Beer Marketer's Insights
Coca-Cola’s Jim Murphy just became a futurist. KO vet whose most recent assignment has been vp for strategy & venturing at co’s VEB incubation arm, is seguing on May 16 to recently established Global Ventures team as vp, global venturing and emerging growth platforms, a newly created post with mandate of serving “as a futurist who thinks beyond our current operations and investments,” per memo signed by Global Ventures prexy Jennifer Mann, to whom he’ll report. Global Ventures, of course, is unit set up to steward quasi-indie acquisitions and investments like Monster Beverage, Innocent Juice and Costa Coffee.
Murphy, a 24-yr KO vet who’s credited with having played key role in forging investment in Monster Beverage a few years back, is charged with “shaping our investment strategy in areas that are new to the company, along with coordinating our local venturing work around the world,” Jennifer’s memo indicated. He’ll also collaborate with bottlers and internal groups at KO, including M&A, strategy and marketing. Memo notes that Murphy had also been involved in transactions that brought Costa Coffee, Innocent juice co and Dirty Lemon parent Iris Nova under Coke umbrella.
Now that Coca-Cola has devolved lotta innovation leadership to local level around the globe, Murphy’s job is “to ensure we more clearly focus on connecting our existing, local efforts, while also taking a longer-term view of growth opportunities worldwide.” Hence the “futurist” role.
As for VEB, that seems to have been considerably downsized over past year or two, tho Coca-Cola North America indicated it will name a successor to former VEB prexy Scott Uzzell, who left for ceo role at Converse, “in the near future.”
Monster Beverage turned in strong first-qtr performance, with its 11.2% sales surge blowing thru Wall Street expectations in part on strength of Reign sell-in and allaying concerns among some that its biz is undergoing fundamental challenge. “With concerns about the health of the business, topline was the focus and they beat,” wrote Consumer Edge Research’s Brett Cooper. Added RBC Capital Markets’ Nik Modi: “With strong revenue delivery in the US over the past few quarters, we are hoping investors can refocus on the long-term bull case: Monster’s international opportunity.” MNST shares were soaring in early trading this morning.
Net sales surged 11.2% to $946 mil. Gain was comprised of 11.5% gain for Monster Energy segment (including newly launched Reign Total Body Fuel) to $870.4 mil and 6.9% gain for Strategic Brands segment (NOS, Full Throttle, Predator, Burn and other brands picked up from Coca-Cola) to $70.3 mil. Were it not for adverse $18.2 mil impact of foreign exchange, Monster Energy div gain would have come to 13.9%. On other hand, if you back out the $25.5 mil attributed to Reign sell-in, core Monster brand was up lesser 8.3%. Strong gains continued in overseas markets, +17.4% to $284.1 mil, albeit at tradeoff of weaker gross margin. Operating income rose 11.3% to $311.5 mil.
And new qtr is off to strong start, with chmn/ceo Rodney Sacks saying Apr sales grew by 15.6%, +18.9% on forex-adjusted basis (boosted by extra selling day). Innovations on core line like Ultra Paradise, Swiss Chocolate flavor of Java Monster and restaged and extended Dragon Tea should contribute further momentum, as will unspecified new items in queue for launch in coming months, ceo indicated. Reign is showing signs of solid acceptance by Coke bottlers and retailers, and will get further lift from buy-one, get-one promo planned for later this qtr. So even with Bang and other performance energy brands continuing to rack up big numbers, Monster’s own brisk ride should continue.
On conference call late yesterday afternoon, Sacks was restrained in his remarks about Reign, saying “initial results have been positive” and warning that it’s early days, with brand in only half the accts that carry Bang. Too early to say which brands are taking share from which brands, he said in response to question. Vice chmn/prexy Hilton Schlosberg went a bit further in saying Reign “exceeded our expectations.” Hilton said buy one get one deal was part of original launch plan rather than response to anything co has encountered in market.
Far from pooh-poohing performance energy segment, Sacks in his comments seemed to acknowledge it’s for real, with retailers increasingly treating it as separate subset in space allocation decisions. “Most retailers are agreed that there should be additional space allocated to this high-performance category, it is a profitable category for the retailers, it is a higher ring,” and Monster anticipates more space being dedicated to it, Rodney said. “We believe overall we’ll end up with increased shelf space.”
