Beer Marketer's Insights
In era where flock of hardware “platforms” like Keurig and Nespresso are promising convenient way to upgrade consumers’ at-home coffee consumption, serial tinkerer named Josh Wilbur is offering defiantly unmechanized alternative: teabag-like “filters” called Steeped that require no equipment and, in being fully compostable, resolve sustainability taint dogging discarded coffee pods. After hacking out idea intermittently over 8-year period, the Santa Cruz, Calif-based entrepreneur has begun selling the Steeped bags online, enlisted dozens of 3d-wave roasters like Counter Culture and Victrola as partners, and begun to crack hotels and retailers with elegantly simple items. “Coffee in a teabag is a far cry from a new brewing method,” he told us last week, contrasting Steeped Coffee with highly engineered platforms whose sustainability issues seem to be of increasing concern to consumers. Tho solution appears simple, it took extensive experimentation, given commitment to sustainability that’s so deep that Wilbur sought to avoid using glue, staples, even the soy-based inks that pass muster as sustainable in some circles.
Wilbur tells us friends know him as “mad inventor who can’t stop coming up with fixes and new ideas,” including fee-less transaction payment system called PayStand and, at analog end of scale, well-crafted version of biblical literature called Bibliotheca that eschews clutter of chapter and verse numbers in favor of presentation more like a novel. The germ of Steeped was his conviction that “it should be easier to have a really good coffee at my in-laws at Thanksgiving” rather than bringing his preferred Verve beans and apparatus with him. He ordered various alternatives online but concluded none “came close to representing what a cup of coffee should be.” The coffee appliances in particular appalled him, given expense, clutter, indifferent coffee quality that comes of “forcing water at high pressure for 30 seconds through plastic” and problem of where the used pods end up. Breakthru came on flight to visit grandmother in Fla while involved in PayScan project, when he “journaled the entire plan,” only to shelve it again as Kickstarter-based Bibliotheca effort took off. Once that was completed, he returned to what would become Steeped.
Steeped offers promise of freshly ground, nitro-sealed specialty coffee in guilt-free packaging, made using renewable and compostable materials, as marketing materials say. Users are urged to submerge what co refers to as “full-immersion filter” or “Steeped bag” in mug, slowly add 8-oz of hot water, dunk bag for 15 seconds until crema appears, then leave it in for another 5 minutes to steep. “No machines, no special equipment, no plastic pods, no waste – just fresh, ethically sourced, micro-batch coffee.” Nitro-sealing process protects freshness so that, when consumer opens pack, aroma fills the room.
The co currently offers 5 blends under its own Steeped brand: Sunrise (light roast), California (medium), Odyssey (dark), Driftwood (French roast), all from Colombian beans, and Eventide single-origin Swiss water process decaf from Ethiopian beans. They go for $15 per 10-unit box online, with subscriptions available. But Steeped has also been enlisting indie roasters seeking guilt-free option for convenient at-home prep. So far it’s recruited over 60, including NC-based Counter Culture, Passion House and Metric in Chicago, Cat & Cloud in Santa Cruz, Pilot in Toronto, Victrola in Seattle, Honest Coffee in Tenn, Dark Horse in San Diego and handful of overseas partners. (Wilbur says partner listing at SteepedCoffee.com will go live soon.) Steeped has been picked up by on-premise partners like Waldorf-Astoria Las Vegas and hotels in Calif wine country, while Victrola got its version into Thompson Hotel in Seattle. Co is targeting retailers now.
For its 3d-wave partners, Steeped serves as hedge vs take-home bags of ground coffee that must be discarded if they haven’t sold within a week or so. Co asks that these 3d-party items be branded in some way as using Steeped method, but “we give a ton of leeway” to partners on specifics, Josh told us.
Co also is setting up another arm of biz offering the proprietary Steeped bag format to CPG players. That packaging, which eschews fasteners and uses water-based inks, is fully compostable and recently was upgraded from 3 layers to 2 layers while maintaining 6-month “best by” date, Wilbur told us. He’s taking steps to relocate supply chain to US.
After self-funding initial stages, Wilbur recently closed seed round that included faith-based group in Redding and just opened up new round. Serial entrepreneur plans to take conservative tack, raising funds as needed, not ahead of growth. Staff has grown to a dozen, 10 of them in Santa Cruz, and co has won certification as a B corp. Among advisors helping founder navigate quirks of bev biz are LifeAid cofounders Aaron Hinde and Orion Melehan.
