Every year evian releases a limited edition glass bottle designed by a fashion house. This year is no different, with evian and the French fashion house Kenzo joining together to release their 2015 limited edition designer glass bottle. This year’s bottle design features a wavy zig zag pattern in purple and yellow print. Via popsop.com, Kenzo’s creative directors Carol Lim and Humberto Leon, describe the wavy pattern as the French Alps (purple lines) and the mountain spring water (yellow lines).
Including Kenzo, this marks the eighth year that evian has partnered with fashion designers to launch premium collectible water bottles. Starting with Christian Lacroix in 2008, evian has also partnered with Jean Paul Gaultier (2009), Paul Smith (2010), Issey Miyake (2011), Andre Correges (2012), Diana von Furstenberg (2013), and most recently Elie Saab (2014).
It seems that evian has really carved out a niche for themselves with these collectible bottle designs. Consumers interested in fashion or otherwise (myself) anticipate the launch of these bottles and pick up a few of them. After missing on first few bottle designs, I’ll be adding the Kenzo glass bottle to my collection this year.
Here’s some more photos of the Kenzo evian glass bottle design.
Many experts had created their own lists for food & beverage trends for 2014, how do you make sense of all of these? Some are more macro-level and includes a generic view toward food & beverage (like this Innova report) while another taps into consumer needs that drive changing beverage preferences (like this CSP publication). Euromonitor International’s white paper has also listed five beverage trends pertinent to the Canadian landscape (link here, must process credentials before report can be accessed). These five trends are fairly on point, but may have missed out on some other additional activity that will change the beverage landscape this year. Here’s some additional points BevWire has noticed and would like you to consider:
Improved Natural Sweeteners To Grow Zero/Low/Mid-Calorie Sodas
Dr Pepper & Pepsi had both launched mid-calorie sodas with combination sweeteners in the past two years, while Coca-Cola finally took the plunge last year with Coca-Cola Life. Although Coca-Cola Life has yet to make its entry into the North America, this is a strong sign that everyone believes calorie segmentation for sodas is a step in the right direction. Coca-Cola also has received FDA approval for Reb-X – their stevia sweetener developed in conjunction with Pure Circle. In addition, Zevia & Steaz are also among a host of naturally-sweetened soda manufacturers that are gaining broader exposure and shelf space within grocery retailers.
These factors indicate that natural sweeteners are receiving just as much as attention as their regular calorie counterparts – if not more. Optimizing a soda formula that removes the bitter aftertaste will go a long way toward restoring sales to this segment.
Aspartame Fears Continue to Depress Diet Sodas
The fear over safety of consuming aspartame came to a climax in mid-2013 as Coca-Cola ran an advertisement to dispel fears over this ingredient (link here). With a greater focus toward ingredient consumption, consumers are leaving diet sodas for other beverage products. The soda segment as a whole is facing scrutiny for contributing to obesity, but having extra attention on ingredients within diet soda has led to more consumers choosing alternative beverages such as juice, tea, and water.
With a continued rise in competition from adjacent segments and beverage categories, diet sodas will continue their rapid decline relative to the other soda segments.
Small Home Appliances Crowd the Consumer’s Kitchen Counter Space
SodaStream’s controversial in the 2013 Super Bowl ad really put them on the map, as well as put other carbonated soft drink manufacturers on notice. Consumers also noticed this and SodaStream was rewarded with sales as well as increased availability across Canadian retailers. SodaStream has also benefited with licensing agreements and partnerships to carry branded syrups like Kraft’s Kool-Aid and Country Time. Starbucks is making inroads to get on your kitchen counter as well, trademarking “Fizzio” in 2013. From trademark documents, Fizzio is their at-home carbonation unit that will carbonate water into soda flavors.
Outside of at-home carbonation units, coffee & espresso makers are also seeing a bump in sales. Keurig, Nespresso, Tassimo and other coffee pod makers offering deep discounts on the coffee machine, attracting your initial purchase in order to have you buy exclusive coffee or tea pods from them in the future.
