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After a couple of silent months, I thought I would restart my musings with a quick recap of the top three things on my mind...

First, its a project I have been working on - underWAY. I have been banging away in person and on this blog about real, differentiated functionality for a while - and this is something I believe underWAY has in spades. underWAY is the first appetite suppression beverage, using a combination of superfiber technology for "stomach bulk" and low GI sweetening for smoothing body insulin/blood sugar levels. The result is a beverage that can immediately end hunger in a great tasting beverage. We are out starting to introduce this to retailers, targeting the nutrition aisle... Contact me (neilgkimberley@gmail.com) if you want more info.

Second has been the exuberance in beverage stocks. A combination of higher retail pricing, M&A activity and lower input costs has made beverages a flavor of the month with Wall Street, led by the non-M&A bottling-driven stocks (DPS, CCE) and HANS. Will this last? How can these businesses sustain growth in an environment of more promotions and higher input costs?

Third, where are the other hot new ideas? Energy Minus (Purple/Drank)? Coconut Water (Zico, Vita Coco, ONE). Kombucha (look for it in the POM section of the grocery store!)? Can energy evolve one more time?

Here we go 2010!

Here Comes Coconut Water...

Pepsico's Latest Purchase

In a summer when much of the focus of the beverage industry has been on the Pepsico move to buy its distribution systen, PEP showed that it still had its eyes on the future with the acquisition of Amacoco.

While the acquisition is dressed up as a move with international motivations, its is likely that PEP has also got a eye on the US with the move. In recent months media coverage of coconut water has increased, and the three current players in the US market (Zico, Vita Coco and ONE) have been in an distribution expansion for the entire year.

I personally like coconut water: Great original taste, nice unique packaging... Its ready for primetime: Now the question is - who will be the winner??

The Summer of 2009 is Over. Now What?

This has been a good summer for the traditional beverage powerhouses.

While the recession economy has driven consumers to cheaper refreshment alternatives (ie CSDs) to boost consumer demand, everyone has benefited from the price increases of 2008 and the fall in input costs in 2009. As a result volumes may have been soft, but revenues and profits are up. As a bottler friend of mine observed, "This is the best summer for years. pricing is up, costs are down - I am profitable on every case that I sell".

Even the softness in bottled water is a reason for the big guys to celebrate. Bottled water has been a low margin, high volume distraction for a decade... the summer of 2009 has weakened a strong competitor (Nestle) and decreased retailer clout.

So all is well in the beverage world? Well, probably not.

It is now apparent that the traditional consumer marketing of commodity CSDs appears to be failing (see the failings of Pepsi for illustrations).

Underlying consumer interest in more healthful, more functional alternatives is still there: Attractive products in Energy, Sports, Enhanced Waters, and Functional Beverages are still making progress.

So, coming into the planning phase for 2010 what will be on people's minds?

- How quickly will Pepsico close the deal with their bottlers and what will the fallout be?
- Is bottled water at its maximum? Or is there more growth there?
- If input costs go up as the economy reflates, how much margin can the businesses keep?
- Can the businesses continue to cut overhead and marketing with no fallout?
- Coconut water is now front and center in the new beverage agenda (after Pepsi's purchase of Amacoco) - will it grow to scale? Who will the winner be?
- Can Gatorade evolve? Its single use positioning is no longer enough to sustain its 80 share.
- How quickly will energy resume its growth? And will shots continue to complicate the category?

Lots of questions...

Interesting year ahead.

Move Over Acai, Beetroots Are Coming

Now there is scholarship on the humble beetroot, claiming that beetroot juice can increase the drinker's stamina by 16%.

It is fascination how we still are finding new perspectives on the foods we consume.

Soda's Moment in the Sun

It has been a long decade for CSDs. Consumer's increasing interest in "better for you" and "functional" beverages has been arrested by the economy, and CSDs are benefiting.

Results from Coke, Pepsi, DPS, CCE and PBG are all very similar. While CSD volume has declined, its pricing has increased while input costs are down. As a result there have been strong results from the major players and stock prices are up. As a large bottler put it to me recently - this is the best year this century for the bottler: the old price point paradigms for 2 Liters and 12 Packs have gone, replaced by far higher price points based on multi-purchase deals (two 2 liters for $3 etc).

In the past year the cost of gas is 60% of last year, aluminum is 50% of last year and corn (the principal sweetener) is 50% of last year. And all of the major players took out a significant number of heads from their budgets as they expected a similar cost environment in 2009 as they faced in 2008.

But it is unlikely that these results are little more than a short downhill stretch along an uphill road towards the challenges of tomorrow. Health and functionality trends are still there, just covered in the interim by the challenges of the economy.

The large CSD businesses still have to figure out the right portfolio for future success.

A Quick Trip Down Memory Lane

Just found this blog entry about the RC Bottle Guy commercials we worked on back in 2000. Too bad we never got to properly run them - but I did get to wear the RC Bottle suit at a few sales meetings...

Big Press For Little Bottles

Around 4 years ago, I was researching energy drink pricing and first came across a 2.5oz product called (I think) Lift. While doing a sort of highest priced per ounce beverages, it came top.

That was 2005, and now in 2009 Energy shots have made the big time. The New York Times has gee whizz coverage, and ConsumerEdge is reporting a category trending in $1B in retail sales this year.

And to the big boys of energy, this is both a blessing and curse. A blessing because it grows the category: A curse because it makes them compete from a position of weakness Vs 5 Hour Energy - the 400 lb gorilla of the checkout.

But more interesting to me is the expansion of the energy need state. So, now it is shots - next will it be chews? Hydrive is already there.