By Jeffrey Klineman
A Bump in the Numbers – From Wal-Mart
For those of you who dream nightly about this kind of thing – and yes, the BevNET crew is part of that group, don’t you doubt it – we recently got some spectacular news. Symphony IRI Group, the company that provides our awesome brand sales data, has updated its information to include Wal-Mart.
This change in sales data offers us, this issue only, an opportunity to at least infer, by comparing 52-week periods – and acknowledging that they cover two 52-week periods separated by a 28-day month – the overall impact of Wal-Mart sales in many beverage categories. The new information also includes a few other, smaller channels, including military commissaries and what the company calls “select club and dollar retail chains,” which can affect some of the results.
It’s also worth noting that Symphony IRI is largely chain-focused – it’s hard for the organization to pick up many natural, specialty, and other incubation channels where so many smaller beverage companies debut or build share, or the up-and-down-the-street deli, mom-and-pop convenience, foodservice, or other retailers where local brands can build a presence. Whole Foods is included, but extrapolations from the small sample of Whole Foods’ 300 or so U.S. stores covered means phenomena growing in a few of that core retailers’ stores can escape the survey’s notice.
Finally, one area where Symphony IRI has an admitted point of confusion is its occasional inconsistency in rolling various SKUs into brand listings. Thus for some companies, an entire brand family will be listed in sales totals, while for others, SKUs have to be rolled together to give a complete picture. That doesn’t change regardless of outlet, however.
Those caveats aside, it’s an exciting development: for retailers, distributors, and the brands themselves, the new data set offers the ability to provide a more complete picture of their strength in key mainstream channels. But it also provides us this one-time opportunity to comparatively demonstrate the importance of Wal-Mart as a sales outlet for many leading brands.
Some channels are more strongly affected than others. We see, for example, that 5-Hour Energy sells nearly $200 million in product via Wal-Mart and the other included channels, comprising about 20 percent to its annual sales, and about 20 percent to the category overall. (It should be noted that 5-Hour Energy also has a long history of being popular in military commissaries).
The more diverse nature of the energy drink category leads to less of a bump in Wal-Mart, however: overall sales are about $8.1 billion in the channels that include the superstore, and $7.3 billion without it. Refrigerated juice sales show how much of an influence the company has had on that traditional grocery category, as nearly $1.5 billion more sales are added to that $ 6.5 billion category when Wal-Mart is rolled in – fully 30 percent more than sales without it. Bottled juices increase even more: from $5 billion to $7 billion, with shelf-stable staples like apple juice and cranberry juice accounting for nearly $1 billion in that difference alone.
This leads to some extreme comparisons: almost half of Sunny D’s sales appear to come from Wal-Mart (although the addition of dollar stores to the count may play a role with that brand as well), $324 million as opposed to $188 million. Less likely to be found, however, are entrepreneurial brands like Good Belly, or even Coke-owned Odwalla Protein Monster, both of which show roughly equal sales even with the additional channels.
Another big Wal-Mart category is the sports drink, with $5.6 billion in sales including the extra channels, as opposed to $4.3 without them. Both Gatorade and Powerade seem to derive about 17-20 percent of their sales from Wal-Mart and club channels.
The Pepsi/Starbucks partnership also fares well in Wal-Mart and club channels, with Frappuccino sales rising from $587 million to $707 million when those channels are added in, while Doubleshot adds a more modest $26 million to the $286 million it does without the new channels.
The most extreme bump, however, indicates that when Americans are thirsty for bottled water, they head to Wal-Mart: the extra channels add another $3 billion in sales, from $8.3 to $11.3 billion – about 35 percent more than without the megastore. Of course, the typical thinking would be that consumers who are buying bottled water in Wal-Mart would seem to favor value-priced offerings – and they do: Nestle Pure Life, a low-cost brand, sells nearly $1 billion in all channels ($932 million) but less than half of that ($408 million) came from the older Symphony/IRI channels. Another brand that is fully taking advantage of the channel is Sparkling Ice: the red-hot Talking Rain product is selling more than 1/3 of its product through Wal-Mart and the other new channels: an additional $43 million to a topline of $82 million from the month before. Of course, with Sparkling Ice also accelerating nearly 400 percent year-over-year, a month can make a big difference. Still, if you’re starting to move a lot of product, and you’ve got the right price and a big-enough name, Wal-Mart truly is your one-stop shop… for volume.
In the pages that follow, we’ll use the numbers as a jumping-off point to frame much of what has happened in the industry this year.
Key Innovation Categories
RTD TEA AND COFFEE
There were several brands that could qualify for “MVTea” this year; Peace Tea, Tradewinds, and AriZona Arnold Palmer lines showed significant growth off healthy initial bases. Gold Peak similarly continued to be a surprisingly strong performer for the Coca-Cola Co., both in large and small formats. By the numbers, it appears to be closing in on $250 million in sales in tracked channels between refrigerated and shelf-stable iterations.
