Founders Moves All Day to All Year
The Grand Rapids, Mich.-based brewing company introduced All Day IPA in March, then only as a seasonal product. But consumer demand and record sales quickly catapulted the 4.7 percent session ale to Founder’s largest volume brand, forcing the company to think about offering it year-round.
“We are looking at this brand as a category leader in the session ale category,” said Mike Stevens, Founders Brewing co-founder and CEO. “Knowing that, we have decided to brew the beer year-round.”
Through the end of June, Founders had sold over 130,000 case equivalents (CE’S) of All Day IPA since March 1. Sales of its next best-selling beer, the year-round Centennial IPA, have only barely eclipsed 102,000 CE’s.
Although the brand currently comprises 25 percent of the company’s total volume, Stevens said he expects the number to grow and believes All Day IPA will account for nearly 40 percent of total production in 2014. So what’s driving the demand for All Day? Stevens credits a three year recipe development process and unmatched quality.
“It is no secret that the IPA category has become a crowded space,” he said. “I think what you get with All Day IPA is a solid craft beer, that is reminiscent of a higher-ABV offering. And even though it’s called ‘All Day,’ the most important words on that label are ‘session ale.’”
Stevens hopes that All Day IPA will serve what he feels is an underrepresented category within craft beer: lower alcohol session offerings.
“It has a space within the craft industry,” he said. “It’s an underserved category and All Day isn’t taking away from what is really great about well-made craft beer.”
But that doesn’t mean the beer isn’t cutting into sales of Centennial IPA, another one of Founders’ core offerings.
“We have seen some cannibalization,” he said. “I would attribute some of that to the success of All Day but also to the crowded nature of the IPA category.”
Nonetheless, the new brew has helped to keep Founders Brewing on pace for yet another year of 75-plus percent growth. Production volumes are up 51 percent in 2012, 58 percent of which is All Day IPA, Stevens said. The company will enter Florida, its 25th state, on August 19 and Stevens said he is also eyeing the Maryland, Delaware and Tennessee markets.
“We’ve been talking to wholesalers in those markets already,” he said. “We are slowly identifying what we want to do there and which distributors we want to go with.”
The company will introduce canned 12-packs of All Day IPA next month across its entire distribution footprint. Stevens said it’s the only Founders brand that will be packaged in aluminum for now. The company produced 71,000 barrels of beer in 2012 and is projecting that volumes will reach 135,000 barrels in 2013 and 200,000 barrels in 2014. Founders made just 12,000 barrels in 2008.
Crafting Secondary Placements
With the finite amount of retail space allocated to craft beer becoming more crowded, Dogfish Head founder Sam Calagione wanted to create a non-traditional opportunity for his brand to catch the attention of retailers and earn secondary placements beyond the beer aisle.
For Calagione, this meant line-extending beyond the beer category altogether. So he turned to bratwursts. Besides that typical German beer hall fare, the company’s recently announced foray into food also includes clam chowder and pickles flavored with hops. The impetus, Calagione claims, came largely from the opportunity to build cross-category retail sets.
“We began this process with our beer-wine hybrid racks, which are placed in wine sections and feature our wine-centric beers like Noble Rot, Sixty-One and Midas Touch,” he said. “Now we are setting up cross-displays that feature brats, chowder cans, pickle jars and the Dogfish beers that best pair with each item.”
Making your own branded bratwurst is kind of an extreme way to get real estate near the meat counter, but that doesn’t mean that other beer companies aren’t angling for the same address. And the retailers are eager for them to move in, as well.
“High-end grocery and specialty outlets that are familiar with craft brands understand the value of trying to merchandise the beer category throughout a store,” said Tom Fox, a national category management expert and partner with CM Profit Group.
Fox believes that additional points of purchase not only encourage consumer trial but also increases the likelihood of craft beer making it to the checkout line.
“Anytime you can get a secondary point of purchase placement, there is a lot of data that suggests it will drive more velocity,” he said.
Liquid Enhancers Advance
Coca-Cola Co., Inc. has extended its reach into the rapidly growing world of water enhancers with Powerade Zero Drops, a new line of zero-calorie liquid concentrates. Aimed at on-the-go sports drink consumers, the new products are infused with the same range of electrolytes as its flagship brand.
“Convenience is key,” said Ilan Sobel, senior vice president, glacéau. “Between class, practice, errands and work, our lives are becoming busier and busier by the day. With Powerade Zero Drops, we’re providing athletes with even more options to help hydrate with sports drinks.
Powerade Zero Drops come in three flavors and are packaged in 3 oz. squeezable containers, each with a suggested retail price of $3.99. Each package makes approximately 24 8 oz. servings.
