Beverage world 2009

World Fair for Beverage and Liquid Food Technology

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USA:Ms. Anika Niebuhr . Tel. 646-437-1014 . Fax 212-262-6519 . [email protected]

14–19 September 2009

New Munich Trade Fair Centre

Dt09_BevWo_1_212,7x273_US 1 29.08.2008 13:04:17 Uhr

BEVERAGEWORLDBEVERAGEWORLD

JACK OWOC, CEO, CSO of VPX Sports/Redline Energy

»Shotin the Armin the Arm

INTELLIGENCE FOR THE GLOBAL DRINKS BUSINESS APRIL 15, 2009

All signs are pointing to a potential successstory for energy shots.

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State of theIndustry ’09

State of theIndustry ’09»»

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“Consumers are demanding a solution that allows them tomanage their ‘hollow’ and often unhealthy snacking in theafternoon while maintaining the great fresh tasting productprofile of mainstream beverages,” Karl Gradon, vice presidentof product innovation for Fonterra USA, says. “They want tostay full until their next meal without reaching for the candybar. Consumers are not willing to compromise on taste justbecause of the amazing benefits that this can deliver.”

The satiety water beverage comes in flavors Lemon &Lime, Tangerine and Berry. Sweetened with sucralose andacesulfame potassium (Ace-K), WH2OLE only has 30 caloriesper serving, and has as much protein as a banana, almost asmuch fiber and one-fourth the calories of a banana.

Fonterra has a brand portfolio of New Zealand, Australianand international household names and annual revenue ofNZ$1.4 billion, yet with global demand for dairy declining,the company was seeking ways to develop new brands andtake advantage of its existing functional ingredients.

The company enlisted the help of New York, N.Y.-based

NEW ZEALAND/AUSTRALIA

Fahrenheit 212, an innovation consultancy, to uncover hid-den assets, in this case, an underleveraged technology in theform of a clear, taste-neutral whey protein isolate part of thecompany’s existing ingredients portfolio. When added towater, the ingredient could offer satiety benefits. Fonterrathen had to develop a brand around that benefit and so wasborn WH2OLE. The company eventually plans to launch theproduct globally.

The whey protein isolate ingredient, branded as ClearProtein, allows WH2OLE to provide five grams of protein(or 10 percent of the recommended daily intake) and 1.5grams of fiber (or 5 percent of the RDI) per 500 ml serving.Gradon notes that Clear Protein is the culmination of adecade of research as Fonterra is a pioneer in dairy anddairy flavor technology.

“Clear Protein delivers a shot of hunger-satisfying proteinwith an amazingly clean flavor profile without the milky or‘cardboard’ overtones of protein alternatives,” says Gradon.“Cutting edge patented and protected

WORLDBEATWORLDBEATnews and analysis from a global perspective

4_BEVERAGE WORLD_ APRIL 2009 BEVERAGEWORLD.COM

One of the world’s largest dairy companies branches out into new territory with aninnovative protein and fiber-enhanced water.

by heather landis weight management becomes an increasingly impor-

tant consumer need on a global scale, New Zealand-

based Fonterra, the world’s largest dairy exporter,

found a way to leverage its greatest asset—dairy-

based ingredients—to launch a new product in the ever-growing

functional water market. WH2OLE, a functional water fortified

with fiber and protein, hit the New Zealand market last month

marketed as a beverage product to help bridge the hunger gap

between meals.

A

A Whole New Market

FONTERRA’S WH2OLE, fortified with fiber and protein,is designed to promote satiety.

»

» CONTINUED ON PAGE 6

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[WORLDBEAT]

technology, unique to Fonterra, has been applied to the pro-cessing of the product in not only the manufacturingprocess, but also the bottling plant to make it clear and sta-ble for the entire shelf life and to remove the poor flavornotes.”

The company is now in the interesting position of beinga dairy exporter and producer as well as a marketer of thedairy ingredient Clear Protein and a player in the growingfunctional water category.

“As the leading global dairy ingredients solutionprovider, Fonterra is already working with a number ofcompanies globally to take the ingredient solution to mar-ket. Our focus has largely been on Japan, Korea, the US andEurope as these countries have high awareness for such agreat-tasting weight management product,” Gradon says.

The 2009 Australian wine grape harvest is estimated to fall 11percent from last year, although notas badly as predicted given heatwaves across southeasternAustralia, the Victorian bushfiresand Queensland’s floods.

The estimated 11 percent dropwould make the 2009 harvest,which is now half complete, wellbelow the record 2005 harvest of1.93 metric tons, but well abovethe drought and frost-affected2007 harvest of 1.34 metric tons,the Australian Wine and BrandyCorp. (AWBC) reports.

Seasonal conditions are mainlyresponsible for lower yields. Therelatively cooler conditions in November hampered floweringand fruit set, while a heat event in late January resulted inlower yields in heat-affected regions.

The AWBC says the full impact of the recent Victorian bush-fires is not yet known. Media reports indicate wildfire damageto Australia’s Yarra Valley region affected more than 350 acresof vineyards, with 29 wineries suffering damage.

“The current prospects of a below-average-yielding seasonwill be viewed with some relief at a whole-of-industry levelbecause of current high stock levels. While a low season mayimply some shortening in the availability of some varieties on aregion-by-region basis, current high stock levels mean thatAustralian wine supply is not threatened.”

2009 Wine Grape HarvestExpected to Fall

BW

A Whole New Market» CONTINUED FROM PAGE 4

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FEATURES

State of the Industry Report 2009S1

8_BEVERAGE WORLD_APRIL 2009 BEVERAGEWORLD.COM

[ APRIL2009 ]Volume 128 • Number 4 • Issue 1797

WORLDBEAT4 Fonterra’s

Functional Water

BEVBEAT12 Eco-Friendly

Launches16 New Beverage

Roundup

UPCLOSE WITH...61 Jarboe Sales Co.63 Boisset Family

Estates66 Gusto Brands Inc.68 Primo Water Corp.

BEVSOLUTIONSProduction69 Aseptic Filling

R&D72 Antioxidant Update

Packaging76 Bioplastics Update

Supply Chain78 Learning the Lingo

Cover Story: Pure Performance They’re petite, portable, powerful and pricey: energy shots are the next wave of energy consumption.

20

DEPARTMENTS

Beverage World Vol. 128, No. 4 (ISSN 0098-2318, USPS 526-550) is published monthly by Ideal Media LLC., 303 East Wacker Drive, 21st Floor, Chicago, IL 60601. Tel: 312-456-2822. Subscription rates for US: $89.00/one year, $139.00/twoyears, $189.00/three years. Single copies: $10.00; Canada: $99.00/one year, $159.00/two years, $209.00/three years, Single copies: $15.00; All other countries: $159.00/one year, $229.00/two years, $279.00/three years. Single copies $15.00.Periodicals postage for Beverage World paid at Chicago, IL, and additional mailing offices. Canada Post Publications Mail Agreement No. 40031729. Return undeliverable Canadian addresses to:Deutsche Post Global Mail, 4960-1 Walker Road, Windsor, ON N91 6J3. POSTMASTER: Please send address changes to Beverage World, Subscription Services, P.O. Box 2054, Skokie, IL 60076.

Distribution82 Fleet of the Month: Biagi Bros.

New and Expanded Truck Trend SurveyPart 1 of our newly enhanced 26th Annual Truck Trends Survey shows an evolution in fleet buying plans.

54

S2 Carbonated Soft DrinksS8 Bottled Water

S10 Energy DrinksS14 RTD Tea

S18 Functional DrinksS20 BeerS23 SpiritsS24 Wine

PLUS10 Editor’s Note 71 Operations Observations84 Road Ways85 BevSource88 Classifieds89 Event Calendar90 Ad Index

TECHNOLOGY • CREATIVITY • INNOVATION

Robertet is a closely-held multinational company whose vision is long-term and

whose technologies are focused on the flavors and aromas that nature always

intended. For all of your flavor needs, call Robertet at 732-981-8300, or send

an email to [email protected].

Bringingnatural flavorsinto focus.

[EDITOR’SNOTE]

April has become a bit like Super Bowl season around here at Beverage World.Those of you who read my column last month know, of course, thatBevOps/Beverage Fleet Summit happens this month. Besides that, it’s also time forthat other official Beverage World rite of spring, the State of the Industry Report(props to the BW edit staff for turning in another fine report).

As one likely would surmise, good performance in the current economic climate(if I had a nickel for every time I’ve read or written that three-word phrase…) isnot so much “good” as it is “less bad.” So in that regard, overall liquid refreshmentbeverages (LRBs) really held their own. Still, it’s hard to sugar-coat the fact thatLRB volume was down about 2 percent, according to Beverage MarketingCorporation, the first volume decline for overall LRBs.

Even once-juggernaut bottled water was down 1 percent. The single-serve PETsegment, which had been the big growth driver of the category, posting double-digit gains in previous years, was essentially flat in 2008 with a gain of only 0.3percent. Bottled water certainly is a category that’s had a number of factors work-ing against it. First, of course is the economic issue. Consumers might be substi-tuting tap for bottled when they’re trying to trim daily costs. Then there’s theenvironmental issue. When people are trying to tighten their belts, they might bemore willing to believe negative environmental claims put forth by certain groupsand city officials (I’ve written about that issue in this space on numerous occa-sions and you pretty much know BeverageWorld’s take on this issue).

But enough about the bad and the ugly, let’stalk about the good. And there’s plenty of it.There was an 8.3 percent volume boost for fla-vored and enhanced waters. There was an evenhigher gain for energy drinks, 9 percent, continu-ing to prove that category’s viability. Granted,both categories are only a relatively small portionof the whole LRB picture, but when you considerthe premium that consumers usually pay forthose beverages, above and beyond what they’dpay for, say, CSDs, it shows that there is quite a bitof resilience in the US beverage market.

And if that’s not convincing enough, let’s lookbeyond liquid refreshment toward the alcoholcategories. Overall beer volume, according to BMC, was up 0.5 percent (craft vol-ume up mid-single digits, dollars up low double-digits). Sure, it’s down a bit fromlast year’s 1.5 percent gain, but positive is positive.

Spirits posted better numbers, with a volume gain of 1.6 percent for 2008, basedon numbers reported by the Distilled Spirits Council of the US. Again, it’s a small-er bump than the past few years have yielded, but an increase is still an increase.

Of course, most of those alcohol gains are coming from off-premise sales, as on-premise channels have been hit pretty hard by the economic downturn. But we’refocusing on the positive here—and the bottom line is when times are tough, it’snot a bad thing to be a part of the beverage business.

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Springing Forward

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EDITORIALJeff Cioletti, Editor-In-Chief

+1.646.708.7303 [email protected] Kaplan, Managing Editor

+1.646.708.7301 [email protected] Landi, Senior Editor

+1.646.708.7302 [email protected] Cirillo, Associate Editor

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ARTRosanna Bulian, Art Director


CONTRIBUTING EDITORS Michael Bellas, Tom Kelley

John Koss

EDITORIAL RESEARCH Joy Francesconi


PRODUCTIONJeff Carlson, Production Manager


E-MEDIAAmanda Westbrooks, Website Manager


GROUP DIRECTORSBarbara Killeen, Director of Operations and Research

+1.646.708.7325 [email protected] Fiden, Group Marketing Director

+1.312.447.5103 [email protected] David, Director of E-Media


SALES DEPARTMENTJeff Blanch, Northeast/Mid-Atlantic Sales Director

+1.203.739.0775 [email protected] Adams, Midwest/West Sales Director

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+49.202.271.6915 [email protected] Buccieri, Classifieds/Tele-Sales

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BEVERAGEWORLD


BW

NEW SUPER POTENT 2-OUNCE SIZE

*AC NIELSEN DATA - JUNE 2008

ENERGY SHOT

produced at the Aquafina purification center where fillingoccurs, eliminating cardboard base pads from the 24-packs, whichcontributes to saving 20 million pounds of corrugate by 2010.

“The new design leverages structural engineering, whichallows the Eco-Fina Bottle to support 50 times its weight whileoffering consumers a contemporary, attractive package thatmeets their needs,” Robert Le Bras-Brown, vice president ofpackaging innovation and development at PepsiCo, says.

Oakland, Calif., USA-based Plant It Water also launched anew “green” package in the form of a Tetra Pak recyclablecarton made from 60 percent renewable material fromsources such as plant fibers. The company says it is one of

the first companies in the US to offer natural spring water ina recyclable carton.

“By putting our spring water in a Tetra Pak carton, weoffer a ‘greener’ alternative without compromising portabili-ty, convenience and delicious taste,” Jane Goldberg, Plant ItWater CEO, says.

Outside the bottle, Pepsi also is testing climate-friendlyvending machines in the Washington, D.C. area. The “green”machines are cooled by carbon dioxide rather than hydroflu-orocarbons (HFCs), use less energy and generate 12 percentless greenhouse gas emissions than current vendingmachines, according to the company.

12_BEVERAGE WORLD_APRIL 2009

BEVBEATMARKET UPDATE

news and analysis on a changing marketBEVBEAT

everage companies are stepping up their green initiatives

with the launch of several new eco-friendly products. Last

month, Purchase, N.Y., USA-based PepsiCo debuted the

Aquafina Eco-Fina Bottle, touted as the lightest half-liter bottle of

any nationally distributed bottled water brand. Available this month,

the Eco-Fina Bottle weighs 10.9 grams as it’s made with 50 percent

less plastic than the previous half-liter Aquafina bottle.

The company estimates that the new bottle will eliminate about

75 million pounds of plastic annually. The Eco-Fina Bottle also is

Going Greener

by heather landi

BEVERAGEWORLD.COM

B

BW

INSIDE BEVBEAT

MARKET UPDATERelaxation beverage drank

signs deals with nine distributors across the US.

PAGE 15

NEW BEVERAGESFruit2O offers the

nutrition and refreshmentof real fruit to water.

PAGE 16

PEPSICO’S Aquafina Eco-FinaBottle is made with 50 percentless plastic. The company alsois testing climate-friendlyvending machines.

»

The beverage marketplace continues its commitment to the environment with several new eco-friendly product launches.

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All Sport Goes NaturalCapitalizing on the availability of an all-natural sweet-

ener from stevia, All Sport, Inc. and Dr Pepper SnappleGroup, Inc. launched All Sport Naturally Zero, a zero-calorie sports drink sweetened with rebiana. Formulatedwith electrolytes and B vitamins, All Sport Naturally Zero20-ounce bottles will beavailable this month in con-venience and gas, groceryand specialty retail channelsin three flavors: Dragon-fruit, Strawberry Star Fruitand Mandarin Orange.

Rebiana is an all-naturalzero calorie sweetenerderived from the steviaplant and was recently approved by the United StatesFood and Drug Administration for use in a variety offoods and beverages.

“We have been working diligently in our R&D center toincorporate stevia in our products and in our alliedbrands such as All Sport,” Larry Young, chief executiveofficer of Dr Pepper Snapple Group, says. “Taste is kingin the beverage industry, but for today’s consumers,health is becoming increasingly important. All SportNaturally Zero delivers a unique proposition for the mil-lions of Americans who exercise regularly and are lookingto get the most out of their workouts.”

Nestlé Waters North America, Inc. has madea US$15.6 million investment in Austin,Texas, USA-based Sweet Leaf Tea Co. DanCostello, a Nestlé Waters North Americaexecutive, will relocate to Austin, to becomepresident of Sweet Leaf Tea, reporting tocompany founder and chief executive offi-cer Clayton Christopher. Nestlé Waters alsowill add two directors to Sweet Leaf Tea’sboard of directors.

According to Christopher, the partnershipwill transform the company from a regionalbrand to one with full national distribution with-in 24 months.

“This investment speaks volumes about our enthusiasmfor the exceptional company Sweet Leaf has built, based onthe principles of quality and all-natural goodness,” TimBrown, executive vice president of retail operations, NestléWaters North America, says.

NWNA Makes a Sweet Deal

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Marketed with the tagline “Slow YourRoll,” drank relaxation beverage is tak-ing the beverage market by storm as itinks new distribution deals across theUnited States. Houston, Texas, USA-based Innovative Beverage, the makersof drank, recently announced that, as ofpress time, the company has signeddeals with Anheuser-Busch distributorsArkansas Distributing Co., GriffinBeverage Co., Mississippi Distributors,Inc., Mitchell Distributing Co. and WilFischer Companies, along with long-time Pabst Brewing Company supplierArrow Beer Distributing as well asClayton Distributing, MBC-UnitedWholesale and Select Drink.

“Distributors from across the country

are reaching outbecause they recognizethat drank is not onlythe inventor, but indus-try leader, in this newcategory of functionalbeverages,” says PeterBianchi, creator ofdrank and CEO ofInnovative Beverage.“For drank, thesestrategic alliances arean integral part of ouraggressive growth plan, allowing us tobolster our national distribution net-work. For distributors, drank is a high-margin revenue stream in a new mar-ket segment.”

Innovative Beverage’s “Slow Your Roll”Movement Gains Momentum

BW

IN MEMORIAMJames Coleman Lee, Jr., abeverage industry leader whoturned Buffalo Rock Co. into aforce in the bottling industry,passed away Feb. 28. Lee tookthe reigns as president ofBirmingham, Ala., USAbasedBuffalo Rock in 1951 andsteered the familyrun company for decades, helping it togrow into a US$500 millionoperation. After stepping downas chief executive, Lee servedas Chairman Emeritus. He alsowas an active business andcivic leader in the Birminghamarea and won numerous industry and civic awards.


