High Grade, Anheuser-Busch distributor in central NJ that’s shown deft touch on NA side via its Briar’s unit, has expanded to northern part of state with NA portfolio as Drink King abruptly shut doors.  Among brands being distributed by High Grade in new territory are Bang Energy, Polar Seltzer, Voss Water, Kitu Super Coffee and Reed’s Ginger Brew, drawing from warehouses in Brunswick and Warrenton to service such populous areas as Passaic, Essex and Bergen counties earlier served by Drink King and also-exited JD.  Drink King, operated by former Red Bull exec Peter Strahm, once boasted fleet of 30+ trucks across NY and NJ but last fall retreated from NYC side of Hudson River after losing key brands like Sparkling Ice in that market (BBI, Sep 20).  On NJ side, it retained Ice while recently adding Bang Energy.  But that apparently wasn’t enough to sustain operation, and it closed down abruptly in past 2-3 weeks.  (Sparkling Ice in that territory went to Canada Dry NY, a Honickman operation.)  High Grade, part of informal NIDA alliance of indie Northeast DSD houses, played key role in igniting of AriZona Iced Tea in early 1990s and has helped incubate host of other successful brands while maintaining A-B portfolio and building extensive wine & spirits portfolio, too.  No comment yet from Strahm, who told us he’s currently immersed in activities related to the closure.

Red Bull Exit, Bang Emergence Redraw Some Maps in New England   Termination by Red Bull of longstanding partners Atlas in Worcester, Mass, and Burke in Boston and emergence of Bang Energy has redrawn some other DSD maps, too.  Both former Red Bull houses that were terminated without cause have picked up fast-growing rival Bang, with Atlas extending its footprint to western part of state for Bang, while Burke has agreed to provide Bang coverage across Rhode Island, we hear.  Like High Grade/Briar’s, Atlas is a member of the 9-state NIDA alliance, along with houses like Metro in Philadelphia, Big Geyser in NY, B&E in Conn and Farrell in Vermont, but Burke isn’t. 

Sprig, an early entrant into CBD sector, has enlisted extensive roster of DSD partners, many of them Bud houses, but has eased up for now on geographic expansion as it dives deeper into existing markets.  To sharpen focus, it’s dropped dispensary-targeted THC line early in year, while also moving in core LA market from LA Distributing to the much larger Haralambos Beverage.  And it just brought aboard Presence Marketing as national broker, riding that co’s methodical, progressive stance on CBD.  It’s readying some new products that it’s not ready to discuss yet for Q4, and is tweaking branding.  One likely change: move away from “soda” as descriptor, given poor connotations of word, not to mention fact that 3 of Sprig’s 4 sku’s are sugar-free.  Co has been funding its growth via incremental raises, with last one completed in Q1 bringing cumulative total to $4 mil, but hasn’t yet set done seed round or Series A.  Sparkling line is packed in 12-oz cans, contains 20 mg of hemp-derived CBD and is offered in Citrus Soda (in cane sugar and zero-sugar versions), Lemon Tea and Melon Soda flavors at $3.99 SRP.

Tho only 4 years old, that’s enough to make Sprig pioneering entrant into cannabis bevs, as he noted at BevNet’s first cannabis forum last Dec (BBI, Dec 3), so we reached out to cofounder Michael Lewis to see how he’s navigating tricky shoals of what’s still a highly unsettled business, with seemingly contradictory initiatives emanating from regulators at local, state and federal levels.  His experience is particularly interesting because he’s sticking with CBD on label, rather than using “hemp” as safer euphemism, and offering substantial amount, 20 mg, compared to 10 mg in lots of rival entries priced higher than his. 

Overall, Lewis said co is at point where it’s balancing its aggressiveness in expanding ahead of rivals with commitment to building good velocity story in the markets it enters.  For now, that generally means easing up on geographic expansion in favor of “blocking and tackling.”  So his travel sked has slowed a bit from frenetic first quarter, where he sought to get Sprig brand in front of as many distributors as possible, even if he suspected time wasn’t right to ink an actual contract.  Its first-mover instincts have proved sound, as later arrivals are finding distributors standing pat with current portfolios, at least until regulatory climate clarifies.  Some DSD partners report to Lewis that they’re approached by 2-3 brands every week.

