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Food labeling bill with bipartisan support would pre-empt states' efforts to require GMO labeling in favor of national standard. Bill dubbed The Safe & Accurate Food Labeling Act intro'd by Rep Mike Pompeo (R-Kan) and GK Butterfield (D-NC) would empower FDA to create uniform, national labeling program under which all new products to market would be first subjected to FDA review and labeled as containing GMO ingredients only in instances where FDA can demonstrate some risk, per Shelby Report. Bill was drawing initial praise from food lobbying groups such as Grocery Mfrs Assn for avoiding patchwork of state laws in favor of a federal law "that keeps the authority to set safe, reasonable and national labeling requirements regarding GMOs with US government agencies that have decades of scientific and regulatory expertise in this area" . . . Conn Democrat Rosa DeLauro has intro'd bill called Sugar-Sweetened Beverages Tax Act of 2015 (or SWEET Act) that levies excise tax of 1 cent per teaspoon (4.2 g) of caloric sweetener. That would raise price of 12-oz can of Coke by about 10 cents - "enough to put a modest dent in consumption, but also enough to raise about $10 billion a year for diet-related disease prevention programs," noted CSPI approvingly. Bill reprises one Rep DeLauro intro'd last year and has drawn support from likes of American Heart Assn, American Public Health Assn, National Consumers League and Shape Up America.
Coffees, Bottled Waters and Energy Were Big Gainers in 2014, Says BMC; CSDs, Fruit Drinks Off
RTD bev segment continued to be one of haves and have-nots in 2014, with coffee, bottled water, energy drinks, tea and sports drinks on the upswing even as enhanced water, CSDs and fruit drinks declined. Annual tally by Beverage Marketing Corp found that total "liquid refreshment beverage" category returned to growth, +2.2%, in 2014 after essentially flat 2013, -0.1%. It measures LRBs at 30.9 bil gals.
But there was real disconnect between fortunes of various segments. Small RTD coffee segment continued strong rise, gaining 10.7%, followed by bottled water (+7.3%) and energy drinks (+6.4%). Also in plus column were iced tea (+3.7%) and sports drinks (+3%). Offsetting those were "value-added water" (mainly sliding Vitaminwater, off a tad, 0.9%), CSDs (-1%) and fruit bevs (-2.8%). Still, by way of perspective, BMC noted that "no energy drink, RTD coffee or value-added water brand ranked among the leading trademarks by volume."
What were those major trademarks? BMC looks at overall brand families, including full-calorie, zero-cal and other extensions, and had Coke back in #1 spot despite 2.4% volume decline to 4.2 bil gals. It was followed by Pepsi (off 3%), Mountain Dew (up 1.5%), Dr Pepper (-1.6%) and still-surging Nestle Pure Life (+9.3%). For all their woes, CSDs accounted for 5 of top-10 trademarks in 2014, BMC noted. Another 4 were bottled waters: Pure Life, Dasani, Aquafina and Poland Spring. Gatorade was other.
At brand level, newsletter Beverage Digest released its 2014 rankings, showing that, with diet CSDs continuing skid, Pepsi-Cola was able after 4 years to reclaim #2 spot ahead of Diet Coke, despite declining itself. Recall that Diet Pepsi's slipping to #3 spot back in 2010 was widely viewed as symbol of PepsiCo's marketing dysfunction, at time it was eschewing usual Super Bowl presence and focusing on do-good projects. But mounting consumer concerns about artificial sweeteners - not necessarily borne out by scientific research - continue to take big bite out of diet sodas.
Not surprisingly, news of CSDs continued declines drew triumphal statement from Center for Science in Public Interest: "It comes as welcome news for public health that sales of full-calorie, carbonated soda continue their modest trend downward . . . Health officials, legislators, and other policymakers should escalate their efforts to further drive down consumption by supporting policies that decrease availability in public places, raising new taxes, requiring warning labels, and otherwise promoting water as the default drink."
For full year, net loss narrowed to $754K from $1.52 mil but REED would have been in black were it not for Q4 loss of $1.22 mil due to higher commodity prices (which have since moderated), copacking fees, labor costs, writeoff of obsolete inventory related to private-label customer and lower than anticipated margin on other PL customer. Some unanticipated costs were incurred when co had to undertake cross-country shipments from East Coast copacker to avoid out-of-stocks out west, but it's broadening copacker mix this year to minimize chance of repeat, Chris indicated. Previously discussed tripling of line speed at LA plant, which should drastically improve labor productivity there, is being honchoed by newly recruited coo, Mark Beaton, former operations vp at Dr Pepper Snapple Group. Revamped line should be fully operational by early Q3, Reed indicated.
