What If Pepsi DID Acquire Sodastream?

Sourced from coolest-gadgets.com
Sourced from coolest-gadgets.com

It’s been a few weeks since news reports came out linking beverage conglomerates Pepsi and Coca-Cola’s interest in acquiring Sodastream.  While these reports have since been refuted, this does present an interesting scenario for the carbonated soft drink (CSD) industry should Sodastream become part of either company’s portfolio.  Since Pepsi has been the most commonly linked of the two, what would happen if Pepsi did in fact acquire Sodastream?  How would that change the CSD landscape, or would it change it at all?

Ignoring the growing trends of sustainability, DIY products, and small home appliances, Sodastream has still caught a lot of attention since the Superbowl banned their TV commercial.  The company’s positioning focuses on the environmentally-conscious aspect, touting that its at-home carbonation machine saves tons of plastic bottles from entering the landfill.  One of the qualitative acquisition benefits will include extending the sustainability factor for Pepsi that goes beyond plant bottles.  Is there any better way to deter perception of increasing plastic bottle waste but eliminating the bottle completely?

For the quantitative benefits of this theoretical acquisition, Pepsi will certainly integrate many aspects of Sodastream’s operations into their own.  The integration will create efficiency savings for distribution and production, but likely after a few years since there will be some figuring out to do.  Sodastream would be able to expertly utilize Pepsi’s distribution system to increase their market penetration without having to use up as much marketing dollars as they previously have; this lowers the cost of getting their machines and syrup bottles onto more store shelves.  In addition to heightened market penetration, Pepsi would also hasten adoption  of the sodamixes.  Offering Pepsi-branded syrup mixes will improve consumer confidence for the machines and halo over to the syrup mixes themselves.  Not to mention this blocks Coca-Cola from getting any potential licensing deals with Sodastream to have their syrup mixes packaged for the Sodastream carbonation units.  Not only will the soda enthusiast be able to purchase their favorite branded sodas in gas stations, convenience stores, and grocery stores but now they will be able to make their own at home.

Sourced from vidafine.com
Sourced from vidafine.com

While changing the carbonated soft drink landscape won’t happen as a result of this acquisition, it will fortify another revenue source for the category.  In a global market worth $183 million where the category is well developed coupled with negative connotations relating to health, any incremental revenue source is beneficial.  The benefit of Sodastream beyond their eco-friendly positioning is that it allows the end user to create their own soda.  This allows the end user to be more involved with their soda and own the production process.  While this interaction level is not a solution to the existing health issues, it does provide customization at a time when individuality is increasingly celebrated.

From the news reports, the current price tag for acquiring Sodastream is around $2 billion.  Should consumer trends persist (all signs indicate that it will, which is why its a trend), Sodastream may end up with a stronger valuation and become too expensive for anyone to acquire.  At that time, Pepsi and Coca-Cola may regret the day where they passed on the acquisition opportunity.  At that time, Sodastream may become such a strong disruptive force that the category landscape will be changed.

Liquid Enhancer Segment Legitimized With Powerade Launch

Sourced from www.coca-colacompany.com
Sourced from http://www.coca-colacompany.com

Funny how just a few years ago, no one has ever heard of liquid flavor enhancers but now many people have heard about and possibly tried MiO.  This is due in no small part to Kraft, which created the product segment and put a lot of marketing support behind their MiO to introduce and educate consumers on how to use this product.  And as Dasani introduced their own liquid enhancer to capitalize on the market trend, Kraft innovated to stay ahead of its competition.  These innovations include employing a dual brand strategy by launching Crystal Light Liquid, as well as extending MiO’s platform by branching out to energy and sports drinks.  With recent news about Powerade coming out with a liquid enhancer, this segment appears to provide legitimate profitable returns for manufacturers.  However, is the segment itself big enough for so many different branded offerings?  Will this spur Pepsi to participate in some shape or form?  Possibly with a Gatorade drop to maintain their market share in sports drinks?

