U.S. Cola War Continues with Pepsi True Launch

Pepsi True

It seems the Cola Wars continue to expand across the calorie spectrum.  Where Coke and Pepsi used to spar over full calorie soda (Coke vs Pepsi) and zero-calorie soda (Diet Coke vs Diet Pepsi, Coke Zero vs Pepsi Max), the two beverage giants now go to war over the middle.  The contestants are Coca-Cola Life and Pepsi True, two sodas sweetened with sugar and stevia, with less calories, and green packaging.  That may be where the similarities end in this round though, because this iteration is very different from prior rounds.  Their product launch tactics differ greatly, and this particular fight appears to be highly contained with the United States.

What some people may forget is that Pepsi already has a stevia-sweetened mid-calorie soda on the market – just not in the U.S.  Remember Pepsi Next?  The American Pepsi Next contains artificial sweeteners whereas other countries with Pepsi Next have a stevia-sweetened version.  Unless Pepsi decides to discontinue the existing stevia-based Pepsi Next everywhere, this Cola War will only exist in the U.S.  And it is likely that the Pepsi True launch is primarily relevant to Americans given Pepsi Next’s presence elsewhere.  So in effect, this should be termed more of a Cola “battle” rather than a Cola “War”.  Pepsi Next against Coca-Cola Life in markets outside the U.S., while the U.S. battle will be between Pepsi True and Coca-Cola Life.

Related Post: Pepsi Next May Find More Success in Canada

Both companies are also more cautious in their launch approach.  Coca-Cola Life has experimented in multiple countries outside the U.S. first to measures its market viability, and only recently started rolling out in U.S. regions this past August.  The American rollout isn’t national and they have yet to provide marketing support welcoming Coca-Cola Life to America.  Pepsi True is taking a similarly conservative approach by not even stocking this product in traditional channels.  Pepsi’s mid-calorie soda variant is set to launch exclusively through Amazon, where shelf space is limitless, operating costs are lower, and product delivery does not come from their distributor network.  After all, Pepsi distributors work with limited storage space and a delivery system optimized for sales and profitability; carrying Pepsi Next could mean sacrificing sales of other better-selling products.  To satisfy American distributors, Pepsi indicated that they will reimburse distributors for Pepsi True sales in their regions.

Related Post: Coca-Cola Life Commercial Review: Open Your Good Nature

It makes sense for both beverage manufacturers to take baby steps first.  Launching anything in the mid-calorie segment has been challenging for over a decade.  The 2004 introductions of C2 and Pepsi Edge marketing sucralose as a sugar alternative proved unsuccessful.  The 2012 Dr Pepper Snapple Group TEN-calorie soft drink line-up hasn’t received marketing support to keep up its launch momentum.  Earlier this year, Coca-Cola’s vitaminwater reverted back to its original formula after consumer complaints about its stevia formula.  The beverage industry’s history is littered with more failures than successes when companies attempt to bring mid-calorie refreshments to the consumer.  And as much as Pepsi Next could be deemed a global success, the results undoubtedly vary between markets.

Going forward, the road will only become more difficult.  Consumer perspective toward mid-calorie soda in general has not been overwhelmingly positive.  Taste is always the first consideration and most stevia-sweetened beverages contain a bitter aftertaste.  Consumers have also persisted in choosing drinks that offer health benefits and less calories over mid-calorie soda.  Regardless of consumption trends, soft drinks are still a significant part of the beverage landscape.  Even though the Cola War has evolved, both Coca-Cola and Pepsi will find new frontiers to wage their battles.

