Guayakí Yerba Mate - A Powerful Rainforest Experience
Buzz in the PressANALYSIS: Snapple, Hansen, Red Bull - Is Everybody in Play?
We're living in turbulent times in bev biz - and skittish ones if you're distributor hoping your portfolio will be intact a yr from now. Lately, it seems, pace of rumors has accelerated even from burst last yr when Coke started phoning anybody with semi-developed new age brand to discuss acquisition. These past few weeks, BBI has heard persistent rumors that Snapple could end up being sprung loose from bev biz of Cadbury Schweppes following unit's anticipated sale later this yr; that PepsiCo may make a run at Monster marketer Hansen Natural, and that even Red Bull could end up in hands of a bev behemoth like Coca-Cola. So much for those summer doldrums so dreaded by ski shops, soup restaurants and bev journalists. Tho we can't offer definitive info on any of these possibilities, here's our take.
First, Snapple. Auction of Cadbury naturally is destabilizing event, and it's certainly conceivable that debt-encumbered winning bidder might be tempted to spring loose Snapple, particularly at rich (some say ridiculous) multiples that so-called "strategic" (meaning "desperate") buyers like Coke are willing to pay. This week, Coke ceo Neville Isdell stirred new frenzy of speculation by acknowledging his interest in Snapple in Reuters interview. But while admission made headlines, it really couldn't be more of a non-event. After all, in nearly every recent public utterance, Coke has re-emphasized its determination to finally become a player in tea, and its protracted negotiations with AriZona marketer Ferolito, Vultaggio & Sons seem to be going nowhere. (Indeed, some bottlers believe Neville's coming out of closet on his lust for Snapple was intended mainly to stampede AriZona into doing deal with Coke.)
Does that mean Coke/Snapple is likely to happen? Not by any means. For starters, any buyer of Cadbury's bev unit would know that unloading Snapple would condemn co to same over-reliance on CSDs that has dogged Coke, not to mention further disabling company-owned Bottling Group that's already losing Vitaminwater and Monster. True, Cadbury has done well with its CSDs in face of long-term segment decline, but it would be foolish for new owner to presume it can buck that trend much longer. Meanwhile, after several yrs of neglect, Snapple is showing signs of life, meaning any buyer likely would regard it as integral to co's noncarb strategy rather than expendable as other brands (such as Mistic, Stewart's and Nantucket Nectars) are likely to be. Further, even if Snapple brand did go on block, Coke could find itself competing vs Tata Group (which likely would keep brand in indie channel) or others. Not least, tho Coke seems to have gotten its Glaceau acquisition past a snoozing Federal Trade Commission, that's no guarantee another mega-deal six months later wouldn't awaken agency. After all, FTC's attorneys by now have had chance to sample plenty of Vitaminwater Revive. Indeed, old bev hand reminds BBI that, at time PepsiCo bought SoBe at beginning of decade, the feds warned co that it would face tuffer scrutiny next go-round. Yet that was relatively small deal, similar in magnitude to Coke's acquisition of Fuze rather than Glaceau. So even if Snapple ends up on block, and Coke proves highest bidder, there's no guarantee deal would actually be allowed to close.
Hansen Natural? Since it's publicly traded and fairly broadly held, something certainly could happen there. PepsiCo - seeing energy as a rare growth segment where it's taking a back seat to Coke - is likeliest bev player to try to dislodge Anheuser-Busch as distrib partner of Hansen's Monster Energy brand. Could it happen? Recall that, barely a yr ago, when BBI 1st reported that A-B may be prepping alliance with Hansen, brewing giant went out of its way to rule out outright purchase of co. So far, alliance - which has seen about half of Monster distribution transition to A-B network, generally with success - does not entail any equity tie, unlike deals being negotiated by A-B with less-developed NA brands. But as megabrewer moves forward with plans to assemble broad NA portfolio, that may change - especially if A-B concludes that savvy development team at Monster would rep upgrade over co's scattershot approach to innovation (on both alc and NA fronts). If A-B is leaning that way, it may get further nudge from threat that PepsiCo may have its eye on Hansen. Recall that PepsiCo chmn Indra Nooyi recently assured investors that it's in the M&A game, too. And while the distrib contracts with Bud houses would be obstacle, they all contain buyout clause, meaning dislodging Bud shops would be expensive but not insurmountable. Certainly, Coke proved willing to brook even tuffer contracts in acquiring Glaceau.