An Unexpected LiqueurXanté, a spirit that has been avail-able in Europe for more than 10years, became available in the

US in February. Xanté is thecombination of pears with atouch of French cognacmatured for four years inFrench Limousine Oak barrelswith hints of vanilla. Pro-duced by Swedish distiller-ies, Xanté can be experiencedas an ultra premium shotchilled, served neat, on therocks or in a chilled martiniglass. Distributed by KindredSpirits of North America, Inc.,Xanté retails at approximatelyUS$40 for a 750 ml bottle.KindredSpiritsUSA.com

Tasting RedZT is a red tea made fromthe spiny leaves of therooibos bush that grows inthe Cederberg Mountainsof South Africa. Tea madefrom rooibos has beenprized for centuries for itscomplex flavor and good-for-you properties.Founders of ZredT, pro-ducers of ZT, were turnedon by red tea and set outto make their own organ-ic, ready-to-drink version.The Baton Rouge, La.,USA-based companylaunched ZT in four fla-vors—Unsweetened, Lemon, Vanilla and Ginseng & Honey. Theproduct is sold for a suggested retail price of US$1.79-US$1.99 inselect grocery and natural food stores nationwide. zredt.com

NEW BEVERAGES

Fruit2O Introduces Essentials Lineruit2O was introduced in 1999 asbottled water with real fruit fla-vors added. Thisyear, the same

company is bringing itsbottled water to newheights with Fruit2OEssentials, a fortifiedwater that offersthe nutrients andrefreshment of realfruit to clear water.

The concept forFruit2O Essentialsbegan when its brandteam studied the cur-rent landscape of thefortified water marketand conducted con-sumer research thatrevealed there was a

strong demand among women for afortified water with little or nocalories and easy-to-understandbenefits.

“The creation of the Fruit2OEssentials line was really in

response to a lack of better,more nutritious fortifiedwater options out there

for women,” says DavidZellen, brand manager forFruit2O.

“Many fortified watersclaim to provide importanthealth benefits, such asimmunity enhancing nutri-ents and enriched vitamins.The problem is that manyof them either don’t pro-vide meaningful, under-standable nutritional ben-

efits, or, worse yet, are loaded withextra sugar and calories,” says Zellen.

Fruit2O Essentials has no sugars orcarbohydrates and zero calories and isavailable in six flavors: CranberryRaspberry, Strawberry Kiwi, PeachMango, Citrus, Blueberry Pomegranateand Cherry Açai. Each flavor is fortifiedwith the nutrients in the amount equalto two servings of fruit.

Fruit2O Essentials will be available inmany US markets beginning thismonth. Single 18-ounce bottles will besold in grocery stores for a recommend-ed retail price of US$1.29-US$1.49, andin 15- and 20-packs at club stores for arecommended retail price of US$9.99-US$12.99.

A new Fruit2O website is slated tolaunch in May to support the launch ofEssentials. fruit2o.com

F

[BEVBEAT]


Sparkling PinkMartini & Rossi has added Martini

& Rossi Sparkling Rosé to its portfo-lio of fine wines completing its“sparkling trio,” which includes anaturally sweet Asti and an extradry Prosecco. The sparkling Rosé iscultivated in the areas of thePiedmont and Veneto regions inItaly and made with handpickedMoscato Bianco, Malvasia andBrachetto grapes. Soft pink incolor, the Rosé is characterizedby aromas that blend hints ofcitrus, elderflower andpeach with notes of wildrose, according to the com-pany. It can be paired withan assortment of foods,especially lighter flavors offruits, cheeses and fish.Martini & Rossi SparklingRosé will be available in a750 ml bottle and 187 mlfour-packs at fine wineretailers this spring. It hasa suggested retail price ofUS$12.99. martini.com

AriZona’s Electrolyte Enhanced WaterAriZona Beverage Co. ventures into a new areaof hydration with Vapor Water. AriZona has cre-ated a vapor-distilled water that infuses a blendof electrolytes, calcium, magnesium and potassi-um, the company says. This proprietary formulais designed to help increase a person’s rate ofhydration and enhance performance during phys-ical activity, without adding calories and sodium.AriZona’s Vapor Water will begin distributionnationally this winter for a suggested retail priceof US$1.59 per 33.8-ounce PET and US$1.29 per25.3-ounce PET. drinkarizona.com

Hint for KidsHint Essence Water is re-launching HintKids with new packaging and a new ingredi-ent—fluoride. Available in 11-ounce TetraPak containers, Hint Kids is available instrawberry-kiwi, tropical and watermelon.“We are thrilled to re-launch HINT Kids andgive younger ones a chance to enjoy a bev-erage that contains no calories, sugar orsweeteners,” says Kara Goldin, founder andCEO of Hint Inc. drinkhint.com

Not Just for FridayFriday Monkey wines from Australiaare made for any occasion. The newestrelease from the company is FridayMonkey Cabernet/Shiraz, which is setfor national distribution this year.The Friday Monkey line includesChardonnay, Shiraz, Merlot, Rosé,Cabernet/Merlot, Cabernet/Shirazand Cabernet Sauvignon. All thewines are available in 750 ml bot-tles with prices ranging fromUS$8.99 to US$10.99. Chardonnay,Shiraz, Merlot and CabernetSauvignon wines also are availablein 1.5-liter bottles with pricesranging from US$13.99 toUS$15.99. fridaymonkeywine.com

[BEVBEAT]

Asahi Offers A Dark BeerAsahi Breweries, Ltd. re-introduced itsAsahi Kuronama, meaning unpasteur-ized black beer. The brew, which orig-inally launched in Japan in 1995, isavailable at select retailers in the fol-lowing states: California, Nevada,Texas, New York, New Jersey,Pennsylvania, Georgia, Arizona andColorado. Brewed at the Suita Breweryin Osaka Prefecture, the oldest breweryamong Asahi’s nine breweries in Japan,Asahi Kuronama is described as having asmoky and honey-like flavor with a dis-tinct aroma. The beer is 5.3 percentalcohol by volume. asahibeerusa.com

*When combined with strength training & a low calorie diet. Use only as a dietary supplement. These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure or prevent any disease.

BEVERAGEWORLD.COM20_BEVERAGE WORLD_APRIL 2009

[COVERSTORY]

PerformancePureThey’re petite, portable, powerful and pricey: energy shotsare the next wave of energy consumption.

By Jennifer Cirillo

SOME OF THE LEADING energy shot brands are resonating with con-sumers craving an alternative way to obtain energy. These small, con-venient and potent formulations are delivering on their performancepromise resulting in a demand for them at retail. From a distributionstandpoint, energy shots create an added opportunity as they can beincorporated into a distribution operation with ease.

»

APRIL 2009_BEVERAGE WORLD_21BEVERAGEWORLD.COM

ver heard of energy sunflower seeds? How aboutenergy cookies? Or what about energy spray?Tabs, maybe? Well, they’re out there.

Energy is a need state that is being sourcedfrom everywhere—wherever you can get it andwherever you can put it. With beverages, “thenext better thing,” as Walter Orcutt, executive

vice president of NVE Pharmaceuticals, Inc., makers of 6Hour Power, refers to them, are these miniature bottles ofliquid tagged “energy shots.”

“People are always looking for the next better thing andthis might be it,” Orcutt says.

These 2- to 3-ounce bottles that are primarily sold at thefront counter of convenience stores for a premium price—around US$2.99-US$3.49—have proven to resonate withconsumers, despite their cost. Orcutt explains, “It’s a primarysale,” meaning regardless of economic climate, the productwill still be purchased.

“They’re truly a phenomenon; everyone is coming outwith one,” says Michael Bellas, chairman and CEO ofBeverage Marketing Corporation. (Red Bull even plans to

launch Red Bull Energy Shot and RedBull Sugarfree Shot this month in theUnited States.) Bellas continues, “There’sa rationale that it’s easy to consume, not

bulky and has a fast effect.” A much different consumptionexperience from the 8- or 16-ounce carbonated energy drink.

Energy shots, in the format the beverage audience is famil-iar with today, came to the forefront in 2004/2005 when thecurrent leading brand, 5-Hour Energy, began marketing itselfas an alternative way to get energy, one that takes less timeto consume and provides long-lasting energy without thesugar and only four calories.

“5-Hour Energy actually launched on a marketing platformthat competed with energy drinks—that you have all of theenergy without the crash,” says Garima Goel Lal, senior con-sumer analyst for Mintel International Group, a marketresearch firm. “When energy drinks appeared in the US, peo-ple were aware of the functional benefits, but there weresome people who were also aware that energy drinks con-tained X amount of caffeine and X amount of sugar. So,energy shots have built up on that shortcoming.”

According to Scott Henderson, president of LivingEssentials, makers of 5-Hour Energy, the company has grownfrom less than US$10 million in sales in 2005 to more thanUS$250 million for 2009 thus far. Hendersonexplains why: “The first thing is that it works.You can put anything in a nice package and sellit once, but after that, it actually has do what itpromises to do for the consumer in order for

E

them to come back and buy it over and over again.” One of the brand’s commercials claims that 2.5 million

bottles of 5-Hour Energy are purchased a week. Hendersoncomments that particular TV ad is already out-dated as salesof 5-Hour Energy have now surpassed that figure. The com-pany also is now offering Extra Strength and decaffeinatedversions, which are likely to boost sales.

Some analysts and industry leaders believe the platformenergy shots are marketed on will help grow the overallenergy category by expanding its demographics.

“From what we’ve seen, the energy shot user is definitelyslightly different from an energy drink user,” says Tutal

Rahman, brand manager of energy drinks for Fuze Beverage,makers of NOS PowerShot and PowerShot X, line extensionsof NOS Energy Drink. “They tend to be a little bit older …even a white-collar audience.”

One of the handful of reasons for this, according to GoelLal, is the distinction between some energy shots that arelabeled as dietary supplements—for example, 5-Hour Energy,6 Hour Power, and Redline Power Rush and Meltdown fat-burning shot from VPX/Redline—which might appeal moreto an older consumer.

Citing Nielsen data, Orcutt says that 6 Hour Power is thesecond best-selling energy shot brand in C-stores. VPX saw a


[COVERSTORY]

VPX Sports/Redline Energy was foundedin 1993 with the goal of creating bever-ages and supplements that worked aspharmaceuticals without the sideeffects, notes Jack Owoc, CEO and CSO.

With offices in Davie and Weston, Fla.,USA, comprising a total of 220,000 squarefeet of manufacturing, R&D, sales, ship-ping and production space, the companyformulates beverages that are gainingmomentum—the company expects toreach US$250 million in sales this year.

“VPX just puts out a super premiumproduct that retailers out here are veryreceptive to,” says Bob Groux, presidentof Coast Beverage Group, the master dis-tributor of VPX/Redline products inCalifornia.

As part of the company’s line ofsports nutrition supplements, VPX offersRedline Power Rush and Meltdown fat-burning shots, line extensions of their 8-ounce counterparts.

“Redline (the company’s 8-ounceenergy drink) and all of our otherdrinks have entirely different super

cutting-edge ingredient profilesand consumers know Redlineand our other beverages are dif-ferent when they drink them,”says Owoc. “It is the experi-ence that the consumer getsthat make VPX beveragesworth remarking about.”

In fact, Owoc says thatwith little advertising dollars

spent compared with what other leadingbrands in the segment invest, the com-pany’s beverages have gained a con-sumer following through viral marketing.

“What really separates Redline PowerRush from the other shots is that it con-tains a specialized beta amino acidcalled beta-Alanine. Beta-Alanineincreases ATP, which is your body’s natu-ral energy currency,” explains Owoc. “Italso buffers the acid within muscle soyou can play hard and longer with moreintensity no matter what you aredoing.” Redline Power Rush contains twoservings per 2.5-ounce bottle claimingseven hours of energy with 326 mg or350 mg of caffeine, depending on theflavor, zero sugar and zero carbs.

The Meltdown shot has a similaringredient profile and claims fat-burningability for more than six hours.

The company prides itself on creatingits formulations in-house. (To read about

the scientific research behindVPX/Redline products, visitvpxsports.com.) The company works witha handful of trained flavor experts aswell as half a dozen flavor companies tocome up its formulations, Owoc notes.

Before getting into beverages, VPXspecialized in liquid capsules of whatbecame Redline and Meltdown. So,when the time came to formulate thethree-capsule delivery system (or a 5 mloral dispenser) into 75 mls of liquid, thetask was “simple,” says Owoc, allowingthe company to include more activeingredients than its competitors.

“We do some really radical stuff andour facility is always open for somebodyto come and visit ... We have four facil-ities where we produce Redline and allof our products 20 hours a day in two10-hour shifts,” Owoc says. “We are try-ing to raise the bar and take everythingto the next level.” —J.C.

What a Rush

BY USING high-tech equipment to test and produce its supplements, VPX scientists are able to remainon the cutting edge.

»

more than 25 percent increase in revenue from 2007 to 2008,notes Jack Owoc, CEO and CSO of VPX Sports/Redline Energy.And Henderson, also citing Nielsen data, says that 5-HourEnergy holds a 70 percent share of the 2-ounce energy shotmarket adding that distribution of the product has expandedto include stores like The Home Depot, OfficeMax, auto repairshops and sporting goods stores.

“Pretty much anywhere there is a cash register you can sell5-Hour Energy,” says Henderson.

Demonstrating ValueCounter space at the register is prime real estate that

brand owners are battling over. Aside from commonly used12-pack pop-up display boxes, there are additional effortsbeing made to come up with new merchandizing strategies.

“That’s valuable space,” says Jeff Lenard, vice president ofcommunications for NACS (National Association ofConvenience Stores) of the counter at the register. “That’s thespace where you make your business off of. It would beimpulse [purchases] and everybody wants that space, but whogets it? You have to demonstrate your value to the retailer.”

Doug Stuart, president of Power Trip Beverages, Inc.,believes that some brand owners are going to have to give uptheir egos in order to succeed in a limited retail space. “Whatthe retailer wants to see is … who is going to offer up a rackthat competition can go on … because they are not afraid tocarry five or six different brands, but they certainly don’thave space for five or six different 12-packs,” Stuart says.

Within the next month or two, Power TripBeverages plans to introduce a plexiglass rack forthe front counter to display its Power TripVitamin Energy Shots, and other shots, that isopen through the back to help prevent theft—aconcern among retailers.

Bob Groux, president ofCoast Beverage Group, the distributor of VPX/Redlineproducts in California, saysthat he’s found success usingsuction cup racks inside cooler doors. “When you putthe suction cup rack in thedoor you can sell up to threetimes more shots becausesome people really like themcold,” he says.

Hansen’s MonsterEnergy, which launchedHitman in November2008 is working with itsdistribution partners,Anheuser-Busch andThe Coca-ColaCompany, to come up withmarketing strategies.

“I think you’ll see a whole merchandizingevolution up there that the retailer will embracebecause there are good margins for the product … and proba-bly that register space is going to evolve to accommodate themerchandizing strategies that the large companies develop,”says Mark Hall, president of Monster Energy. For Hitman,that involves hanging fixtures, standing fixtures and mini-refrigeration, notes Hall.

“This is going to become the same battle that the cooler is,”Hall says. “And you just never know who is going to win,that’s why they play the Super Bowl.”

But the game is about to change with the introduction ofRed Bull’s energy shots, which will be available nationwideby June. “Consumer research and trade feedback confirmthat the energy shots category has been waiting for a trustedpremium brand like Red Bull to enter,” says Patrice Radden,director of corporate communications for Red Bull North

America, Inc. “Red Bull Energy Shot and RedBull Sugarfree Shot are a natural extension ofthe Red Bull product portfolio, offering Red Bull

efficacy in a concentrated form.” Although the energy shot consumer is con-

sidered “different” from the energy drink con-sumer, as big energy drink brands continue tolaunch energy shot line extensions there is therisk of cannibalization.

According to a Mintel survey, 11 percent ofenergy drink users have tried energy shots andbelieve it is a better way of getting energy,reports Goel Lal. However, she offers that forcompanies like Monster or Full Throttle, forexample, that already have found acceptanceamong consumers, launching an energy shot isa way for them to keep consumers purchasing

their brands. “When a consumer needs energy they are

going to choose at that point from a variety ofoptions, between coffee, traditional soft drinks,traditional energy drinks, pills and shots, and any other delivery mechanism we come up withnext,” says Hall. “We’ve got some ideas.”

Until then, energy shots seem to be the nextbetter thing.

[COVERSTORY]


BW

TO HELP DRIVE sales, new packagingand new merchandizing strategies arebeing introduced. Hitman is offered ina two-pack, while tiered racks, likethe one displaying Full Throttle QuickShot and NOS PowerShot (top right),are being provided to retailers.

»

*When combined with strength training & a low calorie diet. Use only as a dietary supplement. These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure or prevent any disease.

1. Please check what is the primary business activity at this location. (pleasecheck ONE only)

01 Beverage Franchise Company/Importer/Brand Owner (No Production)(Go to Question 3)

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Carbonated Soft Drinks

Page S2

BeerPage S20

RTD TeaPage S14

Functional Drinks

Page S18

Bottled Water Page S8

SpiritsPage S23

Energy Drinks

Page S10

WinePage S24

BEVERAGEWORLD

State of the

IndustryReport ’09

SPONSORED BY

CSD REPORTState of the Industry ’09

ast year was marked by challenges for the UnitedStates economy and most consumer product goodsindustries, and the beverage market was not

immune. In an economic climate where consumers increas-ingly tightened their wallets, fewer beverages were beingpulled off beverage aisle shelves or ordered at restaurantsand fast food chains. The overall US liquid refreshmentbeverage (LRB) market, which includes all non-alcohol

beverages, shrank by 2 percent by volume, the firstvolume decline on record. The health and wellnesstrend that began to take shape earlier this decadecontinued to positively impact the market’s per-formance as segments like enhanced and flavoredwaters were drivers of growth. Yet the double-digit

increases witnessed in years past haveslowed considerably. “Generally, whenlooking at growth trends, the declineis slow and gradual. This past yearyou saw growth rates cut in half forthe premium LRBs and that wasshocking,” Michael Bellas, chairmanand CEO, Beverage MarketingCorporation (BMC) says. And thebeleaguered carbonated soft drink

category, which has been struggling for several years, sawits decline accelerate, charting a 3.1 percent drop in vol-ume. Even bottled water, a category with a considerablehealth halo, dropped by 1 percent, affected by the econo-my and environmental concerns.

