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.

Starbucks Buys Teavana, Diversifies Beyond Coffee

It appears that Starbucks’ recent purchase of Teavana has some analysts and coffee drinkers scratching their heads.  Considering that the coffee giant already owns a tea brand in Tazo, why would they want to purchase another tea brand?

The simple answer is that Starbucks is readying their continued evolution to a diversified beverage company.  Having changed their logo to remove the words of “Starbucks Coffee” shows their seriousness of extending their brand beyond just coffee, and beyond the Starbucks name. Their past acquisitions of Tazo (1999), Ethos Water (2005), and Evolution Fresh (2011) have been instrumental for expanding their beverage footprint in the consumer’s mind and physical purchase locations.  And while most of these offerings have been incorporated within the Starbucks coffee shops, other products have expanded their reach into grocery supermarkets and other consumer outlets.  Products like the bottled Frappucinos, Starbucks VIA Ready Brew, Verisimo system, Starbucks Refreshers, Tazo Tea, and Evolution Fresh juices and smoothies have all permeated other channels and have seen some form of success beyond the Starbucks coffee shops.

So what can we expect the Teavana purchase to do for Starbucks?  How is this product differentiated from Tazo Tea?  Will there be some form of cannibalization between the two tea offerings under the Starbucks portfolio?

The Teavana purchase will undoubtedly expand Starbucks’ reach outside their branded coffee shops.  Teavana owns and operates their own stores, which may soon incorporate select Starbucks products that fits into the Teavana theme and strategy.  For example, selling Starbucks coffee within Teavana shops may not be appropriate, but selling Evolution Fresh juices and smoothies and Ethos Water may be a possibility.  This cross-selling effort will certainly increase the reach of non-coffee beverages under their portfolio.  Also, considering that Starbucks has started to open standalone Evolution Fresh locations in the U.S., those locations may also incorporate some Teavana offerings as well.  Aside from the bricks and mortar stores that Teavana operates, Starbucks also acquires their online infrastructure where the loose leaf tea products are sold as well.  This also significantly buffs up Starbucks online presence and can provide an entirely new set of learnings and opportunities.  Starbucks has mainly existed as a bricks and mortar presence insofar to create that “third location” away between the home and office, but expanding their online presence gives them a chance to offer additional products to the consumer.  How about purchasing some VIA Ready Brew with that Teavana tea tin?

With regard to product differentiation, it’s commonly understood that the Tazo-branded products are bottled or tea bags.  The main opportunity does not exist in offering a different form of tea packaging, but the expanded consumption occasion.  Tea bags or bottled tea are typically consumed on-the-go or at the office, because the consumer is in a rush and does not have the time to sit and enjoy the beverage.  Teavana’s loose leaf tea allows Starbucks to reach the consumer in their relaxed state – at home or at the office – when they have more time to enjoy their beverage.  In that aspect, these two tea brands should be complimentary to the overall “tea consumer” rather than cannibalistic.  It would also make sense that Starbucks only minimally incorporates the Teavana products into their existing Starbucks establish (similar to Evolution Fresh) while maintaining the operations separately and at arm’s length.

At the end of it all, this acquisition bolsters Starbucks’ presence and further entrenches their beverage offerings into the consumers’ hands – be it at the office, on the streets, or at home.

This also signals a warning shot to the traditional beverage manufacturers (ie Coke, Pepsi, Dr Pepper Snapple Group) that the total beverage landscape is changing dramatically.  Consumers are increasingly turning away from the the sodas, to coffees, bottled water, and teas.   And Starbucks is leading the charge in this area.  If you don’t believe me, check out their video below.

Updated Minute Maid Single Serve Packaging

 

It’s long overdue in the implementation process, but the new Minute Maid bottles have phased into the Canadian marketplace.  Originally launched in the U.S. in 2009/2010 for the full Minute Maid assortment, the single serve bottles appear to be the last ones to be change over to the new packaging.  This may be a result of the labeling changes as well, since the adhesive labeling is now replaced with the plastic shrink wrap.  Here in Canada, that change from paper labels to plastic shrink wrap only took place this past June (could be earlier, but that’s when it was noticeable in coolers and store shelves).  Judging that there has been no backlash on Minute Maid like the Tropicana fiasco, it would appear that this change is a success in the Canadian marketplace.

Ultimately it’s a sleeker looking bottle that places more emphasis on the bottle’s images than the bottle’s content.  With more of the content behind this whole bottle plastic wrap, this makes the product more dependent on the imagery and colors – sliced oranges and leafy green colors.  The bottle itself is also streamlined – gone are the wavy grooves from the previous iteration and replaced with a smoother grip-friendly shape.

