Tuesday, June 30, 2009

FRS: Lucky 13??

FRS - out in front of the curve

Today there are news stories on the value of Quercetin as an antioxidant that can improve endurance. Over the past three years FRS has been promoting the compound as an endurance ingredient: well now they have their wish. The data claims that people taking Quercetin could increase their endurance by 13% - not an insignificant number.

FRS has employed some interesting approaches to the market, from free samples to DSD distribution to social networking - but this press may be the most significant. I wish them luck!

Tuesday, June 23, 2009

Rightsizing HANS...

HANS is a very successful beverage business. It has created a powerhouse energy brand in Monster, and is steadily making strategic changes to maximize that performance over time. Their growth has been strong, their innovation track record has been exemplary, and their profitability reflects Monster's status as a highly functional, well differentiated brand.

As a result, the brand has become a darling of the investment set's chattering classes. Rapid growth, strong profitability and a history of beverage brands being sold at massive premiums to Coke, Pepsi and Cadbury (now DPS) built a high level of expectations around the business.

But all of this was dependent on growth:
  • Category growth in high margin energy beverages
  • Growth in market share in energy
  • Profit growth... scale benefits, Cost of Goods savings etc etc
So far this year Monster has increased share and COGs are lower - but the category is flat. And while their business is strong, CEO Rodney Sacks wanted to be clear that future growth was going to be challenging - even with the assistance of mega-distributors CCE and Inbev/AB.

This has had the result of knocking $14 off their share price, reducing the stock from $43.61/share to around $30/share in six weeks - a fall in market capitalization from around $4B to $2.7B in 6 weeks.

HANS 2008 revenue was around $1B per year, and their operating profit is around $200M before costs related to distribution agreement changes. In the normal world this would put the business value somewhere between $1.5B and $2.5B. Still a very large and successful business with significant upside as consumers continue to seek functional beverages. A position that would allow the business to operate successfully into the future.

However, if their stock price continues to fall, it is likely that the business becomes a more attractive target for the big beverage companies. But right now it seems that the business running well, positioned for the future - but without the irrational valuation that has had many of us pondering their high stock price.

Banging The Social Media Drum...

I came across this presentation at slide share... does a good job of dimensionalizing the impact of how social media and the digital world has changed brand building.

As ever, it strikes me how far behind CPG businesses are behind in leveraging these changes. It will be interesting to see who will get there first.

Friday, June 19, 2009

Ritalin - Not Just For The Unruly Homeroom?

The BBC has an interesting piece on the potential use of Ritalin as a functional aid to healthy people.

The main thrust of the article is that since Ritalin has no negative impact on healthy people, it is unethical to block its use. In the UK use without a prescription could lead to 14 years in jail.

The reality is that we are about to enter an era where new synthetic drugs, with no side effects could become available - effective drugs that do not endanger the user. The history of humanity has been to restrict such use, but we may be facing a new era.

Next stop Ritalin Tea? Its no longer an impossibility...

Rockstar Energy... A New Brand Facing An Old Challenge

Urban Legends 2009

Rockstar is a very successful business. It was at the forefront of the development of the energy drink segment; it good tasting products and a wide variety of flavors, and today Rockstar is the third largest energy brand in the US, and has begun to roll-out worldwide.

The brand is the brainchild of Russ Weiner, a Las Vegas resident he made its image that of a serious "party" product... hence the tag line "Party like a Rockstar", events at stripclubs & the Playboy mansion, and suggestive imagery on its website (www.rockstar69.com). This makes the brand unsavory to some - but edgy and cool to some key energy consumers.

Sampling outfits that probably don't help with the activist community

Weiner is the son of notorious conservative talk show host Michael Savage. And that is where the problems start. Savage is now thought of as Rockstar's owner... leading to boycott calls from the activist community. See this website for an example of the spread of this rumor.

In the tradition of Snapple being owned by the KKK (a rumor driven by the Kosher certification on the bottle - and the rumor that the Boston Tea Party graphic on the label - was actually a slave ship), Rockstar is fighting a PR challenge of its own. An issue that may fatally hit the brand, disrupting its relationship with PBG - and with inherently conservative retailers.

In response, there is now a corporate "Truth about Rockstar" site, that addresses many of these issues and lists the charitable works of the owners. But the site does not link to the main Rockstar site.