“The year started with high fuel prices and some of thatwas passed on to the consumer in terms of higher pricesbecause the cost of distributing beverages was higher, butyou also had higher packaging costs because of the cost ofPET. And then the last half of the year is really when theeconomy hit the wall. In effect, the economy would be thebiggest overriding impact,” says Gary Hemphill, man-aging director, information services, BMC.

However, there continues to be shiningstars in the LRB market as smaller, moreniche beverage categories posted thestrongest growth, despite being higher-priced, premium beverages. As con-sumers continue to seek value and areal functional benefit, it seems thosebeverage companies most effectivelyresponding to those needs are theones who will continue to prosper inuncertain times. —Heather Landi

The US liquid refreshment beverage market had its share of hits and misses in 2008.Challenging Times

L

S2_BEVERAGE WORLD_APRIL 2009 BEVERAGEWORLD.COM

SPONSORED BY

*INCLUDES RETAIL PET, RETAIL BULK, HOME AND OFFICE DELIVERY, VENDING, DOMESTIC SPARKLING AND IMPORTS;EXCLUDES FLAVORED AND ENHANCED WATER.; SOURCE: BEVERAGE MARKETING CORPORATION

VOLUME IN MILLIONS OF GALLONS, GROWTH AND SHARE

Million Market Share PointBrand Gallons Share Growth ChangeCarbonated Soft Drinks 14,232.6 47.5% -3.1% -0.5Bottled Water* 8,672.9 28.9% -1.0% +0.3Fruit Beverages 3,928.2 13.1% -2.0% 0.0Sports Drinks 1,318.6 4.4% -3.1% -0.1Ready-to-Drink Tea 859.3 2.9% -1.8% 0.0Flavored and Enhanced Water 548.1 1.8% +8.3% +0.1Energy Drinks 365.9 1.2% +9.0% +0.1Ready-to-Drink Coffee 47.5 0.2% +1.6% 0.0Total 29,973.2 100.0% -2.0% NA

US CSD CONSUMPTION

Newer beverage categories, especially those with a health and wellness positioning, con-tinue to steal market share from the larger categories, such as CSDs. CSDs continue tobe the largest category, with a commanding 47.5 percent of the LRB market. However, ina tough economic climate, consumers are being conservative when it comes to beverageconsumption as once fast-growing categories have seen their growth rates decelerate.Energy drinks and flavored and enhanced water, which enjoyed 24.7 percent and 30.6 per-cent growth, respectively, in 2007, saw only single-digit increases last year.

US LIQUID REFRESHMENT BEVERAGE MARKET

20,000

15,000

10,000’03 ’04 ’05 ’06 ’07 ’08

15,258.5

15,367.2

15,271.6

15,083.3

14,688.0

14,232.6

SOURCE: BEVERAGE MARKETING CORPORATION

MILLIONS OF GALLONS

Big brands arecertainly part of theindustry, but whereall the innovation iscoming from is theniche brands becausethe need states havebeen chopped up tosuch a degree that inorder to be success-ful you’ve got to dosomething that’s going totarget a specific consumerbenefit.

GARY HEMPHILL, MANAGING DIRECTOR,INFORMATION SERVICES, BEVERAGE

MARKETING CORPORATION

One cola drink that did well was Coke Zero. It had a relatively big, strong performance.MICHAEL BELLAS, CEO AND CHAIRMAN, BEVERAGE MARKETING CORPORATION

“

“

“

BEVERAGEWORLD.COM APRIL 2009_BEVERAGE WORLD_S3

SPONSORED BY


SOURCE: BEVERAGE MARKETING CORPORATION; *INCLUDES CITRA, INCA COLA, KINLEY, SMART AND SURGE

*NATIONAL INCLUDES THE SHASTA AND FAYGO BRANDS; SOURCE: BEVERAGE MARKETING CORPORATION

Although Coca-Cola remainsthe largest CSD company,commanding a 43.4-per-cent market share, it con-tinues to struggle as itsaw negative growth inalmost all of its carbonat-ed brands. Even its diettrademarks, which hadbeen bright spots in theportfolio, declined. CokeZero continues to be thesaving grace, recording double-digitgrowth. Many companies are hopingsweetener innovations will help savethe CSD category. Coca-Cola launchedSprite Green containing Truvia, a ste-via-based sweetener, in late 2008.

THE COCA-COLA COMPANY CSD PORTFOLIOMillion Million Market Share of Share Point

Brand Cases Gallons Share Coke Growth ChangeCoca-Cola Classic 1,665.7 2,498.5 17.6% 40.5% -2.5% +0.2Diet Coke 981.1 1,471.7 10.3% 23.8% -3.0% 0.0Sprite 536.5 804.8 5.7% 13.0% -3.0% +0.1Fanta 154.1 231.2 1.6% 3.7% -1.0% 0.0Caffeine Free Diet Coke 124.5 186.8 1.3% 3.0% -8.0% -0.1Barq’s 101.3 151.9 1.1% 2.5% -3.0% 0.0Coke Zero 128.5 192.7 1.4% 3.1% +36.0% +0.4Cherry Coca-Cola 71.8 107.7 0.8% 1.7% -4.0% 0.0Diet Sprite/Sprite Zero 58.9 88.4 0.6% 1.4% -4.0% 0.0Mr. Pibb 57.5 86.3 0.6% 1.4% -5.0% 0.0Other* 234.9 352.3 2.5% 5.7% -17.4% -0.4Total Coca-Cola CSD 4,114.8 6,172.3 43.4% 100.0% -3.0% +0.1

0

-1

-2

-3

-4

-5

-6

1

2

3

4

The Coca-ColaCompany

PepsiCo, Inc.

Dr PepperSnapple Group

CottCorporation

NationalBeverage

Big Red CarolinaBeverage

11.043.1374.5

676.4

2,207.0

4,451.2

6,172.3

MILLIONS OF GALLONS

LEADING US CSD COMPANIES

-3.0%

-4.2%

-1.3%

-6.0%

+2.4%+2.7%

+4.0%

“

The tasteof aspartame

Aspartame has sweetened foods and beverages for more than 25 years. During that time it has been compared to other sweetening ingredients in numerous taste tests. Time and time again, the people taking part in these tests have preferred the natural-tasting sweetness of aspartame. There is no bitter aftertaste, and most people cannot tell the taste of aspartame from sugar.

“Sweet” is one of the four basic tastes that can be sensed by the tongue. Almost everyone likes sweet-tasting foods and drinks. From our earliest days we enjoy the sweetness of our mother’s milk from the natural sugar called lactose that it contains. Many of us like the feeling of comfort that sweet foods provide.

Certain foods such as honey and fruit are naturally sweet, while other foods need to besweetened by adding sugar. When we eat sweet foods and drinks, the sugars in them lock onto certain taste buds on the tongue. Whenthey are stimulated, thesetaste buds send messagesto our brain telling us weare tasting somethingsweet. Aspartame lockson to the tastebuds in justthe sameway assugar, honeyand fruit.

“Why do certain foods and beverages taste sweet?” “Why do we like

sweet-tasting foods and drinks so much?”

“What does aspartame taste like?”

The Sweet Spot

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Hit it right, and the effect is amazing.

Combine HFCS or sugar and Ajinomoto Aspartame in regular foods and drinks and

you’ll be serving market-winning taste. With rising commodity prices meaning that

100% calories are slicing into your profits, Ajinomoto Aspartame will improve your

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Our global experience in formulating products sweetened with caloric sweeteners

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S6_BEVERAGE WORLD_APRIL 2009

SPONSORED BY


Pepsi’s revitalization campaign was an attempt to bring excitement back to the category. It’s a first step toward bringing back the category. They’re going to have to look at ingredients and continue to innovate.

MICHAEL BELLAS, CEO AND CHAIRMAN, BEVERAGE MARKETING CORPORATION

“ “SOURCE: BEVERAGE MARKETING CORPORATION; *INCLUDES AMP, SOBE NO FEAR AND SOBE ADRENALINE RUSH

Although Pepsi’s overallgrowth was off by 4.2 per-cent in 2008, a number ofbrands performed well. DietMountain Dew had a niceboost, as did Mountain DewBaja Blast, indicating thestrength of that flavoredCSD brand line, while PepsiMax, a CSD fortified withginseng and extra caffeine,surged ahead with 45 per-cent growth. Pepsi also is experiment-ing with sweetener innovation as itlaunched SoBe Lifewater with PureVia, asweetener made from an extract of thestevia plant leaf.

PEPSICO CSD PORTFOLIOMillion Million Market Share of Share Point

Brand Cases Gallons Share Pepsi Growth ChangePepsi-Cola 1,040.7 1,561.1 11.0% 35.1% -6.5% -0.4Mountain Dew 664.5 996.8 7.0% 22.4% -0.5% +0.2Diet Pepsi 528.7 793.0 5.6% 17.8% -7.4% -0.2Diet Mountain Dew 164.0 246.0 1.7% 5.5% +4.1% +0.1Sierra Mist 137.2 205.8 1.4% 4.6% -5.3% -0.1Caffeine Free Diet Pepsi 74.9 112.4 0.8% 2.5% -11.1% -0.1Mug 69.9 104.9 0.7% 2.4% +0.1% 0.0Wild Cherry Pepsi 68.7 103.0 0.7% 2.3% -0.5% 0.0Caffeine Free Pepsi 30.2 45.3 0.3% 1.0% -12.9% -0.1Other* 237.3 244.3 1.7% 5.5% +2.4% +0.1Total Pepsi CSD 2,967.5 4,451.2 31.3% 100% -4.2% -0.3

Diets outperformed reg-ulars, but not dramatically.There was some hope thatnew sweeteners would havesome radical, overnightimpact on the category, butit doesn’t appear that way.New sweeteners like steviamay not be the panacea toall the ills of the CSD cate-gory, but it certainlyoffers some help.

GARY HEMPHILL, MANAGING DIRECTOR,INFORMATION SERVICES, BEVERAGE

MARKETING CORPORATION

“

“


1,500

1,000

500

0

2,000

2,500

DietMountain

Dew

Diet DrPepper

DietPepsi

SpriteDrPepper

MountainDew

DietCoke

PepsiCola

Coca-Cola

Classic

Fanta

231.2236.5246.0

793.0879.1879.1

996.8

1,471.71,561.1

2,498.5

RANKED BY VOLUME IN MILLIONS OF GALLONS

TOP 10 CSD BRANDS

Of the top 10 brands only Diet Mountain Dew and DietPepsi charted positive gains. The convenience storechannel was significantly hurt by the economic down-turn, which, in turn, affected CSD sales. Even diet CSDs,which generally had been outperforming regular CSDs,were down. “The best way beverage companies can beresponsive to the economy is to try and target certainpackages to particular price points as way to appeal toconsumers,” says Michael Bellas, CEO and chairman,Beverage Marketing Corporation.

BEVERAGEWORLD.COM


SPONSORED BY


DR PEPPER SNAPPLE CSD PORTFOLIOMillion Million Market Share of Share Point

Brand Cases Gallons Share DPS Growth ChangeDr Pepper 586.1 879.1 6.2% 39.8% 0.0% +0.2Diet Dr Pepper 157.7 236.5 1.7% 10.7% +2.3% +0.17UP 96.1 144.1 1.0% 6.5% -8.0% -0.1Sunkist 100.7 151.0 1.1% 6.8% -2.0% +0.1Canada Dry 86.5 129.7 0.9% 5.9% +2.6% 0.0A&W Root Beer 62.9 94.3 0.7% 4.3% -1.5% 0.0Schweppes 45.7 68.5 0.5% 3.1% +1.2% 0.0Squirt 43.7 65.6 0.5% 3.0% -3.1% 0.0Diet 7UP 40.5 60.7 0.4% 2.8% -4.1% 0.0RC Cola 33.0 49.5 0.3% 2.2% -5.0% -0.1Others 218.7 328.0 2.3% 14.9% -4.5% 0.0Total Dr Pepper Snapple CSD 1,471.3 2,207.0 15.5% 100.0% -1.3% +0.3

Dr Pepper SnappleGroup also reported avolume decline in2008, although less sothan Pepsi or Coke.Diet Dr Pepper contin-ues to buck the trendhitting the rest of theCSD category, growing2.3 percent. The com-pany, which officiallyseparated from CadburySchweppes a year ago, seems tohave hit an innovation stride. Itrecently launched the first sportsdrink sweetened with stevia. Otherinnovations include Venom energydrink, Cherry 7UP Antioxidant andCanada Dry Green Tea Ginger Ale.

Pepsi had five of the leading liquid refreshmentbeverage trademarks, while Coke had three andDr Pepper Snapple had one. Nestlé Pure Lifeachieved the fastest growth among the leadingtrademarks, as it debuted on the top 10 list forthe first time, knocking off Minute Maid.Although the bottled water category had threetrademarks in the top 10, signifying the contin-ued strength of the health and wellness trend,the overall category was down in 2008 andDasani and Aquafina, owned by Coke and Pepsi,respectively, registered significant declinesafter robust growth in 2007. Consumers mayhave opted to drink tap water instead of buyingbottled water.

SOURCE: BEVERAGE MARKETING CORPORATION; ALL RESULTS PRELIMINARY

5

0

-5

-10

-15

10

15

20

Coca-Cola* Pepsi MoutainDew

DrPepper

Gatorade** Sprite Tropicana Nestlé Pure Life

Aquafina Dasani

VOLUME AND GROWTH, 2007 VS. 2008

LEADING LIQUID REFRESHMENT BEVERAGE TRADEMARKS

-3.0%

-6.7%

+0.5%

-0.6%

-2.5%-3.3%

-6.2%

+19.4%

-11.0%

-5.7%

*INCLUDES ALL TRADEMARK VOLUME (E.G., ALL TYPES OF COCA-COLA, INCLUDING DIET COKE, CAFFEINE-FREE COCA-COLA, ETC.); **INCLUDES G2; SOURCE: BEVERAGE MARKETING CORPORATION

Growth

2007

2008

or a number of reasons, 2008 marked a tough year forbottled water. The category that experienced stronggrowth in previous years due to its good-for-you and

convenience platform saw a decline in volume for the firsttime in more than 10 years.

“This was the perfect portable, healthful lifestyle bever-age for the past 15 years, but what’s happened isthat value proposition has been attacked as peopledon’t have the money to spend, and secondly, the

environmental issue put a little bit of a tinge onthe whole product,” says Michael Bellas, chair-man and CEO of Beverage MarketingCorporation (BMC).

The economy and the environment are the twooverarching factors that have inhibited thegrowth of bottled water. As the economic climatecontinued to get worse last year, an opportunitywas created for private label bottled water brandsto succeed due to their competitive price point.

In terms of the environment, anti-bottled

water campaigns have hit home with consumers as govern-ment officials continue to position bottled water againsttap water, resulting in some consumers choosing to turn totap water instead of purchasing bottled water.

“The environmental issues will still be there, but essen-tially the reasons to drink water, which are purity, health,convenience, those aren’t going to go away. And, peoplewill still drink water,” notes Bellas.

Bottled water has maintained its position as the No. 2beverage category in the United States behind car-bonated soft drinks holding 28.9percent of liquid refreshment bev-erage (LRB) volume share, accord-ing to BMC.

Among the Top 10 leadingLRB trademarks based on vol-ume, Nestlé Pure Life,Aquafina and Dasani hold theNo. 8, 9 and 10 positions,respectively. —Jennifer Cirillo

Bottled water backlash coupled with the economic downturn resulted in sluggish sales.Uncharted Waters

F


BOTTLED WATER REPORTState of the Industry ’09

The category islikely to continuesluggishly, but oncethis economy turnsaround we think theunderlying variablesof the category arestill very good.

MICHAEL BELLAS, CHAIRMAN &CEO, BEVERAGE MARKETING

CORPORATION

“

“SOURCE: BEVERAGE MARKETING CORPORATION; *EXCLUDES FLAVORED AND ENHANCED WATER

Even though bottled water had three trademarks among the Top 10 trademarks in 2008, according to BMC, up

from just two the previous year, the category registered an unprecedented decline in volume. One reason for

the decline could be that some consumers are looking for ways to reduce spending.

3,966.34,411.2

4,725.05,185.3

5,795.66,269.8

6,806.7

7,538.9

8,253.58,757.4 8,672.9

+8.9%

+11.2%

+7.1%

+9.7%

+11.8%

+8.2%

+8.6%

+10.8%

+9.5%

+5.8%

-1.0%

12

10

6

8

4

2

0

-2’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08

MILLIONS OF GALLONS

US BOTTLED WATER VOLUME, 1998-2008*


BOTTLED WATER REPORTState of the Industry ’09

DOLLAR SALES UNIT VOLUME

Bottled Water Fact: According to Mintel, there were358 new water products launched in the US in 2008.

SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC. (IRI); *CONVENIENCE/PET STILL WATER FOR TOTAL US F/D/MX (SUPERMARKETS, DRUGSTORES AND MASS MERCHANDISE OUTLETS, EXCLUDING WAL-MART) ENDING DEC. 28, 2008

SOURCE: THE NIELSEN COMPANY

The top four manufac-turers of bottledwater—Nestlé, Coca-Cola, PepsiCo andCrystal Gyser—accountfor nearly 70 percent oftotal FDMx sales,according to Mintel. Butmost of these companieshave lost market sharein the category to pri-vate label and smallermanufacturers. Thereason: pricing. In theconvenience/PET seg-ment consumers arelooking for savings. In adeclining economy, private labelbrands offer more value for the buck.On the other hand, enhanced waterslike vitaminwater and SoBe Life water(not shown) exhibited growth, againas a result of consumers looking foradded value.

Convenience continues to be a driving factor for the bot-tled water segment. On-the-go consumers are looking fora convenient, good-for-you beverage alternative.

