Beer Marketer's Insights
A return of supply chain issues has taken down a 2d ceo at Reed’s Inc. In announcement after market closed yesterday afternoon, Norwalk, Conn-based marketer of natural sodas said that chmn John Bello has stepped in interim ceo after ouster of Val Stalowir, and that Bello’s trusted colleague over several gigs in past 30 years, Norm Snyder, was stepping in as coo. Snyder is picking up role of incumbent coo Stefan Freeman, aboard 2 years now, who’ll move into “transitional operating role” helping Snyder get handle on job and then, presumably, himself exit.
Unexpected move followed production meltdown that once again left sales on table, following similar challenges 3 years earlier that had ultimately cost founder Chris Reed his job as ceo. In making move, REED offered preliminary Q3 sales outlook indicating that gross sales would be inching up 3-4% to $8.5 mil, paltry gain considering sweeping brand revamp undertaken by Stalowir that seems to have been embraced by retailers. At least in short term, the benefits of brand restage, addition of zero-sugar entries on both Virgil’s and Reed’s brands and innovations like alcoholic RTD Moscow Mule and hemp-based entry were undone by return of production issues as co failed to build in enough copacker redundancy to avert out-of-stocks (BBI, Aug 14). Part of issue, as Val explained at time, was that co waited to add production partners until it finished transition to concentrate-based model for its core Reed’s Ginger Brews, which would greatly expand universe of potential copackers. But things broke down among current network before that moment arrived, frustrating long-suffering investors and leaving Stalowir and Freeman to take the fall for the shortfall. Since disclosure of issues in mid-Aug, REED shares have skidded from $3 to $1.30 range.
In brief phone call last night, Norm said he expected to have quick impact on operations that would release the value of brand innovation masterminded by Stalowir. In making move to Reed’s, he’s exiting role as prexy/ceo at Avitae USA LLC, marketer of caffeinated waters that’s been in search for new financing at time concept has drawn numerous other entrants offering value-added alternative to La Croix. As of now that financing hasn’t come thru and Norm said it wasn’t clear what future holds for Avitae. Reached last night, Val declined to comment except to say he was proud of work he’s accomplished on sales and marketing fronts. Indeed, until Stalowir entered picture and started aggressively tweaking Canada Dry’s acknowledged lack of ginger, Reed’s hadn’t really embarked on any meaningful consumer marketing efforts in its several decades pushing natural sodas. In statement, Bello thanked Val “for his dedicated and tireless service over the last 2 years executing our transformation plan. Val repositioned the business operations and built out a strong sales and marketing organization that is poised to drive the business to its next level.”
Tho Bello has rep for being volatile, demanding boss, he’s engendered enduring loyalty of some colleagues thru numerous ventures, and Snyder is very much in that club. He worked at Bello’s side at NFL Properties, where he served as controller, and then subsequently as cfo/coo at SoBe marketer South Beach Beverages, which enjoyed successful exit to PepsiCo, and at Adina for Life, which ultimately foundered. Along way Snyder also has served as prexy/ceo of Genesee brewer High Falls Brewing and coo of Rheingold Brewing, both roles which entailed significant operating oversight. At SoBe, as Bello noted yesterday, Snyder had enlisted 17 packing facilities by time brand hit $275 mil in sales prior to exit to PEP. So he’s on familiar terrain in trying to establish Reed’s as a reliable partner to its retail customers.
B’More Organic, whose name was a clever riff on its Baltimore origins, has abruptly closed its doors after an 8-year run marketing nutritionally rich Icelandic-style skyr yogurts. BBI had been unsuccessful in its efforts to contact founder Andrew Buerger in recent weeks, but BevNet confirmed closure, with founder citing copack issue as last straw. He said newly onboarded copacker refused to produce bevs after inaugural run, and prospect of cash drain until replacement could be found prompted him to throw in towel.
Flush with $40 mil in new funding via private-equity partner Eurazeo this past spring, Q Mixers has been dialing up its staffing and trade marketing activities while laying groundwork for first significant consumer-facing effort next year.