Courtesy of www.makeitmio.com
Courtesy of http://www.makeitmio.com

Liquid enhancers have enormous growth potential and despite its infancy, have extended across sports drinks and energy drinks.  This has certainly broadened its consumer appeal and increased the segment’s awareness and adoption rates.  However, the segment still appears to be crowded with four branded players: MiO, Crystal Light, Dasani, and now Powerade.  And it only looks that way because the segment itself is still small.  For all the excitement around MiO, it is still only a $200-$300 million brand.  Combined with Crystal Light, Dasani, Powerade, and even private-label offerings, the segment itself is not predicted to be over $500 million.  But with more advertising support behind each of these beverage properties as well as higher levels of consumer adoption, the segment will grow to be large enough to house these four liquid enhancer brands.  MiO will certainly be rewarded for being the first mover.  Consider this the initial stage of energy shots, when 5-Hr Energy was the only one in the segment and it took some time to gain sales.  As more companies introduced their own energy shots, the segment gained popularity and market size.  Through all this, 5-Hr Energy became the de facto leader in energy shots and rebuffed Red Bull, Rockstar, and Monster.  5-Hr Energy capitalized on the news that other energy drink manufacturers brought to the segment and benefitted from being the most recognized name among the consideration set.  So while it currently appears that liquid enhancers is congested, the potential size of the segment mirrors energy shots, and may even outpace it given less consumer backlash.

With great potential, comes great competition.  We’ve seen Coca-Cola wait for Kraft to prove that this is a viable segment, and then furiously pursue them with their own offerings.  Why has Pepsi not done anything yet?  A Gatorade Drop would certainly gain lots of attention among athletes, not to mention give them another extension to complement their Gatorade Chew.  Pepsi could also come out with a tea offering to start off in a segment where there are no current liquid enhancers (though there are rumors that AriZona is coming out with one soon.)  Given that liquid enhancers can be sold warm and are so compact, they can be stocked on shelves and also at the cash register as consumers complete their purchases.  Pepsi would be missing out on a large opportunity if their only presence were in coolers or displays – far away from the point of purchase.  My guess is that they are likely in the works to launch their own enhancer soon, but only time will tell.

Liquid enhancers are here to stay and has proven to be rich opportunity for the participants.  As the segment gets bigger, it will spell of a missed opportunity for Pepsi if they remain on the sidelines.

Zevia’s Organic Growth Differentiates Them From vitaminwater

Courtesy of Zevia.com
Courtesy of Zevia.com

Zevia recently announced that they were adding three more all-natural soda flavors to their Canadian offerings.  Cherry Cola, Dr. Zevia and Caffeine Free Cola joined the existing Canadian selection that included Cola, Cream Soda, and Ginger Ale among many other flavors.  In total, that brings their total portfolio to 11 sodas for the Canadian market.  Our American counterparts only have four incremental flavors than us, which may prove that our taste preferences are not really all that different.  See all the Zevia flavors here.  However, with the proliferation of soda flavors, will Zevia run into a problem that we have seen with another beverage offering: glaceau vitaminwater?  Will this end up being detrimental to Zevia in the long term, as we have seen vitaminwater peak and start to decline with reduced advertising support?

In more ways than one, Zevia and vitaminwater have common ground that would lead us to come to this conclusion of Zevia’s possible rise and fall.  For one, both beverage brands capitalized on consumption trends.  Zevia gained market acceptance as consumers became increasingly interested in all things “all-natural”.  vitaminwater gained sales as consumers started to look for something less boring than bottled water.  And because both were the leaders of their respective categories, their growth became synonymous with their segment’s growth.  Both companies started out as independent outfits separate from global beverage manufacturers.  vitaminwater as most of know may know, is now a part of Coca-Cola, despite all the separation the hydration brand is trying to create between them.  In terms of product offerings, both have great tasting products that stretch into the double digits.  It is a very plausible assumption to think that Zevia will follow vitaminwater’s path.

