Beer Marketer's Insights
Halen Brands is pursuing intriguing strategy to continue building fast-growing OWYN plant-based protein brand while minimizing channel conflicts. Seeing big opening in kids’ space, it’s placed its new Tetra Pak’d OWYN Dairy Free Milk into multiple Costco regions, as way of placating club chain while keeping core protein shake line focused on its natural-channel partners, for whom it’s become high-velocity item at premium price. Meanwhile, OWYN (which stands for “only what you need”) is ready to launch meal replacement subline as online-only play for now, again with view to adding to revenue stream without complicating channel strategy. It’s already claimed to be headed toward $20 mil in base biz this year.
In discussion today, Halen Brands owner Jason Cohen – who’s placed many of his prior food brands into Costco – and cmo Mark Olivieri said that with Costco clamoring for brand, they came up with inventive solution that would keep core line out of channel in which rivals like Ensure and Orgain go out with aggressive pricing that can undermine their natural-channel partners. “It was hard to say no to Costco” on core brand, but they spotted gaping white space in kids milk, where Costco offers Horizon on branded side and Kirkland Signature chocolate milk on private-label side. With moms increasingly concerned about sugar and allergens, OWYN would be able to provide its low-sugar, allergen-free alternative, with clean label to boot. (OWYN Dairy Free Milk contains just 5 g of sugar without sacrificing sweet taste kids favor thanks to inclusion of monk fruit, vs 23 g for Horizon and 30 g for Kirkland.) So it’s going out in 18-packs into Costco’s LA, Northeast, Northwest, Southeast and Midwest regions around Aug 1, ahead of back-to-school rush. Cohen and Olivieri anticipate line will command 15-20% premium to Horizon, enough to make it profitable addition for both mfr and retailer despite heavy sampling requirement. Meanwhile, they don’t risk undermining natural-food allies like Fresh Thyme, Erewhon, Bristol Farms and Sprouts for whom OWYN has become #1 protein entry, or Whole Foods, where it’s now at #2 after only 2-3 months authorized chainwide. It’s also built big velocities at Wegmans among conventional grocers. Latest flavor, Cookies & Cream, which proved out well among indie stores serviced in NY by Big Geyser, has been greenlighted by Whole Foods as 4th flavor in lineup, likely around Aug.
The move into Costco solved another issue too. As self-financed co, OWYN need to remain disciplined, Cohen explained, riffing on themes he’d addressed not long ago at Beverage Forum in Chicago (BBI, May 2). With OWYN needing to commit to initial production run of half million units for so to get Dairy Free Milk off the ground, the Costco entry offers way to justify run while getting brand into market for other retailers to pick up, as Whole Foods will via 4-pack version in its Northeast region this Sep.
Meanwhile, NY-based co is proceeding with anticipated launch of meal replacement line next month as online-only entry. Offered in 12-packs in Chai and Chocolate flavors, it will offer 20 g of protein, 23 vitamins and minerals in quantities at 25% of recommended daily value, and come in at just 300 calories per 12-oz plastic bottle. And Halen continues to refine DTC consumer strategy, harnessing data from Shopify in way that grew overall DTC biz 40% last month, Amazon’s by 20%, without spending more money, Olivieri told us. While rivals price in $20s on Amazon in synch with Costco presence, OWYN goes out at $38.99 yet still outsells more established brands like Muscle Milk and Core Power, he noted. Guiding decision-making, he reiterated, is “to be successful in our kids, original and meal replacement lines but maintain the integrity of our channels.”
Monster Beverage brass offered bullish assessment of their Reign performance energy drink launch at co’s annual meeting yesterday afternoon, while advising that arbitrator’s decision is imminent in dispute with partner Coca-Cola over whether launch in Europe of Coca-Cola Energy violates MNST role as exclusive energy purveyor to co. Meanwhile, with just a year remaining on restriction that MNST not compete with Coke brands outside energy category, ceo Rodney Sacks acknowledged co has begun to plot future moves, including likelihood of acquisitions or new-product launches outside energy in both alc and non-alc segments, with new or acquired entries not necessarily employing red system as optimal route to retail.
M&A, Non-Energy Innovation Should Rev Up in 2020; Alcohol Entry Very Much on Monster Minds As Evercore ISI’s Robert Ottenstein noted in give-&-take yesterday, restrictions on Monster competing with Coke in non-energy categories is coming off now in Europe and in another year in US. Does that augur new directions for MNST? Answer from Sacks seemed to be emphatic yes – but not immediately.
