Beer Marketer's Insights
FDA Letter to Curaleaf Flags CBD Crackdown
As US Food & Drug Administration tries to figure out strategy for regulating CBD, it’s staying highly vigilant about marketers’ efforts to push current crop of products. Today it put out lengthy notice disclosing that it’s issued warning letter to Wakefield, Mass-based Curaleaf Inc for “illegally selling” CBD products online with “unsubstantiated health claims” boasting its products can help ailments such as cancer, Alzheimer’s disease, opioid withdrawal, pain and anxiety issues for pets along with many other conditions, per news release. “As we examine potential regulatory pathways for the lawful marketing of products containing cannabis and cannabis-derived compounds like CBD, protecting and promoting public health remains our top priority,” said FDA. By pushing unsubstantiated claims, these products “can put patients and consumers at risk by leading them to put off important medical care,” noted acting FDA commish Ned Sharpless, MD. FDA has “high-level internal working group” that’s currently exploring “potential pathways for various types of CBD products to be lawfully marketed.” Curaleaf has 15 days to respond to FDA to explain how it will correct violations from its online sales and social media posts using “unfounded claims” for about a dozen products. Failure to do so, “may result in legal action,” warned agency.
New CBD bev player called Good Day is aiming to target its individual canned entries toward different dayparts, starting with cold-brewed coffee for morning, citrus sparkling water for afternoon and chamomile tea for winding down in evening. First to ship is unsweetened Cold Brew, using Fair Trade organic coffee from Latin America but no creamer and containing 15 mg of CBD from hemp extract sourced in Colorado. It’s priced online at $42 per 7-pack, a week’s supply. The other 2 entries will follow in coming months, says Good Day, which operates out of offices in NY and LA, where it will initially focus its retail efforts in coming weeks. The drinks are packed in 8.4-oz slim cans with matte finish prominently identifying item as “Cold brew coffee with benefits.” Each entry contains 15 mg of CBD from hemp extract, along with array of organic ingredients, Fair Trade where feasible. Ingredient list will be kept to 8 or fewer, with no added sugar. No word yet on distribution strategy.
Good Day’s NY-based cofounder/ceo Warner Siebert comes out of hospitality biz via tech plays like BuzzTable guest mgmt system acquired by Sysco and CAKE tech products for restaurants. His cofounders, both taking coo roles, are LA-based Nick Miller, most recently at Facebook, and NY-based Andy Gabriel, a former Credit Suisse exec who segued to food/bev via roles at Miami-based juice brand JugoFresh and HPP processor Nutrifresh Services. A rep for co said many of its investor scome out of tech biz, working at companies like Google, Facebook, Snapchat, Slack, Stripe and Cisco, tho others are associated with bevcos like hard kombucha player JuneShine and yerba mate brand Guayaki as well as restaurant chain Sweetgreen. Also in co’s orbit is Giannuzzi Group. Preliminary info at DrinkGoodDay.com.
Before diving into the numbers in latest Nielsen all-channel scans thru Jul 13, it’s important to remind readers that Nielsen has announced its c-store data “is overstating sales declines, meaning this month’s data likely understates actual trends,” noted Dara Mohsenian of Morgan Stanley. Those overstated declines in c-stores started at around 1% in Feb and got up to 4% by Jun. Restated data will be avail Aug 20.
CSD volume decline eased to -1.2% (vs -2.7% for 12 wks) with a still solid 4.2% avg price increase last 4 wks thru Jul 13 in Nielsen data, per Morgan Stanley report. That includes key July 4th holiday weekend. Diet CSD brands increased volume 1% while regular CSDs slowed decline from -3.5% for 12 wks to -2% last 4 wks. Coca-Cola CSD volume was off just 0.3% (vs -1.5% for 12 wks) on avg price gain of 4.6% last 4 wks. KO, led by Coke Zero momentum, increased its diet sales 2% for 4 wks. PepsiCo CSD volume was off 3.2% last 4 wks, an improvement vs 4.7% decline for 12 wks. PEP decline decelerated even as avg prices edged higher to +3.9% for 4 wks. Keurig Dr Pepper CSD volume was down just 0.4% (vs -2.4% for 12 wks) as its avg price increase was down over a percentage point but still up a solid +4.3% last 4 wks. KDP diet CSDs were up 1.8% while full-calorie brands slipped 1%. Private-label CSDs were off 2.3% on avg price gain of 2.5% last 4 wks.
