Beverage Industry

Industry Issues

April 1, 2006

Sports Drinks Duke it out
Coca-Cola’s Powerade and Pepsi-Cola’s Gatorade went head to head last month in a lawsuit over brand advertising. At issue was a Powerade Option ad that featured a “drag race” between horse-drawn carts, one of which was carrying 10 bales of hay and the other 50. The message was that 10-calorie Option allowed the 10-bale horse to win the race over the 50-calorie competitor.
The lawsuit argued the ad sent the message that Powerade was more effective as a sports drink, as well as containing fewer calories. The matter was resolved in a matter of days, with Coca-Cola agreeing to modify the ad.  BI
Constellation adds winemaker
Constellation Brands will acquire Canada’s Vincor International for $1.1 billion. Constellation had dropped out of the bidding for Vincor in December, but brokered a deal that included $1.09 billion in cash, plus the assumption of about $220 million in debt. The transaction is expected to close in June.
Based near Toronto, Vincor is the fourth-largest wine producer in North America, with operations in Canada, California, Washington state, New Zealand, Australia and South Africa. Brands include Inniskillin, Jackson-Triggs, Toasted Hea and Kumala. Constellation is expected to allow the company to be managed as a separate entity.  BI
FDA responds to benzene questions
The U.S. Food and Drug Administration responded last month to concerns about the potential for benzene to form in some soft drinks. The FDA indicated that around 1990 it was informed that benzene, a carcinogen, could form at the parts-per-billion level in some beverages that contain benzoate preservatives and ascorbic acid. Elevated temperatures and light could stimulate the formation, it said, while sugar and EDTA salts inhibit benzene formation.
Last November, the FDA again looked at laboratory results reporting low levels of benzene in soft drinks, and began collecting  and analyzing a sample of beverages. It concluded “from this limited survey, the vast majority of beverages sampled (including those containing both benzoate preservative  and ascorbic acid) contain either no detectable benzene or levels below the 5 ppb limit for drinking water, and do not suggest a safety concern.”
The FDA says it will continue to sample beverages to gain more representative data, and will release results at a future date. It also is in contact with manufacturers and industry trade groups, and has followed up with the companies whose samples it tested for benzene. BI
A-B dispels acquisition rumor
Anheuser-Busch and Monster Energy Drink maker Hansen Natural Corp. are said to be partnering on the development of a new product, and possible distribution agreement, but A-B recently tried to quiet rumors that it is looking to buy Corona, Calif.-based Hansen.
“We’ve obviously been looking at this energy drink category to become a more meaningful player, but not through acquisition,” August Busch IV told the St. Louis Post-Dispatch.
Citigroup analyst Bonnie Herzog commented on the potential partnership in a recent report, saying it, “demonstrates that A-B is willing to add higher margin products that will help distributors’ profits. Last year, many distributors indicated that without new age beverages, they may have been unprofitable due to the heavy discounting by brewers last year.” BI
Coca-Cola, P&G settle suit
Procter & Gamble Co. and The Coca-Cola Co. have settled two patent infringement lawsuits, one of which involved a P&G patent relating to the calcium fortification of orange juice, and the second to a preservative system used in a number of non-carbonated Coca-Cola products. Terms of the settlement were not disclosed, but it allows Coca-Cola to continue selling its calcium-fortified juices and to use P&G’s patented preservative technology in certain non-carbonated Coca-Cola products.
“We are very pleased with the terms of the agreement and that we could resolve this amicably,” said Jeff Weedman, vice president of P&G’s external business development organization. “P&G is proud that our technology is helping to meet the needs of consumers by being used in some of Coke’s products.” BI
IBWA seeks the year’s best
The International Bottled Water Association (IBWA) has opened the nomination process for the 2006 IBWA Aqua, Route Salesperson of the Year, and Plant Manager of the Year Awards. The winner of each award will be announced during an awards presentation ceremony at the 2006 IBWA Convention and Trade Show, to be held in Las Vegas at the Mandalay Bay Resort and Casino from Oct. 3-6, 2006.
The 2006 Aqua Award will recognize outstanding contributions by IBWA bottler and supplier companies in advertising, marketing and public relations. Award categories include television advertisements, radio advertisements, Web sites, point-of-purchase advertisements, public relations campaigns and vehicle advertisements. The Route Salesperson of the Year Award recognizes the non-management route salesperson who has excelled at customer service in the delivery of bottled water. Plant Manager of the Year is for those plant managers who achieve the business goals and objectives of his/her company.
Award entries will be accepted through July 5, 2006, and all awards will have small, medium and large company divisions. For more information or to make a nomination, visit IBWA’s Convention and Trade Show Web site at bottledwater.org. BI
Penn Brewery celebrates 20th anniversary
Penn Brewery, Pittsburgh, is marking its 20th birthday with a brewery expansion that will allow it to increase production 100 percent. The brewery recently added six new beer tanks, each able to hold 2,500 gallons of beer, plans to install a new bottling line, and upgrade most of the support systems. With the expansion, the company hopes to increase sales to 30,000 barrels by 2010.  BI
GO FIGURE
2
Trillions of dollars in annual income earned by baby boomers, according to North Castle Partners’ Perspectives: Insights on Healthy Living and Aging. Boomers represent 50 percent of all discretionary spending power.
3.7
Percent of the specialty coffee market, such as Frappuccios and flavored iced coffees, held by teenagers, according to the NPD Group and reported by the Atlanta Journal Constitution. Teens account for only 1.3 percent of plain coffee consumption. NPD attributes the interest in coffee drinks to the popularity of coffee shops as hangouts.
66.7
Percent of food retailers who expressed an interest in developing a gourmet/specialty niche format in their stores, according to the Food Marketing Institute. Natural and organic concepts followed, with 50 percent interest, and ethnic store concepts round out the top three, with 25 percent.
71
Percent of U.S. men considered
overweight, up from 67 percent in 2000, according to CNN.com. Thirty-one percent of U.S. men are obese, up from 27.5 percent. The number of overweight and obese women remained steady at 62 and 33 percent, respectively. Experts say this may indicate a turning point in the obesity epidemic, as women are often responsible for household nutrition.
441
Millions of gallons in California wine sales in 2005, according to a Gomberg-Fredrikson Report.
30,000
The stated store goal of Starbucks, but a recent Reuters report speculates the company could soon raise that goal, with the potential for that many stores in its international markets alone. The United States, it says, has room for as many as 22,000 locations.