Year-End Brings Big Deals:

Talk about saving the best for last: after a year in which plenty of money had already been thrown around, there was a big closing rush, as a pair of strategic investors made big bets on evolving beverage categories.

First up was the Coca-Cola Co., Inc., which in early December completed its fast-moving courtship of the dairy protein drink Core Power, bringing former Coke employee Steve Jones’ two-year-old brand into the fold.

The purchase came just two months after the company revealed that it would begin distributing the entrepreneurial brand on a national basis, and only six months after it began to deliver the brand to stores in the Midwest.

Core Power, a branded beverage venture that was spawned by one of the country’s largest dairy cooperatives, will be run independently while under Coke’s ownership, according to Jones, a former marketing executive with the soda giant.

He said the acquisition represents the first major move into the $12 billion dairy industry by either Coke or rival PepsiCo. Pepsi’s “Blue System” currently distributes Muscle Milk, an independently owned protein beverage that ushered in a new era of direct-store-distribution (DSD) protein drinks several years ago.

With an innovative protein-isolating manufacturing process in hand, Jones said he believes that Core Power can provide a new level of milk-based functionality to the Coke portfolio, one that he believes may ultimately catch Muscle Milk, which exceeds $250 million in sales.

“We think we can broaden the protein platform beyond the weightlifter and the athlete,” Jones said. “I would love to launch a product that meets so many consumer need states where they are.”

For a milk-based beverage, the category Core Power – originally called “Athlete’s HoneyMilk” – wants to dominate what Jones called “milk-plus.” In that area, soy, hemp, and nut-derived milk substitutes have become nearly a $1 billion business, according to recent sales figures from the Symphony/IRI Group, which tracks retail sales.

Next, the day after Christmas brought a big stocking full of cash to the owners of BluePrint, the fresh juice and cleanse brand that was closed on by natural foods conglomerate Hain Celestial.

The deal, which was initially announced in November, is expected to increase the operational capacity of Blueprint and the availability of its line of single-serve bottled juices, which are currently sold in a number of natural retailers in the Northeast and Southern California. Financial terms of the transaction have not been disclosed.

“We see great potential with the BluePrint brand as consumers increasingly seek the benefits of the nutrients, enzymes and fresh taste of raw juice,” Irwin D. Simon, the president and CEO of Hain Celestial said in a statement. “We plan to leverage the BluePrint brand across our portfolio and create a larger retail presence for the BluePrint brand.”

Launched in 2007, BluePrint products generated approximately $20 million in sales in 2012, according to Hain. While BluePrint Cleanse, the company’s direct-to-consumer juice cleanse business, generates most of the revenue for BluePrint, Hain will look to build upon the rapid growth of the brand’s BluePrint Juice line, which is sold in a number of national, natural and gourmet retailers including Whole Foods and Dean & Deluca.

“Hain Celestial’s commitment to supporting a healthy lifestyle is reflected in their portfolio of products, and they are the ideal partner with whom we can grow and expand the BluePrint brand,” BluePrint founders Zoe Sakoutis and Erica Huss said in a statement.

Coke wasn’t done either, however: in an operational move announced just after the start of the new year, the company announced it was buying up Sacramento Coca-Cola Bottling Company, the 6th-largest independent Coke bottler in the U.S.

Sacramento Coke Bottling was founded in 1927, and distributes Coke products in all or part of the nine California Counties of Sacramento. The company employs over 460 people.

“We are proud of our 85-year legacy of service to the community and have come to the decision that the time is right to transition the business to The Coca-Cola Company,” said Rob Siebers, President and CEO, Sacramento Coca-Cola Bottling Company. “We believe this is the right action to ensure the continued success of Coca-Cola in Northern California.”

While the purchase price was not disclosed, in a statement, SCCBC noted that the sale was approximately nine times earnings before interest, taxes, depreciation and amortization (EBITDA).

