Beaver Soda and Beaver Buzz Energy enters US, but at what price?

Courtesy of www.beaverbuzz.comBeaver Soda and Beaver Buzz, two brands of functional beverages produced by Double D Beverages Corp is expanding into the American market.

“Until recently there has been such a saturation of new products and we didn’t want to get lost in the mix moreover we really felt we needed to build a strong enough brand and company in Canada before we attempted to gain a foothold in the United States” said Double D Beverage Corps. Co President and CEO Richard DeBanks. “Let’s face it, the US is a game changer it’s going to demand complete focus and an executable strategy.”

DeBanks also suggests, “In the last few years it’s been ok for the big multi nationals to throw in another SKU and ride double digit growth, but that’s no longer the case.  Any growth or sustainability in the category will only come from products with a genuine point of difference. and we can offer distributors and retailers a profitable addition to their portfolio.  It’s been proven time and again that if you offer a better product at a competitive price and you support your distributors and retailers you will grow your brand and gain market share.”

Double D Beverages will be releasing 3 Beaver Buzz Energy flavors (Cirtus, Saskatoon Berry, and Green Tea) along with two Beaver Soda flavors (Canadian Cola and Retro Root Beer).  Distribution will be through 7-Elevens in Washington, Oregon and Northern California.

An interesting area to consider will be the company’s pricing strategy.  The Beaver beverages comes in a 355ml (12oz) package, while the majority of energy drinks come in a 473ml (16oz) can.  The only other 355ml energy drink out there is Red Bull.  If Beaver Buzz Energy launches into the US market with a 355ml package size, it will be interesting to see what price point they set.  Red Bull is currently priced at $2.99/355ml can, while most 473ml energy drinks are priced at $2.19.

Should Beaver be priced at $2.99 like Red Bull, because it is a 355ml package?  Of course not, Beaver is trying to penetrate the market and have nowhere near as much brand stature and recognition as Red Bull.

Should Beaver be priced at $2.19 like all the other energy drinks that are 473ml?  If it does this, then why would consumers choose to purchase Beaver in the first place?  The price is the same as other energy drinks, but the product is smaller and offers the consumer less value.

Then what price should Beaver beverages set?  $1.99 may be a good starting point.  This price shows the consumer that they will receive similar value compared to Red Bull or the other energy drinks.  With Red Bull bring at the same size but $1 more, it may be easy convincing price-conscious consumers to purchase or try Beaver beverages.  In addition, being smaller than a 473ml energy drink, a lower price shows the understanding of this size difference and a willingness to compete.

The price for Beaver Buzz Energy will be an interesting point, and we will know what they set for prices when it launches on July 1st 2009.

Pay attention to drank, the drink that slows “your roll”

drankbeverageDeveloped and produced by Innovated Beverage Group Inc (IBG) and launched in the United States since early 2008, this lightly carbonated beverage contains ingredients (melatonin, valerian root, and rose hips) targeted to help the user relax their mind and body without medication or sleeping aids.  Melatonin is a hormone released in the human brain to regulate the sleep cycle, while rose hips and valerian root are two ingredients that contain calming agents to help relieve the user from stress and insomnia.

The initial marketing targets the hip hop community, with artists such as Ludacris, TI, Three 6 Mafia helping develop the beverage’s image.  Since its introduction, this beverage is gaining traction as it has signed up numerous local distributors across the United States, and recently gaining nationwide distribution with 7-Eleven’s convenience stores.

Having gained national distribution in the United States, what will IBG’s drank beverage do next?  Develop new flavors to increase the offerings to the public?  Stay with the current flavor and gain international distribution?  Both are important steps, and IBG may very well be working on achieving new distribution, but they should also focus on increasing their product offering.  By increasing variety drank will also be able to leverage on the success of their current flavor (grape) and introduce new flavors.  Also, having variety increases the product’s shelf presence.  In a business environment where product positioning is paramount, IBG should look to produce new flavors to serve a double benefit.

drank is currently distributed in 24 of the 50 US states and is found mainly in the southern states.  When and if this beverage makes it way up north, feel free to try one to see how it will “slow your roll.”

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!

Vitaminwater Sync: Download of vitamins and antioxidants

VWsyncThis summer, vitaminwater will be cross-promoting their new vitaminwater flavor in a collaboration with MySpace.com.  To promote their new flavor – Sync – vitaminwater will be producing 24 million bottles of this Berry-Cherry flavored drink nationwide with the MySpace logo and an under the cap code.  Users may redeem this code to download a free MP3 song by going to the MySpace website.