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vitaminwater Refreshes Canadian Product Portfolio

The @vitaminwater_caa twitter headshot, current as of July 2014. Courtesy of twitter.com
vitaminwater Canada product line-up from their twitter page head shot as of July 2014.  Courtesy of @vitaminwater_ca (twitter.com)

It seems vitaminwater has recognized the limit on how many drink flavors can be sustained in the Canadian marketplace.  That number stands at twelve.  The hydration brand has quietly launched two new flavors under their Zero sub-brand, introducing Rise (orange) and Squeezed (lemonade) to build their calorie-free portfolio.  Very subtly, two of the previous zero-calorie flavors – Resilient-C (grape raspberry) and Recoup (peach mandarin) – are being phased out to make space for the two new offerings.  Beyond the zero-calorie product transition, Spark (grape blueberry) also is being phased out.  Notice the different flavors in the image above and below (Recoup has never been pictured).  It’s certainly interesting to see that the marketplace – and retailers – can sustain twelve flavor extensions.  Definitely not an easy feat to create shelf or cooler space for twelve items.

What is more interesting though, is vitaminwater’s approach to continuously refresh their product line-up.  While there has always been steady sales coming from popular flavors such as XXX, Essential, and Multi-V, there are “test” flavors launched into Canada.  From the hydration brand’s introduction, Rescue (green tea) was the first to be discontinued.  Through the years, other flavors have made brief appearances and slowly gone away, including Formula 50 (grape) and Sync (Berry Cherry).  And beyond these flavors that were expected to mainstays were limited-time offerings, such as the recent Glory (peach mango) flavor for the 2014 Olympics.  Regardless of all these other changes, the magic number – or limit – appears to be twelve flavors.

Despite a mixed response leading to varied success and failure, their constant innovation is admirable.  The company keeps on bringing flavors into the market to see what sticks with consumers.  It would be safe to say that vitaminwater has introduced up to twenty flavors at one point or another to the Canadian market.  Beyond the original eight flavors that accompanied the Rescue offering at launch, the most successful introduction has been Energy (tropical citrus).  Most of the grape flavors – Spark, Formula 50, Resilient-C – have only made brief and unsuccessful appearances.

vitwaminwater Canadian product line-up as of July 2012.  Courtesy of @vitaminwater_bc (twitter.com)
vitwaminwater Canada product line-up as of July 2012. Courtesy of @vitaminwater_bc (twitter.com)

Regardless of success or failure, it is a welcome sign to see a company continuously improve their product line-up.  Before an item can be launched, a company invests significantly behind research and development to determine its viability, demand, and sales potential.  And to consistently bring new products to the market, this is a sign that vitaminwater believes in the product’s longevity.  Even with product proliferation being a key concern that prevents retailers from stocking all the flavors, substituting new products in place of slower selling products helps both parties.

After all the product substitution, let’s just hope that vitaminwater eventually finds a grape flavor product combination that will stick in the Canadian marketplace.

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.

Pepsi Next May Find More Success in Canada

Pepsi Next Canada

After launching in other parts of the world for the past two years, Pepsi Next officially launched in Canada.  Unlike the American version that contains 60% less sugar compared to the regular Pepsi, the Canadian version contains 30% less sugar.  The difference is a function of the sweetener composition.  The American version is sweetened with artificial sweeteners such as high fructose corn syrup, acesulfame potassium, and sucralose.  The Canadian version is naturally sweetened with stevia extract. This difference affects how Pepsi Next is marketed on both sides of the border.  How will Canadian consumers respond to Pepsi Next and its marketing communications?  More curiously, how much of the marketing communication will be customized to the Canadian market?

Pepsi supported Pepsi Next’s introduction with a pre-launch promotion, partnering with the NHL and the Heritage Classic hockey game in Vancouver.  Here is part of the Canadian consumer reaction to the beverage as captured by Pepsi below.  The initial consensus indicates positive response to the beverage.

While mid-calorie soda is still an emerging product area for Canadians, it is certainly on point with what most people are looking for.  Canadian consumers are more health-conscious and more proactive at seeking out healthy food offerings.  Sugar intake and calories per serving are more top of mind for Canadians shopping within grocery stores.  A product that provides the same taste without any bitter aftertaste (like the American Pepsi Next) and contains less sugar helps to lessen the guilty burden.  Naturally sweetened with stevia also helps to increase adoption since artificial sweeteners are also perceived to be less healthy.  Consider Pepsi Next similar to the early successes of the vitaminwater Canadian launch.  The enhanced water brand pioneered a new segment with a health-based product positioning at a time when consumers were beginning to question what they eat and drink on a daily basis.  The beverage met their requirements given its appeal as a great tasting healthy product.  While Pepsi Next is still a soft drink and cannot be considered “healthy” in the traditional sense, it is healthier relative to the other soft drinks.