In investor conference call yesterday afternoon, founder Reed added considerable color to operations of co:
Harnessing Triple Trends for Reed's Soda Growth Ginger brands for some time have sought to ride favorable health news associated with core ingredient, but more recently are tapping into pair of other trends, too. One is perceived boom that's afoot in craft soda, where Reed views his category-leading brand as "the Sam Adams of the craft soda revolution." Another is Moscow Mule craze, which co has been unabashedly riding, after earlier years' reservations about associating brand with booze.
In early days of co, Chris recalled spurning overture from Seagram to do 5K-store merchandising test with Capt Morgan rum brand on grounds that "that's the wrong image for us." But "I've mellowed over the years," he told listeners yesterday. Recently co has teamed with brands like Gosling's Sailor Jerry and Dewar's White Label Scotch to pitch booze-and-ginger-beer pairings, and Mule trend was key inspiration for launch at recent Expo West of stronger ginger brew, following bartenders' requests. This year, co will be announcing partnerships with major spirits cos to work ginger-beer-based recipes, he promised. That booze-oriented usage occasions don't necessarily clash with brand's healthy aura was attested at Expo West by clamor of buyers lining up for the Moscow Mules that Reed's staff dispensed from booth, he noted. "Natural food may seem very pure, but they still party," he added. (At Expo booth a couple of weeks back Reed himself and fellow staffers churned out loud renditions of chestnuts like Hotel California on their guitars before nearby exhibitors complained and concert was shut down by show sponsor.)
Progress on Kombucha, with High Hopes for Coffee Entry Launch of Culture Club Kombucha has proved long slog, and ACV remains low, growing over past year from 5% ACV in grocery to 8%. That still was enough to support 118% brand growth in channel, Reed noted. With some natural grocers including Whole Foods indicating they're happy with single national entry, leader GT's, buttressed by local and regional players, Culture Club's growth has mainly occurred in conventional grocers, but Chris said he's hoping newly launched subline using fermented coffee rather than tea will build interest on natural side.
Breaking New Sales Ground with Distributors Manhattan Beer, Haralambos On investor call, Reed offered intriguing account of way co is harnessing new data service to dramatically boost sales productivity in 2 key markets, NY and LA, as it seeks ways to better exploit what Reed terms the "beer distribution network." Unidentified data service allows salespeople to get immediate read as they prepare sales call on how each Reed's item is selling in store, often on daily basis. "Instantaneous from-the-cellphone window into sales in the account," Chris termed it. In NY, where Reed's has 3 local sales mgrs working with 250-person sales force of Manhattan Beer, co enjoyed 108% growth year over year. In LA, where co partnered with Haralambos Beverage last Apr and has 2 local salespeople, REED is anticipating 50% sales growth in 2015. Upside should be dramatic as co applies new approach in mature DSD markets like Pacific NW.
Retailers Coming Around to Argument for More Shelf Space, CEO Reports Earnings release noted that "prominent national retailers are having a gestalt moment and recognizing that Reed's brands deliver higher margins and larger gross profits than the cola giants" (in first use of word "gestalt" that BBI editor can recall spotting in earnings release, at least outside Europe).
Reed detailed sales discussion with megagrocer Safeway, where brand has averaged single item in chain's 1,800 stores. Tho it's #5 gross-profit-generating sku in soda set, it's only been deemed worthy of 6 inches of shelf space, vs #1 GP-generating Coke's 6 feet of space. "So not only do we beat everything DPS does, but we're #5, so do you think we deserve to be there a little heavier?" has been argument to Safeway buyers. "In linear inches we deserve to be #1." In recent months, efforts for greater presence there have "gone well," Reed said. Similarly, unidentified club store that Reed's entered last year yielded $750K in first-year sales - 2% of total category sales but 7% of GP. Buyer has indicated readiness to add sku's and shoot for $3-4 mil in 2015 sales, Reed said.
C-stores are next frontier. Co's debut at NACS c-store expo last fall is likely to yield 500-1K new outlets, indicating that Reed's lines no longer are viewed by channel as too arcane for those customers, Reed said. That's been pleasant surprise, and points to large new growth channel, he said.
Nix on TV Ads as Key Part of Mix Much-touted TV campaign last fall proved valuable learning experience but doesn't seem likely to be repeated soon, Reed indicated. The $400K+ invested in effort didn't seem to produce "anywhere near the pop" co gets investing in sponsorships and partnerships - say, Vans event in Hermosa Beach, Calif, that drew 750K people. So co will go back to "whoring samples and educating the consumer one at a time, saying hi." Liquor occasions will increasingly be part of that mix. Co also is more aggressively working social media/pr channels via Wpromote online agency in LA.
