vitaminwater zero Quietly Arrives in Canada

Has anyone noticed the subtle changes to the low-calorie vitaminwater lineup in Canada?  There used to be three vitaminwater10 variants available: go-go, resilient-c, and recoup.  Now they have quietly replaced the go-go and resilient-c 10 calorie offerings with zero calorie offerings.  The recoup (peach mandarin) doesn’t appear to be on the market anymore, in favor of a zero calorie version of XXX, renamed as XOXOXO (acai-blueberry-pomegranate).  It appears that the United States’ transition in December 2010 has finally made its way north of the border this past April.  As it stands right now, there are 9 regular calorie flavors of vitaminwater, along with the three new low-calorie offerings.

One has to wonder why glaceau did not simply launch the zero-calorie offerings from day one, rather than wait a year to eliminate the 10 calories inside the bottle.  How did the 10 calories get eliminated after a few months’ launch into Canada?  Was it fear that Canadians would not adapt to the zero calories right away and needed to be transitioned away from calorie-filled beverages?  Was there a delay in getting approvals on the ingredients, particularly the sweetener?  In any case, the complete Canadian vitaminwater line-up still stands at 12 flavors.

Having 12 flavors makes it challenging to manage the product portfolio.  The benefit of this vitaminwater zero transition is that it will not impact the overall shelf spacing – only the existing area that vitaminwater product occupies.  However, 12 flavors for any product is quite significant, and getting a retailer to list all 12 at the same time will certainly be difficult.  Take for example Red Bull, which has found success with only three variations (Red Bull, Sugar Free Red Bull, and Red Bull Total Zero).  Or Coca-Cola, which also has three offerings (Coke, Diet Coke, Coke Zero).  Both these brands have fewer flavors and have been very successful.  Monster Energy and Rockstar Energy are also successful as a result of their broad portfolio of products – but not all products get listed in the retailer.  The most successful brands have fewer variations and can command more shelf space.  They also tend to be leaders in their respective categories.  vitaminwater seems to be buck that trend.

Is vitaminwater a leader in the enhanced or flavored waters category?  Sales data would almost guarantee it as such.  Why would they need so many flavors, when traditionally four or five flavors will be enough?  The answer is portfolio shelf space relative to sales.  If the vitaminwater portfolio commands 40% of the category sales, they should be allocated 40% shelf space.  After all, the argument is that the cooler space should reflect market conditions for the consumer.  This is why in the summer there are less shelf space allocated to juices, but more to water and sports drinks.  Having a broader portfolios always gives you more opportunities to create shelf space and in turn sales.  Just look at how Gatorade has been able to gain more shelf space following its prime/perform/recover extensions.  So while the majority of sales may come from the most popular flavors, the less popular flavors also have a significant role to play in creating and extending shelf space for the vitaminwater total portfolio.  Imagine that the sale for one vitaminwater flavor was marginal relative to the total portfolio, but had two shelf facings.  That flavor still remains on shelf to “hold space” for other better performing flavors, and allow the retailer to reduce that flavor to one facing while increasing facings for another better performing flavor.

Optimizing the shelf space ultimately falls onto the beverage category manager’s responsibility.  As long as vitaminwater’s broad portfolio keeps making sales, it makes difficult for other enhanced waters like Aquafina Plus to gain shelf space.  Once you secure the shelf space, it’s up to you to structure and space out your products to protect your shelf space.

 

 

 

Kraft MiO Enjoying Exclusivity in Canada…For Now

Kraft’s liquid beverage enhancer MiO is now available in Canada, after being available in the U.S. for over a year.  My earlier post detailed the MiO’s impact on the American market, how it has led to line extensions as well as inspired copycats (link here).  While MiO is still in a state of infancy in Canada and offers very few challengers, it’s worthwhile to look at the example south of the border to see what type of impact it may have in Canada.  Here’s the first MiO commercial for Canada, followed by the American commercial link below.

American MiO commercial link here.  The differences are quite obvious in its message and communication, since each ultimately caters to different audiences.  Kraft Canada has decided to target 18-34 year old males with the MiO (article from Strategy Magazine details MiO’s Canadian strategy here).   With regard to the business impact, will the MiO inspire copycat products from Coca-Cola or Pepsi?  Will it also lead to caffeine-infused line extensions like MiO Energy?

While there exists a template in the United States, it’s important to note that the two markets are decidedly different.  As we’ve already seen, Canadians do not react to the same type of messaging and need customized advertisements.  Further to the differences, Canadian regulations also stipulate stronger focuses on health-consciousness (ie calorie listings on packaging) and product compositions (ie  mandatory nutritional tables).  This all boils down to the point that what may works in the United States may not work here in Canada.

Kraft Canada will work to grow the category of liquid flavor enhancers, and this will lead to copycats.  With Kraft bearing the education costs and the initial market research, other beverage organizations will be able to see what type of opportunities exist in this category.  Judging by how the American market is performing, the category does have growth potential and can sustain more than one branded manufacturer.  Understanding their own production & distribution capabilities, the entry of Coca-Cola, Pepsi, and even Dr Pepper Snapple Group in Canada seems just like a matter of timing.  Currently on grocery store shelves, the MiO sits by itself with powdered drinks like Crystal Light, Kool-Aid, Nestea without any store brands.  It would appear  that at this time, even private labels are hesitant of coming into the market and are watching to see how the MiO will perform first before jumping into the category.