Red Bull? That one is hardest to get a handle on. Tho brand is under some pressure in US, it's barely challenged in most overseas markets and pressing ahead with ambitious expansion into new parts of Asia and elsewhere. Meanwhile, it main US rivals, Monster and Rockstar, have barely any presence outside N Amer so far. Certainly, in interview with IBQ mag (see below), co-founder Dietrich Mateschitz betrayed no hesitation in discussing upside for brand that currently sells 3 bil cans per yr. In US, new crew running Red Bull North America has shown no impulse to abandon existing network, tho further consolidation is considered likely. Not least, at current premiums being paid for growth icons in bevs, pricetag would be astronomical. In current tipsy-topsy world, of course, anything is possible. But right now, that one does seem a stretch. Ask us again in 6 mos.
Yerba Mate Bandwagon Picks Up Speed as Snapple Eyes Energy Entry; Guayaki, Bombilla, Herbal Mist Expand Segment
Tho so far it's mainly been province of health food stores, yerba mate is edging toward broader acceptance as flock of consumer-friendly RTD packs hit market and that most mainstream of all "new age" brands, Snapple, eyes its own foray into segment with "natural energy drink" fortified with South American stimulant herb. Sources tell BBI Cadbury Schweppes Americas Bevs is considering Snapple-branded entry packed in 12-oz resealable PET bottle with Fuji wrap that would be positioned as offering better-for-you energy lift than conventional energy drinks. If greenlighted, brand would launch in 2-3 flavors, tho timetable is not clear.
Activity comes as key natural player, decade-old Guayaki, has been steadily extending RTD range and entering DSD network, even as startups see chance to offer even more mainstream take on mate with sweeter, consumer-accessible formulations. Guayaki launched 1st RTD 2 yrs ago, with items like Raspberry Revolution and Empower Mint in 16-oz glass widemouths, and now is adding 4 sku's: pure, unsweetened version demanded by some consumers, as well as 3 that employ yerba mate as "potentiator" for other herbs, said vp marketing & sales Pierre Ferrari, former Coke marketing exec who is investor in co. These are Pure Mind (pom with gingko biloba plus basil variety called tulsi), Pure Passion (passion fruit/kundalini blend plus damiana and Brazilian aphrodisiac catuaba) and Pure Endurance (citrus blend plus ginseng). Yerba mate at core of bevs is antioxidant-rich and may also have appetite-suppressing characteristics.
Guayaki is strongest on W Coast, where it is sold in chains like Safeway, Fred Meyer, 7-Eleven and Gelson's and distributed by cos like Columbia in Pac NW, but it's slowly pressing forward in other regions. On E Coast, for example, it's going thru Boylan DSD operation in NY, and POM and Bolthouse distrib Shelterwood in Fall River, Mass. "We're being patient and steady and don't want to go too fast," Pierre said. "We're looking for distributors who resonate with mate - who drink it out of the gourd!" Literally drink it out of the traditional gourd? Pierre insists that's the case at offices of beer wholesalers like Columbia and Morris in Bay Area. Live and learn! Brand samples at alt-music sites such as Bay Area's Shoreline and Fillmore concert halls.
Meanwhile, new entrants are coming in. Recall that 3 Jersey guys in early 20s recently launched Bombilla Gourd, named for gourd and straw used to consume it indigenously, in Lemon, Mint & Honey and Peach flavors (BBI, Feb 1 - bombillagourd.com). Another co, ABF Beverage in Cedarhurst, NY, has launched more highly sweetened line - in same 16-oz slim glass bottle -under name Herbal Mist "all natural tea with herbs" in Green Tea, White Tea, Black Tea, Peach Tea, Lemon Tea and Raspberry Tea (drinkherbal.com).