Coke has been streamlining operations over the past three years, and this most recent deal comes 14 months after the cola giant acquired Great Plains Coca-Cola Bottling Co., which, at the time, was the fifth-largest independent Coca-Cola bottler in the United States, for $360 million. Coke also acquired Coca-Cola Enterprises Inc., its largest bottler in North America, for $12.3 billion in 2010.


Big Brewhaha Over Craft vs. Crafty:

It’s becoming the battle of the year: the Brewers Association (BA) and its members taking aim at large brewers like AB Inbev and Miller Coors over their marketing of higher-quality beer under the guise of labels that indicate a false independence.

But there are plenty of other brewers caught in the crossfire as well, including stalwarts like Schell’s, Yuengling, Goose Island, and the Craft Brew Alliance (CBA), and they aren’t happy about it.

The fight began with a December editorial broadside launched both in print and online in which the BA lashed out at “crafty” beers produced by international brewing conglomerates. The editorial was part of what the BA promises will be a long battle to increase consumer awareness of the definition of craft beer.

The BA, which represents the business interests of craft brewers, was able to land an Op-Ed piece in the St. Louis Post-Dispatch on Wednesday headlined “Craft or Crafty? Consumers deserve to know the truth.” The BA marketing team followed up with a release to its media list attempting to generate stories that will underscore the difference between products owned or assisted by larger breweries and those made by its constituents, knocking “crafty” beers that fall outside BA’s own definition of “craft.”

“We call for transparency in brand ownership and for information to be clearly presented in a way that allows beer drinkers to make an informed choice about who brewed the beer they are drinking,” noted the statement.

According to a chart included in the release, “crafty” products include higher-end offerings like Blue Moon (owned by Miller/Coors) and Shock Top (owned by Anheuser Busch/InBev) as well as brands like Goose Island (Bud-owned as of last year), and Craft Brew Alliance (CBA) brands Widmer, Kona and Red Hook (partially owned by Bud). Taken together, in 2011 those brands sold about 3.7 million barrels of beer — nearly the equivalent of the 4 million brewed by top three craft brewers Boston Beer Co., Sierra Nevada and New Belgium. And that’s not even counting other large, popular “non-craft” breweries like Yuengling, Dixie, and Straub.

“I’d say what we’re doing is pointing a bright light on this part of the beer industry by showing who’s behind some of the beers that are essentially being marketed as small brewer beers,” said Paul Gatza, the director of the Brewers Association

Several brewers, large and small, took issue with the statement, however, releasing public comments defending their position in the brewing world.

“The question we have for the Brewers Association is ‘why are we being punished for brewing with a locally grown ingredient, which started out of necessity, and has continued out of tradition?’” asked Jace Marti, the Brewmaster at Schell Brewing. “And why is it only bad to use adjuncts if you are brewing an American Lager, yet perfectly acceptable to use them in basically any Belgian style of beer, IPA’s or double IPA’s?”

Tenth and Blake president and CEO Tom Cardella also responded recently with a statement, challenging the BA’s “crafty” designation of the company’s Blue Moon brand.

“Whether people call them craft or some other title is fine with us. We’ll just keep brewing great beer,” noted the statement.

It’s a membership imperative, BA director Paul Gatza told Brewbound yesterday, to “point a bright light on this part of the beer industry by showing who’s behind some of the beers.”

Among the brewing practices the BA called outside the purview of craft are those that may use “adjuncts” like corn or rice to “lighten rather than enhance flavor.”

But Marti – whose “adjunct” offerings make up more than 60 percent of Schell’s total annual output, which leaves him outside of BA membership – believes his company has the same goal, nevertheless.

“We are fighting the big guys just like they are,” he said. “Why fight us if we are doing the same fight they are?”

Indeed, the BA, while garnering publicity with the campaign, nevertheless found its profile as the defender of the craft faith under attack from some media circles. During one interview on FOX Business, Julia Herz of the BA appeared shrill and strident, while Time Magazine labeled the entire episode a “Beer Cat Fight.”

Like lots of cat fights, expect this one to get louder before it finally ends.

