Coca-Cola Expands “Official” Olympic Drink Portfolio

Courtesy of eprize.com

It’s another year for the Olympic games, this time in Sochi.  For Coca-Cola, every Olympic year is a boon based on the event partnership agreement where they hold the distinction of official Olympic non-alcoholic beverage partner.  As one of the Olympics’ global partners, the beverage giant pays about $100M to monopolize non-alcoholic beverage serving rights in all Olympic venues (other global partners hold exclusivity in their respective industries).  In recent years, the definition of “non-alcoholic beverage” has expanded to include more than just carbonated soft drinks.  Coca-Cola has gained exclusivity to serve sports drinks (Powerade), juices (Minute Maid), and waters (Dasani, vitaminwater) over the past few Olympics games.  The “Olympic Wolrdwide Partner” logo has also started appearing on Coca-Cola’s ZICO coconut water brand lately.  So given the substantial cost, how beneficial is it for Coca-Cola to be a worldwide Olympic partner?  And with the expanded definition of “non-alcoholic beverage”, which product categories are next to gain Official Olympic product status?

Despite a cost of $100M each active Olympic year, Coca-Cola has renewed their Olympic partnership until 2020.  It would appear that this agreement delivers substantive returns.  For one, Coca-Cola has blocked out their global competitor in all product categories that the conglomerate participates in.  No Pepsi-branded soft drinks, Aquafina, Gatorade, or Tropicana can be served within all Olympic-event venues.  Brand visibility is another partnership benefit.  Every game or after-party event that becomes broadcasted will feature a Coca-Cola logo or Coca-Cola beverage product.  Live viewers and spectators may only celebrate with Coca-Cola branded products and nothing else.  Positive associations is another partnership benefit.  Spectators seeing their athletes win also see them hydrating themselves with Coca-Cola products.  These same spectators will associate hard work, performance, and winning all being supported by Coca-Cola.  From a qualitative perspective, these are invaluable benefits that Coca-Cola has been able to enjoy – reduced competition, brand visibility, and positive associations.

Courtesy of designyoutrust.com

With changing taste preferences among spectators and athletes alike, incorporating other product categories as “Official Drinks” certainly makes sense.  Some people will choose carbonated soft drinks, some will want flavored water, and still some people prefer juices.  With coconut water emerging as a beverage category, expansion to include this as an Olympic-approved beverage makes sense.  However, increased exposure of Olympic branding potentially cheapens the Olympic brand with broader availability on all products – not just beverages.  Furthermore, not all products will be suitable to display the Olympic logo on its packaging.  For example, energy drinks may be one category that could be denied Official Olympic product status given possible negative associations despite the category growth.  Within Coca-Cola beverage portfolio, it’s likely that liquid enhancers (Dasani Drops, Powerade Drops) and teas (Honest Tea, Fuze) could gain approval should they apply for it.  Both these categories are enjoying growth and have fewer negative associations portrayed by the media.

Coca-Cola has been one of many key sponsors that has supported the Olympic games through the years, and it appears that both parties are satisfied with the results.  2020 is still three more Olympic games away, but given the goodwill both parties have been generated, it’s very possible that this relationship goes well beyond 2020.

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Gatorade Pulls G Series Fit From Store Shelves

Goodbye Gatorade (G Series) Fit, see you in 2014 after your re-positioning initiative.  PepsiCo reportedly started pulling their Gatorade Fit line-up on drinks from store shelves earlier in August as a result of sub par performance (link here).  From their initial 2011 re-positioning launch, BevWire had also speculated that one of G Series beverage line-ups may eventually be pulled (link here).  Was this product destined to fail from the beginning?  Would the “occasional” athlete want to be considered the occasional athlete, rather than the serious athlete?

Gatorade’s original problem was that their product had fallen into the hands of consumers beyond their target market with sales growing outside athletic consumers – which puts them in an enviable position by any means.  This re-branded effort was an attempt to create product separation between these general consumers and their core consumer – the athlete.  One of the key issues after the re-branding efforts was the nine different segments for the Gatorade beverage portfolio.  Although they showed ingenuity to differentiate consumption occasions (Prime – pre-training, Perform – mid-training, Recover – post-training), the “athletic segmentation” may have created confusion and led to the G Series Fit’s poor performance.  The Original G Series, G Series Fit, and G Series Pro became the “athletic segmentation” to differentiate occasional athletes, fitness fanatics, and the professional athletes.

