Red Bull Expands Editions Line-Up

The expanded Red Bull Editions Line-up.  From left to right, Orange, Cherry, Red, Blue, and Yellow.  Image courtesy of cspnet.com.
The expanded Red Bull Editions Line-up. From left to right, Orange, Cherry, Red, Blue, and Yellow. Image courtesy of cspnet.com.

It seems that Red Bull has found more success introducing energy drinks than energy shots or cola, as their recent launches like the Red Bull Total Zero and the three Editions flavors have fared much better.  So it should come as no surprise that the energy drink behemoth continues building sales momentum behind their energy drink assortment.  At the 2014 National Association of Convenience Stores (NACS) show, Red Bull announced three new members to the Editions family.  Joining the Red (Cranberry) and Blue (Blueberry) Editions are the Yellow (Tropical Citrus), Orange (Orange), and Cherry (Cherry) energy drink flavors.  The Orange & Cherry options contain zero calories and zero sugars, while the Yellow option returns with nationwide availability after a two month test exclusively with 7-Eleven.  These new flavors will be available starting mid-February in 355ml (12oz) cans, while the 250ml (8oz) cans will transition to a multi-pack sku.

Among the three new flavors, Cherry may be the only true new addition to Red Bull’s portfolio.  The Yellow flavor was brought to market during the 2014 summer months, exclusively with 7-Eleven.  It was known as the Summer Edition to temporarily complement their Red, Blue, and Silver drink line-up from July to September.  Meanwhile, the Orange flavor may have previously existed in limited U.S. markets under the name of BULL Energy.  BULL Energy had different packaging, with limited references to Red Bull, and was available exclusively across soccer venues (as an exclusive product for the New York Red Bulls, the city’s soccer team).

Related Post: Red Bull Celebrates Summer with New Flavor

Regardless of the flavors being truly new innovations or otherwise, this marks an accelerated pace of product introductions for Red Bull than previously recorded.  Before 2012 (year of Red Bull Total Zero launch), it was back in 2009 when Red Bull added to their product line-up, with an unsuccessful expansion into energy shots.  Since the 2012 launch of Total Zero, three new items were added in 2013 (Red Bull Editions) and now three more in early 2015.  Although their pace doesn’t match that of Monster Energy or Rockstar Energy (which launches multiple new products annually), Red Bull’s more recent product expansion activities indicates their commitment to giving brand loyalists more choices.  And this ultimately lets consumers reward Red Bull with more dollars.

Courtesy of BevNet.com – the new Red Bull “Bull” Energy Drink.
Courtesy of BevNet.com – the new Red Bull “Bull” Energy Drink.

With these new introductions, it appears that Red Bull may not be done with their product expansion.  The Orange and Cherry flavors are decidedly different from the Red, Blue, and Yellow items, containing zero calories and zero sugar.  In essence, these two skus align closer with Red Bull Total Zero.  In which case, Red Bull may explore opportunities to build out their “Zero” product line-up.  Would the energy drink manufacturer launch both the Red and Blue flavors under the Zero portfolio?  Also mentioned in the press release was the Editions will be available in single servings (355ml/12oz sizes) and multipack servings (4-packs of 250mls/8oz).  Would Red Bull consider up-sizing some items even more, to join the original Red Bull Energy Drink in a 473ml (16oz) size?  Even yet another option would be exploring additional flavors to bring to market.  Beyond the current flavors, would Red Bull add to the Editions line-up with a Pink (lemonade), Peach (peach), or Purple (grape)?

Related Post: Red Bull Launches New Product: BULL Energy Drink

Incremental offerings for the Editions line-up certainly presents Red Bull with opportunities and risk.  It’s worth noting that Red Bull has quietly swept the Silver (Lime) edition under the rug.  It’s not clear whether Silver is being discontinued, but keeping the current Red Bull flavor portfolio at five flavors is a sound decision.  As long as energy drink consumers enjoy Red Bull’s new products, the energy drink company will continue to deliver popular innovations.  Today, the Red Bull company looks very different from the one back in 2009.  After a period of failed experimentation, a string of successful innovations has helped Red Bull take back control of the energy drink market.