Asked recently for update on how new capital is being deployed, founder/ceo Jordan Silbert offered us comprehensive rundown of recent months’ activities as his brand heads to what he views as “tipping point” in getting premium carbonated mixers firmly ensconced in US. The effort by Q comes as its key rival, Fever-Tree, has been stepping up its own hiring and in-market activities in US as its biz flattens in core market (BBI, Jul 8 and 23); together, the 2 brands have been winning increasing shelf space as American consumers learn to pair their top-shelf spirits with comparable mixers rather than HFCS-sweetened mainstays of the past. For first time, premium mixers have begun to outsell mainstream entries at some key retail banners, among them Safeway’s Eastern div, where Q and Fever-Tree have combined to outsell mainstream set dominated by Schweppes and Canada Dry – offering bump in margins from far less shelf space, Silbert noted. As momentum builds, Q has been winning co-merchandising roles in off-shelf displays erected by spirits marketers, including outings with Pernod Ricard products at Target and with Tito’s Vodka at Kroger’s Ralph’s banner.
On on-premise side, Q has been winning national mandates at broadening range of high-profile national restaurant groups including Capital Grill, Buffalo Wild Wings, Omni Hotels and PF Chang’s, Jordan reported.
Meanwhile, it’s been stepping up trade-marketing activities intended to put its tonics, ginger beers and other items on mixologists’ mental maps, serving as official mixer at influencer-focused events like Bar Convent Brooklyn, Repeal Day, Portland Cocktail Week, Arizona Cocktail Week, Camp Runamuk and Whiskey X. It was mixer at influential Tales of the Cocktail event in New Orleans this past Jul, where highball (long a drink consisting of a spirit, carbonated mixer and garnish) was chosen as global cocktail of the year, putting fresh wind behind sails. And as reported, Q has hosted 18 “Highball’r” events for top bartenders hosted in hospitality meccas around US.
So far, Q has managed to build significant business with remarkably little in way of consumer-focused efforts beyond in-store sampling and the like, but that will be changing next year. Jordan said Q was just beginning to address shape this will take, with plans to seek out agency partner as plans get fleshed out.
To support efforts, it’s been on hiring spree, particularly on retail side. Nestle vet Mike Atkins, who was recruited to run retail earlier this year (BBI, Feb 14), moved this summer to build his team with additions of 3 regional sales leaders and category mgr, all with past experience at Nestle. Sean Kiehl came in as vp sales Midwest after runs at Jonny Pops and Nestle Waters), Monte Miller is vp sales East after runs at Mamma Chia, Nestle Waters and General Mills, and Karen Fuchs is vp sales West after runs at Canyon Bakehouse, Nestle and Dreyer’s. In addition, for Nestle Waters and PepsiCo exec Emily Johnston is serving as senior category mgr. Atkins augments on-premise leader Ted Roman brought in several years earlier from spirits marketer William Grant (BBI, Apr 18 2016). Silbert noted that Atkins moved quickly to commission syndicated data provider SPINS to analyze mixer category as co steps up its game to win regional grocery banners.
Analyst Nik Modi at RBC Capital has offered bullish assessment of Monster Beverage prospects, saying threats from rival entries like Bang Energy and its distribution partner Coca-Cola’s own Coke-branded energy line are exaggerated and “revenue growth is higher than the current consensus thinking.” He’s anticipating 6% growth in US from current portfolio, 25-30% growth overseas and upside both from China and from “white space expansion into non-energy categories.” Recall that, while MNST brass hasn’t said much about that lately, co had long signaled that it was eyeing moves into other segments, including alcohol, both via internal development and thru acquisitions and outside partnerships (BBI, Jun 7). (We’d recently flagged investment in Hawaiian coffee plantation operated by Monster brand creator Mark Hall as potentially signaling one such direction.) Modi has other categories in mind, figuring that “grabbing just 1 point of share in spiked seltzer, non-alc seltzer and bottled water could drive 4-5 points of volume growth in 2020.” He also notes that from 2016-18, Monster launched 14 products that made it into top 100 energy sku’s, vs 5 for Red Bull, 4 for Rockstar and 3 for VPX/Bang. (Full Throttle, operated by MNST, accounted for 2 more.)
Innovation-wise, MNST will show some of its hand at NACS c-store extravaganza this week in Atlanta. At BBI, we’ve heard rumblings about double- or triple-strength Java Monster as well as oatmilk extensions, and slight elevation in caffeine levels for zero-sugar Ultra subline. We’re also hearing that glass-bottle Caffe Monster entry may be on its way out from Coke system as KO seeks other routes to reviving its flagging RTD coffee biz, including via its acquired Costa Coffee unit in UK. That, along with Coke’s move into energy under its core trademark, could be prompting Monster Bev to look beyond red system for some of its future growth.