However, the image problem persists if the G Series Fit’s target market does not see enough value to trade up from the Original G Series.  Even more so, is that the occasional athletes would never want to be considered just an occasional athlete –  so they would try to copy what the more serious or professional athletes are drinking.  This is the original point of having athletes endorse your product because you want the audience to feel as if the performance can be attained by using the product (cases in point – the Gatorade Michael Jordan Be Like Mike campaign, and the recent Gatorade Michael Jordan Win From Within Campaigns).  Consider that the image of being athlete is also part of the selling equation – examples of why lululemon and Underarmour are used beyond the scope of yoga and athletic training people.  Bottom line: these occasional athletes would believe that they can achieve the level of fitness they want only by using what the pros use, not the occasional stuff.

After taking pricing into consideration, and the variety of products that are on the market now to hydrate an athlete, there was just not be enough value created by the G Series Fit line-up.  The fitness fanatic athlete may stick with the G Series products since it would provide the minimum necessary benefits they are seeking, and also purchase coconut water as they contain more rehydrating benefits.  The occasional athlete would see that these serious athletes are also only using the Original G Series line-up and continue purchasing these themselves.

Lesson:  Gatorade was in an enviable position of having its product reach mainstream beyond athletes, but their “athletic segmentation” did not product enough value for trading up for the serious athletes – cannibalization by their Original G Series line-up.  And with the market changes that welcomed coconut water, along with their confusing line-up, something had to give.

How Big Can Recovery Beverages Grow?

Monster Rehab - courtesy of billdist.com

Initially piggybacking off of energy drinks, beverage experts are now defining recovery drinks to merit their own category (BevNet article here).  BevWire also previously reported on Lush Recovery Drink (recently rebranded to Amara Recovery Beverage).  As recovery drinks are still in its infancy along the beverage product life cycle, how can this category grow?  Who are the major players and what is being done to bring news/attention to the category?

The more well-known major players are energy drink manufacturers that each have their own line of recovery beverages such as Monster Rehab and Rockstar Recovery.  However, as Monster and Rockstar are companies that have built their name associated with “energy”, Rehab and Recovery may find it hard to grow within the companie’s beverage portfolios.  Despite their organization’s international distribution network, marketing budgets are devoted to the energy drinks since there’s more competition and the larger energy drink brand’s awareness needs to be maintained.

Amara Can - courtesy of drinkamara.com

Given these circumstances, there are high reward opportunities for lesser known manufacturers to drive awareness to their recovery drinks.  Amara builds awareness through event sampling where the consumer can firsthand understand and experience the functions of the recovery beverage.  Also interesting about Amara is that their rebranding effort also included coating their aluminum cans with flourescent material so the packaging will glow when it’s on the shelf and in coolers.  BevNet’s article describes GTOX as another recovery drink manufacturer that is driving awareness for their product with Dennis Rodman as a spokesperson.  Code Blue is another manufacturer that is trying to re-position itself as more than just a hangover recovery beverage by targetting exercise recovery and hydration.  Although not all these beverages have national distribution, each of them are driving news and awareness to this category.

The theory is that companies that bring awareness to the category bring awareness to the product, and consumers are likely to reward these companies with their business.  It happened with Coca-Cola and Pepsi with carbonated soft drinks, it also happened with Red Bull, Monster and Rockstar with energy drinks.  Consumers also rewarded vitaminwater with their business for growing the enhanced water category.  The market leader for each of these respective beverage categories are typically those that started off bringing attention to the category.

On the original question on how big can this emerging category get, one needs to look at the path of the coconut water category.  The major players that drove category awareness – O.N.E. Zico, and Vita Coco – either purchased or signed partnership agreements with PepsiCo, Coca-Cola Refreshments and Dr Pepper Snapple Group in the past two years.  The beverage conglomerates recognized the potential of coconut water and quickly brought on experts in the business.  Even AriZona has gotten into the game (link here).  That said, it is still not time to put a dollar figure on the category worth of recovery drinks, but it certainly draws parallelisms to coconut water. There are only a few main players for now, but all the potential lies with names that are not nationally known.

The next time you go into your grocery store or convenience store, look for where they stock the Monster Rehab and Rockstar Recovery, and keep an eye out for other recovery drinks.

