Vegetable Beverages Hitting Mainstream

Gatorade's Cucumber Lime flavor.  Image courtesy of gatorade.com.

Gatorade’s Cucumber Lime flavor. Image courtesy of gatorade.com.

Would you drink a cucumber lime-flavored Gatorade?  How about blueberry mint-flavored water?  An article on Beverage Industry on emerging beverage trends claim that vegetable-flavored beverages are increasingly popular because of their “healthy halo” (article link here).  With everyone focusing on healthier options, it makes sense that vegetable flavors reach mainstream status and consumers seek to take in more vegetables.  After all, berry and other fruit-flavored beverages can only deliver so much momentum.  That said, the article describes that consuming a vegetable-only flavor is still in uncommon and many beverage options are a combination of both vegetables and fruits.  How will this particular flavor trend impact beverage makers?  Will these drinks ever reach a level of popularity to take down mainstream colas, juices, or waters?

Beverage manufacturers constantly monitor flavor trends and Pepsi has locked into this trend since 2011, when they launched a Cucumber Lime flavor under the Gatorade franchise.  Pepsi Japan’s limited-time releases of Pepsi Shiso and Pepsi Ice Cucumber also proves this point.  Since most (if not all) beverage organizations monitor consumption trends, it would not be surprising to see manufacturers build momentum and launch more vegetable-infused variants over the next few years.  It just needs to make its way into the North American market.  And this is beginning to catch on more in the U.S.; research firm Mintel tracked over 100 U.S. beverage innovations with vegetable or vegetable-fruit flavors launching in the past year, representing a 20% increase from 2013.  It still stands to be seen whether these vegetable-flavors will launch under the most popular and mainstream beverage lines like Gatorade, Coke, and Pepsi or launch under emerging beverage brands.  No matter the case, any approved product launch puts sales pressure on other items to perform or risk losing the shelf space.  This flavor trend may not have been successful replacing other products’ sales to justify shelf space though it looks that will soon change.

On the topic of reaching critical mass to take down mainstream product categories, it doesn’t look promising.  This isn’t to say that vegetable-flavored beverages will not reach mainstream status themselves, just that it will not overtake other mainstream categories.  For one, this is a flavor trend that integrates the product under a specific beverage segment; it is not a standalone beverage category in itself.  Consider these vegetable-flavored products to pattern after  Campbell’s V8 juices or Bolthouse Farm smoothies, where they represent a growing portion of a drink category (juices and smoothies, respectively) but are not large enough to overtake juices as a whole or smoothies as a whole.  Regardless, these healthier options will compete aggressively for retail shelf space alongside other beverage options.

Image courtesy of foodbusinessnews.net

Image courtesy of foodbusinessnews.net

The Beverage Industry article also describes other beverage flavor trends, include a growing preference toward sweet and spicy combinations.  Consumers increasingly look for flavors that will satisfy multi-sensory experiences.  Some examples include chocolate gojuchang tea (gochujang is a Korean spicy sauce),  spicy ginger mango juice, and mango jalapeno water.  So be on the lookout, soon enough you’ll see more cross-flavored beverages on store shelves.  Be in sweet and spicy or vegetable-fruit flavored, it will sound exotic but your taste buds and your body will thank you for choosing that over another drink.

5-Hr Energy’s Quest for New Growth

The 5-Hour Energy Shot Line-up

The 5-Hour Energy Shot Line-up

It seems that the craze over energy shots have died down since 2012 and left 5-Hour Energy as the last company standing.  That shouldn’t be a surprise since existing consumers were fiercely loyal to the brand, to the extent that offerings from energy stalwarts like Red Bull and Monster failed to sustain sales in this segment.  After winning the battle for energy shot supremacy, 5-Hour Energy still faced challenges toward reaching a wider array of consumers.  The energy shot manufacturer need to reach other demographics to continue growing.  That spawned line extensions to reach women, as well as sampling events to reach seniors. This past summer, the company ran a “Yummification” campaign to leverage 5-Hour Energy as a mixer (BevNet’s Ray Latif has an in-depth look at the campaign here).  While all companies have growth barriers, what has 5-Hour Energy done differently to overcome these growth challenges?  And beyond its success, what other opportunities exist for them in the foreseeable future?