As for another point of recent concern among Wall Streeters – that last Nov’s 4% price hike isn’t sticking after Red Bull failed to match it –MNST brass indicated that things have been more or less working out according to plan, without need to offset frontline hike with increasing promos. Pressed by analyst, Schlosberg allowed that “we are watching the market and watching Red Bull carefully and will make adjustments if we think it will have a long-term impact. But the majority of Red Bull’s growth is actually coming from innovation.” (In refreshing contrast to execs at most major cos, Hilton had no problem referring to Red Bull by name, not once using euphemism like “our main competitor.”)
No comments from Sacks and Schlosberg, or questions from analysts, about Coke relationship, at time partners have been proceeding thru arbitration over KO’s launch of Coke-branded energy play in overseas markets (they’d originally indicated they expected resolution by Apr), nor of approaching deadline for KO to up its equity stake in MNST on pain of losing board seat. First-qtr termination expenses came to $10.7 mil, most or all of that presumably going to Kalil in Ariz and Big Geyser in NY, last non-Coke distribs in US to be dropped in favor of red system. Interestingly, tho Coke just acquired UK’s Costa Coffee and is making plans to use that as platform for RTD entries, Sacks indicated he sees continued promise for Monster’s own coffee lines in Europe, with plans to expand Espresso line on Continent and to potentially launch other coffee items into UK market.
Reuben Canada, former patent attorney who took left turn into bev space with award-winning ginger elixir called Jin+Ja that might be viewed as early entrant in non-alc cocktail space, died on Apr 24 at 41 in his family home of Lithonia, Ga. “He lost his battle with mental health issues and committed suicide,” per announcement posted by his family on MenaFN biz news site. Tho Jin+Ja remains modest in size, charismatic Canada drew broad attention in winning Specialty Food Assn’s first national “My Story My Ad” contest, as well as via CNBC and USA Today profiles, and he also won Sofi and other awards for complex Jin+Ja recipes.
Leading up to cannabis bev legalization in Canada later this year, Moosehead Breweries, one of country’s oldest breweries, has entered into definitive agreement with Sproutly Canada “to form an exclusive joint venture to develop, produce and market non-alcoholic cannabis-infused beverages in Canada,” cos announced earlier this week. Deal is structured as 50/50 equity ownership to be run by Moosehead supply chain vp Matthew Oland as ceo. (Matthew is member of ownership family at Moosehead, but before joining family biz he spent 15 years at Canadian operations of Heinz, Colgate Palmolive and Smucker, his LinkedIn page shows.) Moosehead has exclusive rights to Sproutly’s “proprietary, naturally produced water soluble cannabinoids” for 5 yrs with ability to extend another 2 yrs. Brewer is to provide “R&D, operations, procurement, finance and distribution” help in developing “clear cannabis beverage that is much easier and faster to formulate than its competitors.”
As our sibling publication Craft Brew News noted, Moosehead has been around for 150+ years and 6 generations of family ownership under the Olands, selling over 5.8 mil cases (over 420K bbls) of beer per yr in Canada, US and 15 other countries, per release. Recall, Moosehead distributes Boston Beer (Sam Adams) products in Canada as well. But like so many other brewers, Moosehead is lookin’ beyond beer in this next phase. Co feels it’s “uniquely positioned to be a leader in the cannabis beverage category,” said Moosehead ceo Andrew Oland. “We are very selective about new business opportunities,” yet “after a significant amount of due diligence on Sproutly’s APP technology . . . vs other competitive technologies, we are excited to announce this joint venture.”
It wasn’t long ago that Walmart execs were rarely seen or heard in public forums, certainly not on bev side. But that’s changed as retailing giant aggressively revamps for new era, effort seen in areas like ecommerce, where it’s finally become credible player vs Amazon. So bev buyers from Bentonville, Ark, giant were back on the hustings at Bev Forum this week, looking to cement recent message that they offer welcoming environment for leading-edge, and even bleeding-edge, brands. This time divisional merch mgr for chilled bevs, Sarah Alderson, who’d pitched entrepreneurs at BevNet Live just a few months ago (BBI, Dec 4) was joined by vp/DMM Seth Malley. Their appearance coincided with retailer’s recent onboarding of brands like Forto, LifeAid, Hellowater, Trimino and C4 (BBI, Apr 8).