$431.1

$706.0

+7.3%

-12.6%

-10.0%

-10.4%

-3.8%-1.6%

-3.5%

-5.9%

+6.7%

-1.03%

+11.0%

-6.4%

-16.6%

$426.4 $423.1

$253.4

$169.6

$2,489.1

$167.8 $130.1 $118.7 $106.9 $98.7 $92.8 $89.4

Percent Change from 2007

Millions US Dollars

15

10

5

0

-5

-10

-15

-20

1.5

1.0

.5

0

-.5

-1.0

-1.5

-2.5

-3.0

-3.5

-2.0

PRIVATELABEL

GLACEAUVITAMIN-

WATER

AQUA-FINA

DASANI PROPELPOLANDSPRING

ARROW-HEAD

DEERPARK

OZARKA ICEMOUNTAIN

FIJINESTLÉPURE LIFE

CRYSTALGEYER

2008 TOP SELLING BOTTLED WATER BRANDS IN THE US*

DOLLAR SALES AND PERCENT CHANGE

TOTAL US BOTTLED WATERC-STORE SALES AND VOLUME, 2007-2008

$2,522.5

1,847.7 1,789.2

52 weeks ending Dec. 27, 2008

52 weeks ending Dec. 29, 2007

CONVENIENCE/PET STILL JUG/BULK STILL SPARKLING/MINERAL

SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC. (IRI); *CONVENIENCE/PET STILLWATER FOR TOTAL US F/D/MX (SUPERMARKETS, DRUGSTORES AND MASS MERCHANDISE OUT-LETS, EXCLUDING WAL-MART) ENDING DEC. 30, 2007 AND DEC. 28, 2008

Pricing is one factor that has hurt the category in 2008. Some con-sumers are returning to tap water or just drinking less, trying to reducespending, according to Michael Bellas, chairman and CEO of BMC.

15

12

9

6

3

0

-3

-6

TOTAL US BOTTLED WATERSALES BY CATEGORY*

2007-2008

$4,133.2 $4,034.6

$740.0 $708.7

$335.9 $328.4

2007 | TOTAL: $5,209.1

2008 | TOTAL: $5,071.7

Change -2.4%Change -3.2%

Change +1.3%

Change -4.2%

Change -2.2%

ottom line: everybody needs energy. How theysource that energy, well, that’s up for discussion.However, for this discussion it is energy drinks.

The premium priced beverages have been making strongleaps of growth through 2007 since Red Bull pioneeredthe category more than a decade ago. And while thecategory continues to progress—though growth hasslowed to the single-digits in 2008, accord-ing to Beverage Marketing Corporation(BMC)—it also continues to change.

For one, Hansen’s Monster Energy hasovertaken Red Bull’s No. 1 position in con-venience stores by unit volume, accordingto AC Nielsen research. “That was a starperformer,” says Michael Bellas, chairmanand CEO, BMC. “They’ll be up about 20percent this year.”

Other changes include an evolvementof new products. Take for instance thephenomenon of the energy shot. The 2-and 3-ounce beverages have already

gained a strong following by offering consumers a quick,convenient and fast working way to consume energy.

But in uncertain economic times, when consumers arepinching pennies and spending cautiously, when it comes

to beverage purchases, will this premium pricedbeverage feel the pull back?

In 2008, energy drinks was one of the fewbeverage categories that experienced positivegrowth, according to BMC, with volumeincreasing by 9 percent. Though the categoryhasn’t demonstrated the same level of growthit has in the past, its functional properties con-tinue to give the category a boost compared toother segments that experienced negativegrowth.

Energy drinks ranked seventh among the topeight performing liquid refreshment beverage(LRB) segments by volume last year, for exam-ple, with 365.9 million gallons, representing a1.2 percent share of the overall LRB market,

according to BMC data. —Jennifer Cirillo

Even in a down economy, premium priced energy drinks continue to grow.Filling A Need-State

B


ENERGY DRINKS REPORTState of the Industry ’09

Although theenergy drinks category...was inpositive territory,the level of growthprobably declinedmore than some ofthe other categorieson a percentagebasis. Price mostlikely played a rolebecause it is a pre-mium priced LRB.

GARY HEMPHILL, MANAGING DIRECTOR,

INFORMATION SERVICESBEVERAGE MARKETING

CORPORATION

“

“

SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC (IRI); *TOTAL US F/D/MX (SUPERMARKETS, DRUGSTORES AND MASS MERCHANDISE OUTLETS, EXCLUDING WAL-MART), ENDING DEC. 28, 2008

Though growth isn’t as strong as the industry has seen inthe past for these boosting beverages, the energy categorycontinues to grow demonstrating that energy continues tobe a huge need state.

$143.7

$360.2

+4.4%

+44.6%

N/A

+43.0%

+335.0%

+24.7%

-34.1%

+2.8%

+11.6%

$99.3

$35.4

$23.5

$22.5 $18.8 $13.5

Percent Change from 2007

Millions US Dollars

350

300

200

250

150

100

50

0

-50REDBULL

ROCKSTARMONSTERENERGY

AMP FULLTHROTTLE

DOUBLESHOT

SOBE NOFEAR

AMPOVERDRIVE

JAVAMONSTER

MONSTERENERGY

XXL

$13.8

$14.4

TOP 10 US ENERGY DRINK SALES 2008*

DOLLAR SALES AND PERCENT CHANGE

-47.4%


ENERGY DRINKS REPORTState of the Industry ’09

Energy Drink Fact:Energy drinks exhibited 390 percent growth during 2003-07 in FDMx, primarily due to the up to 20 percent pricesavings consumers received by purchasing single-servemultipacks in the grocery channel. The segment, however,faces increased scrutiny from legislators, schools andmedical authorities due to the presence of high amountsof caffeine.

SOURCE: MINTEL

US ENERGY DRINKS UNIT SHARE 2008*

TOTAL US CONVENIENCE, LATEST 52 WEEKS ENDING JAN. 25, 2009SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC. (IRI)

Red Bull32.7%

MonsterEnergy18.7%

Rockstar9.7%

Java Monster3.8%

NOS3.5%

Amp3.5%

FullThrottle3.3%

Other28.1%

The steady incline of energy drinkvolume reinforces the consumers’need for energy. However, thedecline in growth could indicatethat energy is being sourcedfrom other beverages as well,such as coffee, tea, energyshots and other energy deliv-ering products. Price also isanother factor that possiblycontributed to the segment’sslowed growth.

SOURCE: BEVERAGE MARKETINGCORPORATION

242.7

335.7365.9

160.8

93.5

59.539.726.3

120

100

80

60

40

20

02001 2002 2003 2004 2005 2006 2007 2008

Energy is a huge need state;it’s sourcing from everything—coffee, CSDs and teas.

MICHAEL BELLAS, CHAIRMAN AND CEOBEVERAGE MARKETING CORPORATION

“ “

US ENERGY DRINK VOLUME, 2001-2008MILLIONS OF GALLONS

NEW ENERGY DRINK RELEASES, 2005-2008

SOURCE: MINTEL GNPD

0

200

100

2005 2006 2007 2008

300

400

172

219

185

380Monster continues to grow its market share, while one of itsnewest product extensions, Java Monster, commands a 3.8-percent share on its own. “Monster is very good at doing fieldactivation and they constantly introduce new line extensions,”notes Michael Bellas, chairman and CEO, BMC.

+109.8%

+52.9% +54.9%+64.0%

+79.2%

+49.1%

+27.7%

+9.0%


everage marketers continued to brew up innovationin the tea category in 2008, putting their moneybehind new varietals, flavors and even brewing

methods. But despite these attempts at reigniting excite-ment, the ready-to-drink (RTD) tea category was side-swiped by the unexpected: the bad economy, which exert-ed its own influence on consumer choices.

“In 2008 the declining economy definitely influencedready-to-drink tea,” says Garima Goel Lal, seniorconsumer analyst, Mintel International Group.“That was the first time in five years in ready-

to-drink tea that the category exhib-ited a decline, in this case of 1 per-cent. Before that it was showing 20percent growth in food, drug andmass merchandise stores in eachyear — 2005, 2006 and 2007.”

The bad economy also hasgiven a boost to private labelsales. According to Goel Lal,private label RTD tea saw

unprecedented growth, with salesincreasing by 46 percent from 2007 to2008 in food, drug and mass.

Aside from private label, consumerswho are spending their smaller savingson RTD tea are choosing what they per-ceive to be healthier options. The brandsshowing a lot of growth are those toutingall-natural ingredients, such as sugarinstead of high fructose corn syrup.“They are seeking more all natural andthings with actual benefits, like green tea,low sugar, nothing artificial in it andmaybe organic as well,” observes Beverage MarketingCorporation chairman and CEO Michael Bellas. “That’sthe high end of tea.”

But consumers want it all: the health benefits of tea, butat an affordable price. Goel Lal says brands positioned todeliver both—Lipton PureLeaf, as an example—are show-ing the most growth. “Consumers are probably going tofind a middle ground,” she says. —Andrew Kaplan

About 26 percent say theyhave tried organic,but have goneback to choosing regular tea because theyfound organic tooexpensive.

GARIMA GOEL LAL, SENIOR CONSUMER ANALYST,

MINTEL INTERNATIONALGROUP

“

“

The RTD tea category is brimming over with innovation.

Fresh Brews

SPONSORED BY

RTD TEA REPORTState of the Industry ’09

B

TOP RTD TEA BRANDSDollar Growth

Brand (in millions) 2007-20081. Arizona $303.1 +4.8%2. Lipton $236.3 -3.4%3. Snapple $123.3 -7.9%4. Lipton Brisk $82.3 -6.5%5. Diet Snapple $76.1 -9.0%6. Nestea $61.4 -7.0%7. Lipton Diet $53.6 +12.3%8. Lipton Pureleaf $35.9 +56.6%9. Private Label $28.1 +46.4%

10. Nestea Diet $17.4 -0.5%11. Lipton Iced Tea $16.2 -41.5%12. Gold Peak $14.3 +24.1%13. Nestea Enviga $11.5 -62.8%14. Tradewinds $10.4 +64.3%15. Arnold Palmer Lite Half & Half $9.9 +93.2%16. Fuze $9.8 +29.5%17. Sobe $9.7 -26.4%18. Honest Tea $8.3 +36.0%19. SSips $6.1 +11.3%

20. Arizona RX Health Elixirs $5.4 -5.0%

US DOLLAR SALES AND GROWTH, 2008*

SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC. (IRI); * TOTAL US FOOD, DRUGAND MASS (SUPERMARKETS, DRUGSTORES AND MASS MERCHANDISERS, EXCLUDING WAL-MART)52 WEEKS ENDING DEC. 28, 2008

While much innovation continues to

impact the RTD tea category, it is

not really making that much of an

impact on the ranking of the top

brands. Just four brands—Arizona,

Lipton, Snapple and Nestea—com-

mand the overwhelming bulk of

sales. Fueling the growth of the

others was everything from organic

(Honest Tea) to new brewing meth-

ods (Tradewinds) to the bad econo-

my (Private Label). And category

leader Arizona also scored another

hit with the tremendous growth of

the company’s Arnold Palmer Lite

Half & Half product, a blend of iced

tea and lemonade, which showed

more than 93 percent growth. On

the losing end was Enviga, whose

calorie-burning claims generated

controversy and ultimately proved

not to be a hit with consumers as

the product’s sales dropped by

more than 60 percent.

In terms of varietals, green tea was by far the most popular, with the highest number of new products. Studieshave shown it is conducive to weight loss and also beneficialin preventing cancer and other diseases, and this has gottena lot of media attention.

GARIMA GOEL LAL, SENIOR CONSUMER ANALYST

MINTEL INTERNATIONAL GROUP

““

SPONSORED BY


RTD TEA REPORTState of the Industry ’09

SOURCE: THE NIELSEN COMPANY

Sales of RTD tea in the C-

store channel in 2008 were

virtually unchanged from

the year before, falling by

just 0.4 percent. The lack of

growth may have reflected

the souring economy, and

also, the spike in fuel prices,

which curtailed the number

of times motorists refueled

at gas station/ convenience

store locations.0

$200

$400

$600

$800

$1,000

$1,200

2007 2008

$1,046.1 $1,042.4

DOLLARS SALES IN MILLIONS

CONVENIENCE STORE SALESOF RTD TEA

Change: -0.4%

SOURCE: BEVERAGE MARKETING GROUP

-5

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008

509.4 522.6602.9

760.9

875.1 859.3

MILLIONS OF GALLONS

RTD TEA VOLUME GROWTH

FREQUENCY OF TEA CONSUMPTIONBottled RTD Tea. . . . . . . . . . . . . . . . . . . 3.2 times per weekCanned RTD Tea . . . . . . . . . . . . . . . . . . . . 3.2 times per weekFreshly Brewed Iced Tea (at home) . . . . . 4.5 times per week

As the economy has deteriorated, more and more consumers are

foregoing purchasing RTD bottled and canned iced tea in favor of

brewing their tea at home.

SOURCE: MINTEL

What a difference a year makes. After growing by double digits for three years in a row, volume growth ofRTD tea came to a screeching halt, andeven declined, in 2008, falling from 15percent growth to -1.8 percent. As inother older New Age beverage cate-gories such as sports drinks, RTD teahas been losing share to newer bever-ages like functional waters and energydrinks, two categories that are popularwith the younger demographic who hadtraditionally made up a large percent-age of RTD tea consumers.

+0.7%+2.6%

+15.4%

+26.2%

+15.0%

-1.8%

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“All The Above”

or a category that saw arguably the most innovation in2008, it may be worth recalling that many drinks—from wine to Pepsi-Cola—have had some sort of

“functionality” associated with their history. Even so, theancient Romans sipping their goblets of wine would still be

amazed at today’s functional beverages. According to Mintel, sales of functional bever-

ages slowed, growing by just 2.6 percentin sales in 2008. (For Beverage World’spurposes, energy drinks are not includ-ed in the functional category, but arebroken out separately.)

For one thing, the category—home tomany higher-priced products —was notimmune to the severity of the eco-nomic downturn.

“I would say that price is one of thethings that has inhibited growth in thismarket,” says Garima Goel Lal, seniorconsumer analyst for Mintel

International Group. The category also appears to be canni-

balizing itself. For example, Gatorade andPowerade, which account for more than80 percent of the entire sports drink seg-ment, have had a couple of sluggish yearsin terms of sales. Explains Michael Bellas,chairman and CEO of Beverage MarketingCorporation: “Sports drinks are now facingmore competition from some of theenhanced waters, such as glacéau vitamin-water, and also some of the protein drinksthat have been coming out such as Muscle Milk. So theplaying field has gotten far more competitive.”

And one final issue that cuts to the heart of the categoryis trust in whether or not the drinks actually do what theyclaim to. “According to our survey only 21 percent thinkthe functional drinks are very effective, 27 percent saysomewhat effective and another 36 percent are basicallyneutral,” says Goel Lal. —Andrew Kaplan

The line between beverages and the medicine cabinet continued to blur in 2008.Liquid First Aid

F


FUNCTIONAL DRINKS REPORTState of the Industry ’09

SOURCE: MINTELIN FOOD, DRUG, AND MASS CHANNELS, EXCLUDING WAL-MART *DOES NOT INCLUDE ENERGY DRINKS

The impact of the slowing economy can clearly be seen by thesharp downturn in sales of functional drinks in the US in 2008.The almost 5 percent drop was the steepest in years for a cate-gory that had been showing steady growth for a while.

2004 2005 2006 2007 2008

-1.1%

-4.9%

+3.0%+3.2%+2.8%

4

3

1

2

0

-1

-2

-3

-4

-5

FUNCTIONAL BEVERAGE MARKET*

SALES GROWTH 2004-2008

SPONSORED BY

BEVERAGEWORLD.COM

Many brands with probiotic claims really did well, but the probiotictrend seems to be catching on more inyogurt because they arecheaper than drinks.

GARIMA GOEL LAL, SENIOR CONSUMER ANALYST, MINTEL

INTERNATIONAL GROUP

“

“


FUNCTIONAL DRINKS REPORTState of the Industry ’09

+13.8%

-5

0

5

10

15

20

25

Functional Drink Fact:Some 466 new products launched in the US in 2008claimed to be vitamin or mineral fortified. There were 86new sports drinks launched in the US in 2008, accordingto Mintel’s Global New Products Database.

The number of consumersdrinking sports drinks hasn’treally gone down, but they are

drinking them less frequentlybecause they are a little cautious about drinking somuch high fructose cornsyrup, which is also why thelower calorie options aredoing well. And they are alsoswitching to various lineextensions.

GARIMA GOEL LAL, SENIOR CONSUMER ANALYST, MINTEL INTERNATIONAL GROUP

The last two years the sports drink categoryhas been slow, and thatspeaks mostly to the performance of Gatorade.I think the rebranding was an attempt to jump-start that brand and the category to get itgrowing again.

GARY HEMPHILL, MANAGING DIRECTORBEVERAGE MARKETING CORPORATION

“

“

“

“

SPONSORED BY

TOP SPORTS DRINK BRANDS2008 DOLLAR SALES AND GROWTH

TOTAL U.S. - F/D/MX (SUPERMARKETS, DRUGSTORES AND MASS MERCHANDISE OUTLETS(EXCLUDING WAL-MART); SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC. (IRI)

Dollar Growth Brand (in millions) 2007-20081. Gatorade $586.9 -8.8%2. Powerade $246.7 -1.8%3. Gatorade G2 $165.6 +9,041.0%4. Gatorade All Stars $128.7 -3.0%5. Gatorade Frost $124.7 -12.2%6. Gatorade Rain $102.1 -35.9%7. Gatorade Fierce $64.2 -30.0%8. Gatorade Tiger $61.9 NA9. Gatorade X Factor $49.5 -39.9%

10. Gatorade Am $47.7 -31.7%11. Powerade Zero $27.5 NA12. Private Label $8.2 -11.7%13. Gatorade Xtremo $7.3 -39.8%14. Powerade Option $3.1 -84.4%15. Fuze Vitalize $1.5 +21.1%16. Accelerade $0.8 -69.8%17. Xzude $0.8 +3.8%18. Rw Knudsen Family Recharge $0.8 +5.3%19. Honest Ade $0.7 +65.9%

20. Grace $0.6 -32.7%

With the core brands of the two major sports drinks continuing to strug-gle in 2008, their marketers turned again to new line extensions in aneffort to drive some more excitement. Gatorade scored with its newTiger Woods-branded offering, which debuted in eighth place, whilePowerade Zero, with no calories, appeared to be just what athletic-mind-ed consumers were looking for, debuting at No. 11.