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Big Red Buys Xyience, Ends UFC Partnership

Xenergy Lineup

It seems the beverage industry continues to go through some form of consolidation.  Big Red Inc. – one of North America’s Top 10 beverage organizations – has acquired Xyience effective immediately.  Xyience – one of the more well-known energy drink brands through their sports sponsorships – now joins a drink portfolio that includes Big Red Soda, Hydrive Energy Water, Nesbitt’s, and Thomas Kemper Soda.  While many things may change for Xyience in the future, one thing has already changed as a result of this acquisition: Xyience has ended its UFC sponsorship.  Will ending this sponsorship hurt Xyience’s growth among their core demographic?  How else will their communicate to this group of consumers?  Will the gains from being part of Big Red’s system outweigh Xyience existing as a standalone energy drink company?  What benefits Xyience in this arrangement?

One major factor: Big Red’s national footprint.  Xyience had been working well to gain distribution, winning more doors and regions over the past few years.  However, most of these distribution gains have occurred along the coasts.  There are many areas within the U.S. that Xyience products cannot be found.  Joining Big Red gives Xyience national distribution by piggybacking off of Dr Pepper Snapple Group (DPSG), which is a national distributor and delivers to three-quarters of all Big Red retail accounts.  This change alone provides significant gains for Xyience, allowing the energy drink to challenge Red Bull, Monster, and Rockstar across more geographies.  The best part is that this is organic growth, where Xyience can rely on their brand name to help them do some of the work.

Beyond distribution gains, another growth opportunity for Xyience would be to broaden its target audience.  While the energy drink manufacturer owns a niche following among a select group of consumers, appealing to more consumer groups will help this brand evolve from its current state to a much larger energy drink player.  Hence ending their UFC sponsorship.  Gary Smith – Big Red’s CEO – said as much:

“I’m just gonna soften it (their image) up a little bit, make it a little less hardcore than the image that it’s got today.”

Ending the sponsorship won’t immediately alienate their niche consumers, but provides the opportunity to reach other consumer groups.

If managed properly, Xyience may be primed for explosive growth following its Big Red acquisition.  The brand is very recognizable and will be available in more places where consumers will recognize them.  And in the distant future after new consumer marketing content is built, they will certainly be challenging Red Bull, Monster, and Rockstar for share of mind in addition to share of shelf.

Coca-Cola Builds a Monster

Image courtesy of brandchannel.com
Image courtesy of brandchannel.com

Looks like Coca-Cola realizes what it’s good at and what it isn’t good at.  Their increased stake in Monster Beverage proves as much.  With $2.1 billion invested, Coca-Cola now owns 17% equity in the energy drink behemoth, and in turns switches up their product portfolios.  Coke will give Monster their own acquired or homegrown energy drink brands, which includes Nos, Full Throttle, and Burn among many others, while Monster trades them their non-energy drink products, such as Hansen’s Natural Sodas & Juice Products, Peace Tea and Hubert’s Lemonade.  This deal brings together the world’s largest soda manufacturer and the U.S.’s largest energy drink manufacturer.  Although both sides got a great win out of this, but who needed this deal more – Coca-Cola or Monster?  Let’s start by seeing what each side actually gets out of this arrangement.

For Coca-Cola, acquiring a larger stake in Monster and then trading energy drinks for teas & juices serves as a win in itself.  With consumer habits and preferences changing, fortifying their product portfolio to keep pace with these changes was a necessity.  And with key brands generating bad press lately (think Diet Coke slogan fiasco), Coca-Cola could not afford to keep beverage products that carry high negative publicity potential.   Nos, Full Throttle, and the like most certainly qualify given the category requires caffeine content regulation following linkages to caffeine poisoning.

Energy drinks didn’t necessarily fit into the brand image that Coca-Cola wanted to sustain.  Energy drinks focus around an extreme sports lifestyle, with key sponsorships across mountain biking and motor biking.  Distancing the brand from energy drinks better promotes Coke’s image as a family-oriented product manufacturer.  Furthermore, their marketing acumen is better leveraged across Monster’s non-energy products given Coca-Cola’s existing strength across juices and teas.  Coca-Cola has already made a strong name for itself behind Minute Maid, Simply, Odwalla, Nestea, and Honest Tea.  Giving up energy to return focus to juices and teas helps Coca-Cola stay sharp and work on what they’re good at.