National Beverage shares skidded 5.4% yesterday after UBS report showed that sales of its La Croix sparkling water slipped 1.2% over 4 weeks ended Jan 26, in category up rousing 16.1%, MarketWatch reported. “We see ample room for Coca-Cola and Pepsi’s sparkling water brands to expand distribution, while the La Croix brand is bound by limited reach to the c-store channel," analysts wrote, referring to La Croix’s very limited use of DSD distributors. “We believe both Bubly and Topo Chico brands are seeing accelerating velocities as a consequence of the La Croix slowdown.” (Bubly is Pepsi brand, Topo was acquired by Coke.) Shares recovered a bit today .
IRI scanner data that’s been shared with us is showing some surprising RTD coffee trends in Northeast, with flat overall category masking some wildly divergent performances among specific brands. Each of top 5 incumbent unit leaders is markedly off: leader Starbucks Frappuccino -8.7%, #2 Dunkin’ -15.8%, #3 Starbucks Doubleshot -22.8%, La Colombe -13.6%, Starbucks -5%. Among other familiar brands, Starbucks Cold Brew plunged 24.7%, High Brew dropped 8.5%. (Starbucks entries move thru Pepsi system, Dunkin’ thru Coke and High Brew thru KDP.) So who’s on upswing then? Java Monster (Coke) grew 6%, Caffe Monster (Coke again) grew 31.9% and McCafe (Coke yet again) popped 51.3% off small base. Forto (KDP) was up 17.9%, also off small base. But Sunniva Super Coffee brand (recently rebranded as Kitu) has come out of nowhere to claim #4 spot, 344K units sold, for 9 share. Its velocity of $244K per sku handily leads category (only Dunkin’ and Frap are close, at $222K and $193K respectively, and they’re lately declining). Compared with other unaligned brands, Super Coffee’s velocity is 8X that of La Colombe, 14X Bulletproof, 20X High Brew. Super Coffee, launched by 3 college athletes, DeCicco brothers now based in NY, harnesses recipe much like Bulletproof with coffee, dairy and MCT oil, and has lately enlisted DSD partners like Big Geyser in NY and Polar in New England. They’ve been heralding data in flyer they’re sending around to trade partners. Some other coffee brands we often see on local stores shelves, like Rise, Picnik and Heyday, aren’t in scanner database, we’re not sure why.
Tough nuts to crack? Coconuts, for sure. But also rater-haters, who begrudge even a single star to the targets of their enmity. Believing its fast-growing Vita Coco Pressed extension can finally overcome resistance to coconut water still harbored by sizable share of consumers, NY-based All Market has enlisted some of the most vituperative raters it could find for new campaign breaking today that posits Pressed as “Impossible to hate.” New 30-second videos heading to streaming-TV and digital media sites like Hulu, YouTube, Amazon and Spotify Sessions along with paid social media bring rave reviews like “It’s OK,” from woman who rated Grand Canyon a “big dumb hole,” and “It’s doable,” from burly guy who warned local launderette that “I’ll be contacting my attorney.” Also in mix are audio spots on iHeartMedia and Spotify, and out-of-home ads all over NYC, LA, Chicago, SF, Dallas, Denver and Boston thru summer. “Surprise! You like coconut water now,” informs one. Another depicts Donna, who posted that Central Park “is mostly dumb trees . . . She says that Vita Coco Pressed is actually OK.” There’s a money-back guarantee, too.
As reported, All Market has consolidated its entire summer ad spend behind Pressed, believing coconut-forward liquid formulated with 2% coconut puree holds potential to get brand back on brisk growth trend, overcoming reluctance of consumers who find coconut water polarizing even as they gravitate to more overtly coconut-y flavor of bevs like La Croix’ coconut flavor (BBI, Mar 11 and May 6).