Sports drinks volume fell in the US for the first time in years in 2008as the category was hurt by the poor economy and consumers switch-ing to other categories, such as functional waters and energy drinks.

SPORTS DRINK VOLUMEMILLIONS OF GALLONS

1,318.61,361.11,322.6

1,220.2990.4

882.6

’03 ’04 ’05 ’06 ’07 ’08

+12.2%

+23.2%

+8.4%

+2.9%

-3.1%


BEER REPORTState of the Industry ’09

n an election year rife with references to good ol’ JoeSix Pack (along with that other Joe, the plumber), itseems that the faltering economy took its toll on the

overall beer category’s growth, yet may have bolstered thelower-price beer segments. Light beers and economy beers,which had been taking a hit, saw improvement in 2008,

quite certainly due to the economic outlook.According to Beverage MarketingCorporation, the domestic beer market wasup 0.5 percent by volume, down from2007’s 1.5 percent growth and 2006’s 2.2

percent gain. Total domestic beer was up1.1 percent. And, as Gary Hemphill,managing director, information services,BMC, notes, “Beer was up a little moremodestly than in previous years, but inthis economy, that’s a feat in itself.”

And there were definitely bright spotswithin the beer segment, such as craftbeers, which posted a 5.8-percent vol-

ume gain, although a significantdecline from 2007’s 12 percent jump.Super premium and light beers alsodrove growth for the category.Imports continued to decline, drop-ping 3 percent, due to pricing andthe weak economy. Individual starperformers included Bud Light Limeand Budweiser American Ale, bothintroduced in 2008, which had strongperformances last year, helping to boost Anheuser-Busch’svolume as well as gain share of the overall domestic beermarket. Although premium beers took a hit, Coors andCoors Light continued to see success, thanks to ongoingproduct and packaging innovation, such as Coors LightCode Blue.

Like spirits and wine, declines in the on-premise channelhurt beer consumption in 2008, as well as poor perform-ance in convenience stores, as spiraling gas prices keptconsumers away from the pumps. —Heather Landi

The beer category’s growth slowed in 2008, yet craft, super premium and even economybeers helped bolster the overall market.

Cheers to Beer

I

Some of thedomestic beer segments, which hadbeen struggling for alittle while, havestarted to bounceback and will continueto do so in 2009. Theeconomy is certainlyplaying a role, butalso pricing activitywithin the categoryplays a role.

DAN WANDEL, SENIOR VICE PRESIDENT, BEER, WINE AND

SPIRITS, INFORMATIONRESOURCES, INC. (IRI)

“

“

US BEER MARKET

2005 2006 2007 2008Domestic Beer 179.7 180.4 182.7 184.7Non-Alcoholic Beer 1.2 1.2 1.2 1.2Total Domestics 180.9 181.6 183.9 185.9Imports 25.5 29.3 29.6 28.7Total Beer 206.4 210.9 213.5 214.6


MILLIONS OF BARRELS

While certain segments of the US beer market continue to besluggish—namely, imports and premium domestic—the catego-ry did have much to celebrate in 2008, most notably a vol-ume increase despite a sluggish economy. The US beer mar-ket is one that also is in the throes ofmassive change, due to global con-solidation. This past summermarked the acquisition of US brew-ing giant Anheuser-Busch byBelgium-based InBev. SABMillerand Coors Brewing also formed ajoint venture, MillerCoors, whichcombined the operations of theirrespective US subsidiaries.


SOURCE: THE BREWERS ASSOCIATION

2003 2004 2005 2006 2007 2008

10,000

8,000

6,000

4,000

2,000

0

5,137.15,555.2

5,956.1

7,147.0

8,123.68,569.9

Pricing very likely played a role inthe decline in the import sub-catego-ry, with both Heineken and Coronahaving tough years. Super premiumsand craft beers, which offer con-sumers more variety in terms of fla-vor as well as package sizes, contin-ue to chart strong growth as con-sumers move away from domesticpremium beers. The Nielsen numbersinclude convenience stores, whichtook a hit in sales due to gas pricesand the economy.


TOP 20 BRANDS BY SALESDollar Growth

Rank/Brand (in millions) 2007-20081. Bud Light $1,375.7 +4.4%2. Miller Lite $684.6 -0.5%3. Coors Light $663.2 +9.0%4. Budweiser $660.4 -1.7%5. Corona Extra $438.8 -2.5%6. Heineken $295.4 -0.2%7. Natural Light $272.5 +2.3%8. Michelob Ultra Light $204.5 +3.7%9. Busch Light $200.0 +4.0%

10. Miller High Life $170.6 +6.6%11. Busch $154.8 +5.7%12. Miller Genuine Draft $138.0 -7.8%13. Corona Light $124.8 -0.9%14. Keystone Light $113.7 +17.5%15. Bud Light Lime $102.8 NA16. Tecate $97.8 +12.6%17. Budweiser Select $82.3 -15.4%18. Natural Ice $80.3 +5.2%19. Heineken Premium Light $72.5 +6.4%

20. Milwaukee’s Best Light $69.1 -3.5%


US BEER CATEGORY VOLUMEVOLUME IN MILLIONS OF CASES AND GROWTH

SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES INC. (IRI)*SUPERMARKETS, DRUGSTORES AND MASS MERCHANDISE OUTLETS (EXCLUDING WAL-MART),CALENDAR YEAR 2008, ENDING DEC. 28, 2008

The craft and super premium segments performed remarkably well despite the economic conditionsbecause they really appeal to today’sconsumers. There’s a lot of variety inthose two segments and another bigreason is innovation.

DAN WANDEL, SENIOR VICE PRESIDENT, BEER, WINE AND SPIRITS, INFORMATION RESOURCES, INC. (IRI)

“

“

CRAFT BEER GROWTHTHOUSANDS OF BARRELS

Beer Fact:There were 244 new productintroductions in the US beermarket in 2008, according toMintel.

Growth Volume 2007-2008

Regular Beer 621.6 -1.8%Light Beer 794.4 +1.4%Super Premium 305.9 +2.9%Imports 161.7 -2.5%Craft Brands 42.8 +7.1%Premium 715.8 -1.6%Economy 435.8 +0.2%Total Beer 1,422.8 -0.1%

SOURCE: THE NIELSEN COMPANY; TOTAL US, FOOD/DRUG/LIQUOR/CONVENIENCE STORES

04SOI_Beer:SPRING INDEPENDENT.qxd 5/13/09 9:56 AM Page 3


1. Coors Light2. Tecate3. MGD Light 64*4. Stella Artois Lager5. Miller High Life6. Yuengling Traditional Lager7. Modelo Especial8. Keystone Light9. Busch10. Pabst Blue Ribbon11. Samuel Adams Seasonal12. Blue Moon Belgium White Ale13. Dos Equis XX Lager Especial14. Busch Light15. Bud Light16. Coors17. Land Shark Lager18. Michelob Ultra19. Red Stripe20. Pacifico21. Michelob Golden Draft Light22. Mike’s Hard Variety Pack23. Labatt Blue Light24. Heineken Premium Light25. Bud Ice26. King Cobra Malt Liquor27. Blue Moon Seasonal28. Natural Ice29. Miller High Life Light30. Becks

Coors Light was a starperformer as was MGDLight 64. The reformu-lation and repackagingof the brand, from MGDLight to MGD 64 Light,played a big role inpropelling sales lastyear. Even thoughthe import segmentstruggled, Tecateperformed verywell. Often pricedlower than otherimport beers, Tecatehas been garneringstrength in US super-markets for the lastcouple of years.

SOURCE: INFORMATION RESOURCES, INC.(IRI); BRANDS RANKED BASED ON 11 MEAS-URES, INCLUDING CASE SALES, CASE SALESGROWTH, DOLLAR SALES GROWTH, DOLLAR

SHARE OF PRICE SEGMENT AND AVERAGEWEEKLY DOLLAR SALES.; *MGD LIGHT 64 IS A

COMBINATION OF THE MGD LIGHT AND MGDLIGHT 64 BRANDS DUE TO RE-ISSUE OF UPCS

BY BREWER.


TOP 30 BEER BRAND PERFORMERSTOTAL US SUPERMARKETS, 52 WEEKS ENDING DEC. 28, 2008

Clearly Coors Light had anexceptional year. I think the economy is certainly not hurtingbecause Coors Light is a brand thatis going to get a closer look whentougher times come like this.

DAN WANDEL, SENIOR VICE PRESIDENT, BEER, WINE AND

SPIRITS, INFORMATION RESOURCES, INC. (IRI)

““

In 2007, Miller Chill took the No. 1 newbeer brands spot, beating out 140other new brands launched in the USmarket that year. In 2008, new beerbrand case sales totaled 4.9 million.New beer brand case sales have morethan doubled since 2004, when newbeer brands accounted for 1.9 millioncases. It’s clear that product innova-tion and line extensions are playing anincreasingly important role in boost-ing beer sales.

TOP 15 NEW BEER AND FMBBRANDS 2008

Dollar Rank/Brand (in millions)1. Bud Light Lime $93,539.42. Smirnoff Ice Strawberry Acai $6,244.93. Budweiser American Ale $5,598.94. Mike’s Hard Pomegranate Lemonade $3,932.25. CM Parrot Bay Mojito $3,489.16. Smirnoff Ice Light $3,360.47. Bacardi Silver Mojito Mango $1,933.98. Samuel Adams Irish Red $1,623.59. New Belgium Variety Pack $1,272.4

10. Blue Moon Variety Pack $636.911. Mike’s Cocktails Mojito $500.412. Deschutes Green Lakes Organic Ale $480.613. Mike’s Cocktails Pomegranate Martini $428.114. Michelob Dunkel Weisse $317.415. Michelob Pale Ale $303.5

TOTAL US SUPERMARKETS

SOURCE: INFORMATION RESOURCES, INC. (IRI)

SOURCE: THE BREWERS ASSOCIATION

BEER SEGMENT GROWTH2007-2008

Craft

Imports

Non-CraftDomestic

6543210

-1

-2-3

-4

+5.8%

-3.4%

+0.6%

The craft beer segment increased its volume share of the overall US beermarket to 4 percent, up from 3.8 percent in 2007. Craft beers offer morevariety of flavors, which is resonating with consumers. According to IRI, sea-sonal beers have now become the No. 1 selling craft beer style.

BEVERAGEWORLD.COM

roving that no beverage category is completely“recession proof,” the wine and spirits categoriesexperienced slower growth in 2008 compared to pre-

vious robust years. Yet, in an indication that the spiritsmarket might be a little more resistant to the economicdownturn than other consumer products categories, premi-

umization continues to be a market driver as consumersare willing to splurge on what they see as affordableluxuries. The spirits industry charted 1.6 percent volume

growth, down from last year’s 2.4 percent volumejump, while sales were up 2.8 percent, totaling $18.7

billion, according to the Distilled Spirits Councilof the United States (DISCUS). While the seg-ment’s growth slowed considerably from last

year’s 5.6 percent revenue gain, the spirits indus-try proves that it is resilient in the face ofchallenging economic times, thanks in largepart to consumers’ ongoing fascination withcocktail culture and the perception thatspirits are a good value compared to otheralcohol beverages. Spirits also managed to

hold onto its 33 percent market share of the totalbeverage alcohol category.

The economy is beginning to impact the moreupscale sub-segments of the spirits industry asconsumers are perhaps opting to drink premiumrather than super premium brands. Overall, thesuper premium sub-category charted a modest1.7-percent volume gain compared to 11.3 per-cent growth last year. Meanwhile, the high-endpremium segment actually saw its volume dipby 0.6 percent last year.

US wine consumption continues to grow, yetat a more moderate pace than in previousyears, due, in large part, to the slowing econo-my. As consumers opt to stay home more, wine is one bev-erage alcohol segment that takes a hit from a dip in on-premise consumption. Wine volume grew by 0.8 percent in2008, compared to 4 percent growth in 2007. Domesticwine enjoyed stronger growth than imports, while certainsegments, such as boxed wine or 3L packages, also per-formed well. —Heather Landi

Raise A GlassGrowth in the wine and spirits segments slowed in 2008, yet continued premiumization offers a silver lining.

SOURCE: DISTILLED SPIRITS COUNCIL OF THE UNITED STATES

It’s clear that while the overall super premium segment grew last year volume-wise—with super premium

tequila as well as bourbon, Canadian whiskey and Irish whisky charting notable growth—the poor economic

climate had an impact, as growth in high-end premium and super premium brands slowed overall. Value and

premium segments, meanwhile, posted some significant volume gains, giving the spirits category a boost.

P

VOLUME GROWTH BY PRICE TIER 2007/2008

APRIL 2009_BEVERAGE WORLD_S23

High End SuperSpirits Type Value Premium Premium Premium TotalBlended Whiskey +0.3% +2.6% NA NA +1.4%Bourbon & Tennessee +0.9% -3.3% +2.6% +16.5% +1.1%WhiskeyCanadian Whiskey +1.4% -2.3% +65.4% +5.6% +2.1%Blended Scotch +1.3% -4.3% -1.3% -2.6% -1.6%Single Malt Scotch NA -2.3% +0.4% -0.3% +0.2%Irish Whiskey NA NA +17.4% +34.2% +20.3%Vodka +1.1% -2.1% +3.2% +6.5% +1.3%Rum +2.6% +13.6% -0.5% -3.6% +4.1%Tequila +6.4% -1.3% -9.2% +10.6% +1.1%Gin +1.3% -16.2% -1.9% +43.7% -1.2%Brandy & Cognac +1.2% +12.9% -13.0% -10.7% -3.4%Cordials -2.4% -2.6% +8.8% NA -1.9%Cocktails -22.2% +26.8% NA NA +3.3%Total +0.6% +3.7% -0.6% +1.7% +1.6%

WINE & SPIRITS REPORTState of the Industry ’09

All things considered in thedifficult economythat we faced lastyear, it was a veryrespectable year forbeverage alcohol—beer, wine and spirits grew in vol-ume and dollars.

“

“

DAN WANDEL,SENIOR VICE PRESIDENT, BEER,

WINE AND SPIRITS,INFORMATION RESOURCES, INC.

WINE & SPIRITS REPORTState of the Industry ’09


Some of the top major brands, Absolut, Bacardi, Grey Goose and JimBeam, saw sales in food and drug stores drop last year. And in 2008super premium tequila brand Patrón broke into the Top 20 at No. 19,knocking off Malibu Rum. While value brands reported solid gains, onlytime will tell if that trend continues and whether the current economicclimate will impact sales of high-end and premium brands.

Slower revenue growth in 2008 could be contributed to a marked slow downin sales of the luxury sub-categories, which bring in higher margins. Whilesuper premium and high end premium revenue growth dipped, the valuesegment actually posted a sales gain of 1.8 percent.

TOP 20 US SPIRIT BRANDSDollar Growth

Rank/Brand (in millions) 2007-20081. Smirnoff Vodka $189.2 +3.6%2. Bacardi Rum $149.8 -2.1%3. Captain Morgan Rum $124.4 +2.0%4. Jack Daniels Whiskey $107.5 +2.9%5. Absolut Vodka $93.8 -0.4%6. Jose Cuervo Tequila $84.9 +0.3%7. Crown Royal Whiskey $71.9 +3.2%8. Skyy Vodka $63.5 +10.2%9. Jim Beam Bourbon $57.0 -0.1%

10. Bailey’s Cream Liqueur $49.2 -1.4%11. Grey Goose Vodka $48.8 -0.3%12. Jagermeister $48.4 +4.2%13. Private Label Domestic Vodka $49.3 +1.3%14. E&J Domestic Brandy $45.3 +3.7%15. Ketel One $43.0 -5.5%16. Seagrams 7 Crown Blends $40.7 +1.7%17. Sauza Tequila $39.9 -1.7%18. Stolichnaya Vodka $36.9 -9.6%19. Patrón Tequila $36.17 +17.7%

20. Popov Domestic Vodka $36.16 +5.5%


* FOOD AND DRUG STORES ONLY; SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC.(IRI), 52 WEEKS ENDING DEC. 30, 2008

Sales of table wine in the US topped $5.1 billion in food anddrug stores in 2008, a jump of 4.3 percent, and volume grew1.3 percent in 2008, according to IRI. The showstopper wasBarefoot Wines, owned by E&J Gallo, as it jumped up to the No.5 spot from No. 9 in 2007. California wines dominate the list,although Australia’s Yellow Tail continues to ring in top sales.

TOP 10 US WINE BRANDSDollar Growth

Rank/Brand (in millions) 2007-20081. Yellow Tail AUS $184.7 +2.6%2. Sutter Home CA $173.5 +4.8%3. Franzia Box CA $166.4 +2.8%4. Woodbridge $156.2 +5.6%

By Robert Mondavi CA5. Barefoot CA $136.8 +46.7%6. K-J Vintners Reserve CA $135.6 +3.7%7. Carlo Rossi CA $110.7 +2.1%8. Beringer CA $104.7 -2.5%9. Livingston Cellars CA $98.3 +2.2%

10. Robert Mondavi $82.1 +0.4%Private Selection CA


SOURCE: INFOSCAN REVIEWS, INFORMATION RESOURCES, INC. (IRI); TOTAL USFOOD AND DRUG ONLY, CALENDAR YEAR 2008 ENDING DEC. 28, 2008*EQUIVALIZED UNIT VOLUME IN THOUSANDS OF 9-LITER CASES, WHICH IS EQUIVALENT TO 12 750ML BOTTLES

SPIRITS REVENUEGROSS REVENUES IN MILLIONS OF DOLLARS BY SEGMENT

SOURCE: DISTILLED SPIRITS COUNCIL OF THE UNITED STATES

Value Premium Super Premium

High EndPremium

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

0

2006 | Total $17,246.0

2007 | Total $18,207.0

2008 | Total $18,720.0

BEVERAGEWORLD.COM

300

245.5

258.3 268.1

273.7 283.0

294.4296.8

’02 ’03 ’04 ’08’07’06’05

US WINE CONSUMPTION2002-2008, MILLIONS OF 9-LITER CASES

250

SOURCE: HANDBOOK ADVANCE 2009

US wine consumption grew by 0.8 percent in 2008, amarked decline from 2007’s 3.9 percent increase and2006’s 3.4 percent rise. Wine sales have seen a steadyclimb since the early part of this century, with consump-tion growing a whopping 5.2 percent from 2002 to 2003.Volume rose 3.8 percent in 2004 and 2.1 percent in 2005.