Energy Volume Gain Accelerates; Solid MSNT Prices Keep in mind that energy category and MNST are likely most impacted segment and co from Nielsen c-store calculation issues, so gains may be understated past 4 and 12 wks. Energy volume in all-channel increased 4.6% (up from +4% for 12 wks) on avg price gain of 3.6% last 4 wks. Monster Energy volume was off 1.6% (vs -2.6% for 12 wks) on solid avg price hike of +5.1% last 4 wks. “Reign added ~740 bps to MNST sales growth in the 4-week period reaching ACV of 44% in the last week (89% in gas & convenience) vs ~680 bps of sales contribution in the prior 4 weeks at 38% ACV (88% in gas & convenience),” noted Dara. Red Bull volume increased 1.8% with flat pricing over last 4 wks, in line with its 12-wk trends in all-channel. Bang rolled to 350% gain with avg price increase of 4% last 4 wks. “Bang market share was 8.1% in the last week,) up 0.1% vs end of prior 4 weeks, added Dara. Bang at 8.3% share in gas/c-stores. Rockstar (-17.5%) and PepsiCo (-15.4%) continued to lose volume at double-digit pace last 4 wks.
Body Armor Only Sports Gainer Sports drinks volume decline eased a bit to -6.5% (vs -7.1% for 12 wks) with solid avg price gain of 4.5% last 4 wks. PEP (Gatorade) volume was down 6.3% on avg price increase of 1.8% last 4 wks. KO (Powerade) volume dropped 15.7% on smaller avg price gain of +1.4% last 4 wks. Meanwhile, Body Armor posted 56% volume gain (up from +43.4% for 12 wks) on small avg price drop of -0.3% last 4 wks.
Small Water Gains; PEP Prices Up Bottled water segment eked out 0.2% volume gain (up from -0.5% for 12 wks) with a slight increase (+0.3%) in avg prices last 4 wks. Nestle avg price increase was halved to +2.2% last 4 wks, which helped slow its volume decline from -10% to -7.6% last 4 wks. Coca-Cola bottled water cut its volume decline in half as well to -2.6% as its avg price increase was at just +1% for 4 wks. PepsiCo water volume fell 4.2% with avg price increase of 3.9% last 4 wks. Private-label waters gained 5.7% with small price drop of 0.8% last 4 wks.
Hydration powder marketer Liquid IV has pulled in 2d round of $5 mil in capital via celeb-rich Series B raise that will support brand’s expansion into additional functions supported by its proprietary cellular transport tech. A melatonin-based sleep aid has just launched, and an energy entry using matcha, moringa and guayusa base is targeted for late in year, said founder/ceo Brandin Cohen, a former collegiate golfer who went from hand-selling his powder sticks in a handful of Southern Calif stores 3 years ago to being on track for $100 mil in annual sales now. “For the past 5 years we’ve been very focused around hydration,” Brandin said in interview last week. “Now we’re applying it (company’s Cellular Transport Technology) to other nutrient payloads,” with view of becoming “360-degree wellness brand.” The efficient CTC process enables users to get energy lift with smaller amount of caffeine and therefore with less of a crash later, he noted.
Cohen himself and key investor Scooter Braun led the round, which also brought in $$ from Demi Lovato, Kevin Hart, Kendall Jenner, Hailey and Justin Bieber, James Corden, Gary Vaynerchuk, Usher, DJ Khaled, Steve Aoki, Patrick Schwarzenegger, Maria Shriver, Yes Theory, Freddy Wexler, Jake Kassan, Elle and Ross Walker, and Moiz Ali, the co announced. Braun is Kanye West’s former mgr, who’s recently made headlines via acquisition of Taylor Swift’s music masters, to displeasure of crossover country star. He was connection to several of new celeb investors. By Cohen’s account, would-be investors kept “bothering me” for 6 months and, while Liquid IV didn’t need the money, Braun saw oppty to “blow this business up.” But co was careful not to overraise, out of fears of dilution, and “it was more about the people than the money,” with individual investments kept to “the least amount so they feel they have skin in the game.” Series A round last summer, also for $5 mil, was led by CircleUp (BBI, Aug 28).
As reported earlier, Liquid IV uses its CTC as “hydration multiplier” to offer similar hydration benefit to drinking 2-3X as many bottles of plain water. It’s built cause marketing platform into plan, donating a serving of Liquid IV to needy peoples overseas for every sale, to tune of anticipated 2 mil servings by end of 2019. Since brand adheres to World Health Organization’s guidelines for Oral Rehydration Solutions (ORS) that’s natural direction to go. But co will further step up commitment with launch of Change The World program that will construct schools in poor countries to educate underserved communities about health and hydration.