AriZona Enters Coconut Water Category

CocoZona - courtesy of bevnet.com

BevNet has posted a review on AriZona’s recently launched coconut water beverage – CocoZona (link here).  According to BevNet’s review, CocoZona is a 100% pure coconut water product that contains 70 calories per 14.5oz (429ml) serving, and comes in a resealable and fully recyclable  aluminum can.  The suggested retail price is $1.99-$2.49.  The product is not yet available in Canada, having launched in the United States first (like how most products are initially launched) and recently gaining national distribution.

BevNet’s review on CocoZona’s product and packaging is on par, saying that the product is on par with other coconut water brands available and that the packaging is refreshingly different from other coconut water manufacturers with their resealable aluminum bottle.  Their only suggestion is that the company name AriZona should be more visible and printed across the front of the bottle, rather than its current position that has the brand name vertically printed, semi-transparent, and on the side of the bottle.

Why would AriZona, a well-known beverage manufacturer, choose to brand their coconut water product with ‘CocoZona’ across the top of the bottle rather than their own company name AriZona?  Wouldn’t they want to leverage on their brand name and generate more exposure for their new launch?  In my opinion, the success of AriZona is also the reason why they chose not to print AriZona in big, bold letters across the front of their coconut water product.  AriZona is most famous for their tea products – Green Tea Gingseng, Arnold Palmer Half & Half, Pomegranate Tea, etc – but not for their other products.  Without much success, they have tried to branch out into energy drinks (AZ Energy, Caution Energy), energy shots (AM, PM, Rx), water (Vapor Water, Rescue Water, Organic Tea Water), sports drinks (AriZona Sports), and even snacks (AriZona snack trays).  This means that the strength of their brand name only extends to tea products but not other areas.  Likewise, consumers will trust the AriZona brand name for tea beverages, but are likely to choose another brand for energy drinks (Red Bull, Monster, Rockstar), water (Nestle, Aquafina, Dasani, private label), sports drinks (Gatorade, Powerade) and so on.  As a result, this puts AriZona in their current state as they try to expand their product offerings outside of tea.

I do see the possibility of AriZona making their name more visible on CocoZona.  There are many similar product benefits between their tea and coconut water offerings that would help the consumer easily associate both products back to the AriZona brand name.  Both tea and coconut water are low calorie products, and both are also seen as healthier beverage alternatives.  The point is, the reach from tea to coconut water is not as far as from tea to energy drinks or sports drinks.  Since packaging may differ from country to country, we may have to wait for this product to enter Canada to see AriZona plans on printing their brand name across the front of their coconut water.  So when and if this product crosses the border, BevWire will post an update and opinion on CocoZona’s packaging.

ZICO Gains Distribution in Target Stores

ZICO coconut water

Scanning the news headlines the past few days, I found an interesting article saying that ZICO will be the only coconut water sold in Target stores (link here).  This has interesting implications for the natural health beverage in Canada for the coming years, as last month the news reported that Target will be entering Canada by taking over Zellers locations.  With roughly 1,700 US locations and 200 future Canadian locations, Target will make a strong impact for ZICO as well as many other products.

What’s also interesting is that ZICO is part of Coca-Cola’s portfolio of products through an investment deal.  Coca-Cola has a business unit that searches for emerging drinks and invests these beverages.  They pour financing into them and further develop the beverage through a separate distribution network, until it gains critical mass and warrant distribution off of their own distribution network.  Currently, ZICO coconut water is not delivered off of their trucks, but with the beverage’s acceptance into Target critical mass may have been achieved and warrant retailer distribution through Coca-Cola’s delivery trucks.

Though mainly in the United States for now, once Target enters Canada I’d expect the product offerings that Target has in the U.S. would be carried north of the border as well.  The question then becomes how the other two main players Vita Coco (owned by Dr. Pepper Snapple Group) and O.N.E. (owned by PepsiCo) would react to this news.  If there is no exclusivity agreement with Target, will the other two companies seek to gain distribution through the retailer as well?  If there is exclusivity, will these coconut water companies then seek a partnership agreement with other retailers (Whole Foods, Loblaws, etc) as their sole provider for coconut water?

ZICO joins Coca-Cola US Distribution Network

Zico Product Family

Jeffrey Klineman from BevNet.com reported that premium coconut water manufacturer ZICO has decided to switch their distributor to the Coca-Cola network (link here).  This is happening in the Southern California and Boston areas and if successful, may mean full integration into the Coca-Cola distribution network everywhere else in North America.