That thesis is briefly explored by Nik in note issued today. “At its core, we believe Monster is a marketing company,” he writes. “Over the past 2 decades, the company has proven its ability to create strong brands. After all, there are not many beverage brands that can transcend borders and beverage sub-categories like Monster. Reign is also good evidence that Monster can quickly address new trends with new brands. The company is tightly connected to media properties that align well with Gen Z and Millennial consumers (gaming, extreme sports, music) while also catering to older consumers (NASCAR/Tiger Woods). Against this backdrop, we expect the company to leverage its marketing core competency to create new brands outside of the energy drink category.”
Looking at potential threat posed by Coke-branded energy item, Modi cites CSP magazine bev buyer survey in concluding that “we expect the product to be shelved next to Coke’s CSD products and other tertiary energy drink brands—with very little placement next to Monster’s products.”
At time major beercos are having trouble finding ways to grow their mainstream brands and consumers are embracing all manner of beer hybrids and alternatives, the National Beer Wholesalers’ Assn issued a clear message to its members in Las Vegas last week: it’s time to look beyond the narrow definition of beer to insure prosperity in coming years. Those were among first words from lips of NBWA ceo Craig Purser at opening general session, and it was focus of panel that NBWA asked BBI to assemble to make case for why NA brands in particular are feasible route to growth. As Craig put it, market challenge for distribs should be viewed not as “either/or” but as “both/and” as they aim to get more adept at managing categories of interest to consumers on both alc and NA sides. View got further emphasis from Boston Beer founder/chmn Jim Koch, who urged listeners to regard beer as anything “made in a brewery, distributed by beer wholesalers and sold in accounts where beer is sold. I’ll call that beer.” He added, “That’s the playground we’ve looked at to grow Boston Beer.” It includes hard seltzers, flavored malt bevs, ciders, hard kombuchas, even canned cocktails, wines and spritzers, whose embrace at Boston Beer has returned co to double-digit growth past 2 yrs. Tho Jim was speaking specifically of alc initiatives, his stance fit within NBWA broader view that its wholesaler members need to learn to play wherever consumers want to go. Will beer houses embrace trend? It remains to be seen: powerful Miller Coors/Constellation operator Reyes Group remains skeptical of putting NAs on its beer trucks (with several fast-growth NAs recently exiting DBI following its acquisition by Reyes), and we encountered several wholesalers in Vegas who’re happy to remain on sidelines, sometimes after less than fulfilling experience with brand like Red Bull or Monster Energy. Lotsa others told us they’re building their portfolios, tho, and exhibitors on trade show floor told us panel brought quite a few interested wholesalers to their booths. So, as US president likes to say, we’ll see what happens.
(It’s not that NBWA has lost interest in growing beer, and unveiled Beer Growth Initiative detailed in our sibling newsletters Insights Express and Beer Marketer’s Insights.)
BBI Panel: Disruptors Offer New Avenues into Isotonic, Protein, Coffee, Energy Segments; How Nevada Beverage Thrives as ‘Foster Parent’ to Up-&-Coming NAs Panel assembled by Bev Biz Insights editor Gerry Khermouch made case that brands long regarded as impregnable – including Gatorade, Muscle Milk, Starbucks Frappuccino and Monster Energy – are being disrupted by new challengers that are offering beer wholesalers a chance back into the game in those categories. Tho Gatorade disruptor Body Armor moves thru Coke system, a new wave of well-crafted entries under names like Hoist, Halo and Coco5 offers an entrée to beer houses, just as plant-based protein bevs like OWYN (Only What You Need) offers a route into protein bevs once dominated by Muscle Milk and cold-brewed coffees and Bulletproof-style blends like Kitu Life Super Coffee offer healthier alternative to Frappuccino. Of course, many beer houses already have embraced new wave of “performance energy” brands like Bang, C4 and Celsius as way back into energy segment that previously seemed locked up by Red Bull, Monster and Rockstar. (One panelist was C4 sales exec Declan Duggan, who outlined potential of segment that he noted researchers like Nielsen have taken to calling “fit energy.”) Given direct-to-consumer channel and social media outreach, brands often can demonstrate degree of awareness and sales in particular market by time they approach wholesaler for retail distribution.