Hubert's Lemonade, now part of the Coca-Cola family.  Will this lemonade brand grow exponentially?  Image courtesy of hansens.com
Hubert’s Lemonade, now part of the Coca-Cola family. Will this lemonade brand grow exponentially? Image courtesy of hansens.com

For Monster Beverages, this deal unlocks a stronger global distribution network to grow their product base.  They’ve also added some larger name-brand energy drinks to complement Monster.  A strong competitor like Nos now becomes a fantastic ally.  Full Throttle owns a cult following despite Coca-Cola’s neglect and has a very good chance of being resurrected.  This arrangement gives Monster a wide assortment of products to target energy drink consumers, both locally and internationally.

Monster has also done a better job at marketing energy drinks than Coke because they’ve invested in resources to build out an entire lifestyle.  Energy drinks are more integrated into a consumer’s lifestyle than some other beverages, given their wide target in terms of drinking occasions.  The soda drink manufacturer was not prepared to build out a 24/7 lifestyle like how Monster, Rockstar, and Red Bull have.  Though Monster’s success isn’t a defined blueprint, they already have the infrastructure in place for one energy drink and this could be scaled up for other energy drinks.

It’s really hard to say who needed this more though Coca-Cola benefits more in this new arrangement.  The soda maker had more to lose because they were never going to catch Red Bull, Monster, or even Rockstar with their homegrown products.  Giving up distribution bought them expertise and healthy beverage brands.  Similarly, Monster’s true success existed in the energy drink segment, so much that they even changed their company name to halo off some brand equity.  Their strength in energy drinks would have prevented them from properly developing their nonenergy product portfolio.

Regardless of who benefited more, this only proves that larger companies must take creative approaches to keep growing.  In the past, it was about building strong brands.  Now, it’s about buying a brand that’s already been built, and making it stronger.

Rockstar Quietly Introduced Energy Waters

The three flavors of Rockstar Energy's new Energy Waters: Citrus, Orange Tangerine, Blueberry Pomegranate Acai.
The three flavors of Rockstar Energy’s new Energy Waters: Citrus, Orange Tangerine, Blueberry Pomegranate Acai.

Rockstar Energy showcased their Rockstar Energy Water over 18 months ago at the 2012 NACS Show, but never divulged the launch date.  The energy drink manufacturer’s enhanced water offerings were quietly introduced in September 2013, and has recently launched into Canada.  Via Rockstar Energy Canada’s Facebook page – the three flavors of Citrus, Orange Tangerine, and Blueberry Pomegranate Acai – launched February 24.

Beyond their energy drink’s portfolio breadth, Rockstar has been traditionally known for their innovative and attention-grabbing packaging.  Their energy drinks come in aluminum cans that have matte finishes (Rockstar Recovery series) and slim cans with straws (Rockstar Pink).  However, their foray into enhanced waters have stayed with safer packaging resembling other products that define the segment landscape.  Even as packaging can help demonstrate a product’s unique features, Rockstar has chosen to play it safe since they do not have a strong brand name.  Their packaging resembles that the glaceau’s vitaminwater packaging, the clear market leader.  Perhaps Rockstar is looking to enter this segment as a follower and build up credibility as a key competitor in this segment before experimenting with its packaging.

The launch of Rockstar Energy Water is also an indication of the energy drink manufacturer’s goals to diversify beyond energy drinks.  Similar to Starbucks’ aim to expand outside coffee and Monster Energy’s expansion into teas, Rockstar is leveraging their expertise in energy drinks to introduce other caffeinated beverage products.  These new products are targeted toward a different consumer, and will be placed in other beverage sections within convenience and grocery stores.  With more touch points in the grocery aisles, Rockstar now has more opportunities to connect with the shopper: both the energy drink shopper and the enhanced water shopper.

As Rockstar targets a new consumer demographic, their marketing message and vehicles should also change.  Energy drink companies have forged strong ties with extreme sports athletes since their products fit that particular demographic and lifestyle.  Their new beverages may need to start communicating on other media channels (ie TV, print, digital) and communicating differently to identify more closely with this demographic’s behaviors and needs.  While some analysts expect Rockstar Energy Waters to go after the same “energy” consumer, there are bound to be new interest.  At the same time, communicating similar messages within identical media platforms dilutes the overall product awareness.

Rockstar Energy Water Shelf

Even as Rockstar Energy Drink continues to increase its availability, two key challenges they must address are awareness and consideration. Their February launch showed that they have only communicated to the public through sporting events and social media.  How will they improve their awareness?  And with their competition firmly entrenched in shopper’s minds when they are looking to buy enhanced waters, what will Rockstar Energy Water do to have the shopper consider trying Rockstar Energy Water?

