Coca-Cola’s Reply to SodaStream: Keurig Cold

Courtesy of nytimes.com

Most people by now may have heard of Coca-Cola purchasing an investment stake with the makers of the Keurig machines – Green Mountain Coffee Roasters (GMCR).  For those that haven’t, there’s some quick information from the New York Times here.  As a result of this deal, Coca-Cola appears to be making its first foray into small home appliances and endear itself more closely with consumers.  Experts have called this a great deal for both companies, providing each with mutual benefits.  But is this really the case where both companies benefit?  And what about other companies, should companies like Pepsi, SodaStream, or Starbucks be concerned?  Let’s take a quick look, first at the participating companies and then toward the others that are potentially affected.

For GMCR, this is partnership born out of necessity that will secure their footing in the single-serve beverage marketplace.  Following 2012, Green Mountain’ single-pod (K-Cup) cup patent expired and paved the way for other manufacturers (namely store brands) that could make these beverage pods cheaper.  To ensure survival of this increasingly rich revenue stream (more than two-thirds of the company’s revenues come from these pods), GMCR took to forming licensing agreements.  Coca-Cola was added to a licensing roster that already includes Starbucks, Lipton, Snapple, Timothy’s, Kahlua, and many more.  With a Keurig machine that produces single-serve hot beverages and now one that can product single-serve cold beverages, Green Mountain has certainly done well to ensure its survival.  With Coca- Cola’s reach across the consumer distribution channels, the Keurig machine will see dramatic business growth over the course of their 10-year pact.  Think of what Coca-Cola has done for beverage brands like evian, Monster, and vitaminwater.  An even better scenario would be signing Pepsi to a licensing agreement as well, which will further increase the Keurig’s machine placement among households and strengthen their dominance in making branded single-serve pods.

With Coca-Cola, this is a partnership that further segments the beverage landscape, and answers competitive pressure from new entrants to the ever-changing beverage market.  Coca-Cola is undoubtedly answering SodaStream’s “Sorry Coke and Pepsi” campaign about how the global beverage manufacturer is creating waste through its plastic bottles.  With single-serve pods and small home appliances, Coca-Cola is able to compete in a position similar to SodaStream – providing carbonated beverages at home without the need for plastic bottles.  And Coca-Cola now has an opportunity to exist on the counter shelf within the household, in addition to the refrigerator, pantry and garage.  Think about the ability to remind the consumer to consumer or purchase your product when your products are so pervasive within their household.  The next step to success for Coca-Cola may be investigating opportunities to leverage Coca-Cola Freestyle (create your own beverage mix) with the Keurig Cold, building on consumer insights to provide custom combinations and offer exclusive flavors “voted” by consumers.

Courtesy of belloblog.com. Scarlett Johansson stars for SodaStream’s 2014 SuperBowl spot – “Sorry Coke and Pepsi”.

For SodaStream, this marks their inclusion into the Soda Wars that has primarily existed between Coca-Cola and Pepsi over the past few decades.  If you keep on making eye-catching commercials targeted against the beverage conglomerates, they are certain to pay attention and respond.  This may be detrimental to SodaStream given the extra competition toward securing household counter space, but it also calls for innovation and a return to focus on the product benefits.  SodaStream’s foundation is still their ability to make soda at home, less expensive and without the use of plastic bottles.  Similar to GMCR, SodaStream must innovate and work to secure more licensing agreements.  Beyond Kraft and Ocean Spray, SodaStream may also work to sign on other brands such as Pepsi, Dr Pepper, and many more.

Now that Coca-Cola has invested into single-serve pods, it’s almost certain that Pepsi will respond in some way with their own pod offerings.  They responded in the past to Coke Zero with Pepsi Max and Dasani Drops with Aquafina FlavorSplash, amidst a host of other gap-filling products.  Pepsi surely won’t allow Coca-Cola to dominate the consumer’s counter space when their own offerings are just as robust, so it will only be a matter of time before Pepsi take the Soda War to the small home appliance.  The question is when and with whom.

The dark horse in all this may actually be Starbucks.  Starbucks had trademarked the name “Fizzio” with the intent to produce their own carbonated beverages.  To expand on their own burgeoning beverage empire, Starbucks may need to move up the deadline for when the Fizzio will be launched, or partner more closely with GMCR to serve both hot and cold single-serve beverage pods.

This news of Coca-Cola and Green Mountain Coffee Roasters signing a 10-year agreement has certainly created ripples across the industry.  The impact that has yet to be fully fleshed out with retailers as well, and that itself will be another article in the coming weeks.