While BevWire doesn’t have an official list where these trends are being ranked, the rise of natural sweeteners certainly seems to be the most likely to take place in early 2014. That said, we are only 13 days into 2014 and many things can still happen to change up the trends. Let’s see how this plays out over the next 352 days.
For the seventh consecutive year, evian has commissioned famous fashion designers to design a limited edition bottle for them. Following in the tradition of Issey Miyake, Jean-Paul Gaultier, and Diane von Furstenberg, Elie Saab has agreed to design a limited edition glass bottle for evian. Saab’s unique patterns is described to depict a lace gown, which showcases the strong attention to detail and expert craftsmanship for both Saab and evian.
It appears that evian has forged a strong partnership between their premium bottled water brand and the fashion industry. With seven consecutive years of unique glass bottle designs and no indication of slowing down, this has become an annual tradition that all beverage shoppers look forward to (this one included). As all successful ventures spur imitators, it is very likely that other beverage brands will follow in evian’s footsteps by collaborating with artists and designers. Diet Coke has commissioned Marc Jacobs to design a collectible bottle for them, specifically available in the European markets. Prior to that, both Diet Coke and evian have both sought out a collaboration with Jean-Paul Gaultier for limited edition glass bottle designs. And most recently Perrier got into the designer bottles with Andy Warhol collector glass and plastic bottles. However, in trying to imitate evian, which beverage manufacturer has done it right and which hasn’t?
It seems that Diet Coke has done it right and Perrier has not. The partnership choices with Marc Jacobs, Jean-Paul Gaultier and Andy Warhol are all great choices. Despite being artists and designers in different industries (fashion and art), they all represent important facets toward artistic culture. However, while Marc Jacobs, Jean-Paul Gaultier, and Elie Saab were commissioned to design the bottles in their current years, the Andy Warhol bottles are a design from twenty years ago. The difference is that what was current twenty years ago is not necessarily current today. And the designs with Jean-Paul Gaultier and Elie Saab were a direct collaborative effort with the designers themselves, Perrier’s collaboration is with the Andy Warhol Foundation.
Beyond the design, the other major flaw in Perrier’s strategy has been its packaging itself. A designer bottle must convey elegance and prestige, which will certainly exist for glass bottles. Even aluminum cans can have this elegant property when designed properly. Plastic bottles do not carry this trait. Plastic bottles carry with it a notion that it changes the taste of whatever beverage it holds with it. It also carries with it the perception that it was born out of a replacement for glass bottles. In addition to glass and plastic, see the image below for the various sizes that Perrier has made their Andy Warhol collection available for purchase. Despite the different product sizes and shapes that Diet Coke can be found in, the designer products were only limited to glass bottles and select aluminum cans. evian created a special 750ml size for their designer glass bottle. Neither made it available across their entire portfolio. Once this has been done, it takes away the prestige factor because it’s not as scarce.
Perrier’s final flaw: distribution. Not that Diet Coke showing up in grocery stores is any better, but the Perrier bottle has been found with the dollar channel. Does this need any more explaining? Collectible, and fashionable products rarely make its way to dollar channels or wholesale channels simply because of the channel’s image. With Andy Warhol Perrier being found there, what does that do for the brand and the product? I would imagine that it lowers its prestige and elegance.
In the end, it may only be a question of whether the Andy Warhol Perrier bottles actually helped Perrier sell more product. However, the broader question may be whether this collaborative effort has actually been detrimental toward both Perrier and Andy Warhol.
Over the last few weeks, glaceau vitaminwater have come under scrutiny for its under-the-cap promotion that spelled out the words “YOU RETARD” (story link here). As a bilingual Canada nation that calls English and French as its national languages, certain words may not translate so well. vitaminwater’s promotional intent was to put one English and one French word under the cap, with the consumer collecting the caps to make funny sentences. Apparently the problem was that the English list of words and the French list of words were separately approved and no one thought of what the consequences should both words were combined. These consequences were amplified given that the family finding these words were a special needs family. Doug Loates (the dad) sent Coca-Cola a letter immediately letting them know of his displeasure toward their campaign and how hurtful it was to his family. As you see from the letter (below), he has signed it as “an ex-Coke drinker” which likely means that they have lost a customer for life.