How about the MiO Energy, will it enter Canada?  It is an intriguing product because the user can personalize their beverage and control the amount of caffeine they would like in their drink.  However, with the increased attention on energy drinks, their high caffeine content, and their adverse effects, will this product be successful if launched in Canada?  My perception is that it will extend into Canada, but their success hinges on their market positioning. Positioning it as a customizable caffeine drink against coffee, rather than energy drinks may be more successful.  Coffee is generally more acceptable as a caffeinated beverage over energy drinks due to their lower caffeine concentration.

In the meantime, Canadians still have the regular Kraft MiO to enjoy in four flavors pending more introductions.  Enjoy the exclusivity while it last MiO, because it appears that you’ll have to defend your shelf space soon enough.

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.

Jones Soda Expands Their Product Portfolio

Jones Soda recently put out a press release detailing their upcoming entry into the sparkling waters segment, launching three flavors of sparkling water under a product line titled “Au Naturel”.  The press release in its entirety is available here, and BevReview.com covered some additional information talking about other products that Jones has previously launched and/or re-introduced:  Jones Naturals, Jones GABA, and Whoopass Energy Drink among others.  The link to BevReview’s piece can be found here.   Jones Soda’s press release also indicated that the product line will be stocked in natural grocery stores, which mean that stores like Whole Foods, Choices Food Market, and Urban Fare may have these products in stock soon.

This is an interesting launch for Jones, since the most of their previous beverage introductions have been in the premium soda and energy drink categories.  That is not to say that 24C, Jones Juice and Jones Naturals are not successful, but they have not been able to capture the same level of publicity and success that the other launches recorded.  The launch of Au Naturel marks an entry into another completely new category, one with a different set of competitors and challenges.  The launch still provides a level of similarity for Jones Soda since their most successful product launches share the following characteristics: premium and niche.  For example, Jones Soda itself using sugar cane for a variety of their 12oz glass bottle sodas and Jones GABA doesn’t include caffeine.  This gives Jones experience with bringing premium beverages to market – the category may be different but the experience and skillset should be transferrable from premium sodas to sparkling water.  Also of significance is that sparkling water gives them a shelf presence in a different area of the grocery store, or in another set of grocery stores altogether.  Au Naturel will be distributed in natural grocery stores at first, but may expand to regular grocery stores if there is enough traction.

On the challenges that Jones will face, they may be similar to the challenges that Jones Soda faced with launching their Juice, Naturals and Organics products.  These other categories all have a different of competitors, and much more store-brand (private label) competition.  Unlike sodas, the markets are less regulated and monopolized, making competition more likely.  The category itself is more commoditized, and telling consumers to trade-up to premium sparkling water is a significant problem.  Despite bottled water sales growing this past year, the category is currently challenged with educating consumers on the added benefits between tap water and bottled water.  With all these challenges, does Jones Soda’s expertise with featuring premium soda transfer over into featuring sparkling water?  Will Au Naturel be a short-lived offering, an experiment to see how another category may provide diversification for the company?

Even with all the challenges that the water category brings, I feel that this product launch has a stronger chance of success that some of Jones Soda’s other launches.  The key difference is that water itself is seen as wholesome and healthy, and the market trends shows consumers increasingly prefer healthier alternatives.  In order to compete with the more established sparkling water players, Jones may need to look to alternative channels to gain distribution and popularity.  One suggestion may be to look for opportunities in the on-premise channel such as salad & health food joints, and smoothie & yogurt shops.  By stocking their sparkling water in these establishments, Au Naturel aligns themselves with healthier alternatives that shoppers want.  Gaining traction in the alternative channels leverages on these shoppers to look for their products in the traditional grocery store and gain more shelf space.

Since consumers expect their food and beverage options to become increasingly health conscious, Au Naturel’s entry into sparkling waters is preemptive and a good chance to diversify their product offerings.  Should Au Naturel see strong sales in their current grocery stores, it is likely that their expansion into more locations would come quickly.  Cross-border expansion may also be a possibility at that time, and hopefully that means I’ll be able to find Au Naturel locally rather than having to make a trip down to the U.S. to find it!

Coca-Cola Freestyle – Full Steam Ahead

Coca-Cola had already launched their 125 flavor fountain machine three years ago in some US test markets.  Named “Freestyle”, this fountain unit stores up to 125 flavors of soda, juice, sports drinks, and flavored waters - and sends consumption information directly back to Coca-Cola headquarters.  Data analysts at the headquarters can then tell you which flavors are most popular at each location, at a specific time of the day, and see which flavors are mixed together most often.  Ad Age’s Natalie Zmuda has more information on this machine and its success in the test market as well as some upcoming advertising media support for the unit (link here).