04SOI_Spirits2a:SPRING INDEPENDENT.qxd 6/17/09 11:58 AM Page 2

Equipment availability and flexibility are themost important requirements for filling plantsfor beverages and liquid food of all kinds andcontainers of all shapes and sizes. From Sept. 14to 19, 2009 all the relevant producers of bever-age filling technology will be represented atdrinktec 2009, the world fair for beverage andliquid food technology. This is a unique event inthat the public from all over theworld can take a close look at origi-nal equipment in action.

The heart of every filling plant is,of course, the filler. Whether the sys-tem used is volumetric, gravimetricor level-controlled filling depends onthe product, the type of containerused and, equally importantly, thephilosophy of the beverage fillingcompany. Volumetric processes areused predominantly for PET dispos-able bottles, because these corre-spond exactly to the specifieddimensions.

Still and carbonated drinksrequire different technologies. Of course therealso are combined processes that allow thesame production line to be used for still andcarbonated products. Deciding whether to carryout the filling process with no pressure, withcounterpressure or in a vacuum is equally prod-uct-specific, and the question of whether short-tube or long-tube filling valves are used alsocan be determined on an individual basis.

Hygienic design is a general theme withregard to filling equipment. Hygiene circum-stances play a large part in all system compo-

nents that come into direct contact with theproduct. CIP systems (cleaning-in-place) cleanthe product routes fully automatically. Theouter surfaces of rinsers, fillers and sealerscan be rinsed off and treated using fixed,automatic flushing equipment, which consid-erably improves the hygienic environment.For germ-reduced filling, the filling machines,

sometimes combined with rinsers and sealers,are often equipped with slanted front tables.

The shelf-life of still beverages can easily beextended by heating them before the fillingprocess. According to one major drinktecexhibitor, there is currently a growing demandin the market for hot-fill systems for bottlingsoft drinks in plastic bottles, and a trend towardthe flexibility of combination lines is clearlydeveloping. At the same time, cold aseptic fill-ing has developed into a sought-after process inthe beverage market over the past few years,and will of course find its ideal platform atdrinktec 2009.

No matter how, no matter what, when itcomes to filling equipment for liquid prod-ucts there is only one international trade fairthat brings together all suppliers and users—drinktec 2009 in Munich.

drinktec At-A-Glance

What: The largest trade exhibition for beverages in the world

When: Monday, Sept. 14 toSaturday, Sept. 19, 2009

Where: New Munich Trade Fair Center, Munich, Germany

Visitors: 70,000 from 170 countries expected

Visitor Target Groups:Producers of soft drinks, fruitjuices, energy and wellnessdrinks, packaged mineral water,dairy drinks, wine and cham-pagne and distilled spirits;brewers; wholesale and retailbeverage merchants; hotels,restaurants and caterers; serv-ice providers and advertising;public authorities, universitiesand specialist colleges.

Exhibitors: 1,500 from 60 countries expected

Website: drinktec.com

Contact: Anika Niebuhr 646.437.1014 • 212.262.6519 (fax)[email protected]

countdown to

drinktec Highlights Product-Specific Filling

This Special Promotion Section was produced by Beverage World’s Special Projects department.

April 2009 Edition

A Special Promotion Section

154 days 6 hours 21 minutes. . . 154 days 6 hours 21 minutes. . . 154 days 6 hours 13 minutes 47 sec-rs 21 minutes. . .

September 14–19, 2009

New Munich Trade Fair Center

10ReasonstoVisit

2009

This e-book was produced and distributed for by

Drinktec5 6/9/08 3:18

PM Page 1

See It Now Access an exclusivee-book that puts you inside thedrinktec experience. Go to beverageworld.com/go/drinktec

World Fair for Beverage and Liquid Food Technology

shouldn’t you be there?

14–19 September 2009

New Munich Trade Fair Centre

See It Now Access an exclusive e-book that puts you inside the drinktec experience.Go to www.beverageworld.com/go/drinktec

USA:Ms. Anika Niebuhr . Tel. 646-437-1014 . Fax 212-262-6519 . [email protected]

“drinktec is gargantuan by any comparison to any trade show I’veattended here in the US. Krones and Steinecker companies put onan amazing display of technology in one enormous pavilion whereyou could see the machinery running, and the German hop growersgave out lots of information. There were a number of Americanmicrobrewery guys there. I don’t think I’ll miss drinktec in 2009because I had such a good time. The trade show alone was worthgoing to, but with Oktoberfest starting at the end, it was amazing.”

—MARK VICKERY, BREWMASTER, GOLDEN VALLEY BREWERY, MCMINNVILLE, ORE.

Why I Attend

The drinktec website (drinktec.com)has relaunched with a new look andclearer structure.

A broad orange strip stretchesacross the screen, bearing the familiarkey visual of the fair. Although thelook and the structure are new, theinformation contained within the siteis as extensive and detailed as ever.Visitors to drinktec.com will quicklyfind the familiarheadings and menupoints. Under “At aGlance” there is allthe basic informationabout drinktec. Anda click on the“Exhibitor & ProductDatabase” will pro-vide an overview ofthe products exhibit-ed at the fair and thecompanies represent-ed there. One newfeature of the site is a“Contacts and Service” area with spe-cific information of interest to visitors,exhibitors and media representatives.Here, for example, you can find con-tact details, plus tips on travel andaccommodation. A useful service forvisitors from outside the EU is helpwith visa applications. Set out here isinformation on which documents arerequired for visa applications. It’s evenpossible to request a visa invitation let-ter here online.

All of the information on the site isin both German and English. In addi-tion, the basic information also is pro-vided in the following languages:Chinese, Czech, French, Hungarian,Italian, Japanese, Korean, Polish,Russian, Spanish and Turkish.

Visitors who wish to purchase a tick-et online are addressed in the lan-guages listed above (except Japanese).

And the exhibitor and product data-base can be searched and filtered forcertain criteria (exhibitor’s name,country, hall, product) in five lan-guages (English, French, German,Italian and Spanish). The productbreakdown (nomenclature) can becalled up in seven languages. PetraWestphal, exhibition director of drink-tec, comments: “We take our visitorsvery seriously. We want all of them tofeel at home on the drinktec website.”

New Look and Structure for drinktec.com

A Special Promotion Section • April 2009 Edition

Travel TipsHotel Rooms:Book your hotel now, rooms are goingfast! The closest hotels to the fair-grounds with rooms available are the NHMünchen Dornach am MCC and the HotelPrinzregent an der Messe. UsingTRADEFAIRS.com you can book yourroom(s) as well as airline, train or bustickets. drinktec.com also provides thehotel directory of Messe MünchenInternational with links to hotels, guest-houses and travel agencies.

Tickets:Buy your ticket for drinktec online atdrinktec.com to save half the cost. A 3-day ticket is half price (44 euros,about $60). You’ll receive a ticketvoucher by e-mail that you can print outand bring to the fair.

Air Travel:Munich Airport is Germany's second-largest airport, and is considered by travelers’ surveys to be the "BestAirport in Europe." The fastest way togo directly from the airport to drinktecis to use the airport shuttle bus (depart-ing every 30 minutes). Subway trainsalso go to the New Munich Trade FairCenter, and the station is only stepsaway from the terminals.

Train:Most major European cities connect byrail to the Munich Central Station locat-ed in City Center, minutes away from thefairgrounds. Using the “Train & Auto”rental car service, you can rent a car atthe Munich Central Station and drive todrinktec.

Automobile:The New Munich Trade Fair Center is adjacent to the easy-to-use A94 motor-way. Limousine and transfer servicestravel to and from the airport with pas-sengers getting off and on at designatedlocations along the way.

Public Transportation:With your online purchase of an admis-sion ticket for drinktec, your voucherentitles you to use public transportationon the local underground and Munich railnetwork (U-Bahn and S-Bahn) from theday before until the day after the fair.

Go to drinktec.com to arrange your trip!


26TH ANNUAL TRUCK TRENDS SURVEY

Shifting Gears

ven though current economic conditions are worse than

they’ve been since the late ’70s, beverage fleets will still be

buying (and leasing) trucks in 2009. Our annual Truck

Trends survey indicated that more than a quarter of the respondents

have not yet shelved buying plans, and that many are interested in a

different mix of vehicles, compared to current fleets.

Responding to the fleet managers’ need for more detailed informa-

tion, the survey included its first-ever “census” of the number and

types of vehicles currently owned, as well as those planned for pur-

chase in 2009. By comparing existing fleet makeup against purchas-

ing plans, the survey identifies trends as they emerge. In addition to

fleet demographics, respondents provided feedback regarding tech-

nology adoption, green initiatives and operational concerns.

EPart 1 of our 26th Annual Truck Trends Survey shows an evolution in fleet buying plans. By Tom Kelley

Who Responded? The survey was completed by more

than 150 respondents representing adiverse cross-section of the beveragemarketplace. The respondents wereprimarily distributors, but producersalso were significantly representedamongst the results.

Sales volume was nearly evenly dis-tributed, with companies generatingunder US$10 million in sales slightlyoutnumbering those at US$10-50 mil-lion and US$50+ million. Just over 25percent of the respondents representedmultiple location fleet operations, withthe majority of those having two to sixlocations.

Geographically, the fleets involvedspan from coast to coast, with strongrepresentation in the quickly expand-ing South and Central US regions.Product mix among the respondentswas widely distributed across the keycategories of water, beer, New Age,CSD and wine and spirits. Many of thecompanies distribute brands frommore than one product category.

Current Fleet SizeFleet size varied substantially, from

small fleets with five or less vehicles,up to large mega-fleets with more than1,000 vehicles. The majority of the par-ticipating fleets operate between 10and 75 vehicles. Average annual vehi-cle mileage came in at just under30,000 miles, with most fleets loggingbetween 10,000 and 75,000 miles pervehicle per year.

Given the diverse makeup of the

Existing Fleet Size» Side-load bay beverage trailers

[SPECIALREPORT]

Class 6 or 7

Passenger cars, SUVs

Lift trucks

Dry van trailers

Vans

Pick ups

Class 8

Refrigerated trailers

Class 3, 4 or 5

Hybrid or alternativefuel vehicles

11.9%

12.7%

19.8%

10.1%

8.2%

5.8%

3.8%

3.6%

2.2%

15.1%

6.9%

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Learn more at www.dematic.us/bevpicking

Replenishment

Inventory Control

WarehouseControl SystemsforBeverageWarehousing& Distribution

respondents, the survey provides a realistic picture of thecurrent operations and purchasing plans of the typical bever-age fleet.

TrendsIn spite of a weak economic picture and continued uncer-

tainty, fleets are still planning to buy or lease vehicles in2009. Planned acquisitions are less than 5 percent of theexisting fleet size, amounting to less volume than normalreplacement cycles.

Purchase PlansWhile this may seem pessimistic, especially for equipment

manufacturers, it’s not necessarily a poor reflection on thefleets’ state of health. Many distributors reacted to the recentvolatility of fuel prices by fine-tuning vehicle configurations,optimizing loading and refining routing strategies, enablingmore product to be delivered by fewer trucks. The emergingshift in vehicle configurations is evidenced in both the sur-vey results and anecdotal reports from fleet managers.

Among the light-duty vehicles in our respondents’ fleets,the popularity of passenger cars and SUVs seems to be fad-ing, while pickups and vans are poised to gain a bigger sharein the fleet makeup. Obvious advantages such as capacityand capability account for some of the shift, while new pick-up models and purchase incentives undoubtedly addmomentum.

With vans representing the single most popular choiceamong our respondents’ purchase plans for 2009, at least two

of the vehicle manufacturers are working on new configura-tions. Ford has already announced plans to start selling itscompact Transit Connect cargo van in North America, andNissan is looking at similar vehicles in its global portfolio forpossible distribution in North America.

Traditional side-load beverage bodies and trailers stillmake up the majority of our respondents’ fleets, but are notas popular when it comes to future acquisition plans. Dry

van trailers, bulk bodies and comboside/rear load configurations providethe flexibility that many fleets requireto optimize their delivery processes.

Looking strictly at trailers, side-load-ers are the most popular in existingfleets, but when it comes to future pur-chase plans, dry van trailers take the topspot.

Although it may yet be too subtle todefine as a trend, it would appear thatClass 6 and 7 trucks also may be losingsome of their popularity. Without sepa-rate figures for straight trucks and trac-tors in Class 7, it’s difficult to tell if thenewer Class 7 tractors are responsiblefor much of the strength in the Class 6and 7 segment.

While Class 6 and 7 trucks are themost prevalent power units in ourrespondents’ fleets, the adjacent seg-


Acquisition Plans»

Side-load bay beverage trailers

Class 6 or 7

Passenger cars, SUVs

Lift trucks

Dry van trailers

Pick ups

Class 8

Refrigerated trailers

Class 3, 4 or 5

Hybrid or alternativefuel vehicles

Vans

11.9%9.9%

9.1%

6.4%

3.1%1.6%

7.1%

6.4%

15.0%

14.9%

14.5%

[SPECIALREPORT]

ments, Class 3, 4 and 5 on thesmaller end, and Class 8 on thelarger end, show slightly strongervolume amongst future acquisitionplans, compared to slightly weakervolume plans for Class 6 and 7.

Hybrid and alternative fuel vehiclesrepresent the smallest fraction of ourrespondents’ fleets at just over 2 percentof the total vehicles in operation. Similarly, among futureacquisition plans, the “green” vehicles also are the smallestsegment, at just under 2 percent of the total vehicles to beacquired, with nearly 14 percent of our respondents indicat-ing plans to implement hybrid technology in 2009. Given therelatively recent debut for most of the green offerings, mostfleets are just now in the evaluation stages.

Green StrategiesSpeaking of “green,” eco-friendly strategies employed by

the respondent’s fleets were not limited specifically to vehi-cle choices. Motivated as much by bottom-line green as byeco-friendly green, many of the fleets already employ strate-gies that lower operating costs while simultaneously reduc-ing environmental impact.

The majority of the respondents are already optimizingtheir routing and are coaching drivers to keep fuel bills to aminimum. These low-tech solutions can bring the most dra-matic results in the green equation. Numerous studies haveshown that driving technique alone can account for asmuch as a 30 percent difference in fuel consumption.Curiously, while more than half the fleets employ drivercoaching, less than 20 percent use any form of on-board

driver feedback to provide real-timecoaching when it can do the most good.

One less-obvious strategy for reduc-ing a fleet’s environmental impact isreplacing older trucks with those sport-ing the latest in exhaust emission con-trols. The 2010 model trucks that areslated to debut later this year will repre-sent a 98-percent reduction in 1988 levelemissions. Replacing older trucks wasone of the most popular green strategiesamong the responding fleets’ implemen-tation plans for 2009, coming in at aclose second to hybrid technology.

Willing to try any realistic means forreducing their fleets’ environmentalimpact, more than 10 percent of ourrespondents indicated plans to adopt


Plan to Implement Strategy Currently Use within Next 12 Months

Route Optimization 58.4% 8.7%

Driver Training/Coaching 55.9% 4.3%

Replacing Older Trucks 53.4% 11.8%

Fuel Management Software 19.9% 6.8%

On-Board Driver Feedback 16.1% 8.1%

Hybrid Technology 8.7% 13.7%

Alternative Fuels 8.7% 10.6%

Green Strategies»

What Do The Big Guys Know?Part IINearly half of the fleets with revenues overUS$50 million use wireless communicationsand/or remote vehicle tracking, compared toless than a quarter of the fleets with revenuesunder US$50 million.

alternative fuel technology in 2009. Althoughwe didn’t break out alternative fuels by typein this survey, anecdotal reports from fleetmanagers put natural gas and low-concentra-tion bio-diesel at the top of the list.

On-Board TechnologyWhile green technologies are relatively well

accepted, the fleets were less receptive to otheron-board technologies. Of those technologiesincluded in the survey, even the most popular,wireless voice/data communications, was cur-rently used by less than 30 percent of thefleets. Among the plans for implementation in

2009, remote vehicle location/trackingranked highest at just under 15 percent.

The difficulty in measuring the ROIfor these technologies may well con-tribute to the low acceptance rate.While it’s very easy to track fuel con-sumption or miles traveled, it’s muchmore difficult to assign a dollar valueto the collision that didn’t happen orthe time saved by using the various on-board safety, tracking, navigation andcommunication systems.

Operational IssuesGiven last year’s roller-coaster ride

with fuel prices, and in some cases avail-ability, it’s no big surprise that morethan 90 percent of the fleets ranked fuelprice volatility highest on the survey’slist of operational concerns. Maintenancecosts came in at a close second-place, sostay tuned for next month’s issue wherewe’ll go in-depth on the maintenancesection of the survey.

Curiously, vehicle safety and insurancecost also ranked quite high, at just overand just under 80 percent respectively.This is quite odd given that the surveyfound low acceptance of on-board safetytechnologies such as collision warning.

At the other end of the worry scale,fleets seem to be coping with environ-mental and regulatory issues, with lessthan half of respondents choosing theseas major areas of concern.