For starters, since home base is US, it’s the US non-compete that’s most relevant, and that’s not over for another year. So tho co is eyeing field of potential acquisition and product launch targets, it’s still premature to set any deals or launches, he indicated. “We’re getting there and will look at it, but what we will do exactly in 12 months’ time we don’t know,” he said. One issue will be whether any new products go into Coke system, with imponderables including whether red system wants them and whether, for early-stage entries in need of incubation, that’s the right system in first place. And there’s good chance MNST will make move into alcohol too. “Clearly, we do have an appetite to look at alternative brands and to develop more beverages in the non-alcoholic as well as the alcoholic market,” Sacks said. Those efforts will “certainly step up as we get closer to this time next year.” On alc side, co would consider broad range of segments, including malt-based, hard seltzers and spirits-based entries. “We’re looking at some of them at the moment but not made decisions to do anything, but that’s something we certainly would be open to,” he said. It goes without saying, of course, that this is all presuming continued status quo relative to Coke rather than move by soda giant to take control of MNST.
Arbitration Should Conclude within Weeks Arbitration has to do with KO’s launch of Coca-Cola Energy in full-calorie and no-cal iterations in several West European countries, move that MNST believes violates spirit of agreement carving out role as exclusive energy drink purveyor, tho Morgan Stanley’s Dara Mohsenian is among those who’s noticed exception for Coca-Cola and Vitaminwater brands that might sustain KO as arbitration draws to close. At annual meeting, Sacks said hearings been completed and decision is expected by end of Q2, meaning in a matter of 2-3 weeks. Tho KO went ahead and launched energy entries without waiting for outcome of arbitration, “its entitlement to continue to sell such drinks will be governed by the outcome of the arbitration,” Rodney said. In any case, “whatever the outcome of the arbitration, we will continue to cooperate and work together as partners.” That was in synch with Sacks’ consistent stance that issue represents dispute between committed biz partners that’s being settled amicably via in-place mechanism rather than existential crisis sometimes portrayed by some on Wall Street and in media.
As for Coke Energy, Sacks said it was too early to assess performance or impact on Monster just 4 weeks in so far. But his co is trying to get on same page as Coke and bottlers so that Coke Energy goes on shelf in areas where it can be incremental to Monster, not competitive to it. In initial European markets it’s being priced vs Red Bull at premium level, tho that could change in other markets. But Monster’s in dark on that, as partner hasn’t shared plans so far. This is all assuming, of course, that Coke wins arbitration and isn’t forced to discontinue brand.
Reign Seen as $300 Mil Brand in First Year No new news on Reign, especially after Evercore ISI’s Robert Ottenstein noted from paperwork in VPX suit that brand is projected by MNST to rack up $235 mil from May to Dec, after selling $70 mil during initial phase of launch starting in Mar (BBI, Jun 5). So that amounts to $300 mil brand in first year, 2.2-2.3X that amount in retail sales, as Sacks noted yesterday. Tho Monster has sought to have Reign shelved in separate performance set to minimize cannibalization threat on core brand, Sacks told questioner that in some cases co has opted to carve out the space for Reign from existing Monster shelf set rather than wait months for next reset window. (Of course, it’s also likely that some retailers have rebuffed idea, too.) In back-&-forth with Wall Streeters, it was clear that as cold-filled, zero-sugar product, Reign should exert beneficial impact on overall MNST margins, once we get beyond buy-one, get-one promo window surrounding launch.
For all focus Reign has gotten both on Wall Street and within MNST, Sacks emphasized that it’s being managed entirely separately from core Monster brand so as not to dilute focus on workhorse entry. He described extensive sku expansion in Europe as entries like Ultra, Mango Loco, Pipeline and even the coffee entry Espresso Monster push out thru Europe, Middle East & Africa (EMEA) region. Here in States, Monster portfolio will expand later this year with ginger-based Mule entry, as well as with additional sku’s within Reign performance line. Robust slate of innovation on core brand is in pipeline for next year, he indicated.
We’ll update readers on changes to Monster Bev board in next issue as co puts more info out on balloting.
