performance, including Vita Coco and Bai5," noted Bonnie.