Deal announced this morning putting In Kraft and Heinz together has spun lotsa speculation about other deals we may or may not be seeing that have implications for beer and bevs. KraftHeinz will be name of public co with $28 bil in annual revs, after complicated deal in which Warren Buffett's Berkshire Hathaway and 3G Capital will invest $10 bil. Recall, the principals of 3G are largest shareholders of Anheuser-Busch InBev. At KraftHeinz itself, bevs will be very small piece of biz, mainly non-RTD plays such as Folgers and Gevalia coffee, Crystal Light powder and MiO bev enhancers. Premise of deal, Heinz chmn and 3G mgg partner Alex Behring told media this morning, is to expand Kraft's iconic brands internationally while offering platform for Heinz to accelerate growth domestically.
Some initial speculation today assumes this deal puts 3G on sidelines of other prospective deals for the moment, notably merger of ABI and SABMiller, whose shares edged downward this morning. "This move supports our thesis that the Brazilians are focusing on expansion outside beer and will use ABI as a cash machine . . . we think this rules out a bid for SABMiller," wrote Nomura's Ian Shackleton. "We see some risk to SABMiller's share price as bid speculation is likely to unravel." Ditto another theory that 3G could be prepping a leveraged buyout of Coca-Cola - also "off the table for now," wrote Ian.
More generally, some Wall Streeters see Heinz/Kraft deal spurring another round of consolidation in food biz, with General Mills and struggling Campbell Soup - marketer of V8 and Bolthouse Farms juices - often named as targets. Recall that CPB ceo Denise Morrison in recent quarters has been noting shift of consumer activity away from center store, where co's shelf-stable core brands lurk, to perimeter aisles like produce section, and bemoaning fact that traditional sales-building levers like ads and promos just don't seem to work any more. So she's been stepping up participation at high end thru actions like Bolthouse acquisition and ramping up innovation while pleading for patience from Wall Street. As a result, some view CPB as particularly vulnerable if consolidation wave hits.
Consolidation wave could similarly spark demands from some investors for PepsiCo to split its snacks and bevs units, but PEP has reached temporary accommodation with activist investor Nelson Peltz and in any case is enjoying smoother run lately than CPB. Still, "in a foods industry where companies like PepsiCo, Campbell Soup, General Mills and Kellogg are struggling and brand conglomerates such as Procter & Gamble are divesting assets, Kraft Heinz could emerge as empire-building consolidator," noted Forbes.
In interview this morning on CNBC, legendary investor Buffett detailed how his firm had invested $4.25 bil in Heinz and now $5.2 bil in this deal. That will leave Berkshire with 320 mil shares, or 26% of merged co. "We will be in this stock forever," vowed Warren. CNBC started asking Warren about other potential future deals for Campbell and General Mills, but he deflected questions. Deal came together in just last mo or so, Buffett said, and is expected to close in 2d half. Heinz will own 51% and Heinz ceo will run merged co. Kraft ceo John Cahill, an ex-Pepsi exec, will take vice chmn post. <A
Major distribution transition is formally ready to get underway: Monster Beverage has inked 20-year deal placing its Monster Energy brand in Coca-Cola network throughout almost all of North America. It's key part of transaction by which KO is taking minority stake in MNST while making Corona, Calif-based co custodian of its entire energy portfolio - including Coke brands like Full Throttle, NOS and Relentless that MNST will now own. Fast-growing, high-margin brand had previously split territory between Coke bottlers, including some territories of KO-owned Coca-Cola Refreshments, and Bud wholesalers, with just a few exceptions.
Agreement disclosed in regulatory filing by MNST seems to build in variety of protections to maintain Monster as premium, innovative brand while not hobbling Coca-Cola from moving into related realms not served by Monster items. It comes at time that sources at street level report that, in making preliminary preparations for anticipated transition, Coke system appears to be embracing Monster brand, committing to carry as many as 60 sku's, despite capacity constraints that make major sku additions challenging. That's not much more than half of total Monster portfolio but is believed to represent well over 90% of Monster Energy's business.
