Investigations I: New York AG Digs into Energy Drinks
The New York State Attorney General is probing the ingredient and advertising claims made by energy drink companies.
News of the investigation first broke when energy drink titans Monster and 5-Hour Energy revealed the existence of informational subpoenas by the AG of an unknown state. According to Monster, the disclosure came in a quarterly report that said it was being investigated “concerning the Company’s advertising, marketing, promotion, ingredients, usage and sale of its Monster Energy brand of energy drinks.”
A few days later the office of Erik Schneiderman, from New York, leaked the information to major media sources in New York City, including the New York Times and Wall Street Journal.
The probe is looking into the mysterious ways some of the brands seem to package and disclose their caffeine content, which can come from the addition of caffeine, tea, guarana, yerba mate and other stimulants. It also involves larger drink companies like PepsiCo.
The caffeine content in most energy drinks is typically dismissed as being equivalent to that present in a cup of coffee — an amount that can vary with the strength of the brew. Most of the mainstream brands — including those being probed by the AG’s office — have been able to avoid negative controversy except in extreme cases or when the products have been mixed with alcohol.
The filing came on the heels of a disappointing earnings call earlier that afternoon, when investors who have showed strong faith in the company’s growing earnings were shaken by news that Monster was having difficulties building the brand overseas, particularly in Korea, where the company delayed its launch. Monster shares plunged more than 9 percent over the course of the trading day after a run-up of nearly 50 percent over the previous six months.
Meanwhile, another claim against the company has surfaced in an entirely different, although no less high-profile venue. Rap group the Beastie Boys filed suit against the company, claiming that Monster had infringed on their copyrights by posting a 23-minute video synchronized to many of the group’s well-known songs to promote its Ruckus in the Rockies 2012 event.
The U.S. Food and Drug Agency (FDA) has responded to requests for an inquiry into the caffeine content of energy drinks by telling U.S. Sen. Richard Durbin (D-Ill) to take a look at places like Starbucks.
In those stores, the agency told Sen. Durbin, he would be able to find brewed coffee with 330 milligrams of caffeine in a 16 oz. serving – comparable to the range of caffeine contents found in many energy drinks.
The letter indicated that most studies have not indicated any particularly harmful effects for caffeine consumption of up to 400 mg per day. While the agency said it was in the midst of conducting a review of recent safety studies on caffeine, “the available studies do not indicate any new, previously unknown risks associated with caffeine consumption.”
FDA said it had taken an “updated assessment of the amount of caffeine that people in the United States ingest from all sources,” with the results showing that “even when the consumption of energy drinks is considered, most of the caffeine consumed comes from what is naturally present in coffee and tea.”
Durbin had requested that the agency consider whether it could – or should – regulate what he termed “high levels of caffeine and additives that raise safety concerns” in energy drinks. The letter came in April, following Durbin’s stated concerns about a study that indicated an increased number of emergency room visits due to caffeine toxicity, and, in one case, the death of a 14 year-old girl from Maryland.
The letter to Durbin seemed to indicate that there was not a high level of concern about caffeine in energy drinks even as it continues to analyze and prepare guidance for companies on the distinction between beverages and dietary supplements, noted lawyer Justin Prochnow, who has worked on many cases concerning product claims with the FDA.
“This letter seems to only confirm our discussions that until the FDA is made aware of some evidence that caffeine is unsafe at the common levels found in energy drinks (80 mg for 8 oz.), there is unlikely to be a specific attack on caffeine-containing products,” Prochnow wrote in a note to BevNET. “It is more likely that other ingredients will be the focus of any attack on larger, beverage-looking supplements.”
Coca-Cola Co., Inc. promoted three seasoned executives to head up a new, tripartite organizational structure that will be effective on Jan. 1, 2013. The company announced that it will streamline its operations around three major businesses in an effort “to better address the changing demands of the global marketplace.”
Beginning next year, Coke’s operations will be comprised of Coca-Cola International, which covers Europe, Pacific and Eurasia & Africa; Coca-Cola Americas, which covers North America and Latin America, and; Bottling Investments Group (BIG), which oversees Coke-owned bottling operations outside of North America.