However, I’m more interested to see what the market impact of this fountain machine will be.  Will this fountain unit show up in all quick service restaurants?  As is the case in a duopoly type of industry, will the other competitor (Pepsi) react or do anything?  Since this machine is so successful in the United States, will this be launched worldwide; or to quench my curiosity, will this unit make its way to Canada?

Given that the machine stores up to 125 flavors and has been tested in high traffic on-premise (quick service restaurants) locations, its safe to say that it will not appear at your location Joe’s Diner.  With the technology involved for the Freestyle, it’s likely very expensive and the argument to have it at a local restaurant that may not sustain high trafic levels will come by quite often.  Coca-Cola would like to launch this machine across the United States so they can mine data on consumers in every state to find out how their consumption habits differ, so if the traffic levels justify having a Freestyle fountain unit, they will undoubtedly install one there. 

Will Pepsi react to Coca-Cola?  The restaurant channel for both Coca-Cola and Pepsi are enormous, and with Zmuda’s Beverage Digest statistics indicating that Coca-Cola (70%) and Pepsi (19%) market shares for this channel so far apart, it’s very likely that Pepsi will react and strike back.  If the technology is not patented by Coca-Cola, Pepsi may try to develop a fountain unit that holds numerous beverage flavors as well.  If the technology itself is patented and there’s no workaround, then Pepsi will explore some other options to gain market share in this channel.  During the time that Pepsi lost the No.2 cola position to Diet Coke, Pepsi had been actively promoting their Pepsi Refresh project, as well as other beverages in their portfolio like Pepsi Max.  By focusing efforts on Pepsi-cola and specifically on fountain, Pepsi may be able to re-gain some lost momentum. 

However, at the end of the day, the most profitable channels for beverages involves bottles so losing in fountain does not mean you lose overall.  If Pepsi were to gain strong market share in the convenience, grocery supermarket and drug store channels then losing in the restaurant may not seem as important (less important overall but not as important – restaurant market share is a component to their overall market share).

As to whether the Freestyle will make its way up north or elsewhere, it seems like a distant possibility.  Again working on the belief that Coca-Cola would like to understand how consumption habits differ from state to state, it is also important to understand these habits country by country.  The insights from understanding how consumers may choose some flavors more often than others may enable Coca-Cola to save money on launching future beverage offerings (ie. Cherry Coke Zero, Raspberry Nestea, etc).  My belief is that once the Freestyle has gained enough publicity and momentum in the United States, other countries will start asking for this machine and support.  And since Canada is similar to the United States in demographics and geography, this makes Canada a very likely second country to implement the Freestyle.

For the readers that are in the United States where the Freestyle machine is tested, have you seen the Freestyle?  If you have, please leave a comment on which flavors you’ve mixed together.

Kraft To Launch New Liquid Water Flavorers

Kraft is set to launch it’s first new product in 15 years, and it’s a zero-calorie, liquid water flavor enhancer called Kraft MiO.  Available in six flavors (berry pomegranate, fruit punch, mango peach, peach tea, sweet tea, and strawberry watermelon), MiO is packaged in a water droplet-shaped plastic bottle that will yield 24 servings.  Nutritional information on the Kraft MiO’s Facebook page (link here) says that it’s no calories, no artificial flavors, and no caffeine.  However, as USA Today pointed out in their report on MiO (link here), it does contain artificial colors, sweeteners, and preservatives.  The product – which is similar to Kraf’ts Crystal Light powder – will launch March 7 in the United States, but no word yet on whether it will come up to Canada.

While some the news reports and Kraft propaganda claims that this product will revolutionize the water enhancers category, I’m not fully convinced.  Will consumers see this only as a novelty item, try it once and not re-purchase?  And since water enhancers are mainly in powder form (with Kraft having a large market of the powder water enhancer category), how much cannibalization will occur?  Will consumers want to trade up from the less expensive powder format, for the more expensive liquid format?  The idea of a liquid water flavor enhancer is fantastic, and if Kraft is able in getting consumers to adopt MiO beyond the trial stage it will be a huge success for both the product and the category.  Right now, Kraft is not only trying to introduce a new product, but educate the public on the new method of flavoring their water.  The majority of consumers that flavor their water uses a powder, so changing behaviors and habits might take a lot of marketing.  And on the cannibalization factor, getting consumers to switch away from powder to liquid will see consumers leaving Crystal Light (hopefully for MiO), just how many will be the question.  In the end, anyone consumer that trades the powder format for liquid will likely be trading to MiO since there are not too many other substitutes on the market right now.  However, unless the cost to product MiO is significantly lower than Crystal Light, Kraft may actually be taking in less profit.  A package of 30-count Crystal Light currently retails for $13, working out to 43cents each serving, while a 24-serving of Kraft MiO will retail for $3.99 (breaking down to 16cents each serving).  Consumers that work out these calculations will see that MiO gives more value than Crystal Light and switch to MiO, leaving Kraft with savvier consumers, but less profits.

MiO can work, but you really have to wonder if it’s in Kraft’s best interests to have it work.