Preserving Value in Value Stores
While the functional beverage categories continue their ascent, brands that simply offer refreshment have also proven their results in the marketplace. In a discussion that outlined consumer trends through data, Brian Reed, a principal at IRI, and Kathryn Peters, an executive vice president of SPINS, shared insights that back up this rise.
Peters said that in the past two years, sales of natural refreshment beverages have increased by 26 percent.
“The traditional carbonated soft drink category, there’s a demand for something,” she said, “but the existing, larger scale offerings are not really meeting [the consumer] need.”
This demand has opened the door for Sparkling Ice, which jumped from $10 million in sales to $100 million in fewer than 18 months, according to an April study by The Boston Consulting Group.
Sparkling Ice has succeeded by offering what many consumers perceive as similar refreshment to carbonated soft drinks (flavored, sparkling), but with zero calories. In certain stores, mimicking Coca-Cola and Pepsi products, Sparkling Ice has thrived with 10 for $10 promotions.
In a discussion on value pricing and its ripple effects, C.J. Rapp, the CEO of Karma Culture, Dave Minnick, the vice president of sales and marketing for Purity Organic, and James Hoagland, the vice president of sales and marketing for Ito En, agreed that these promotions can certainly have their benefits, however, only for the right brands.
Minnick said that Sparkling Ice, a company selling refreshment, not function, has created a winning formula with the 10 for $10 model. Yet, for other kinds of beverages, Rapp said that these promotions present a conflict of interest. If the function is so effective, then why is it selling for $1 a bottle?
Minnick said that Honest Tea likely won’t be able to maintain a 67 cent price in Kroger stores. These kinds of deep discounts, he said, can mitigate your brand’s equity and value. The short-term gains from increased volume and more consumers could hurt your brand’s reputation in the long run.
Hoagland and Minnick said that they’ve walked away from retailers because of promotional pressure.
“It doesn’t work for everybody,” Rapp said, “and that’s a really hard thing to come back from.”
Sometimes It Works Out
The beverage industry has accurately been labeled as boom-or-bust, however, when the pricing and the partnerships succeed and a beverage brand creates disruption in the marketplace, the results can be astonishing. Just ask David Kearns, the vice president of sales for Talking Rain, the parent company of Sparkling Ice, who reflected on the product’s recent triumphs.
Kearns shared a problem that most beverage brands would kill for: the past two summers, he’s been out of stock. He said that last year, he projected about 100 percent growth, had the capacity for about 200 percent growth and achieved about 300 percent growth. How did he do it? Well, that’s a long story on its own. However, a key contributor was simply drawing the focus of distributors.
“If you’re two percent of their business,” Kearns said, “how do you become 5 percent of their attention?”
While the numbers may not align perfectly, that could become a primary question for Health-Ade Kombucha, the winner of the New Beverage Showdown. Offered in four flavors — Original, Ginger-Lemon, Pomegranate and Cayenne Cleanse — the kombucha trumped the other 19 competitors with trendy packaging (an amber, artisanal bottle and a sleek label) and its credible, professional approach to a still-developing category.
“The look and feel of the brand, it’s very tight and that’s awesome,” said judge Greg Fleishman, the chief marketing officer of Suja.
If the pricing structure, distribution partnerships and consumer awareness take some time to develop for Health-Ade Kombucha, at least retailers are paying attention and clearing their shelves for something new.
“The future is exciting,” said Dina Slekys-Trout, co-founder of Health-Ade Kombucha, “and we have loyal, addicted customers.”
Other sessions at the event included a briefing from Michael Jacobson of the Center for Science in the Public Interest (who recommended that one of the best ways for entrepreneurial beverage companies to escape CSPI’s notice as lawsuit targets was to stay small), as well as presentations from beverage company executives like Scott Lerner of Solixir and Alan Murray of GoodBelly.