Pepsi Launches Liquid Enhancers: Aquafina FlavorSplash

The new Aquafina FlavorSplash line-up: sparkling water and liquid enhancers.  Courtesy of facebook.com
The new Aquafina FlavorSplash line-up: sparkling water and liquid enhancers. Courtesy of facebook.com

It’s been a few years after Kraft MiO revolutionized flavor enhancers, but Pepsi has finally launched their own liquid enhancers under the Aquafina water brand.  Following a beverage portfolio evaluation that lasted nearly 12 months, Pepsi will overhaul Aquafina FlavorSplash to include new sparkling water flavors and liquid enhancers.  On the liquid enhancer front, they will have three offerings: So Strawberry, Berry On, and World Peach.  Pepsi’s offerings are targeted toward a younger demographic primarily aged 13-19 years old (more on that later).  After waiting so long to enter this beverage segment, will Pepsi see success?

With another household name entering the segment – be it Pepsi or Aquafina – liquid enhancers as a segment benefits from more media support.  Like Coca-Cola, Pepsi has their own distribution network as well as their own merchandising and cooler units.  Having your own branded equipment assets are important for consistent communication, and even more crucial to ensure flawless execution.  As we have seen Powerade Zero Drops and Dasani Drops merchandised within Coca-Cola coolers, we can expect Pepsi to do the same with Aquafina FlavorSplash droplets.  This will help Pepsi get prime location space within grocery channels and restaurant establishments to display their newest products.

Aquafina FlavorSplash Berry On flavor.  Courtesy of facebook.com
Aquafina FlavorSplash Berry On flavor. Courtesy of facebook.com

By targeting a younger demographic, Pepsi aims to introduce consumers to their beverages at earlier life stages.  While appealing to the product’s purchaser (moms) is a different challenge, Pepsi hopes teens will be able to influence the purchase decision.  If not, Aquafina FlavorSplash may be something teens can still buy in school.  AdAge’s article detailing the Aquafina FlavorSplash interviews Pepsi’s CMO Simon Lowden, which describes the possibility at getting Aquafina FlavorSplash stocked in high schools as well (article link here).  The younger demographic puts Pepsi’s liquid enhancer in a niche where no other competitive liquid enhanced is targeting.  So far, young adults, athletes, and tea drinkers have been the general target.

The product packaging itself will spur interest, as the candy-colored packaging is brightly colored that will attract the demographic’s attention.  With unique flavor names – unlike the many berry-pomegranates and mango-peaches on the shelf – the flavors should stand out among the competitive set as well.

As a new player enters the segment, retailers and consumers will benefit from all the healthy competition for their dollars and chance to quench their thirst.  Pepsi will see success within this segment, given messaging toward an audience where no other brand is explicitly communicating toward, their own equipment assets that allow for prime product placement opportunities, and a product that is on part with market trends.  Even with all the competition within the liquid enhancer landscape – Kraft, Dasani, Powerade Zero, Crystal Light, and Nestea to name but a few – Pepsi’s Aquafina FlavorSplash should be able to garner healthy sales.

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what happened to vitaminwater?

vw+vw0 canada line-up courtesy of @vitaminwater_bc

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.

Evolution Fresh - courtesy of drinks-business-review.comMarket 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.

 

via forum.smartcanucks.ca – just one of many Aquafina Plus coupons. This one is a fairly reasonable 33% discount.

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.

Kraft’s Dual Brand Strategy – Crystal Light Liquid

Courtesy of harpersbazaar.com

Most people by now have heard of Kraft launching Crystal Light Liquid to grow (or compete) in the liquid flavor enhancers marketplace.  Similar to some MiO offerings, Crystal Light Liquid is calorie free and sugar free.  It currently available the United States in 6 flavors: Strawberry Lemonade, Blueberry Raspberry, Iced Tea, Mango Passionfruit, Peach Bellini and Pomtini.  Their facebook page mentions that it may arrive in Canada sometime in March, but there is no guarantee all 6 flavors will make its way north.  It comes in a squeeze bottle that should satisfy 24 servings (of 250ml liquid), similar to the Kraft MiO squeeze bottles.  Although the product is predominantly targeted toward women – the packaging, colors, and communication portray as much – will this not end up cannibalizing their MiO product?  Or will this launch not cannibalize Crystal Light’s powder-based products?  Why introduce such a product when all signs point toward it being harmful to Crystal Light, and possibly Kraft overall?

Contrary to the traditional thinking of market cannibalization, launching Crystal Light Liquid  is beneficial for everyone – especially Kraft.  Back in September, BevWire wrote about Dasani Drops’ entry into this segment and how its presence helps in growing liquid flavor enhancers.  The Crystal Light Liquid will further bolster this growth and solidify the promise that exists for these products.  And since not all consumers are aware that MiO and Crystal Light are under the same parent company, this will help increase both product’s market penetration.  What appears to be three separate branded players in this space, is actually two manufacturers.  And as the market potential grows from $100 million, Kraft’s size of this market potential will grow as well behind the support of these two branded players.  This dual brand strategy of Kraft may be their response toward Dasani’s entry and a signal to others interested in saturating the segment.  It shows that Kraft is committed to defending their product and shelf space, and maintaining healthy margins for the retailer and themselves.  Crystal Light Liquid’s entry will also make it easier to get the retailer’s attention and gain shelf space, since it signals the manufacturer’s seriousness in supporting this segment and legitimizes it as an important focus.

This gain in shelf space may appear to be detrimental for Crystal Light since it could come at the expense of their powder-based offerings.  After all, both powder and liquid form products fall under the same category of “flavor enhancers” and are shelved in the aisle of grocery or mass supermarkets.  However, one must also consider that the Crystal Light Liquid offerings are potentially more profitable for both the retailer and Kraft.  While they may be trading shelf space away from powder-based products, the trade-off could potentially increase both parties’ “profit-per-square-feet”.  That is, consumers may ultimately be paying more for Kraft MiO and Crystal Light Liquid than Crystal Light powder.  Think of how the MiO Energy is priced identical to the MiO flavors but comes in a “down-counted” 18 servings instead of the 24 serving sizes.  The cost-per-serving indicates that the MiO Energy is actually a more expensive product than the regular MiO.  So while the drinking occasions have not increased with Crystal Light Liquid, the limited serving sizes increases the need to re-purchase the flavor enhancers.  This ultimately translates into wins for Crystal Light, Kraft, and the grocery store.

On the issue of cannibalization, Crystal Light Liquid is ultimately targeting a different consumer.  The company’s views may be that the two products are not cannibalistic but complimentary instead.   Crystal Light Liquid messaging and imagery concentrates on women’s lifestyle and social circles, while Kraft MiO’s messaging highlights individuality and customization.  MiO’s messaging is “Your Drink. Your Way” while Crystal Light Liquid centers around “For Every Shade of You”.  The female shopper that buys MiO may also buy Crystal Light Liquid, but for someone else (ie her friend, mom, etc).

From the Crystal Light facebook pageL: Crystal Light Liquid Peach Bellini highlighting a lifestyle.R:
From the Crystal Light facebook page
L: Crystal Light Liquid Peach Bellini highlighting a lifestyle.
R: The subtle hint toward customization with the different colored glasses, but the more apparent communication at the bottle “For Every Share of You” to again emphasize lifestyle and sociality.

The Crystal Light Liquid launch is certainly a positive news as it shows everyone’s commitment to supporting liquid flavor enhancers.  While Kraft wins with two brands and Dasani competes with Dasani Drops, both the retailer and consumer will benefit from aggressive promotions.  A win-win-win situation.

Kraft To Launch New Liquid Water Flavorers

Kraft MiOKraft is set to launch it’s first new product in 15 years, and it’s a zero-calorie, liquid water flavor enhancer called Kraft MiO.  Available in six flavors (berry pomegranate, fruit punch, mango peach, peach tea, sweet tea, and strawberry watermelon), MiO is packaged in a water droplet-shaped plastic bottle that will yield 24 servings.  Nutritional information on the Kraft MiO’s Facebook page (link here) says that it’s no calories, no artificial flavors, and no caffeine.  However, as USA Today pointed out in their report on MiO (link here), it does contain artificial colors, sweeteners, and preservatives.  The product – which is similar to Kraf’ts Crystal Light powder – will launch March 7 in the United States, but no word yet on whether it will come up to Canada.

While some the news reports and Kraft propaganda claims that this product will revolutionize the water enhancers category, I’m not fully convinced.  Will consumers see this only as a novelty item, try it once and not re-purchase?  And since water enhancers are mainly in powder form (with Kraft having a large market of the powder water enhancer category), how much cannibalization will occur?  Kraft MiO GlassWill consumers want to trade up from the less expensive powder format, for the more expensive liquid format?  The idea of a liquid water flavor enhancer is fantastic, and if Kraft is able in getting consumers to adopt MiO beyond the trial stage it will be a huge success for both the product and the category.  Right now, Kraft is not only trying to introduce a new product, but educate the public on the new method of flavoring their water.  The majority of consumers that flavor their water uses a powder, so changing behaviors and habits might take a lot of marketing.  And on the cannibalization factor, getting consumers to switch away from powder to liquid will see consumers leaving Crystal Light (hopefully for MiO), just how many will be the question.  In the end, anyone consumer that trades the powder format for liquid will likely be trading to MiO since there are not too many other substitutes on the market right now.  However, unless the cost to product MiO is significantly lower than Crystal Light, Kraft may actually be taking in less profit.  A package of 30-count Crystal Light currently retails for $13, working out to 43cents each serving, while a 24-serving of Kraft MiO will retail for $3.99 (breaking down to 16cents each serving).  Consumers that work out these calculations will see that MiO gives more value than Crystal Light and switch to MiO, leaving Kraft with savvier consumers, but less profits.

MiO can work, but you really have to wonder if it’s in Kraft’s best interests to have it work.