As the glaceau business unit goes into public relations defense, what can be learnt in this situation? The obvious lesson is to develop stronger approval systems when running a bilingual campaign in Canada (as in any other nation with more than one national language). Ensuring that the correct message is not lost in translation is critical and avoids the company any negative PR and embarrassment. If there was a business team that handles the French marketing and another team that handles English marketing, then these two teams must collaborate more closely to ensure each party is dialed in to what the other team is doing. Ultimately the national campaign is approved by someone that manages both teams, so that executive should also be aware of the consequences.
Aside from focusing on the directly results of this campaign, one has to wonder why vitaminwater ran this type of a campaign in the first place. If the intent was to stimulate sales by having beverage enthusiasts collect the caps to create words, is there a prize for the funniest word? Or was it simply a game for instant gratification by combining words together? I have not noticed any type of media promotion to build awareness or excitement for this campaign in either case. vitaminwater may have fared better had they simply piggybacked off of Coca-Cola’s iCoke.ca loyalty program. After all, with an existing infrastructure where consumers are already knowledgeable of the reward system, this would make it easier to achieve the campaign’s objectives.
The next time vitaminwater runs a marketing campaign that spans the nation, we’ll see whether they have truly learned their lesson. Will it be regional promotions with stricter guidelines for English- and French-speaking provinces? Or will it be the same problem?
Since the explosion of vitaminwater on to the beverage scene years ago, momentum appears to have subsided for the brand and enhanced waters. It seems that a variety of market conditions has reduced excitement for vitaminwater to just another product on the shelf. There are certainly more reasons behind the brand’s continued decline, but BevWire will detail three major contributing market conditions.
Market Condition #1 – vitaminwater has benefited and been obstructed by being a part of Coca-Cola’s beverage family. As highlighted briefly in an earlier post about Zevia, vitaminwater saw immense benefits from the Coca-Cola acquisition. The enhanced water brand entered a broader distribution network that vastly improved the brand’s availability. At the same time, their initial marketing strategy was to be driven by “consumer demand”, relying on key influencers to spread word for the product. This type of demand ensured that consumers and retailers were willing to pay a premium, and made discounting less unnecessary. However, as Pepsi’s Aquafina Plus (in Canada) and SoBe Lifewater (in the U.S.) kept on promoting at enormous discounts, vitaminwater was compelled to react. Without their premium positioning, vitaminwater became just another brand in Coca-Cola’s portfolio that had to fight for promotional dollars. And with Coca-Cola focused on growing its sparkling business of Red (Coca-Cola), Silver (Diet Coke), and Black (Coke Zero), a host of beverage brands lost promotional funding. After initial success in the Canadian market from 2007 to roughly 2010, the vitaminwater has slowly lost market visibility as advertising support shifted more to other Coca-Cola properties.
Market Condition #2 – shifting consumer trends and preferences, highlighted by more juice, tea and energy drink entrants. Since 2010, we have seen more product releases coming out from the juice, energy drink and ready-to-drink tea segments. Starbucks was a strong force that expedited this trend. Their acquisitions of Evolution Fresh and Teavana, along with their Starbucks Refreshers product launch gave them greater market coverage and allowed them to capitalize on the consumer trends. In energy, the big three of Red Bull, Rockstar, and Monster all had product innovations enter the marketplace. And also some negative media attention that led to consumers increasingly purchase these products to find out what whether all the extra attention was merited. With consumers increasingly empahsizing health benefits – and vitaminwater also paying attention to this with their vitaminwater zero production introduction – the natural benefits of juice and tea became top of mind. Because vitaminwater was relatively less healthy than these other products in the emerging segments, consumers shifted their purchase dollars from enhanced waters to juices, teas, and energy drinks.