So how’s the CBD identity playing out?  There have been tradeoffs, as Michael readily admitted, such as when brand’s inaugural retail partner, Bristol Farms in SoCal, got cold feet about designation.  So far, major chains are waiting on sidelines, with his contacts “champing at the bit” to get involved but waiting for greenlight from their sr mgmt, which remains skittish about environment in which various govt entities are liable to raid stores and clear their shelves of CBD items.  Even so, they advise Sprig to be ready to respond to purchase order within a matter of weeks if regulatory clarity emerges and they hit “go.”  In meantime, tho going out as hemp may ease some barriers, Lewis feels that can be disingenuous, since it’s the CBD that’s attraction and that justifies the price point.  Until the big chains come around, Spring is entering indies and smaller chains, including Key Foods in NY and potentially Morton Williams.  As reported this week, working with SAS it’s entered Earth Fare chain in Florida, which is offering line in cooler, on warm shelf and via floor displays (BBI, Jul 17).  Lassen’s Market chain in SoCal has encouraged aggressive demos at all 15 locations, with Silver Lake location in LA depleting 20 cases per week.  The 22-store Rosauer’s Supermarkets chain in Pac NW also has been ardent advocate of brand, with sales there ticking up sharply after demos.  And 90-store Spec’s liquor chain in Texas has been ordering by the pallet every other week.

“We’re comfortable with the package and label, but if there’s a problem and needs to be a change, you can be sure we’ll make it immediately,” Michael told us, adding that he’s assured trade partners that Sprig can be trusted and nobody will get stuck holding the bag if changeover needs to happen.

On wholesaler side, co has enlisted extensive roster of Anheuser-Busch houses, including Double Eagle in Florida about a month ago and many houses in Northeast: entire Bud network in Maine, Dana in NY’s Hudson Valley, Farrell in Vermont, some in Rhode Island.  All of Mich is covered via Bud network, and Lakeshore will come aboard next week in Chicago.  In NY Sprig has stuck with small house Gold Coast, which has reach mainly among influencer accts in lower Manhattan and Brooklyn, and subs out other territory, performing very strongly for house its size, in Lewis’ view.  Move from LAD to Haralambos occurred in Feb.  Brand also moves thru some indy Pepsi bottlers, including one who performs copacking.

There are signs that Sprig’s relatively aggressive $3.99 price is setting standard for other brands, which are coming down or stepping up incentives.  Since Sprig offers 20 mg of CBD to the 10 mg offered by several key rivals, that would seem to create a margin challenge, but Lewis said co is benefiting from 30-40% price decline of CBD isolate from $75-100 per kilo a year and a half ago.  Another area of focus: testing, as marketers aims to deliver the dosages of CBD they promise, a task that can be complicated by product stability issues.  Labs must develop adequate methodologies, too.

In high-end bottled water, is Essentia the new black? Coca-Cola’s Smartwater brand, which in recent months has launched alkaline rival called Smartwater Alkaline 9+pH, seems to have rapidly undertaken a reskinning of plastic bottle that renders it a bit more Essentia-like in adopting black & white tonality rather than original blue tonality that stayed in synch with core brand’s trade dress. Essentia, of course, has striking graphic treatment featuring white lettering against pitch-black background with bright red “E” at bottom, and its dominance of alkaline segment seems to have made it default color for wannabe brands that enter under names like Supreme or retailers’ private labels. (See photo below, sent our way by distributor contact.) Smartwater’s twin extensions into antioxidant-rich and alkaline segments seem to be mainly playing on West Coast so far, together scoring about $24 mil in sales, not quite enough to offset $25.8 mil decline on core brand, per data that’s been shared with us. So KO seems to be reacting quickly to carve out identity that’s more distinctive from Smartwater electrolyte offerings and more in synch with alkaline market leader.