As noted, Liquid IV has scaled rapidly, going from handful of SoCal stores to 20K in 2 years, reaching about 30K doors now, including Costco, Whole Foods, GNC, CVS, Vons, Albertsons, Safeway and Hudson News, where the sticks are attached to water sections of coolers via suction-cup displays to catch attention of fliers replenishing their water after passing thru TSA. Overall, getting “sticks in hands” is best marketing device. Burgeoning online biz has seen Liquid IV climb ranks on Amazon from 18,000th rank among sports nutrition items to #1 in 2 years.
Asked about potential for RTD, Cohen said that was part of original plan, but now he’s questioning whether that’s right direction to go, given booming online biz and core users’ penchant for carrying their own reusable bottles. So while he’d always assumed bottling the concept was the ultimate goal, now he’s not so sure.
Coca-Cola shares raced to all-time high in trading today after co offered evidence in its Q2 report that its innovation jag is paying off, all in benign pricing environment. Net revenues grew solid 6% to $10 bil, compounded of 4% concentrate sales growth and 2% price/mix growth. Coca-Cola trademark enjoyed 4% volume increase, thanks in part to 3d year of double-digit growth of Coca-Cola Zero Sugar and extensions like Coca-Cola Plus Coffee. Trends were encouraging enough for KO to raise its guidance to Wall Street from 4% anticipated revenue growth to 5% for full year. “Upside Surprise!” headlined Wells Fargo’s Bonnie Herzog, writing, “We were very impressed with KO’s better-than-expected topline, suggesting that its refranchising & portfolio transformation are paying off.” On conference call this morning, ceo James Quincey noted that nearly 25% of co’s revenue stemmed from new or reformulated brands, vs 15% just 2 years ago. And a raft of major rollouts are still ahead under brand names like Costa Coffee and Coca-Cola Energy. To make room for these innovations, KO has eliminated over 275 “zombie” sku’s so far this year.
For Q2, operating income grew 8% to $2.99 bil. For 6 months, operating income has surged 15% to $5.42 bil on 5% net revenue growth to $18.69 bil. In crucial N Amer segment, net operating revenues increased 3% to $3.16 bil and operating income advanced 10% to $711 mil. Coke Zero Sugar and Coke Orange Vanilla were cited as growth drivers, as were premium bottled waters like acquired Topo Chico brand, which continues its expansion, and Smartwater.
Overall, CSDs were up 3% in volume in qtr. Category that groups together juice, dairy and plant-based bevs was flat, as growth in Maaza in India and Innocent in Europe was offset by weakness in Rani juice brand in Middle East. Another category dubbed water, enhanced water and sports drinks encompassing hydration plays grew volume by 2% thanks to Ciel and Crystal brands in Mexico and Kinley in India, offset by water brands in Japan, where KO is de-emphasizing commodity brands, particularly in wake of storm that devastated bottler’s plant and crimped overall capacity. Tea/coffee sagged 3% as growth in Fuze Tea across Europe and Mexico was offset by declining Dogadan brand in Turkey. Recently acquired Costa Coffee launched its first RTD entries in Britain, with plans to roll it out into markets operated by Hellenic Bottling and possibly other markets this year. That said, ceo made it clear that RTD is not central part of Costa platform, which emphasizes vending and “beans & machines” placed at foodservice customers. Coca-Cola Energy brand by now has expanded to 14 markets, including lately launching Japan, Australia and South Africa, and should be in 6 more markets by year-end including Mexico and Brazil. Tho Quincey didn’t offer definitive answer, it seems unlikely that Coke Energy will hit US shores this year (see below). An older acquisition, UK-based Innocent juice brand, is ready to hit Asia now, starting with recent launch in Tokyo.
‘Tale of Two Cities’ on Noncarb Side as Mainstream Struggles but Premium Grows Tho it was solid quarter, one analyst pointed to weaker noncarbs as blemish and in his response Quincey pointed to “tale of 2 cities” that’s been seeing above-premium brands perform better than mainstream ones in most still categories. On water side, mainstream brands remain under pressure from retailer private-label casepacks, but Topo Chico and Smartwater are growing. In sports drinks, Powerade has suffered execution issues, but Powerade Zero has done well, and so has more premium Body Armor. In juice, Minute Maid may be slightly off, but Simply is growing nicely. Co aims to step things up in current half via stepped-up media and sampling on Smartwater, Powerade and Gold Peak.