Seeing that expansion is a key growth opportunity, Rockstar’s broader portfolio is a good first start.  If they continue supporting these new drinks and work to build both awareness and consideration, Rockstar can become a strong player across both the energy drink and enhanced waters segments.

5 “More” Questions with Hard Rock Energy’s David Drow

Hard Rock Energy Image

When people think of the energy drink category, they typically think of Red Bull, Monster, and Rockstar.  To a broader extent, consumers also consider Nos and Xyience.  All of these companies have had to build their brand from the ground up, with very little leverage in the first place.  How would the product’s success change if they had some brand equity they could leverage?  We encounter such a case with Hard Rock Energy, an energy drink licensed through Hard Rock International – the themed restaurant chain with rock and roll memorabilia – to market energy drinks.

BevWire recently connected with David Drow and Brent Campbell for an interview.  David Drow is the Chief Executive Officer and Brent Campbell is the Chief Operational Officer of Enterprise Beverage Group, the licensees for the Hard Rock Energy brand of energy drinks.  What initially was “5 Questions” spiraled into many subsequent questions as BevWire wanted to learn more about the business aspects of Hard Rock Energy.  The below is the second part of the “5 Questions” interview with David Drow.  We will be covering the brand’s marketing tactics, test market results, and David’s views on growth opportunities as well as growth barriers.  Click here for last week’s “5 Questions” piece.

BevWire: How successful has Hard Rock Energy been in its test markets of Chicago and Florida?  Has there been strong trial and subsequent repeat purchases?

David Drow:  It is still too early to tell at this point.  Initial sales have done well with limited support.  Our first test stores went “live” in early December and have done very well with the product.  We have enjoyed 15% share of energy drink sales and have had multiple repeat customers.

BW:  For subsequent expansion beyond Chicago and Florida, will cities with Hard Rock branded properties taken precedent over ones that do not have Hard Rock branded properties?

DD:  The initial test market was originally Chicago only.  It was selected with a couple of key criteria in mind: there was a local Hard Rock presence (this guaranteed brand awareness and would also allow us to utilize those resources in the launch), Chicago has a sizable population base that would allow us to gauge the acceptance of the product, and the population is considered a microcosm of the remainder of the country.  South Florida was added to the initial launch as a way to support our Seminole Tribe of Florida partners.  And let’s face it…. It’s a lot more pleasant marketing a beverage in the dead of winter in Miami than it is Chicago (no offense Chicago!)

BW:  How do you plan on reaching your core demographic target audience (males 18-24)?  What type of specific grassroot and social media tactics will you be implementing that caters to this audience?

DD:  While this is our core demographic, the category is ever expanding.  My direction to my team is “everything social”.  All marketing must have some type of social media exposure for each event or promotion.  We are focusing on music and music related events.  It is not only a good fit for the brand, it plays a major roll in the lives of our key customers.  We are developing both a strong social media presence and a robust website at hardrockenergydrink.com.

BW:  With regard to “everything social”, does that mean Hard Rock Energy’s marketing tactics differ differently between Twitter, Facebook, Instagram and other social tools?

DD:  Our goal is to utilize each social media vehicle to capture certain niches within our target demographics.  Hard Rock Energy’s website and mobile sites are our central hub for all main/universal information on our product and brand.  The Facebook page is used as the main communicator for large-scale communications.  We utilize Twitter for communication to capture current industry trends as well as generate a broader international reach; as we’ve noticed that most of our international audience is on Twitter.  Instagram is utilized to gather information on what the current trends are within the industry as far as collateral goes; but is also our “wild card” resource for reaching our audience.

BW:  What do you see the top three biggest opportunities toward growing of Hard Rock Energy?

DD:  The energy drink category continues to grow, yet there are very few new entries with the power and branding of Hard Rock.  There also appears to be some fatigue with the two majors.  As such, consumers appear poised to consider alternatives.  The levels of interest both domestically and internationally is greater than I ever anticipated.

BW:  What do you see the top three biggest challenges toward growing of Hard Rock Energy?

DD:  Competitors with unlimited budgets, regulatory intrusion, and growing too fast.  We need to ensure support to our partners.

