Odwalla Upsizes and Updates Packaging

Odwalla's updated 2014 packaging.  Courtesy of facebook.com
Odwalla’s updated 2014 packaging. Courtesy of facebook.com

Odwalla’s most recent packaging update has upset some consumers.  The premium juice maker was considered a leader in sustainable packaging by using Coca-Cola’s PlantBottle technology, but the makeover has them abandoning the PlantBottle in favor of the regular plastic bottle used by other beverages (BevNet story here).  This update also sees Coca-Cola’s premium juice brand forsake their color-coded cap system implemented in their previous packaging update – just last year.  Does this imply that the 2013 changes were unsuccessful, and confused consumers?  Will that the recent changes return their competitive edge?

With consistent product packaging for six years prior to the 2013 update, it would seem that their 2013 changes were geared toward attracting new consumers to the Odwalla business.  After all, if the product was fantastic and equally adept at generating repeat purchases, why change it?  Introducing a color-coded cap system was designed to build the juice franchise through educating consumers on their product portfolio.  Green caps denote “superfoods,” red meant fruit smoothies, blue equaled proteins, orange represented juices, purple for quenchers and finally yellow communicated seasonal products.  Do you think six different cap colors for over 20 different juices and smoothies help educate the juice browser, or frustrate them to the point of walking away?  Despite good intentions, this packaging change likely turned consumers away rather than bring them into drinking Odwalla.

Part of Odwalla's updated 2013 packaging.  Courtesy of facebook.com
Part of Odwalla’s updated 2013 packaging. Courtesy of facebook.com

Rectifying this fiasco necessitated the 2014 packaging changes.  Though a stronger competitive set meant returning to the old system wouldn’t suffice.  Everyone (Evolution Fresh, Bolthouse Farms, Naked, and a host of other niche players) had larger bottles compared to the Odwalla 12oz (355ml) bottle.  In order to properly compete, Odwalla brought in a bigger bottle in addition to making it clear.  They also returned to green caps to (hopefully) simplify the consumer’s shopping process.

It’s hard to say if these packaging updates helps restore the premium juice maker’s competitive advantage, though it’s a step in the right direction.  Anything that simplifies the shopping process has a higher probability of getting sold.  What may also help them increase sales is securing produce placement, which is what they are trying to do.  The product section is a stronghold juices made by Bolthouse Farms, Arthur’s Fresh, and POM, so getting product placement in this area will certainly help Odwalla enter the conversation among premium juice purchasers.  Only time will tell if this new, simpler packaging will help move the needle for Coca-Cola’s premium juice brand.

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.

Just for Kids: Odwalla Smoothies

Odwalla Smoothies for Kids - courtesy of bevbet.comOdwalla recently launched Odwalla Smoothies for Kids, a fruit juice smoothie that comes in a kid-friendly juice boxes (link here).  This is a departure from the Odwalla beverages that are currently available.  Not only are they gearing part of their product portfolio towards youth, they are also developing new packaging that kids are accustomed to using.  Is targeting kids a good strategy for the beverage manufacturer, or will there be cannibalization from their base business: the environmental-friendly plant bottle smoothies?  Will Naked, Arthur’s Fresh, Bolthouse, and other smoothie producers follow Odwalla, and segment their business to market towards youth?

From a marketing standpoint, BevWire believes this to be a good strategy.  Distribution is one area where Odwalla can leverage upon to succeed for the new launch.  Aside from on-premise locations like coffee shops and food courts, Odwalla’s bottled smoothies currently has distribution in natural food stores,  high end supermarkets and specialty outlets.  These products’ availability in grocery shopping outlets help the juice boxes succeed since the typical household grocery shopper is the mom.  If moms already consume Odwalla products, she may introduce the healthy beverage to her children.  However, the bottled smoothies pose a challenge since the serving size are meant for adults and the resealable container’s caps are meant to be opened by stronger hands.  Kids can consume the smoothies but only in the presence of adults.  The Odwalla Smoothies for Kids goes after an entirely different consumption occasion – one that does not require the presence of mom to help open and close the bottle.

It is also because Odwalla is going after a different consumption occasion that will limit cannibalization.  Adults rarely drink from juice boxes so the cannibalizing effect will be minimized.  In fact, this may expand the business really well since the purchaser will be buying the bottled smoothie for herself, and buy the juice box version for her children.