Malley and Alderson had been buying colleagues on frozen food side, and as Malley noted, their bev-buying approach was instilled partly by that experience, where they saw unlikely-seeming entries like vegan pizza ignite. Lightbulb went off: far from avoiding frozen sections, millennials were walking down those aisles but just not spotting anything they liked. So the aim now, as Seth put it, is for “stopping power” in brand selection. For those kinds of brands, he seemed to imply, the marketing almost takes care of itself. “When you find something that’s authentic and meets a need and resonates with the customer, you don’t have to do much to sell it,” he offered.
What are bev brands they view as commanding stopping power? Duo showed slide featuring Hapi kids drinks, Soylent meal replacements, canned Dry Sparkling zero-sugar subline and Bulletproof Coffee. “These are all brands that are now at Walmart that you wouldn’t necessarily expect to find there,” Malley said. “This has stopping power . . . something truly authentic, customers willing to spend time shopping.” He happily acknowledged doing considerable learning on cutting-edge retailers like Southern Calif’s Erewhon chain, where bev set seems to change almost weekly. (BBI profiled Erewhon’s new Santa Monica store a few months ago – BBI, Dec 3.)
Moderator Danny Stepper of LA Libations, who assembled panel that also included Bristol Farms exec (below), set stage by noting that previously impregnable categories are looking ripe for disruption, citing Body Armor inroads into Gatorade franchise, Fairlife’s challenge to dairy biz and onset of performance energy brands like C4 and Bang that make energy leaders “look a little stale now.” When new categories hit, they can hit big, as was case with kombucha, plant-based bevs, ketogenic plays and likely CBD. (Seeing ironclad grasp on chelada category by Clamato, Stepper himself mustered one such disruptor under brand name Arriba, in partnership with Hispanic retailer Northgate and copacking giant Langers – BBI, Jul 30. Two months in, it’s won 35 share at Northgate’s stores, he reported, in unchallenged category that may run $500 mil or more.) Seeing potential, retailers themselves are investing in brands, among them Amazon, Safeway, Walmart, Danny noted. (We would add Whole Foods and 7-Eleven.)
So it’s with new sense of urgency that even giants like Walmart are working to cultivate innovative new brands that reflexively head to indie chains on coasts for incubation. “We’re looking to brainstorm with you even if you have less than $10 million in revenue,” was Malley’s message. And while entrepreneurs with organic brands always want to launch in Calif, he pointed out that Walmart’s biggest-selling organic store is in Oklahoma, where shoppers have fewer options to buy organic. “When we meet the needs of customers in food deserts like Oklahoma, they come to us,” is his conclusion. On similar note, one of top Soylent stores is in Dakotas, serving people working the oilfields. So entrepreneurs should take broad view of where opportunities are.
Tho innovative brands are finding their way into all of Walmart’s modulars (its term for Plan-O-Gram), new approach is most visible in New & Cool cooler that launched 3 weeks ago in just 17 stores. Modest goal was to at least generate comparable sales to what was replaced, but some brands are doing 200% of forecast out the gate, Malley reported. So “overall it’s doing what it’s supposed to do.” That’s contrast to typical supercenter with 260 linear feet of bevs, but much of it random assortment, including section called healthy beverages “that wasn’t really healthy beverages.” So that’s been revamped too, with some modulars actually store-specific at this point.
Some practical details: Walmart prefers warehouse distribution system because it’s more controllable and yields better margins, and co can steer new suppliers to consolidation cos. And not surprisingly for retailer fixated on everyday low prices, 95% of volume occurs off the shelf, so off-shelf promos “not that big a deal to us,” Seth said. Walmart prefers to use that space just to stage inventory to get thru the weekend.
Bristol Farms: Taste Rules, No Slotting, Taste Rules, Quick Changeovers Bristol Farms and its sibling Lazy Acres Natural Market chain often are out there on bleeding edge in Southern Calif. “We move fast,” explained Pat Posey, vp for non-perishable procurement & merchandising. “If something comes in that we think is good, we pull the other thing out.” Criteria for new brands? “First and foremost, taste,” Pat said. (That prompted polite interjection from Walmart’s Malley: “How did kombucha pass the taste test?”) Further, Bristol Farms doesn’t charge slotting fees but does ask that brand owners promote product. (Even better if the owner is in the stores representing the brand.) A lot of inventory is moved off endcaps (Walmart’s negligible reliance on endcaps as described by Malley and Alderson “is astounding to me,” he confessed).
