Christmas Bonus: You get extra categories! Instead of a deep dive into a single product, for this end-of-the-year roundup we’re including extra numbers to keep you warm – and busy – through the winter.

Product of the Year: ZICO Chocolate flavored Coconut Water

While most entries into the coconut water space have been focused on either straight coconut water or traditional or tropical fruit flavors, Zico did something radically different by launching a chocolate flavor.

It was definitely a risky move on their part – and its something that hasn’t yet realized its full potential – but so far the response to it is extremely positive.

It’s one of those products that is almost universally liked – even people who don’t like coconut water seem to make an exception for this one.

And when it comes to BevNET Best of Awards, the ability to take something that’s innovative and turn it into something that clearly has some commercial legs to it is exactly what the panel looks for.

So this year is ZICO Chocolate’s – congratulations to the BevNET 2011 Product of the Year

Best Functional Beverage: Body Armor

Body Armor super drink is a fruit flavored line of functional beverages that has a coconut water base. In addition to coconut water, Body Armor takes a “kitchen sink” approach, with functional ingredients that tackle hydration, recovery and antioxidant-based health protection. Plus it has really great looking packaging in a proprietary bottle that really reflects its brand purpose. Ultimately what made our panel give the award to Body Armor, though, is that regardless of functionality this is a proiduct you’d want to drink over and over again.

Best Energy Drink: Monster Rehab

A combination of tea and lemonade, standard energy ingredients, and electrolytes – even a little bit of coconut water – put Monster Rehab on a higher level than most other entries from a functional perspective. The flavor was also spot on — it was easily the best tasting energy drink that the panel tasted all year.

Additionally, Monster has always featured strong branding and the Rehab product is no different. The can is very familiar in appearance but it also offers unique yellow and faded gold tones really help sell the tea and lemonade flavor inside.

That’s why, after much jittery deliberation, Monster Rehab is the winner of BevNET’s Best of 2011 Best Energy Drink.

Best Relaxation Drink or Shot: Dream Water

While the product has been on the market longer than just this year, 2011 was definitely a big turning point for the brand, both because of the company’s execution and because the function – relaxation – became validated by a plethora of products in the space.

And as far as those products go, Dream Water is the cream of the crop. Our panel loved the branding, the flavor, and their approach to describing the function of the beverage without making it seem like a pharmaceutical product.

Best Non-Carbonated Beverage: Mamma Chia

Mamma Chia helped turn a burgeoning functional ingredient – the chia seed – into a refreshing and hip beverage.

The rehydrated chia seeds, which float throughout the drink set this product apart from not only other chia beverages most other beverages as well. Meanwhile, the glass bottle and clean label combined with the striking visual of the suspended chia seeds. The combination of visual and ingredient innovation catapulted this product to the top of the panels’ list.

Best Carbonated Beverage: Joia

What makes Joia so special is its unique approach to flavor. The company combines mellow fruit flavors with spices and herbs to create something that’s extremely unique and addictive.

Additionally, the branding of their product is very clean and attractive, with whimsical looking graphics that are well executed and should be very appealing with consumers who are seeking a natural soda.

Ultimately, the panel really liked that this product felt both different and familiar, a combination that is difficult for many brands to achieve.

Best Tea or Tea Based Beverage: Chia GT Kombucha Synergy

GT’s, the winners of BevNET’s 2010 Product of the Year award, executed these new flavors extremely well. The blend of chia seeds tastes great and cuts down on the fermented flavor of the kombucha. The chia addition also provides additional health benefits, and the company has given the product an eye popping visual look. Our panel decided that the combination of great flavor, appearance and innovation should be a boon for both the kombucha and chia categories.

Best Juice or Juice Based Beverage: Jamba Daily Superfruit Shots from Zola

Jamba’s brand has spread to several new products RTD drinks as part of an awareness-raising campaign, but this product was definitely the best of the bunch.

The design of the bottle is unique and appealing, with a cup on the cap that helps the consumer pour just the right amount; from a flavor point of view, these products use very enjoyable Brazillian superfruit enhanced formulations brought to the party by ZOLA, Jamba’s partner in the product.

Each variety has its own unique blend of enhancements, which include things like vitamins, antioxidants, and natural caffeine.

Overall, our panel felt that this product did a great job of blending flavor, functionality, and packaging Plus it has the Jamba brand, which is well known as for its premium products.

Best Product Revamp: Deluxe Honeydrop

Every year there are dozens of products that relaunch and restage themselves but our panel believes that this year it was Deluxe Honeydrop that shined the brighest.. The switch from an ehanced water to a tea and juice play was significant and well done, and helps the brand execute better behind its core honey branding. Additionally, Honeydrop moved from a 16 oz. stock PET container to a propietary glass bottle and redesigned its label, both of which help clarify the brand’s focus.

Best Smoothie or Meal Replacement: Simpli Oatshakes

Simpli is an oat-based product that comes in a couple of different flavors and packaging formats. And in additon to being a potential dairy alternative, Simpli Oat Shakes contains protein, fiber and vitamins, making it something that can definetely satify your hunger. And their chocolate flavor is one of the best-tasting non-dairy chocolate flavors out there.

Best Sports or Hydration Beverage: Greater Than

Greater Than is a coconut water based sports drink that launched last year. However, in 2011 the company tweaked the flavors and added a sharp-looking black label. One of the key components to Greater Than is its mathematically iconic branding, which, combined with its grassroots marketing campaign in Chicago, has really help the brand resonate in the sports community. And when it comes to sports drinks our panel thinks Greter Than is one of the best-tasting entrepreneurial entries into the category in a long while.

Best New Powder, Tablet or Mix: Mio

This liquid flavor enhancer was designed to be mixed with water, like other products in the category, but it’s dispensed from a nifty-looking, convenient 1.6 oz. bottle that makes about 24 drinks per container. While each of Mio’s flavors taste great, it is the fact that Mio complete dissolves in water without mixing any kind of ingredient “cloud” or clump impressed the panel the most.

Best Enhanced Water: Aloe Gloe

The product – which is positioned as an “aloe water” – is the most innovative and well executed product that entered into the enhanced water category this year. The panel really likes the packaging and positioning of the product, which seems much more approachable and mainstream compared to most other products using aloe vera.

Best Packaging Design: Stumptown Cold Brew

Up and coming coffee roaster Stumptown won the award for Packaging Design this year for its Stumptown Cold Brew.

The fact that they chose a stubby – a little brown glass bottle that has been around forever – and turned it into something that feels modern, cool, and innovative impressed the panel a lot. Plus, they did a great job executing the vintage style label art. Both of these are very consistent with the Stumptown brand.

The label is clean, readable and direct – you know exactly what it is. Plus, the silkscreen application gives the appearance of quality, which is what Stumptown is all about. Just from looking at it, it’s clear that the coffee inside the bottle isn’t going to disappoint.

Best Packaging Innovation: CSWISS

CSWISS’s new cardboard can, which is made by a European company called Cartocan, is a highly innovative and brand-appropriate take on the ubiquitous 250ml energy drink can.

Aside from having a softer feel in your hand, the cardboard makes for much more vibrant colors and helps the design for CSWISS really pop.

But for the panel, it ultimately came down to the fact that this is an innovation on a package format that has already proven itself and been massively successful.

Best Marketing Campaign: Vita Coco

Vita Coco’s “Hydrate Naturally” campaign is simple and easy to understand, but it’s also a powerful and succinct way to state the benefit of the product.

In core markets they canvassed both Los Angeles and New York with ads featuring crossover superstar Rihanna, while in Boston and New York they also utilized sports icons in Alex Rodriguez and Dustin Pedroia.

What’s great about all of these campaigns is that the product use seemed natural rather than forced and it reiterated that Vita Coco is a product that can be consumed during many different occasions.

And, as with the product itself, their campaign was everywhere in target cities – up and down the street, on buildings, buses, and even in the media. It was clearly a campaign that reached the masses, while building Vita Coco as a product that crosses many racial, ethnic, and class barriers as well as myriad use occasions.

Best Social or Interactive Marketing: Coca-Cola Freestyle

The campaign for the Coca-Cola Freestyle, which is a unique on-premise soda delivery system that allows consumers to build custom tailored beverages, was spearheaded by two very clever digital applications. The first was an iPhone app, which, using the same interface as a Freestyle machine, takes users through a classic memory game. The second was a Facebook application that used the same interface as the Freestyle machine to allow page visitors to build their own virtual drink.

Both of these efforts have helped Coca Cola create excitement and build an “insider” group of fans who have their own attachments to the machine in much the same way as visitors of In-N-Out Burger on the West Coast have their own language for their orders. For creating a following online that is actually translating into concrete usage offline, the Coca-Cola Freestyle campaign is the winner of best social or interactive marketing.

Faced with last year’s crippling FDA ban on the addition of caffeine to alcoholic beverages, a number of malternative brands were left for dead as many assumed that the drinks, stripped of their energy, would lose their allure and crumble as quickly as Superman wearing a crown of Kryptonite.  However, malternatives proved that they are not only alive and well, but soaring their way to the cash register through the undeniable popularity of the beverages as well as a greater emphasis on innovation from brands within the space.

Nevertheless, state and federal regulators continue to take aim at the beverages, claiming that malternatives’ high alcohol content, sweet flavor profile and colorful packaging encourage binge drinking and underage use.

Based on sales data over the past year, it’s clear that the FDA’s ban has done little to affect consumption of malternative drinks. Flavored malt beverages accounted for nearly $1 billion in sales over the last 52 weeks, up 6.7 percent over the same period last year, according to Symphony/IRI data. And in the face of consistent and vociferous criticism from state and federal regulators – concerned that the high alcohol beverages are often abused by those both above and below the legal drinking age – the malternative category is thriving.

Two of the most popular malternative brands, Four Loko and Mike’s Hard Lemonade, combined for over $460 million in sales over the past year and are expanding their reach to a variety of demographics with new products and flavors. At the same time, longstanding beer brands, including Pabst Blue Ribbon and Mississippi Brewing Company, are leaping into the category with “me too” types of drinks. Pabst debuted a new fruit flavored 12 percent ABV product called Blast by Colt 45 in April, while Mississippi Brewing recently launched Arnold Palmer Hard, an alcoholic version of AriZona’s Arnold Palmer iced tea and lemonade combo line.

As the category continues to grow and expand, three key trends have emerged as brand producers look to spur greater consumption and profits.