While it may not change sales all that much, the new bottle certainly makes the juice brand more current by adapting to the stronger emphasis placed on beverage packaging.

Bolthouse Farms Very Likely To Expand

A few weeks ago I detailed a post where Bolthouse Farms had put up their “for sale” sign and solicited bids from interested companies (article link here). Not surprisingly, Campbell Soup Company was one of the bidders and the latest news indicated that it is now a closed deal – Campbell Soup Company has bought Bolthouse Farms for $1.55 billion dollars. With deeper corporate pockets, Bolthouse Farms now emerges as an even stronger competitor in the premium juice & smoothie beverage category. The linked article above detailed the benefits toward Campbell Soup Company and how it would impact retailers. But what we have not yet discussed is how it would affect the competitive landscape. Which manufacturers and brands will be impacted? Will this change anything in the retail environment?

The premium juice & smoothie beverage segment can count a few niche players as well as two large players. Arthur’s Fresh, Happy Planet, and the not-yet-in-Canada Evolution Fresh juice brand serve as the niche brands. At the other end of the spectrum you have Odwalla (owned by Coca-Cola) and Naked Juices (owned by Pepsi) as your national premium juice & smoothie makers. Bolthouse Farms previously stood closer to the niche end despite its broad distribution in Canadian grocers. Their primary operating space was in the fresh produce section in a grocery store, sitting on the shelf next to Arthur’s Fresh and Pom Wonderful products. This deal will not change where Bolthouse Farms is located, but it will help them on negotiating power and price their drinks more aggressivley because of their newfound corporate support.

The larger affect will happen outside of grocery stores, in channels such as drug, convenience, and on-premise. These channels are typically dominated by Coca-Cola and Pepsi drinks, and will likely include Bolthouse Farms products in the near future. Bolthouse Farms products are already in grocery for the most part, so their expansion plans would involve exploring new channels of growth. And if Bolthouse Farms provides their own branded coolers, then their channel penetration should speed up. Given that Coca-Cola & Pepsi both manufacturer other beverages where the public may view negatively (ie. soft drinks contributes to obesity), retailers may also be more willing to work with Bolthouse Farms with its clean company image.

While the expansion to other channels are immiment, I believe the prime targets to be the Canadian drug channel (ie Shoppers Drug Mart). With this retailer’s expanding its grocery offerings and abundant cooler spaces, Bolthouse Farm should see this retailer as a great expansion opportunity. To further help this fact is that drug stores typically have a healthier perception in the Canadian market (they have pharmacies, cater to the senior demographic, etc).

The sale to Campbell Soup Company just happened and it will take some time to integrate Bolthouse Farms’ operations. Once they have settled in and are ready to expand, be ready to find Bolthouse Farms at your local drug store, convenience store or local food joint.

POM Wonderful In the Headlines For Good & Bad Reasons

Pomegranate juice manufacturer POM Wonderful has frequently been in the headlines these past few weeks, and not all are positive headlines.  Earlier this month the juice company extended their product line to include a smaller single serving bottle: the 236ml (8oz) bottle (one of many new articles link here).  Just last week they were involved in headlines for supposedly losing a Federal Trade Commission (FTC) ruling on deceptive advertising; it’s really about perspective as POM Wonderful believes they have won a considerable measure from the ruling (link here).  What does the FTC ruling mean for POM Wonderful now?  Will consumers still see the same advertising health claims from?  And is the 8oz bottle extension good for business, given that size proliferation eventually leads to product rationalization?

On the issue of the FTC ruling, POM Wonderful’s first reaction was to roll out some advertisements celebrating the judge’s ruling.  While they can no longer claim to prevent heart disease or prostate cancer without scientific research, the ruling agreed that there are indeed significant health benefits.  Beyond the first wave of advertising response, POM Wonderful may likely ramp up their health claims to test the limitations of the FTC ruling.  However, there will be a paragraph about how there was scientific research conducted to prove the particular health claim. The real question then becomes whether it will affect how other beverage products are advertised in the media (ie energy drinks with their claims of alertness, or energy shots claiming no crash, etc).