Mix1 Shuts It:

Not all strategic investments work out. That’s certainly the lesson learned at Mix1, where after two years and $12 million, Hershey decided to foreclose on its purchase rather than finish paying for the nutritional smoothie company.

The shutdown came just three months after the brand had announced a broad redesign.

Boulder-based Mix1 – known by its corporate name as Tri-US — was 69 percent owned by Hershey. The company spent $5.8 million to acquire a 49 percent stake in 2011, and another $6 million in 2012 to purchase another 20 percent. The company had been due to close on the final 31 percent later this year but the company’s board of directors – controlled by Hershey — apparently decided to let Mix1 close instead.

The company suffered through a tough 2012, including an FDA-initiated recall of 18,000 cases of its 11 oz. PET bottles due to the discovery of yeast and mold in the drinks. But the company also had recently invested behind the brand, redesigning its PET packaging to better suit convenience and grocery stores, and had begun to roll out a sales strategy behind that package. It had also hired advertising agency Walton/Isaacson to help market the products.

The brand was started in 2006 by entrepreneurs Greg Stroh, Dr. James Rouse, and Wes Brasher and had received $6 million in backing from Highland Capital Partners in 2009 before its eventual sale to Hershey. During that time it went through several leadership changes, including the departure of Brasher and Stroh, and a year-long period in which Highland general partner John Burns worked as the company’s CEO and Chairman. Murphy came from Hershey’s health and wellness strategy group to replace Burns in July of 2011.

The purchase by Hershey had been expected to provide stability to Mix1, which had struggled to establish itself as a natural alternative to products like Muscle Milk. Mix1, while small compared to other strategic beverage acquisitions, was also expected to help provide Hershey a pathway to developing its own foothold in the beverage business, as well as a platform for further strategic expansion into the health and wellness arena.


All Quiet on the FDA Front

Things were largely quiet on the FDA front – perhaps because legislators were too busy wrestling with the “Fiscal Cliff” to hassle the agency – but that doesn’t mean the lawyers put away their billable hour ledgers.

In California, functional beverage brand FRS is facing a class action lawsuit alleging that the company is engaging in false and misleading advertising related to its Healthy Slim product line. Filed in the Los Angeles Superior Court on Dec. 5, the lawsuit states there is “no generally accepted scientific evidence within the scientific community” the active ingredients in FRS Healthy Slim, consumed “either individually or in combination,” will contribute to weight loss and appetite suppression.

The lawsuit was launched by Santa Monica-based Red Law, LLP on behalf of lead plaintiff Colin Kelly. According to its website, Red Law specializes in class action lawsuits, as well as personal injury and pharmaceutical litigation.

FRS launched Healthy Slim in May 2012 and is formulated with a number of ingredients, including Slendesta, Quercetin, vitamins, and fiber, which the company claims are “proven to help curb appetite and increase energy levels.”

Stating that the beverage “will help consumers achieve their healthy weight goals,” Healthy Slim boasts of its use of Slendesta, a natural protein derived from potatoes. FRS claims that the ingredient is “clinically proven to curb appetite” by signaling to the brain that a body is full, thereby reducing hunger. However, the lawsuit states that “those consistent and uniform claims are false,” noting that “not even Kemin Industries, Inc., the manufacturer of Slendesta, describes Slendesta as ‘clinically proven.’”


Port Strike Costs Beverage Manufacturers – and Everyone Else

A strike at the Port of Los Angeles, the nation’s busiest shipping exchange, stalled imports and exports from Nov. 27 to Dec. 5. The strike cost the U.S. economy approximately $1 billion per day, according to CBS News.

Several beverage manufacturers were directly affected by the strike. Pete Grego, director of contract manufacturing and new business development at Nor-Cal Beverage Co., said that his company was forced to explain delays to those handling shipping containers.

“We were affected as a result of delays in getting filled containers to the port and getting empty containers out of the port to replenish for exporting customers to Japan,” Grego said.

The strike was resolved after representatives of the Office of Clerical Workers and the International Longshore and Warehouse Union approved a deal that moderately increased wages and pension benefits. The deal also included an agreement by management, which promised that, until 2014, as workers retire or leave their roles, no more than 14 jobs will be outsourced.

