Kraft’s Dual Brand Strategy – Crystal Light Liquid

Courtesy of harpersbazaar.com

Most people by now have heard of Kraft launching Crystal Light Liquid to grow (or compete) in the liquid flavor enhancers marketplace.  Similar to some MiO offerings, Crystal Light Liquid is calorie free and sugar free.  It currently available the United States in 6 flavors: Strawberry Lemonade, Blueberry Raspberry, Iced Tea, Mango Passionfruit, Peach Bellini and Pomtini.  Their facebook page mentions that it may arrive in Canada sometime in March, but there is no guarantee all 6 flavors will make its way north.  It comes in a squeeze bottle that should satisfy 24 servings (of 250ml liquid), similar to the Kraft MiO squeeze bottles.  Although the product is predominantly targeted toward women – the packaging, colors, and communication portray as much – will this not end up cannibalizing their MiO product?  Or will this launch not cannibalize Crystal Light’s powder-based products?  Why introduce such a product when all signs point toward it being harmful to Crystal Light, and possibly Kraft overall?

Contrary to the traditional thinking of market cannibalization, launching Crystal Light Liquid  is beneficial for everyone – especially Kraft.  Back in September, BevWire wrote about Dasani Drops’ entry into this segment and how its presence helps in growing liquid flavor enhancers.  The Crystal Light Liquid will further bolster this growth and solidify the promise that exists for these products.  And since not all consumers are aware that MiO and Crystal Light are under the same parent company, this will help increase both product’s market penetration.  What appears to be three separate branded players in this space, is actually two manufacturers.  And as the market potential grows from $100 million, Kraft’s size of this market potential will grow as well behind the support of these two branded players.  This dual brand strategy of Kraft may be their response toward Dasani’s entry and a signal to others interested in saturating the segment.  It shows that Kraft is committed to defending their product and shelf space, and maintaining healthy margins for the retailer and themselves.  Crystal Light Liquid’s entry will also make it easier to get the retailer’s attention and gain shelf space, since it signals the manufacturer’s seriousness in supporting this segment and legitimizes it as an important focus.

This gain in shelf space may appear to be detrimental for Crystal Light since it could come at the expense of their powder-based offerings.  After all, both powder and liquid form products fall under the same category of “flavor enhancers” and are shelved in the aisle of grocery or mass supermarkets.  However, one must also consider that the Crystal Light Liquid offerings are potentially more profitable for both the retailer and Kraft.  While they may be trading shelf space away from powder-based products, the trade-off could potentially increase both parties’ “profit-per-square-feet”.  That is, consumers may ultimately be paying more for Kraft MiO and Crystal Light Liquid than Crystal Light powder.  Think of how the MiO Energy is priced identical to the MiO flavors but comes in a “down-counted” 18 servings instead of the 24 serving sizes.  The cost-per-serving indicates that the MiO Energy is actually a more expensive product than the regular MiO.  So while the drinking occasions have not increased with Crystal Light Liquid, the limited serving sizes increases the need to re-purchase the flavor enhancers.  This ultimately translates into wins for Crystal Light, Kraft, and the grocery store.

On the issue of cannibalization, Crystal Light Liquid is ultimately targeting a different consumer.  The company’s views may be that the two products are not cannibalistic but complimentary instead.   Crystal Light Liquid messaging and imagery concentrates on women’s lifestyle and social circles, while Kraft MiO’s messaging highlights individuality and customization.  MiO’s messaging is “Your Drink. Your Way” while Crystal Light Liquid centers around “For Every Shade of You”.  The female shopper that buys MiO may also buy Crystal Light Liquid, but for someone else (ie her friend, mom, etc).

From the Crystal Light facebook page
L: Crystal Light Liquid Peach Bellini highlighting a lifestyle.
R: The subtle hint toward customization with the different colored glasses, but the more apparent communication at the bottle “For Every Share of You” to again emphasize lifestyle and sociality.

The Crystal Light Liquid launch is certainly a positive news as it shows everyone’s commitment to supporting liquid flavor enhancers.  While Kraft wins with two brands and Dasani competes with Dasani Drops, both the retailer and consumer will benefit from aggressive promotions.  A win-win-win situation.

Canadian Grocery Re-post: Gas Pump Vending Machines Coming Soon?