Following it’s launch, Pepsi Next has ran a TV commercial adapted from the American Pepsi Next “Baby” spot.  The Canadian version included some very noticeable differences.  The key components being the refreshed packaging, the slogan of “Taste It to Believe It”, and of course, the “30% less sugar”.  The call to action of “Taste It to Believe It” is clearly catering to the Canadian audience.  The American slogan is “Drink It to Believe It”.  The customized “Taste” instead of “Drink” speaks toward a different value system between the two countries.  “Drink” implies consuming the entire beverage.  “Taste” obviously imply giving the product a try.  Perhaps the Canadian population may be more cautious at first toward trying a new beverage, but adapting the slogan clearly shows customizing the message toward the Canadian audience.  In order for Pepsi Next to succeed in Canada, this is a great first step.

The truly telling piece will be how Pepsi Next is supported following the launch period.  We know from earlier articles that Dr Pepper TEN and Pepsi Next are not sustaining earlier launch-period sales following reduced media support (article here).  With less attention dedicated toward the product, consumer focus will shift toward other health option.  Pepsi Next can maintain its launch momentum and also continue its early success if it keeps advertising to maintain its awareness levels .  Let’s hope the Canadian marketing team learns from what happened in the U.S. and find more success than its neighbors south of the border.

Coca-Cola’s Reply to SodaStream: Keurig Cold

Courtesy of nytimes.com

Most people by now may have heard of Coca-Cola purchasing an investment stake with the makers of the Keurig machines – Green Mountain Coffee Roasters (GMCR).  For those that haven’t, there’s some quick information from the New York Times here.  As a result of this deal, Coca-Cola appears to be making its first foray into small home appliances and endear itself more closely with consumers.  Experts have called this a great deal for both companies, providing each with mutual benefits.  But is this really the case where both companies benefit?  And what about other companies, should companies like Pepsi, SodaStream, or Starbucks be concerned?  Let’s take a quick look, first at the participating companies and then toward the others that are potentially affected.

For GMCR, this is partnership born out of necessity that will secure their footing in the single-serve beverage marketplace.  Following 2012, Green Mountain’ single-pod (K-Cup) cup patent expired and paved the way for other manufacturers (namely store brands) that could make these beverage pods cheaper.  To ensure survival of this increasingly rich revenue stream (more than two-thirds of the company’s revenues come from these pods), GMCR took to forming licensing agreements.  Coca-Cola was added to a licensing roster that already includes Starbucks, Lipton, Snapple, Timothy’s, Kahlua, and many more.  With a Keurig machine that produces single-serve hot beverages and now one that can product single-serve cold beverages, Green Mountain has certainly done well to ensure its survival.  With Coca- Cola’s reach across the consumer distribution channels, the Keurig machine will see dramatic business growth over the course of their 10-year pact.  Think of what Coca-Cola has done for beverage brands like evian, Monster, and vitaminwater.  An even better scenario would be signing Pepsi to a licensing agreement as well, which will further increase the Keurig’s machine placement among households and strengthen their dominance in making branded single-serve pods.

With Coca-Cola, this is a partnership that further segments the beverage landscape, and answers competitive pressure from new entrants to the ever-changing beverage market.  Coca-Cola is undoubtedly answering SodaStream’s “Sorry Coke and Pepsi” campaign about how the global beverage manufacturer is creating waste through its plastic bottles.  With single-serve pods and small home appliances, Coca-Cola is able to compete in a position similar to SodaStream – providing carbonated beverages at home without the need for plastic bottles.  And Coca-Cola now has an opportunity to exist on the counter shelf within the household, in addition to the refrigerator, pantry and garage.  Think about the ability to remind the consumer to consumer or purchase your product when your products are so pervasive within their household.  The next step to success for Coca-Cola may be investigating opportunities to leverage Coca-Cola Freestyle (create your own beverage mix) with the Keurig Cold, building on consumer insights to provide custom combinations and offer exclusive flavors “voted” by consumers.