Naked Juice 10oz bottle

How will the competition react?  It appears as if Odwalla is actually reacting to another competitor’s actions.  Naked Juice may have already thought about targeting the younger demographic, just differently.  While the typical on-premise serving size of these smoothie are 450ml (15.2oz) bottles, Naked Juice does have a smaller serving size container: the 295ml (10oz) bottle.  These bottles can be found in Starbucks coffee shops among other locations, but the rationale would be that moms get their coffee beverage while their children get the Naked Juice small bottles (most recently O.N.E. Coconut water has also appeared in Starbuck’s refrigerated coolers, but that’s a story for another topic).  Bolthouse Farms, another competitive smoothie manufacturer, also makes smoothies in the 450ml bottle variety.  They do have a smaller serving size, but only for the acai juices.  This would indicate that Bolthouse Farms currently does not have an offering available toward kids and the in-school drinking occasion.

Local Canadian manufacturer Arthur’s Fresh also produces smoothies and competes against Odwalla and Naked Juices.  With single bottles that have serving sizes of 325ml and 900ml, they are not marketing toward in-school drinking occasion nor are they going after the kids.  Happy Planet also only has their smoothies available in the 450ml (or larger) sizes, meaning that they have also not produced a product that kids can drink without their parents assistance.  However, their next move may be to push out new packaging designs or smaller sizes, since the category’s leading manufactures have products in smaller serving sizes and packaging that attract kids.

While Odwalla’s new products may not change the super premium juice and smoothie landscape completely or at all, they do have the other manufacturers thinking about cateringtoward a different drinking occasion or a different demographic.  It might not be a juice box that caters to kids.  But it could very well be caffeine-infused smoothie to target a completely different demographic.  Or it could be a new and even more friendly product package.

Whatever it is, Odwalla’s Smoothies for Kids offers a refreshing perspective on how creativity and market segmentation have helped expand a product category and maintain (or further accelerate) its growth rate.

Starbucks Buys Evolution Fresh, Naked Juice to Disappear in Starbucks?

Evolution Fresh - courtesy of drinks-business-review.comNumerous headlines were made this week when Starbucks bought Evolution Fresh, a super-premium healthy juice company.  For Starbucks, this signals their entry into the health and wellness juice category, and may also spell the end of Naked Juice in Starbucks locations.  First of all, who is Evolution Fresh and what makes them so special?  Second of all, how will this affect the partnership between Starbucks and PepsiCo, with Pepsi bottling and distributing Starbucks Frappuccinos and Doubleshots?  Will Pepsi’s Naked Juice follow the path of Happy Planet juices, the first juice and smoothie manufacturer in Starbucks coffee shops that was later replaced by Naked Juice when Pepsi and Starbucks entered into the distribution agreement?

In answer to the first question, Evolution Fresh differentiation is its unique pasteurization technique called High Pressure Pasteurization (HPP).  This technique allows the liquid to be pasteurized in the bottle using little to no heat, maintaining the juice’s nutritional value as well as prolonging the shelf life.  Other juices like Naked and Odwalla uses a  technique called Flash Pasteurization”, which uses high temperature heat for 15 – 30 seconds to kill off bacteria and microorganisms.  The main difference would be the use of heat to pasteurize the beverage, as flash pasteurization’s use of heat may slightly shorten the juice’s shelf life and also cause the loss of some vitamins.

Relating to the business and marketing aspects of this acquisition, Starbucks may have to look for a new distribution partner for their Frappuccinos and Doubleshots.  With Naked juices being replaced with Evolution Fresh in Starbucks coffee shops, Pepsi may likely decrease their priority on re-stocking Starbucks products when inventory runs low.  Other distribution options for Starbucks include regional beverage distributors or food distributors that sells products int he same grocery supermarket channels.

It will be  interesting to see how the two companies treat each other when the partnership officially terminates – amicably or otherwise.  With Starbucks initiating this juice purchase, they will be direct competitors in the juice category.  Will Pepsi purchase or create their own coffee brand?  After all, Coca-Cola does have their own boutique Chaqwa coffee brand, so maybe Pepsi will be developing their own coffee beverage to add to their overall refreshments portfolio.