Grego said that one ship had to drop its anchor 10 miles outside the port while it waited for a deal to be reached. The Los Angeles Times reported that 20 ships rerouted deliveries to rival ports in Oakland, Ensenada, and Panama.


Soda? Honest?

Honest Tea is bubbling over, moving a carbonated line extention, Honest Fizz, into Whole Foods.

The flavors for Honest Fizz, which will be available in 12 oz. cans and 6-packs, include Root Beer, Lemon “Limey”, Orange Pop, and (perhaps in tribute to Yale School of Management-based co-founder Barry Nalebuff?) cherry-flavored “Professor Fizz.”

The product is zero-calorie, certified organic, naturally-sweetened with Stevia and Erythritol.

Early sightings of the product were at Expo East in Baltimore, although at the time it wasn’t yet clear that it had been green-lighted.

Meanwhile, more low-calorie bubbles are on tap from DPSG: the company announced that this year will bring a national roll-out of 10-calorie versions of five soda brands, including 7-Up, Sunkist, Canada Dry, RC Cola and A&W Root Beer.

They will join Dr Pepper Ten, launched approximately a year ago as a way of appealing to men who didn’t want the stigma of being seen drinking a diet soda.

Dr Pepper told the Associated Press that the new drinks won’t be as closely aligned with men: the ads will use the theme “Get Both.”

Larry Young, the CEO of DPSG, told the AP that he believes 40 to 50 percent of is sales will come from a mix of diet and lower calorie CSDs, juices and waters in the next few years. It’s in keeping with a trend in which diet CSDs have lost share at a much lower rate than their full-calorie brethren. The company has also launched lower-calorie Snapple teas as well.

The 10-calorie CSDs are sweetened with a mix of high-fructose corn syrup and artificial sweeteners.


Golden Road, Long Trail, Boulevard

Golden Road Brewing announced that it has parted ways with former Brewmaster Jon Carpenter, who tendered his resignation in early January.

The company is replacing Carpenter with former Drake’s Brewing Company head brewer Jesse Houck, whom Golden Road had once considered for the Brewmaster position back in 2011.

Golden Road co-founder Meg Gill said she hoped to have Carpenter on board for the long term but “in the startup world, you never know.”

Brian Walsh has stepped down as president and CEO of Long Trail Brewing Company. Walsh, who departed the company last week after six years at the helm, will pursue new personal and professional opportunities, according to investor Daniel Fulham, who has taken over Walsh’s roles for the Bridgewater Corners, Vt.-based brewery.

The move comes as Long Trail — which based on 2011 sales figures, is the 15th largest craft brewery in the U.S., according to the Brewers Association — continues to expand its brewing operations and footprint in the Northeast, and looks to reorganize its organizational structure to reflect recent and future growth plans.

A veteran in the beer business, Walsh began his tenure as president of Long Trail following the acquisition of the brewery by private equity firm Fulham & Co. Walsh presided over significant growth at Long Trail in his time with the company, which included acquisitions of the Otter Creek Brewery in Middlebury, Vt. and The Shed Brewery in Stowe, Vt.

Bob Sullivan, the vice president of sales and marketing for Boulevard Brewing Company, announced that he is leaving the company and joining Dallas-based Andrews Distributing as the vice president of specialty and craft beer brand building.

Sullivan joined Boulevard in 1994. Under his leadership the company grew to become the tenth largest craft brewery in the country, with sales of its beer growing to 173,793 barrels in 2012.

Sullivan told that he will be responsible for the growth and execution of Andrews’ specialty and craft portfolio, which includes brands like Blue Moon, Samuel Adams, New Belgium, and Boulevard, among others. Andrews is projecting over 2.7 million craft and specialty case equivalents sold in 2013, according to press materials.

“I am excited about the new challenge and a change,” he said. “It’s all coming full circle. I grew up on a beer truck and I am going to finish my career on the distributor side.”