Great insights on this second part of the “5 Questions” with David Drow.  You’ll notice it was actually six questions among this great conversation with David.  As we touched upon the core demographics and how the company’s marketing plan, it’s definitely an indication that the energy drink is focused on building the lifestyle brand that connects with the consumer both online and offline.  Understanding the top barrier to growth of competitors with unlimited budgets ensures that David’s team focuses on delivering success at the most tactical of levels first.  And leveraging on the presence of Hard Rock properties certainly helps as a competitive advantage.  A great “walk before run” recognition to grow their business.  Hopefully we will see this energy drink brand in Canada soon enough.

Thanks again for David’s time, and Brent for arranging this interview!

5 Questions with Hard Rock Energy’s David Drow

Courtesy of amazonaws.com

When people think of the energy drink category, they typically think of Red Bull, Monster, and Rockstar.  To a broader extent, consumers also consider Nos and Xyience.  All of these companies have had to build their brand from the ground up, with very little leverage in the first place.  How would the product’s success change if they had some brand equity they could leverage?  We encounter such a case with Hard Rock Energy, an energy drink licensed through Hard Rock International – the themed restaurant chain with rock and roll memorabilia – to market the beverage.

BevWire recently connected with David Drow and Brent Campbell for an interview.  David Drow is the Chief Executive Officer and Brent Campbell is the Chief Operational Officer of Enterprise Beverage Group, the licensees for the Hard Rock Energy brand of energy drinks.  What initially was “5 Questions” spiraled into many subsequent questions as BevWire wanted to learn more about the business aspects of Hard Rock Energy.  The below is the first “5 Questions” interview with David Drow.  We will be covering the brand’s market differentiation, choice of test markets, and expansion plans.  Next week, BevWire’s interview with Hard Rock Energy will touch on marketing tactics, test market results, and David’s views on growth opportunities as well as growth barriers.

BevWire: What differentiates Hard Rock Energy from other energy drinks on the market like Red Bull and Monster?

David Drow:  When designing the flavor profile, we tried to formulate a product that could be identified as an energy drink, but have a more pleasant taste.  Also, the can graphics prominently display the iconic Hard Rock logo.  At 100mg of caffeine per serving, we have about 25% more caffeine than our major competition.  Our original product is pale blue in color, is slightly sweeter than Red Bull and not as syrupy as Monster.  The carbonation is slightly less than both major brands as well.  Our Paradise Punch has a tropical fruit flavor.  It is pleasant to drink on its own or as a mixer in “adult” beverages.  The Sugar free has 6 calories per serving, no color additives (the liquid is clear) and we use Sucralose as the sweetener.

BW: Hard Rock Energy is currently available in the regional test markets of Chicago and Florida, what do these two test markets have in common?

DD: Both Chicago and Miami (South Florida) markets have substantial population bases and have Hard Rock branded properties.  The Chicago market is really a snapshot of America at large.  They have a big city life, but Midwest culture and values.   Miami (S. Florida) has international flair and culture.  It makes for a good international test without leaving the US.

BW: How soon would international (Canadian) expansion appear on the Hard Rock Energy radar?  And if it’s not international expansion, what are some other test markets that you are planning to enter?

DD:  Upon completion of the two test markets, we intend to seek approval for international expansion to coincide with our continued domestic expansion.  Canada is certainly on the radar for expansion.  On the continued domestic expansion front, we will continue to expand into all major US markets and have personnel presence in each market area.  Internationally, we are working with co-manufacturing partners to develop products and distribution.  The Pan Pacific region looks attractive, as does most of the European market.

BW: How has Hard Rock International’s equity helped leverage growth so far, and how do you plan on leveraging this equity for future growth?

DD: Distribution and acceptance at major retail are the lifeblood of consumer products.  The introduction of any new product encounters intense scrutiny before distributors and retailers will take a product.  The Hard Rock brand has opened doors that would be closed to most new products.  Overseas production will play a big part of future growth.  We also intend to utilize the Hard Rock properties for events and promotions.  What better way to support the brand, then to send people to Hard Rock venues all over the globe?

BW:  Beyond the Original, Sugar Free, and Paradise Punch flavors, is Hard Rock Energy exploring other flavor extensions?

DD:  While we will be looking at line and flavor extensions, we feel that we really need to focus on these three products to create product awareness in the category.

