Gerry’s Insights: Fall Excitement

Journalists of a certain age – those of us who use “TK” as a placeholder for a name or word we’ll plug in later (maybe), or who end our articles with “-30-,” or who recall literally cutting-and-pasting articles together using those indispensable pre-digital tools, the metal rule and glue pot – often were drawn to the profession by the romance of datelines like “BEIRUT, Lebanon” or “DIEN BEN PHU, Vietnam” or “DURBAN, South Africa.” And who could resist the allure of those “I’m out there somewhere” datelines that we’d encounter in our modern history and current affairs classes, along the lines of “ABOARD PRESIDENT ROOSEVELT’S FUNERAL TRAIN” or “SOUTH OF CAPE HORN, STEAMING TOWARD MUMBAI” or “BIVOUACKING WITH CASTRO’S REBELS IN THE SIERRA MAESTRA MOUNTAINS”? During my childhood in a placid but dull New York neighborhood, frying up some frijoles with Fidel in the underbrush seemed like a heady escape.

Though I’ve thoroughly enjoyed my career (and am sorry few in today’s generation have an equal chance of making a living pursuing it), my lot proved not to be the thrilling escapades of a foreign correspondent but the more prosaic career of a business writer chained for long hours to various desks around New York. These days, to buoy my spirits, I occasionally offer up a dateline like “AT WHOLE FOODS’ FLAGSHIP STORE IN AUSTIN, MARCHING FROM THE BIKE REPAIR WALL TO THE COLD-PRESSED JUICE COOLER,” but it never gets past the copy editors. Still, that’s not to say I don’t cover a supremely exciting business, one with more than its share of romance and allure and drama. As we head into the fall trade-show frenzy, when beverage marketers start to show their hand for 2020, I thought I’d offer up some plotlines – and datelines – that are getting my juices flowing.

DATELINE: LA CROIX. The sparkling water juggernaut is subsiding but what will replace it? National Beverage is confronting any number of challenges on its one-time wonder brand La Croix, from bad PR to an underdeveloped DSD presence. Still, I think a lot of it is simply consumer boredom: La Croix provided a charming escape from CSDs, but its thin flavor may be incurring palate fatigue in some users. So what’s going to pick up the slack? Obviously, it’s already drawn an array of copycats, notably Pepsi’s Bubly. Or will there be another turn of the screw as marketers look to liven up the impact? A richer flavor palate, as with Waterloo, or a hint of caffeine as with Limitless and New Wave and Avitae? A tea base, as with Sound? Many marketers struggling to grow in their core categories are viewing lighter, sparkling extensions as a solution. It will be fascinating to see how this sweepstakes plays out. It’s not out of the question, of course, that National itself will pull a rabbit out of a hat and find a way to reinvigorate La Croix.

DATELINE: CAFFEINE. Where does an intensifying arms race end up? As I often remind my newsletter readers, it wasn’t that many years ago that the leaders of the biggest energy drink companies were avowing on Capitol Hill that they would keep their caffeine payloads modest, amid a furor over whether energy drinks, and caffeine more broadly, are dangerous, particularly to young consumers. That was definitely then. Since then we’ve seen the spectacular success of Bang Energy inaugurate a caffeine race that’s brought responses from Pepsi/Rockstar, Pepsi/Starbucks, Coca-Cola/Monster and a flock of smaller players. (So far, Red Bull has stood pat.) Where is this headed? (Some answers should be visible at the NACS convenience store show next month.) Are the energy marketers at risk of prompting another backlash?

DATELINE: PLASTIC. How extensive will the bottle backlash become? In the wake of the 2007/8 near-depression, bottled water found itself in a perfect storm, as consumers curtailed their discretionary spending and high-end restaurants made a show of ousting their bottled waters on sustainability grounds. It didn’t last long, and soon premium waters were the envy of the beverage sector. Now another backlash is looming, starting at corporate campuses, not just of tech players like LinkedIn but even blue-chip players like JP Morgan. Is it for real this time? And if it is, what are the options? Glass poses its liabilities in terms of breakage, shipping weight and cost, and cans haven’t completely solved the problem of BPA in their linings. (Besides, with sparkling waters, hard seltzers and canned wines all surging, there’s barely any capacity available for canned products.) Lightweighting plastic bottles is only a half-step forward, just as natural gas is only a half-step in the direction of eliminating carbon from our fuel sources. Will any real solutions emerge? Or will consumers turn to other concerns and forget about it again?

DATELINE: KOMBUCHA. Will producers get their act together? Kombucha is a great segment, but it’s riven lately by factionalism, as category pioneer GT Dave lashes out at his newer competitors as inauthentic, and everyone maneuvers around the destabilizing issues of alcohol and whether or not essentially shelf-stable products can still be claimed to be “raw.” An effort by the trade association to devise a Standard of Identity seems only to have further inflamed views. And I notice that hardly any journalists (certainly not myself) ever are allowed into a kombucha production facility, whether for competitive reasons or something else. (It would be easier to flag down a donkey for a ride up into the Sierra Maestra.) It sure would be nice if the industry could get on the same page on transparency and equitable standards and really start to accelerate.

DATELINE: THE BIG GUYS. Will their M&A spree continue? So far, we’ve seen a lot of ingenuity from the big beverage players as they deploy incubation investments, accelerator arms and outright acquisitions to boost their toplines, but not so much in the way of results. These efforts bring them enough relevance to muddle along, but nobody can claim to have cracked the code of consistent innovation. With results so tepid, will the pendulum swing back from today’s “M&A is the new R&D” to more internalized efforts at innovation? Or is the current system good enough, as the major players focus on price realization and other measures of success?

Longtime beverage-watcher Gerry Khermouchis is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.