In footprint, co is tightly focused operation, tho it just got new overseas owner. Parent co Good Food Holdings operates just 13 Bristol Farms stores and 5 Lazy Acres, all in SoCal, and sister co Metropolitan Market in Pac NW. Good Food Holdings was acquired for $275 mil in Dec by Emart, South Korea’s largest retailer, which had started to reach limits to growth in home market, as Pat explained. (He said chain had resources to purchase co as big as Albertsons but settled on Bristol Farms, in part to transfer learning to home market.)
Co’s stores on avg are half the size of conventional grocer, but annual sales are just 26% less, meaning sales $$ generated per square foot are 31% more. And gross margins are 10-40% higher. “We’re good and we charge for it,” Posey said without apology. Lazy Acres is positioned more directly to healthy living, offering more wood-grained finishes in décor and positioning itself as authority on vitamins and body care. Two of the stores do over $100K per week in supplements “at pretty high margins.” They carry unusual 56 feet of single-serve cold bevs along with 94 feet of dry bevs.
Posey noted that co isn’t driven by strict product guidelines, aside from wanting to carry “best-tasting, freshest food available.” He said, “We’re brand builders: we look for little brands that want to come in and promote and build their brands to scale.” Once those items start attaining scale and enter likes of Walmart and Target, Bristol Farms thinks hard about whether to keep them, given downward slope of pricing at new rivals.
Pat also made interesting observation from visit to Whole Foods store in Playa Vista about 3 months ago. Of 75 or so patrons hanging out on patio, only 3 had same drink. His conclusion: non-alc bevs “are becoming more of a status symbol,” where people look to diffentiate their identity by the brand they’re nursing. We’ve seen that in beer for decades, but it seems newer consideration on NA side.
Dissenting View: Halen Brands’ Cohen Urges Focused Approach, Building Compelling Velocity Story at Smaller Banners that Millennials Shop A more welcoming Walmart? Tho it wasn’t structured that way (he was speaking on entirely different panel), Halen Brands cofounder/ceo Jason Cohen offered somewhat dissenting view in describing his efforts behind OWYN plant-based protein brand. (Letters stand for “only what you need.”) “Fish in a small barrel at first,” he urged. Seek out smaller chains where you can put a lot of emphasis. After all, millennials are shopping at banners like Wegmans, Publix and Erewhon (and on Amazon). Make sure the people you hire have “have relationships at the retail level you need.” (That seemed rebuke to those who hire ex-Coke or Pepsi execs whose retailer relationships may only be at corporate level.)
To back up his assertions thru lens of OWYN’s development, Jason offered array of interesting stats. For example, OWYN sells 10-20X volume at Whole Foods natural grocery as at conventional Shop Rite across the street at same price. Since you have to pay slotting to get into Shop Rite, why wouldn’t you put your money into working Whole Foods? “While a lot of retailers say they want emerging brands, they might not be ready for it” with right employees, culture or environment. So it may be smarter strategy to focus on tripling or quadrupling velocity in Wegmans over 18-month period, building case that wins over all the retailers around that store. Just working relatively narrow core customers like Wegmans and Bristol Farms enabled OWYN to exceed $10 mil in sales last year. Add in new banners like Fresh Thyme and Sprout’s (and move into Big Geyser DSD house in NY) and this year brand is on target to generate $20 mil in sales. Along way, it’s become #1 driver of growth in protein realm – only 7% of growth in broad set of MULO stores but 54% of growth in natural and 36% of growth in specialty. And in stores that carry Coke-aligned Core Power and Pepsi-owned Muscle Milk, OWYN holds its own, despite aggressive promos by rivals. “No price these legacy brands can dictate convert our customers,” he declared.
Cohen urged brand owners to work hard at store level, erecting secondary and tertiary displays, then going back to buyer to show velocity boost, even without price promotion. Even those who decide to go wide and fast, Jason advised, should make sure they can work with individual store mgrs to get those additional placements and build compelling velocity story.