However, what sets Zevia a part from this comparison is that they are still a stand-alone entity and not a division within a larger beverage organization.  That makes a world of difference.  While they may not have the luxury of stronger financial backing, they are also growing themselves organically.  When vitaminwater was brought into Coca-Cola, the hydration brand was given much stronger product distribution and piggy-backed off of Coca-Cola’s distribution network.  This helped vitaminwater gain strong market visibility, and at a much quicker rate than when they stood separately.  Unfortunately, the downside of being in a conglomerate beverage company also proved detrimental to vitaminwater.  As Coca-Cola shifted their focus inward to grow their core offerings of Coke, Diet Coke and Coke Zero, vitaminwater as well as other beverages in their portfolio suffered.  They received less advertising and promotional support.  Zevia will continue to grow because they are their own company, and their sole dedication is toward this beverage brand.

Zevia is also not as celebrity-endorsed as vitaminwater.  With celebrity endorsements, they could endorse one beverage now and change their endorsement later when another refreshment company provides them with a more lucrative deal.  And while Zevia has less star power than vitaminwater, they are also certainly less volatile given the celebrity’s reputation.  For example, if a celebrity was perceived negatively by the media, the products and services they endorse would receive a “halo effect” and also be viewed as negative.  Take Tiger Woods and Nike a few years back.  Or does anyone want to have Lindsay Lohan as your spokeswoman right now?

In any case, Zevia should continue to rise while vitaminwater continues to experience growing pains.  While Zevia may still yet encounter the same problems that vitaminwater is currently going through, they still have a ways to go.  The all-natural trend is here to stay, and all-natural sweeteners are getting more widely accepted by consumers.  Let’s just hope that Zevia keeps these things in mind should a similar scenario arise for them.

Coca-Cola Embraces Opening Happiness for Summer 2013

Image from 7-Eleven's twitter account
Coca-Cola’s 2013 cold-activated cans, exclusively with 7-Eleven.  Image from 7-Eleven’s twitter account.

It’s certainly been a busy summer for Coca-Cola with tons of consumer news from around the world.  Through a variety of news sources, BevWire has been able to pick up on a few of these news items.

First there was news of Coca-Cola partnering with 7-Eleven to provide summer-ready cold-activated aluminum cans exclusively (picture above).  These cans are available in 16oz (473ml) but there has not been any indication on whether they will also be available in the regular 12oz (355ml) cans, which would make it available nationwide to all retailers.  This continues a trend of beverage manufacturers making use of thermochromic ink to show that the soda (or beer in the case of Coors) are chilled to an appropriate temperature for cold consumption.

Following the news on color-changing cans, Coca-Cola announced that they had created a soda can that can be shared.  While I’m not fully sure if the designer logo featured in the video is the same as the Coca-Cola logo designed by Jonathan Mak (the same designer that gained fame creating the Steve Jobs Apple logo) – it certainly shows that Coca-Cola is all about passing along the message of happiness.  Being able to twist and share the core product itself may potentially lead to other opportunities about packaging.  And for regions and countries that focus intensely on calorie consumption, these sharing cans may be one way for Coca-Cola to say that they are limiting calorie intake (although this is only a positive byproduct of the original intention).  See the YouTube video below.

Finally, there is news of Coca-Cola’s European team following in team Australia’s footsteps in customizing Coca-Cola cans with popular male and female names (link here).  As per the link detailing their European entry, this followed on the success of Coca-Cola Australian where sales improved 4% with these new customized soda cans.  With the customization project extending out to include a vending machine to personalize Coke cans and bottles, the project is truly showcasing ways to extend warm feelings.

The summer of 2013 is about to begin and Coca-Cola has shown that they are all about opening happiness and sharing this with everyone.  While these initiatives are all occurring in different parts of the world, the message that the company embraces is the same everywhere.  I’m sure that there are other strategies the beverage company plan on sharing the joy with consumers and these will be brought to light either this year, or at some other time.