“This is the right structure for the next phase of our journey toward achieving our 2020 Vision,” said Muhtar Kent, the chairman and chief executive of Coke, referring to the company’s goal of doubling revenues by the end of the decade.
The new business divisions will be headed up by the following: Ahmet Bozer, currently the president of Coke’s Eurasia & Africa Group, will be appointed president of Coca-Cola International. Steve Cahillane, who is the president and CEO of Coca-Cola Refreshments (CCR), will become the president of Coca-Cola Americas. Irial Finan will remain as president of BIG. All three executives will report to Kent.
“By consolidating leadership of our global operations under two large, but similar sized geographic regions and BIG, we will streamline reporting lines, intensify our focus on key markets and create a structure that leverages synergies and gives us flexibility to strategically adjust our business within those geographies in the future,” said Kent.
Meanwhile, at PepsiCo, Debra Crew was named o a new role as president of PepsiCo Americas Beverages, as the company continues to shuffle leadership roles in its beverage business. Crew, who previously held the same title in PepsiCo’s Western Europe business, will oversee PepsiCo’s Gatorade and Tropicana business in North America, its Latin America Beverages business, and the Beverage Growth Ventures Group, PepsiCo’s new beverage innovation and incubation unit. Crew will report to PepsiCo Americas Beverages CEO Al Carey.
“Debra is a highly respected executive within PepsiCo and I’m delighted to have her move into this critically important role,” said PepsiCo Chairman and CEO Indra Nooyi. “She brings strong leadership and diverse experience across multiple food and beverage categories to her new position and will be a driver of continued growth across the businesses she’ll be overseeing.”
The move comes as Sarah Robb O’Hagan, the head of PepsiCo’s Gatorade business, departed the company and has taken a position as president at Equinox Holdings Inc., a chain of fitness clubs. O’Hagan had been the president of Gatorade and PepsiCo’s Global Sports Nutrition Group since 2011 and was the brand’s head of marketing in the two previous years. O’Hagan was largely credited with improving lagging sales of Gatorade by refocusing its marketing toward teen athletes and introducing new products including Gatorade’s G-Series line.
Meanwhile, at Vita Coco, Jeff Popkin,a former Red Bull executive, has gone from VP of Sales to President. He joined the company 11 months ago.
It’s not surprising that Vita Coco would go to a veteran to keep the trains running on time as the company’s distribution network becomes both larger and more centralized via its ongoing relationship with DPSG.
Popkin certainly has experience in keeping an independent company humming through a large web, having held senior positions at both Red Bull North American and at Coors and Mike’s Hard Lemonade.
The move to put Popkin in a more executive position should let CEO and Co-Founder Michael Kirban step back from an increasingly frustrating role in dealing with day-to-day headaches — as recently as last year he complained that he was spending much of his time signing checks instead of thinking strategically.
“He has demonstrated success in leading our business in both emerging and developed markets, and he has played a critical role in making Vita Coco the first coconut water brand with a national distribution footprint,” said co-founder and CEO Michael Kirban.
It happened quietly and without much detail, but TSG Consumer Partners – the same private equity company that backed Vitaminwater and that currently owns a chunk of Cytosport (as well as snack brand Pop Chips, which has many extended relations to the beverage world) – took a minority position in Neuro earlier this year.
The deal was shepherded by Silverwood Partners and is termed a “partnership” on their web site. TSG also quietly acknowledged the news online putting up a mention on its web site on June 29.
Brian Krumrei, a Managing Director at TSG, confirmed that he is now a member of Neuro’s board of directors; he’s no stranger to the beverage business, as he’s also a director at Cytosport, which makes Muscle Milk.
TSG’s stated investment criteria indicate the company makes equity investments of $20 million at minimum, and that companies are expected to have sales of at least $20 million. Neuro’s president, Paul Nadel, told BevNET that the investment wasn’t about the money, however.
“They are the preeminent firm in consumer packaged goods,” Nadel said. “It was not done out of financial need, but out of strategic purposes. These guys made Vitaminwater, they made Muscle Milk, so we feel like we’re in very good company. They get it and that’s why we did the deal.”
Neuro recently made a couple of tweaks to its product line, changing “Gasm” to “Passion” and reformulating Neuro Trim.