From wholesaler side, local distributor Ken Wrathall, mgr of NA bevs at Bud house Nevada Beverage, offered roadmap to how beer houses can exploit opportunities offered by brands like Essentia Water and Bang Energy without undercutting their performance on beer side. It’s time that there’s rich array of unaligned brands, even as Coke and Pepsi bottlers are dropping smaller accounts, meaning high service levels will be richly rewarded. “We’re showing up and getting in their face while they (the big soda systems) are walking away,” Wrathall said. “When you show up with some service, they’re absolutely welcoming you,” often to tune of placing 100-case order. As for beer wholesalers’ frequent lament that absence of franchise laws encourages brands to flee, Ken said he’s learned to view his house as “foster parent” to newer NA brands, negotiating contract with adequate exit so that departure of successful brand yields buyout that “builds the bridge to the next thing.” (He noted that Monster Energy had grown to 750K cases by time it departed Nevada Bev for Coke system.) “Just build the portfolio, ride the hot trends and get paid kindly for your expertise.”
Ken, who put in years within Coke system, has spent 12 years at Nevada Beverage, managing transition after exit of Monster to Coke system and rebuilding portfolio under aegis of owner and gm who believed in diversification. At time Monster exited, he noted, viable energy alternatives were scarce, so he turned attention to #1 NA category, bottled water. “Why not get behind that?” he reasoned. By now wholesaler has assembled coterie that includes Essentia, Core and Eternal Water, with view to building category portfolios “that retailers can’t deny.” Also in house are growing brands ranging from Brew Dr Kombucha to Calypso Lemonade, as well as Anheuser-Busch-aligned entries like Teavana Tea, Icelandic Glacial Water and Hiball organic energy.
At operating level, Ken said he looks for well-funded brands and has learned to tune out empty assurances that item goes well with vodka or resonates with millennials. He demands exclusivity, with minimal exclusions, perhaps for natural retailers like Whole Foods and Sprouts or nutrition channel. For functional brands, margins are fine, and even brand like Sparkling Ice offers adequate margin “and it certainly fills up the trucks.” Generally speaking, Wrathall seeks NA brands either with high margin dollars or high volume/high-margin-percentage. “Look for 25% minimum,” he advised. He’s assembled set of channel area mgrs with key relationships to retail decision-makers, on theory that pitching narrow book of NAs separately guarantees several “yeses” compared to pitching NAs at end of long beer list. And “don’t run from non-licensed accounts: it’ll be OK. Put minimums, but you will be surprised what’s out there.”
Bulletproof 360, the parent co of Bulletproof Coffee, has turned to corporate America for successor to renegade “bio-hacker” Dave Asprey as ceo, as co seeks to build out its CPG biz. In to steer ship starting Tues is Larry Bodner, who brings 30 years of experience via exec roles at cos like P&G, Walt Disney, Del Monte Foods and Sovos Brands and board seat on Hostess. Bodner joins a year after co brought in $40 mil in Series C funding but also saw lotta churn in exec ranks while balancing efforts to support multiple platforms and channels. “As the brand moves into large retail distribution to make it more accessible for everyone, we are attracting the heaviest of hitters from the retail and consumer packaged goods space, people with the skills and experience to make Bulletproof into even more of a household brand,” per statement from Asprey, who segues to exec chmn role and will remain in day-to-day. “Simply put, Larry has what it takes.” In recent years, Asprey has proved uncommonly influential voice on nutrition via pair of best-selling books (with new one on the way) and Webby-winning podcast called Bulletproof Radio. We recently visited with co at Natural Products Expo East, at time it’s spawned a flock of bev imitators harnessing coffee, grass-fed milk and MCT oils that seem to be outrunning Bulletproof in some channels (BBI, Sep 16).
Restaurants in Philadelphia serving kids’ meals will be required to first offer customers a “healthy” bev as “default drink option” under new legislation passed by City Council, reported CBS. The new law, designed to prevent childhood obesity, would not prevent customers from choosing sodas or other bevs if they choose. “Ensuring that these healthy beverage options are available to families is a step in the right direction toward the health and well-being of our city’s children,” said councilmember Reynolds Brown. New rule has to be signed by Mayor Jim Kenney, which seems likely given that he successfully implemented controversial 1.5-cent-per-oz tax in city back in 2017.