This marks the first time that vitaminwater launches a flavor through a cross-promotion with another company.  The campaign, which runs until July 31, will be supported through radio and magazine advertisements.  In-store advertisements will also support this campaign, with celebrities like Carrie Underwood, Alicia Keys, and 50 Cent making appearances to promote this flavor.  Sync, which was released in April, is already among vitaminwater’s top performances.

vitaminwater has been existence for quite some time, this does mark the first time where cross promotion is used to market one of its beverages.  However, given the success of the brand, and the struggles that MySpace is having, one has to wonder why MySpace has been chosen for this partnership.  The on-package advertising tagline –  “Download of vitamins and antioxidants” – certainly helps with making this work, but wouldn’t iTunes have been a better partner for vitaminwater?  Or they were aiming to build a strong social network following, wouldn’t Facebook have been a better option?

If selecting a strong music partner, iTunes would have been a better choice than MySpace.  And Facebook may have been a better partner if vitaminwater was only interested in building a social network following.  However, MySpace offers the best combination of functionality for vitaminwater.  iTunes would have been too narrow of a choice (music only) and therefore wouldn’t have been the most appropriate choice.  MySpace is stronger in the United States (where this marketing campaign is being executed) so they would make a better partner.  MySpace’s website seems to offer its users more functionality and would therefore allow users to express themselves better with the brand.  Not to mention that the celebrities (Carrie Underwood, 50 Cent, etc) have a stronger tie to MySpace than to Facebook.

It will interesting to see if this campaign meets expectations.  Conversion metrics indicate that social networks are among the lowest to convert consumers into customers, and MySpace is currently struggling to turn a profit.  BevWire will stay updated on this and try to evaluate this after the campaign is fully executed…

PepsiCo’s bid for Pepsi Bottling Group labelled “inadequate”

Pepsi Bottling Group (PBG) announced yesterday that the board of directors has reached an unanimous decision to reject the PepsiCo bid to buy out the bottling group.  PBG’s CEO Eric Foss sent a letter to PepsiCo’s CEO Indra Nooyi stating the following:

May 4, 2009
Indra Nooyi
Chairman and Chief Executive Officer
PepsiCo
700 Anderson Hill Road
Purchase, NY 10577

Dear Indra:

We are writing to respond to your proposal of April 19 to acquire all of the outstanding shares of common stock of The Pepsi Bottling Group, Inc. (“PBG”) not owned by PepsiCo. A Special Committee of the Board of Directors of PBG (“the Special Committee”), comprised entirely of independent directors, has carefully reviewed your proposal with the assistance of independent financial and legal advisors. Based on the unanimous recommendation of the Special Committee, the Board of Directors of PBG has concluded that the proposal is grossly inadequate and not in the best interests of PBG and its stockholders.

PepsiCo’s proposal substantially undervalues PBG for many reasons, including:

* Opportunistic Timing: Your proposal was made shortly before the public release of PBG’s strong first quarter 2009 earnings on April 22. As you know, PBG exceeded Wall Street expectations for the quarter, raised its full-year guidance for earnings per share and operating free cash flow, and provided details of its plans to achieve over $250 million in cost and productivity savings in 2009 on a standalone basis.
* Inadequate Value: The value of your proposal is substantially below PBG’s intrinsic value, as well as the value that would be implied by comparable transactions. Your offer is at virtually no premium to market given PBG’s first quarter earnings and upward revision to full-year EPS and operating free cash flow guidance. Transaction premiums, especially those including cash consideration, have been very substantial since the market dislocation last September.
* Understated Synergies: We believe you have substantially understated the synergies that would be available through the combination you have proposed. As you know, PBG has thoroughly analyzed the savings and efficiencies that could be achieved through a transformation of the Pepsi system. Based on our analysis, we are confident that readily achievable synergies are multiples of the $200 million you referenced.

PBG values its longstanding relationship with PepsiCo, but the PBG Board will not agree to a proposal which does not reflect the true value of PBG. Accordingly, based on the Special Committee’s unanimous recommendation, the Board has taken customary steps to protect PBG and its stockholders from opportunistic acquisition attempts.

We remain confident that PBG’s continuing efforts to strengthen its brand portfolio, further improve its performance through operational excellence, and capitalize on geographic growth opportunities position PBG to create substantial value well into the future.

Sincerely,
Eric J. Foss Ira D. Hall
Chairman of the Board and CEO Chairman, Special Committee of the Board of Directors
The Pepsi Bottling Group, Inc. The Pepsi Bottling Group, Inc.

PBG is rightfully portraying its value to PepsiCo saying that the bid is inadequate.  Some analysts have pegged the cost savings to be around $600 million, rather than the $200 million that PepsiCo believes it will recoup by acquiring their bottler.

Now the ball is in PepsiCo’s court, and they must decide how determined they will be in pursuing this acqusition.  Analysts are confident that PepsiCo will submit a higher and more attractive offer, and it makes sense to acquire PBG to gain cost savings and  increase efficiency.  However, what is the price at which this will settle?

PepsiAmericas, the other major Pepsi bottler, still has not responded to PepsiCo’s offer yet.

Stayed tuned for further developments…