Pepsi Brings Propel Back to Gatorade

Propel – from the makers of Gatorade

After a couple years differentiating itself focusing on the lifestyle space, Pepsi is re-launching Propel water under the Gatorade hydration portfolio.  From AdAge, Natalie Zmuda shares that the enhanced water brand will update its product packaging, remove the “zero” from its product name, and position itself as a hydration beverage for regular exercisers (article link here).  Unlike Gatorade, which is targeting the serious athletes and is a sports drink, Propel helps fulfill an athlete’s need with water – not an isotonic.  Still, the question remains how effective can Propel compete within the crowded enhanced waters space?  And given all the changes to the Propel franchise, how will consumers perceive Propel after another restage?

With popular brands like glaceau vitaminwater, glaceau smartwater, and SoBe Lifewater in leading market positions, Propel still manages to control a 13% market share.  It has remained competitive as a result of the brand’s equity and the consumer’s affinity with the hydration beverage.  The franchise will look to strengthen its market position by catering toward “routine exercisers” and piggy-backing on the Gatorade name.  Their updated packaging will feature the line “from the makers of Gatorade” to drive awareness and availability.  This point is critical to Propel’s growth, as owning a part of the consumer’s mind becomes increasingly important with the enhanced waters market expanding to include with more brands in recent years.  Even Pepsi themselves has plans on introducing a premium water brand – Qua – within the year. (article link here).  The competition within this segment is fierce, and owning a particular segment – the casual athletic segment – helps Propel stake its claim in enhanced waters.  With Gatorade also catering to the athletic segment, it would not be surprising to see more promotional efforts where Propel and Gatorade products complement one another.

Propel Water. In 2009 (L) and in 2014 (R).

The issue surrounding product perception could have been a tougher obstacle to overcome.  Propel was originally introduced under the Gatorade before moving away from the athletic consumer in 2011.  As consumers and their drinking habits evolved, the Propel brand followed the moving target to become more of a lifestyle water brand.  Instead of continuing to target males/females 25 and above, their core target demographic moved up to Boomers and Generation X.  Measured media spend to celebrate the new positioning was over $10 million.  Three years following this direction, Propel is changing their focus and advertising message.  Again.  If not for leveraging the Gatorade brand name, Propel may have a tougher time connecting to younger consumer segments after structuring the communication toward a difference audience.  With the sports drink’s backing, Propel has a stronger platform to broadcast their marketing message toward athletes and exercisers.

Regardless of the marketing message and target demographic, the product fits into the changing needs of consumers.  Propel is well-received as evidenced by their market position.  With the support of Gatorade, Propel’s path on the road to success becomes much less challenging.

Propel The Workout Water

Pepsi Next May Find More Success in Canada

After launching in other parts of the world for the past two years, Pepsi Next officially launched in Canada.  Unlike the American version that contains 60% less sugar compared to the regular Pepsi, the Canadian version contains 30% less sugar.  The difference is a function of the sweetener composition.  The American version is sweetened with artificial sweeteners such as high fructose corn syrup, acesulfame potassium, and sucralose.  The Canadian version is naturally sweetened with stevia extract. This difference affects how Pepsi Next is marketed on both sides of the border.  How will Canadian consumers respond to Pepsi Next and its marketing communications?  More curiously, how much of the marketing communication will be customized to the Canadian market?

Pepsi supported Pepsi Next’s introduction with a pre-launch promotion, partnering with the NHL and the Heritage Classic hockey game in Vancouver.  Here is part of the Canadian consumer reaction to the beverage as captured by Pepsi below.  The initial consensus indicates positive response to the beverage.

While mid-calorie soda is still an emerging product area for Canadians, it is certainly on point with what most people are looking for.  Canadian consumers are more health-conscious and more proactive at seeking out healthy food offerings.  Sugar intake and calories per serving are more top of mind for Canadians shopping within grocery stores.  A product that provides the same taste without any bitter aftertaste (like the American Pepsi Next) and contains less sugar helps to lessen the guilty burden.  Naturally sweetened with stevia also helps to increase adoption since artificial sweeteners are also perceived to be less healthy.  Consider Pepsi Next similar to the early successes of the vitaminwater Canadian launch.  The enhanced water brand pioneered a new segment with a health-based product positioning at a time when consumers were beginning to question what they eat and drink on a daily basis.  The beverage met their requirements given its appeal as a great tasting healthy product.  While Pepsi Next is still a soft drink and cannot be considered “healthy” in the traditional sense, it is healthier relative to the other soft drinks.