A Tale of Two Plant Bottles: Coca-Cola and Pepsi

Pepsi PlantBottle - photos.prnewswire.comJust as Coca-Cola releases their plant-based bottle packaging to Canadians this past month, Pepsi puts out a news release stating that they will be launching their own plant-based bottle (link here).   The news release does not indicate whether Pepsi’s plant bottle will be available in Canada right away in 2012, but it is likely a North American rollout rather than just the United States.   Since Coca-Cola already debuted their plant bottle for their core products last year at the Vancouver 2010 Olympics, it appears that Pepsi has been lagging on the topic of sustainable packaging.  But what the public did not know is that Pepsi already has a variety of products made using sustainable packaging, such as the Aquafina ‘Eco-Fina’ bottle and the Naked ‘reNEWable’ bottle.  The only thing lagging from Pepsi’s end is having a plant-based bottle with their own logo on it rather than a water or juice logo.

So is there any difference between the two different plant bottles, technology or recyclability or otherwise?  While the traditional recyclable plastic bottles are made using fossil fuels such as petroleum, Coca-Cola’s plant-based bottle materials for both Dasani and Odwalla are made through a process that turns sugarcane into a key component for PET and HDPE plastic.  This process reduces emissions and ultimately produces the plant bottle that looks like a regular plastic bottle.  Pepsi’s plant-based plastic bottle goes through a similar process that turns the inputs into PET and HDPE plastic, except it sources different materials; Pepsi will turn switch grass, corn husks, and pine bark (and expand to include orange peels, potato peels and other bio-based products from their food business) into the PET and HDPE plastics used for the bottle packaging.

Despite the “ground-breaking” news that each company released about using plant-based materials to produce their plastic bottles, it’s ultimately the same technology save for different material inputs.  The good thing is that the world’s two largest beverage manufacturers are mindful of their impact on the environment and have taken steps to reduce their emissions while refreshing their customers in the process.

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.

Odwalla’s New PlantBottle

courtesy of www.bevnet.com

Odwalla, the natural health beverage company announced that starting in March 2011, it will be transitioning their single-serve bottles to PlantBottle packaging.

“Plants do such a good job of making our juice, Odwalla hired them to help make our bottles,” said Alison Lewis, President, Odwalla. “Doing good things for the community and building a business with heart are core guiding principles of Odwalla’s vision. PlantBottle packaging is just the latest step in our continued commitment to the environment.”

PlantBottle packaging consists of material derived from molasses and sugarcane juice. It has the same performance as traditional HDPE and PET bottles: no differences in shelf life, weight, composition or appearance. PlantBottle™ HDPEcan be recycled again and again in today’s recycling facilities. The redesigned plastic represents a significant step in sustainability efforts and in protecting the planet.

This seems like a great move step for a health beverage company – not only is your beverage natural, but your packaging as well.  Another interesting fact is that Odwalla is bottled and distributed by Coca-Cola in Canada.  Some might remember that Coca-Cola also introduced plant-based packaging late last year in prepration for the 2010 Vancouver Olympics.  That said, Coca-Cola is environmentally conscious and supports the PlantBottle as well, so having Odwalla transition to sustainable packaging represents a step in the right direction.  Not sure what the cost is on this type of packaging, but if Coca-Cola can bottle their products using this type of packaging and their competitors stick to the traditional PET bottles, this further reinforces the fact that they are the leading beverage company.  So what else should Coca-Cola try to distribute using the plant bottle?  Nestea?  Minute Maid Juices?  Powerade?  My recommendation is to distribute the Minute Maid Juices in the PlantBottle as well. It seems like the right thing to do since Minute Maid juices are also a healthy beverage offering.

Question is, will Pepsi bottle any of these beverages using this type of packaging?  The Tropicana and Naked Juices product lines, as well as the Lipton tea series seems like suitable candidates to be transitioned to sustainable packaging.  If Pepsi also bottles their products using the PlantBottle packaging it might negate one of Coca-Cola’s selling points to consumers right now.  In a time when it matters to consumers not only what is within their drinks but how it is produced, packaging innovation is a natural progression of their curiosity.  And supporting a company that cares for the environment while providing you with what you need (in this case liquid refreshments) beats one that only cares about making money.

Your move, Pepsi.