Dasani Drops: Serious Competition For Kraft MiO

 Dasani Drops - courtesy of BevReview.com

I’m sure by now most people have heard of Coca-Cola’s entry into liquid flavor enhancer.  If not, Coca-Cola is launching Dasani Drops to compete with the Kraft MiO and is set to enter the U.S. market in October – you can read more about it at BevNet (link here).  BevWire had also previously written about the impending entry of Dasani Drops (link here), which should offer some top level insight to what this piece will focus on.  With a price point that rivals the MiO and more servings per package, Coca-Cola is ready to offer some serious competition to the original innovation.  What is the potential of this segment now that another branded player is entering the category?  Will Dasani Drops take away Kraft MiO’s share leadership and continue to grow liquid flavor enhancers?  Those are just some of the questions that comes to mind with this launch.

Liquid flavor enhancers exist as a natural transition away from the traditional delivery format.  Aside from the trade up story and the extra consumption occasions this product creates, it taps into the consumers today that want a customizable beverage.  The MiO’s Canadian messaging advertises on the fact of customization – that the user can squirt as much or as little of the MiO into their water to their liking.  The basis is that liquid flavor enhancers are geared toward a younger consumer, one that wants to choose the level of sweetness and flavoring in their beverage.  It would be much harder to do that with powder packets with limit the level of flavoring based on the pack size.

The liquid flavor enhancers market is believed to be worth slightly over $100 million dollars – contributed mainly by Kraft MiO sales with some minor contributions from store brands at the moment.  With another strong branded player, the segment is expected to have an accelerated growth rate.  And given the size of Coca-Cola, doubling segment sales double to $200 million may not be completely out of reach.  

Behind Coca-Cola’s distribution strength and their availability in all places with beverages, Dasani Drops may take away the MiO’s share leadership simply by being more widely available.  The immediate consumption and convenience/petroleum channels are just two areas that Coca-Cola will have access to that the Kraft MiO will not.  Kraft products may exist in the convenience store environment, but it will not be located in the same area that the Dasani Drops may be placed – by the beverage coolers.  Even within the grocery store environment, Coca-Cola may benefit by having the ability to exist in both the bottled beverage aisle and in the powdered drink aisle.  Given that both branded products offer the similar benefits and flavors, winning the liquid flavor enhancers segment really depends on which company can achieve strongest distribution at this time.

Price competition may not completely make sense from a category perspective.  However, beverage products are constantly featured items in the grocery channel and retailers may pressure either manufacturer to increase feature frequency and depth.  As long as both manufacturers understand that this is relatively new segment and a product innovation, neither would want to over-promote the segment since it would a longer time to recuperate their investments.  It’s just a matter of time before Pepsi wants to join the fight, and price promotions will be essential at differentiating each brand’s offering.

Kudos to Kraft for innovating and bringing something truly different to the flavor enhancers market, but now let’s see how well they can defend against a beverage manufacturer like Coca-Cola.

Goodbye Full Throttle, Hello Nos Energy

FullThrottleSplashpage - drinkfullthrottle.com

The above image is what the viewer sees when they visit Full Throttle Energy’s website.  However, the website will soon undergo changes to remove the NHRA logo and “drag racing” copy.  Various news outlets reported that Coca-Cola’s Mello Yello will be replacing Full Throttle as the title sponsor of the National Hot Rod Association (NHRA) in 2013.  The Sports Business Daily article also mentions some quick insights into why Mello Yello was given title sponsorship over other Coca-Cola beverage brands (link here).

This effectively spells the end of Full Throttle as Coca-Cola continues to reduce investments in this homegrown energy drink brand.  Full Throttle had four flavors existing in the Canadian marketplace as recent as just two years ago.  But with the distribution switch from Rockstar Energy to Monster Energy, and the rise of Coca-Cola’s other homegrown energy drink – Nos Energy Drink – there just wasn’t any room for Full Throttle.  First the underperforming flavors of Diet Full Throttle, Blue Agave, and Red Berry (Fury) were phased out leaving only the Regular Citrus as the sole Full Throttle marketing offering.  Then the website’s functionality was limited to the above image – there is no click-through possible except for privacy policies, contact info, and the link to NHRA.  And now the loss of the NHRA official sponsorship, which removes even more functionality from this brand.  One of the key questions left to be answered is that, since Full Throttle has been given less investments in the past few years, why hasn’t there been communication to acknowledge its discontinuation?

Nos Energy 473ml Assortment

Even though Full Throttle has been at the end of its product life cycle for more than a year, it would appear that there were multiple factors playing into why no official announcements were made.  For one thing, Full Throttle was still the title sponsor of NHRA and it would be detrimental to Coca-Cola’s relationship with the NHRA if they discontinued their official energy drink while the sponsorship was still on-going.  How will the racing association look if their official energy drink was not even on the market anymore?  It is also during this languishing time for Full Throttle that Coca-Cola rapidly increased its sponsorships and visibility for Nos Energy Drink.  Nos Energy Drink obtained sponsorship for NASCAR, Formula Drift, and Major League Baseball among other organizations.  Occurring simultaneously was the portfolio expansion of Nos products.  Originally available only in a 650ml bottle, Nos began extending itself to a 473ml can, then increased its offerings to include a Sugar Free and Grape variant.  It recently introduced two other variants into the Canadian market: Cherry and Citrus.  The product proliferation was to further entrench Nos with the consumer market and expand their visibility at the point-of-sale.

Full Throttle’s role in the energy drink portfolio shifted from growth to flanker status – it’s purpose was to hold steady until Nos Energy Drink was ready to take over as the company’s official homegrown energy drink.  Now this transformation looks all but completely done.    In-aisle shelf space and cooler space has been shifted from Full Throttle Energy to Nos Energy Drink.  As such, consumers will likely be seeing an official Coca-Cola communication on the end of Full Throttle Energy in 2013.