1. Glass packaging. Though a majority of malternative brands have embraced the large format can, a package popular among younger consumers and the one most often sold in convenience stores, a number of companies have added a glass bottle option as a way to introduce their products to a wider range of demographics and gain entry into new retail channels such as grocery and mass markets. Leading the way are United Brands, which released new 12 oz. glass bottles for its JOOSE malt beverage line in January, and Phusion Projects which recently added a new 8 percent ABV line of 11.2 oz. glass bottles to its line of Four Loko products.

2. Variety packs. Following the success of the format seen in the craft beer industry, variety packs are becoming increasingly utilized by malternative producers, North American Breweries (NAB) introduced its new Seagram’s Smooth line with both 12- and 24-count variety packs containing each of the line’s four flavors. Similarly, Four Loko’s new glass bottle line debuted with 12-bottle variety packs featuring all three flavors.

3. New lemonade flavors. Though Mike’s Hard Lemonade is the undisputed leader in lemonade flavored malternative beverages, a number of companies within the space have added lemonade flavors to their portfolio of beverages within the past year. Lemonade itself is a beverage on the rise, and its infusion into malternatives appears to be a natural progression. Jeremiah Weed, NAB’s Seagram Smooth, and Phusion’s new Poco Loko line have all included lemonade flavors to their
brand line-ups. Not to be outdone, Mike’s has introduced Mike’s Harder, a new higher alcohol line of its lemonade drinks.

Despite vast financial success within the category, malternative brands still face intense scrutiny from government regulators and elected leaders. In October, Phusion Products agreed to re-label and repackage its 23.5 cans of Four Loko in order to resolve Federal Trade Commission (FTC) charges of deceptive advertising. The FTC alleged that Phusion misrepresented Four Loko by claiming that the beverage contained an amount of alcohol equivalent to one or two regular 12 oz. beers. According to the FTC, “one can of Four Loko contains as much alcohol as four to five 12 oz. cans of regular beer and is not safe to drink on a single occasion.”

To resolve the charges, Phusion will be required to include alcoholic content disclosures on the labels of its products that contain more alcohol than 2 ½ regular beers. Additionally, the company will have to use resealable containers for any products that have more alcohol than the equivalent of 2 ½ regular beers.

Additionally, the attorneys general of 35 states recently asked the FTC to impose even more stringent marketing guidelines on malternatives.  Suggested guidelines include prohibiting the sale of flavored malt beverages in containers exceeding 12 ounces and limiting the number of alcohol servings per can to two standard drink. According to the AGs, label disclosure and a resealable package do not eliminate binge-drinking risks.

Nevertheless, it wouldn’t be surprising to see malternatives continue to flourish in spite of greater regulation. In pushing the category this close to the $1 billion mark, the companies in the space have shown a remarkable ability to adapt and evolve in order to protect their booming businesses.

Those ideas about branding – and many other off-beat ideas that are necessary to distinguish beverage companies in highly competitive times – came alive during the BevNET Live Winter event in Santa Monica. The two-day conference, the sixth held by the beverage media company in the past three years, served as a capstone on a year filled with innovation and intrigue in the beverage world.

Appropriately, it was BevNET founder John Craven who first made news at the event, notifying attendees that the company’s trade magazine was changing its name to BevNET Magazine from Beverage Spectrum. The publication will feature enhanced coverage of suppliers and ingredients, as well as its traditional mix of news and trend information.

But news about the host company was just the beginning. Following Craven’s announcement and opening remarks, a host of industry leaders and thinkers took to the stage to introduce the room-filling crowd of 460 to ideas about addressing the issues of product introduction, growth, distribution and investment.

Former FUZE CEO Lance Collins explained one of the most important ways that he harnesses his ideas to create marketable products, introducing a “roll call” of brand-building partners, most important of which is his longtime creative “muse,” Paula Grant of Nyack, NY’s Flood Creative, as well as his sales and marketing “fraternity”: a group including longtime sales chief John Kenneally, who is just one of many team members currently living at Collins’ house in Los Angeles. The group is working on shepherding Collins’ newest product, a multi-function vitamin and mineral-enhanced beverage called Body Armor through its early growth phase.

Even with money and experience behind him, Collins said, he is fully cognizant of the long odds for runaway success in the beverage business, which can provide high returns for brand CEOs but typically involves long odds and hard work. Collins advised entrepreneurs to stay away from venture capital and private equity funds, and also explained his “hive” approach.

“Surround yourself with people smarter than you and you’ll go far,” he said.

Still, that fight for success can be abetted by authenticity, one of the key themes running through the event and one explored by a panel of entrepreneurs immediately following Collins’ presentation.  Collins, visibly energized by the return of much of his old team, joined with Tom First, a brand builder and investor in the beverage space, as well as retailing specialist Perry Abbenante and distribution ace and Aloe Gloe owner Danny Stepper to talk about the potential for resonant, authentic brands in the marketplace.

The exploration of authenticity returned with Grant , who worked with fellow designers Ian McLean and Mark Mitchell to create a series of three presentations exploring visual authenticity. Grant, who was just one of several new faces enriching the speaker mix, instructed attendees to distill their ideas down to a simple sentence in order to get at an authentic root. McLean talked about conceptualizing authenticity across several different product types, while Mitchell spoke to the ways authenticity can help build and support new categories while giving advantages to first movers.

Also shaking things up were Red Bull marketing director Amy Taylor, who wowed attendees by giving glimpses of Red Bull’s focus on growing influential subcultures as a way of enhancing the brand’s ability to generate media that in turn brings credibility to the brand. By associating the energy drink with rising stars of those subcultures – and then not pushing, but instead capturing –their excitement in live events and on film, the brand has become a recognizable player both on television and on-line, with recognition that transcends the cooler and extends into sponsorship and, at best, works as a litmus test for legitimacy.

Taylor might have shown how Red Bull became the best-selling energy drink in the world, but BevNET itself stirred the pot even more, offering its Best of 2011 awards, including an interview with Vita Coco founder Mike Kirban, who was selected as Person of the Year. Another coconut water, ZICO Chocolate, took the Product of the Year title, continuing a three-year run of dominance in the top awards for the burgeoning category.

BevNET Live’s first afternoon was devoted to smaller groups. Attendees had the opportunity to choose between nine 45-minute breakout sessions offering granular instruction on ingredients and packaging, marketing through science, charities, and celebrities, and  distribution and retailing advice, while in another private session a group of beverage company CEO’s were given the chance to discuss problems and issues in a new BevNET Live roundtable session. Networking continued for all with a multi-booth “mini-expo” and subsequent cocktail hour.

While Monday’s event might have been given over to awards chosen in the weeks leading up to BevNET Live, Tuesday’s session was marked by a day-long march to choosing the winner of the New Beverage Showdown, a session sponsored by Coca-Cola’s Venturing & Emerging Brands group that saw six new brand owners square off in an attempt to win $5000 and the kind of “instant credibility” that public victory can confer. Brands participating included 82GO, a new water “pouch” developed by Bawls founder Hoby Buppert; HDX, a sports drink mix targeted to adventure athletes; Coco Café, a coffee/coconut water hybrid; high end soda Joia; Jet Way, an anti-jet lag functional beverage company and Runa, a new tisane made with the leaf Guayusa. With morning and afternoon sessions offering interesting pitches and advice that aided both the participants and the audience, the tension built throughout the day.

Of course, there was also the traditional mix of entrepreneur presentations and panels taking place as well. To start the day, Clayton Christopher, the founder and former CEO of Sweet Leaf Tea joined with Catterton Partners’ Michael Farello and Nestle Waters North America CFO William Pearson to provide a three-headed presentation on the inception, growth through investment and eventual sale of Sweet Leaf to the larger strategic acquirer. At one point, Farello explained the difference between Sweet Leaf’s having turned itself into a viable national brand and a viable national company – introducing the steps it would eventually follow to make Nestle its ultimate destination. Meanwhile, Christopher revealed some of the tough early decisions an entrepreneur needed to make to keep the business going – such as choosing between product liability insurance and employee payroll. Such considerations had Pearson humorously musing whether he needed to go back and reexamine the deal documents, but he nevertheless termed the acquisition a success.

Another successful acquisition was touched on during a presentation by Todd Woloson, the co-founder and former CEO of Izze Beverage, which was purchased by PepsiCo at the end of 2007. The spunky company relied on what Woloson termed “discovery” as a way of winning consumers. He described a process by which the brand owners “thought of Izze as a real person… what would Izze do? Where would Izze go?” as part of the company’s marketing and distribution play. Initially describing the discovery process as “the layers of an onion,” Woloson talked about ways that the brand had kept the element of surprise by holding back flavors from accounts in an attempt to always have something new to provide in case a SKU didn’t sell.

While Monday had featured a drop-in from Person of the Year winner Kirban, Monster, the company that won Best Energy Drink for 2011 sent over two representatives, President Mark Hall and marketing chief Geoffrey Bremmer. The pair provided insight into the energy drink category – which Bremmer said still had a long way to go in terms of adding consumers, let alone increasing the number of use occasions for existing adopters – and also its competitive environment. Hall termed the energy shot category “medicine” instead of a beverage, while nevertheless conceding that his company needed to continue to play in it. He also offered the overall branding strategy for Monster as a contrast to competitor Red Bull – whereas Red Bull has turned into a media company, from the start, Monster aimed to become a “lifestyle brand.” He also turned an inquiry about negative press surrounding the energy drink category on its head, declaring that caffeine couldn’t be an issue “as long as there’s a Starbucks on every corner.”

BevNET Live’s Tuesday afternoon session moved from inspirational brands to distribution and investment. The audience was introduced to a rising young distribution company, Gourmet Purveyors International, as well as several ideas about attracting brand investment, including a panel on brand incubation and another on recent trends in capital availability and the switch to capital efficiency as a measure of a brand’s investment-worthiness instead of growth rate. After a presentation on Field Marketing and another exploring diverse – and somewhat unorthodox — retail channels, it was time to announce the winner of the showdown: Coco Café. The company’s owners, Eilan Eifer and Brian McCaslin, work locally – so locally, in fact, that they were preparing to walk down Ocean Avenue, just outside the hotel, with their oversized winner’s check.

With institutional investors getting a bad rap in beverages these days – the National Enquirer version of the complaint is they force you to juice your projections in order to get the deal done, then steal your company when you fail to hit those unrealistic targets – a lot of early-stage beverage companies have been in a quandary as to where else to turn once they’ve reached the limits of where friends-and-family and angels can take them. (In fairness, the institutional groups have their own grievances against beverages as good investment prospects.)