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5 “More” Questions with Hard Rock Energy’s David Drow

Hard Rock Energy Image

When people think of the energy drink category, they typically think of Red Bull, Monster, and Rockstar.  To a broader extent, consumers also consider Nos and Xyience.  All of these companies have had to build their brand from the ground up, with very little leverage in the first place.  How would the product’s success change if they had some brand equity they could leverage?  We encounter such a case with Hard Rock Energy, an energy drink licensed through Hard Rock International – the themed restaurant chain with rock and roll memorabilia – to market energy drinks.

BevWire recently connected with David Drow and Brent Campbell for an interview.  David Drow is the Chief Executive Officer and Brent Campbell is the Chief Operational Officer of Enterprise Beverage Group, the licensees for the Hard Rock Energy brand of energy drinks.  What initially was “5 Questions” spiraled into many subsequent questions as BevWire wanted to learn more about the business aspects of Hard Rock Energy.  The below is the second part of the “5 Questions” interview with David Drow.  We will be covering the brand’s marketing tactics, test market results, and David’s views on growth opportunities as well as growth barriers.  Click here for last week’s “5 Questions” piece.

BevWire: How successful has Hard Rock Energy been in its test markets of Chicago and Florida?  Has there been strong trial and subsequent repeat purchases?

David Drow:  It is still too early to tell at this point.  Initial sales have done well with limited support.  Our first test stores went “live” in early December and have done very well with the product.  We have enjoyed 15% share of energy drink sales and have had multiple repeat customers.

BW:  For subsequent expansion beyond Chicago and Florida, will cities with Hard Rock branded properties taken precedent over ones that do not have Hard Rock branded properties?

DD:  The initial test market was originally Chicago only.  It was selected with a couple of key criteria in mind: there was a local Hard Rock presence (this guaranteed brand awareness and would also allow us to utilize those resources in the launch), Chicago has a sizable population base that would allow us to gauge the acceptance of the product, and the population is considered a microcosm of the remainder of the country.  South Florida was added to the initial launch as a way to support our Seminole Tribe of Florida partners.  And let’s face it…. It’s a lot more pleasant marketing a beverage in the dead of winter in Miami than it is Chicago (no offense Chicago!)

BW:  How do you plan on reaching your core demographic target audience (males 18-24)?  What type of specific grassroot and social media tactics will you be implementing that caters to this audience?

DD:  While this is our core demographic, the category is ever expanding.  My direction to my team is “everything social”.  All marketing must have some type of social media exposure for each event or promotion.  We are focusing on music and music related events.  It is not only a good fit for the brand, it plays a major roll in the lives of our key customers.  We are developing both a strong social media presence and a robust website at hardrockenergydrink.com.

BW:  With regard to “everything social”, does that mean Hard Rock Energy’s marketing tactics differ differently between Twitter, Facebook, Instagram and other social tools?

DD:  Our goal is to utilize each social media vehicle to capture certain niches within our target demographics.  Hard Rock Energy’s website and mobile sites are our central hub for all main/universal information on our product and brand.  The Facebook page is used as the main communicator for large-scale communications.  We utilize Twitter for communication to capture current industry trends as well as generate a broader international reach; as we’ve noticed that most of our international audience is on Twitter.  Instagram is utilized to gather information on what the current trends are within the industry as far as collateral goes; but is also our “wild card” resource for reaching our audience.

BW:  What do you see the top three biggest opportunities toward growing of Hard Rock Energy?

DD:  The energy drink category continues to grow, yet there are very few new entries with the power and branding of Hard Rock.  There also appears to be some fatigue with the two majors.  As such, consumers appear poised to consider alternatives.  The levels of interest both domestically and internationally is greater than I ever anticipated.

BW:  What do you see the top three biggest challenges toward growing of Hard Rock Energy?

DD:  Competitors with unlimited budgets, regulatory intrusion, and growing too fast.  We need to ensure support to our partners.

Great insights on this second part of the “5 Questions” with David Drow.  You’ll notice it was actually six questions among this great conversation with David.  As we touched upon the core demographics and how the company’s marketing plan, it’s definitely an indication that the energy drink is focused on building the lifestyle brand that connects with the consumer both online and offline.  Understanding the top barrier to growth of competitors with unlimited budgets ensures that David’s team focuses on delivering success at the most tactical of levels first.  And leveraging on the presence of Hard Rock properties certainly helps as a competitive advantage.  A great “walk before run” recognition to grow their business.  Hopefully we will see this energy drink brand in Canada soon enough.