To set up campaign, brand dir Allison Finazzo oversaw devising of algorithm that might ID some of most difficult people to impress, judging by stream of invective they’ve unleashed in negative reviews of positively reviewed entities like Central Park and Grand Canyon, along with sheer volume of their negative reviews and sentiment analysis. That yielded a bounty of nearly 1 mil “people of interest” who’d posted over 40 mil reviews on tens of thousands of forums. Among hardest nuts to crack were luxelex0380, the rater who derided Grand Canyon as “big dumb hole.” “She called her local hairdresser ‘a butcher,’ and her local butcher ‘a criminal,’ and about Chicago, ‘don’t bother,’” as voiceover states in one video. “So when we wanted to prove that new Vita Coco with Pressed Coconut is impossible to hate, we asked her to try it.” “It’s OK,” she deadpans, dismissively.
As for Alp_85, the launderette hater who also called a diner “disturbed” and a bookstore “disgusting,” Pressed is able to get the “doable” praise out of him. Working with Finazzo, a 5-year Vita Coco vet who returned to fold a year ago after 3-year diversion at Anheuser-Busch InBev a few blocks away, was creative agency Interesting Development (formerly Office of Baby), whose clients have included Google, Etsy, Siggi’s and Zulily.
As for the rater-haters, if you can think of a reason to want to get to know them, they’re profiled in Youtube video that can be accessed here. “It’s a harsh world, and it takes a lot to impress me,” luxelex defends herself. (So Pressed “is not as good as I want it to be, but it’s good enough.”) “I would drink this, if someone gave it to me,” allows HeyitsIrene9.
Vita Coco Lands Original, Pressed in Life Time Cafes Also on marketing front, Vita Coco said it’s inked partnership with Life Time fitness chain to carry Vita Coco Original and Pressed entries at all 130 in-house cafes, which it calls LifeCafe. 
Still cycling a flock of discontinued brands, Reed’s Inc reported flat topline for Q1, but the core brands on which it’s focusing enjoyed 15% surge. Net sales rose 2% to $8.4 mil, but restaged Virgil’s craft soda brand soared 46% even as sell-in has begun on other revamped line, Reed’s Ginger Brew. Move to “asset-light” model involving sale of co’s LA plant as well as greater price realization helped boost gross profit by 9% to $2.5 mil, and gross margin advanced to 30% from 28%. But $1 mil in higher spending on sales & marketing widened operating loss to $2.9 mil from $1.1 mil a year earlier. Net loss was $3.3 mil vs $1.6 mil. Overall, REED is anticipating year-over-year core brand growth in 20-30% range, yielding $42-44 mil in revenue for full year as it tries to get back on growth track after disastrous production meltdown a few years back threw gears into reverse and ultimately led to new team at top.
Still, speaking to investors yesterday afternoon, ceo Val Stalowir cited Virgil’s sales pop as harbinger of improvement anticipated as revamped Reed’s line grabs momentum this spring and summer, boosted by aggressive marketing campaign that broke a few days ago. Among improvements, both have added stevia-sweetened Zero Sugar lines that have gotten good reviews on flavor grounds, and diversified reliance on glass bottles with canned format. Val said it was too early to discuss prospects for flock of other innovation intro’d a coupla months back at Natural Products Expo West: alcoholic Moscow Mule that will test in SoCal (via Young’s Market) and Pac NW (via Odom), Reed’s Wellness Ginger Beer with Hemp Extract that will test in Pac NW, and Wellness Ginger Shots (BBI, Feb 19 and 27). As sign of co’s improved prospects under new mgmt team, ValStal reminded, co was able to upgrade to Nasdaq market, move heralded last Fri with bell-ringing ceremony in Times Square. Co has been funding the new-product and sales & marketing activity by bringing in new capital, most recently netting $14.9 mil via common share offering that was oversubscribed (BBI, Feb 21).
Among new ideas that current mgmt team is bringing is commitment to marketing that never existed in past. Most ambitious such effort, which broke late last week (BBI, May 10), is dubbed “Ready for Real Ginger,” playing on consumers’ increasing recognition that ginger ale can have restorative benefit in easing inflammation or soothing upset stomach and pointing out that mainstream entries like Canada Dry have no meaningful ginger content, point highlighted during recent settlement of class action suit. “Ginger is a superfood with many health benefits, but you’ve got to have a material amount for real benefit,” Stalowir said. Campaign focuses on 5 key markets of NY, Boston, Seattle, LA and San Diego with media mix that ranges from radio to couponing and sampling.
