Bevscape: The Latest News on the Brands You Sell

DEALTIME 1

New Age Marriage

Its distribution might still be nascent, but Bucha’s leadership is thinking big after a merger with Xing Tea.

Brent Willis, the CEO of the publicly traded kombucha company, announced in May that Bucha will be merging with Xing, a Colorado-based natural tea line that is also owned by Tom Lebon and Scott Lebon, the brothers who run Denver distribution powerhouse New Age Beverage.

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Bucha is paying close to $20 million in cash and stock for XingTea, XingEnergy and Aspen Pure water, enabling the Lebons to buy out longtime silent partner Dan Carney. Under the arrangement, Tom Lebon will remain the head of sales for Xing, while Scott Lebon will run operations for the brand; Willis, who once ran Cott Corp. in addition to several other executive slots with companies like AB InBev and the Coca-Cola Co., will be CEO of the combined entity.

“We can take the position as a world leader in healthy, functional beverages,” Willis told BevNET.

The combined companies believe the partnership will quickly realize about $7.5 million in combined cost savings and revenue expansion in the next 12 to 18 months, with Xing’s sales force driving Bucha through its broader distribution profile, according to Willis.

Bucha will quickly realize distribution through having the brands plugged into the Lebons’ own distribution company, which has about 4,500 accounts in the Rocky Mountain region. Then sales efficiencies will help power more growth for the kombucha brand, which has the advantage of being able to travel at ambient temperatures, according to Willis.

As for Xing, “We’ll have a good partner who can help us strategically,” said Tom Lebon. “It gives us the money to start doing marketing and the things we haven’t been able to do out there.”

The combined entity, New Age Beverage Corporation, will eventually trade as NABC on the OTC exchange, with plans to move to a more senior stock exchange. Currently Bucha itself trades under the ticker symbol ABRW, the remaining legacy of craft brewer American Brewing, which sold its brewing business last year to focus on healthy, functional brands. The sale left the company with positive cash flow — a rarity for the OTC market.


DEALTIME 2

Celebrinvestment From Beyonce, DiCaprio Buoys Brands

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Global pop star Beyoncé has invested in WTRMLN WTR. The News came in May following the launch of the singer’s ,much-heralded new album, Lemonade.

Beyoncé’s investment was part of a capital raise that closed in February, according to WTRMLN WTR co-founder Jody Levy. That raise included funding from CAVU Venture Partners and other undisclosed investors, however, Levy declined to offer details on the total amount of the raise and Beyoncé’s contribution, citing investor confidentiality. Acompany filing with the U.S. Securities and Exchange Commission dated Oct. 15, 2015 indicates that the company targeted $8 million in new funding.

Although Levy would not discuss Beyoncé’s financial stake in WTRMLN WTR, she described her as “a meaningful partner.”

“She’s really in it from the perspective of making an investment and being in entrepreneurship and in the company, rather than it be more of a traditional celebrity ‘endorsement/investment,’” Levy said. “Like many of our investors, she’s active and connected.”

C_600x600Beyoncé’s involvement sprung from a coincidence in the timing of WTRMLN WTR’s market debut and the launch of her song “Drunk in Love,” which both occurred in December, 2013. After friends and family members alerted Levy to the song’s lyric, “I’ve been drinking watermelon,” she quickly arranged to have samples of the beverage sent to Beyoncé’s management company, Parkwood Entertainment. Levy followed up with more sample packages on Valentine’s Day and Mother’s Day.

The following year, Parkwood reached out to WTRMLN WTR to discuss a potential partnership with Beyoncé. The two sides eventually reached a deal based on aligned values, particularly that of bringing healthy products to more consumers.

“I invested in WTRMLN WTR because it’s the future of clean, natural hydration; as partners, we share a simple mission to deliver accessible wellness to the world,” Beyoncé said in a prepared statement. “This is more than an investment in a brand, it’s an investment in female leaders, fitness, American farmers, and the health of people and our planet.”

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The same week the WTRMLN WTR investment was revealed, Guayusa-powered natural energy drink Runa confirmed the long-rumored addition of Oscar winner Leonardo DiCaprio as an investor, joining a new wave of high-profile individual investors including fellow thespians Marlon Wayans and Adam Rodriguez.

Tennis players Steve Johnson and John Isner had already been announ-ced as investors.

The investment was long an object of speculation, and Runa co-founder and CEO Tyler Gage had even taken time from the Expo West floor to head to a meeting with DiCaprio during the March event.