Following it’s launch, Pepsi Next has ran a TV commercial adapted from the American Pepsi Next “Baby” spot.  The Canadian version included some very noticeable differences.  The key components being the refreshed packaging, the slogan of “Taste It to Believe It”, and of course, the “30% less sugar”.  The call to action of “Taste It to Believe It” is clearly catering to the Canadian audience.  The American slogan is “Drink It to Believe It”.  The customized “Taste” instead of “Drink” speaks toward a different value system between the two countries.  “Drink” implies consuming the entire beverage.  “Taste” obviously imply giving the product a try.  Perhaps the Canadian population may be more cautious at first toward trying a new beverage, but adapting the slogan clearly shows customizing the message toward the Canadian audience.  In order for Pepsi Next to succeed in Canada, this is a great first step.

The truly telling piece will be how Pepsi Next is supported following the launch period.  We know from earlier articles that Dr Pepper TEN and Pepsi Next are not sustaining earlier launch-period sales following reduced media support (article here).  With less attention dedicated toward the product, consumer focus will shift toward other health option.  Pepsi Next can maintain its launch momentum and also continue its early success if it keeps advertising to maintain its awareness levels .  Let’s hope the Canadian marketing team learns from what happened in the U.S. and find more success than its neighbors south of the border.

Starbucks Refreshers Get “Refreshed”

Courtesy of starbucks.com

The Starbucks Ready-t0-Drink Refreshers hasn’t been on the market for a very long time, but are already undergoing a packaging update and product rationalization.  In addition to updating their packaging graphics, Blueberry Acai is replacing the Orange Melon variety.  It’s curious to see changes so quickly to both the product line-up and packaging.  Does this imply that the Orange Melon flavor was unpopular with consumers on both sides of the border?  Was the previous packaging not resonating with Starbucks consumers?  Both old packaging and flavors are still available in grocery channels, which may add to the confusion that shoppers see at the shelf.

The packaging refresh changes the upper body of the aluminum cans.  With the update happening so soon after international launch, Starbucks must have monitored the progress of these new products closely.  The results may have indicated lackluster sales and an inability to connect with the consumer.  The logo and “Starbucks Refreshers” name now sit in front of a silver background, with the name appearing on black font. The subsequent communication of product benefits also changes, now highlighting its real fruit juice and vitamins.  It appears that the main changes are the font color and the benefit callouts.  As such, it leads me to believe their consumer research may have indicated product confusion around what the can contained.  Were the contents coffee, given it’s green coffee extra callout?  Did consumers clearly see the Starbucks logo in front of color clashes of purple, orange, and pink?

From a cosmetic perspective, the new packaging certainly looks more appealing and communicates the product benefits more clearly.  Product confusion is reduced with the “green coffee extract” wording removed, replaced with “real fruit juice” and the vitamin callout.  The green Starbucks logo in front of a silver background also showcases the brand identity better, and ultimately better for brand equity and visibility.

What about the Orange Melon flavor?  Were sales of this item so poor that it merited rationalization just one year after its launch?  Could the Blueberry Acai flavor not have been an incremental product to their Refreshers portfolio?  BevWire had tried both the Strawberry Lemonade and Raspberry Pomegranate, but not the Orange Melon.  Are other beverage consumers’ taste preferences similar to mine?  If this was the case, it certainly would indicate that the Orange Melon flavor was the least considered option among the Starbucks ready-to-drink energy drink line-up.  It would merit rationalization quicker in order to preserve retailer confidence in the burgeoning food and beverage company.

While changes within the Refreshers line-up is surprising, it certainly shows that the company is investing support behind these new products.  Making product and packaging changes requires financial investment – especially when done so quickly.  Hopefully this is an indication that Starbucks plans to commit on making these products a market success over the long term.  As the organization continues to expand outside of coffee, it is imperative that their track record of success stays intact.

Courtesy of usatoday.com. The old Starbucks Refreshers packaging and flavors.

Beverage Pods Need Their Own Section

Courtesy of retailwire.com

The growth of small home appliances like coffee makers, mixers, and juicers has led to new business opportunities between Coca-Cola and Green Mountain Coffee Roasters (GMCR).  Through their 10-year agreement, GMCR and Coca-Cola will develop a Keurig Cold beverage machine that serves cold beverages and provide GMCR the exclusive licensing rights to single-cup beverage pods for Coca-Cola products.  While many analysts have detailed how this deal affects manufacturers like Coca-Cola, Starbucks, and SodaStream (my article on manufacturer impact here), the retail impact is similarly significant.  With grocer’s help, this partnership will increase Coca-Cola’s consumer reach across more grocery aisles and in the consumer’s home.  For retailers where soft drinks is a trip driver, supporting this innovation stands to benefit them just as much.