Market Condition #3 – retailers react to new reality of people’s purchase habits. Following the economic recession (that some still think we’re in), many Canadians buying behavior has focused more intensively on price. That is not to say that they are not willing to pay more, but the value-benefit equation is more influential of their purchase decision. Retailers have long pressured manufacturers for price concessions and finally Coca-Cola gave in to price promotions on vitaminwater in 2010 – around the time its descent began. What happened next was more price cutting by its competitors to maintain their own sales – Aquafina Plus discounts became much deeper than before. Ultimately this leads to the current situation, which is reduced segment value. Since vitaminwater is no longer the premium brand that it once was, retail support started to transfer to other segments. Shelf space for vitaminwater was compromised, and sku rationalization also start to slowly creep in.
While these three conditions do not represent the entirety of why vitaminwater is losing steam, it summarizes what is happening. There are both internal and external contributors. However, all hope shouldn’t be lost on the segment itself. More competitors will look to redefine the value equation because the market leader is down. Bottled water sales itself is on the incline. And other vitamin beverages like Karma, Activate, and even Rockstar Energy Waters look to carve out their own niche in the marketplace. Liquid enhancers such as Dasani Drops, Kraft MiO, Crystal Light Liquid are also seeing sales gains too.
Just wait to see how vitaminwater will react to the competitive pressure and what they might do to revive the one-time darling of the beverage industry.
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.
There are many companies that embrace driving social causes with their products, aiming to make the world a better place by donating a portion of their profits to for sustainability initiatives. Nika Water is one such company that does this, and really tries to help as much and as quickly as possible with their social mandate. Nika Water’s website details that the company donates 100% of their profits for clean water, education, and sanitation projects in developing nations. BevWire was given an opportunity to interview Jordan Mellul, VP Operations for Nika Water – and through this interview you will see that their focus is really on improving sustainability and environmental causes. Read about my insightful interview with Jordan below, ranging from Nika’s product positioning, to their marketing strategy, and their distribution strategy.
BevWire: While Nika’s unique selling proposition is a social mandate to not only be carbon neutral, but also to donate profits to help solve environmental problems in developing countries, what makes Nika better than other products?
Jordan Mellul: To be honest, we try to keep it simple at Nika Water. While our product is a reverse osmosis/UV light purified water, we really do want the focus to be on the brand and message that it carries. Our aim is to reach the mass population and appeal to the widest demographic possible. After all, Nika is set to donate our profits. By specializing, and thus limiting, our consumers, we have less of a chance of creating larger funds to donate. Compared to those that are benefiting from our efforts, we are humbled to even be able to discuss water choice in such detail.
BW: Nika Water’s website mentions that part of your strategy is to leverage marketing partnerships and social media to raise awareness of these environmental causes. As such, Nika Water has partnered with World Vision and Free the Children among other organizations. What type of inventive marketing partnerships and social media activities has Nika Water implemented?
JM: Unlike most typical and traditional water companies, Nika has always set itself apart by how we promote and share our brand’s message. We know that educating the consumer on what choosing Nika Water means is the primary goal. By marketing in the way that young, energetic juice, tea, and energy drinks go about things, we are able to show that the water category has the opportunity to be relevant and cool as well. By speaking face to face with people at street fairs, festivals, and other events, we can share our story directly. We have partnered, not only with world-class NGOs to show how social entrepreneurialism is a new way to make global change, but also clothing, accessory, and lifestyle brands that help make a difference too. Social media has been used at every level and intertwined into all of our efforts to create awareness. By holding contests, promoting other like-minded groups, and keeping open, honest conversations active with supporters, Nika does what no other bottled water does to be in touch.
BW: In terms of product availability, the website mentions that Nika can be found in natural food stores, delis, cafes among other distribution channels. Is there any particular retailers stores I can direct the readers to go if they would like to purchase Nika water? Also, what is Nika’s plan for expansion into the traditional grocery/drug/mass retailers?
JM: Currently, we are focused on building our brand in the types of places that have an independent feel and are staples of their community. With a cause-based product like ours, we seek quality accounts over simply quantity. It’s the owners and customers in these locations that connect with Nika’s entire appeal. It’s because of this, that it isn’t so easy to point people directly to where to find Nika, other than their “corner shops”. We may have plans to do open opportunities with more traditional grocery/drug/mass retailers down the road, but not until we feel we can really compete on the level that it requires.