Call it karma: after losing its VEB chief to sneaker maker Converse, Coca-Cola has found his replacement fishing in same pool, recruiting much-lauded Reebok marketing exec as his successor. Filling top spot at incubation unit Venturing & Emerging Brands will be Melanie Boulden, who joins Aug 5 as prexy/gm. Internal memo from Coca-Cola North America chief Jim Dinkins said she’ll report directly to him and sit aside him on CCNA exec leadership team “at a pivotal time as we accelerate our North American business and total beverage portfolio of options, and we seek to drive long-term sustainable growth as a top-tier company.” Boulden most recently served as global head of marketing & brand mgmt at Reebok, where “she reignited Reebok’s connection to pop culture, entertainment, fitness and fashion,” per Jim’s memo, which notes nod she got as one of Advertising Age’s 2019 US Women to Watch. She earlier served as svp global marketing at Crayola after solid runs at Henkel (on Dial brand) and Kraft Foods. Longtime Coke hand Uzzell departed for Converse job early this year (BBI, Dec 27). As a woman of color, Boulden also helps KO advance key priority of increasing diversity within top mgmt ranks. Boulden, who’s racked up Clio and other awards in her career, was captain of women’s basketball team at Iowa State and named 1994 Female Student-Athlete of the Year for her athletic and academic accomplishments. She holds MBA from Univ of Iowa.
CALENDAR: Tea Expo Hits Vegas on Tues; BevNet Live, Cannabis Forum Follow in NY Starting Wed
World Tea Expo opens at Las Vegas Convention Center on Tues, drawing 3K+ tea professionals to 200+ exhibits and full conference agenda. Featured speakers include Euromonitor’s Matthew Barry, making case that “curated herbal tea blends” are driving N Amer growth with promise of functionality. For first time show will include kombucha pavilion. Show exhibitors include Ito En (bringing first-flush Shincha), Brew Dr Kombucha, Harney & Sons and Rishi. In another first, American Specialty Tea Alliance will host US national qualifying round in Tea Masters Cup competition. Info at WorldTeaExpo.com . . . In what’s become key networking event for innovation-focused bev execs, BevNet Live runs next Wed-Thurs at NY’s Metropolitan Pavilion West, bringing speaker roster that includes Body Armor cofounder Mike Repole, Oatly gm Mike Messersmith, Amazon Launchpad strategist Kyle Walker, LifeAid cofounders Orion Melehan and Aaron Hinde, Super Coffee ceo Jim DeCicco and Dirty Lemon creator Zak Normandin, along with Showdown competition among new brands. It’s among cluster of NY events the Boston-area co is hosting, including Cannabis Forum on Fri and food-oriented Nosh on Mon-Tues. Info on all can be accessed at BevNet.com.
Ocean Spray growers co-op has leavened its juice drinks with solid dose of fiber and zinc in line dubbed Ocean Spray Growing Goodness that are claimed to offer immune and digestive health benefits. Pouched line in Cranberry Strawberry Kiwi and Cranberry Cherry Orange flavors contains 117 mg of vitamin C (130% of daily value) and 1.1 mg of zinc (10% of DV) per 6-oz pouch, with sugar derived from apple, grape, cherry, cranberry and orange juice concentrates and calorie count of 40 per pouch. Marketing push is built around “bog squad” of frog, turtle and crane to animate message.
Coca-Cola has taken its penchant for using Freestyle systems as crowd-sourcing mechanism in new direction with “Make Your Mix” contest offering $10K prize to consumer who comes up with most popular ingredient blend. Thru Jun 30, consumers are invited “to find a Freestyle machine, create a mix using 2 or 3 of the nearly 200 drink choices offered in the machine, snap a photo of their mix, and upload it to Instagram or Twitter,” MediaPost reports, with 5 finalist mixes to be made available on 50K Freestyle units in US from Aug 25 to Nov 4. Grand prize goes to creator of the mix that’s poured the most. Given KO’s history of using FreeStyle to validate ideas like Orange Vanilla Coke for its packaged lineup, it’s not out of question that winning entry could make it into cans and bottles, too.
What do you get when you restage Chimp Food to take out the grains, veggies and chimps? Love Plantz Whole Food, that’s what. Florida-based entrepreneur Scott Jacobs has done substantial pivot on paleo brand, dropping chimp allusions that proved to be confusing and polarizing and reformulating line to correspond with new info he’s picked up on what chimps actually eat to stay healthy.
Refrigerated HPP line is packed in 12-oz straightwall plastic bottles priced at $4.99 in Grape, Orange, Pineapple and Apple flavors. “Fruits, veggies, nuts & seeds,” heralds front panel. (In case of fruit, that means peels, pulp and seeds.) Side panel uses photos of individual ingredients in order of magnitude from top of barrel down, in interesting twist on type-based systems used by some HPP plays. Cognizant that Great Sugar Freakout of past year or two has lessened consumers’ interest in cold-pressed juice, Joseph adds no sugar and keeps calorie count to 80 per bottle. The healthy amount of fiber sourced from pulp and skin keeps user’s blood sugar from going up, Joseph pointed out. This go-round, Joseph is going out entirely online to start, enlisting South Fla copacker to produce and ship the product and digital agency to drum up demand. Kept refrigerated, it has 45-day shelf life.
