The Retailer Shoe Starts to Drop...

Back in September I posted a comment about how beverage businesses were now as the strongest position that they were likely to be, and a combination of increasing commodity costs and retailer pricing pressure would be headwinds for 2010.

There is increasing evidence of the second part of that statement with the Costco rift with Coke. Ad Age has picked up on this theme in the context of building brands. In reality this is a value fight - and who deserves to make what margin. This will become an even bigger theme into the future, and with DPS and PEP consolidated, it will be more challenging for KO/CCE to come up with the right value division scenario...

Great Idea: Poor Communications

There is a real challenge in creating compelling integrated advertising and entertainment. How do you achieve brand communications objectives without making the viewer's flesh crawl?

Today I watched "The Broadroom" from Maybelline, and the faux music video from Muscle Milk, and was disappointed by both.

The Broadroom has real potential - written by Sex and the City author Candance Bushnell, and has spared no expense to hire real talent. Unfortunately the premise and the script reads like a draft of the brand segmentation study, and cannot figure how to subtly include product ID's.

The Muscle Milk faux music video is used to to promote the sexy pilgrim... a guy with the ripped torso who got ripped because of Muscle Milk. Good idea for a gag, well produced, but just awful.

So here's to a new year with a better idea of how to do product endorsed entertainment. Otherwise the decade of the teens may be more of a throw back to the sponsored content of the 50s, rather than the brave new world of digital marketing.

Sparks - No: But Red Bull/Vodka - yes

So in the infinite wisdom of the FDA, prepackaged Energy/Alcoholic drinks are too dangerous to sell:

But bars are still able to sell Vodka/Red Bull, Irish Coffee, even Rum and Coke. While I will grant that the interactions between alcohol and caffeine are not well understood, but people have been mixing these substances for years without FDA involvement.

I scratch my head...

The End Of Advertising And Bachman Turner Overdrive...

Over the past few weeks, a recurring topic of conversation has been about how the agency and client model of marketing and communications is changing - and there are very few people embracing that change.

Most traditional commercial enterprises have people in outdated roles being serviced by consultants (agencies of every description) that no longer know what their role is.

I came across this interesting White Paper by (of all people) IBM, that really hit home. If you think we have seen change to date, you ain't seen nothin' yet...

The Coca Cola View of the Year 2020

KO just completed a two day analyst presentation in Atlanta to give some insight into its vision for how it will double its consumption globally over the next decade. It is apparent that months were spent by their consultants and strategists to deliver a vision driven laid out in a strategy map format to show the assembled wise people of Wall Street that KO is ready for the challenges of the next decade.

I have uploaded all the presentations to my slideshare account, for those beverage geeks who are interested... but I have not had the time to sit through the webcasts... those are available at the Coke website in their investor relations section.

Overall it is an impressive treatise on the KO objective of global domination, and more precisely on their determination to make brand Coke even more omnipresent ( if that is even possible), through various marketing, sales and supply chain tactics. I particularly liked the insight into Japan and China -probably because I am so US focused.

A couple of things do feel forced into the agenda (sustainability comments, and platitudes on how Coke will get people to exercise more). But the biggest concern I would have for the red machine is that it remains so singularly focused on its core, refreshment-driven CSD products. I saw nothing that made me believe that anything can be done to elevate the business above commodity status.

Also it overshadows some of the good work being done in the Venturing and Emerging Brands area, where real innovation (outside the Atlanta homeland) is being recognized and invested in (Honest Tea, Illy etc). The corporate innovation presentation sounds like the standard approach: KO wants Big Ideas that warrant Big Bets. As ever the "Big Bets" approach flies in the face of how beverage innovation actually creates success. Small incubation has won, big bet innovation has lost.

It is an interesting read for anyone in beverages, but the overall message is really "more of the same". They are lucky that "more of the same" has a large iconic base that will not be eroded easily. However, ignoring the functional future of beverages (eg. Vitamin Water and energy drinks) will be something they will do at their peril.

Mainstream Sex... The wave keeps (ahem) coming

Passionfruit-Viagra is the new desert created by some Colombian Chefs: Apparently the eaters enjoy "delicious tickles". ANyway, a couple of years ago I had heated arguments with some colleagues about a future trend called "mainstream sex". My theory was that in the next few years, "erectile assistants" and other libido enhancers would represent a mainstream opportunity away from the Horny Goat Weed at the checkout counter.