It would appear that targeting women and seniors are components of an overarching 5-Hour Energy growth plan, and the strategic objective is to increase consumption.  Reach new demographics isn’t all that different from what other companies do, so catering to women and seniors are not all that unique.  What is unconventional is their “Yummification” campaign.  5-Hour Energy recognized that taste was a blockage that would not be solved despite their efforts to highlight product benefits.  The “Yummification” campaign leveraged fans’ creativity in a contest to create recipes for mixing 5-Hour Energy with other beverages (mainly non-alcoholic ones) to lessen the medicinal taste.  As a side benefit, this contest required submissions through YouTube helped generate a lot of media exposure.  Beyond media impressions, the campaign showcase new usage occasions for 5-Hour Energy.  Contest submissions advertised concoctions to refresh the user during athletic training, waking up, and gaming among many others.  Athletic training, waking up, and gaming are occasions typically paired with other refreshments, such as sports drinks, coffee, and juice & water.  Energy drinks – let alone energy shots – seldom enter the conversation as refreshments during these times.  However, it looks like that will change following the success of their “Yummification” campaign.

5-Hour Energy's Yummmification Contest.  Courtesy of blog.5hourenergy.com.

5-Hour Energy’s Yummmification Contest. Courtesy of blog.5hourenergy.com.

Beyond the campaign’s success, it seems 5-Hour Energy has uncovered business opportunities that they were previously unaware of.  Serving as an ingredient as well as a standalone product gives them many more opportunities to sell itself.  Beyond the regular activities to feature the product as a strong standalone product, mixing the shot with other beverages now gives 5-Hour Energy many cross-promotion and marketing opportunities.  5-Hour Energy could try securing displays in the juice aisle to forge a stronger bond with the juices that could be mixed with their product.  Or secure displays in the coffee aisle to convert or steal coffee consumers.  Regardless of displays or other in-store activation tools, many opportunities have emerged to continue delivering growth momentum.

Judging by the potential that this campaign could provide to 5-hour Energy, it’s a surprise it took them so long to come up with it.  It may be the fact that the segment was riding a hot growth trend that nullified the need for marketing support.  Or that negative media surrounding energy drinks required more immediate attention than developing a sustained growth strategy.  Whatever the case, the campaign has now happened and translated fantastic success.  The one downside is that the campaign won’t be repeated, as said by Brandon Bohland, a special markets manager at the company.  Which means that the recipes submitted for the campaign are the only ones that will exist for the foreseeable future, until 5-Hour Energy creates other contests calling for recipe creations.

Visit 5hourenergy.com/yummification to see the videos and recipes for their Yummification contest.

U.S. Cola War Continues with Pepsi True Launch

Pepsi True

It seems the Cola Wars continue to expand across the calorie spectrum.  Where Coke and Pepsi used to spar over full calorie soda (Coke vs Pepsi) and zero-calorie soda (Diet Coke vs Diet Pepsi, Coke Zero vs Pepsi Max), the two beverage giants now go to war over the middle.  The contestants are Coca-Cola Life and Pepsi True, two sodas sweetened with sugar and stevia, with less calories, and green packaging.  That may be where the similarities end in this round though, because this iteration is very different from prior rounds.  Their product launch tactics differ greatly, and this particular fight appears to be highly contained with the United States.

What some people may forget is that Pepsi already has a stevia-sweetened mid-calorie soda on the market – just not in the U.S.  Remember Pepsi Next?  The American Pepsi Next contains artificial sweeteners whereas other countries with Pepsi Next have a stevia-sweetened version.  Unless Pepsi decides to discontinue the existing stevia-based Pepsi Next everywhere, this Cola War will only exist in the U.S.  And it is likely that the Pepsi True launch is primarily relevant to Americans given Pepsi Next’s presence elsewhere.  So in effect, this should be termed more of a Cola “battle” rather than a Cola “War”.  Pepsi Next against Coca-Cola Life in markets outside the U.S., while the U.S. battle will be between Pepsi True and Coca-Cola Life.