Courtesy of belloblog.com. Scarlett Johansson stars for SodaStream’s 2014 SuperBowl spot – “Sorry Coke and Pepsi”.

For SodaStream, this marks their inclusion into the Soda Wars that has primarily existed between Coca-Cola and Pepsi over the past few decades.  If you keep on making eye-catching commercials targeted against the beverage conglomerates, they are certain to pay attention and respond.  This may be detrimental to SodaStream given the extra competition toward securing household counter space, but it also calls for innovation and a return to focus on the product benefits.  SodaStream’s foundation is still their ability to make soda at home, less expensive and without the use of plastic bottles.  Similar to GMCR, SodaStream must innovate and work to secure more licensing agreements.  Beyond Kraft and Ocean Spray, SodaStream may also work to sign on other brands such as Pepsi, Dr Pepper, and many more.

Now that Coca-Cola has invested into single-serve pods, it’s almost certain that Pepsi will respond in some way with their own pod offerings.  They responded in the past to Coke Zero with Pepsi Max and Dasani Drops with Aquafina FlavorSplash, amidst a host of other gap-filling products.  Pepsi surely won’t allow Coca-Cola to dominate the consumer’s counter space when their own offerings are just as robust, so it will only be a matter of time before Pepsi take the Soda War to the small home appliance.  The question is when and with whom.

The dark horse in all this may actually be Starbucks.  Starbucks had trademarked the name “Fizzio” with the intent to produce their own carbonated beverages.  To expand on their own burgeoning beverage empire, Starbucks may need to move up the deadline for when the Fizzio will be launched, or partner more closely with GMCR to serve both hot and cold single-serve beverage pods.

This news of Coca-Cola and Green Mountain Coffee Roasters signing a 10-year agreement has certainly created ripples across the industry.  The impact that has yet to be fully fleshed out with retailers as well, and that itself will be another article in the coming weeks.

Coca-Cola Expands “Official” Olympic Drink Portfolio

Courtesy of eprize.com

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

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

Courtesy of designyoutrust.com

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

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

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.

Zevia’s Organic Growth Differentiates Them From vitaminwater

Courtesy of Zevia.com
Courtesy of Zevia.com

Zevia recently announced that they were adding three more all-natural soda flavors to their Canadian offerings.  Cherry Cola, Dr. Zevia and Caffeine Free Cola joined the existing Canadian selection that included Cola, Cream Soda, and Ginger Ale among many other flavors.  In total, that brings their total portfolio to 11 sodas for the Canadian market.  Our American counterparts only have four incremental flavors than us, which may prove that our taste preferences are not really all that different.  See all the Zevia flavors here.  However, with the proliferation of soda flavors, will Zevia run into a problem that we have seen with another beverage offering: glaceau vitaminwater?  Will this end up being detrimental to Zevia in the long term, as we have seen vitaminwater peak and start to decline with reduced advertising support?

In more ways than one, Zevia and vitaminwater have common ground that would lead us to come to this conclusion of Zevia’s possible rise and fall.  For one, both beverage brands capitalized on consumption trends.  Zevia gained market acceptance as consumers became increasingly interested in all things “all-natural”.  vitaminwater gained sales as consumers started to look for something less boring than bottled water.  And because both were the leaders of their respective categories, their growth became synonymous with their segment’s growth.  Both companies started out as independent outfits separate from global beverage manufacturers.  vitaminwater as most of know may know, is now a part of Coca-Cola, despite all the separation the hydration brand is trying to create between them.  In terms of product offerings, both have great tasting products that stretch into the double digits.  It is a very plausible assumption to think that Zevia will follow vitaminwater’s path.