On the organic front, Sweet Leaf and Honest both continued to grow at a healthy clip in mainstream channels, although they remain mired at around $30 million. Their ability to maintain share in independent natural and specialty markets are likely to determine how their acquirers view their investment this year, although both companies have other positives as well. Sweet Leaf is actually being outsold by its stable-mate, Tradewinds, while Honest’s Honest Kids and Honest Ade lines are also performing well for the brand.
Smaller tea companies continued to experiment with blends as well; white tea innovator Inko’s moved into Red, Green and White varieties, while half-and-half ruled the land, as Honest, Cabana, Hubert’s and many, many others signed up for the latest version of Arnie’s Army.
With coffee, the category remains the playground of the North American Coffee Partnership, which combines the forces of PepsiCo and Starbuck’s into $1 billion worth of product. Coke entry Illy Issimo had a good year – one that likely is undercounted given its growth in smaller accounts supplied by incubating distributor Big Geyser – and so did Marley’s One Drop, which has redesigned cans and a new marketing focus behind the charged-up brand.
On the innovation front, a large crop of cold-brewed coffee brands are beginning to appear, including New Beverage Showdown participants Grady’s Cold Brew, Gorilla Cold Brew, Stumptown, and many others belonging to the so-called “Third Wave” of coffee companies. They may be uncounted, but they are not unnoticed.
Tea also became the proving ground for one of the fastest-growing functional product types, as Marley’s Mellow Mood tea began to take hold in convenience and supermarket chain accounts. As of mid-year, the brand was at about $7.5 million in sales, with more outlets coming on line and a growth rate of more than 600 percent.
On the kombucha side, GTs and GTs Synergy showed $40 million in revenue – a number that might indicate a small tip of the iceberg of the kind of sales it is producing in natural channels, but a telling one nevertheless. Kombucha, coconut water, certain kinds of tea, coffee, and juice, are the products that have grown in natural and specialty channels and are now rocketing into mainstream. Their growth rates reflect that – all are up more than 50 percent year-over-year, and should continue to increase share in the rankings as they gain more ground.
Here’s a category that isn’t in need of recovery: Energy Drinks. They continue to grow at a strong – 17.5 percent – clip in tracked channels. But that growth was, ironically, goosed by “Recovery,” a relatively new set of extensions launched by Monster and Rockstar in the past two years. Together, the two brands have added nearly $500 million in innovation to a category that had not existed.
Innovation also seems to have taken hold at Red Bull, which added Total Zero to its line this year and three flavored line extensions that will launch in the spring. The company, a $3.25 billion property that continues to grow at a healthy clip, remains the category’s sales leader.
Negative publicity has begun to drag a bit on the share price of Monster, the only “pure play” in the energy drink business, but scrutiny from politicians and regulatory agencies hasn’t been able to slow the company’s growth. The edgy nature of the category is also shown in the growth of Xyience, which continues to push forward at a greater than 20 percent clip – and that’s not tracking sales through key channels like GNC, gyms, and other outlets.
The soda giants remain in the mix, albeit more through distribution than through organic brand growth. Still, NOS and AMP remain popular choices among consumers, and even Full Throttle broke its losing streak when it came to dollar sales.
Nevertheless, growth in Energy Drinks – and Energy Shots – belongs almost entirely to the big independent brands, including 5-Hour Energy. With regulatory action perhaps scaring strategic investors away from potential deals, it seems like those brands could remain independent for the foreseeable future, as well.
One could spend all day scouring scan data for information on the coconut water category and still fail to find numbers that accurately represent the growth of the product – mostly because, for many brands, a significant percentage of their sales remain in natural, specialty and small-format channels. Vita Coco, for example, still runs about 20 percent of its volume in natural.
But there’s no denying that the main brands – Zico, ONE, and Vita Coco, have made inroads when it comes to mainstream channels (although tracked channels before and after the Symphony IRI switch show that coconut water still hasn’t erupted in Wal-Mart).
BevNET scoured the scan data so you don’t have to, digging through Aseptic Juices (where a lot of the category tends to hang out due to its Tetra-Pak package) as well as a variety of juice blends and bottles that are now Zico’s by right of bottled concentrate format.
In these channels, here are the numbers: Vita Coco, $84.8 million; O.N.E., $26.6 million; Zico (rolling all formats together), $28.2 million. Naked is also at $10.1 million in its aseptic package. What does that say? Mostly that the covered channels sold nearly $150 million in coconut water. It’s an interesting snapshot – a category grounded in natural, but one that is moving authoritatively into mainstream channels in a short period of time. If the growth rate remains as strong (all three brands were on pace to more than double year-over-year) and it continues to migrate, the category could become significantly larger in short order — although it might still be hard to track.