Certainly a great first “5 Questions” session with David Drow.  It shows that taste is one of the most critical defining attributes of the product.  Even with a strong lifestyle brand in Hard Rock International, Hard Rock Energy is building the product’s awareness and momentum the right way, through representative test markets.  Tune in next week for the second part of my interview, where we explore David’s views on growth potential and challenges, marketing tactics.

Thank you David for spending the time to answering the questions, and Brent for arranging the interview!

Red Bull Launches New Product: BULL Energy Drink

Courtesy of BevNet.com - the new Red Bull
Courtesy of BevNet.com – the new Red Bull “Bull” Energy Drink.

Thanks to a tip-off from BevNet.com, we learned that Red Bull North America has quietly released a new limited edition orange-flavored energy drink (BevNet article here).  The new 8.4oz (250ml) energy drink is closely linked to soccer, predominantly available in sporting venues where soccer is the main attraction.  After launching beverage innovations in other areas, it appears that Red Bull has returned to exert their influence within energy drinks.  With failed experiments at penetrating soft drinks (with Red Bull Cola) and energy shots (with Red Bull Energy Shots), the renewed focus toward energy drinks is a welcome sign for the energy drink manufacturer.

However, why was this product launched without much publicity?  It took consumers to bring up this launch in order for BevNet to squeeze more information out of Red Bull.  Even a search through google has revealed no information nor any high quality images for this product as of yet.  Is this a new launch plan that Red Bull is trying out, where they offer different flavors in limited duration?  Is this even a good strategy given their strength and associations with “energy”?

Red Bull’s latest launch carries with it the discussion of “Push vs Pull Marketing”.  With consumers searching out more information on the BULL energy drink, Red Bull may have effectively created new consumer demand for this innovation – hence the manufacturer’s “pull” tactic.  Regardless of intent, they have transformed their brand loyalists into advocates for the new energy drink.  And instead of selling it into retailers and sacrificing shelf space for a new extension (the manufacturer’s “push” tactic), the consumer demand may help put this drink in the fridges and cooler vaults at the expense of Monster, Rockstar, or a host of other energy drink manufacturers.  Even if the target was for sporting venues exclusively.  If this is a new introduction strategy that Red Bull is trying, then it has been successful at generating buzz.

The question on whether this is a good strategy is a tougher one to answer.  Even with the product launch deemed a success, the question on how much more successful it would have been with marketing support remains.  Given that Red Bull and “energy drink” are synonymous like Kleenex and facial tissue, or Colgate and toothpaste, or Band-Aid and adhesive bandages, why do they not leverage on the strength of their brand name?  The equity of the Red Bull name carries with it easy access to retailer distribution and a profit premium.  The fact that the product’s packaging bears minor resemblance to Red Bull starts an entirely new discussion on what Red Bull is trying to do here.  Per the BevNet article on the different look of this product, could Red Bull be attempting to create sub-brands or sub-segments within their product portfolio?  Or are they trying to be show off more brand personality with the whimsical packaging?  Certainly thought-starters for a different day.

What we know so far is that after the foray into soda and energy shots, Red Bull has hit home runs with their energy drink product launches.  Red Bull Total Zero and Red Bull Editions should have generated incremental sales to their beverage franchise without much cannibalization.  Should the BULL energy drink become a staple, chances are it will be a success as well.

Diet Coke Advertisement: Aspartame is Safe

It seems that the beverage manufacturers have to continually defend the health & safety of their products in order to keep it selling.  Most recently, energy drink manufacturers like Red Bull, Monster, and Rockstar had to defend the caffeine content of their products as well as provide a recommended daily dosage.  Prior to that, Coca-Cola ran a campaign calling for unification behind calorie consumption, to defend general claims that soft drinks contributed to obesity.  The latest defense comes from Diet Coke, defending the safety of their chemical sweetener: aspartame.

Here’s their print ad that they ran in some American publications.

Coca-Cola's Diet Coke print ad, describing the safety of aspartame from 200+ studies over the last 40 years.

While the safety debate continues to polarize consumers and manufacturers alike, it’s interesting to note the timing of the advertisement itself.  Aspartame controversies have been around since the 1970s when diet soda products have also been around, why the need to make a statement to calm consumers down?  It turns out that Diet Coke’s sales are slipping – faster than the average rate of decline itself.  When a category is in decline, the best case scenario is that your product is outperforming the category benchmark.  That is, your product itself is still growing and outpacing category performance or at least declining at a slower rate than the category.  It seems that Diet Coke is down 6% and is losing sales at a faster rate than the category.  This in effect makes this advertisement a campaign to stimulate sales, where calming aspartame fears is a means to an end.  If Diet Coke is able to change the negative consumer perception toward aspartame, it looks like they may be able to reverse their fortune.