One avenue worth a gander – albeit with a careful eye – is the growing ranks of beverage incubators.  “Grade school for consumer products,” is how Dino Sarti, a partner in an incubator called L.A. Libations, put it at the recent BevNET Live conference in Santa Monica, and that kind of captures their essence. Though they take various forms and their substance is not always easy to separate from their marketing hype, the incubators offer a range of expertise in critical areas such as product development, distribution and financing (including sometimes serving as an intermediary with the institutions). For new brands, they offer the prospect of devising a grounded development and launch plan. For the distributors and retailers who’re being pitched, they offer some assurance that the entrepreneur has received at least minimal adult supervision on the way to market.

I’ll admit I find the borders to be blurry between incubators and other species of service providers to new brands: consultancies like Cascadia Managing Brands and Jim Tonkin’s Healthy Brand Builders; boutique private-equity shops like First Beverage Group; sales agencies like Coast Brands Group (which itself launched an incubation unit earlier this year). But it’s worth scanning some of the options.

Incubation units launched by the beverage giants always garner a disproportionate share of attention because those companies represent such an obvious strategic exit for new brands. Currently, Coca-Cola’s Venturing & Emerging Brands unit has earned a spot in everyone’s Rolodex for its bias toward action and willingness to experiment. (It operates separately from another incubator, minority-owned by Coke, called Brain-Twist in New York.) Among other strategics, the Learning Labs concept established by Pepsi Bottling Group seems to continue on at PepsiCo, though its strategy and approach remain murky, whether by design or because of the ongoing churn at PepsiCo. We might also include Nestle Waters North America among these, though I get the sense so far that NWNA prefers not to go really small in chasing opportunities.

Partnering with one of those is a fairly predictable aspiration, because of their national distribution networks and identity as potential acquirers. But it can leave you exposed to the whims of those companies’ own portfolio strategies as they, for example, launch their own entries into the same category. (Or, as in the case of Anheuser-Busch with its 9th Street Beverage unit, the incubator can be abruptly abandoned when the core strategy changes.)

Among strategics not wedded to a specific national channel is Sunsweet, which has been involved with brands like Function, Ayala Herbal Water and C2O Coconut Water. Independent Coke bottler Coca-Cola Consolidated has remained committed to an incubation unit called BYB, which has scored a sizable success with its sub-premium Tum-E Yummies kids line while looking to build premium brands such as Bean & Body and Bazza. And Sunny Delight Beverage Co. has sought to move beyond its value-price niche with plays such as Bossa Nova acai.  All three meld the deep resources of a big company, a channel-agnostic approach to distribution, and leadership by big-company lifers who’ve proved surprisingly agile in the emerging-brand realm.

Then there are the independents. Big Red has successfully grown its core soft drinks while placing a side bet on Thomas Kemper Soda and winning the assignment to produce and distribute the much-ballyhooed Street King energy shot line. Shadow Beverages, created by some old Pepsi hands, has been on an impressive run, capped by its assignment to develop a multi-tier functional line for GNC. GBS Growth Partners got started helping Coke Consolidated devise its BYB plan but has managed forays into fresh teas, energy drinks and functionals.

Among others, L.A. Libations has served as an agent for relatively established brands like Icelandic Glacial water while nurturing small brands, some of them Coke entries like Illycaffe, and recently launching an aloe line of its own. Maverick Brands, though it seems to prefer to operate under the radar, has done well with Sunkist Naturals and launched a coconut water play called Coco Libre. And Brands Within Reach has parlayed its success managing Danone’s Volvic brand into a broad array of investments, acquisitions and agency assignments.

Though it’s hard for outsiders to sort out the incubators’ different approaches and verify their claims, they do offer advantages to startups. They usually bring deep experience in a range of disciplines, and are more likely to be agnostic on the right distribution approach than a strategic with a captive system to keep humming. Most have solid contacts at retail chains, though it’s important that these have been deployed not just on mainstream sodas and teas, where brand-building is a very different game. And while they generally prefer an ownership stake as well as a retainer, that’s not a bad thing in keeping the partners aligned, as long as it’s tied to measurable accomplishments by the incubator. As GBS partner Jack Brennan promised at BevNET Live, “we also understand that the entrepreneur needs to make a big part of the money, so we’re not greedy.”

In what is being described as the first “greenwashing” lawsuit in the state’s history, California Attorney General Kamala Harris filed a complaint last month against two beverage companies and a plastic bottle manufacturer for deceptively marketing and labeling their packaging as “biodegradable” and “recyclable.” The lawsuit could have far-reaching implications for how beverage companies choose bottle manufacturers and label their products. In the short term, however, it’s likely to have at least two water companies scrambling for replacement bottles to comply with the law.

The complaint named Balance Water, AquaMantra, and ENSO Plastics as defendants and claims that “the advertising and marketing practices of these companies are misleading to California consumers and businesses, and potentially harmful to the environment.” The lawsuit also states that the three companies are in violation of the state’s 2008 environmental law banning the words “biodegradable,” “degradable” or “compostable” on the labels of plastic food and beverage containers.

The lawsuit centers around ENSO Plastics’ specially coated PET bottles used by both Balance Water and AquaMantra. According to ENSO’s website, the bottles contain a microbial additive that is incorporated into PET resin during the manufacturing process.  ENSO claims that the additive will enable the bottles to naturally biodegrade within one to five years. The hitch is that the bottles would need to be placed in an environment with high microbial activity, such as a landfill.

The Attorney General’s Office, however, disputes ENSO’s claims that the additive will speed up the process of degradation. The lawsuit states that the claims are false, deceptive, and misleading and further notes that “items containing degradable additives… are considered contaminants by postconsumer plastic recyclers and, where possible, such items are culled out from recyclable plastics.” The Attorney General’s Office fears that consumers – thinking that the bottles will biodegrade – will improperly dispose of the bottles or will try and recycle them and cause problems for commercial recycling companies.

Both AquaMantra and Balance Water have said they will try to comply with the law.

Legal Files II: FDA had BPA Deadline

In a court settlement that may have wide-ranging implications for the beverage industry, the Food and Drug Administration (FDA) has agreed to decide whether to ban bisphenol A (BPA), a controversial plastic and resin ingredient commonly used to line plastic bottles and metal cans. The settlement resolves a lawsuit filed against the agency by the Natural Resources Defense Council (NRDC), an environmental action group, and requires the FDA to make a final decision on BPA by March 31, 2012.

While for years the FDA maintained that low doses of BPA are safe, mounting scientific research about the negative effects of the chemical caused the NRDC to send a written petition to the FDA in 2008 that asked the agency to ban BPA. The petition noted that the ingredient has been found to act as a hormone disruptor and poses a number of health risks, particularly amongst infants, children and pregnant women.

In January 2010, the FDA announced that it had concerns about the potential health effects of BPA. The agency concluded that it would “support changes in food can linings and manufacturing to replace BPA or minimize BPA levels.”

However, the FDA never made a direct ruling on whether to prohibit the chemical for use in food and beverage containers.  After 18 months with no direct response to the petition or clear action regarding BPA, the NRDC decided to file a lawsuit, which led to yesterday’s ruling.  The agreement was approved by U.S. District Judge Barbara S. Jones of the Southern District of New York who said the FDA must issue a final decision, not a “tentative response.”

“Every day, millions of American consumers are exposed to this dangerous chemical, commonly used in packaging for canned foods, beverages and even baby formula,” said Dr. Sarah Janssen, a senior scientist in the Environment and Public Health program at NRDC. “The FDA has an obligation to protect us from toxic food additives. As thousands of studies have already shown, BPA is a dangerous chemical that has no place in the food chain. Its use in food and beverage containers needs to be banned.”

While many new beverage companies have begun to utilize BPA-free containers, some of the largest drink manufacturers have held firm on its use. On its website, Coca-Cola noted that “the clear scientific consensus is that there is no risk to the public from the miniscule amounts of BPA found in Coca-Cola or other beverage cans.” Coca-Cola continues to use BPA to line its cans despite a request from a number of its shareholders to prepare a report that detailed the company’s efforts to find an alternative to the chemical. Coke stated that 75 percent of its shareholders voted against the proposal for a report.

Shareholder concerns at O.N.E. Coconut Water and Celsius Holdings led to big changes last month.

O.N. E. Coconut Water dismissed both Steve Coston, the president of the O.N.E., and Steve Vasquez, the vice president of sales. O.N.E. founder Rodrigo Veloso said that the moves were part of a general restructuring at the company, though he declined to explain the exact reasons behind Coston and Vasquez’ seemingly abrupt exit.

“We respect them and wish them well, but I don’t want to comment on [their departure] right now,” said Rodrigo Veloso, the founder of O.N.E.

As a replacement, O.N.E. brought on Tim Prager, as executive vice president of sales and marketing. Prager, a Nestle Waters veteran, was working in a similar function at Sweet Leaf Tea – a company that, like O.N.E., received investment from Catterton as a prelude to a deal with a larger strategic acquirer.

Veloso did say that the company had been struggling to stay in the fast-moving coconut water mix: sales of O.N.E. products have lagged in the past year as compared to those of category leaders, Vita Coco and ZICO. Speaking with BevNET, Veloso blamed weak returns on supply chain and sourcing issues, but claims that O.N.E. has moved past such problems and the company is focused on fully moving into the Pepsi system beginning in 2012. Veloso also noted that O.N.E. would finally debut a long-awaited organic SKU in the first quarter of the year.

At Celsius Holdings, founder Steven Haley was removed from his position as CEO and replaced by Gerry David, a longtime executive at a number of consumer products companies.  While Haley will stay on with Celsius as a consultant, his exit – which, according to Haley, had been discussed as early as June – appears to have been prompted by Carl DeSantis, Celsius’ main shareholder.

Haley explained that DeSantis owns $4 million worth of Celsius debt and was owed the full amount in September 2012. Had DeSantis’ debt stayed on the books, any new capital or investment over the next year would end up going directly to him – a daunting notion for an already struggling company.

“It would have put a stranglehold on the company,” Haley said. “There were really no other answers. [DeSantis] wanted more of his team at Celsius where he could take control of the company and do things his way. His heart and his pocketbook are in the right place, and he’s showing it.”

In addition to replacing Haley as CEO, DeSantis agreed to push back the loan payment for two years and increased his ownership stake in the company from 42 percent to 52 percent.

Haley noted that his exit was “very amicable” and that he “wants the best for Celsius.”

David, who was also named president of Celsius, was most recently the executive vice president of sales and marketing of consumer products at Oragenics, a biopharmaceutical company. David specializes in start-ups as well as turnaround and fast growth projects and joins Celsius at a time when the company faces declining sales and is attempting belt-tightening on sales and marketing expenses. Through the first three quarters of 2011, revenue at Celsius dropped by nearly 17 percent as compared to the same timeframe in 2010, though net loss – $1.2 million vs. $14 million the year before – was significantly lower.