For those who scoffed... I start to claim victory.

Chocolate The Real Superfood

Just to add to the ever growing list of things that Chocolate can do (reduce inflammation, improve heart health, etc etc) now add "reduce stress".

Soon every bar of chocloate will be stamped with an "S" and sold with a cape...

Coca Tea

Last week, a friend (thanks Alex) drew my attention to Kuka. Well... Kuka Tea is coming to the USA, using de-cocanized Coca leaves.

A very interesting proposition.

A good idea from differentiation and innovation: But sailing too close to the wind of America's puritan ethics? Time will tell. In the interim, I am very interested in tasting it!

10% Growth in Tea?

How to win in the tea business...

Nielsen is projecting that Tea is about to surge because "If the recession has proved anything, it’s that American consumers are willing to pay a premium for healthy products."

Really?

I would love to see their data, because from what I have seen, CSDs are leading growth (with a significant contribution from Private Label) and the leading tea brand (AriZona) is often the single cheapest product on the shelf - offering the retailer and distributor less margin that any other beverage product. Their 99c cans have been a success dating from 1992, and have spawned hundreds of imitators (for example Snapple now with 79 cent cans). Indeed both Lipton and Snapple have struggled to respond to AriZona's ownership of the bottom end of the market.

The release continues that "Over the next several years, tea’s health halo will gradually return the market to the double-digit gains it experienced prior to the recession, particularly as additional research solidifies the product’s healthful and functional properties."

Let's be clear. Tea has become a cheap, low margin player in beverages.

The days of success driven by hot filled premiumness have disappeared under 99c cans, $2.50 gallons, and players like Red Diamond who fill their gallons cheap at dairies. Undoubtedly tea can grow, and there is some residual interest in tea's health benefits, but the bulk of growth is driven by value, and not consumers willing to pay a premium for healthy products.

The choice beverage makers have to make is whether they want to disappear down the value tea rabbit hole, or whether they can build propositions that can command a premium price from consumers.

Gatorade Starts to emerge from the 60's

From what Crain's Chicago is reporting, Gatorade has finally recognized that it needs to leverage its primacy in Sports Drinks to prepare formulas specific to sports needs, as opposed to an infinite variety of "replenishment" beverages.

Gatorade will have 3 line extensions: Prime, Perform, and Recover that correspond to the different need states of the sports person. Bravo for figuring it out - but they are probably a decade late compared to many of the leading sports nutrition businesses.

No details on the formulations, but I would guess is that Prime will be a caffeine-added, BCCA product, Perform will be standard replenishment product, and Recover will be Protein based (they have previously had Gatorshake in the works for a while).

Strategically it is a rejection the past "one size fits all approach", but I'm not sure that it does anything for the problem at the core of their business... there are better non-sport products with a similar sweetness and better taste (ie Vitamin Water). It does however position the business to be stronger and more focused in the future.

An Unexpected Protein Use

Did not see this coming...

Well, I have been anticipating greater proliferation of protein enhanced beverages - but this one has me doing a double-take.

Devotion is a Protein-enhanced Vodka. Yes, its a vodka for the fitness fan. The fan that avoids carbs, and wants to keep their protein levels high whether its from Muscle Milk in the morning or from Devotion vodka at the club at night. I guess those pumping iron are not looking to get drunk at the same time.

Vodka is very crowded category, but very profitable. I will be looking forward to tasting the product... protein as an ingredient is a challenge at the best of times, be interesting to see how the challenge is handled in alcohol.

Personally, I am interested and open to it... but whether it can be mainstream enough to get the scale it needs... Well - time will tell.

Food in the age of Energy

Now beef jerky with added energy.

Perky Jerky is certainly an interesting concept, using a higher quality beef and guarana; And it is well within the interest of the male energy consumer. In the linked article the creators talk about a desire to "take jerky upmarket"... And while the package is interesting (it will be tough for Red Bull to stop them from using a bull) the name Perky Jerky belies a pretty serious product.

This may not be THE big idea that will take stimulants into meat snacks, but it is an interesting progression in taking energy functionality to a new market space.