(Note that Cohen’s views were in synch with annual resolutions for entrepreneurs that BBI runs every Jan in first issue of year, warning not to be afraid to say no to retailers who’re too difficult to support at early stage, and to be wary of recruiting big-company vets whose retailer instincts and relationships may not be right – BBI, Jan 2.)
Red Bull Extends Hoops Reach by Setting Up Qualifiers as 3v3 Game Heads to 2020 Summer Games
Red Bull North America is heading in new marketing direction, inking multiyear deal with USA Basketball to set up feeder tournaments for men and women seeking a berth on 3x3 half-court basketball due for debut at 2020 Summer Olympics in Tokyo. Under umbrella of what’s being called Red Bull USA Basketball 3X Nationals, energy drink power will host 20+ qualifying tournaments around US to ID 8 athletes who might represent US at summer games. Winning teams will compete to accumulate enough FIBA points to move on to regional commencing this fall and then to Nationals next Mar as selection of men’s and women’s teams draws near. The first qualifier will occur Jun 22 in Detroit. Red Bull Media House media machine will churn out profiles and other content to elevate visibility of newly elevated activity, which brings street flair in synch with numerous other Red Bulls sports affiliations.
Sean Eggert, who runs Red Bull Sports for North America, said new event builds on brand’s NBA team and athlete partnerships. Red Bull already is official energy drink of USA Basketball and its men’s and women’s teams, who both took gold at 2016 Summer Olympics. Among pro basketball endorsers are Anthony Davis, Blake Griffin and Breanna Stewart.
Monster’s Reign Extension Off to Strong Start, RBC’s Modi Believes; Feels Bang Threat Overstated
Just ahead of Monster Beverage earnings report late this afternoon, RBC Capital’s Nik Modi offered deep dive into competitive dynamics between Bang Energy and Monster response Reign, drawing on variety of sources to conclude that Reign is off to strong start and could leapfrog Bang in sales within a year. Along way, Nik also poked a few modest holes in Bang growth story, pointing out, for instance, that its explosive growth in scanner data is coming in part at expense of 30-40% sales decline in unmeasured nutrition channel, as consumers migrate to more accessible c-store and other channels that Bang is opening up.
Tho consensus view on Wall St has often had Monster sales heading down, “Monster actually has been overdelivering more often than not in the US despite the dramatic growth in Bang and other brands like C4,” in 9 out of past 12 qtrs, as he showed. So Modi has no trouble seeing MNST maintaining sustainable topline growth of 6% over next 5 years even as new entrants get traction.
While some have assumed Bang’s growth is coming out of Monster’s hide, Modi’s analysis suggested that overlap is greater with tertiary energy brands than with leaders like Monster. Using data from co called Numerator, he showed that about 14% of Monster households also purchased Bang in latest 52 wks, and 58% of Bang households also purchased a Monster. So it’s smaller brands that are “getting cannibalized by Bang much more meaningfully than Monster.”
Meanwhile, Bang challenger Reign just headed into market this month, and early signs are encouraging, Modi argued. Scanner info shows it at close to 30% ACV, but info from Coke bottlers suggests it might be closer to 50-60% range already. And that’s not including non-scanned markets like nutrition channel, which MNST brass had said they would make a key target. Even this early, Reign already is 23% as large as Rockstar, 17% as large as Bang. Within MNST portfolio, it already is bigger than Hydro, in market 28 months now. (Of course, tho Nik didn’t go there, it hasn’t been uncommon for major brands to get off to big start as pipeline fills and promos kick in and falter later. But so far, from what there is to judge on, performance seems strong.)
Monster execs have quietly seethed over frequent analyses that cite scanner data to show that brand is softening, arguing that scanner data needs scrubbing to attain meaningful accuracy, and that some of analysts have omitted entire fast-selling skus (like Ultra Paradise). Nik didn’t go there today, but he did note that scanner database covers only 16-17% of 150K+ c-stores, omitting many of the indies where a system like Coca-Cola can be expected to offer greater penetration than Bang achieves.
One intriguing line of analysis was so-called basket affinity analysis, checking to see what other items shoppers buy and how those overlap with rivals. Among top 15 sub-categories, Monster and Bang overlapped only in 2 (shoppers of both have propensity to purchase La Croix and Propel), making for very little overlap. By contrast, similar analysis of Body Armor vs Gatorade in sports drink category finds that households share purchasing patterns in 7 of top 15 sub-categories. “This is what a problem looks like,” as Nik’s slide said of Gatorade, which seems to have clearly suffered at Body Armor’s hands.
Dunkin’ Brands may be in retooling phase, but it scored 5.5% systemwide sales growth in Q1, while key indicator of same-store sales tilted up by 2.4%, largest gain in 4 years. Overall, US revenues rose 7% to $149.7 mil and US segment profit rose 5.7% to $111 mil. “This solid performance, across both morning and afternoon, was driven by consistent, compelling national value promotions and continued beverage sales momentum,” said prexy/ceo Dave Hoffmann. “In particular, the relaunch of our highly successful handcrafted espresso platform, without impacting our trademark speed of service, has demonstrated our ability to deliver on the commitment of ‘great coffee fast.’” Espresso revamp was target of $100 mil investment in equipment and training, and focus of popular offer of $2 mid-size drinks from 2-6 pm in afternoon.
On conference call this morning, ceo noted that, in pointed contrast to unnamed Seattle rival, “high-quality espresso beverages sold at a fair price and served at the speed of Dunkin' is something only we can do. It’s why we believe we are the brand that could democratize espresso, and why we’re committed to the category for the long term.” So co is boosting in-store training in prep for summer season and promoting such espresso-based additions as signature latte line in flavors like Blueberry Crisp and Caramel Mocha. The $2 promos drove trial during usually soft daypart and succeeded in bringing in younger consumers, Dunkin’ execs believe.
The 2.4% same-store sales gain occurred despite a decrease in traffic, thanks to increase in avg register ring driven by price increases and shift to higher-priced espresso and frozen beverages, along with Go2s value breakfast sandwich platform. Cold bevs grew by double-digits, led by iced espresso, iced coffee, Cold Brew, frozen bevs and return of Girl Scouts flavors, Hoffmann indicated. He made it clear to investors that Dunkin’ isn’t content with the traffic declines and will get those back into positive realm.
On CPG side, retail sales grew over 5%, per IRI data cited on call. Total CPG portfolio across both Dunkin’ and Baskin-Robbins brands generated over $230 mil in retail sales, including $34 mil in RTD coffee sales via Coke partnership. As recently reported, co is expanding distribution of Shot in the Dark canned espresso line and adding 48-oz multi-serve iced coffee. (This story was written with assist from Motley Fool transcript of call.)
Dunkin’s Newest Brewery Partner: Apex in NC, with Collab on Espresso Kombucha Dunkin’s upgraded espresso program has won it a new collaboration partner in Southern Peak Brewery of Apex, NC, which maintains both beer and kombucha brewing programs. The pair have created espresso-flavored kombucha dubbed Dunkin’ Espresso Kombucha in which Dunkin’ espresso beans have been cold-brewed in-house at Southern Peak. Limited-time entry is being sold in 10-oz pours at Southern Peak taproom with $3 per drink going to Western Wake Crisis Ministry and Dunkin’s own Joy in Childhood Foundation matching amount raised. “We’re excited to partner with a company like Dunkin’, who has a renewed focus on the true craft of coffee and espresso,” said Southern Peak’s in-house kombucha specialist, Sarah Michalski, referring to Dunkin’s $100 mil espresso upgrade over past year. For Dunkin’, collab moves beyond similar partnerships with likes of Harpoon that have been more concentrated in roaster’s New England base market. Earlier this month, Dunkin’ and Harpoon launched limited-time Summer Coffee Pale Ale.
Deploying New $100 Mil Fund, Boulder Food Group Seeks Mix of Seed Rounds, Bigger Investments
After earlier $55 mil fund inked investments in Barnana, Caulipower, Birch Benders and Olipop and enjoyed exit with Chameleon Cold-Brew, newly assembled $100 mil Fund II of Boulder Food Group is aiming to keep growing with its portfolio partners while still taking a flier on some early-stage players with revenues of as little as $1 mil.