Recently, the American publication Vending Times reported on some interesting news that may increase sales for beverages and other food items as well (link here).  Vendgogh, a company that provides “gas island solutions” have come up with a concept where gas consumers can integrate their beverage and snacks purchases with their fuel purchase.  The gas pump machine that normally asks the customer which grade of gas they want to fill up and if they want a car wash, can now also be programmed to prompt about purchasing drinks and snacks.  As more and more fuel stations are fitted with technology to allow for payment at the pump, these same stations are seeing their basket size decrease with less opportunities to influence the fuel customer.  The National Association of Convenience Stores (NACS) indicates that about half of all gas customers do not go inside the store, and therefore gas stations have half as many opportunities to drive incremental sales.  The premise of this concept gives petroleum stations increased opportunities to convert pay-at-the-pump consumers without them ever having to enter the fuel station kiosk or store.

While fuel is the core of this channel’s business, growing the basket size is just as important here as in other channels.  Customers may prefer paying at the pump since it’s convenient and quick, but gas owners prefer the customer come inside since there’s many more opportunities to up-sell the customer.  Have you bought a beverage or lottery ticket as part of your fuel-up?  That likely is a result of suggestive selling by the store clerk.  Without the ability to add on beverages, snacks, lottery tickets, or cigarettes, the gas station is only getting base business.  And with so many gas stations around, the competition is fierce for the customer’s dollar.  Even the same chain will be competing with the next closest gas station in the chain for the same dollars.

Vendgogh’s beverage gas pump unit re-establishes the suggestive selling opportunity for the gas station.  By maintaining the customer’s convenience to pay at the pump, the fuel station also has the ability to up-sell beverages and snacks, which drive over 40% of a gas station’s in-store sales.  Beverage purchases drive about 25% of the in-store sales, so popular beverage options such as energy drinks, carbonated soft drinks, and bottled water can be expected to be filled in the vending unit.

Gas stations can always rely on one thing: customer trips.  There will always be motorists that need to refuel, and therefore provide gas stations with opportunities to influence their refuel purchase.  Having a machine to assist in growing the customer’s basket should be a welcome tool across the overall petroleum convenience channel.

Dasani Drops: Serious Competition For Kraft MiO

 

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.

HappyWater Enters Vancouver’s Beverage Market

HappyWater – a premium alkaline-based bottled water product – is launching in Vancouver this summer.  From their Twitter account (@LiveHappyWater) and media kit, their bottled beverage can be described as a “100% blend of pure, natural spring and lithia waters from ancient Canadian mountain springs.”  Their Twitter feed also tweets where they’ll be around Vancouver this summer to sample out product to passerbys, so feel free to seek them out for a free bottle if you work downtown.

First of all, what is the difference between “alkaline” or lithia water relative to other types of water and beverages?  Scientifically speaking, there is a pH scale that determines the acidity and alkalinity of all beverage products. On a scale from 0 (acidic) to 14 (alkaline), 7 would be consider neutral.  Searching on the web revealed the following results on beverage acidity: soft drinks (~3.2), juices (~5.0) and coffee (~5.0) are acidic.  Waters have varying degrees of acidity or alkalinity depending on its manufacturing and purifying process.  Aquafina (~5.4) and glaceau smartwater (~5.9) are slightly more acidic on the scale while evian (~7.4) and Fiji (~7.6) are slightly more basic on the scale. HappyWater’s (~7.4) alkalinity puts it in the same arena as evian (~7.3) and Fiji (~7.6).  Since our stomach produces acid to break down our consumables, neutral (milk) and alkaline-based drinks would be some options to stabilize an upset stomach (or balance out the natural acids in our stomach).

Vancouver should be a good market to launch this premium product, given its local sourcing.  HappyWater originates from the Canadian Rocky Mountains, relative to evian (French Alps) and Fiji (Fiji Islands).  While I’m not sure if the location factors into the product pricing, they can be expected to be priced competitively with other premium waters.  Their current availability is localized to Vancouver and parts of the Lower Mainland at the moment, but national and American expansion would be a great opportunity given the premium waters potential in the marketplace.

Until their expansion out East or me making a trip to Vancouver, I’ll just wait to try a HappyWater.