Co also is returning to reliance on DSD distribution, strategy abandoned years back on cost grounds. Val said co is in talks with range of beer and NA houses in key regions of Southeast, Midwest, South Central and Canada, as well as seeking partners in some international markets. They occur as co rebuilds retail presence lost during period of extensive out-of-stocks and adds new doors, including placing 7 sku’s in 1,100 Walmart doors and entering 2 Costco regions. On-premise also is a greater focus, particularly with last year’s addition of more intense ginger beer. So far this year, co has added 500+ nightclubs to mix, ceo indicated.
Some Doors Open as Others Close in Hemp Biz As for hemp entry, Stalowir made no bones about uncertainties that abound, but made case that “the only way to learn how to swim is to jump in the water and start swimming.” Tho hemp/CBD are legal at federal level now, industry is waiting on direction from new FDA commissioner and seeing how things shake out at state level. Day to day, he said, “it is still a moving target, where it seems more doors are opening in certain regions and then some are closing in other regions.” In the meantime, REED is approaching distributors and “forward-looking retailers” who tend to be smaller in scale but more receptive to innovation. Tho segment could some day be huge, co isn’t included meaningful amount of sales in 2019 forecast, Stalowir was careful to note.
Icelandic Glacial is dialing up its retail presence by half with addition of 8K new doors, as growing demand for naturally alkaline water prompts addition of 2d shift at plant in Iceland’s Olfus Springs and possibility that 3d shift will need to be added too. Avalanche of new doors to total of 22-23K is encouraging LA-based co to hold off on its marketing plans until resets have occurred by Jun, ceo Reza Mirza told us in recent conversation. Recall that brand has long boasted minority investment from Anheuser-Busch InBev and national presence in brewer’s blue-chip distribution network, but sometimes seemed to suffer from scant focus accorded to NA brands there, particularly after Monster Energy left fold years back.
LifeAid Beverage Co has finally deemed the time right to address sugar concerns of its fitness-oriented demo, launching zero-calorie versions of both its core FitAid entry and its creatine-infused FitAid Rx extension targeting Crossfit boxes, gyms and other endemic channels. New FitAid Zero and FitAid Rx Zero entries, which employ blend of monk fruit and stevia as sweetening agents, went live online today, and is heading into select retailers and gyms. Co is waiting to gauge reaction on core sku before propagating zero’s among its other sublines, such as LifeAid, ImmunityAid, FocusAid and PartyAid. Santa Cruz-based co is claiming over $100K in pre-orders for new entries, which are line-priced at $2.99 per 12-oz slim can.
In conversation this morning, sales vp Dan Leja said co had timed entry strategically to period when it knew it generally wouldn’t make spring resets at its national retail partners, preferring to seed it in its core gym channel, nutrition stores like Vitamin Shoppe, smaller chains and indie stores to gauge performance, including effect on core sku’s. With several of LifeAid’s other full-calorie entries still in early stages of development, it made sense to wait on launch zero extensions of those, tho formulation work has been completed. Initial reception has been strong, he said, and some of larger retailers are reaching out to discuss when they can bring in the new items. He allowed that zero-sugar options may be a bit overdue, considering that many ardent consumers are following ketogenic diets or are in body-building community that’s gravitating to no-sugar bevs, but reminded that co has sought to stay methodical in its growth.
Launches come as there’s been movement on other fronts in portfolio. As reported, FocusAid just dialed up caffeine content from 53 mg to 100 mg and repositioning as an “energy blend,” yielding quick uptick in velocity, enough in some cases to pass FitAid. Of course, this is in broader context of energy category that’s been disrupted by challenger brands like Bang, C4 and Celsius that have origins in nutrition space, a trend that Leja views as beneficial to LifeAid, as emphasis on diet and fitness plays to LifeAid’s origins and strength. LifeAid’s entries often are shelved near Celsius or, at Walmart, next to C4. Unlike many of those new entries, all of LifeAid’s products are clean enough to warrant entry into natural retailers like Whole Foods. Recall that LifeAid launched about 8 years ago within Crossfit community with FitAid sku, which contains BCAAs, turmeric and 45 mg of caffeine from green tea, and has since built out extensive suite of functional items with moderate sweetener levels.
