InterBev 2015: Different Points of Emphasis for the Big 3
By Howard Telford – Senior Beverages Analyst
This past week, the InterBev 2015 trade show was held in Chicago, in conjunction with FMI Connect 2015 (Food Marketing Institute) and United Fresh. Euromonitor International, a media partner of the event, also attended the show.
Prominent among event exhibitors were familiar soft drinks companies, as well as smaller players in the world of soft drinks manufacturing, packaging and retailing. A variety of new products and retail strategies were on display, as beverage companies sought to convince their grocery retail partners of the strong role that branded, packaged beverages can continue to play in the store. A common emphasis on healthier, lower calorie options is not new or surprising, but each of the so-called “big 3” in US soft drinks had their own particular spin on tackling the problems plaguing the soft drinks industry in 2015.
PepsiCo’s aggressive, multipronged US innovation strategy continues at an impressive pace, across beverages and packaged snacks, in both retail and foodservice channels. At InterBev/FMI, the company offered an array of samples and new products for attendees, stressing the synergies between its snacks and beverages portfolios. The company boasts that its successful new brands and SKUs have lifted overall retail sales for the company in the US.
There is no single, common point of focus for PepsiCo in terms of consumer drivers or consumer base, with a diverse range of products reflecting many new (and sometimes disparate) consumer trends. Starbucks Doubleshot Coffee and Protein was on prominent display, a product seeking to combine the twin growth categories of RTD iced coffee and protein beverages. The company has had recent success with the Starbucks brand partnership in bringing indulgent, sweetened RTD Frappuccino beverages to retail channels. Tropicana Farmstand, first launched in Walmart in Dec 2012 and into other stores in early 2013, remains a focus of the Tropicana label with a new attempt to bring “green” juices (Tropical and Apple Blend juices mixed with green vegetables) in to the mass market under the mainstream Tropicana banner, while maintaining a premium price position over traditional juice. At the super premium end of the juice segment, Naked Juice is set to see launches in beet juice (Bright Beets) as well as chia juice mixes.
Samples of these healthier, premium products sit on the demo table next to Mountain Dew Baja Blast (a high growth limited-time launch in 2014) and new flavours of the company’s hit Mountain Dew Kickstart – cups of neon green and orange soda in brightly coloured packaging that seem slightly incongruous on a table with Naked 100% NFC juices and Quaker Oats granola bars. The only commonality might be strong sales growth. PepsiCo’s blistering innovation strategy could easily seem frenetic and scattershot, but may be an accurate reflection of the frequently confused and capricious habits of the US beverage consumer. In reality, different consumer segments within the population are exhibiting very different preferences in their soft drinks selection, with Pepsi’s new product launches and flavours seeking to appeal to very different ends of the spectrum.
The Coca-Cola Company seemingly had fewer new products to display, with product sampling of Fairlife high-protein milk (launched nationally in November 2014), zero calorie Dasani Sparkling water (launched in March 2014), Glaceau Fruitwater (launched March 2013) and a special focus on Gold Peak and Honest Tea flavour launches in foodservice channels. However, if PepsiCo’ s focus at the show was on an ever wider net of product innovation, Coca-Cola had more interest in advocating for increasing daily consumption occasions with consumers (particularly millenials) and smaller, tactical adjustments to merchandising and point-of-sale retailing rather than wholesale changes to product formulas and new brand introductions. One particular focus for Coca-Cola at the show was the push for new centre-store beverage strategies for grocery retail partners. In the US, non-alcoholic beverages are usually afforded considerable centre-store shelf space in supermarkets and hypermarkets, with a large but static space for the declining carbonates category. The company’s booth showed images of a reimagined, flexible, modular centre-store display for its Coca-Cola branded carbonate products, allowing retailers greater flexibility with the merchandising of seasonal promotions, limited-time offers and a wider range of package mix to appeal to consumer desires for smaller portions and lower price points. Coca-Cola’s merchandising first approach to category growth was substantiated with survey insights on the impulsive nature of Millenial purchasing habits and the company’s own data on the efficacy of recent promotions and in-store materials in reaching this valuable consumer group. The company suggested an 11% overall volume lift resulted from the prominent “Share-a-Coke” packaging promotion in the US, a campaign that remains a big push for the company’s cola in 2015. Overall sales of 20oz PET packaging increased by 19%, which Coca-Cola claims is the largest such increase in the company’s history.
If PepsiCo’s innovation-led strategy in soft drinks runs the risk of seeming haphazard, then it may be fair to wonder whether the retail-led approach of Coca-Cola fully reflects the realities of a sustained negative sentiment on the part of consumers towards many beverage brands (and the companies that produce them). This remains an important, open question in US soft drinks: Do products need to fundamentally change and refresh to meet consumer demands? Does Pepsi’s decision this spring to remove aspartame from its Diet Pepsi formula in the US represent a reasonable response to a real, long-term consumer trend or a kneejerk response to online chatter? Are existing portfolios of products simply in need of better packaging, merchandising and promotion? Does the volume lift resulting from the “Share-a-Coke” campaign represent a sustainable growth story, or a temporary fad?
For its part, Dr Pepper/Snapple Group (DPS) has placed its focus on winning new consumer demographics, realigning (if not exactly innovating) existing brands to reflect changing consumer US demographics. Peñafiel, a Mexican-produced flavoured mineral water, is a success story for the company that was front and centre at the company’s InterBev booth (seemingly at the expense of the Dr Pepper/7-Up mid calorie carbonates range, a previous focus for the company). The flavoured, carbonated, sweetened Peñafiel “water” was brought to the US in late 2014 with a focus on expanding distribution in regional US markets containing significant Mexican immigrant populations. This is not a new brand in the company’s global portfolio, but a new introduction for US retailers. The expansion of Peñafiel represents a targeted, low-cost, brand-driven approach that can increase incremental sales without major research and development or marketing investment. The smaller scale approach has proven successful to date, with the company reporting double-digit US growth for Peñafiel in 2014.