BFG is run by managing partners Tom Spier, based in Boulder, and Dayton Miller, based in LA. Tom comes out of entrepreneurial food space, having cofounded Evol Food frozen foods and run Bear Naked Granola, while Miller’s will be familiar name to BBI readers from role as cofounder of once high-flying doctor-devised brand called Function that sought to fill void left by Coca-Cola acquisition of Vitaminwater a decade ago with more efficacious entry. After landgrab strategy didn’t pan out and several down rounds on capital side, brand ultimately exited modestly to Sunsweet. Miller had left M&A role at Disney to grow Function, so he boasts both financial expertise and hands-on bev experience.
BFG focuses mainly on natural/organic, better-for-you foods, bevs and supplements, seeking brands as small as those with “line of sight” to trailing $1 mil sales. That puts it among minority of big funds that don’t maintain rigid sales threshold on order of $5 mil or $10 mil or more. It invested in Olipop when that brand was on shelf only in Erewhon natural chain and handful of other accounts. But Miller stressed that doesn’t mean BFG wants to fritter away its focus on cluster of toddler brands. “We’ll go super-early but we don’t want all early-stage” cos, he said. “We’re not a pre-product company, it has to be on the shelves and selling somewhere.” In part that’s a function of finite time that BFG principals have. “I want to be as available for David Lester (at Olipop) as for Gail Becker at Caulipower,” he said.
Investment targets don’t necessarily have to be organic, but BFG likely will not go in if they’re not all-natural, Miller indicated. While it has certain base premises that it works off, Miller emphasized that a lot of deals prove to be opportunistic. He described fundamentally conservative operating bias, going with gradual buildout rather than landgrab approach and effort to get co to be self-sustaining financially. And “price point matters,” in quest to help incubate big winners, not items destined to remain niches. As noted, BFG’s investments have included 2 pure plays in bevs with prebiotic soda Olipop and altdairy player Malk, along with powder hydration play Scratchlabs, snack play Barnana and Caulipower. Only exit on bev side was Chameleon Cold-Brew (to Nestle). “We loved that they were leaders in organic and couple that with low-sugar,” Dayton reminisced of Chameleon; also crucial was that BFG team viewed ceo Chris Campbell as “rockstar operator.”
Among current investments, Olipop was interesting way to play in gut health after taking close look at kombucha, with brand’s potential mass appeal and taste getting high marks and BFG principals respecting David Lester and Ben Goodwin. With Malk, BFG loved branding, viewed Malk as having cleanest, freshest taste among altdairy plays, appreciated authentic story of founder August Vega and her methodical buildout. Scratchlab boasted “true cultlike following” right in Boulder, where it would be easy for BFG to monitor activities, and boasts real science behind formulation. Among service-oriented investments is Austin-based Cartograph, an Amazon sales engine that numbers as clients several BFG partners who’d touted its capabilities. Green Spoon, a broker firm that’s also in Boulder, gleaned insights of benefit to portfolio such as Whole Foods’ imminent move to dial back presence of kale as interest began to recede. So again, portfolio partners’ experience led to new investment.
BFG lately has sought out media arms like BevNet and BBI for interviews because, as Miller readily allowed, capital side has become more crowded segment and Boulder group wants to make sure its voice is heard. “It’s harder now than when we started 5 years ago, but overall, there are tailwinds” behind sector that remain grounds for optimism, he indicated. And if the market does turn down, “people will still care about what they put in their bodies.” Miller anticipates that # of exits will increase as Big Food makes M&A an integral part of innovation mix that also includes relaunch of existing brands and incubator/accelerator activities.
DISTRIBUTION: Big Geyser Cements Another Brick in Post-Monster Energy Wall with Celsius Pickup
With Monster Energy lately having absconded to local Coke bottler, Big Geyser execs had said they’d replace powerful energy entry with group of niche brands. After adding C4, Uptime and Phocus in recent weeks, big NY house has now added calorie-burning fitness line Celsius to portfolio. Move gives Boca Raton, Fla-based Celsius its first significant DSD foothold in biggest US metro, completing DSD map in region as Celsius enters CVS and Target chains on national basis. Big Geyser also has tight connection with local 7-Eleven stores, where Celsius has been available. Distributor is taking on full Celsius Original line and higher-caffeine Celsius Heat extension. Big Geyser coo Jerry Reda lauded Celsius’ “healthy functional fitness-forward position” in energy space.