Meanwhile, in another sign of maturing of 8-year-old brand, it’s finally ready to enlist strong network of DSD partners, starting out west with partners like DBI near NorCal base and Odom in Pac NW and engaging in talks with NIDA alliance of indie distributors in Northeast. Leja said co intends to be strategic in buildout, targeting key regions as it increasingly penetrates general-market retailers. Among its newer partners have been likes of Walmart and CVS, with Target and Publix among key partners LifeAid still is seeking to enlist.
Great yarn in Forbes about kombucha pioneer GT Dave seems to break some new ground, revealing discussions with potential acquirers in wake of 2010 category recall, capturing founder’s outspoken view that category may be headed toward Palookaville as rivals dumb down recipes, and offering glimpse of $40 mil new plant (along with Dave’s modernistic, art-filled hilltop home in Beverly Hills) in related video that can be viewed here.
As story details, over past year Dave has opened $40 mil, 260K-sq-ft plant in industrial suburb of Vernon south of LA that’s capable of producing over 1 mil gals per year. He’s defiantly sticking to small-batch process of fermenting blend of black and green tea in 5-gal jars for a month, tho as story makes clear, path from that crucial step is highly mechanized, with 200-head, 200-ft-long line filling brand’s trademark 16-oz glass bottles, then moving them on to quartet of robotic arms that fill, stack and move finished cases. Story estimates co’s sales at $275 mil.
Story offers personal glimpse of Dave, now 41, with home in Beverly Hills, 8 acres in Kauai and contemporary art collection, tho he emphasizes, “I didn’t start making kombucha because I wanted to be rich,” statement it’s hard to question given non-existent state of market when he started in 1995. At that time, article notes, he was failing classes at Beverly Hills High under influence of moneyed, drug-taking friends, so he got his GED early and decamped, launching GT’s from home from same mother strain that his parents had used for years and that he believes played key role in his mom Laraine’s recovery from breast cancer.
Article describes GT’s empire as “under siege,” its share down to 40% as army of 350+ kombucha brands invades retail, collectively “slurping” $340 mil in institutional and strategic funding (if that’s counting PepsiCo’s $260 mil takeout of KeVita, that figure may even be low). Along way, Dave derides Health-Ade, with estimated $50 mil in sales, as “Cherry Berry. Tropical Punch. . . . They make it basic, make it mainstream. If your claim to fame is that you’re in amber bottles, or you’re 3 cool hipsters behind this product, and that’s it? Your days are numbered, in my opinion.” Pow! As story notes, he seems particularly aggrieved at category price war that Health-Ade has helped foment. As for Pepsi-owned KeVita, Dave argues it shouldn’t call itself kombucha because “it uses lab-created probiotic strains, adds a tea flavoring and pumps it full of artificial carbonation.” He adds: “If you want [a drink that’s] clear and consistently sparkling with no vinegar flavor, that’s called carbonated flavored water. You can get it for 99 cents at the thrift store.” Superkapow!
Story takes Dave at face value in his suggestion that GT’s played no role in alcohol crisis that resulted in 2010 category recall (our own coverage over the years suggested that GT’s was most consistent offender), or that co had any legal vulnerability when it settled for modest sum a trio of class action suits involving alcohol content and health claims. (“Corporate extortion at its finest,” Dave inveighs.)
Tho he’s adamant that he has no intention of selling out now, GT acknowledges getting deep into discussion with pair of unidentified food cos after 2010, wooed with “roses, champagne, limos to meetings” and promise of boost in distribution and invitation to evangelize for kombucha via TED talk. “It sounded good, but both deals required him to give up control over his formula. He passed,” as Forbes summarizes outcome. Tho he’s committed to forging ahead as indie co, Dave is hedging his bets with lines like Alive drinking vinegar, acquired CocoKefir brand and CocoYo coconut-based yogurt, given his anxiety about where kombucha category is headed. “This category – that I feel that I was instrumental in allowing it to be what it is – is slowly being killed by all the noise and all the success. I say that with almost tears in my eyes. The future for kombucha may not be as bright.” Or as he says in video, “You’re seeing kombucha trying to become a new-age soda, which is just a sparkling, flavored something. I’m going to fight that with every fiber in my being because kombucha is the opposite of that. It’s frustrating. It’s kind of like watching a world that you created slowly catch on fire and you’re just hoping it’s not just going to torch everything but it does keep me up at night, I must admit.”
Chief Product Officer Canek, a GT’s Vet, Departs Health-Ade after 5-Year Run Tho GT Dave derides Health-Ade for recipes he believes are too soda-like, his rival in nearby Torrance appears to have stayed equally true to commitment to small-batch production – to point where those who move in dealmaking circles tell us it may be hampering co’s efforts to find exit, whether from minority investor Coca-Cola or other potential acquirer, given inefficiencies inherent in scaling up via thousands of small jars as Health-Ade has been intent on doing. It’s not clear whether issue has created any internal stresses there, but there’s been recent transition as production chief whom Health-Ade recruited from GT’s, Ramon Canek, recently left, hoisting shingle as consultant under banner RC Consultants, as his LinkedIn profile confirms. In his 5 years at Health-Ade, Canek said he got new plant in Torrance fully operational in just 8 months, while also helping to create new flavors. Before joining Health-Ade Canek had spent a decade working at GT Dave’s side.
CSD volume swung from 1.6% decline to 2.6% gain last 4 wks thru May 4 in mid-cycle update of Nielsen all-channel data reported by Morgan Stanley. Avg prices rose 2.7% vs 4.6% for 12 wks. Note that Easter holiday is included in this 4-wk period but was not a year ago. Coca-Cola CSD volume shot up 7.6% (up from +1% for 12 wks) as avg price increase moderated to +1% for 4 wks vs +4.2% for 12 wks. PepsiCo CSD volume eked out 0.2% gain (vs -2.9% for 12 wks) while avg price increase was cut in half to +2.1% last 4 wks. Keurig Dr Pepper improved to -0.5% volume trend (vs -3.9% for 12 wks) on still-solid price hike of 5.8% last 4 wks. Private-label CSDs were down 2.7% on avg price gain of 1.6% last 4 wks.
Monster Still Sliding on Higher Pricing Energy drink volume increased 6% last 4 wks on avg price gain of 5% last 4 wks. That’s just ahead of segment’s 12-wk trends. Monster Energy volume fell 7.1% (down from -6.4% for 12 wks) on avg price increase of 5.8% last 4 wks. Red Bull’s volume gain slowed a bit but still rose a solid 5.9% on modest price decrease of 0.3% last 4 wks. Rockstar volume sagged 18.2% (vs -14.7% for 12 wks) on avg price increase of 4.8% last 4 wks. PEP energy brands tumbled 9.2%, double its 12-wk decline as avg price increase shot up to +12.5% last 4 wks. That’s departure from recent months, where Rockstar, which moves mainly thru Pepsi system, has declined at slower pace than PEP’s own brands, notably Amp.
Solid Price Gains Slowed Sports Volume Sports drink volume went from small gain (+0.3% for 12 wks) to 2.5% decline as avg price increases reached +6.7% last 4 wks. PEP (Gatorade) volume decrease doubled to -5.1% on avg prices increase of 4.5% last 4 wks. KO (Powerade) volume down even steeper, off 5.6% (vs -2.9% for 12 wks) on avg price gain of 1.3% for 4 wks. No data on share-winning Body Armor reported here.
Nestle Water Prices Head Higher Bottled water volume rose 4.3% (down from +5.1% for 12 wks) on small avg price decrease of 0.3% last 4 wks in all-channel. Nestle volume dropped 12.9% as its avg price increase went higher to +9.2% last 4 wks. Coca-Cola water volume was off 3.1%, nearly matching its 12-wk trend, while its avg price increase edged a bit higher to +3.1% for 4 wks. PepsiCo volume was up 1.3% on avg price gain of 1.5% last 4 wks. Very similar to its 12-wk trends. Private-label waters up 16.9% last 4 and 12 wks with avg price cut of around 3%.
Is chocolate milk due for a further reboot? Pair of Boston-based entrepreneurs are taking Fairlife concept of lactose-free, lower-sugar liquid and repackaging it into somewhat more male- and adult-branded via 11-oz slim cans under brand name Slate, with view to launching in 3 flavors this summer or fall as they get copacking infrastructure in place. They figure using canned format should give items more adult, male tilt while also overcoming increasing skittishness about plastic among consumers and corporate accounts.