Most experts have been warning marketers that it could be another year or 2 before wary FDA comes around to legitimizing sale of hemp-based CBD foods/bevs. Could breakthrough come much quicker than that? That’s case that Canna Law Blog makes in article posted yesterday that says mounting pressure from Congress has put agency on a “clear path within 4 months” to giving greenlight to responsibly sourced and formulated products. It bases analysis in part on letter sent to FDA a week ago by bipartisan group of 26 House members urging agency to “quickly act,” even if that means issuing interim rule while continuing to develop more permanent stance. At same time, as Canna Law reports, Sen majority leader Mitch McConnell convinced Appropriations Committee to include in ag bill a provision mandating that FDA “clear a path for lawful marketing of these products within 120 days,” submitting a report detailing progress within 90 days, as newsletter wrote. (McConnell, of course, has vested interest in outcome, as he represents tobacco growers looking for more lucrative cash crop.) Story can be accessed here.
Much as brands like Soylent and 3D Energy have done before it, Black Rifle Coffee is latest brand to try to translate its growing online clout into RTD space. After building online base of bagged coffee, pods and other formats to what it claims is $80 mil run rate, brand keyed to military vets and first responders will unveil its first canned coffees in Atlanta next week at NACS c-store expo, effort that’s been helmed by former Ohio distributor Bryon Evans, more recently in private-label coffee space, and former PepsiCo and Argo Tea exec Pete Popovich. The shelf-stable 11-oz slim-can line debuts in new year in Espresso Mocha and Espresso with Cream flavors priced at $2.99.
Team is riding brand that was launched 5 years ago out of Salt Lake City by former Army Green Beret Evan Hafer with colleagues like Mat Best, Army vet and former CIA contractor who’s developed cult following for his in-your-face YouTube comedy channel and whose new book Thank You for My Service has been racing up charts. Brand’s shtick is mix of patriotic uplift, gunplay and blatantly un-PC hijinks that won it endorsement from Donald Trump Jr a coupla years ago and has gotten the brand featured on outlets like Fox News. Evan’s co-ceo is former Taco Bell exec Tom Davin, who joined in Jan after 8-yr run on 5.11 Tactical. By now, co operates roasteries in Salt Lake, San Antonio and Manchester, Tenn, offering broad line of bagged and pod coffees under names like Thin Blue Line and AK-47 Espresso Blend. Also in mix are organic entry, instant coffee powder sticks, even Bulletproof-style “Fit Kit.” Co says it’s consummated 1.4 mil transactions for YTD and boasts 100K monthly subscriptions to its Black Rifle Coffee Club and 13M social media followers across its various platforms, including even a magazine called Coffee or Die. In rejoinder to Starbucks’ plan to hire 10K refugees, Black Rifle said it would seek to employ 10K vets as it grows. (For its part, Guayaki Yerba Mate is aiming to recruit thousands of released felons – BBI, Jan 4.)
In conversation today just after he landed in Atlanta for show, Bryon said he and Popovich were drawn to brand’s uplifting theme and clear connection it’s forged not just with military personnel, mfg workers, cops and other first responders, many of them in Sun Belt states like Texas, but with Internet-savvy millennials all over US. He said they’ve quietly begun outreach to retailers and potential distribution partners, with specific go-to-market plan evolving based on feedback. He imagines DSD will play a role in key metros. Popovich told us earlier this week that he’d been brought into project by his former PepsiCo colleague Davin and in turn recruited Evans, whose Strategy & Execution Inc has been active in private-label coffee space in recent years. NACS show opens Wed.
Starbucks is opening location in NY transit hub Penn Station that’s completely dedicated to pickups of mobile orders from My Starbucks Rewards members, Food & Wine reported. Unit goes further than pickup store opened in Beijing earlier this year that did include limited seating and baristas to take orders . . . Skyscrapers get built in far less time: Laird Superfood is claiming to have taken 4 years developing new Vanilla Superfood Creamer, on account of extensive search for right vanilla source in Madagascar rather than resorting to what are usually listed as “natural flavors.” Powdered entry includes coconut cream, Madagascar Bourbon vanilla and organic maple sugar, in 8-oz bags at $10.95 .