Related Post: Pepsi Next May Find More Success in Canada

Both companies are also more cautious in their launch approach.  Coca-Cola Life has experimented in multiple countries outside the U.S. first to measures its market viability, and only recently started rolling out in U.S. regions this past August.  The American rollout isn’t national and they have yet to provide marketing support welcoming Coca-Cola Life to America.  Pepsi True is taking a similarly conservative approach by not even stocking this product in traditional channels.  Pepsi’s mid-calorie soda variant is set to launch exclusively through Amazon, where shelf space is limitless, operating costs are lower, and product delivery does not come from their distributor network.  After all, Pepsi distributors work with limited storage space and a delivery system optimized for sales and profitability; carrying Pepsi Next could mean sacrificing sales of other better-selling products.  To satisfy American distributors, Pepsi indicated that they will reimburse distributors for Pepsi True sales in their regions.

Related Post: Coca-Cola Life Commercial Review: Open Your Good Nature

It makes sense for both beverage manufacturers to take baby steps first.  Launching anything in the mid-calorie segment has been challenging for over a decade.  The 2004 introductions of C2 and Pepsi Edge marketing sucralose as a sugar alternative proved unsuccessful.  The 2012 Dr Pepper Snapple Group TEN-calorie soft drink line-up hasn’t received marketing support to keep up its launch momentum.  Earlier this year, Coca-Cola’s vitaminwater reverted back to its original formula after consumer complaints about its stevia formula.  The beverage industry’s history is littered with more failures than successes when companies attempt to bring mid-calorie refreshments to the consumer.  And as much as Pepsi Next could be deemed a global success, the results undoubtedly vary between markets.

Going forward, the road will only become more difficult.  Consumer perspective toward mid-calorie soda in general has not been overwhelmingly positive.  Taste is always the first consideration and most stevia-sweetened beverages contain a bitter aftertaste.  Consumers have also persisted in choosing drinks that offer health benefits and less calories over mid-calorie soda.  Regardless of consumption trends, soft drinks are still a significant part of the beverage landscape.  Even though the Cola War has evolved, both Coca-Cola and Pepsi will find new frontiers to wage their battles.

Odwalla Upsizes and Updates Packaging

Odwalla's updated 2014 packaging.  Courtesy of facebook.com

Odwalla’s updated 2014 packaging. Courtesy of facebook.com

Odwalla’s most recent packaging update has upset some consumers.  The premium juice maker was considered a leader in sustainable packaging by using Coca-Cola’s PlantBottle technology, but the makeover has them abandoning the PlantBottle in favor of the regular plastic bottle used by other beverages (BevNet story here).  This update also sees Coca-Cola’s premium juice brand forsake their color-coded cap system implemented in their previous packaging update – just last year.  Does this imply that the 2013 changes were unsuccessful, and confused consumers?  Will that the recent changes return their competitive edge?

With consistent product packaging for six years prior to the 2013 update, it would seem that their 2013 changes were geared toward attracting new consumers to the Odwalla business.  After all, if the product was fantastic and equally adept at generating repeat purchases, why change it?  Introducing a color-coded cap system was designed to build the juice franchise through educating consumers on their product portfolio.  Green caps denote “superfoods,” red meant fruit smoothies, blue equaled proteins, orange represented juices, purple for quenchers and finally yellow communicated seasonal products.  Do you think six different cap colors for over 20 different juices and smoothies help educate the juice browser, or frustrate them to the point of walking away?  Despite good intentions, this packaging change likely turned consumers away rather than bring them into drinking Odwalla.