Innovation remained a strong current in the coconut water category, as Coco Cafe moved into Target and Zico began to steadily roll out earthier products, adding a Latte flavor to buttress its chocolate line. Meanwhile, other promising juice brands moved into the coconut space as well – Purity Organic, Zola, and Aloe Gloe, to name a few. On the incubation channel side, Harmless Harvest became the darling of Whole Foods, creating a higher level of taste and purity for the others to shoot for. Coconut water also migrated as an ingredient into products ranging from Body Armor and Greater Than to Odwalla and Naked smoothies and juice blends.
Powerade ION4 is making strides toward $1 billion in sales, but it’s hard to judge if that’s really affecting Gatorade, as the unit price between the two is more than 60 cents in Gatorade’s favor, $1.83 to $1.19. That doesn’t mean that Gatorade has stopped growing, either, as it has a lot of SKUs that are showing above 20 percent volume leaps – a sign that innovation is starting to take hold as the brand re-tools.
This is also a spot where it’s interesting to think about the growth of coconut water; Vita Coco would immediately be the third-largest brand if it were classified as part of the Sports Drink category, although it would still be about one-tenth the size of ION4.
The category also gives a glimpse of the fast growth of another Starbucks line, Refreshers, which are coming in at about $32 million in sales – and again, that’s not counting incubation channels. One brand that doesn’t show up on the sports drink report yet – but should next year, given its growth rate – is Body Armor, which hadn’t landed Wal-Mart as of October but still showed about $3.5 million in sales with a strong growth rate for the 52 weeks previous to Sept. 9. With little up-and-down-the-street volume added into the total, either, it’s actually a mark of no little success that the brand has been able to activate enough chain accounts to register in core mainstream channels. This time next year could make for an interesting set of findings concerning that product line.
Sports drinks are now a dual concept, overlapping with the protein/meal replacement category, which is also listed here for the very first time. A look at those numbers reveals the underlying strength of the product that built the category – Muscle Milk. While Ensure and Pedia Sure are largely clinical products, Muscle Milk, which has about 10 percent of the category, is the product that remade the idea of protein drink as a post-workout product to pack on the pounds. One can see the potential for growth in protein-forward brands – all are up in the high double digits. With Coke now marketing Core Power, expect a potent new entrant this year, as well.
The Symphony IRI numbers provide a look at the two major functional water brands, vitaminwater and Sobe Lifewater, that define the category. And the takeaway is that the brands are moving in different directions: vitaminwater and vitaminwater zero have sold near $1 billion in the past 52 weeks, while Lifewater and Lifewater Zero have about one-quarter of that volume at a lower price. Zero is a little less than 30 percent of vitaminwater’s sales, although its growth is starting to equalize with the category overall.
Right now, the best-moving parts of the functional water category are moving at about the same rate as the rest of the PET/Still water category – that is, slow and steady. Most of the “me-too” entries have subsided, leaving just a couple of brands in its wake – which means that the big strategic investors might have won this round.
A spin through the juice numbers reveals clues to the fates of all manner of entrepreneurial beverage companies, but as with other situations in which natural and specialty channels also play key roles, you have to do some hunting and gathering to determine the state of things.
Ranging across juice subcategories, V8’s V Fusion and V8 Splash lines total $451 million – a strong complement to its original vegetable juice products, which have seen declining revenues in light of new veggie juice alternatives.
In the higher end lines, Odwalla had $142 million in sales of combined listed products, Naked $369 million and Bolthouse $281 million. Rolling Bolthouse in with Campbell’s V8 products makes the erstwhile soup company a pretty big player in beverages, indeed. Of course, the Naked/Odwalla/Bolthouse $800 million in sales is only the part of the category that’s visible above water – again, there may be twice that level of revenue – when natural channels and foodservice are combined into the total.
The new data also gives a lot of insight into kids beverages, showing InZone’s Tummy Tickler/BellyWasher products at near $100 million in sales. BYB Brands’ Tum-E Yummies were at about $80 million, and both have forward momentum outpacing their native categories.
And that goes double for the high-end juices. What’s interesting here isn’t so much the exact number, but the momentum: Sambazon, Odwalla, Naked, Bolthouse, are all outpacing their categories; in the case of products like juice smoothies, they are setting the pace.
Juice smoothies and sparkling and mineral waters, at 33 percent volume increase apiece, are by far the fastest-growing of any category of product with $500 million or more in sales. Natural’s influence on mainstream can also be found in categories like dairy substitutes, which grew 15 percent in the past year, to almost $1 billion as a category, buoyed in great part by recently spun-off SILK, as well as Lifeway’s Kefir products.
That’s indicative of which products are ultimately forming inroads to mainstream grocery. Where they grow, more innovation is sure to follow.