DiCaprio’s stake in the company wasn’t revealed, but he wasn’t making the deal to make a profit: according to an announcement from the company, the actor will eventually donate his shares to indigenous community groups in the Amazon rainforest, the source of Runa’s key ingredient, guayusa leaf.

DiCaprio is also joining the company’s advisory board.

Meanwhile, Runa also revealed another key hire, adding former Smartwater senior brand manager Kavita Patel as brand director. Patel had worked in a similar role, most recently, at chocolate brand Barkthins.


REGULATION 1

FDA Changes Nutrition Facts Labels….

The U.S. Food and Drug Administration (FDA) recently pulled back the curtain on an updated Nutrition Facts panel that will appear on nearly all packaged food and beverage products sold in the United States.

The FDA revealed the new labels in a press release in which First Lady Michelle Obama – who has played an active role in efforts to update the Nutrition Facts panel since 2014 – said the label changes “make a real difference in providing families across the country information they need to make healthy choices.”

At first glance, the most pronounced change to the panel is a bolder, highlighted calorie count, which now appears even larger than the Nutrition Facts header. Other significant changes, particularly relevant to the beverage industry, include a newly introduced requirement for companies to list added sugars and revised serving sizes from 8 to 12 ounces.

Justin Prochnow, a regulatory attorney and partner at Greenberg Traurig, said he could see the effect of the new labels resulting in beverage companies moving into smaller container sizes.

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“Right now you have products in 24 oz. cans that are listed as three servings but that’s going to be a single serving container now,” said Prochnow. “Companies are going to have to declare the calories of all 24 ounces and they’re not going to want to list 360 calories on their cans.”

The Center for Science in the Public Interest came out in support of the label revisions in a statement, with CSPI president Michael F. Jacobson saying the new labels “should spur manufacturers to add less sugar to their products.” Jacobson also championed the First Lady’s efforts to spearhead the initiative, adding that “Americans concerned about nutrition and their health owe a special debt of gratitude to the First Lady of the United States.”

Food industry trade group the Grocery Manufacturers Association (GMA) also seems to have accepted the new requirements. GMA science officer Dr. Leon Bruner called the update “timely, as diets, eating patterns and consumer preferences have changed dramatically since the Nutrition Facts panel was first introduced [in 1993].” Still, Bruner noted that consumers may be confused by some of the changes and that the transition will require “a robust consumer education effort.”

Meanwhile, The Sugar Association expressed its disappointment in the FDA in a statement on its site.

“The extraordinary contradictions and irregularities, as well as the lack of scientific justification in this rulemaking process are unprecedented for the FDA. We are concerned that the ruling sets a dangerous precedent that is not grounded in science, and could actually deter us from our shared goal of a healthier America.”

Companies have until July 26, 2018 to implement the new Nutrition Facts labels in their packaging. Companies with annual revenues of less than $10 million will have an additional year to transition.


REGULATION 2

….and Decries Evaporated Cane Juice

In late May, the FDA released its final guidance regarding use of the controversial term “evaporated cane juice,” having deemed it to be “false or misleading.” The agency recommends that food and beverage companies that list evaporated cane juice as an ingredient instead use “sugar” and optionally accompany it with “a truthful, non-misleading descriptor to distinguish the ingredient from other cane-based sweeteners.”

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The FDA’s guidance comes seven years after it published initial labeling guidance regarding evaporated cane juice, an ingredient that is commonly described as a sweetener derived from the fluid extract of sugarcane; marketers claim that evaporated cane juice is processed differently than sugar. At the time, the agency stated that the term is “not the common or usual name of any type of sweetener, including dried cane syrup,”

Despite its stance, FDA noted that the guidance does “not establish legally enforceable responsibilities” and “should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited.”

Nevertheless, the FDA’s position on evaporated cane juice has been a point of focus in several class action lawsuits launched since the agency’s draft guidance was published in 2009. Beverage makers including Reed’s, Odwalla, Zola, Steaz and Santa Cruz Organic have faced lawsuits regarding labeling of evaporated cane juice. In most cases, plaintiffs claim that consumers are being misled into thinking that evaporated cane juice is a healthier option than sugar.

In a high-profile case involving super-premium juice brand Odwalla, the judge in the case chose to postpone the lawsuit until the FDA issued its final guidance. In 2014, United States District Court Judge Yvonne Gonzalez Rogers stated that in the case of Reese v. Odwalla, “any final pronouncement by the FDA in connection with that process almost certainly would have an effect on the issues in litigation here.”