Part of Odwalla's updated 2013 packaging.  Courtesy of facebook.com

Part of Odwalla’s updated 2013 packaging. Courtesy of facebook.com

Rectifying this fiasco necessitated the 2014 packaging changes.  Though a stronger competitive set meant returning to the old system wouldn’t suffice.  Everyone (Evolution Fresh, Bolthouse Farms, Naked, and a host of other niche players) had larger bottles compared to the Odwalla 12oz (355ml) bottle.  In order to properly compete, Odwalla brought in a bigger bottle in addition to making it clear.  They also returned to green caps to (hopefully) simplify the consumer’s shopping process.

It’s hard to say if these packaging updates helps restore the premium juice maker’s competitive advantage, though it’s a step in the right direction.  Anything that simplifies the shopping process has a higher probability of getting sold.  What may also help them increase sales is securing produce placement, which is what they are trying to do.  The product section is a stronghold juices made by Bolthouse Farms, Arthur’s Fresh, and POM, so getting product placement in this area will certainly help Odwalla enter the conversation among premium juice purchasers.  Only time will tell if this new, simpler packaging will help move the needle for Coca-Cola’s premium juice brand.

Code Red Joins Mountain Dew’s Canadian Flavors

Image courtesy of Mountain Dew Canada's facebook page, facebook.com

Image courtesy of Mountain Dew Canada’s facebook page, facebook.com

It looks like Mountain Dew Canada’s crowdsourcing contest has brought another drink flavor to grocery shelves for permanent distribution.  Following their win in Canada’s first Backed By Popular DEWmand, Code Red (Cherry) will return to shelves alongside Mountain Dew, Diet Mountain Dew, and Voltage (Raspberry Citrus).  Code Red had been available in the U.S. since 2002 and is considered one of the brand’s most successful extensions, so it should not be a surprise that it won the contest.  That said, after bringing in another flavor extension – and essentially doubling their assortment from two items to four items – what will Mountain Dew do next year in Canada?  Should they (or will they) repeat this consumer activity, or give a rest to avoid fatigue?

More info: Voltage Wins Canada’s first DEWmocracy

We can look toward the American crowdsourcing contests for some insights.  The first DEWmocracy ran in 2007, and again in 2009.  Backed by Popular DEWmand ran in 2011 to resurrect a flavor for a limited duration.  Beyond those three consumer activities that helped launch (or re-introduce) new soda variants, it appears Mountain Dew had abandoned the promotion in favor of other marketing activities.  A BrandWeek interview in 2010 with Brett O’Brien (Pepsi’s Marketing Director) described that the key objective was to openly and honestly communicate with Dew fans and consumers (link here).  It could be that Mountain Dew learned to focus on developing an entire social platform (ie Green Label) to engage with their fans on a sustained basis, rather than support crowdsourcing contests that generated a short term surge in conversations and awareness.

On the Canadian front, running this contest again in 2015 may induce fatigue.  Having ran the social media contests so close together (back-to-back years of 2013 and 2014), repeating this campaign for 2015 may lead beverage enthusiasts tuning out.  Worse yet, so much repetition may lead consumers to consider the brand as boring and unimaginative.  Despite the gap in available flavors, the Canadian team could decide to execute some other initiatives to launch new drink flavors or drive consumer engagement.  At the very least, their campaign findings could be compared with the American counterparts to determine next steps.

Ultimately, Mountain Dew’s crowdsourcing campaigns have delivered them two years of success and made many people happy along the way – consumers and retailers alike.  And the main message that they may have learned?  Is that Canadians and Americans alike are passionate about Mountain Dew.

Big Red Buys Xyience, Ends UFC Partnership

Xenergy Lineup

It seems the beverage industry continues to go through some form of consolidation.  Big Red Inc. – one of North America’s Top 10 beverage organizations – has acquired Xyience effective immediately.  Xyience – one of the more well-known energy drink brands through their sports sponsorships – now joins a drink portfolio that includes Big Red Soda, Hydrive Energy Water, Nesbitt’s, and Thomas Kemper Soda.  While many things may change for Xyience in the future, one thing has already changed as a result of this acquisition: Xyience has ended its UFC sponsorship.  Will ending this sponsorship hurt Xyience’s growth among their core demographic?  How else will their communicate to this group of consumers?  Will the gains from being part of Big Red’s system outweigh Xyience existing as a standalone energy drink company?  What benefits Xyience in this arrangement?