Coke Energy Off to Strong Start in Early Markets Like Spain; US Launch Doesn’t Seem in Immediate Plans Tho Coke Energy is rolling out quickly, Quincey took pains to state in prepared remarks that KO “remains fully committed to our partnership with Monster,” which had unsuccessfully contested partner’s ability to launch brand under their contract. Still, brand offers oppty to capture more new drinkers in “rapidly evolving category,” Quincey said. In Spain, thanks to strong bottler with deep inroads into cafes and other on-premise channels, Coke Energy already holds 2% share, with similar velocity to leading energy brands. Brand is in 14 markets now, anticipated to grow to 20 by year-end, as noted earlier. Is US among those plans? Quincey ignored question first time, but pressed again, seemed to imply brand has some road to travel before it arrives here in “2.0” version, as KO first absorbs learning from inaugural markets. Still, “the markets we haven’t announced we’re not going to announce until we’re ready,” he said. “Clearly we’re thinking about the US.” Quincey ignored question asked later in call as to whether the evidence supports Coke’s earlier-expressed view that Coke Energy’s volume will come mainly from Red Bull.
Retiring ‘Hospital Ward’ as Nickname for Bottling Investment Group For years it’s been the unvarnished term Coke brass has used to describe troubled bottlers around the world who fall into co’s Bottling Investment Group for rehabilitation and future refranchising. But Quincey sees no reason their performance expectations shouldn’t be elevated. So he’s “given them permission to abandon the concept of the hospital ward,” he said on call. That’s particularly true because so many of BIG bottlers are in promising underdeveloped markets, within once-shrinking segment that these days accounts for about 20% of total co revenues. In latest setback to KO impetus to reduce BIG size, political and economic issues in Africa have pushed back refranchising effort there, with Coke pulling bottler off market until conditions improve and right buyer can be found.
Alc Launch in Japan Not So Relevant Elsewhere in World – Or Is It? Coke reported earnings as media were abuzz with news of rollout of alcoholic canned lemon chuhai drink called Lemon-Do in Japan after earlier test proved promising. “Why not look to other markets?” one analyst wanted to know. Quincey sought to build case that Lemon-Do “obeys a very Japanese logic,” given local competitors in that country who play in beer, wine & spirits who’ve been offering products that are “competing for a consumer and occasion that heavily overlaps ours.” Still, given advent of new alcoholic categories that heavily overlap NA categories like sparkling water, kombucha and RTD coffee, that would seem to be case in many developed markets. For now, at least, KO ceo isn’t going there. “The logic of taking it elsewhere has not been clear . . . Anything else would need to be considered very carefully,” he said. He did acknowledge that many Coke bottling partners also play adroitly on alc side.
Ska Brewing has joined ranks of craft brewers who’ve taken their non-alc concoctions out of their taprooms and onto retail shelves. In Ska’s case it’s not a soda line but a lightly sweetened sparkling water dubbed Skagua that’s been offered on tap for free at its Durango, Colo, taproom for over a decade now. On Fri it debuted at retail stores in Southwest Colorado in 12-oz cans in 3 flavors: Grapefruit, Lemon and Watermelon. The first 2 are sweetened with organic cane sugar and come in at 25 calories per 12-oz can, while Watermelon is sugar-free at zero calories.
“What the heck is yaupon? It’s American tea!” That’s new tagline of Yaupon Bros American Tea Co as Florida-based organic grower wrestles with challenge of getting American consumers to understand mellow-tasting cousin of yerba mate that’s only form of tea that’s domestically grown. At recent Fancy Food Show, New Smyrna Beach, Fla-based co also intro’d new flagship blend called American Green using Florida-grown organic yaupon that’s been cured 4 days without heat for grassy, sweet-finishing flavor. Also unveiled was Florida Chai, using cardamom, ginger, cinnamon Malabar peppercorns and cloves, for milder version of India’s Masala chai recipe. Those entries joined lineup that includes likes of traditional-style Fire Roasted Warrior’s and top-selling Lavender Coconut, sold in compostable containers co calls “eco-tubes.” Co is operated by the brothers of its name, Bryon and Kyle White, along with Mark Steele, a retired pilot and inventor of drum instruments who came in as part owner 3 years ago.