DISTRIBUTION

News From the Allied Brands Front

In the last few months, Dr Pepper Snapple Group has added Core Hydration to its allied brands portfolio, a move that will significantly expand distribution for the premium water brand.

The announcement follows a successful test in which DPSG distributed Core in Northern California, parts of Nevada and western Pennsylvania beginning in September, 2015. Core president and operating manager Paul Nadel said that the goal of the trial was “to see how the two companies interacted” and evaluate potential for a larger partnership.

“We kind of blew the doors off, especially in Northern California, so then it was just a conversation of ‘where do we go next?’” Nadel said. “Our target for [DPSG] are areas that we have no distribution agreements in place.”

As such, the deal with DPSG will not affect agreements with other Core wholesalers, which include Haralambos, Lenore, Columbia, Nevada Beverage and Kalil on the West Coast, and Big Geyser, Honickman Canada Dry, Polar and others on the East Coast. The deal does not include distribution of Core’s Organics brand, a line of five-calorie flavored water and juice blends, which was introduced in December.

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DPSG will continue to manage Core Hydration, which is marketed as having a “perfect pH” of 7.4, in the trial markets. The beverage giant recently began distributing Core in Texas and Florida and will launch Core in other adjacent territories, including southern states, in the coming months.

In DPSG’s earnings call for the first quarter of 2016, CFO Marty Ellen praised the addition of Core to the company’s allied brands portfolio, which includes Vita Coco, Bai, Body Armor and High Brew Coffee. He called Core a brand that has strong market potential and is gaining traction amid a burgeoning and fast-growing category.

“It’s a somewhat crowded category, but some would say you can’t have [enough] waters, given the growth in that category,” Ellen said. “And it should remind everybody here that this strategy enables us to move with the consumer quickly, quicker than we believe we could do on our own. And we think we’re taking advantage of that.”

As to the potential for adding more brands to DPSG’s allied brands portfolio, Ellen said there’s “probably more than two dozen opportunities” available. He explained that “the whole strategy [for the portfolio] is about capturing the passionate spirit of these people, and bring something to the party that they absolutely need and we need.”

“This is about innovating with a very, very fast-changing consumer,” he said. “And while we are getting growth in some it these categories today, and that’s really good, we’ll see where the growth curves go. Some may fade over time, just because consumers change over time and they’re changing quickly.”


BIG TIME TEAMUP

Starbucks and Anheuser-Busch InBev recently announced a partnership to manufacture and distribute a ready-to-drink bottled tea under the Starbucks-owned Teavana brand, which Starbucks acquired in 2012 for $620 million. The product is slated to launch in the first half of 2017.

The division of labor for the joint venture will see Starbucks “contribute Teavana’s tea expertise, industry-leading retail activation, and consumer engagement capabilities,” while Anheuser-Busch “leads production, bottling and distribution to retailers nationwide,” the two companies revealed via press release.

“Tea has been an important part of Starbucks heritage since we opened our doors as Starbucks Coffee, Tea and Spices in the Pike Place Market in 1971,” said Starbucks CEO Howard Schultz. “When we acquired Teavana in 2012, we saw a unique opportunity to do for tea what Starbucks has done for coffee and expand the Teavana brand across many customer experiences and products. We are excited to work with Anheuser-Busch to unlock the premium ready-to-drink market and further grow demand for the Teavana brand.”

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Schultz discussed the alliance further in a conference call, saying that the company elected to look outside of its longstanding relationship with PepsiCo – the companies sell both bottled coffees and Starbucks-owned Tazo teas jointly — for the launch of RTD Teavana due to PepsiCo’s existing Pepsi-Lipton Tea partnership with with Unilever. Schultz also championed the power of Anheuser-Busch’s distribution capabilities, pointing to A-B’s ability to access more than 300,000 retail accounts on a weekly basis.

“[We’ll have] more points of distribution than we have with Frappuccino, which is well over $1 billion in sales,” Schultz added. “There is a great demand for this product and we are sitting on a very large category.”

Also on the call was Anheuser-Busch CEO Carlos Brito, who indicated that the partnership with Starbucks to produce a premium bottled tea represented the company’s shift towards higher-end craft products.

This isn’t the first time AB-InBev has tried to make a run at the premium tea or the non-alcoholic beverage segment overall. In 2009, under its 9th Street Beverage incubator, the company launched Paradise Key, a tea brand it developed with Jimmy Buffet property Margaritaville. AB-InBev has also had a longstanding relationship with Monster Energy that has eroded as that company has moved its products into the Coca-Cola distribution network.