Given the changing beverage market, the consolidated retail landscape, and the consumer’s taste preferences, the challenges are much greater toward winning in the competitive environment. For retailers, getting the grocery shopper to choose one retailer over another retailer has never been greater, which pressures the retailer to be more creative when communicating out.  For manufacturers, the rise of beverage categories like liquid flavor drops, energy drinks, and coconut water gives the grocery shopper more options than ever before.  The choice to try alternative and healthier beverages are positively reinforced as soft drinks come under scrutiny for containing unwanted sugars and calories.  With Coca-Cola bringing new news to a retailer’s trip-driving category, in-store support and product placement helps ensure full potential is realized.  Winning the grocery trip is the first step, but winning at the shelf requires proper retail support.

Grocery retailers have already started building single-cup pod sales by offering these single-cup pods next to tea bags and ground coffee.  However, a dedicated section for pods itself will soon be warranted.  As the selection variety expands beyond tea and coffee, these single-serve cups can no longer be confined to the tea and coffee aisle.  Rather, they deserve their own section where a consumer can find pods for teas, coffees, and soda.  

While the Keurig Cold isn’t expected to reach the market until 2015, grocery retailers should continue monitoring the selection and sales of their beverage pods.  Beverage pods may become a trip driver in and of itself for some retailers.

Dr Pepper TEN a Casualty of “/1” Campaign

Courtesy of brandmagazine.com

As Dr Pepper invests more support to highlight their “1/1″ campaign for Dr Pepper and Diet Dr Pepper, are they providing less support to Dr Pepper TEN?  The beverage manufacturer continues to feature their core soda offerings and exclude the low-calorie Dr Pepper TEN soft drink.  As much as the company says that this segment is growing, neither Pepsi (makers of Pepsi Next) nor Dr Pepper Snapple Group (makers of Dr Pepper TEN, RC Cola TEN, 7UP TEN, Sunkist TEN, Canada Dry TEN, and A&W TEN) have provided the same media support levels since the 2012 launch period.  Given consumer trends of shifting consumption away from soft drinks, what will happen to these Dr Pepper low-calorie sodas if they are not supported by Dr Pepper?

As seen above, the commercial’s final scene shows both Dr Pepper and Diet Dr Pepper but not Dr Pepper TEN.  The marketing message for Dr Pepper TEN is clearly different from Dr Pepper and Diet Dr Pepper, but it is concerning that there has not been additional support behind Dr Pepper TEN.  With market activity, consumer trends, and expert opinions all suggesting a continued decline toward carbonated beverages, it is understandable to support Dr Pepper and Diet Dr Pepper since it delivers the biggest return.  Conversely, not supporting these two brands will also provide the most detrimental effects to the business.  This is why Dr Pepper and Diet Dr Pepper will continue to receive the majority of funding.

With the low-calorie products receiving less funding, sales decline should be expected.  But by how much?  While the initial repeat levels were above expectations and more than half of all sales were sourced from outside the carbonated soft drink business, these early wins were not sustained.  Dr Pepper Snapple Group’s SEC  10-K filing from February 2014 indicated as much:

Our Core 4 brands, which included the impact of the launch of our Core 4 TEN products, decreased 1% compared to the year ago period. This result was driven by a a 5% decrease in 7UP, a 7% decline in Sunkist soda and a 2% decrease in A&W, partially offset by a 6% increase in Canada Dry. Crush, Squirt and RC Cola declined 7% , 4% and 4% , respectively.

The entire 2013 annual report can be found here.  So while it’s possible that other soft drinks within the 7UP, Sunkist, A&W, Canada Dry and RC Cola portfolio also declined, the fact that these TEN products sales did not balance the other beverage losses indicate that they were also losing sales thselves.  Times are tough within carbonated soft drinks right now, especially when you’re not a Coca-Cola or Pepsi with a broader more diversified beverage (or food) portfolio.  And even these two global conglomerates recently released results that were slightly less positive.

Dr Pepper TEN and the other TEN products still stand a chance at survival, because it is keeping in line with trends toward lower calorie consumption.  However, delivering growth with less marketing support and when everyone is pushing full calorie offerings makes it challenging.  At some point, Dr Pepper Snapple Group will have to make a decision whether they will re-invest in Dr Pepper TEN, or turn their attention toward other initiatives.  Let’s just hope they make this decision sooner rather than later.