This is the second foray for Coke into liquid enhancers following its launch of Dasani Drops in September. The introduction of Powerade Zero Drops also comes a few months after Kraft’s launch of a new sports and fitness variety for its MiO brand called MiO Fit. With MiO products expected to reach a jaw-dropping $200 million in sales this year — an incredible figure for a two-year old brand — Kraft’s runaway success with MiO is undoubtedly fueling Coke’s emergence in the category. And it’s not just Coke that sees tremendous potential for the products. In an interview at BevNET Live Summer ’13, AriZona Beverages founder Don Vultaggio revealed that the company will be introducing a tea-infusing liquid enhancer later this year.
Mintel: People Like Coconuts
Over the past five years, a deluge of new products introductions has helped pushed coconut water from the outskirts of the beverage industry to one of fastest growing and visible categories on the market. According to Mintel, a leading global supplier of consumer, product and media intelligence, new coconut water products have grown by 540 percent since 2008 with most brands utilizing health claims associated with the liquid to propel product launches.
Mintel found that North America and Europe led the way for new coconut water products launches in 2012, totaling 35 percent and 34 percent of global coconut water introductions, respectively. The natural and electrolyte-laden beverage has been particularly popular with natural foods consumers in the U.S. who often consume it as a sports drink.
“Coconut water is doing particularly well in the U.S. because both sports recovery drinks and vitamin-enhanced waters are well-established—much more so than in other countries—meaning that people already buy into the benefits of electrolytes in a beverage,” said Jonny Forsyth, a global drinks analyst with Mintel.
Additionally, coconut water has latched onto growing demand for low-fat and low-calorie beverages. Labeling claims promoting low fat/calorie aspects of coconut water accounted for 47 percent of all coconut water claims in 2012. Meanwhile, low/no/reduced allergen and gluten-free followed with 43 percent of all claims, environmentally-friendly packaging amounted to 42 percent and natural came to 40 percent.
Double Cola Doubles Down on New Product Lines
Could anyone have guessed that in its 80th year of business, The Double Cola Company, a stalwart of classic Americana and traditional sodas, would venture into…coconut water? Perhaps not, but Double Cola, like many other CSD companies, is doing its best to adapt to wave after wave of consumers increasingly mindful of what they drink and the impact of sugary beverages on overall health and wellness.
Knowing that it’s operating in the midst of a beverage landscape in transition — and with some gentle prodding from its distributor partners — Double Cola is making its first foray into New Age beverages with the introduction of a 100 percent, not from concentrate coconut water and a line of vitamin-infused teas. The company has also introduced a new value-priced energy drink brand. The products are set to launch later this year and will key new distribution initiatives for the company, which is planning to expand into markets in the Northeastern and Western U.S.
While Double Cola’s sphere of distribution has long centered in and around the South and Midwest, the regions closest to where its products are formulated, the company will begin distribution of its Minoku Coconut Water, which is sourced from and co-packed in Thailand, along the East and West coasts. Double Cola vice president Gina McCommon said that the despite the dozens of coconut water brands currently on the market, the company sees “a lot of room left” in the category, particularly with lifestyle trends leaning toward health and wellness. And believing that its distributors would inevitably begin to carry coconut water as part of their portfolios, McCommon noted that it’s “better if it comes from us” than another beverage company.
Although Double Cola hopes that the new drinks will offer a measure of balance for its portfolio and preparedness for the changing times, McCommon said that the company will continue to place its focus and attention on the growth of its existing line of core brands, several of which, including its flagship cola and citrus-flavored Ski, have been repackaged and rebranded over the past year. Along with the addition of several distributor partners, including a number of independent beer houses, the new look drinks helped spur 17 percent growth in overall revenue for the company in 2012.
Analysis: Labeling and Lawsuits
Breaks in a pair of cases unrelated to the beverage industry might offer a glimmer of hope for brands in several ongoing food and beverage court battles. But labeling remains a flashpoint for dozens of civil suits across the country, with attorneys continuing to parse labels for any potential ingredients or marketing statements that might allow some leverage against FDA guidelines.
According to attorneys for Shook, Hardy & Bacon – the same firm helping to defend the Coca-Cola Co. Inc. and Vitaminwater in a class-action suit over false advertising and marketing claims on Vitaminwater labels – a federal court in California dismissed several claims that Chobani yogurt had mislabeled its products as all-natural and that another company, Wholesoy & Co., had misled consumers over its use of “organic evaporated cane juice” as an ingredient because the Food and Drug Administration itself had not set a “’legally enforceable’ standard” over the use of that ingredient.
Evaporated cane juice is a popular beverage ingredient and has been cited during the high-profile Vitaminwater suit as one of the ways in which the beverage maker allegedly misled consumers into believing the product was healthy.