Among terms alluded to in filing, deal signed Mar 18 crucially calls for MNST's Monster Energy unit to maintain control of pricing and terms offered to national accounts, which is likely to be picked up as reassuring signal by retailers and by energy rivals that lucrative segment won't quickly descend to heavily price promoted category, as has happened in most new segments Coke has entered, from sports drinks to enhanced water. MNST and CCR will split costs of promo activities. MNST will retain control on marketing side too: "Monster Energy will maintain primary responsibility for the overall global branding and positioning of MEC Products, as well as brand and image marketing for MEC Products." As recently noted, those marketing activities will be in hands of Mark Hall, brand's creator who recently returned to full-time role at co, this time as cmo. In addition to honchoing innovation, he'll work to figure out respective roles of new brands entering MNST portfolio and, staffers hope, inject shot of energy in activation of properties ranging from music and altsports to UFC, recently picked up after Xyience exited relationship upon being purchased by Big Red.
Among other deal terms, on each invoice Monster will capture and pass on to Coke an undisclosed "facilitation fee," similar it seems to per-case fee that Anheuser-Busch received for allowing its distributors to carry Monster brand. Monster Beverage may continue to service some national accounts under certain conditions, but will pay invasion fee to CCR for doing so. And at time all kinds of hybrid energy products are coming to market, contract seems to take steps to insure Coke isn't precluded from offering energy-related innovations that might capture occasions or segments not served by Monster. Under contract, CCR isn't barred outright from carrying any other energy brands - only those that are "reasonably likely to be confused with" Monster items. That seems intended to avert situations like tension that arose between Rockstar and its distribution ally Pepsi when Pepsi launched Mountain Dew Kickstart, which Rockstar execs interpreted as being in violation of contract clause that prohibits Pepsi system from adding other energy brands in territories where it carries Rockstar.
Tho MNST execs in past have sometimes chafed at perceived lack of commitment to their brands by CCR, particularly in contrast to Bud system, both allies hope their firmer ties will surmount that hurdle. In any case, contract doesn't neglect to demand that CCR exercise "commercially reasonable good faith efforts to develop and exploit the full potential of the business of distributing, marketing and selling MEC Products throughout the Territory." That new phase of Monster Energy's development is officially beginning now.
PepsiCo strengthened board with addition of Richard Fisher, former prexy/ceo of Federal Reserve Bank of Dallas.
National grassroots tour behind Pepsi's newly launched Lipton Sparkling Iced Tea line is offering eye-grabbing technological tweak: use of wall-sized transparent projection screen impregnated with photo-excitable particles that make people holding cans appear to be levitating, in synch with widely airing TV ad behind brand. Screen is nano-optical particle diffusion screen, per MediaPost, which caught tour at stop in Grand Central's Vanderbilt Hall in NY last Fri. New brand intro'd at NACS c-store expo last fall has been working events like Sundance and last week's South by Southwest, on way to handing out 1 mil samples, sr dir of mktg Linda Bethea told MediaPost. "Tiny bubbles" campaign is fronted by "Pitch Perfect" star Brittany Snow and band American Authors, which is reprising 60s-era folk hit Tiny Bubbles for campaign. Also in mix is "When Tea Met Bubbles" campaign on Instagram.
EXPO WEST: Now Sporting More Ownable Name, Temple Turmeric Intros Higher-End 'Super Blends'
Turmeric - Elixir of Life has had its Lite Beer moment. Just as Miller Brewing years ago, under assault from Bud Light, realized you can't really own generic word like "Lite" as trademark, Turmeric - Elixir of Life has undertaken sweeping rebranding to create more ownable equity at time that turmeric-containing bevs are proliferating. This year's edition of Natural Products Expo West offered platform for unveiling of Temple Turmeric as new moniker, along with new Super Blends subline that dials up quantity of core ingredient. On retail front, brand is about to get first exposure in general grocery via 350-store pilot in Kroger starting in Apr.
Show capped busy stretch for NY-based Temple, launched 6 years ago by Daniel Sullivan, who initially peddled it from bicycle in city but now, working with same Hawaiian turmeric growers that he started with, goes thru over 100K lbs annually, grown on 10 acres. (In first year he used mere 300 lbs.)
The rebranding first. Intent was to make brand more ownable while reflecting heritage and segment better and communicating celebration of purification, ceo Sullivan told BBI. Alliterative name should make for easier retention without sacrificing visibility to consumers who enter "turmeric" into search engines. Related mandala image helps anchor look while conveying sense of uplifting energy. Font employs offers distressed-wood feel to offer rootsy vibe. Rebranding was accomplished without agencies, entirely internally, within space of 9 weeks, Sullivan noted. He acknowledged that trade partners initially were skeptical of plan to up-end successful line, but said that once new look and name were presented to them they readily embraced them. "Same company, same vibe," collateral materials reassure consumers and trade partners.