In Celsius’ most recent earnings report, David said that the company has “done an outstanding job of getting the Celsius brand placed on the shelves of thousands of retail outlets… the focus now is driving consumers into the stores” via social/digital media campaigns, direct response TV and sampling programs at health and fitness clubs.

Starbucks Gets in the Buyout Game with Evolution Juice

Starbucks made big news in November, announcing the purchase of super-high-end Evolution Juice for $30 million, stating it planned to use it as the jumping off point for a bold move into what chairman Howard Schultz termed a “$50 billion health and wellness sector.”

“We’re not only buying a juice company but we’re using this acquisition… to position us to build a major health and wellness category in an exciting way,” Schultz told investors and media during a conference call announcing the deal. “Our logo change [earlier this year] was in anticipation of a new direction to leverage the iconic nature and trust of Starbucks to other products.”

The company also announced that it was making a key change in an earlier acquisition, Tazo Tea. Starbucks said it was moving Tazo from its original base in Portland, Ore. to Kent, Wash. as a way to seek production efficiencies. Starbucks spokesman Alan Hilowitz said that the transition will begin in April of next year and be completed by November.

While the Tazo consolidation was driven by scale, the Evolution purchase was due to innovation. According to Schultz, Evolution’s recent investment in manufacturing technology that enables juices to be pasteurized in the bottle under high pressure – but without the heat that can kill flavor and vitamins — was the prime motivation behind the acquisition.

The “HPP” process created a huge turnaround for Evolution, which had previously been hamstrung by its own commitment to freshness, as its lack of pasteurization had kept it restricted geographically to the West Coast. The company adopted HPP technology earlier this year, and it eventually created not just increased distribution, but apparently increased attention, as well.
“Evolution possesses a unique technological advantage – that’s the technology of HPP,” Schultz said. “This gives us a significant technological advantage over Naked, Odwalla, and the people who are selling fresh juice today.”

Schultz said that Starbucks plans to build off of Evolution’s strong distribution infrastructure on the West Coast and expand the Evolution brand into new channels and increase its grocery footprint nationally.

We gathered 460 beverage professionals from every part of the business; marketers, distributors, retailers, suppliers, the investment community and consultants and service providers.  The excitement and energy at the venue was palpable. The spirit of cooperation, consideration and sheer open dialogue was tremendous. The educational program and the accompanying speaker roster delivered in spades.

Meanwhile our “sampling bar” was teeming with over 120 new and exotic brands. A “Mini-Expo” bannered over 40 goods and services to aid our attendees in conducting their businesses. Networking was non-stop, old friendships were rekindled and new ones were formed. The beverage marketplace was on display at its finest.

We are blessed to work in such a great industry, and all the good was crystallized in the two days we spent together. BevNET  is privileged to serve as the conduit for bringing the industry together. Yes, there are issues and tough economic times that permeate the air, but the feeling that anything is possible was palpable. It is important to feel good about what you do and how you conduct yourself personally and professionally. The industry needed a lift, and that is what they got.

I just want to share a few takeaways that I gleaned there:
• Coconut waters are the shining star, and will continue to be going forward. Its variables are endless.
• The power of Red Bull, Monster, and Rockstar is dominating the energy drink space, but the other brands seem to have found their markets as well.
• Functional Drinks are still proliferating, but there are still the questions of the efficacy that must be proven to the consumer. They need to be convinced. Protein drinks are growing at a rapid pace.
• The delivery system caps are just hitting their stride. Between Activate, V Blast, Karma and other entries joining the fray, the category will grow.
• Lemonade is no longer seasonal, and proves that old fashioned good taste, without functional claims, is still a winning proposition.
• The investment community is still hesitant to invest, and sets their threshold at $5 million in sales before they will consider a brand. Too many brands are on the verge of elimination because they cannot raise the funds to grow.
• Legal issues, labeling and functional claims will come under greater scrutiny. The toothless tiger of government regulation might actually have the guts to do what it is supposed to do.
• The power and prowess of experienced distribution players organizing their own networks, such as Coast Brands Group and NIDA, is strengthening.
• That Coke and Pepsi are following the moves of the entrepreneurial spirits is indeed encouraging — but don’t set your agenda and hopes on them acquiring your brand as your business plan
• There was so much to absorb at the conference. I encourage those who want to capture BevNET Live to go to our site and read about and view the sessions. It’ll be time well spent.

One last note: We announced at the conference that the name of my baby, Beverage Spectrum, was changing to BevNET Magazine. It was the right move and now incorporates all aspects of our franchise. But it is an emotional change, analogous to a parent seeing their child grow up and prosper. With our terrific team, I’m glad my child is still in good hands. We all hope you enjoy happy and healthy holidays.

Normally, we’d do a “Top Ten,” but with the year being what it was and all, we couldn’t resist the chance to go to 11. Here’s hoping that the craft beer business busts through even that Spinal Tap imposed ceiling and beyond in the New Year. Until then, cheers!

11. Best Managed Potential Demand Crisis – Victory Brewing Headwaters Pale Ale
After originally being part of the “Pursuit of Pale Ale” series, the Headwaters Pale Ale officially moved year-round in February. Turns out the Bill Covaleski and the folks at Victory know what they are doing. The beer sold through faster than anticipated and the brewery couldn’t supply the demand nationwide. Except in their home market, Headwaters experienced a quick disappearance on retailers’ shelves between July and October until the company could purchase its 2012 allotment of citra hops. The company then over-purchased for 2012 and shuffled the brewing schedule to produce more Headwaters when they received the shipment in October – quenching thirsty drinkers’ thirsts everywhere.

10. Best New Year-Round Offering: Widmer Pitch Black IPA
In 2010, black IPAs emerged as a new style that had staying power. One of the early adopters of the trend, Widmer Brothers, originally released their ‘Pitch Black IPA’ offering into the ‘W’ series in the early part of 2010. Pitch Black outperformed previous W releases like Brrr and Drifter – which have both since become year-round offerings. After seeing the success, Widmer made the decision to take the beer year-round in 2011. It was the company’s first new nationwide release since Drifter Pale Ale in 2008. The beer launched on February 21st and is now one of the brewery’s top-selling selections behind the Hefeweizen and Drifter brands.

9. Best New Package
Design/Decision:
Sixpoint Craft Ales
2011 was definitely a breakout year for canned craft beer, although the move into the metal package has been on the rise since 2009, when Charlie Papazian, president of the craft beer trade group the Brewers’ Association, noted that the number of craft breweries canning their beer was just 52. Craftcans.com, a website that tracks craft beer in cans puts the current number at 148. And not a single craft brewer transitioned into the package better than Brooklyn’s Sixpoint. In May, the company capitalized on growing awareness of the brand by announcing it would be expanding from a draught-only distribution model to 16 oz. cans. With sleek graphics, detailed design and an excellent price point, Sixpoint has quickly become a standout on the shelf.

8. Best Collaboration:
Baird/Ishi/Stone Green Tea IPA
It’s no secret that craft brewers love working together and 2011 certainly saw its fair share of collaborations. But these mashups can be tricky: they often end up turning into a competition to see who can brew with the most unique ingredients. Nobody bridged the gap better — and for a better reason — than Stone Brewing Co., which teamed up with Bryan Baird (Baird Brewing Company, Numazu, Japan) and Toshi Ishii (Ishii Brewing Co., Guam) to brew a one-time beer for tsunami relief. Sencha, a variety of whole leaf Japanese green tea, was used in the dry hopping phase. The brewers also experimented with lesser-known hop varieties to create an incredibly quaffable 9.2 percent IPA. All $64,000 generated from sales of the beer benefited the Japanese Red Cross Society.

7. Best New IPA/Double IPA:
21st Amendment Hop Crisis
As IPAs passed Pale Ales earlier this year to become the country’s most popular year-round style, ranking second in dollar sales only to craft seasonals, it’s quite clear that consumers are craving more and more IBU’s. That means more brewers are doubling down on Double IPAs. The newest beer to enter the Double IPA category arrives by way of Nico Freccia and Shaun O’Sullivan at 21st Amendment. Hop Crisis boasts 94 IBU’s, and it’s noticeable. And at 9.7 percent, only a handful of other beers in the category have a higher ABV. Hop Crisis stands out on the shelf, too — 21st Amendment is consistently referenced as a leader in design and packaging amongst craft brewers.

6. Biggest Beer Headline:
Goose Island Acquired by
Anheuser-Busch
The Goose dropped a bomb on the industry just as folks were settling back in from an inspiring Craft Brewers Conference in March. Goose founder John Hall described the sale as more of a partnership, allowing Goose Island to grow and continue to develop new beer styles. As the news spread, the craft beer blogosphere reacted with fury — but while beer geeks may have been upset with the sale, the deal set an important precedent for future craft acquisitions.

5. Emerging Trend:
‘Session’ Beers
Though the trend towards higher ABVs certainly isn’t going away anytime soon, some brewers challenged that in 2011 with ‘session’ offerings. Massachusetts start-up Notch Brewing, for example, is brewing nothing but full-flavored beers under 4.5 percent ABV. Other breweries continue to release new session offerings and even re-brand existing beers under the ‘session’ moniker. Most recently, Shmaltz Brewing announced that, going forward, Hebrew Genesis would be described as a dry hopped session ale.

4. Best Growth Year:
Ninkasi Brewing
Ninkasi’s growth was well-documented in 2011, even in industry conference calls. Just eight months into the year, the brewery was the leading craft beer vendor for new product dollar sales, according to Symphony/IRI data. Ninkasi will finish the year brewing over 57,000 barrels, 26,000 more than 2010, and flagship offering Total Domination IPA was up over 50 percent on draught. The brewery also introduced a seasonal box set of four 22 oz. bottles, as well as two new packaged beer selections. The company is outpacing New Belgium for growth through the first 5 years in business, and accomplishing all that growth in its existing markets (AK, OR, WA, ID and San Francisco, CA).

3. Breakout Brewery:
Sun King Brewing
If you hadn’t heard of Sun King Brewing before the Great American Beer Fest, you certainly found out about it after. The brewery took home an impressive eight GABF award medals – four of which were gold.

2. Best New Brewery:
Baxter Brewing
No startup brewery in the country has experienced instant success quite like Baxter Brewing. Founder and President Luke Livingston launched the brand into Maine markets in January and the company is on pace to brew over 5,000 barrels of beer in its first calendar year. Baxter Brewing brewed, packaged and shipped two styles of beer throughout Maine and also entered Massachusetts in August. Livingston said he plans to enter New Hampshire and Vermont in 2012.