The yogurt rulings came during a mixed week of results for the plaintiffs in the Vitaminwater suit itself. While a magistrate judge in the U.S. District Court for the Eastern District of New York certified the suit as a class action, he also ruled out financial damages for that class, allowing the suit to go forward only for declaratory and injunctive relief.
That ruling put Coke, which famously bought Vitaminwater for more than $4 billion in 2007, in something of a bind. While the loss of potential damage penalties puts a low ceiling on the financial gain for the certified class during a trial — and often leads to a quick settlement — in this case it likely won’t be enough to satisfy the co-counsel on the case, the Center for Science in the Public Interest (CSPI), which has doggedly pursued Vitaminwater for years over what it claims is a highly misleading marketing scheme.
Indeed, the ultimate win for the CSPI in the case – the possibility that Coke could even be forced to change the name “Vitaminwater” – remains a possibility. U.S. District Court Judge John Gleeson left that door open when he allowed the case to go forward in 2010 over the objections of Coke. At the time, Gleeson wrote that the names of the drinks and other label statements “have the potential to reinforce a consumer’s mistaken belief that the product is comprised of only vitamins and water,” regardless of what is listed on the ingredient panel.
Even tougher for Coke was the recent news that big beverage companies capitulated in a pair of similar cases. PepsiCo agreed to settle a class action for $9 million and take the words “all-natural” off its label, and Dr Pepper Snapple Group agreed to a settlement that it no longer fortify 7Up with vitamins – or use label claims that some of its 7Up flavors have antioxidants. Both of those cases were taking place in the U.S. District Court in the Central District of California, although they were consolidated class actions similar to the Vitaminwater case.
Coke put its best face forward following the magistrate’s ruling, saying it was pleased the recommendation had gone against damage awards and that it was confident the rest of the case would eventually be dismissed.
Prochnow told BevNET that “whenever you get a ruling from a judge that says there’s no damages involved, that’s a pretty good case for the defendant. Sure, there might be some amount from attorney’s fees, but if you already know they’re not going to get damages from it, that’s a pretty big win in the case.” But, he added, having the potential for the loss of the Vitaminwater name as potential for injunctive relief remains a high-value wild card in the case.
CSPI language on Vitaminwater has been strong: the company has called the product a “junk food” and referred to it as a non-carbonated soda. Both are product types that are not allowed to be fortified with vitamins under FDA policy, according to the CSPI.
“The marketing of Vitaminwater will go down in history as one of the boldest and brashest attempts ever to affix a healthy halo to what is essentially a junk food, a non-carbonated soda,” said CSPI executive director Michael F. Jacobson in a release that followed the ruling. “Vitaminwater, like Coca-Cola itself, promotes weight gain, obesity, diabetes, heart disease, and cannot deliver on any of the dishonest claims it has made over the years.”
The beverage suits, which have hinged largely on the involvement of CSPI as a co-counsel, stand in some respects as a contrast to many food and beverage cases – and indicate a pattern that is starting to get some notice in legal circles.
Free enterprise advocate Glenn Lammi, the chief counsel of the right-leaning Washington Legal Foundation, blamed a consortium of lawyers targeting the U.S. District Court in the Northern District of California – where both the Chobani and Wholesoy cases are being litigated — for a series of cases exploiting consumer protection laws. According to Lammi, the consortium has targeted that district as the base of its lawsuits because it is the most friendly venue for class-action suits related to consumer protection laws and labeling regulations covered by the FDA.
According to Lammi, these kinds of suits – which often deal with the issue of whether products are labeled as “all-natural” or healthy – are “an appealing, Erin Brockovich-like conception of litigation, but is quite far from reality with regards to why scores of class action lawsuits are pending” against many food companies. Lammi cited reporting that indicated a pair of plaintiffs’ attorneys who have made money suing tobacco companies and commercial airlines worked with a former FDA advisors (some of which have worked, it has been argued, on behalf of the food companies themselves) to help them file suits against the food companies.
Of late, Chobani has taken to the offensive, winning its partial dismissal and also pointing out that the plaintiffs in its case are represented by a set of attorneys it calls the “Barrett/Pratt Group” who are also suing more than 30 other companies in the same federal jurisdiction, over very similar branding claims.
Beverage and beverage-related companies in the group of claims include Odwalla, Hain Celestial, Nestle, Welch’s, Ocean Spray, Sunsweet, and others.
The attorneys in the cases justify their claims on the basis of public health – and that breaches of FDA regulation may be the best way to get at the companies and threaten them with being put on the stand.
As the cases proceed on opposite sides of the country, chances are the CPG firms, the “Consortium,” and the CSPI will be watching each other closely, looking for any tool they can use in the fight.