Core line of HPP-produced Elixirs, packed in 12-oz PET bottles with square footprint, offer 13 g of proprietary turmeric variety that Temple moved last fall to trademark as Oana. Thanks to nutrient-rich volcanic soil in which it's grown, it's claimed to offer 4X the active phytochemical curcumin vs Southeast Asian varietal commonly sourced to US formulators. Temple never works from powdered turmeric, Daniel stressed. That line currently numbers 7 sku's under names like Original, Coconut Nectar, Ginger-Aid, Brooklyn Beet and Japanese Matcha (from ceremonial-grade matcha). They're priced at $5.99.
Tho co has talked in past of moving to more accessibly priced entry line, at Expo West it actually moved in opposite direction, with debut of higher-end, more turmeric-intense subline called Super Blends. Subline had begun modestly with Golden Mylk item offered over holidays at Whole Foods as limited-time entry targeting flu season but was quickly promoted to year-round status. Golden Mylk combines coconut and hemp milks with 16 g of Hawaiian Oana turmeric. It's been joined now by 3 other sku's, all on exclusive at Whole Foods thru Jun. Matcha Latte melds stone-ground Japanese matcha with 13 g of Hawaiian Oana turmeric. Bullet Brew Turkish Coffee offers a cold-brewed take on Middle Eastern classic recipe, slow-brewing coffee in-house for 24 hours and melding it with traditional accompaniment, cardamom, with 16 g of Oana turmeric. Jumping on bandwagon of popular flave these days, Mexican Chocolate melds cacao with cinnamon spice kick. Super Blends command $6.99 at retail vs $5.99 for core line.
Third leg of stool is 3-oz Prana Shot, which Sullivan acknowledged still carries low awareness 3 years in, despite carrying as much turmeric as core single-serve bevs, along with tulsi and ashwaganda. Priced at $4.99, HPP item sports 120-day shelf life and targets athletes.
Brand continues to be co-packed at FreshBev in New Haven, which also produces its own HPP mixer line Ripe and Project Fresh juice. Temple sold minority equity stake last fall to Boulder Brands Investment Group, whose managing partner Duane Primozich now sits on Temple's board. An earlier investor in co has been NY distributor Rainforest, where Temple was first brand aboard trucks. Brand moves nationally thru broadliners UNFI and Kehe and employs Nature's Best to support Sprout's chain. Kroger pilot is supported by DPI.
Ranks of organic food/bev purchasers seems to be broadening quickly, with proportion of African American and Latino purchasers doubling in recent years, study by Organic Trade Assn indicates. "There no longer is a typical organic consumer," OTA notes. "Organic is meeting the needs of a wide and multi-faceted culture, and the faces of organic-buying families now mirror the demographics of the US population in terms of ethnic background," per Jan survey of 1,200+ households dubbed US Families' Organic Attitudes and Beliefs 2015 Tracking Study. Study undertaken in partnership with Kiwi magazine indicated that % of African American families buying organic on regular basis doubled from 7% percent to 14% over past 6 years, while Hispanic households choosing organic rose even faster, to 16% from 7% over past 4 years. Those shares generally mirror proportion of population represented by those groups, OTA notes. With retail availability of organic food rapidly expanding, some 78% of organic buyers say they typically buy organic foods at conventional grocer. Over half also shop organic at big box stores, up nearly 10 points from a year ago, and 30% report that "it's not unusual" to buy organic at warehouse club, also up nearly 10 points . . . As high-pressure processing (HPP) continues to score strong gains in food/bev production, # of HPP machines installed worldwide is expected to exceed 350 this year, per study from Visiongain. Overall HPP equipment and service market (including tolling by 3d parties) should hit $330 mil. Tho meats remain biggest category of HPP products, cleanse trend has seen explosive growth in HPP juices in recent years, with total sales of HPP foods expected to hit $9.8 bil this year. Tho Avure and Hiperbaric are major HPP equipment suppliers, Chinese supplier Baotou KeFa has been making inroads, partnering with US cos, Visiongain noted.
MillerCoors Wholesalers Deep into NAs, but Core Supplier Expressed Concern on SKU Proliferation
Distributor survey detailed at MillerCoors wholesaler convention indicated that overwhelming majority distribute NAs as well as beer, but MC brass said that complexity stemming from large # of sku's is exacting toll, including lower profitability. Survey indicated that fully 86% of MillerCoors houses sell NAs, while almost half (47%) sell wine and over 20% sell spirits. In subsequent talk with INSIGHTS, sales prexy Ed McBrien, wondered, with so many new items still coming on, when "do you hit a point of diminishing returns?" Considering current "free-for-all" at retail and "pressures on the costs," distribs should be asking themselves: "What are the implications as I think about my portfolio?"