1. Person of the Year:
Greg Koch, Stone Brewing Co.
Nobody in craft beer was busier this year than CEO and Co-Founder of Stone Brewing Greg Koch. Koch co-authored a book, announced $26.6 million in expansion plans that include two new locations and a hotel, and picked up an Ernst and Young Entrepreneur of the Year Award in the process. Koch did all of this while continuing to remain environmentally conscious. He drives a Chevy Volt, thinks locally while growing globally and never stops advocating against ‘fizzy yellow beer.’ Cheers to 15 years in business, Greg.

I didn’t start this talk. Mike Kirban brought it up, for one, and the Kombucha folks have been talking about it since at least the middle of last year. Heck, many of the industry stalwarts like Coke and Pepsi have worked on it themselves in one guise or another.

But I’m going to mention it here, and ask, right away, what you think about it yourselves.

What am I talking about? The standardization of industry norms and best practices for emerging beverage categories.

Kirban, the CEO of Vita Coco, brought it up at BevNET Live in Santa Monica, discussing it as a way to hedge against consumer confusion and disappointment regarding coconut water. And while Kirban undeniably has a dog in the fight – his chief competitor uses a product made from concentrate, while he uses pure juice – the fact is that there’s still enough noise around coconut water’s signal properties and attributes, as well as enough new entries into the category, that it would be good for the industry to officially define what it is and what it does before anyone else does it for them.

The most compelling reason for this is that industry standards and practices often form the framework for what regulatory agencies adopt. If you build good bones, then even when the government arrives – and it will, and there’s no reason it shouldn’t – the structure it builds around those bones will help support it, rather than try to knock it down and start the whole thing all over again.

Certainly, the Kombucha business has been negatively affected by the lack of standardized practices. While the bifurcation of products into above and below .05 percent alcohol has kept a repeat of the Summer of 2010 at bay, it’s going to take just a couple of rogue fermented bottles on the Whole Foods shelf to knock all of the producers back to square one again. The best defense against that is a shared set of standards that the industry can compare with individual product lines during that kind of emergency situation.

For functional products, which are already entering into a landscape with boundaries formed by the Food and Drug Administration and the Federal Trade Commission, many of the standards are already in place, but there’s still potential for self-policing to work. Products that are supposed to produce certain effects can use scientific study to indicate efficacious dosage minimums on their own. Again, when the government comes knocking, the standards of the science you’re using are going to be evaluated and it’s better to talk to the lawyers now, from an inoculation standpoint, then later, when you’re trying to figure out what parts of the body you can save.

These kinds of ideas aren’t radical. As I said, big food companies have longstanding best practices for advertising claims, ingredient standards, packaging and safety. Some of them were adopted under pressure from the outside, some came internally. As they’ve grown, they’ve found increasing need for lobbying arms, industry-based media campaigns, and increasing knowledge about where companies can work together and where the rifts are the result of competition.

Knowing where those rifts lie is a good problem to have. Lots of the companies we write about and speak with talk of growing categories as much as they do of growing brands. There are ways to do that from a firm base – best practices can help establish a significant part of that base.

At the entrepreneurial level, there have been a few attempts at best practices. In the past, Yerba Mate companies have met regularly to discuss issues, but they are the exception. Most of the best practices are attribute-based – fair trade and organic groups operate under their own certification mandates, as do carbon offset rating agencies. Those examples clearly illustrate places where government oversight has been largely determined by industry practices; but as of today, in most emerging beverage categories, there has not been enough pooled research or definition of goals to help communicate those messages to consumers or regulators. From a sales standpoint, it shows a clear lack of vision; from an intervention standpoint, it’s just plain dangerous.

At least, that’s how I see it. How many of you would work with others in your evolving product categories to establish or discuss standards? How many retailers and distributors would feel more comfortable selling products that come from at least a minimal level of industry oversight? How many of you believe that you should all hang together, or else run the risk of hanging separately? Let us know what you think.

In 2011 Kirban thought big, ramped up the company’s marketing approach to a national program while transitioning distribution in several major markets from independents to the Dr Pepper Snapple system. He also managed to play it fairly safe: while the company obviously spent money on marketing initiatives and distribution buyouts, it did so with an eye toward keeping the brand moving steadily toward becoming a national brand.

With a low key, no-drama approach, Kirban has changed the type of business he has run from one that chases accounts up and down the street to one that chases high-profile new hires and national billboard contracts. That development of a long range outlook was on display during BevNET Live, where Kirban followed the acceptance of his award with an interview with BevNET founder John Craven, which is posted below.

“2011 was total insanity,” Kirban said. “It was a great year. We saw over 100 percent growth and for the seventh consecutive year – it was amazing, coming from a pretty substantial base which was in 2010.”

Certainly, 2011 was not all roses for Vita Coco – the company’s pickup of Yankee slugger Alex Rodriguez as a Manhattan-based spokesman brought with it a slight PR blowback, as A-Rod had previously invested in rival Zico. Rather than get upset, however, Kirban simply moved forward with the understanding that the slugger is much more of a known quantity than any insider-y intrigue. Indeed, what is more impressive is the way Kirban turned supply problems that beset the company in 2010 into a steady supply of product in 2011, turning what could have been a major disruption into a hiccup.

“We had some pretty big highs and some interesting lows throughout the year,” Kirban said. “We started the year with some inventory issues early on left over from 2010, and as supply started to really ramp up we focused on our core markets and launched an ad campaign. We decided to go big. We decided to go big in our core markets to really separate from what was becoming a crowded category.”

Watch  the full interview in the following video to hear Kirban discuss more on Vita Coco’s big year, and get his take on the category with regard to supply chain issues, standardized labeling for coconut water brands, and what he called the “future bastardization of pure coconut water.”

Video editing by Joshua Pratt.

It’s probably unfair to name names.

Oh well. In the interest of showing how far things have come in the post-Vitaminwater world – and in the interest of having a little fun, (and also highlighting the war on punctuation and spelling that the category we’re about to talk about engendered,)  let’s name a few anyway:

There was IQH20. There was Speedo Sportswater. There were also Water +, Vital Lifestyle Water,  Activwater, and  Clearly Canadian Natural Enhanced
Water: Blueberry (dailyVITAMIN). There was Jones 24C Multi-Vitamin Enhanced Water.

When it comes to Vitaminwater me-toos, there were a lot, and a lot of bad ones, okay? And, as a result, distributors and retailers are still pretty wary of brands that come to them with the idea of mixing up a bit of sugar, a few potentially functional elements and a relatively interesting bottle, and calling it a name with weird punctuation and phonetic spelling.

It’s easy to understand why folks wanted to knock off Vitaminwater. From a marketing, sales, and branding perspective, the company had it going on – even now, despite the derisive comments by some that Coke might have overpaid for the brand and its $4.1 billion price tag, it’s hard to dispute that the Glaceau stable of brands has become a major sales producer for its new owner. Between Vitaminwater, Vitaminwater Zero and Smartwater, Coke pulled in $1.2 billion in sales last year alone, according to channels covered by symphony/IRI – and that’s not counting a small retail chain called Wal-Mart.

But what the brand pioneered – the grow-until-you-get-bought phenomenon that put profitability second to expanded reach – left a hard-to-swallow legacy for distributors and investors, and they’re not necessarily willing to put their money behind the next functional product that comes along.

Particularly, they say, since the public largely understands that despite Vitaminwater’s much-advertised use of a variety of commonly-occurring vitamins as part of its formulations, it’s largely accepted that the product isn’t going to do much in terms of making consumers healthier. While the product still has great taste and branding going for it, when it comes to functionality, for a new product to break out as a functional brand, many industry insiders believe that it’s going to have to break the mold.

And with most of the me-toos finally fading into memory, marketers are once again making the argument that they can do it.

“People are tired of the pixie dust phenomenon,” said Carl Sweat, the CEO of FRS, which aims to supply some of that true functionality through the fitness-oriented extract quercetin. “Consumers are deciding they want something stronger.”

Sweat, himself a former Coke employee, has seen the obstacles left in the wake of Vitaminwater’s unfulfilled physiological promise. While he said he believes that the brand’s combination of taste and packaging leave it unassailable in its category, Sweat and other brand owners seem to be motivated by a belief that they have found a new generation of functional beverages that are actually able to back up the claims they make on the label. The market is there, as well, with functional beverage products expected to reach nearly $10 billion by 2014, according to the findings of a 2010 Mintel International study. While that would represent a mild increase of about $1 billion from 2009, it’s a bump that could theoretically be filled by a handful of strong, emerging brands. A runaway hit could easily overwhelm those expectations. But the time has to be right.

“If we’d launched ten years ago, it would have been confusing to the public,” said Paul Nadel, the President of Neuro Beverage, which claims to offer an “operating system” for life through enhanced beverages. “We’ve have been accused of being a me-too. And now, I think people think of Vitaminwater as a good tasting beverage – they don’t really think of it as a healthy beverage or a functional beverage.”

So rather than try to emulate Vitaminwater, this next generation has made it a priority to move away from the brand. The next generation of functional brands distinguishes itself by trying to present a scientific case for its products’ efficacy. They provide megadoses of  vitamins and other compounds where once a simple Recommended Daily Intake (RDI) might have sufficed, introducing new elements whose presence can be quickly felt in the body. They even make an argument for better performing packaging styles, all while still attempting to show creativity and good taste.

“Our bottle design, our structure/function claims, the advertising we’re doing, we’re trying to separate ourselves from that group,” of ‘me-too’ brands, Nadel said. “Clearly, we have to separate and distance ourselves from them.”
And for some of them, the investors and the distributors have started to re-appear, ready to move on and take a chance. The question is, are consumers emerging from the Vitaminwater era ready to move on, as well?

“There are so many products that have gone through their life cycle where the more consumers find out the brand, the less they like it,” says C.J. Rapp, the founder of “mix-to-drink” Karma Water, which, like a growing cadre of products, uses a cap dispenser to push vitamins into a water bottle.

If consumers are indeed interested in moving on, a front line of products is beginning to form by strength of the experienced hands and deep pockets that are powering their operations, but also by presenting brand arguments that do indeed seem to differentiate the products from the crowd of fallen me-toos. It’s an interesting group because none of them have yet broken out, and there are formats that range from single functional plays to brands that offer multiple SKUs as an “operating system” for a consumer’s life. Some are vitamin-based, while others rely on caffeine or other stimulants to drive home instant effects.