One major factor: Big Red’s national footprint.  Xyience had been working well to gain distribution, winning more doors and regions over the past few years.  However, most of these distribution gains have occurred along the coasts.  There are many areas within the U.S. that Xyience products cannot be found.  Joining Big Red gives Xyience national distribution by piggybacking off of Dr Pepper Snapple Group (DPSG), which is a national distributor and delivers to three-quarters of all Big Red retail accounts.  This change alone provides significant gains for Xyience, allowing the energy drink to challenge Red Bull, Monster, and Rockstar across more geographies.  The best part is that this is organic growth, where Xyience can rely on their brand name to help them do some of the work.

Beyond distribution gains, another growth opportunity for Xyience would be to broaden its target audience.  While the energy drink manufacturer owns a niche following among a select group of consumers, appealing to more consumer groups will help this brand evolve from its current state to a much larger energy drink player.  Hence ending their UFC sponsorship.  Gary Smith – Big Red’s CEO – said as much:

“I’m just gonna soften it (their image) up a little bit, make it a little less hardcore than the image that it’s got today.”

Ending the sponsorship won’t immediately alienate their niche consumers, but provides the opportunity to reach other consumer groups.

If managed properly, Xyience may be primed for explosive growth following its Big Red acquisition.  The brand is very recognizable and will be available in more places where consumers will recognize them.  And in the distant future after new consumer marketing content is built, they will certainly be challenging Red Bull, Monster, and Rockstar for share of mind in addition to share of shelf.

Coca-Cola Builds a Monster

Image courtesy of brandchannel.com

Image courtesy of brandchannel.com

Looks like Coca-Cola realizes what it’s good at and what it isn’t good at.  Their increased stake in Monster Beverage proves as much.  With $2.1 billion invested, Coca-Cola now owns 17% equity in the energy drink behemoth, and in turns switches up their product portfolios.  Coke will give Monster their own acquired or homegrown energy drink brands, which includes Nos, Full Throttle, and Burn among many others, while Monster trades them their non-energy drink products, such as Hansen’s Natural Sodas & Juice Products, Peace Tea and Hubert’s Lemonade.  This deal brings together the world’s largest soda manufacturer and the U.S.’s largest energy drink manufacturer.  Although both sides got a great win out of this, but who needed this deal more – Coca-Cola or Monster?  Let’s start by seeing what each side actually gets out of this arrangement.

For Coca-Cola, acquiring a larger stake in Monster and then trading energy drinks for teas & juices serves as a win in itself.  With consumer habits and preferences changing, fortifying their product portfolio to keep pace with these changes was a necessity.  And with key brands generating bad press lately (think Diet Coke slogan fiasco), Coca-Cola could not afford to keep beverage products that carry high negative publicity potential.   Nos, Full Throttle, and the like most certainly qualify given the category requires caffeine content regulation following linkages to caffeine poisoning.

Energy drinks didn’t necessarily fit into the brand image that Coca-Cola wanted to sustain.  Energy drinks focus around an extreme sports lifestyle, with key sponsorships across mountain biking and motor biking.  Distancing the brand from energy drinks better promotes Coke’s image as a family-oriented product manufacturer.  Furthermore, their marketing acumen is better leveraged across Monster’s non-energy products given Coca-Cola’s existing strength across juices and teas.  Coca-Cola has already made a strong name for itself behind Minute Maid, Simply, Odwalla, Nestea, and Honest Tea.  Giving up energy to return focus to juices and teas helps Coca-Cola stay sharp and work on what they’re good at.

Hubert's Lemonade, now part of the Coca-Cola family.  Will this lemonade brand grow exponentially?  Image courtesy of hansens.com

Hubert’s Lemonade, now part of the Coca-Cola family. Will this lemonade brand grow exponentially? Image courtesy of hansens.com

For Monster Beverages, this deal unlocks a stronger global distribution network to grow their product base.  They’ve also added some larger name-brand energy drinks to complement Monster.  A strong competitor like Nos now becomes a fantastic ally.  Full Throttle owns a cult following despite Coca-Cola’s neglect and has a very good chance of being resurrected.  This arrangement gives Monster a wide assortment of products to target energy drink consumers, both locally and internationally.

