Beer Marketer's Insights
Yerbae sparkling yerba mate brand has scored some additional retail wins, including 1,100 locations of the Circle K c-store chain in multiple regions. Drug chain CVS is coming on with 800 locations, Target has added 250 locations and the brand is going chainwide within Fred Meyer, said Todd Gibson, who founded co with his wife Karrie. And WinCo is picking up brand in its Southern Calif and Wash State locations. “Moving the needle,” Todd informed us.
Peet’s Coffee has played for a while in growing market for single-origin beans. But its entries have been scattered across numerous portfolios. Now the SF-based roaster is consolidating and expanding them under new Single Origin line designation, tapping into co’s longstanding direct ties to growers. Among coming additions this fall will be medium roast from Finca La Hilda operated by Vargas family in Costa Rica, long a partner to Peet’s. In announcing move, co cited Nielsen data indicating that single-origin beans grew by 4% to $182 mil over 52 wks ended Jun 15.
Intensified cold-bev innovation push helped Starbucks score its first lift in afternoon sales in US in 3 years. That was among highlights of 3d qtr in which Starbucks blew the doors off in its 2 key growth markets, US and China, prompting surge in shares in trading today. Driven by 6% growth in same-store sales globally, Seattle-based roaster scored 7.3% increase in net revenues to $19.76 bil. Net revenues for core Americas segment grew 11% to $4.7 bil thanks to 7% growth in same-store sales and addition of 641 stores. Operating income surged 18% to $1.07 bil. In key growth market, China/Asia Pacific, net revs grew 9% to $1.3 bil thanks to 5% same-store sales and 994 store openings. Operating income grew 15% to $269.8 mil. As SBUX likes to remind with its “Growth at Scale” motto, growth figures of that magnitude are no mean feat for mature retail/CPG co. Investors responded by driving shares up in trading so far today.
In US market, US comp-store sales surged 7%, across all dayparts, thanks to efforts to shift staffers from overhead functions to customer-facing activities, continued digital expansion and bev innovation. Tho transactions remained flat, that was actually an improvement over the declines of 2018, ceo Kevin Johnson told questioner on conference call yesterday afternoon. Kevin took particular satisfaction in finally finding a way to overcome afternoon lull at stores, thanks to cold-bev innovations like Nitro Cold Brew, which now is in 5,800 US stores and should be fully available by end of fiscal year in Sep, with ad support kicking in by then, too. Continued strong demand for such iced espresso bevs as Cloud Macchiato and Starbucks Refreshers provided further vindication of tilt toward bev innovation. Thanks to that digital progress, “We know a lot more about our customers now,” noted Americas coo Roz Brewer. “And it’s really fueling what we have in the pipeline for beverage innovation as well as when we need to be ready for those customers at store level.”
Meanwhile, in China, store count grew by 16% to 3,900+ stores by end of qtr, with comp sales rising 6%. “Much like the US, China's comp performance was driven by an enhanced customer experience and beverage innovation,” Johnson told investors last night. The innovations there included line of Modern Mixology cold bevs that originated at Rose Street store in Shanghai as way to accommodate local taste preferences. Among other innovations in China was launch of new store format called Starbucks Now in Beijing that focuses on express service and pickup or delivery of mobile orders. “I’m pleased with how quickly our China team was able to light up mobile ordering for pickup or delivery and create this entirely new retail format,” Kevin said.
On channel development side, Johnson cited global coffee alliance with Nestlé as further extending global reach of Starbucks brand, expanding into 6 new markets with roasting brown, whole bean and Nespresso and Dolce Gusto single-serve items. “Starbucks-at-home coffee remains on track to be in 16 markets, including the US and Canada by this September,” he said. No specific mention on call or in financials of other channel-development efforts, including RTD coffee lineup marketed with PepsiCo or Teavana Iced Tea marketed with Anheuser-Busch InBev. That segment suffered 6% revenue decline to $533 million due largely to shift to licensing model with Nestlé. “While the decline was expected, it was partially mitigated by higher-than-expected sales of inventory to Nestlé as they prepared to directly fulfill customer orders under the Global Coffee Alliance,” said cfo Pat Grismer. (BBI got assist from SeekingAlpha transcript in assembling this story.)
A bio we were sent on Andy Gabriel, a cofounder of newly launching CBD bev player Good Day (BBI, Jul 23), mistakenly listed him as serving in coo role. He’s actually cfo.
Fever-Tree reported that sales rose a mere 5% in past 6-month period, continuing plateauing of once-torrid growth and sending shares skidding 10%. Tho observers pointed to any number of special considerations, including cycling of year-earlier period buoyed by royal wedding, World Cup and hot temps, results played into notion that growth in core UK market will be harder to eke out now that Fever-Tree has grabbed #1 mixer spot. That in turn is prompting speculation of more extensive push in US as well as enhanced chances that lower valuation could prompt move by strategic to pick up co. CPG giants “are prepared to pay up for faster growth, but the previous valuation might have made it a difficult sell to their own investors,” per Bloomberg opinion writer. “Fevertree is still far from a cheap tipple, but for a thirsty buyer, it could slip down more easily.”
Ditto the likelihood of more intense overseas push. “Given the challenging UK environment, developing the overseas business is more important than ever,” per Bloomberg. “At least Europe has significant potential, given that drinkers there are at an earlier stage in discovering the delights of gin. And the US looks promising,” given 24% sales gain excluding foreign exchange effects and strong position the brand has won within premium mixer market.
Nutrabolt’s C4 performance energy brand continues to make headway building out comprehensive DSD network, sliding into Arizona’s Kalil bottler to help fill the void left by departed Monster Energy. It goes on Kalil trucks at beginning of Aug. At same time, brand will be clambering aboard Polar Beverage trucks in New England now that that deal’s been finalized (BBI, Apr 17). In Pac NW, C4 has added Maletis in Ore and Olympic Eagle in Wash, while MillerCoors network is providing coverage across Illinois. And Bud house Beechwood, a Sheehan operation in Wis, has also come aboard. (Sheehan operation Union in NY has been runnin’ with C4 rival Bang.) “We’re clipping away at full national coverage,” said sales exec John Herman, even as co works to accumulate authorizations at bigger chains like Walgreens, CVS and Kroger.
Cannabis in Congress; High-Profile Dems Intro Reform Bill, Senate Looks at Banking Reform
Cannabis legalization hit DC radar again in recent days. A number of high-profile Democrats, including chair of House Judiciary Committee Jerrold Nadler and Dem prexy candidates Kamala Harris (bill’s Senate sponsor) and Elizabeth Warren, intro’d Marijuana Opportunity Reinvestment and Expungement Act. Broad-based reform bill removes cannabis from Schedule 1 status in Controlled Substances Act, expunges criminal records of those convicted of cannabis crimes and provides financial support for start-up minority bizzes in budding cannabis biz. Notably, bill addresses key issues (the latter two) that ultimately stymied legalization efforts in NJ and NY earlier this yr as state legislators could not come to agreement on them. But new bill takes direct aim at both, including not only expungement of prior convictions, but 5% sales tax on cannabis sales to fund services to communities “most adversely impacted” by War on Drugs and assist minority-owned startups. There are also provisions that ensure those with prior convictions aren’t denied federal public benefits, nor suffer “adverse impact” under any immigration laws. Not surprisingly, and likely as a result, among 4 Senate co-sponsors and 27 in House, only one Repub signed on so far. Net-net from this bill and recent hearing that raised same criminal justice/biz assistance issues: bipartisan support for reform may be losing momentum.
Meanwhile, Senate Banking Committee recently held hearing to consider reforming laws that mostly force cannabis biz into being cash-only and stifle investment. Committee chair Mike Crapo acknowledged “strong case” for need to resolve banking issues, reports Marijuana Business Daily. But he apparently has “concerns” as well and concluded that banking reform “is an important, complex issue that we need to get right.” Up to Crapo whether SAFE Act, which would clear banks to serve cannabis bizzes without being tagged for prosecution by feds, advances in Senate. SAFE has passed House committee. But, in perhaps another sign of fading bipartisan support for cannabis reform, only about 1/3 of Senate Banking Committee members even attended the hearing, MJBiz reported. (This report was picked up from BBI’s sibling publication Insights Express.)
PEOPLE: Former A-B Innovation Exec Ornstein to Run Online Delivery Service GoPuff’s Alc Bev Biz
Randy Ornstein, Anheuser-Busch InBev vet who played key role creating successful Teavana iced tea partnership with Starbucks and went on to broad role orchestrating brewing giant’s Beyond Beer efforts before departing last month, has landed new gig that combines his analytical skills with alc innovation. He’ll be director of alcohol at GoPuff, the fast-growing online delivery platform for c-store items like snacks and bevs that’s building out a broad alc-bev capability. Reached this week, Randy declined to say much more about his role at this point, tho it will require relocation to co’s Philadelphia base. By now co is operating in dozens of cities, tho not yet NY, LA and some other major metros, per website listing. GoPuff rep didn’t immediately respond to our inquiry yesterday. Tho he’d spent years behind scenes working Walmart, Ornstein proved highly visible, entrepreneurial proselytizer for innovation in his Beyond Beer role, inaugurating range of innovations spanning multiple categories, and energetically talking them up at shows and conferences.
Voss Water, which has been losing ground in US lately, finally has its rock to stand on. Long-bubbling negotiation with Dwayne Johnson has come to fruition: Norwegian import brand has recruited The Rock for what it’s describing as long-term partnership that will encompass new ad campaign under “Live Every Drop” rubric along with innovation push including functional extension due early next year. The tie could energize soft US biz while adding boost to Asian biz, where key investor Reignwood Group has been orchestrating major push and where Johnson is an icon thanks to blockbuster success of vehicles like Fast & Furious 7 and Rampage. We’d reported on talks at end of 2018, after Juggernaut Capital Partners investor Rich Owens took reins of co in wake of exit of ceo Joe Bayern (BBI, Dec 27) and, as partners now claim to have been working for months on marketing effort, it’s possible deal closed not long after that.
Co said today that partnership will kick off on Aug 5 with brand’s largest consumer-facing ad and and social media campaign in years, “Live Every Drop,” featuring Johnson in creative running on outdoor, digital and social media platforms. In statement issued by co, Johnson said, “I’m thrilled to have evolved my genuine passion for Voss into a formal business investment and work with their exceptional leadership team, to create new products and develop strategic brand initiatives and collaborations. We are going to build great things together.” Global marketing dir Ariel Boorstin added that Johnson will support “an expanded brand vision as we stretch into new categories and territories, and extending the reach of our core, shared values.”
Starbucks and its global partner Nestle are collaborating on line of Starbucks Creamers debuting in groceries next month in Caramel Macchiato, White Chocolate Mocha and Cinnamon Dolce Latte flavors. They’ll be packed in 28-oz plastic carafe bottles priced at $5 . . . Ceria Brewing, which in past year has launched THC-laced non-alc wheat beer called Grainwave, has decided to offer a non-infused version to ride growing consumer interest in non-alc beers. Co launched in Colo by retired Coors Brewing chief Keith Villa and his wife Jodi is adding Grainwave NA to its portfolio, launching in 12-oz aluminum cans in Colo later this summer, then adding Calif and eventually rolling out nationally.