What Do The Big Guys Know?More than half of the fleets with revenues over US$50 million use leasing, while less than 40% of the fleets withrevenues under US$50 million leased any of their trucks.

[SPECIALREPORT]

Plan to Implement Strategy Currently Use within Next 12 Months

Wireless Voice/Data 28.0% 4.3%

Remote Vehicle Location/Tracking 22.4% 14.9%

Back-up/Blind-Spot Detection 15.5% 6.8%

On-Board Routing/Navigation 11.8% 8.7%

Stability Control 5.0% 2.5%

Collision Warning 2.5% 3.7%

Tech Adoption»

Future Concerns»100

80

60

40

20

0

90.7%84.0% 81.5% 78.3%

61.6%57.3%

47.7% 46.6%42.0%

Fuel PriceVolatility

MaintenanceCosts

VehicleSafety

InsuranceCost

DriverRetention

VehicleLifestyle

Cost

Environ-mentalImpact

RegulatoryCompliance

Cost

RegulatoryInstability

BW

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ohn Jarboe and J.B. Jarboe, the father andson team who run the Tulsa, Okla., USA-based Jarboe Sales Co., like to think of thewine and spirits wholesaling business thatthey are in as either being “trickle down” or

“trickle up.”By “trickle down,” they mean a marketplace where the sup-

plier is able to exert a lot of influence on the wholesalerrelated to product mix, promotions, pricing, etc. This is theway it is typically done in the franchise system that most USwholesalers do business in.

By “trickle up,” on the other hand, the Jarboes are referringto the kind of marketplace in which they exist in Oklahoma,which, it turns out, is one of the only non-franchise marketsfor wholesalers in the US. In this market, the wholesaler ismore influenced by the demands of both the consumer andthe retailer, and those demands, in turn, “trickle up” to thewholesaler and the supplier. Things such as the type of wineor spirit the consumer is looking for, and what price he orshe is willing to pay for it, are set more by the consumerthan anyone else.

The non-franchise system in Oklahomadates back to 1959 when the state was writ-ing the first alcohol beverage control laws.The desire was for strong state control ofthe distribution of beverage alcohol ratherthan a system that might be dictated byany segment of the industry.

For wine and spirits wholesalers likeJarboe, a major effect of all thisregulation is to limit the leversthe companies can use to com-pete to basically just two: inven-tory control and customer serv-ice. So Jarboe has worked hard toachieve best practices when itcomes to both of these since itsfounding 50 years ago by John’sfather Joe R. Jarboe. Along with Joe, others who left a

mark on the company over the years include Louis AbrahamJr., who passed away in November of last year and hadrecently retired as an active partner but had continued toserve as an advisor emeritus. He joined the company as oneof its original salesmen and became one of the managingpartners in 1973, together with Mark Carson. Also recentlyretired as an active partner, Carson continues to serve as anadvisor emeritus and has been involved in the wholesaleliquor business since 1949.

Another person credited with the company’s success isRichard Peck, general manager, who has more than 35 yearsin the wine, spirits and beer industry in Oklahoma. Hejoined Jarboe in 1974 as the manager of purchasing and in1977 he was appointed general manager.

Over the years, Jarboe has marked many industry firsts inthe Oklahoma market, including being the first wholesaler to

Heartland WholesalerLEADING JARBOE as it celebrates its 50th anniversary

this year are partners John B. Jarboe (l) and his son J.B.Jarboe II.

»

Jarboe Sales Co. puts the customer first in a highly competitive marketplace.By Andrew Kaplan

VITAL STATSJARBOE SALES CO.

PARTNERS: J.B. Jarboe II and John B. Jarboe

HEADQUARTERS: Tulsa, Okla., USA

EMPLOYEES: 100+

GOALS: Jarboe is constantly striving to providecustomers with the finest customer service,delivery and support to ensure their success.J


connect its order entry sys-tem to a live computer inven-tory, the first to equip itssales force with handhelddevices and the first whole-saler in Oklahoma to operatein a fully temperature-con-trolled warehouse.

A good indicator of howthe company has grown overthe years can be seen in thesize of its Tulsa warehouse.In 1959, that warehouse was14,000 square feet. In May of1992, it moved into its pres-ent facility consisting of a120,000-square-foot warehouse and office.

Today, the company has more than 100 employees, servic-ing licensed retail and on-premise customers throughoutOklahoma. “We spend a lot of time educating our sales teamabout not only the products that they sell and what’s newand what’s coming up, but also about what’s happening in

the industry,” says John. “Onthe delivery side, our driversare a more constant point ofcontact with our customers.And we stress to them theimportance of not just haul-ing a box over to somebody’sdoor and dropping it off, butbeing a point of contact and Ithink they take pride in theway they present themselves.”

Adds J.B., “I think the mostimportant thing we’velearned in 50 years is thatyou cannot have good service

without good people. And wefeel we undoubtedly have the best people in the State ofOklahoma working in this industry that we possibly can.We’ve maintained a family culture that has allowed us toattract and retain some of the best people in the industry.”

For more about Jarboe Sales Co., visit beverageworld.com.

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BW

THE JARBOE MANAGEMENT TEAM (l to r) includes Janet Jarboe, productionmanager; Margaret Conner, comptroller; Brett Lay, purchasing manager; Ron Hill,logistics manager; J.B. Jarboe II, partner; Bud Hill, sales manager; John B.Jarboe, partner; Gerald Brumble, plant & equipment manager; Richard Peck,general manager; Richard Holland, warehouse manager; Jimmie Naifeh, assistantwarehouse manager; Debra LaPointe, customer service / information technologymanager and Tonja Frazier, human resources manager.

»

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n speaking with Jean-Charles Boisset,president of Boisset Family Estates, itis clear that there is never a dullmoment for the Burgundy, France-based

wine and spirits company, which also hasan arm of its business headquartered inSausalito, Calif., USA. The family business, founded in 1980,is a modern day operation leading the way in the wineindustry in packaging innovation and environmental initia-tives, including biodynamic farming, which avoids fertilizersand pesticides by maintaining a balanced, diverse ecology.

Among some of the most recent news Boisset FamilyEstates has to share is the introduction of a new sustainablewine brand, Fog Mountain, from DeLoach Vineyards, locatedin California’s Russian River Valley in Sonoma County. FogMountain is packaged in a 1-liter PET and Boisset explainsthe larger package was a result of consumer feedback. Insome instances consumers perceived a 750 ml PET as asmaller container compared to a traditional 750 ml glass bot-

tle of wine. The reason being because thebottle was thinner than glass thereforeappeared smaller on the shelf when placednext to a traditional wine bottle. So, Boissetsays, the idea was to go bigger visually.

The benefit of that is what he refers to asa “double whammy.” Packaged in a largercontainer, Fog Mountain offers 33 percentmore wine in a similar sized package, andfor on-premise distribution this meansmore glasses—about seven—poured per

bottle. Secondly, Boisset explains,“You are putting more in thesame container, more or less, sowe use less CO2 than we do on a750 ml.” The wine brand, avail-able in merlot this month, retailsfor about US$12.

The JW Marriott Hotels andResorts added the Fog MountainMerlot as an optional selection inits 2009 beverage portfolio.According to Daniel Hoffman,

director of equipment and beverage specifications, lodgingfood and beverage for Marriott International Inc., the winewas selected for several reasons.

Beginning with taste, Hoffman explains that beverageproducts go through a rigorous blind taste test before beingselected, and in the blind tasting flight for the merlot, FogMountain came in first place.

The product also was considered because of its packagingand environmental attributes. Hoffman says: “Starting threeyears ago we started to add biodynamic wine, spirits andbeers and organic wine to our program. This year, one of thefocuses was to look at additional product selections that meetthe organic/biodynamic as well as environmentally friendly

Breaking the ‘Rules’JEAN-CHARLES BOISSET, president of Boisset Family

Estates, has a vision of sustainability and a desire to pro-vide wines for every occasion and mode of consumption.

»

Boisset Family Estates continues to break the traditional rules of the wine industry.By Jennifer Cirillo

VITAL STATSBOISSET FAMILY ESTATES

PRESIDENT: Jean-Charles Boisset

HEADQUARTERS: Burgundy, France

EMPLOYEES: 670 (including US)

GOALS: Boisset Family Estates seeks to express thequalities of its wines with an “art de vivre” andstyle that consistently enhances terroir, provenance,history, heritage and quality.

I

packaging options. And this particular product fit.” This isthe only PET wine in the portfolio, according to Hoffman.

What made the package so appealing is that it mimics thelook of a glass bottle, partially due to the design of the bottle.“We feel that alternative packaging, if designed well, has aplace in upscale hotels and fine dining,” Hoffman says. “Ithink as a result of the research that the Boisset family hasconducted on this wine, that they will set a benchmark thatwill be tried by many of their competitors. As a company,they are very innovative and they are not scared to breaksome of the rules.”

Boisset Family Estates is making an effort to minimize the

carbon footprint of serving wine by the glassas well. It is launching an on-premise initia-tive called The Barrel to Barrel Program(B2B). The B2B program was designed tooptimize bottle-to-glass pours and helpenhance a retailer’s contribution marginwhile reducing their carbon footprint.

How it works: retailers are provided witha 10-liter wooden barrel with a spout thatcan be placed on the bar. The barrel isdesigned to hold a 10-liter bag of wine serv-ing a minimum of 60 glasses.

The barrel can help reduce spoilage byprotecting the wine from oxidation andkeeping it sealed off from bacteria. In thecurrent economic climate where consumersare spending less on-premise and drinking more wine by theglass as opposed to a bottle, this program is designed to offerretailers an advantage by not having to discard bottled winethat has gone bad. According to the company, the shelf life

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AdvertisementCF NAPA“Much of the growth within the Boisset portfolio is attributable to ourdesign company, CF Napa. What sets them apart from other agencies istheir creativity and ability to grasp the essence of each brand. They under-stand the intricacies of the beverage industry and the subtleties of position-ing and communication. Their designs strike an emotional chord with ourconsumer and trade audiences. Dave and his team are talented, experi-enced and professional.”-Jean Charles Boisset, Boisset Family Estates. For Info: CFNapa.com

FROM DELOACH VINEYARDS comes Fog Mountain Merlot pack-aged in a 1-liter PET.

»

of the wine in the barrel is four to six months.The program offers a number of environmental benefits as

well. For one, there is a savings on transportation—one bag ofwine is the equivalent of 12 bottles. And the bags are madefrom recyclable material, reducing waste.

Launching May 1 exclusively for on-premise, the B2B pro-gram will offer a special blended pinot noir, zinfandel andcabernet from DeLoach Vineyards.

“I am very thrilled about three things: Providing therestaurant owner with something very unique to put on hisbar; providing a point of interest for the consumer in the

restaurant and, of course, minimizing incredibly the carbonfootprint of this endeavor,” Boisset says.

By continuing to push the boundaries in wine packagingand looking for new ways to reduce the carbon footprint ofits wines, Boisset Family Estates aims to gain more con-sumers and retailers in the process, and has begun to do so.

“We are experiencing that a lot of the consumers are nowvery intrigued about all of the initiatives we are doing,” saysBoisset. “We are widening our demographic pool. People arenow saying, ‘I’ll give it a shot; this is fun; this is unique; thisis different.’ So, I’ve been very happy with that.”


Leaders in Pinot NoirAs a leading pinot noir producer,

Boisset Family Estates is continuing itsefforts with the release of its 2008DeLoach Vineyards Russian RiverValley Pinot Noir, says Jean-CharlesBoisset, president of Boisset FamilyEstates.

“It is very tender, very delicate instyle and very soft flavored,” describesBoisset of the pinot noir. He hopes thatthe wine, slated for release in May,

will find success in theon-premise channel. Thewine is expected to retailfor US$24.

All of the Russian Rivertier vintages will have anupdated look with newlabels, according toBoisset Family Estates.

In addition, Boissetrecently launched a high profile col-lection of pinot noir from Sonoma

County, California. JCB byJean-Charles Boisset is a col-lection of five, rare num-bered edition wines createdby Boisset in limited quanti-ties. Within the collectionthere also is a Pinot NoirRosé and a Chardonnay.According to Boisset FamilyEstates’ website, the collec-

tion is “a way of reinventing time andcelebrating style.” —J.C.

BW

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bout five years ago, I was going toretire,” recalls Gusto Brands Inc.president Lonnie “Pete” HaralsonIII. The third generation to head

up this family beverage distributorship startedin 1945, Haralson had a deal to sell the company, but it fellthrough. “So I said, ‘what the heck,’ and just went back towork.” In those five years since Haralson’s decision, the com-pany’s business has doubled.

Situated in the small city of LaGrange, Ga., USA, the bever-age distributor has extended its reach over the past five yearsto encompass the entire state of Georgia, fueled by double-digit growth. Gusto has garnered that growth through a“David versus Goliath” strategy, creating a niche in niche bev-erages overlooked by larger distributors.

“Niche products are the only real avenue left,” saysHaralson. Gusto has built its reputation, and its volume, byselling here-to-fore little-known products.

“We’ll be up this year a good 20 percent overall in sales,”

says Haralson, who anticipates similarannual sales gain over the next five years.

The company consists of four groups eachwith a dedicated sales force: the soda-pop/non-alcohol division, a malt beveragegroup, a wine group and a spirits division.Soft drinks are distributed under SouthGeorgia Beverage, which services about halfof the state primarily with products from DrPepper Snapple. Soft drink volume is up 22

percent over the prior year, notesHaralson. Beer is up 2 percent, bet-ter than the industry average. Butthe real growth has come fromGusto Brands’ wine and spiritsdivisions, which were added justfour years ago. Wine has increased70 percent over the prior year,while spirits have jumped 760 per-cent, according to Haralson.

A big coup for Gusto has beenthe addition of Ivanabitch, a Dutch-made vodka. “It’s thehottest vodka in the state of Georgia,” claims Haralson, “andwe have it.” Ivanabitch had been “lost in the shuffle” atanother distributorship, when Gusto picked it up and devel-oped the brand. Now the vodka is so popular that Gusto ishaving a hard time meeting the growing demand.

That type of demand is moving Gusto to develop astatewide presence. Estimated sales for this year are US$27million. Right now, the company is servicing most of thestate from its single 58,000-square-foot warehouse inLaGrange, which has already been expanded three times overthe past four years.

“We need new warehouses and sales points because we’regetting demand from all over the state,” says Haralson. To be

Scratching a NicheGUSTO BRANDS PRESIDENT Pete Haralson (l to r), spirit

sales manager Howard Glover and beer sales manager DanSchlommer showcase their stock of Ivanabitch Vodka.

»

Small distributor gets bigger by focusing on bringing specialty products to market.By Tom Strenk

VITAL STATSGUSTO BRANDS INC.

PRESIDENT: Lonnie “Pete” Haralson III

HEADQUARTERS: LaGrange, Ga., USA

EMPLOYEES: 100

’08 REVENUE: US$20 million

GOALS: To double its business over the next fiveyears.‘A

competitive, Gusto needs a warehouse in the populous statecapital. “Right now we’re dickering to buy one company,which will give us an additional location,” he says. The ware-house in Atlanta should be open this year, with a third loca-tion in South Georgia anticipated within the next 12-18months.

“We’ve been growing by adding SKUs, and the more SKUsyou have, the more warehouse space and equipment youneed,” he points out. The company sells about 60 brands ofsoft drinks, for example. “Welch’s has been a great additionfor us, it’s a stable product that sells well.”

Gusto Brands has a growing number of new brands. Onerising spirit in the portfolio is a small-batch whiskey calledConecuh Ridge; originally made illegally by an Alabamafarmer, the story goes that the ’shine was much appreciatedby raiding revenuers.

The company has a reputation for listening to small start-up suppliers. “They make good products, but have a difficulttime getting to market,” explains Haralson. “They know theycan get us on the phone. We have that family feeling, maybeit helps us.”

Good business is forged upon good partnerships, believes

Haralson. Most of his partners are people he’s known foryears. “We have a level of trust and integrity, you can bankon what they tell you,” he comments.

The company got its start as a retail outlet, with a 40-footcounter and a sawdust floor. “When Prohibition ended mygrandfather was the largest Schlitz draft account in theSoutheastern US,” relates the younger Haralson. “He had aplace where he sold hot dogs for 5 cents apiece—5,000pounds a week. And 50 kegs of Schlitz a week and about 50cases of wine and 250 cases of bottled beer.” The elderHaralson became a Schlitz distributor in 1945; his sonbought out the business in 1949. “In turn, I bought my fatherout in 1986.”

The next generation is already hard at work. Haralson’sdaughter is the chief financial officer. As for future manage-ment, “I have several grandchildren,” he says.

Haralson is upbeat about the future, despite the currenteconomic situation. “I wouldn’t want to be a Mercedes orBMW dealer right now; no big-ticket items for me,” he says,noting that alcohol is usually considered recession proof. “Idecided years ago that I’d rather sell something you couldput in a brown paper bag.” BW


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rimo Water Corp.’s path to the beverage market hasto be one of the more unlikely ones: It found its wayto water by way of propane.

Prior to founding Primo about three years ago,CEO Billy Prim was running another company of his found-ing, Blue Rhino. Blue Rhino had made a name for itself byperfecting a customer propane tank exchange process atretail, something it ultimately realized could benefit the bulkwater market and estalished a nationwide 3- and 5-gallonexhange service for retail.

Primo’s systems tie-in with retailers’ point-of-sale systemsto gather necessary sales information. The company is thenable to tailor just-in-time delivery for those accounts.

Another takeaway from the propane business that Primohas been able to apply to the water market is what Prim calls

the “razor and razor bladeeffect.”

“We established a prod-ucts division that is nowselling coolers with newstyling, bottom load capabil-

ities, more impressiveoperating rates, moreenergy efficient, etc.,”Prim notes. “And we’reselling these through retail-ers that we also sell waterthrough … This influx ofwhat we call razors, our coolers, will bring volumes of newusers into the category.”