Push into mainstream is creating tricky positioning issues. Bombilla Gourd opted to call its entry "mate tea" to demystify ingredient, but is finding that's creating obstacle at DSD houses where core tea suppliers like Snapple may cry "foul." Similarly, tho Guayaki items are positioned as naturally energizing, vs isolated extracts, vitamins and other ingredients melded in conventional energy drinks like Red Bull, it has avoided overtly calling bev an energy drink to sidestep conflicts at DSD houses it approaches. May have been the right move: in some cases, Guayaki has been able to get into house that already carries Red Bull, Pierre indicated.
Potential Snapple entry carries particular interest because in recent yrs brand has stuck mainly to close-in extensions into premium green, white and red teas, while staying away from more aggressive moves on order of Whipper Snapple smoothies, Elements enhanced bevs or Snapple A Day meal replacements of yrs past. Launch may signal that brand execs finally are ready to start making grander statements with their new products. Go To Top
Racing Deals Spinning Speculation
International Speedway Corp, owner of Daytona Int'l Speedway, is reportedly in talks with Coca-Cola to become racetrack's official soft drink, per Florida Today. Currently, ISC has 49-yr association with PepsiCo, which sponsors Pepsi 400 this weekend. Neither Coke nor Pepsi commented on report, while ISC spokesman responded, "As the largest promoter of motor sports entertainment, we are always in discussions with various current and potential partners looking to enter or strengthen their position in the racing industry." Meanwhile, Savannah Morning News reported Pepsi may decide to let its sponsorship with ISC lapse to concentrate on deal with Dale Earnhardt Jr. Since "Junior" switched over to Hendrick Motorsports, many big-name sponsors have been hot on his heels. "Budweiser, Earnhardt Jr's current sponsor, is working to remain with him, but Pepsi's Mountain Dew has become the clear front-runner," paper stated. Most expensive deal in NASCAR as of now is Dupont's $20 mil deal with driver Jeff Gordon, but deal with Mountain Dew "is expected to challenge, if not beat, that standard."
PRESS CLIPS: Mateschitz Sees Plenty of Growth Left in Red Bull; Derides Big Cos' Innovation
In rare press interview, Red Bull co-creator Dietrich Mateschitz outlines go-slow strategy on broadening portfolio while offering highly skeptical take on biggers cos' innovation efforts. In q&a in inaugural issue of BevNet IBQ (Innovative Beverages Quarterly) published by BevNet/Beverage Spectrum folks, Dietrich takes skeptical view of broadening product base at this stage. "We don't believe too much in line extensions, taste segmentations, etc," he says. "Red Bull is an 'efficiency product' tailor made for its target group." Asked whether he's OK with view that Red Bull is a "one-product company," Dietrich responds: "Yes, for the time being. We have yet to finish our global rollout and Red Bull is still expansive, so it would be wrong to launch other products now. In the medium and long term, however, the company needs and will get additional main pillars." (Dietrich does discuss Carpe Diem, devised in fermented kombucha and kefir varieties as well as gingko and botanical water, which he describes as "functional products." Botanical water is 1st subline to hit US.)
Tho execs at Red Bull North America certainly have stressed to staff and distribs that emphasizing Red Bull's credentials among youngest consumers is priority, Mateschitz denies that aging of brand's original consumer base is a problem: "For the kids and teens today, Red Bull is as young, innovative and attractive as it was 20 years ago for the 'first generation.'" All other brands, he contends, are lower-priced "me-too products." Asked to ID most innovative beverage cos, Dietrich responds: "I don't know one. Even in Japan - probably the most innovative beverage market in the world - recently launched 'new age products' are rather trivial and not really innovative." What has stifled innovation at major US bevcos? "Perhaps there was not enough 'need' for innovation. Huge multinational companies shared the world market and have been doing well. This creates the right opportunity for newcomers to create new and successful market segments with niche products."
NOTABLE QUOTABLE: Snapple Co-Creator Marsh on Begging Beer Wholesalers
Another profile in BevNet IBQ keyed in on Snapple co-creator Len Marsh, who recalled his efforts to find distribution for his new brand in words that might be spoken by other brand owners today. "No soft drink people wanted to distribute for us," he told mag. "We took the beer people. First, we had to beg them - but they ended up making more on Snapple than on beer." Go To Top
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