What is certain here is that success for these brands is by no means certain – it’s sort of an “if-then” statement on time and momentum that  will eventually determine if a new category has emerged from the long shadow of Vitaminwater’s  apothecary bottle. But if it does, here’s what new product makers are gambling on:

1. Better Payloads
Recently, Sweat and his old friend Lance Collins, who started Fuze and is now grabbing distributors’ attention through his next-generation “Super Drink” Body Armor, chatted at a trade show booth, daring each other to try to up the protein contents of upcoming line extensions.

The message was clear: more is better.

“You’re going to try 25 grams of protein?” Sweat dared Collins. “Do you want to do the over/under for how many batches you throw out in a year?”

It’s a dare that illustrates the challenge for functional beverage makers: Because so many of them are gambling that the public will no longer settle for the perceived weak functionality of Vitaminwater, they have to improve the quality of what their products deliver.

Hence Collins’ “kitchen sink” approach of providing – in one drink – electrolytes (including some from coconut water), vitamins, fiber, “fat-burning” tea extracts like EGCG, energy elements like caffeine, and focus products like L-Theanine. Other potential products on the board include a “super-slim” line along with the just-mentioned protein-enhanced drink.

“There are a lot of good things in here,” Collins said.

With his experience in bringing Fuze to the market in the early days of the New Age beverage movement, Collins combines an inventor’s mindset with the ability to get things done. But having all of the ingredients at once is only one approach. Another, taken by FRS, is to have one key ingredient as the building block for a brand.

FRS, which uses the plant-derived flavonoid quercetin as the key metabolic ingredient in its product line, is based on the premise that the product can provide consumers extra energy for performance.

“Consumers have decided it’s the one thing they feel strongly about,” Sweat said. “It’s got to be strong enough to make a difference.”

2. Better sweeteners and flavors to hide the payload
While there’s no doubt that Vitaminwater Zero – as well as chief competitor SoBe Lifewater – has been able to take advantage of the momentum and distribution advantages provided by Coke, some marketers point to stevia and other sweetener developments as a kind of new starting point for brands that are able to come up with formulations that will appease calorie-conscious consumers.

“The Zero part of the brand is the only part of Vitaminwater that’s really growing,” points out Ben Weiss, the founder of coffee fruit-based Bai beverages. “I think that the use of stevia delivers the flavor without the off-notes, and people will opt for higher functionality, higher antioxidant counts, if the flavors are equivalent.”

Adds Sweat, “You can dial back nutritionals and the other things that affect your taste profile, or you can spend a lot of time at the [research] bench and really mask them well. But the high water mark is when there is no taste penalty.”

3. Cool, functional packaging that holds the payload
Mikel Anderson can’t contain his excitement. The developer of more than 1200 styles of caps that consumers can twist, turn, punch, pull, squeeze, or otherwise manipulate in myriad other ways believes that the time of the dispensing cap has come.

“It’s going to be a tidal wave in the next three to five years,” Anderson said. “The story is finally starting to be told and realized.”

But strangely enough, Anderson’s excitement has been generated through a product he hasn’t even worked with: Activate Drinks, a California-based product that is the first to widely market a “dispensing cap” as a way to drop a mixture of vitamins and other healthy ingredients into a bottle of plain water – without having to use a hot-fill process that can cause those ingredients’ effectiveness to degrade.

“Finally, people are starting to take the chance, and daring,” Anderson said. “They see the Tata investment in Activate, and Karma is coming around out there, and it’s not just America. The entire world is looking at these caps. Something dramatic has happened.”

Over the last three years, Activate has indeed been able to leverage more than $20 million in investment from Indian conglomerate Tata, as well as the distribution connections of CEO Dan Holland, to build a large West Coast footprint that is heading national.

To date, the Activate brand has, along with newcomer Neuro and longtime online-stalwart FRS, been one of the leading brands in terms of growing retail sales for the emerging generation of functional products. With a deal in place with Coast Brands Group and a growing number of chain buyers willing to explore the possibility that “mix to drink” might be the wave of the future, Activate has taken the dispenser cap and helped cobble it into a concrete category.

But problems remain for Activate, as well as its emerging group of cap-oriented competitors, including Rapp’s Karma Water and V-Blast, which dispenses a liquid solution instead of a dry one. The key stumbling blocks? Consumer education about how to use the caps, as well as the notion that, for some consumers, the products may be too similar to Vitaminwater in terms of what they promise.

“We understand there’s a huge educational gap to overcome relating to dispensing caps,” says Rapp, whose product attempts to mix the freshness advantage of cap dispensing with a mega-dose of seven different vitamins.

The solution to the second problem is what will also fix the first, Rapp adds. Once consumers feel the effects of the vitamins in their non-degraded form, he argues, they will be more inclined to accept the package that keeps them from degrading.

“Once people understand it and start to be educated, that hot fill is boiled and the enzymes are dead, the sugar is added, and the product is only what they add back in, they’re going to say they don’t want this anymore,” Anderson said. “The biggest obstacle has been the consumer understanding what the process is for [hot-filled] beverages. It really still hasn’t been explained, but the eyes are open and the ears are listening loud and clear.”

4. Immediate Effects
Also working from an efficacy-enhancing standpoint is Neuro, a cold-filled product that is fast becoming a standard-bearer for a wave of brands that use short- and medium-term functional effects to indicate that their ingredients are working.

Rather than provide an alternative to Vitaminwater, said Neuro’s Nadel, the real functional product to which Neuro tries to compare itself is the energy drink Red Bull.

“People felt that drink’s efficacy immediately,” he said. “It changed my paradigm. Initially, at the very inception of the brand, the focus was to find a healthy alternative to an energy drink. But beyond that, as we continued to develop, our research team decided to try to do things that would work.”

To that end, most of the Neuro line – Trim, Gasm, Bliss, Sleep and Sonic among them – have strong enough doses to elicit physiological effects that include fullness (through fiber), relaxation or sleep (through L-Theanine or melatonin), and focus or excitement (caffeine, more L-Theanine, B-Vitamins). Nadel said the products use an intentionally powerful mix of ingredients. While not all drinkers are going to feel all effects (and Gasm may be a bit of a functional reach), the idea is clear.

“If you get a consumer who tries one and it works, like Sleep, they say, what else can I try?” Nadel said. “If just one works, it builds credibility.”

Credibility is a hard word when dealing with products that promise different effects. It’s been the hard work of functional products – particularly those that offer the so-called “long-lead” effects promised by, say, cancer-fighting antioxidants – to prove out that credibility.

Still, the potential for at least one key function – money-making ability – continues to drive many of the products mentioned above onto store shelves. Each of them – Neuro, Activate, FRS, as well as newer products like Bai, Karma Water, and Body Armor – and others, like Vitaminwater-era survivor Function and leading relaxation brand Marley – have managed to grab large chunks of distributor territory in the past year, verging on national footprints. The promised shelves of chain accounts are beginning to beckon, offering the ultimate promise for enhanced beverages: enhanced profits. Will they all feel the effects? In this case, the answer “me too” might not be such a bad one.

It isn’t a premium beer situation, where Bud Light and Miller Lite are leading their flagship brands in sales and distribution, but as the energy drink category matures – and its cohort matures with it –the low-calorie options are outpacing their line-mates.

Recent shopper analysis by AC Nielsen in grocery and convenience channels indicates that this year, sugar-free and low-calorie products have nearly doubled the pace of growth of core brands nationwide, 29 percent to 16 percent.  While sales of the top three brands (Rockstar, Monster, and Red Bull) are still heavily weighted toward full-calorie products, lighter line extensions are becoming key parts of the portfolio. Driving the trend are an overall lightening of calorie profiles across categories, as well as the tiny caloric but ever-growing sales footprint of the energy shot.

For Rockstar, the argument could easily be made that without its diet lines, the brand would be a nonentity – fully 48 percent of its sales this year can be attributed to its sugar-free and zero-carb lines, while its hot “recovery” line (which is now up to three flavors) also has only 10 calories per serving.

Monster (19 percent) and Red Bull (24 percent) both have lower percentage volume of sales from their diet offerings. But they are trying to juice the mix themselves. Recent introductions from Rockstar (Recovery, Xdurance) and Monster (Absolute Zero, Rehab) have extended the trend – they aren’t even introduced with full-calorie versions. Despite rumors that it would be re-branding Red Bull Sugar Free as Red Bull Zero, a company representative said that new launches would be in addition to its existing SKUs — although he also made it clear that the company agreed that consumers are searching for zero calorie, zero carbohydrate options.    At 24 percent, Red Bull’s share of sales through diet has held steady over the past two years, while it has grown for other brands.

One great example of this, of course, is Xyience, which has gradually locked down shelves as a purely calorie-free alternative to other brands. Recent news of Xyience’s extended presence in certain Costco outlets further solidifies its growing presence as a force to be reckoned with. Its “never-had-it-never-will” approach to sugar may have hampered it at the start, but as the overall trend moves toward zero-calorie product, Xyience is well-positioned to take advantage and grow share.

Also helping the trend along are innovations in flavor technology. While energy drinks companies have been slower than other product categories to pick up Stevia as a sweetener, their brash taste profiles and fairly aggressive carbonation make artificial sweeteners easier to deploy. Xyience, for example began to gain share when it reworked many of its flavors.

Of course, the functional rush is a bit different without the sugar, but it seems to be a high that consumers aren’t as interested in chasing these days. In any category.

A LITTLE OVER A MONTH AGO, Ginseng UP, a company that produces a line of ginseng-laden carbonated soft drinks – and long believed by many to be one of dozens of businesses owned or controlled by the controversial Unification Church – issued a rather odd press release. The company announced that “after thirty years of popularity overseas” Ginseng UP was preparing for a full-scale national launch in the United States. However, the product, formulated and bottled in Worcester, Mass., has been sold throughout the United States since 1981.

In a series of interviews with Vish Ganpati, the president of Ginseng UP, BevNET learned that the brand was undergoing somewhat of a relaunch focused around an active and concerted effort to distribute the product nationally. But having been in existence for 30 years, one has to ask: why now? Ganpati explained that the company was looking to capitalize on growing consumer demand for healthy lifestyle and functional drinks. Fair enough, yet when asked about the Unification Church and its involvement in the brand, as well as if and how the Church prompted the relaunch, Ganpati had few answers.

Based on numerous media reports, it is clear that Ginseng UP had long been directly associated with Unification Church. The Church was founded by a Korean religious leader named Reverend Sun Myung Moon in 1954 and is known for a contentious interpretation of Christianity in which Rev. Moon is considered to be a Christ-like figure. Not surprisingly, the Unification Church is often vilified as a cult.