Kraft MiO: Dasani Drops and Other Copycats

This week’s post focuses on the growing trend of liquid water enhancers.  Earlier this week, the Wall Street Journal, Bevnet.com, and BevReview.com all broke news that Kraft MiO will be expecting some branded competition fairly soon (BevReview’s article has some more information, and links to the other two articles here).  While the current market in the United States for liquid enhancers includes MiO and some smaller players, the entry of Coca-Cola’s Dasani Drops signals that the category is viable and ready for more competition.  After all, MiO has been in the market for just over a year and has extended their product line to include caffeine content to reach out to users that want an energy boost in their beverage options as well (MiO Energy).

As the leader and only well-known branded player, Kraft had to invest significant dollars into educating users and bringing attention to the category.  Their product can only be successful with more awareness about the product and liquid water enhancers market.  As a result of increased awareness, private label manufacturers have benefited greatly from MiO’s innovations by driving shoppers into grocery supermarkets and the beverage aisle.  Grocery stores have introduced their own version of the product and placed them side-by-side with MiO but at lower prices.  Shoppers originally came in-store to buy a MiO liquid water pack, but switch to a less expensive option at the shelf because they do not want to sink in so much money into an unknown product.  And now Kraft MiO’s growth and category promotion has attracted Coca-Cola’s Dasani to enter the market.

Smart move by Coca-Cola to wait a year and then enter the market.  Let Kraft do all the work to bring attention to the category and products, monitor their sales and consumer reaction, then enter the category since it merits investment from the beverage giant.  Now they only have to focus on featuring their own product, while promoting the category becomes secondary since all the education costs were bore by Kraft in the previous year.  Kraft MiO will also benefit from the competition that Dasani Drops creates, since that will lead to more dollars spent on promoting products in the category overall.  The stronger category awareness is, the more chances that Kraft can sell their product without promotional dependence.

It’s likely that Coca-Cola’s entry will spark an entry from Pepsi and Nestle Waters in the near future.  When that happens, Kraft MiO will likely see diminishing returns since the category will have grown so much that now their focus will be product differentiation so shoppers are choosing their brand versus that of Dasani, Aquafina, Nestle Waters or some other product (note: there is no confirmation that Pepsi will be launching a liquid flavor enhancer, let alone extend the Aquafina name to the category – this is just a thought).

In Canada, the only liquid water enhancer that I’ve heard of comes from a company called Drink Intuition, which positions their product along the health and wellness trends of stress relief and detoxification.  The liquid water enhancer market would benefit greatly with more category promotion, but Intuition really is a niche player and does not appeal to everyone.  Canada could benefit greatly as MiO and Dasani potentially compete to see who can bring their product into the Canadian marketplace first.  With distribution all set up, it may only be a matter of adjusting their packaging and messaging to meet Canadian guidelines: including French copy and a nutrition table.

Until the product enters Canada, it looks like BevWire will still have to head south of the border to try and find some Kraft MiO and MiO Energy. Soon enough, I will also be looking for Dasani Drops.

Coca-Cola to make more eco-friendly plastic bottle

In a race to be more environmentally friendly, Coca-Cola is planning to introduce to a plastic bottle made partially from plants.  The bottles will be made with up to 30% of plant-based materials, converting  sugar cane and molasses components into polyethylene terephthalate (PET), the material that is used to make the plastic.

Coca-Cola’s first product to use this eco-friendly “PlantBottle” will be the company’s Dasani water brand, and expand to include vitaminwater and certain CSD sparkling beverage brands by 2010.  These certain CSD sparkling beverages are likely to increase Coke, Diet Coke, Coke Zero, and Sprite.  Coca-Cola will provide special on-package and in-store messages to alert consumers of this new type of bottle.

Coca-Cola’s decision to use Dasani as the first brand when introducing this bottle is a good move.  Coca-Cola hopes to promote a healthier perspective, thus choosing Dasani as the first product to launch this new bottle.  By reinforcing this bottle launch with their best-selling beverages, Coca-Cola ensures that the message will reach the maximum amount of consumers.  In addition, these flavors’ wide distribution ensures that more plastic will be saved.

The war between the beverages companies to be more eco-friendly has stepped up.  Among the bigger bottled-water companies, Nestle uses less plastic resin in their water bottles, while PepsiCo recently released an eco-friendly bottle themselves.  PepsiCo has been bottling their Aquafina in these bottles since March.

So far, Coca-Cola says that only sugar cane and molasses can be used to develop this “PlantBottle” but are exploring the use of other plants to create the PET plastic.  Stay tuned for updates on ongoing developments!