However, what sets Zevia a part from this comparison is that they are still a stand-alone entity and not a division within a larger beverage organization.  That makes a world of difference.  While they may not have the luxury of stronger financial backing, they are also growing themselves organically.  When vitaminwater was brought into Coca-Cola, the hydration brand was given much stronger product distribution and piggy-backed off of Coca-Cola’s distribution network.  This helped vitaminwater gain strong market visibility, and at a much quicker rate than when they stood separately.  Unfortunately, the downside of being in a conglomerate beverage company also proved detrimental to vitaminwater.  As Coca-Cola shifted their focus inward to grow their core offerings of Coke, Diet Coke and Coke Zero, vitaminwater as well as other beverages in their portfolio suffered.  They received less advertising and promotional support.  Zevia will continue to grow because they are their own company, and their sole dedication is toward this beverage brand.

Zevia is also not as celebrity-endorsed as vitaminwater.  With celebrity endorsements, they could endorse one beverage now and change their endorsement later when another refreshment company provides them with a more lucrative deal.  And while Zevia has less star power than vitaminwater, they are also certainly less volatile given the celebrity’s reputation.  For example, if a celebrity was perceived negatively by the media, the products and services they endorse would receive a “halo effect” and also be viewed as negative.  Take Tiger Woods and Nike a few years back.  Or does anyone want to have Lindsay Lohan as your spokeswoman right now?

In any case, Zevia should continue to rise while vitaminwater continues to experience growing pains.  While Zevia may still yet encounter the same problems that vitaminwater is currently going through, they still have a ways to go.  The all-natural trend is here to stay, and all-natural sweeteners are getting more widely accepted by consumers.  Let’s just hope that Zevia keeps these things in mind should a similar scenario arise for them.

Rockstar Energy To Launch Energy Waters

courtesy of Beverage Digest's Twitter feed - October 9, 2012

At the National Association of Convenience Stores (NACS) show earlier in October, Rockstar Energy revealed that they plan on launching a line of energy water.  While the timeline has not be revealed, the initial assortment listed on the sell sheet image include the following flavors:  Tropical Citrus, Blueberry Pomegranate Acai, Orange Tangerine.  BevNet has some more information and a quick video on Rockstar Energy’s new products from the show (link here).

This launch from Rockstar Energy pits them against Coca-Cola’s glaceau vitaminwater lineup, and PepsiCo’s SoBe Lifewater and Aquafina Plus lineups.  The question becomes how Rockstar Energy can differentiate themselves against these already established brands.  Despite their positioning as “energy water”, it will be difficult for them to be considered a dissimilar product from flavored water.  It is still an enhanced water beverage and may very well be shelved alongside Aquafina Plus or SoBe Lifewater (Rockstar Energy products are distributed by Pepsi).  And since consumers already have certain expectations for the price point, the new energy waters will have to be priced in a similar range.  There really isn’t that much room for differentiation given what we already know.

So with Product, Place, and Price (the 4 P’s of the Marketing Mix) already determined and largely out of their control, Promotion is the remaining lever Rockstar Energy can use to stand out.  Even then it is still a uphill battle.  In Canada, Aquafina Plus has constantly been on price promotions, to the point where there’s also expectations for feature price points.  In the U.S., many retailers had ran similar promotions but also drove unit sales with a “$10 for 10” feature strategy.  How can Rockstar’s Energy Water stand out?  Featuring on price – especially for a new entrant – will only upset the market dynamics and reduce profitability.

Rockstar Energy Water Lineup

One option may be co-promoting with their energy drinks, which has an established presence that is much stronger than that of Amped, Nos or Full Throttle (possibly only Amped and Nos in the future, read about Full Throttle’s de-emphasis here).  Leveraging on their stronger identity in energy drinks, they can offer consumers an alternative or additional Rockstar beverage when they are in-store.  Enhanced waters also do not carry the negative stigma that energy drinks have, so transitioning the “energy” equity from energy drinks to energy water may be a tactic to completely re-position themselves.