Cult or not, the Unification Church has owned or controlled many businesses in the past, including newspaper The Washington Times, fishing business True World Group, Inc., and, yes, Ginseng UP.

A public relations representative for the Unification Church, who spoke to BevNET on the condition of anonymity, stated that Ginseng UP was once owned by a holding company associated with the Unification Church. However, the representative went on to say that the holding company – which operates under the name “UCI” and was previously named “Unification Church International” – severed relations with the Church “several years ago.” He said that he could not pinpoint the exact year when the two organizations parted ways.

But the reason for the split is clearer, according to media reports: UCI is controlled by one of Rev. Moon’s sons, Hyun Jin (Preston) Moon. Preston Moon has been involved in public disputes, including lawsuits, with his family over the direction of UCI’s funding and profits in recent years.

But that still doesn’t explain why Ganpati claimed to know absolutely nothing about the company’s ownership prior to his arrival in May of 2010. Asked about that ownership, he said only that Ginseng UP is currently owned by “a small group.” Ganpati declined to give any further details, and stated, “I have zero to do with anything [related to] ownership.”

A report in the Bergen Country (NJ) Record was able to pinpoint an office for Ginseng UP that was located at the same address as an office of True World Group – but a True World Group representative told the paper that UCI didn’t own Ginseng UP, despite the common address.

Despite the shadows surrounding Ginseng UP’s ownership, the relaunch of the product has generated a considerable amount of interest, particularly at the recently-held Natural Products Expo East show in Baltimore. Ginseng UP was one of only a handful of products at the show using ginseng as the chief ingredient – one that has seen a steady rise in consumption among Americans over the last decade.

The perceived benefits of ginseng range from energy enhancement and stress relief to memory improvement and treatment of impotency. And similar to other Asian “superfoods” – like aloe vera and gingko biloba – that have slowly trickled into the United States over the last two decades, ginseng is now found in dozens of energy drinks, bagged tea blends, nutritional supplements, as well as highly popular ready-to-drink products like AriZona Green Tea and Starbucks Doubleshot.

Ganpati is betting that as mainstream awareness of ginseng continues to grow, so will Americans’ desire to consume larger quantities of ginseng – albeit in a more portable form.

“We’re finding openness, and pent-up demand for ingredients that consumers have heard of and read about,” Ganpati said. “Now, there are products – like Ginseng UP – that make these ingredients more accessible.”

Additionally, it is Ganpati’s belief that over the last 10 years, three specific health and wellness trends have led to dynamic change in Americans’ consumption habits and, in the process, paved the way for Ginseng UP’s entry into the U.S. market.

“First, there is a much larger market for functional drinks – it’s a huge demand driver,” Ganpati said. “Second, there is far greater awareness and acceptance of beneficial ingredients, like ginseng. And lastly, consumers are gravitating toward products that offer added health benefits. It’s not just what you keep out of your body – it’s now much more important about what you take in.”

And for a product that he described as “the intersection of functional, health, and well-being,” Ganpati believes that Ginseng UP is primed for success in both mainstream and natural foods channels.

As part of the brand’s relaunch, Ginseng UP has designed new contemporary labels etched with the tagline: “The Root of All Power.” Additionally, Ganpati said that company will promote the Ginseng UP through partnerships with “healthy lifestyle” organizations and utilize mainstream video marketing as means of consumer education and exposure about ginseng and the brand.

“We [want to] give consumers two good reasons to choose Ginseng UP: the taste, and the feeling you’re doing something really good for yourself with every sip,” he said.

Ginseng UP is currently sold in metro New York, New Jersey, eastern Connecticut and southern Florida. The product comes in 12 flavors and is sold in single serve 12 oz. bottles for between $1.19 and $1.29 and in 4-packs for between $4.69 and $4.89. While UNFI currently handles distribution of Ginseng UP within the natural foods channel, Ganpati said that the company hopes to go national through Walgreens, where the product is already authorized for sale in its Florida locations.

Where the profits might eventually go, however, appears to be anybody’s guess.

WHEN BARQ’S LAUNCHED its Soviet Union Going Out of Business sale, it set the industry on its ear and generated worldwide publicity for what would turn out to be the only organized celebration of the end of the Cold War.  It generated an eye-popping 30 percent sales increase — but not for the reasons most folks think.

We launched the sale within days of the collapse of Soviet Communism.  The offer was simple: send in proofs-of-purchase from specially-marked 12-pack and 2 L bottles of Barq’s and receive an otherwise unobtainable collection of genuine USSR-era memorabilia. So otherwise unobtainable was it that I would need to go to Moscow to personally find and select it, and that’s a whole other story.  It would be an adventure to say the least.

The announcement was carried by the global news media and generated enormous enthusiasm by Barq’s bottlers eager to get on board to make history themselves.

As a beverage marketer, you should pay attention to this event as a case study. It satisfied consumers and trade customers – the two major constituents a beverage marketer has to serve daily. For the distributor and retail trade, you must provide competitive pricing and margins, periodic promotional incentives and support for their go-to-market agenda. But the trade asks that of everyone – and given the trade’s (understandable) impulse to put its agenda ahead of yours, it is difficult to distinguish your items from everyone else’s.

For consumers, you offer important benefits that include fulfillment of refreshment needs, variety and pricing that represents value, but repeat business comes only once consumers appreciate a unique product benefit.  Keep in mind that it is important to distinguish benefits vs. attributes.  Benefits, simply put, are a function of what the product does for the consumer, vs. what it is. Consumers do not want a ¼” drill; they want a ¼” hole.

Beverage products are all consumed because they provide sensory and physiological benefits: refreshment, nutrient intake, and satisfaction of flavor cravings.   Most brands offer these benefits, but unless they’re designed to provide more than that, it’s a pretty typical set of product characteristics.  The trade understands this and, until you show them otherwise, they will treat your items as commodities.

Still, you’ll get your chance to impress. The good news is that because of an onslaught of new product entries and channel choices – occasioned by historically low barriers to industry entry – beverage consumers are increasingly on a continuous trial curve and are willing and able to try new beverages when and where they become available.  On the other hand, brand loyalty is eroding in favor of impulse stimuli offered by new (or newly discovered) value propositions, unique flavors, new benefit claims and price incentives.

The vast majority of new beverage trial occurs at the individual consumer level, typically via single-serve, cold bottle purchases for immediate consumption.  Products enjoyed in this manner can lead to repeat purchases and ultimately to multi-pack take home buying, but only if the product makes its case in the midst of the flood of competition. The bottom line of all this traffic means that products have a tough time jumping off the shelf and so stay there.  Brands that make news and make waves get the attention and take the leap.

To make that happen, you need a two-edged sword: you have to energize both the trade and the consumer simultaneously.  Consumer-only appeals seldom work, mainly because there is an inadequate effort made to build up retail inventories and visibility. Trade-only programs may create a week or two of display or feature, but are almost always price-centric alone and do nothing to distinguish the brand.

Go for both parties at the same time. Generate excitement in the trade among consumers. Regardless of their age, brands benefit from taking the perspective that they’re still new and untried by most consumers.  The types of news-making programs often used to launch new brands works for old brands as well so long as new news is offered.

That was the logic behind announcing Barq’s Soviet Union Going Out of Business sale. We executed quickly and the announcement was carried by the global news media; it also generated enormous enthusiasm by Barq’s bottlers eager to get on board to make history themselves.

The only catch was that the vast majority of Barq’s bottlers did not produce or distribute the brand in 12-packs or 2 Liter bottles.  Barq’s was basically a 6-pack brand that seldom took part in retail promotions invariably built around these key promotional packages. Truth is, the entire promotion was launched as the incentive for them to get Barq’s into promotional packaging and thus let the brand join the big leagues. Almost all bottlers did.  The promotion went on to win the PMAA Super Reggie Award, Clio recognition, AdAge’s Top 100 Marketer status and included in the soft drink industry’s list of top 100 events in the preceding 100 years.  But the real win was getting the brand into the bottlers’ and retailers’ promotional sets forever forward.

Look at your go-to-market activities as a double-edged sword with a trade and consumer edge and look far upstream of consumers for real opportunities.  Don’t expect products to jump off the shelf unless you give them a push by inducing the trade not only to just include, but also to rely upon your brand to lead an off-shelf promotional agenda.  Being “Me Too” is bad anywhere and anytime.   It is really awful in the promotional space.

It’s equally awful if your packaging is generic, not promotion-friendly and fails to distinguish itself.  Barq’s was the first to be available in a remarkable silver, unpainted can. Its quirky graphics were a package designer’s nightmare, but served to set it apart from its oh-so-polished competition.

Choose your advertising and promotional partners with boldness.  Barq’s focused on MTV and Headbanging to attract an equally non-traditional target market of 12-24 year old guys.  Barq’s sponsored the launch of Beavis & Butthead since no one else would.  Barq’s tied in with Freddie Kruger slasher flicks for the same reason.  Barq’s launched in Manhattan with posters plastered everywhere, despite it being at best a quasi-legal activity.

A side benefit to breaking out of the mainstream is that you can substitute the power of a great idea for big budgets.  The Soviet Union prize pool cost under $80,000 and Gorbachev got zero dollars for appearing in the ads.  Barq’s was in a (solo) buyer’s market for edgy advertising media and promotional properties.

You need to be different and interesting to jump off the shelf. And when you jump, make sure you bring your parachute and your two-edged sword.

Rick Hill, a longtime beverage marketer, is the Founder & CEO of BrandHeat Marketing

IT’S BECOME ONE OF THE MORE overused words in the marketing lexicon: authentic. Yet there’s no denying that many consumers are looking to support brands that don’t seem to have been fabricated in a corporate conference room, that have something real about them – whether the persona of their founders, their local provenance or their retrieval of an age-old tradition – that might seem to help ground the users’ own existence. In beverages, how does it apply?

The New York Times offered an intriguing take on authenticity a few weeks ago, noting how the word lately is so often used by politicians, celebrities, social media coaches and college admissions advisers as to be approaching meaninglessness. “What you can’t do is be told by a social media guru to act authentic and still be authentic,” Jeff Pooley, a media and communications professor at Muhlenberg College, told the paper. He said authenticity today is more accurately described as “calculated authenticity” — “stage management” is how the Times paraphrased it.

I like “stage management,” because that’s generally what we’re talking about when discussing beverage brands as authentic. To me, a lot of it comes down to having a memorable reasonably true story behind the brand, and sticking to that story reasonably consistently as things develop. I like to refer to these origin stories as “creation myths,” (though “myth” often gets me in trouble with brand founders who phone me to complain – although at least a few of them made it up, and you know who you are!) But I mean the phrase more in an archetypal sense, as a compelling story upon which consumers can hang their perceptions, emotions and disposable incomes.