New PepsiCo ceo is proving more willing than his predecessor to write big checks, committing $1.7 bil in cash and debt to proposed acquisition of South African food/bev giant Pioneer Foods. That’s premium of 56% to Pioneer’s trading range over past 30 days, decisively ending period inaugurated by prior ceo Indra Nooyi in which PEP looked warily at deals of greater than “bolt-on” scale of $500 mil or so. Tho ebitda multiple is 11X, RBC’s Nik Modi noted that “PFG’s margin profile is currently trending below its historical norm driven by commodity-related supply chain issues stemming from excessive heat.” Deal gives PEP stronger foothold in continent accounting for 17% of world’s population, he noted. So “this acquisition is a testament to the fact that (Laguarta) is serious about reinvesting behind the business to drive future growth and is willing to be more active with M&A for the right opportunities.” Morgan Stanley’s Dara Mohsenian offered this view: “We see value for PEP from getting access to Pioneer Food’s distribution and manufacturing network in South Africa to expand the availability of Pepsi/Frito/Quaker products in the country longer-term as consumers' disposable income increases, particularly in informal retail outlets, which represent an estimated ~30% of the country's retail footprint.” He reminds that Pioneer served as Pepsi’s bottler in region from 2006 to 2014, meaning buyer is likely to encounter few surprises as it moves toward closing deal. Pioneer’s brands include likes of Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko and White Star. In statement, Laguarta termed the 2 businesses “highly complementary” and noted that both cos have made big commitment to investing back in communities and otherwise operating in purpose-driven way. To maintain focus on region PEP is creating new geographic operating unit, Sub-Saharan Africa, led by Eugene Willemsen, previously evp global categories & franchise. Unit will report financially into existing Europe Sub-Saharan Africa sector. Wells Fargo’s Bonnie Herzog estimates the deal will boost PEP’s Sub-Saharan African biz from $500-600 mil currently to about $2 bil.

Coca-Cola is revving up its Costa Coffee Ltd acquisition as a RTD platform, with Coca-Cola Hellenic Bottling Co saying it will bring the drinks to at least 10 of its 28 markets next year. The roster of anticipated markets includes Bulgaria, Greece, Hungary, Poland, Romania, Russia and Switzerland, Coke HBC said in statement, giving bottler a play in multibillion-dollar category growing by 4% annually in its footprint. Costa, of course, is UK-based café operator with big footprint in Asia that was acquired by KO in Jan. Group of “double espresso shots” shared with BBI by Coca-Cola labeled as being from Coca-Cola European Partners included Straight Forward Americano (15 calories), Smooth Sidekick Latte (105 calories) and Sweet Sidekick Caramel Latte (95 calories), all packed in 250-ml slim cans in deep red shade flanked by color bands keyed to flavor. They’re all based on Costa’s Signature Blend, produced since 1971, as can copy romances. Line debuted in CCEP territory, which includes Costa’s UK base.

Organic-food supplier SunOpta added pair of PepsiCo vets to its board. Joining the Toronto-based co is 31-year PepsiCo vet Leslie Starr Keating, who rose to svp of PepsiCo Supply Chain before heading to Advance Auto Parts for a year and a half and then retiring. Also aboard is Rebecca Fisher, who served as PEP’s svp for human resources before retiring last Dec . . . Conagra Brands has moved its Reddi-wip brand into coffee creamer category with pair of dairy-based entries dubbed Barista Series: Nitro Creamer that can add texture to drinks and Sweet Foam that adds layer of foam atop drinks, a bit like Starbucks’ in-store cascara foams. Both are packed in brand’s familiar spray-top cans, in deep brown hue. “Your local barista will miss you,” marketing materials note sentimentally . . . Chicago Cubs’ Kris Bryant took batting practice in downtown Chicago last week, hitting balls hurled by Rookie of the Year Henry Rowengartner into Chicago River to herald launch of 2d commemorative Red Bull can featuring his likeness. Limited-run promo launched this week in 8.4-oz and 12-oz sizes across Chicago metro . . . Absolut Vodka is latest alc brand to take a leaf from NA brands like Spindrift in touting its use of real fruit for flavoring, with new line called Absolut Juice that’s intended to fill “sip-with-a-spritz” occasions. Containing the base vodka plus 5% fruit juice, new entry is offered in Strawberry and Apple flavors and comes in at 99 calories or less per serving – 20% fewer calories than glass of rosé wine when served as a Juice & soda, co notes. SRP is $19.99.