Monster has also done a better job at marketing energy drinks than Coke because they’ve invested in resources to build out an entire lifestyle.  Energy drinks are more integrated into a consumer’s lifestyle than some other beverages, given their wide target in terms of drinking occasions.  The soda drink manufacturer was not prepared to build out a 24/7 lifestyle like how Monster, Rockstar, and Red Bull have.  Though Monster’s success isn’t a defined blueprint, they already have the infrastructure in place for one energy drink and this could be scaled up for other energy drinks.

It’s really hard to say who needed this more though Coca-Cola benefits more in this new arrangement.  The soda maker had more to lose because they were never going to catch Red Bull, Monster, or even Rockstar with their homegrown products.  Giving up distribution bought them expertise and healthy beverage brands.  Similarly, Monster’s true success existed in the energy drink segment, so much that they even changed their company name to halo off some brand equity.  Their strength in energy drinks would have prevented them from properly developing their nonenergy product portfolio.

Regardless of who benefited more, this only proves that larger companies must take creative approaches to keep growing.  In the past, it was about building strong brands.  Now, it’s about buying a brand that’s already been built, and making it stronger.

Holidays then vacation

Happy Canadian Civic Holiday!  No post this week, nor for the next few weeks.  I’ll be traveling with the family out of town, so no time to write anything in-depth at this point.  I’ll update everyone through Twitter.

Canadians Share A Coke

Share a Coke Jason

A marketing campaign’s success in one part of the world certainly merits consideration to be repeated in other parts.  As such, the initial Australian Share a Coke campaign has been repeated in many other countries, recently coming to Canada earlier this month.  The Canadian campaign customizes 591ml/16oz bottles of Coca-Cola, Diet-Coke, and Coke Zero with people’s names on them.  One side will feature the customized name while the other side still says Coca-Cola.  Coca-Cola will be putting nearly 300 popular Canadian’s names on their bottle labels and then shipping them out to retailers.  Sadly, my name (Jason) does not qualify for one of the 300 most popular Canadian names (find out whether yours is here) so I’ll have to go to a kiosk machine to actually get my name printed on a bottle.  These kiosks will be available all through summer, in Calgary, Edmonton, Montreal, Vancouver, and Toronto.

Funny enough – or smartly – Coca-Cola has provided some parameters around naming, at least for the online portion.  Words that do not exist in their word bank are met with a question mark and an invitation to add the name to their word bank (must be reviewed first).  This prevents people from abusing the labeling system or from using it for malicious intent.  Seems like they’ve learned their lesson from the vitaminwater fiasco from earlier in the year.

Coca-Cola does have safeguard parameters to prevent abuse.  Even the word "Hello" cannot be printed on the label for sharing since it's not in the word bank.  Courtesy of shareacoke.ca.

Coca-Cola does have safeguard parameters to prevent abuse. Even the word “Hello” cannot be printed on the label for sharing since it’s not in the word bank. Courtesy of shareacoke.ca.

All in all, not a bad campaign to extend beyond Australia.  When the customized name campaign first rolled, media outlets and consumers alike picked up on this.  It was categorized as a strong success given the increase in awareness and social media engagement.  The Canadian campaign is decidedly different from the original campaign.  For one, social media engagement plays a different role in Canada than Australia.  The Australian components allowed consumers to create a custom commercial through their Facebook album as well as enter to win $50,000.   More interestingly, the campaign also included customized “name songs” that could be downloaded, which showed a personalized touch between Coke, music, and the individual.  The Canadian iteration of this campaign focuses more on social engagement to share the customized label, but removes the contest and name songs.