Another option would be to fully leverage their entertainment and sponsorship properties to feature this new product – in tandem with their energy drinks.  Offering samples of their energy water at their music and sporting events will increase their exposure to a captive audience.  Especially when their competitive products (vitaminwater, lifewater, aquafina plus) are shut out from these venues.  Especially when they offer a differentiated product than Red Bull and Monster Energy, should it be a multi-sponsor event.

While this is a very unique expansion from Rockstar Energy haloing off their “energy” brand association, it will be interesting to see how it can defend against the pressures of larger and more established brands.  This impending product launch has a chance to succeed, but only if they can carve out their own niche against glaceau, SoBe, and Aquafina Plus.

vitaminwater zero Quietly Arrives in Canada

vw+vw0 canada line-up courtesy of @vitaminwater_bc

Has anyone noticed the subtle changes to the low-calorie vitaminwater lineup in Canada?  There used to be three vitaminwater10 variants available: go-go, resilient-c, and recoup.  Now they have quietly replaced the go-go and resilient-c 10 calorie offerings with zero calorie offerings.  The recoup (peach mandarin) doesn’t appear to be on the market anymore, in favor of a zero calorie version of XXX, renamed as XOXOXO (acai-blueberry-pomegranate).  It appears that the United States’ transition in December 2010 has finally made its way north of the border this past April.  As it stands right now, there are 9 regular calorie flavors of vitaminwater, along with the three new low-calorie offerings.

One has to wonder why glaceau did not simply launch the zero-calorie offerings from day one, rather than wait a year to eliminate the 10 calories inside the bottle.  How did the 10 calories get eliminated after a few months’ launch into Canada?  Was it fear that Canadians would not adapt to the zero calories right away and needed to be transitioned away from calorie-filled beverages?  Was there a delay in getting approvals on the ingredients, particularly the sweetener?  In any case, the complete Canadian vitaminwater line-up still stands at 12 flavors.

Having 12 flavors makes it challenging to manage the product portfolio.  The benefit of this vitaminwater zero transition is that it will not impact the overall shelf spacing – only the existing area that vitaminwater product occupies.  However, 12 flavors for any product is quite significant, and getting a retailer to list all 12 at the same time will certainly be difficult.  Take for example Red Bull, which has found success with only three variations (Red Bull, Sugar Free Red Bull, and Red Bull Total Zero).  Or Coca-Cola, which also has three offerings (Coke, Diet Coke, Coke Zero).  Both these brands have fewer flavors and have been very successful.  Monster Energy and Rockstar Energy are also successful as a result of their broad portfolio of products – but not all products get listed in the retailer.  The most successful brands have fewer variations and can command more shelf space.  They also tend to be leaders in their respective categories.  vitaminwater seems to be buck that trend.

Is vitaminwater a leader in the enhanced or flavored waters category?  Sales data would almost guarantee it as such.  Why would they need so many flavors, when traditionally four or five flavors will be enough?  The answer is portfolio shelf space relative to sales.  If the vitaminwater portfolio commands 40% of the category sales, they should be allocated 40% shelf space.  After all, the argument is that the cooler space should reflect market conditions for the consumer.  This is why in the summer there are less shelf space allocated to juices, but more to water and sports drinks.  Having a broader portfolios always gives you more opportunities to create shelf space and in turn sales.  Just look at how Gatorade has been able to gain more shelf space following its prime/perform/recover extensions.  So while the majority of sales may come from the most popular flavors, the less popular flavors also have a significant role to play in creating and extending shelf space for the vitaminwater total portfolio.  Imagine that the sale for one vitaminwater flavor was marginal relative to the total portfolio, but had two shelf facings.  That flavor still remains on shelf to “hold space” for other better performing flavors, and allow the retailer to reduce that flavor to one facing while increasing facings for another better performing flavor.

Optimizing the shelf space ultimately falls onto the beverage category manager’s responsibility.  As long as vitaminwater’s broad portfolio keeps making sales, it makes difficult for other enhanced waters like Aquafina Plus to gain shelf space.  Once you secure the shelf space, it’s up to you to structure and space out your products to protect your shelf space.