Read the labels. That’s gist of Consumer Reports analysis of 40 RTD cold-brewed coffee entries from 7 mfrs that ended up steering its readers to Califia Farms Black & White Unsweetened Cold Brew Coffee with Almondmilk and Chameleon Cold-Brew Black Coffee as preferred choices. Tho cold-brew’s healthier image derives from unsweetened black variety used as base in coffee shops where style originated, RTD versions are different story, review org warns. “When you start looking at bottled versions that have added sugars and cream, milk, or even plant milk, the calorie count can start to climb,” per CR. “Even ones that say ‘not too sweet’ can have a fair amount of added sugars per bottle. And more than half of the bottles CR looked at had ingredients that contained sodium—some with as much as potato chips,” as with Starbucks Cocoa & Honey flavor with 170 mg of sodium per 11-oz bottle. CR encourages consumers to make their own at home, noting it stays fresh for 2 weeks rather than deteriorating immediately as conventional iced coffee does. Net net: review offers further awareness boost for cold-brew style, but projects considerable skepticism about convenient RTDs lately invading store shelves.

SAS Sales & Marketing has been slowly enhancing its consulting and distribution offerings in So Fla, winning authorization as vendor at several key chains and expanding staff to 7.  Recall that co whose initials stand for founders Susan and Andy Stallone (he helped build out AriZona Iced Tea brand in Fla in early 1990s) started by offering early-stage brands assistance with strategy and sales calls before building out modest distribution arm in 2017 as way to help its clients garner some in-market traction before they approach established distributors about coverage (BBI, Nov 14 2017).  In discussion with Andy yesterday, longtime bev operator discussed SAS brand lineup that includes Rise Coffee, Sprig CBD, PLNT Water, Phocus and Just Chill, serviced by team that includes Andy and 6 colleagues, 4 of them in Miami area and 2 working west coast inland to Orlando.  It draws from warehouses in Boca Raton and Tampa.  After initially focusing on indie stores, SAS lately has been able to win authorization as vendor at several key chains: Lucky’s, Earth Fare, Nutrition Smart, Earth Origins Market and Chamberlin’s Natural Foods.  That’s been helpful with clients like Sprig, which had won chainwide nod from Earth Fare but boasted no DSD partner to support chain’s Fla stores.  So SAS has filled gap.  SAS has also developed solid working relationship with broadliners UNFI and KeHe, which recognize it as incubator that can help develop enough momentum for a new brand to be worth a bet.  And SAS is happy to team with established distributors, such as Bud house Double Eagle, to broaden coverage for clients, as it does now for Sprig.

Tho regarded as influencer market that’s receptive to new concepts, South Florida has been a headache for innovative NAs since indie shop Sand Dollar went under years ago after losing Red Bull brand.  Beer networks, particularly Bud houses, have been tuff to crack by NAs.  Lately, tho, that’s changing, perhaps as outgrowth of slowing beer trends.  “The climate has changed” on Bud side, Stallone reported, with some Bud houses establishing separate NA divs to give those brands greater focus.  They’ve proved particularly interested in performance energy brands like Bang, C4 and Celsius (we reported yesterday that Celsius is entering all but 3 Bud houses in state).  There’s also “tremendous interest” in CBD, tho most are standing pat until there’s greater regulatory clarity.  One exception is Double Eagle, carrying Sprig entry in Palm Beach, Broward and Dade Counties.