In the meantime, Pepsi’s portfolio of products have not done anything to unite and combat against calories nor dispel the fears toward diet products.  Pepsi may be content to let Coca-Cola do the heavy lifting on these media campaign, while reaping the benefits of success if the campaigns work.  After all, if consumers regain confidence for aspartame as a sweetener, Diet Pepsi also stands to see a sales increase.

Also important to note is that Pepsi may see this momentary weakness of Diet Coke and look to restore their position as the Number 2 soda behind Coca-Cola.  If that is the goal in mind, they will indeed need to concentrate their resources on Pepsi, rather than join up with Coca-Cola to combat the negative perception toward aspartame.

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.

Liquid Enhancer Segment Legitimized With Powerade Launch

Sourced from www.coca-colacompany.com
Sourced from http://www.coca-colacompany.com

Funny how just a few years ago, no one has ever heard of liquid flavor enhancers but now many people have heard about and possibly tried MiO.  This is due in no small part to Kraft, which created the product segment and put a lot of marketing support behind their MiO to introduce and educate consumers on how to use this product.  And as Dasani introduced their own liquid enhancer to capitalize on the market trend, Kraft innovated to stay ahead of its competition.  These innovations include employing a dual brand strategy by launching Crystal Light Liquid, as well as extending MiO’s platform by branching out to energy and sports drinks.  With recent news about Powerade coming out with a liquid enhancer, this segment appears to provide legitimate profitable returns for manufacturers.  However, is the segment itself big enough for so many different branded offerings?  Will this spur Pepsi to participate in some shape or form?  Possibly with a Gatorade drop to maintain their market share in sports drinks?

Courtesy of www.makeitmio.com
Courtesy of http://www.makeitmio.com

Liquid enhancers have enormous growth potential and despite its infancy, have extended across sports drinks and energy drinks.  This has certainly broadened its consumer appeal and increased the segment’s awareness and adoption rates.  However, the segment still appears to be crowded with four branded players: MiO, Crystal Light, Dasani, and now Powerade.  And it only looks that way because the segment itself is still small.  For all the excitement around MiO, it is still only a $200-$300 million brand.  Combined with Crystal Light, Dasani, Powerade, and even private-label offerings, the segment itself is not predicted to be over $500 million.  But with more advertising support behind each of these beverage properties as well as higher levels of consumer adoption, the segment will grow to be large enough to house these four liquid enhancer brands.  MiO will certainly be rewarded for being the first mover.  Consider this the initial stage of energy shots, when 5-Hr Energy was the only one in the segment and it took some time to gain sales.  As more companies introduced their own energy shots, the segment gained popularity and market size.  Through all this, 5-Hr Energy became the de facto leader in energy shots and rebuffed Red Bull, Rockstar, and Monster.  5-Hr Energy capitalized on the news that other energy drink manufacturers brought to the segment and benefitted from being the most recognized name among the consideration set.  So while it currently appears that liquid enhancers is congested, the potential size of the segment mirrors energy shots, and may even outpace it given less consumer backlash.

With great potential, comes great competition.  We’ve seen Coca-Cola wait for Kraft to prove that this is a viable segment, and then furiously pursue them with their own offerings.  Why has Pepsi not done anything yet?  A Gatorade Drop would certainly gain lots of attention among athletes, not to mention give them another extension to complement their Gatorade Chew.  Pepsi could also come out with a tea offering to start off in a segment where there are no current liquid enhancers (though there are rumors that AriZona is coming out with one soon.)  Given that liquid enhancers can be sold warm and are so compact, they can be stocked on shelves and also at the cash register as consumers complete their purchases.  Pepsi would be missing out on a large opportunity if their only presence were in coolers or displays – far away from the point of purchase.  My guess is that they are likely in the works to launch their own enhancer soon, but only time will tell.

Liquid enhancers are here to stay and has proven to be rich opportunity for the participants.  As the segment gets bigger, it will spell of a missed opportunity for Pepsi if they remain on the sidelines.