Will Nos hang on to become Coca-Cola’s successful energy drink brand?  Only time will tell, but given the investments that the company is putting behind this brand, it will stand a better chance of success than Full Throttle.

Gatorade Pulls G Series Fit From Store Shelves

Goodbye Gatorade (G Series) Fit, see you in 2014 after your re-positioning initiative.  PepsiCo reportedly started pulling their Gatorade Fit line-up on drinks from store shelves earlier in August as a result of sub par performance (link here).  From their initial 2011 re-positioning launch, BevWire had also speculated that one of G Series beverage line-ups may eventually be pulled (link here).  Was this product destined to fail from the beginning?  Would the “occasional” athlete want to be considered the occasional athlete, rather than the serious athlete?

Gatorade’s original problem was that their product had fallen into the hands of consumers beyond their target market with sales growing outside athletic consumers – which puts them in an enviable position by any means.  This re-branded effort was an attempt to create product separation between these general consumers and their core consumer – the athlete.  One of the key issues after the re-branding efforts was the nine different segments for the Gatorade beverage portfolio.  Although they showed ingenuity to differentiate consumption occasions (Prime – pre-training, Perform – mid-training, Recover – post-training), the “athletic segmentation” may have created confusion and led to the G Series Fit’s poor performance.  The Original G Series, G Series Fit, and G Series Pro became the “athletic segmentation” to differentiate occasional athletes, fitness fanatics, and the professional athletes.

However, the image problem persists if the G Series Fit’s target market does not see enough value to trade up from the Original G Series.  Even more so, is that the occasional athletes would never want to be considered just an occasional athlete –  so they would try to copy what the more serious or professional athletes are drinking.  This is the original point of having athletes endorse your product because you want the audience to feel as if the performance can be attained by using the product (cases in point – the Gatorade Michael Jordan Be Like Mike campaign, and the recent Gatorade Michael Jordan Win From Within Campaigns).  Consider that the image of being athlete is also part of the selling equation – examples of why lululemon and Underarmour are used beyond the scope of yoga and athletic training people.  Bottom line: these occasional athletes would believe that they can achieve the level of fitness they want only by using what the pros use, not the occasional stuff.

After taking pricing into consideration, and the variety of products that are on the market now to hydrate an athlete, there was just not be enough value created by the G Series Fit line-up.  The fitness fanatic athlete may stick with the G Series products since it would provide the minimum necessary benefits they are seeking, and also purchase coconut water as they contain more rehydrating benefits.  The occasional athlete would see that these serious athletes are also only using the Original G Series line-up and continue purchasing these themselves.

Lesson:  Gatorade was in an enviable position of having its product reach mainstream beyond athletes, but their “athletic segmentation” did not product enough value for trading up for the serious athletes – cannibalization by their Original G Series line-up.  And with the market changes that welcomed coconut water, along with their confusing line-up, something had to give.

Canadian Grocer Re-post: Stopping Beverage Category Erosion

Happy Labor Day everyone!  Normally I provide fresh content on a weekly basis but this week’s original content also appeared on my Canadian Grocer blog from not too long ago.  Not completely fresh content, but there are some relevant points to consumers, not just retailers.  So this week’s post is a re-post of what I wrote up for the publication: Stopping Beverage Category Erosion.

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Soft Drinks like Coca-Cola and Pepsi have long been featured on the front pages of flyers at deep discounts to drive traffic in-store and shopping trips.  These deep discounts have benefitted the retailers as consumers reward retailers with their grocery dollars in addition to buying the featured soft drinks.  However, other retailers see the increased foot traffic and participate with deep discounts themselves.  This has led to category erosion as profits are stripped away, ultimately conditioning shoppers to only look for the lowest prices.

As a result, both manufacturers and retailers looking to protect category margins have conceded margins on other segments, such as water and energy drinks.  Have you noticed that the pricing on these products have gotten more aggressive and feature activity has increased?  What are the next steps for manufacturers, and how do they resolve these category eroding issues?

RB Small Medium Large cansManufacturers have adapted to this new reality by charging identical prices on smaller packages, and creating supersized packages to charge higher price points.  Examples of smaller packaging include the 600ml bottles becoming the 591ml bottles for soft drinks & bottled water, and the non-carbonated beverages coming in 341ml aluminum cans rather than the traditional 355ml aluminum can.  Upsizing examples include the larger 473ml cans from Red Bull and the 710ml cans from Monster Energy and Rockstar Energy.  Smaller package sizes are slightly modified to look similar to the current packaging and may not be noticeable by the shopper.  And the fewer liquid in the container allows the manufacturer to save on each unit’s product costs, effectively taking a price increase.  The larger sizes are an attempt to trade up the buyer, and may also be at a price point that makes the original feature look less attractive.

While manufacturers have gotten creative to curb the deep discounting, retailers have persisted to promote the category on price alone.  What are some alternatives for the retailer to avoid this deep discounting?  For one, use better analytics to understand whether these deep discounts are actually driving new business.  Ensure that the retailer is not subsidizing purchases that would have occurred regardless of the feature.  Also investigate whether the features are happening too frequently and try to match the features with the customer’s purchase cycle.  Understand the discount levels to see if a slightly lower discount will yield the same results – would a 30% discount yield the same results as a 40% discount?

Keeping the customer in mind should be the top priority for retailers, but protecting the category profitability is also a key responsibility.  Only with stronger profitability will the category be able to survive and bring innovative products to store shelves.

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