White bros cofounded predecessor co in 2012 and went on following year to become first organic grower, seeking to take the segment beyond the wild-harvesting employed by most brands. Among cues the brand works are ingredient’s naturally caffeinated nature (to tune of 60 mg per cup), rich antioxidant content, tannin-free flavor and 100% organic certification, as well as source of employment for farm workers who’re getting displaced by shrinking citrus biz, particularly as insect-born bacteria called HLB decimates crops. For all these virtues, building awareness of the ingredient has been difficult, and marketers in the space have experimented with different approaches. As reported recently, an Austin-based entrepreneur recently restaged her Texana Tea RTD brand as YaYaYa, opting to lighten things up (BBI, Apr 4). Other players include Cat Spring near Austin and Asi Yaupon in Savannah, Ga.
In chat at Fancy Food booth, Bryon and Mark offered update on their own activities. They’ve continued working research partnership with Univ of Fla’s Institute of Food & Agricultural Science to propagate yaupon, which brings sustainability advantage of reducing nutrient pollution, since it doesn’t require pesticides, fertilizer or irrigation, not to mention not being shipped in from Far East. Co propagates trees at 13-acre organic farm at New Smyrna Beach, placing 10K trees so far and 3,500 more in the ground at 4 plantations. (It will take a year and a half to two and a half years before the leaves can be pulled for the teas.) That should yield sufficient supply to support the specialty biz, tho the co hopes interest eventually will extend well beyond that. Tho Yaupon Bros boasts robust online biz, it’s taking it slowly at retail, expanding gradually out of their Florida base. They devote 5% of their profits to Native American charities, in keeping with yaupon’s key role in tribes’ culture in Fla.
Organic Valley co-op is entering low-sugar milk segment with organic alternative to Fairlife, at time that its rival partly owned by Coca-Cola has seen sales decline in wake of viral video depicting severe animal cruelty at one of its farms. Using similar ultrafiltration process, Organic Valley Ultra delivers 50% more protein and half the sugar of conventional milk, in 4 versions: unflavored in whole, 2% fat and skim versions, along with 2% fat in chocolate flavor. Addition of lactase enzyme means Ultra is lactose-free. It’s just launched at Whole Foods in 56-oz container at $5.99 and will be available to other retailers once that exclusive is over in Oct. “Not only does Organic Valley Ultra provide consumers with an organic, ultra-filtered product they can feel good about buying and consuming, it ensures we can support our cooperative’s mission to save small family farms by marketing their organic products,” said ceo Bob Kirchoff in statement. He added, in pointed reference to situation at Fairlife, “It also further affirms our commitment to ensuring that all of our animals live happy, stress-free lives.” As we recently reported, Fairlife sales appear to have taken severe hit in wake of scandal stemming from secret video showing cruel treatment of livestock at a farm operated by Fairlife, which has made so much of its humane treatment of animals that it operates major agritourism venture that draws hundreds of thousands to observe ideal working farm. In immediate wake of scandal, which Fairlife has vowed to rectify, sales are down as much as 50% in heartland markets, and brand seems to have all but vanished from natural channel, at least in outlets tracked by syndicated data (BBI, Jul 15). Organic Valley, based in La Farge, Wis, claims the entry is first organic one to be nationally available and it represents significant commitment of both capital investment and additional processing time, that it’s handling on its own rather than via its distribution partner Dean Foods, an exec there told us. He’s keeping marketing plans close to the vest for now.
In recent months we’d heard that Health-Ade had completed substantial capital raise (BBI, Jun 26), tho we weren’t able to verify amount and none of key parties were talking. Looks like Coca-Cola committed $20 mil to LA-based co in early May via affiliate of its VEB incubation unit, per report in Mergermarket that was picked up by BevNet news site. Earlier investment by Coke was via VEB affiliate First Beverage Ventures in conjunction with PE house First Beverage Group. (We weren’t able to get Health-Ade, KO or First Beverage Group to comment when we pursued story this spring.) BevNet also quoted earlier Mergermarket story that Health-Ade had retained Piper Jaffray to vet interest in co, suspending process after no deal was forthcoming .
Credit Suisse’s Kaumil Gajrawala takes skeptical view of Keurig platform’s immediate prospects in inaugurating coverage of Keurig Dr Pepper, worrying that pod sales growth is driven by price cuts and tilting more to non-owned brands while his research indicates that household penetration of brewing systems “is flat to down, which could indicate either a smaller market opportunity or potential system saturation.” He also worries about rising coffee prices and impact of tariffs on systems that are mainly made in China. Gajrawala is more bullish on the RTD biz acquired with Dr Pepper Snapple, with Dr Pepper holdings its own in CSD biz and opportunity to leverage captive DSD system to scale smaller partner brands. (Kaumil estimates Dr Pepper brand generates $2.7 bil in sales each year and roughly $1 bil in profits.) So he’s rating shares as “neutral.”