Relating to the introduction of the 8oz bottle, this line extension should fit well with the rest of the line-up.  One might argue for cannibalization, but the 8oz is going after a different consumer segment and a different consumption occasion.  Unlike soft drinks which has sizes like 8oz, 10oz, 12oz, 14oz, etc, the next largest size from the 8oz bottle is twice as large (16oz).  There stands to be more cannibalization between the 16oz and the 24oz bottle than the 8oz and 16oz formats.  Also, POM Wonderful appears to be targeting the health-conscious parent that wants their kids to think and drink healthy.  The 8oz bottle is perfect for kids, where parents can pack the beverage into lunchboxes or even be sold in school vending machines.   Even at such a small serving size, the bottles are resealable so the actual consumer (children) can use the bottle throughout the day.  In terms of grocery location, the 8oz bottle may not lead to product rationalization just yet; it may not even appear in the same location as the other POM products.  At such a small size, the 8oz bottle may appear in impulse coolers or ice barrels near the checkout where thirsty shoppers may want something tasty, small, and inexpensive to quench their immediate thirst.  The added benefit is then that POM Wonderful now has a secondary location to attract the shopper’s purchases.

In all likelihood, the 8oz bottle should sell well individually and not hurt the sales of other products in line-up.  Given that it is a single serve bottle that is targeted at youth, the natural line extension beyond the single bottle would be a multi-pack like 6x8oz bottles or 12x8oz bottles.  We’ll have to wait and see when that time comes, and what type of advertising health claims the communication shows.

Bolthouse Farms For Sale, Campbell Soup Company Interested

Bloomberg – a business news source – recently cited that baby carrot and juice manufacturer Bolthouse Farms is on the market (link here).  Private-equity firm Madison Dearborn Partners LLC (Bolthouse Farms’ parent company), has received an initial offer from Campbell Soup Company among other bids.  While Madison Dearborn analyzes the different offers, I will assess the Campbell Soup bid to see if it makes any sense.

For a company that is famous for  canned soups, this may seem like a strange portfolio diversification to get into carrots and juices.  However, is it really that strange for a soup company to acquire Bolthouse Farms?   Aside from canned soup, the Campbell Soup Company manufacturers a variety of sauces, crackers and beverages (see their worldwide produce portfolio here).  Campbell Soup Company already has expertise in beverage manufacturing and marketing from its V8 line of juice products.  And Bloomberg’s article hints that V8 will be afforded more resources and receive a stronger focus, given their rising sales while the soup business’s performance is softening.  And it appears that if the deal was approved/concluded, Bolthouse Farms’ juice products would fall under the beverage division while the carrot farms and food processing would be integrated into a vertical supply chain for Campbell Soup Company.

Adding Bolthouse Farms beverages to the company’s beverage portfolio will improve scalability and distribution for both.   There will definitely be opportunities to optimize the two distribution networks since Bolthouse Farms products may be listed in retailers where canned soups may not be available (ie convenience/petroleum stores, organic/natural food grocery stores, etc).  Even if both Bolthouse Farms and Campbell Soup products are listed at the same grocery story, Campbell Soup still gains an incremental area of influence within the store.  Bolthouse Farms refreshments anchors the fresh produce aisle in grocery stores while Campbell Soup products typically resides within the non-perishable shelf stable aisles; and penetrating the fresh produce aisle will pay dividends based on the grocery consumer’s shopping habits.  Fresh produce are located near the entrance so there is an opportunity to influence the consumer immediately when she comes in.  And Campbell Soup can leverage Bolthouse Farms juices to scale up promotions by attaching a coupon to offer a different Campbell Soup product (ie V8 juices, Campbell’s Soup, Pepperidge Farm Goldfish crackers, etc), which are located in an alternate section.  When the shopper wheels the shopping cart down the various aisles, they may be more likely to purchase the Campbell Soup product since there’s a coupon offer.

Campbell Soup Company will further solidify the company’s positioning as a manufacturer of healthy and family-friendly products.  The company’s current portfolio of products are already healthy, while adding Bolthouse Farms juices and smoothies further cements their reputation as a company that provides nutritious products.

Campbell Soup Company has been seeking to broaden its consumer appeal beyond canned soup.  While the company is called Campbell Soup Company, the company portfolio extends well beyond soups.  Their soup portfolio alone has come up with some new innovations, such as the microwaveable soup cups and soup pouches.    This is an indication of a company that recognizes where it needs to innovate and where it needs to acquire; internal growth can only add so much value before the organization must look for outside options.  Given its strong positioning on healthy and family-friendly products, bringing Bolthouse Farms into the mix makes great sense.

All that matters now is to how Bolthouse Farms’ parent company assesses the bids from interested companies.  While combining the two companies’ businesses makes sense from my analytic perspective, there are obviously other business and financial considerations.  However, if Campbell Soup does end up acquiring Bolthouse Farms, I can see many positives from this acquisition.