BW: While Nika’s website has a “Shop Nika” section that allows for online purchasing, are there any plans for international expansion into Canadian retailers? If so, when would this be?
JM: Nika’s sales goals are taken territory by territory. Still in our infancy, it is important to stabilize each market that we venture into, before looking to expand. Our goals include covering the major US cities before attempting to break into the Canadian scene. However, with the support of one of our first and largest NGO partners, Free The Children, being based in Toronto and well-known across all the provinces, we’re confident that the support would be there almost immediately. In regards to the merchandise that we peripherally sell however, Canadian followers of Nika are welcome to purchase that now and wear their support!
BW: Last question, are there any plans for line extensions or product innovations?
JM: While it has always been discussed internally, there are no plans being put into action at this moment. We really want people to focus on what we do now, and build our business’ foundation, before becoming more creative and branching out. Water is simply our vehicle at the moment. It is the means to an end. If trends or experience dictated that another product would be more suitable to generate income for our NGO partners, we would definitely adapt accordingly.
Thanks so much for your time Jordan, and thank you Olive PR Solutions for arranging this!
Has anyone noticed the amount of press that AQUAhydrate has gotten recently? After their rebranding effort in 2012, they have reached some significant milestones. Most recently, they gained more national availability in the grocery channel with new distribution agreements at Safeway and Kroger’s. They secured even more publicity after Mark Wahlberg and Sean “P. Diddy” Combs announced they were partnering with AQUAhydrate to help develop and execute the beverage brand’s business strategy. What does all this mean for the brand and for Canadian consumers? Will their continued success lead to stronger availability in Canada? And how will celebrity partnerships help the beverage refreshment perform better?
Let’s answer the latter question first: will celebrity partnerships with Mark Wahlberg and Sean “P. Diddy” Combs help deliver stronger business performance? It all starts with making the right choices; there must be mutual benefits beyond previous arrangements like the celebrity endorsement compensated financially. When you are endorsing a beverage or any other product, you are mainly communicating the product or service benefits to the public. There is no guarantee that you believe in its success or benefits – you are simply saying what you’ve been paid to say in order to make money. However, what more and more companies realize that without any vested interest from the celebrity, it’s mainly a one-way transaction. There is no passion for the refreshment beyond the financials.
Through this realization, more companies are finding celebrities that truly believe in the product’s success. Diet Coke found Jean-Paul Gaultier, Taylor Swift, and Marc Jacobs. Pepsi found Beyonce. Evian has been doing this for years, and has found a plethora of fashion designers willing to put their mark on collectible glass bottles each year. All these celebrities are not just being paid to talk up their favorite beverage, rather they are involved with the business in some shape or form. Beyonce is involved with Pepsi’s creative process and how the soda brand is represented to music fans worldwide. In a similar sense, Wahlberg and Combs are expected to be involved with the business strategy component for AQUAhydrate. They are expected to actively participate in helping get AQUAhydate into more grocery stores and more consumer shopping carts. The fact that both celebrities chose to partner with AQUAhydrate, they must believe in the beverage’s business prospects and how they can add value. Therefore, this business partnership should stand a very high chance of success.
To answer the former question on what this means to Canadian retailers and consumers, the new distribution arrangements should help. Safeway is a grocery chain with an American presence as well as a Canadian presence, so the incremental distribution for AQUAhydrate could likely be the result of having the refreshment merchandised in Canadian Safeway grocery stores. Some research and a quick question to the AQUAhydrate team revealed that the water beverage is indeed found in Safeway stores, as well as most Canadian GNC and Quebec Couche-Tard outlets. Some readers have said that the beverage brand was also found in high-end grocery stores, so it can be expected that AQUAhydrate will continue to expand its Canadian presence.
Since its September rebranding effort, AQUAhydrate has rebounded and made some great strides forward. With its expanded distribution and strong celebrity partnerships, there’s no doubt that the beverage brand is primed for even more success in the future. With Walhberg and Combs on board to help with the business strategy, who knows what celebrity wants to sign on next with the brand to help propel it to new heights?
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.
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.