The process seems most straightforward for the craft beer category, where it’s sometimes sufficient just to have a genuine passion for brewing and a willingness to experiment. That story has been retold, oh, about 2,000 times lately as craft breweries have proliferated. Consumers clearly like hearing it, but for craft brewers the task of being authentic has also gotten less complicated — after all, during the 1990s craft boom, quasi-religious wars were waged between microbrewers who produced their own suds and contract brewers like Sam Adams and Pete’s Wicked Ale who were attacked as inauthentic for relying on others for the bulk of their production needs. That issue has nearly dissipated, with the market accepting Sam Adams founder Jim Koch’s old rejoinder: “If Julia Child comes to your kitchen and cooks a great dinner, is it your dinner or Julia Child’s?” Even the identity of Blue Moon as a Coors brand or the acquisition of Goose Island by Anheuser-Busch don’t seem to have unduly upset the perception of those brands as authentic.

It gets murkier on the non-alcoholic side, where the opportunities for hands-on craftsmanship and differentiation are fewer and there’s a more established tradition of snake oil salesmanship. Those factors seem to put an even higher premium on having an effective creation myth. But it doesn’t have to be a brand new myth for every new brand.

What are some compelling tropes? One is the Everyman who doesn’t like the choices in a given segment and creates a better alternative – Darius Bikoff, for instance, rummaging for bottled water in Manhattan when his water was cut off and having the insight that led to the creation of Smartwater. A particularly endearing subset of this myth is the parent – moms work best – who detests the horrid beverage choices available to her children and sets out to create a healthier one right in the kitchen. That sonata has been played with wonderful rubato flourishes by a long list of entrepreneurs, lately including Hint water creator Kara Goldin.

Another is the intrepid seeker who treks to the far reaches of, say, the Amazon rainforest, to bring back healthful superfruits or herbs that can be bottled for the American public, often simultaneously empowering and enriching the indigenous people who grow and harvest the plants. The founders of brands like Sambazon acai and Guayaki yerba mate have skillfully heralded that role, and the combination of adventure, exoticism and uplift seems really appealing to a lot of consumers.

If you can harness a strong creation myth like one of those, it can give you a great leg up. But there are some corollaries: For one, you need to capture that story at the outset, rather than trying to graft a good story onto your brand down the line. That seems to have been a flaw in the plan of the otherwise well-crafted New Leaf Tea, which years into its existence strained to add instant personality via such unconvincing efforts as proclaiming itself “the official tea of taste” and having its employees strut around its trade show booths in referee shirts.

Also, consistency matters. If you’re buying a brand where the founder is at the center of your creation myth, then it helps to keep that founder around for a while, even once most of the real work migrates to professional managers. Coca-Cola has been smart to keep Honest Tea founder Seth Goldman in the mix — I wouldn’t be surprised if down the road, once the brand is fully established, the company doesn’t offer Goldman a broader role where his “brand” can authenticate other Coke moves toward healthier, sustainable products. By contrast, the departure of Clayton Christopher – who famously brewed his first batches of Sweet Leaf Tea from his grandmother’s recipe using pillowcases as giant teabags – from the now-Nestle Waters-owned brand may rob it of some of its down-home mojo. Nevertheless, NWNA has shown consistent mastery at taking purified municipal water and wrapping it in brands that represent a seemingly infinite series of pastoral springs, parks and mountains, so as Christopher’s “Granny” goes national, it’ll be interesting to see how the trip treats her.

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.

IF YOU WERE LOOKING FOR the next big trend in craft beer at the Great American Beer Festival, you had a lot of choices.

With so many styles being poured and more breweries than ever participating, drawing a single conclusion isn’t in the cards.

So let’s start with what we know, instead.

2011 has been the year of cans. More and more breweries have adopted the package as a legitimate way to get product to the consumer. Take a quick look at the brewery that took home the most awards at this year’s GABF competition – Sun King Brewing – and it’s apparent that the trend is here to stay.

But let’s face it – consumers are looking for more than just a pretty package. So what else should you pay attention to? Here are 7 things to look for before next year’s fest.

The beers gone sour
While so called sour beers may not be the new IPA, they are increasingly becoming an important part of the market. 80 sour offerings were available for tasting at this year’s GABF, and there are now five categories brewers can choose to enter their sour beers for judging.

If you need more proof that sour beers are catching on, look no further than Avery Brewing, whose barrel room has swelled to over 250 barrels, 100 more than last year. The brewery also shipped 620 cases of sour beer in 2011, up from the 97 they shipped in 2010.

Joe Osborne, Marketing Director for Avery, attributes much of the interest in the category to the style’s ability to pair with food.

“It’s such a unique offering and its finding this presence with foodies,” he said. “I think you are going to see more brewers get into sours.”

Beer and Food Pairings are ‘trendy’
Foodies, chefs and craft beer experts already agree that beer pairs with food better than most wines. Now, it is becoming even more obvious that the consumer is actually seeking out beers that they can take home to pair with their meals.

The Brewer’s Association already puts on SAVOR – an American craft beer and food experience – once a year, after recognizing consumer demand for more pairings. The association added two similar programs at GABF. Nine different pairing options were available at the Beer and Food Pavilion while over in the Farm to Table area, 11 gourmet chefs from around the country prepared dishes to pair with 12 different breweries beers.

More recently, at the NBWA conference in Las Vegas, beer industry retailing consultant Bump Williams discussed the growing trend with a room full of distributors. In the discussion, Williams advocated for more secondary beer
placements in the cheese departments of high-end grocers.

Leading the “I.P.wAy”
It wasn’t long ago that your average craft beer drinker chose a pale ale as their ‘go-to’ choice for off-premise consumption.

The industry has since trended towards higher ABV’s and the demand for hoppier styles has grown. The IPA category is on fire, with 253 IPA craft brands now selling in Supermarkets compared to 177 in 2010. This trend was remarkably evident at the GABF: nearly every brewery at the fest was pouring at least one IPA.

The consumer demand for IPA’s is at an all-time high and retailers should be dedicating significant shelf space to the category.

The big names can still bring it
If you thought historic and well-known brands like Boston Beer or Dogfish Head had lost their ‘snob appeal,’ think again. The Samuel Adams brand took home four medals, including a gold in the English-style IPA category. Dogfish Head took home just two medals, but for beers it originally released in 1999 and 2006. Deschutes, the country’s fifith-largest craft brewer, took home three medals while the nation’s third-largest brewer – New Belgium Brewing – won gold in the popular American-Style Sour Ale category for Le Terroir.

Anchor Brewing is an old dog, with no new tricks.
While Anchor is an iconic brand and has built a business on being reliable, it’s clear that the company clearly needs some resuscitating. The last time Anchor took home a medal was 1997, and although they stopped submitting entries to the GABF in the early 2000’s, the Brewer’s Association did confirm that they entered this year’s contest.

They weren’t pouring anything new or terribly exciting and nearly every time we walked by their beautifully constructed wood booth, there wasn’t much of a line. After its sales last year, the brand has done little to re-image a tired look that is losing favor amongst the youth.

The youth of the nation
While it’s hard to tell if the overwhelming amount of 20-somethings in the crowd attended to re-live their college kegger days (with better beer), or if they actually appreciate the artistry of the craft, it’s clear that the younger generation is certainly driving the recent success of craft beer.

“My first experience with the younger attendees was that they didn’t come there to learn about beer as much as they were to have a good time,” said MateVeza founder Jim Woods. “I am seeing a change in that and a lot of the younger generation is as educated as people who have been around the industry for a while. That is very refreshing to see.”

Pay Attention to Sun King Brewing
If you win eight medals at the GABF, you are doing something right. The boys at Sun King Brewing had a coming out party this year, taking home four gold medals, three silvers and a bronze. The victories alone should help an emerging brand that only started brewing in 2009 gain some serious recognition in the coming years.

52 Weeks Through 10/2/2011

Despite all the attention given to the category – new brands, lots of buzz – It’s still hard to draw any kind of meaningful insight about aloe drinks here, except for one distinct trend: that sales for the small category are up by almost 25 percent in the small number of brands that symphony/IRI is tracking here. With new entries and new popularity, however, expect to see a very different set of numbers this time next year.”

There was a two-to-seven-times greater likelihood of higher spending or consumption depending on the media encountered by the study group. The sales impact was most pervasive when social content was combined with other types of media such as PR, out-of-home and TV.

Additionally, out of over 20 channels studied, social content exposure was associated with the largest shift in brand perception during a 7-day period.

Despite these strong social content impact findings, consumers are seeing relatively little branded social content during their daily routine.  Only 24 percent of the study group reported exposure to social content, compared to a 69 percent exposure rate to TV ads.

According to Irfan Kamal, SVP Digital/Social, Ogilvy, “Much of the work to date has looked at direct channel impacts; for example, do direct clicks from a social media site result in sales? This study of restaurant consumers attempts to understand the more complex factors that lead to consumer purchase and perception changes. We found that in the real world, social content exposure – by itself and more broadly when combined with other types of media exposure such as out-of-home, PR or TV ads – is linked with a higher likelihood of consumption and actual spend increases. And, social content exposure alone is associated with the largest shift in week-to-week brand perception.”

Dr. Walter Carl, ChatThreads Founder and Chief Research Officer, added: “Because we captured detailed touchpoint data in the moment from the consumer’s point of view we were able to track day-to-day brand exposures and assess the complex interaction effects of the various media and marketing initiatives.”

After the state and city committed more than $2 million in funding and tax abatements, Coca-Cola committed to creating 40 full-time manufacturing jobs over five years, retaining 176 existing jobs and investing $39.4 million in the project. The company has already exceeded their obligations by creating 100 jobs and directing over $50 million towards the project’s completion.

As part of the facility’s $50 million investment, two cold-fill juice lines producing primarily Minute Maid products were added. The cold-fill project included all packaging, processing and infrastructure required to support the product line. Other facility improvements included a 13,000 square foot expansion and conversion of warehouse space to cold storage.

Coca-Cola in Northampton has been producing hot fill products (Powerade, Minute Maid) since 1995. From 2003-2010, the Company invested over $35 million to support the growth of the hot-fill business in Northampton. This investment has supported the production of many new products and packages including: Honest Tea, Fuze, Vitaminwater, Vitaminwater Zero and Gold Peak Tea. The Coca-Cola Northampton facility employees over 260 people.