Though this is not happening in Canada yet, it is still interesting to note the distribution system for newly acquired smaller beverage makers.  When a small or regional beverage manufacturer distributes products, the original method may be to partner with a third-party operator (TPO) to have their product come off the TPO’s trucks, delivered directly to the store.  The simplifies the delivery system for the customer (grocery stores and convenience stores) because in addition to receiving their regular products off of a TPO, they also get these beverages.  On the manufacturer’s end, they can leverage the TPO’s distribution network to gain listings with more customers in addition to promoting with their own sales and marketing staff.

Klineman’s article mentions that new products being distributed through the Coca-Cola network faces complications.  In addition to the product focus reason (selling 12pk Sprite or Diet Coke is a lot easier than convincing the retailer to carry new products), Coca-Cola’s distribution network will increase volume and exposure significantly for ZICO.  For ZICO, this means that the production must be scalable to handle increased demands for the product.  Also, Coca-Cola’s delivery trucks normally carry numerous products to be distributed into the stores, and packing on a few additional cases of ZICO coconut water may seem harmless since it’s just a few cases here and there.  However, each truck carries the delivery order for at least 5-6 customers (in Canada anyway) and the trucks are fully packed before making a trip out of the product warehouse, so a few cases here and there do add up (especially when your original customer base is around 5000, and now becomes 15000 or 20000).

The good thing is that Odwalla (and ZICO) is not distributed through Coca-Cola’s main delivery network in Canada.  This means that the same trucks that deliver the pallets with 2Ls, 12pks, 24pks, 591 bottles etc are not the same ones that distribute the Odwalla premium juices.  Odwalla’s distribution network involves delivery trucks that have a chilled refrigeration system to keep the beverages cold compared the regular delivery trucks that is simply a big metal box on wheels.  Another product delivered through chilled refrigeration is milk, where the delivery network has an increased focus on the delivery method to limit breakage and damages since the product’s packaging is more fragile.  For ZICO, this means that their products will be given greater attention and care unlike the regular Coca-Cola beverages.  There will be an increased emphasis from the delivery standpoint to ensure the products arrive safely and in commercial condition.

So will this delivery model work in Canada?  I believe the integration will work well on the chilled refrigeration system.  With Coca-Cola realizing that consumers are trending toward healthier beverages, focusing on developing a strong network to handle products through this method will be valuable for other brands in the future.  Odwalla is a good example of a beverage that is being managed effectively through this system, and converting other acquired premium products into this delivery network will help the Coca-Cola system.  The only product then becomes a discussion with the grocery store that they should prepare for two separate deliveries from Coca-Cola every delivery cycle – one for the regular set of 2Ls, 12pk cans and juices, and another for Odwalla, ZICO, and other future premium products.

O.N.E. Kids – Coconut Water and Fruit Juices

ONE coconut water

One Natural Experience (O.N.E), the coconut water natural beverage producer, has recently introduced a coconut water beverage line aimed at refreshing kids.  The beverage has been available in the United States since October and contains low sugar content, as well as a blend of coconut water and fruit juice.  The beverage company – which was acquired by Pepsi earlier in 2010 – is famous for their innovative coconut water offerings.  They produce O.N.E Active, which is a all-natural sports drink combing herbs and minerals with their popular coconut water offering (O.N.E. coconut water).  O.N.E. Kids is their latest innovation.

The question is, how much would parents be willing to pay for this nutritious beverage?  Each 330ml tetrapak is retails at $1.99 individually, and a multipack may only be found at natural food stores or select grocery stores.   A multipack’s price point would likely be close to $20.  Parents can pick up other healthy juice multipacks for a lot less – you’ll likely be able to pick up twice as many multipacks of healthy juices for the price of $20.

In any case, the natural beverage producer is innovating their product line to separate themselves from the other two leading coconut water manufacturers.  Vita Coco and Zico, the other main players in this category, also offer flavored and regular coconut water, but not natural sports drink or a low sugar, youth-friendly alternative.  The category itself is gaining more media exposure as athletes and celebrities support the beverage, recognizing its health benefits.

No word on when O.N.E. Kids will be available in Canada (or if anyone has seen any O.N.E Kids already), but it’s a safe bet that it will be coming to Canada fairly soon.