Another key difference between the original and Canadian campaign is the product assortment.  Our Canadian campaign includes naming labels for Diet Coke and Coke Zero as well.  This is a sound move whereby Coca-Cola understands the geographical differences and taste preferences of Canadians.  Many consumers prefer Coca-Cola, but there are a growing number of Canadians that are looking for lower calorie soda alternatives.

Considering the campaign’s objective to be identical to the Australian objective of raising awareness and driving sales, this one likely is another success story for Coca-Cola’s marketing campaigns.  Personalized labels and engagement across social platforms help to increase Share a Coke’s publicity.  And consumers seeking out these custom bottles will certainly help fuel sales, where they get the added benefit of finding their own, customized bottle of refreshment.  This certainly fits into their overarching “Over Happiness” campaign.  Here’s the first clip to highlight The Sharing Begins.

Nestea and Lipton Go After AriZona

Nestea's new 695ml cans to compete head-to-head with AriZona.  Courtesy of facebook.com

Nestea’s new 695ml cans to compete head-to-head with AriZona. Courtesy of facebook.com

Each summer I pay a little more attention to monitor the Ready-to-Drink (RTD) tea segment.  Some of my beverage industry contacts say that AriZona’s dominance in the RTD tea segment have inspired other beverage companies to launch similar $0.99 tall cans to steal some of AriZona’s sales.  Most recently, I’ve noticed both Nestea and Lipton stock some competitive offerings.  Both have come out with tall cans of tea, with similar $0.99 price points labeled on the cans themselves.  Given that AriZona has made $0.99 teas their claim to fame and have been selling them for many years already, how successful will Nestea and Lipton be at stealing some sales?  More importantly, is selling tea at $0.99 profitable for Nestea and Lipton, or is there another reason for them to enter this segment?

Unlike AriZona, Nestea and Lipton have strong backers.  Nestea’s partnership with Coca-Cola provides them a robust distribution network.  Lipton also has a strong market coverage through their agreement with PepsiCo.  Both competitive brands would be able to leverage the sales and merchandising support of Coca-Cola and Pepsi to ensure retailer shelves are always stocked.  Beyond retail coverage, both Nestea and Lipton would get premium in-store placement locations.  Coca-Cola and Pepsi both own front-end cooler space as well as multiple locations within a grocery store, giving them the opportunity to stock products to their liking within these areas.  So unlike previous challengers, AriZona will face their strongest competition yet in Nestea and Lipton.  These two competitors have the necessary support and expertise to erode AriZona’s leadership in this segment.

Nestea's new 695ml cans to compete head-to-head with AriZona.

Nestea’s new 695ml cans to compete head-to-head with AriZona.

Given these dynamics, it certainly appears that Nestea and Lipton stand as formidable opponents to AriZona and steal their sales.  However, both Nestea and Lipton are known best for their offerings in a different tea format: bottled tea.  By rolling out these $0.99 aluminum cans, don’t they risk cannibalizing their own sales from a more profitable tea format?  Wouldn’t this make the decision to launch 695ml tea cans with $0.99 printed on it hurt their total tea business?  Given the risk associated with devaluing sales potential, why come out with tall cans at all?  In the end, they are just as likely to steal sales from AriZona as they are on stealing their own sales.

Simply put, it may be better to get less dollars from the consumer, than get none at all.  If their market research indicates that the same consumers buy both bottled tea and canned tea, both Nestea and Lipton have much to lose by not having a canned tea offering themselves.  And given the price range of canned and bottled tea, it would appear that canned teas serve as the “value” segment to get people to buy a tea product.  Bottled tea appears to serve more as a “mid-value” or “premium” segment.  Should Nestea & Lipton leave AriZona to own the value tea, it will be much harder to steal that tea customer away at a later point when they are interested in moving up the value chain to premium tea.

As long as you can get them to buy (or try) your drink once, you’ll stand a chance to get them to come by as a repeat customer.  Even if the immediate value is $0.99, there could be opportunities to get these thirsty consumers to buy the more expensive bottled tea at a later time.

Follow

Get every new post delivered to your Inbox.

Join 1,187 other followers

%d bloggers like this: