Vegetable Beverages Hitting Mainstream

Gatorade Lime CucumberWould you drink a cucumber lime-flavored Gatorade?  How about blueberry mint-flavored water?  An article on Beverage Industry on emerging beverage trends claim that vegetable-flavored beverages are increasingly popular because of their “healthy halo” (article link here).  With everyone focusing on healthier options, it makes sense that vegetable flavors reach mainstream status and consumers seek to take in more vegetables.  After all, berry and other fruit-flavored beverages can only deliver so much momentum.  That said, the article describes that consuming a vegetable-only flavor is still in uncommon and many beverage options are a combination of both vegetables and fruits.  How will this particular flavor trend impact beverage makers?  Will these drinks ever reach a level of popularity to take down mainstream colas, juices, or waters?

Beverage manufacturers constantly monitor flavor trends and Pepsi has locked into this trend since 2011, when they launched a Cucumber Lime flavor under the Gatorade franchise.  Pepsi Japan’s limited-time releases of Pepsi Shiso and Pepsi Ice Cucumber also proves this point.  Since most (if not all) beverage organizations monitor consumption trends, it would not be surprising to see manufacturers build momentum and launch more vegetable-infused variants over the next few years.  It just needs to make its way into the North American market.  And this is beginning to catch on more in the U.S.; research firm Mintel tracked over 100 U.S. beverage innovations with vegetable or vegetable-fruit flavors launching in the past year, representing a 20% increase from 2013.  It still stands to be seen whether these vegetable-flavors will launch under the most popular and mainstream beverage lines like Gatorade, Coke, and Pepsi or launch under emerging beverage brands.  No matter the case, any approved product launch puts sales pressure on other items to perform or risk losing the shelf space.  This flavor trend may not have been successful replacing other products’ sales to justify shelf space though it looks that will soon change.

On the topic of reaching critical mass to take down mainstream product categories, it doesn’t look promising.  This isn’t to say that vegetable-flavored beverages will not reach mainstream status themselves, just that it will not overtake other mainstream categories.  For one, this is a flavor trend that integrates the product under a specific beverage segment; it is not a standalone beverage category in itself.  Consider these vegetable-flavored products to pattern after  Campbell’s V8 juices or Bolthouse Farm smoothies, where they represent a growing portion of a drink category (juices and smoothies, respectively) but are not large enough to overtake juices as a whole or smoothies as a whole.  Regardless, these healthier options will compete aggressively for retail shelf space alongside other beverage options.

Image courtesy of foodbusinessnews.net
Image courtesy of foodbusinessnews.net

The Beverage Industry article also describes other beverage flavor trends, include a growing preference toward sweet and spicy combinations.  Consumers increasingly look for flavors that will satisfy multi-sensory experiences.  Some examples include chocolate gojuchang tea (gochujang is a Korean spicy sauce),  spicy ginger mango juice, and mango jalapeno water.  So be on the lookout, soon enough you’ll see more cross-flavored beverages on store shelves.  Be in sweet and spicy or vegetable-fruit flavored, it will sound exotic but your taste buds and your body will thank you for choosing that over another drink.

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POM Wonderful and Coca-Cola sue each other

Courtesy of foodindentityblog.com.  Is the Minute Maid juice label misleading?
Courtesy of foodindentityblog.com. Is the Minute Maid juice label misleading?

The food & beverage landscape may undergo significant changes shortly if a lawsuit between POM Wonderful & Coca-Cola is decided in POM’s favor. POM is suing Coca-Cola for misleading packaging for its Minute Maid Pomegranate Blueberry juice.  The labeling suggests that the beverage is a 100% fruit juice flavored with a combination of five fruit juices.  The beverage contents are primarily apple and grape juice, containing only 0.3% blueberry juice, 0.2%. pomegranate juice, and 0.1% raspberry juice.

The crux is whether one organization can sue another for misleading labeling that was deemed permissible by the Food & Drug Administration.  The FDA has decided that the beverage contents and the name itself satisfies their labeling requirements.  That said, the governing body allows companies to name the product based on the flavor even if trace amounts were used to produce the flavor.  Volume quantification is not necessary for the product contents.  Linda Goldstein, a partner with Manatt, Phelps and Phillips prefaced the following to AdWeek (full article here):

“Depending on how the Supreme Court rules, the ramifications could be broad. This is a huge case for the food and beverage industry.  No one has asserted that Coca-Cola violated FDA rules and law. The issue is whether the FDA regulations are the floor or the ceiling. Pom says it’s the floor and that the label can still be misleading.”

Should this case be decided favoring Coca-Cola, the food & beverage industry’s product labeling practice is kept intact.  POM will have made an even larger name for itself and Coca-Cola will carry on business as usual.  In the end, this could serve as a win for both Coca-Cola and POM Wonderful despite the court ruling in Coca-Cola’s favor and everyone paying exorbitant legal fees (the case has been around since 2008).

If the court ruled in POM’s favor, this sets the stage for increased vigilance toward product package labels.  Beyond the direct impact where Minute Maid must augment the product label, other food & beverage products currently on the market will be availability for scrutiny.  According to Goldstein in the AdWeek article, the fact that it could lead to a class action litigation suggests that many products do not satisfy the labeling requirements.  The precedent would be set that an organization can reduce the competitor’s advantage by scrutinizing their packaging claims.  Will this ultimately lead more companies to sue other companies for the sake of labeling challenges?

The genesis of POM’s lawsuit was Coca-Cola’s introduction of this Minute Maid Pomegranate Juice at a lower price point relative to POM’s products.  Given Coca-Cola’s distribution and marketing muscle, it’s understandable that POM would want to level the playing field as much as possible.  However, be careful what you wish for.  POM is also currently in appeals with the Federal Trade Commission over their own misleading advertising claims (full article here).  Through all of this, both beverage organizations’ focus has been on reducing the competition’s advantage.  Let’s hope that they return to their core business functions sooner rather than later: selling refreshing beverages.

Three More Canadian Beverage Trends For 2014

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

Pepsi Next - courtesy of rft3.wordpress.comDr 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

Courtesy of sodastream.ca

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.

Coffee War: Kraft & McDonald’s vs Starbucks

McDonald's McCafe coffee, now sold in grocery retailers by Kraft.  Courtesy of mcdonalds.ca

Ever since the 2011 break-up with Starbucks, Kraft had been looking for a beverage partner to package and distribute premium coffee.  Enter McDonald’s McCafe.  The quick service restaurant has been looking for growth opportunities outside of burgers & fries, recently turning their attention to premium coffee.  They have even started selling bagged ground coffee within the restaurant.  However, most coffee drinkers still enjoy their first cup of coffee at home, and gaining distribution to the traditional grocery channel is critical to McDonald’s expansion efforts.  While this partnership benefits to McDonald’s, how will it benefit Kraft?  How will it affect their current coffee brands: Gevalia, Maxwell, and Tassimo?  And what about Starbucks – how will this impact their grocery coffee business?

Kraft Benefits Greatly With a Strong, Already-Built Beverage Brand

It is much easier to leverage a well-known brand rather than build your own.  This is what Kraft is doing.  Even without specifically knowing about McCafe premium coffee, McDonald’s itself is a well-known household name.  McDonald’s has also worked hard to change its image as a destination with unhealthy food options.  This has culminated into their successful, award-winning “Our Food.  Your Questions” campaign (read about it here).  As such, consumers are more open and knowledgeable about McDonald’s healthier options like snack wraps or fruit smoothies.  Kraft is able to leverage on McDonald’s name to help them gain some shelf space in grocery retailers.

Gevalia coffee - courtesy of commonsensewithmoney.com

Before ending their partnership, Kraft had helped transform Starbucks’ grocery business from an initial $50 million to nearly $500 million in annual sales.  With Starbucks wresting full control of their coffee business from Kraft, they were forced to refocus on Maxwell House, Gevalia, and Tassimo.  Maxwell House was a value offering, and competed against store-brand coffee.  Growing this brand would only serve to devalue the category.  Tassimo single-serve at-home units were expensive (and still is), not to mention ahead of market trends and did not have a strong market presence.  Growing this would take a considerable amount of investment and still not fill the void left by Starbucks’ premium coffee.  Gevalia was Kraft’s best bet, and still they had to build this premium coffee brand.  You can see from the clip below that they fully intend on competing against Starbucks head-to-head.  And if you haven’t heard about Gevalia, then you’re not alone. It still has work to do before achieving high enough awareness levels to penetrate the shopper’s consideration set when it comes to buying ground coffee in the grocery aisle.

With McDonald’s McCafe coffee part of their portfolio, Kraft now brings another strong and well-known coffee brand to retailers.  However, it only partially fills the void created by Starbucks.  Tony Vernon – Kraft’s Chief Executive – says McCafe is considered a step above Maxwell House, but still below their premium coffee Gevalia (story link here).  That said, Kraft expects McDonald’s McCafe to fill a mid-tier coffee segment and regain lost shelf space, but they still expect Gevalia to be their premium brand to compete against Starbucks.

How Will This Affect Starbucks?

At this point, this partnership is something to monitor but not react.  Within the coffee segment, Starbucks consumers are highly loyal and may not interact much with McCafe coffee.  Considering where McDonald’s McCafe coffee are priced, Starbucks’ similar offerings figures to be priced at a 20% premium – at least.  Consumers also buy Starbucks because it is considered an “affordable luxury” item while McCafe is considered a broader appeal item.  Unless coffee drinkers suddenly change their taste preferences, McCafe will not steal away many Starbucks coffee drinkers.  Within Kraft’s portfolio, Gevalia still remains Starbucks’ top threat yet the brand itself has some work to do.  Gevalia still has to gain awareness and cultivate a rich premium coffee history.

The evolution of Starbucks.  Coffee has not been their core focus since 2011.  Courtesy of  brandautopsy.com

And while coffee still remains the core component of Starbucks’ business, they have been moving to expand their own portfolio.  They have smoothies.  They have tea.  They even have yogurt and baked goods.  They plan on having their own soda line at some point in the future.  What was a company that  only attracted coffee drinkers has morphed into one that attracts any thirsty (or hungry) consumer.

So as Kraft finds a partner to fill a gap in their coffee business, Starbucks has branched out to other beverage segments.  Coffee is a large part of the beverage market and one where a few manufacturers compete in.  It’s a good thing that despite the size of this segment, all three companies – Kraft, McDonald’s, and Starbucks – are diversified and have other focal points to turn their attention to.

 

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.

“Freestyle” Flight Beverage, and a Thought Starter

On my latest flight trip, I decided to step away from my regular drinks.  Normally, I opt for Cranberry Cocktail, Orange Juice or Sprite.  But the flight crew was really comical and interactive, and even made a comment about mixing drinks together.  I decided, “Why not?” and opted to mix the Orange Juice with Sprite.  To which he replied that that mix is fairly common and told me to “Live on the Wild Side.”  So I asked for his suggestion on what would dial up the “wild” factor he was alluding to.

Given that there are finite options on an airplane and I wasn’t interested in paying for alcohol, he came up with the following: Coke Zero and Cranberry Cocktail.  In addition to the Orange Juice and Sprite.  I guess this really turned it into a Cranberry “Cocktail”.  Taste-wise it wasn’t bad because of the mix ratios (about 70% OJ), but it was nice to have a quick Coca-Cola Freestyle moment on the flight.  Here’s my drink on the flight.

Freestyle Flight Beverage - can you guess what's in this? Even though it looks like Orange Juice.
Freestyle Flight Beverage – can you guess what’s in this? Even though it looks like Orange Juice.

So my thought starter as a result of this interaction?

Would there come a day when flights are equipped with more than just the regular assortment of fast-selling canned beverages – like Coke, Pepsi, Club Soda, and Cranberry juice?  How likely is it to get Coca-Cola Freestyle (with over 100 different customizable beverage options) on a flight?  What would it take to make this happen?  Are we currently moving to this state already?

The simple answer to those questions: No.  Based on my observations & understanding, an airline’s beverage assortment is geared toward the top-selling and popular options.  For example, if a Vanilla Coke alternative existed, would it be “turn” fast enough to beat the expiration date?  Despite it having a cult following, this just isn’t a regular beverage option.  Keeping in mind that flight guests typically don’t know what the airline’s beverage assortment consists of.  This means that suggestive selling or flight-attendant input is heavily needed in order to move through slow-turning beverage options.

Operating a Coke Freestyle machine would involve many complicated moving pieces.  For example, how would the syrup be best stored to be protected from denaturing during different altitudes?  Which beverage options should the airline carry on board the plane?  Will they need more syrup cartridges of the popular flavors and less of the more niche offerings?  This also does not solve the problem of slow-turning alternatives.  And let’s not forget the most obvious problem: carbonated tanks.  Forgetting about all the various beverage options and the obvious hazards of carrying carbonated tanks through different air pressure, there is still too much equipment store needed to make this work.  And we haven’t even gotten to the financial part of this alternative.  Ultimately, my thought starter would end up being a non-starter.  Fountain units are not meant for air travel.

Another interesting observation: I never knew that planes had lemon and lime substitutes, but apparently they exist like sugar packets.  Feast your eyes on an image taken in flight (and posted later to BevWire upon arrival) of crystalized lemon and lime packets.  Now that would have been a party if I had added this into my new Cranberry Cocktail!

LemonLimeCrystalized

Canadian Grocery Re-post: Gas Pump Vending Machines Coming Soon?

Gas Island Vending Machine. Courtesy of vendgogh.com
Gas Island Vending Machine. Courtesy of vendgogh.com

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.

Starbucks Buys Teavana, Diversifies Beyond Coffee

Starbucks Logo Evolution

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?

Teavana Logo

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.

Updated Minute Maid Single Serve Packaging

 

New Minute Maid BottlesIt’s long overdue in the implementation process, but the new Minute Maid bottles have phased into the Canadian marketplace.  Originally launched in the U.S. in 2009/2010 for the full Minute Maid assortment, the single serve bottles appear to be the last ones to be change over to the new packaging.  This may be a result of the labeling changes as well, since the adhesive labeling is now replaced with the plastic shrink wrap.  Here in Canada, that change from paper labels to plastic shrink wrap only took place this past June (could be earlier, but that’s when it was noticeable in coolers and store shelves).  Judging that there has been no backlash on Minute Maid like the Tropicana fiasco, it would appear that this change is a success in the Canadian marketplace.

Ultimately it’s a sleeker looking bottle that places more emphasis on the bottle’s images than the bottle’s content.  With more of the content behind this whole bottle plastic wrap, this makes the product more dependent on the imagery and colors – sliced oranges and leafy green colors.  The bottle itself is also streamlined – gone are the wavy grooves from the previous iteration and replaced with a smoother grip-friendly shape.

While it may not change sales all that much, the new bottle certainly makes the juice brand more current by adapting to the stronger emphasis placed on beverage packaging.

Bolthouse Farms Very Likely To Expand

Bolthouse Lineup

A few weeks ago I detailed a post where Bolthouse Farms had put up their “for sale” sign and solicited bids from interested companies (article link here). Not surprisingly, Campbell Soup Company was one of the bidders and the latest news indicated that it is now a closed deal – Campbell Soup Company has bought Bolthouse Farms for $1.55 billion dollars. With deeper corporate pockets, Bolthouse Farms now emerges as an even stronger competitor in the premium juice & smoothie beverage category. The linked article above detailed the benefits toward Campbell Soup Company and how it would impact retailers. But what we have not yet discussed is how it would affect the competitive landscape. Which manufacturers and brands will be impacted? Will this change anything in the retail environment?

The premium juice & smoothie beverage segment can count a few niche players as well as two large players. Arthur’s Fresh, Happy Planet, and the not-yet-in-Canada Evolution Fresh juice brand serve as the niche brands. At the other end of the spectrum you have Odwalla (owned by Coca-Cola) and Naked Juices (owned by Pepsi) as your national premium juice & smoothie makers. Bolthouse Farms previously stood closer to the niche end despite its broad distribution in Canadian grocers. Their primary operating space was in the fresh produce section in a grocery store, sitting on the shelf next to Arthur’s Fresh and Pom Wonderful products. This deal will not change where Bolthouse Farms is located, but it will help them on negotiating power and price their drinks more aggressivley because of their newfound corporate support.

Naked Juice 10oz bottle

The larger affect will happen outside of grocery stores, in channels such as drug, convenience, and on-premise. These channels are typically dominated by Coca-Cola and Pepsi drinks, and will likely include Bolthouse Farms products in the near future. Bolthouse Farms products are already in grocery for the most part, so their expansion plans would involve exploring new channels of growth. And if Bolthouse Farms provides their own branded coolers, then their channel penetration should speed up. Given that Coca-Cola & Pepsi both manufacturer other beverages where the public may view negatively (ie. soft drinks contributes to obesity), retailers may also be more willing to work with Bolthouse Farms with its clean company image.

While the expansion to other channels are immiment, I believe the prime targets to be the Canadian drug channel (ie Shoppers Drug Mart). With this retailer’s expanding its grocery offerings and abundant cooler spaces, Bolthouse Farm should see this retailer as a great expansion opportunity. To further help this fact is that drug stores typically have a healthier perception in the Canadian market (they have pharmacies, cater to the senior demographic, etc).

The sale to Campbell Soup Company just happened and it will take some time to integrate Bolthouse Farms’ operations. Once they have settled in and are ready to expand, be ready to find Bolthouse Farms at your local drug store, convenience store or local food joint.