As for Chimp Food, that line had done well enough at retailers like Whole Foods, Sprouts and HEB “but the main problem was one word,” Scott told us this morning. That was “chimp.” So he undertook rebranding, opting for “whole foods” as better alternative than “vegan.” In process he rethought formula, eliminating veggies and grain-based seeds like chia and flax, which he now understands not to be part of chimps’ diet. Since chimps do eat leaves, he’s given himself a pass on leafy vegetables like romaine, and allowed himself to use seeds derived from fruit, which chimps do eat. And stigma associated with stevia prompted removal of sweetener, in favor of more natural-sounding monk fruit. Info at LovePlantz.com.
Gruesome video of cruelty to Fair Oaks Farms calves posted this week by animal rights group has thrown Coca-Cola-aligned Fairlife brand into crisis, with at least a few retailers in heartland region moving quickly to drop brand in favor of rivals like Organic Valley. Fairlife, a partnership between Coca-Cola and Fair Oaks, quickly acknowledged culpability but insisted problem is limited to single farm in Indiana, while KO issued statement expressing confidence in Fairlife team to address matter involving what it termed “third-party supplier.”
Video posted by Animal Recovery Mission culminates what anti-cruelty org says was exhaustive undercover operation and “shows piles of dead calves and employees kicking, punching and slamming the animals, as well as hitting them with plastic milk bottles and beating them with steel bars, among other abuse,” per summary by Post-Tribune paper. Video amounts to huge embarrassment for Fair Oaks, which has ridden consumers’ interest in food transparency with sizable agritourism biz built around its network of 30 dairies, while building its lower-sugar Fairlife milk brand and Fairlife Core Power protein shakes into powerful retail players via KO bottling network. Fair Oaks founder Mike McCloskey, who’s a veterinarian, wasted no time in acknowledging the authenticity of video, saying on co’s Facebook page, “I am disgusted by and take full responsibility for the actions seen in the footage, as it goes against everything that we stand for in regards to responsible cow care and comfort.” He said issue was limited to one farm, and that all but one of employees seen in video had already been terminated before video surfaced. Still, some retailers were taking avowal with grain of salt, and Valparaiso, Ind-based Family Express c-store chain quickly dropped all Fairlife items in favor of Organic Valley, which also has extensive family farm presence in Ind. Whether other, larger chains follow is unclear right now, tho NBC Chicago said Jewel-Osco also was dropping Fairlife. “A factor in our decision was the public response by Fair Oaks, asserting the notion that this was an isolated incident,” Family Express prexy/ceo Gus Olympidis said in release cited by Post-Tribune, adding, “The minimizing of the graphic animal cruelty offers little assurance of change in a culture that is likely in need of fundamental retooling.”
As for Coke, it issued statement saying it has “full confidence in their management team to urgently address this issue with Fair Oaks Farms, which is a third-party supplier to Fairlife.”
Not surprisingly, consumer reaction included lotsa folks who’re broadly opposed to animal-based nutrition, such as poster on Twitter who called boycotting Fair Oaks a joke, saying, “if ur that pissed about it, cut dairy out of ur diet completely because I promise u it’s not just fair oaks, it’s the dairy industry itself and dairy farms all across the world.” And rivals at retail were sure to react. For one, plant-based protein line OWYN, which competes directly with Core Power, reminded readers that “We milk plants, not cows,” via image that it re-posted on its Instagram page earlier this afternoon.
Pressing for clearer guidelines for the non-psychoactive hemp-derived compound cannabidiol (CBD), speakers at Food & Drug Administration’s 1st hearing on topic on Fri asked agency to act quickly. Given 2 or 5 mins each, 120 speakers (selected from over 400 applicants!) ranged from industry lawyers and trade assn leaders to medical researchers and grieving mothers. But just one thru-line emerged, according to numerous reports: hurry up. “The industry is growing rapidly with little oversight,” an AP report summed up, citing speaker from grocer org Food Marketing Institute that “there is mass confusion in the marketplace.” A dietary supplement lobbyist, concerned about “an underregulated shadow market,” argued that “FDA does not have the luxury of time,” according to PBS. It’s already “a new gold rush,” according to an atty for a synthetic CBD-producing medical co. And “the horse is so far out of the corral here that it will be interesting to see what the FDA decides to do — or can do at this point,” he continued, the NY Times reported.
But two words, pulled from the FDA’s earlier, formal notice about last wk’s hearing, may still sum up its position: “questions remain.” Lots of ’em. “We’re really in the infancy of understanding the physiological effects of cannabidiol right now,” a UCLA researcher offered, according to NPR. Questions about how CBD can safely be used, at what doses, for how long and by whom are still largely unexplored with the kind of scientific rigor FDA prefers to see. Testimony from the producer of the only drug approved by the FDA to employ CBD (in very high concentrations for treatment of epilepsy) underscored the need for clinical trials, which that company underwent over research period of 20 years, as PBS pointed out.
But the FDA probably doesn’t have 20 years. Far from it. Purveyors of pet products and cosmetics already tout health benefits. Food and drink makers continue to market CBD-infused options while mostly tamping down on health claims to avoid stricter FDA scrutiny (the agency still bars these products, tho some states have specifically allowed them). And lawyers already suing pharmaceutical companies over opioid marketing actually admitted that “if our dreams come true, we’ll have the same thing going against the marijuana industry in a year or two,” the NY Times cited. So some expect the agency to take a stab at regulating CBD the way it does some dietary supplements, like folic acid, as NYT wrote, which can be used more freely at low doses but needs more attention and specific clearances at higher doses. (This summary taken from our sibling newsletter Insights Express.)
Adult Use Cleared by Illinois House, Too; NY Next? New Steps in Existing States While fed gov’t weighs CBD, states continue to move toward legalizing adult-use cannabis. In Illinois, the House also approved a bill to allow adults to buy and possess cannabis starting Jan 1, 2020, following Senate vote last week. Again, new governor expected to sign. In NY, local control to opt out of cannabis sales a key issue to passage (still unclear with 2 wks left in legislative session), as a set of NY papers extensively explored late last week. New bill would put issue on the ballot in each municipality, adding cannabis to statute written for alcohol. But opposition to bill would rather see elected officials (in some cases more likely to opt out) make that call. In nearby Massachusetts, regulators took first step toward testing social-consumption sites (limited to a handful of interested communities, but likely to require legislative action, so no time soon), according to Salem News. At the same time, some doctor and scientist groups step up criticism, highlighting that “marijuana is a gateway drug just like alcohol is a gateway drug,” in the Boston Herald. Oregon could already have 6 yrs worth of cannabis supply on hand, a glut that caused legislators to pass a bill aimed at limiting new producer/cultivator licenses, according to AP reports. And finally, a new study in Addiction and highlighted by free-market mag Reason underscores issues with using THC blood levels to pinpoint intoxication in drivers. Despite 18 states with laws on the books using the measure, the recent study shows no statistically significant relationship between THC levels and responsibility for car crashes. Still lots of moving pieces.
Longtime turnaround ace Gerry David is keeping up his frenetic range of activities during his return to “retirement” after run as ceo of Celsius, most recently enlisting as board member at publicly traded Glucose Health, Bentonville, Ark-based marketer of anti-diabetes tea powders that seems to be selling briskly within Walmart chain and on Amazon. Trading under GLUC symbol, co targets pre-diabetics and Type-2 diabetics with brand called GlucoDown that helps reduce blood sugar levels thru use of soluble fiber. It’s sold in multiserve canisters but Gerry said co is exploring other formats like single-use sticks as it pulls in growth capital and prepares to scale up . . . Rich Libonate, part of resurrected Snapple team that’s been scaling up birch water-based Treo brand, has moved on to seek next challenge after seeding brand in 4K or more retail doors and seeing it build velocity at bellwether accounts like Stew Leonard’s. Launched by Bobby Golden, Treo is seeking role as approachable, brightly flavored, low-calorie refresher that offers some nutritional benefits, much as brands like Vitaminwater and Bai have before it. Golden, son of late Snapple cofounder Hyman Golden, had brought back several execs from Snapple’s heyday to get brand off the ground, including prexy Brian O’Byrne, advisor Mike Weinstein and other key sale execs. Tho Libonate had un-retired in order to rejoin former colleagues, he told BBI he’s found his 2 and a half years at Treo to be so invigorating he’s planning to stay in the game this time, tho he hasn’t yet mapped out next move. Golden and O’Byrne expect to have his former role filled shortly.