Thanks again for David’s time, and Brent for arranging this interview!

5 Questions with Hard Rock Energy’s David Drow

Courtesy of amazonaws.com

When people think of the energy drink category, they typically think of Red Bull, Monster, and Rockstar.  To a broader extent, consumers also consider Nos and Xyience.  All of these companies have had to build their brand from the ground up, with very little leverage in the first place.  How would the product’s success change if they had some brand equity they could leverage?  We encounter such a case with Hard Rock Energy, an energy drink licensed through Hard Rock International – the themed restaurant chain with rock and roll memorabilia – to market the beverage.

BevWire recently connected with David Drow and Brent Campbell for an interview.  David Drow is the Chief Executive Officer and Brent Campbell is the Chief Operational Officer of Enterprise Beverage Group, the licensees for the Hard Rock Energy brand of energy drinks.  What initially was “5 Questions” spiraled into many subsequent questions as BevWire wanted to learn more about the business aspects of Hard Rock Energy.  The below is the first “5 Questions” interview with David Drow.  We will be covering the brand’s market differentiation, choice of test markets, and expansion plans.  Next week, BevWire’s interview with Hard Rock Energy will touch on marketing tactics, test market results, and David’s views on growth opportunities as well as growth barriers.

BevWire: What differentiates Hard Rock Energy from other energy drinks on the market like Red Bull and Monster?

David Drow:  When designing the flavor profile, we tried to formulate a product that could be identified as an energy drink, but have a more pleasant taste.  Also, the can graphics prominently display the iconic Hard Rock logo.  At 100mg of caffeine per serving, we have about 25% more caffeine than our major competition.  Our original product is pale blue in color, is slightly sweeter than Red Bull and not as syrupy as Monster.  The carbonation is slightly less than both major brands as well.  Our Paradise Punch has a tropical fruit flavor.  It is pleasant to drink on its own or as a mixer in “adult” beverages.  The Sugar free has 6 calories per serving, no color additives (the liquid is clear) and we use Sucralose as the sweetener.

BW: Hard Rock Energy is currently available in the regional test markets of Chicago and Florida, what do these two test markets have in common?

DD: Both Chicago and Miami (South Florida) markets have substantial population bases and have Hard Rock branded properties.  The Chicago market is really a snapshot of America at large.  They have a big city life, but Midwest culture and values.   Miami (S. Florida) has international flair and culture.  It makes for a good international test without leaving the US.

BW: How soon would international (Canadian) expansion appear on the Hard Rock Energy radar?  And if it’s not international expansion, what are some other test markets that you are planning to enter?

DD:  Upon completion of the two test markets, we intend to seek approval for international expansion to coincide with our continued domestic expansion.  Canada is certainly on the radar for expansion.  On the continued domestic expansion front, we will continue to expand into all major US markets and have personnel presence in each market area.  Internationally, we are working with co-manufacturing partners to develop products and distribution.  The Pan Pacific region looks attractive, as does most of the European market.

BW: How has Hard Rock International’s equity helped leverage growth so far, and how do you plan on leveraging this equity for future growth?

DD: Distribution and acceptance at major retail are the lifeblood of consumer products.  The introduction of any new product encounters intense scrutiny before distributors and retailers will take a product.  The Hard Rock brand has opened doors that would be closed to most new products.  Overseas production will play a big part of future growth.  We also intend to utilize the Hard Rock properties for events and promotions.  What better way to support the brand, then to send people to Hard Rock venues all over the globe?

BW:  Beyond the Original, Sugar Free, and Paradise Punch flavors, is Hard Rock Energy exploring other flavor extensions?

DD:  While we will be looking at line and flavor extensions, we feel that we really need to focus on these three products to create product awareness in the category.

Certainly a great first “5 Questions” session with David Drow.  It shows that taste is one of the most critical defining attributes of the product.  Even with a strong lifestyle brand in Hard Rock International, Hard Rock Energy is building the product’s awareness and momentum the right way, through representative test markets.  Tune in next week for the second part of my interview, where we explore David’s views on growth potential and challenges, marketing tactics.

Thank you David for spending the time to answering the questions, and Brent for arranging the interview!

No post this week

Normally BevWire would provide you with a SuperBowl beverage commercial analysis.  However, work and personal has been quite busy so I’ll be skipping a week of posting.

Check back next week – thanks!