The learning is that being edgy comes at a price.

While the rumors have not impeded the brand to date, they may become the story: When these stories get a life of their own the brand may struggle to recover. I wish them luck in shaking off these issues, but I think it will take more than a website and personal indignation.

Consumers are willing to believe the conspiratorial worst of corporations - Rockstar will have to arrest these rumors with actions.

Friday, June 12, 2009

Social Media and Convenience Stores

Become a fan now for a Free Iced Coffee!

A recent project has had me thinking about how to reach C Store visitors. Since their shopper is normally young and male - social media seemed to be appropriate. What did I find? Well, the normal use of the corporate website was to sell franchises, and there was little interaction sought or built by these corporations with their consumers.

Well, it appears that a number of these chains have started to open their minds to these possibilities. For example Quick Chek (a NJ chain) will give a free iced coffee to all their Facebook friends - if they get to 1,500 friends.

Other stores are also getting active, according to this article in C Store news - including Kum and Go, and Sheetz.

Frankly, its an easy fit, and a small investment that could have a big payback for these retailers.

You know bottled water has issues when...

The best ad for tap water I have seen...

In the NYT today there is a really interesting article on water in Venice (Italy not CA)

In short the article talks about how there is a local push to change Italian consumption habits from bottled mineral water to tap water.

From my perspective it is very interesting that they have taken a specific insight and built a brand image around it. Rather that focusing on a traditional taste cue, or a contemporary "green" cue they have focused on the simple dissonance that challenges bottled water... why pay for something that you can almost get for free out of the tap.

Aqua Veritas... True Water. Love it!

Thursday, June 11, 2009

A New Challenge For Coke Zero...

A victim of its success?

Apparently there are big issues with Coke Zero. Venezuela has banned its sale "to preserve the health of Venezuelans".

Coke Zero is the artificially sweetened, zero calorie taste-alike of regular Coke... and has apparently hit a nerve with President Chavez. Obviously this is some kind of political play rather than a legitimate health concern.

Perhaps Hugo owns some sugar fields??

Wednesday, June 10, 2009

Good Data...

I love a good, well sourced report - and the GMA/PWC 2009 Annual Performance Report on the Food, Beverage and Consumer products industry is just that.

So, I posted it to my slideshare account.

The Semantics of Milk...

The protein world is getting litigious. First Cytosport (make of Muscle Milk) has sued VPX over the trade dress of their Muscle Power product, and now Nestle has decided to go after Muscle Milk over "Milk" because its not actually Milk... its a high protein, artificially-created shake.

So, we run to the dictionary for a definition, and we find:

Milk –noun
1.an opaque white or bluish-white liquid secreted by the mammary glands of female mammals, serving for the nourishment of their young.
2.this liquid as secreted by cows, goats, or certain other animals and used by humans for food or as a source of butter, cheeses, yogurt, etc.
3.any liquid resembling this, as the liquid within a coconut, the juice or sap of certain plants, or various pharmaceutical preparations.

I guess we will be seeing the "pharmaceutical preparation" defense...

But those lawyer bills... ouch!

The Myth of Sustainable Competitive Advantage

It may be a bit academic, but this article in the HBS review is very interesting.

The basic premise is that competition is now so aggressive that no advantage is sustainable over a long period, and that a successfull business no requires a process that builds a series of short term advantages.

The implication here is that the pace of innovation and change is only likely to accelerate, and that personal employment stability will be a thing of the past.

An interesting read, but with far reaching implications...

Friday, June 5, 2009

Vive La Fizzy Difference!

Nice interesting perspective on what Americans call their Carbonated Soft Drinks... Soda, Coke, Pop or something else. A blogger has held a vote on Twitter.

I was personally hoping for a resurgence of "tonic" - a traditional favorite in Boston, and pronounced with great New England vowels as in tahnnik.

Thursday, June 4, 2009

Innovation Process: More Is Better...

Most large CPG companies are obsessed with an innovation process that will increase, if not guarantee success. They want innovation precisely targeted and accelerated to a massive scale as rapidly as possible. A solution that requires massive launch and investment: The "big bet" solution.

In reality, innovation in CPG is more iterative, and tougher to accelerate. This article from Booz Allen illustrates that a smaller, but more profligate approach looks to be more successful.

The winner therefore appears not to be the "big bet", but the "hedged bet".