Although most of the company’s business is in bulkwater, it does have a single-serve version. With an eyetoward eco-sensitivity, the company has packaged its sin-gle-serve offering in a PLA (polylactide) bottle, made from100 percent renewable resources.

“It emits 90 percent fewer greenhouse emissions to pro-duce our bottle than a regular PET bottle of the same size,”Prim points out. “You can grow it once as corn or someother feed stock and that molecule lives forever. It can berecycled and used again and again. It can be composted,breaking down in less than 90 days in a commercial com-post facility.”

Primo’s sustainability commitment is not limited to itssingle-serve product. The company’s bulk water businessoperates in what Prim calls a “closed-in system.”

“No bottles ever end up in the landfills,” he explains.“When we take a bottle out of service, we regrind it andthen it’s used for something else.”

Primo water products can be found at most major retailchains—including Wal-Mart, Target, Safeway, Lowes,Kroger and Albertsons—in 48 US states.

P


BW

The Primo ProcessPrimo Water Corp. leverages years of experience servicing retail to take the US watermarket by storm. By Jeff Cioletti

VITAL STATSPRIMO WATER CORP.

CEO: Billy Prim

HEADQUARTERS: Winston-Salem, N.C., USA

GOALS: To have minimal impact on the envi-ronment in packaging, equipment andprocesses, and continue to bring bulk waterto the masses through retail.

PRIMO WATER CORP.aims to bring bulk water to consumersthrough retail accounts while strivingto minimize its carbon footprint.

»

BEVERAGEWORLD.COM APRIL 2009_BEVERAGE WORLD_69

“Cold aseptic filling essentiallyinvolves bottling a product at ambient temperature withoutusing any preservatives or coldsterilizing agents, in such a waythat it exhibits a predefined shelflife,” explains Stefan Kraus, prod-uct manager aseptic filling,Krones AG (Neutraubling,Germany) in “Cold-asepticBeverage Filling,” a specialist arti-cle distributed by the company.The non-use of preservatives canoffer not only a reduction in costfor the beverage company, butalso an additional health benefitto the consumer.

In a report co-authored by Dr.Harmut Evers, manager, Beverage Engineering Department,KHS, additional plus points of aseptic cold filling are noted,such as creating the ability to retain the natural flavor, aroma

and color of sensitive beverages.Because aseptic filling deals with low

acidic beverages, meaning the risk ofmicro-organism growth is greater, like iso-tonics, teas, juices and nectars, one impor-tant consideration for beverage operatorsto consider before integrating an asepticline is the need for better skilled andmore disciplined staff members, saysMichael Fasold, P.Eng., director of busi-ness development and marketing, SidelNorth America.

There are two types of cold aseptic fill-ing: dry sterilization and wet steriliza-tion. Which process is better for youroperation? According to the KHS report:“While dry sterilization is attractive …due to the additional cost-cutting aspectof using less rinsing water for bottlesand closures, other users consider wetsterilization … because of the traditionalbottle and closure rinsing process, forexample. Wet rinsing is the preferredmethod if the user cannot guarantee thatthe bottles and closures fed to the sterili-zation process in the aseptic cold filling(ACF) block are entirely free of particles,

liquids and condensation. This is generally the situation whenthe bottles and caps are delivered by external suppliers…”

Sidel offers an aseptic filling solution with Predis, its patent-

Riding the Aseptic Wave

PACKAGING

Adding an aseptic line to a beverage operation can offer opportunities.

Beverages with a powerfulhealth boost.PAGE 72

R&D

by jennifer cirillo

ASEPTIC FILLING

INSIDE BEVSOLUTIONS

BEVSOLUTIONSBEVSOLUTIONSdistribution • packaging • production • r&d • sales & marketing • supply chain

ith the continuous rise in popularity of functional and

New Age beverages, including RTD teas, flavored waters,

juices and nectars and energy drinks, aseptic cold filling

has become a process that the non-alcohol beverage segment looks

to as a solution for extended shelf life and, in some cases, potential

cost and energy savings.

W

Are bioplastics finally ready for prime time?PAGE 76

WITH ITS PET-ASEPT process, Krones AG has developed atechnology and method for cold aseptic filling that has gainedinternational acceptance as a leading system on the market,according to the company.

»

ed dry preform decontaminationsystem. Predis sterilizes PET pre-forms as opposed to bottles, usinghydrogen peroxide vapor (H2O2),instead of a H2O2 solution, at ovenentrance requiring no water.(About 250 m3 of water and 200liters of chemicals are used daily todecontaminate bottles on a tradi-tional aseptic bottling line, accord-ing to Sidel.)

“The preform is about one-eighthto one-tenth of the final volume ofthe bottle,” says Fasold. “So by thatfactor, you consume much less inregards to chemicals.”

Another advantage of Predis isthat it provides the potential for filling lightweight bottles.

Sidel also offers aseptic bottling of ultra high temperature(UHT) milk with Combi Predis FMa, which combines thePredis solution with the company’s newest aseptic fillingtechnology, the Sensofill FMa, in a single system of blow

molding, filling and capping. Also for the dairy industry, Tetra

Pak offers Tetra Lactenso Aseptic, acustomized aseptic processingsolution. Farag Amer, CEO andchairman of Faragalla Group, adairy producer based inAlexandria, Egypt, says of the pro-duction solution: “Tetra LactensoAseptic has had a huge impact onreducing operating costs in myplant. It increased availability upto 95 percent through more effi-cient technology, reduced CIPdetergent up to 20 percent, mini-mized energy consumption due toa high degree of energy recovery

and finally reduced product losses by less than 100 liters at aproduction of 12,000 liters/hour.”

To read more about aseptic processing technology fromTetra Pak, visit beverageworld.com.


BW

[PRODUCTION]BEVSOLUTIONS

PREDIS, Sidel’s patented dry preform decontamination systemuses “dry preform technology” meaning bottle rinsing is replacedwith dry preform sterilization using hydrogen peroxide vapor.

»

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MillerCoors and River Network haveannounced the recipients of fourUS$10,000 grants that will go towardslocal watershed protection programs.

The four winning organizations, alllocated in states where MillerCoors hasbreweries, were chosen by the publicthrough an online voting competition inwhich more than 11,000 people voted.

“These grants willprovide investmentand support to localorganizations thatfocus on watershedquality, educationand conservationefforts in their com-

munities,” says Kim Marotta, vice pres-ident of corporate social responsibilityat MillerCoors.

The four winners are:• Friends of the Lower Olentangy

Watershed; Columbus, Ohio• Little Tennessee Watershed

Association; Franklin, N.C.• Milwaukee Riverkeeper; Milwaukee,

Wis. • Ogeechee-Canoochee Riverkeeper;

Statesboro, Ga.MillerCoors has designated water con-

servation as one of its key sustainabledevelopment commitments. It engagesin its own water initiatives and con-stantly strives to reduce the amount ofwater used to brew its beer.

It partnered with River Network toleverage its network of more than 700local, state and regional partners tocreate or expand programs that willimpact and protect watersheds on alocal level. Eight finalists were chosenfor the grant competition with eachremaining one receiving US$1,000.

IN BRIEFMillerCoors HonorsWater Conservation

he concept of aseptic processingand packaging has been a viableapplication since the ’60s.During this time, almost 50

years, process engineers, machinedesigners and market planners havebeen developing improvements in bothaseptic segments. To assess how wellvarious development efforts have pro-gressed, it is important to understandthe aseptic concept and the environ-ment under which it is applied.

Not to belabor Biology 101, asepticprocessing essentially means producinga product “free or freed from pathogen-ic microorganisms.” To produce a prod-uct under these conditions also requiresaseptic packaging. Simply stated, theaseptic concept requires a sterile condi-tion for processing and packaging aproduct. One significant advantage ofaseptic production is the ability to pro-long shelf life of products on a longterm basis.

Providing sterile operating conditionsin a beverage plant can or will be deter-mined by product characteristics anddesired packaging.

Stringent requirements can make theaseptic production application expen-sive and demanding. Since aseptic con-ception in Europe, the criteria of “cleanroom” equipment installations andhighly skilled personnel have beenmajor cost issues. Observation and dis-cussion focused on these issues indicatetechnological progress has reducedinstallation complexities and madeskilled personnel acquisition and main-tenance less of a problem. Even withthe progress made to date, plants con-templating aseptic processing/packag-ing line installation must: 1) evaluate

existing operating capability conditionsand 2) determine the impact of inte-grating an aseptic line into the produc-tion layout. The impact could be signifi-cant because conventional and asepticproduction lines differ not only inphysical content, but also in the psy-chology of managing the operation.

Some major CSD bottling operatorshave, at some time, embarked on anaseptic packaging line operation.Results have been both favorable andunfavorable depending upon: 1) thepackage mix and market demands; 2)the installation and operating costsinvolved and 3) the personnel trainingand commitment. Some have retainedtheir installations, while others haverelegated aseptic production to contractpackers that have invested in requiredequipment and have accomplished suc-cessful concept application. This willprobably be the forecast for futureaseptic production.

One final assessment addresseswhether a beverage producer enters theaseptic world or not. It may depend onthe package, such as the initial asepticbox, but inroads have been made intoPET and glass, especially in the softdrink arena of bottlers. The issues of:1) quality control; 2) costs; 3) packagevolumes and 4) market demands willcontinue as the aseptic concept movesforward.

T

BW

BEVERAGEWORLD.COM

Aseptic AssessmentOPERATIONS OBSERVATIONS

APRIL 2009_BEVERAGE WORLD_71

John Peter Koss, a beverage operationsadvisor, has more than 45 years ofbev erage business experience asso -ciated with General Cinema Bev erages,Carling Brewing and Pepsi-Cola. Hewas an assistant professor ofindustrial engineering at Kent StateUniversity. Contact him at Tel: 305.829.3631; Fax: 305.829.2484

by john peter koss

[PRODUCTION]BEVSOLUTIONS


rom vitamin C-fortified fruit juice to green tea extractin an enhanced water beverage, antioxidants are pop-ping up across the beverage world, thanks in largepart to the growing resonance of the word “antioxi-

dant” in consumers’ health and wellness-focused vocabulary.The term antioxidant is somewhat of a catch-all, encompass-ing phytochemicals, such as flavonoids found infruits and vegetables, as well as vitamins like A,C and E and even vitamin-like substances suchas co-enzyme Q10. Technically, antioxidants aresubstances or nutrients found in foods thatcan prevent or slow the oxidative damagedone to the human body by free radicals.

According to Mintel’s Global NewProduct Database (GNPD), 262 productslabeled “antioxidants” were launched inthe US market in 2008, up from 131 in2007.

“The term ‘antioxidant’ seems to res-onate with consumers as a vital compo-nent of many types of functional bever-ages,” notes Jessica Jones-Dille, industrytrend manager, Wild Flavors. “Since it canbe seen as a somewhat generic descriptor,expect to see marketers utilizing more dif-ferentiation when describing specificofferings and benefits of antioxidantingredients, such as specifying the prove-nance of antioxidants.”

Several years ago, the term “superfruit” emerged on thebeverage scene to describe a fruit with exceptional nutrition-al qualities, including high antioxidant content, and pome-granate and açai are now two of the more popular super-fruits. Beverage formulators say they are now seeing moreexotic superfruits making their way into beverages, oftenpaired with recognized fruits. The latest fruits to generatebuzz include acerola, baobab, an African fruit, borojo, whichis sourced from Columbia, camu camu, cili, a brilliantorange fruit dubbed the “king of vitamin C,” the Tibetanfruit emblic, gac, which is a large, red fruit indigenous toSouthern Asia, sea buckthorn and yumberry.

Making a comeback are blackcurrants, although the fruithas been consumed for its health benefits for thousands ofyears. Currant C is a line of ready-to-drink all natural blackcurrant nectar that’s paired with other nutritious fruits,including boysenberry, kiwi, clementine, passion fruit andblueberry.

Although largely unknown in North America, chaga, anherb native to Siberia, is the next exotic ingredient to makeit onto beverage shelves as the herb is called “nature’s silver

bullet.” Scientific research has shown that chaga has a highantioxidant value (it scored 1,104 on an ORAC scale com-pared to açai’s 167). Sayan Health recently launched SayanChaga in the US market, one of the first ready-to-drink bev-erages to contain the herb. The drink combines wild harvest-ed chaga with other Siberian herbs in an original flavor, aswell as raspberry, peach and unsweetened citrus.

“We wanted to develop a beverage that would provide realhealth benefits and be effective, but we also wanted it totaste good. So it was really all about balancing the amountof chaga and the other berries. We went through probablyabout 80 different samples to get what we wanted,” TroySeeley, one of the company’s founders, says.

“Since antioxidants are such a big thing right now, we’rewell positioned. People are looking for products that reallysupport their claims and the more you read about chaga, the

FThe Antioxidant BoomHEALTHY INGREDIENTS

From vitamins to berry extracts, beverage manufacturers have a range of options when itcomes to formulating beverages with a powerful health boost. By Heather Landi

DUBBED NATURE’S SILVER BULLET, chaga, a Siberian herb rich in antioxidants,is the primary ingredient in Sayan Chaga. Cherry 7UP Antioxidant contains 10percent of the recommended daily intake of vitamin E per 8-ounce serving.

»

[ R&D ]BEVSOLUTIONS

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more you realize how amazing it is. There have been 1,400research articles written about its benefits,” Seeley says.

Beverage manufacturers have a number of antioxidantingredients to choose from, ranging from superfruit extracts,EGCG from green tea, theaflavins from black tea, polyphe-nols from red and white tea as well as physiological antioxi-dants like alpha lipoic acid, co-enzyme Q10, resveratrol,

carotenoids and vitamins A and E.“Depending on what type of antioxidant is used, there can

be some formulation challenges. Thecatechins in green tea can impart somebitterness, so you have to do some fla-vor masking work,” remarks VinnyKrall, applications laboratory manager,Symrise.

Heather Biehl, senior scientist,H.I.T.S., Wild Flavors, adds, “Alphalipoic acid can oxidize quickly resultingin an unpleasant sulfur aroma, high lev-els of vitamin C can cause browningand CoQ10 is very light sensitive sopackaging must protect the productfrom light.”

Wild Flavors offers superfruitextracts standardized to specific com-pounds, such as açai extract standard-ized to polyphenols. Symrise offersindividual components or completesolutions, depending on a customers’needs.

California Custom Fruit and Flavors(CCFF) offers a wide range of superfruitextracts as well as custom formulatedingredient systems. CCFF also developsand manufactures its own stand-aloneflavors and this internal stand-alone fla-vor development capability allowsCCFF the advantage of shorter leadtimes on R&D, the company says.

Nutragenesis offers a branded antiox-idant ingredient, Wellberry, that com-bines Indian Gooseberry extract andPure Way-C, a vitamin C ingredient.According to the company, Wellberrycan boost a beverage’s antioxidant valueby up to 4,400 percent when added tocommercially available fruit juice, veg-etable juice and green tea beverages.And Wellberry has been proven to syn-ergistically boost the antioxidant levelsof other superfruit extracts.

To learn more about incorporatingantioxidants into beverages,

visit beverageworld.com.

74_BEVERAGE WORLD_April 2009 BEVERAGEWORLD.COM

BW

[ R&D ]BEVSOLUTIONS

FIRST JUICE, anorganic kids’ bever-age, features purplecarrots, which con-tain powerfulantioxidants calledanthocyanins.

»

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[ PACKAGING ]BEVSOLUTIONS

Bottling Natureast year’s extreme spike in the price of oil starkly re-vealed the problems the future may hold for beveragemarketers who package their drinks in PET and otherpetroleum-based bottles. While the price of oil has

since fallen dramatically, virtually everyone agrees that whenit comes to the world’s supply of oil, time is running out.

While no one knows when the next future oil shock willcome—and the economic downturn has probably pushed itoff for the foreseeable future—sooner or later the price ofpetroleum is likely to skyrocketagain, and then continue to go upas supplies begin to run out.

But some beverage marketersare not waiting for that day toarrive. They are already choosingto package their drinks in plant-based bottles. Only for most ofthem, the factor pushing theminto plant-based polymers isn’tyet cost, but marketplace differ-entiation.

When Primo Water, for exam-ple, chose plant-based polylactide(PLA) from NatureWorks for itssingle-serve bottled water, thechoice fit in well with the prod-uct’s positioning.

“This customer really was seton having an American grownand produced product for a par-ticular marketing message,” explains Scott Steele, vice presi-dent of development engineering for the Toledo, Ohio, USA-based Plastic Technologies, who helped Primo design its bot-tle so it could work with the properties of PLA.

“So what better way than having the material coming fromour agricultural base and all the converting of the bottlesbeing done locally and of course the water being derivedlocally. It’s not always for engineering reasons. Sometimesit’s marketing aspects. In this case, PLA was a great solution.”

Primo, however, is still a member of a very exclusive club.The actual number of beverage marketers using plant-basedbottles is quite small. And this, despite the fact that PLA—

the dominant plant-based material on the market(NatureWorks markets it under the brand name Ingeo)—wasfirst used by a beverage company—the now defunct Biota—back in 2004.

Dr. Harald Kaeb, chairman of the Berlin, Germany-basedEuropean Bioplastics trade group, estimates that market shareof plant-based plastics of all kinds is still below 1 percentworldwide. “We have a global capacity of bioplastics of around300,000 tons compared to the total capacity of traditional plas-

tics, which is around 230 to 240million tons,” Kab points out.

But Kaeb and others believethat today’s market trends are inbioplastics’ favor. First, as men-tioned earlier, the price of PLAand other plant-based plastics islikely to be more stable goinginto the future as compared withoil-based PET and other bottles.In fact, as more capacity forplant-based plastics comes online,prices should fall even further.

And then there is the issue ofsustainability. While PET is madefrom a finite resource—petrole-um—PLA comes from the renew-able resources of corn or otherplant-based starches. “The mostimportant benefits of our materi-al are on the front end,” explains

Brian Glasbrenner, NatureWorks’ Americas Business Director-Beverages, Films and Cards. “It comes from a renewableresource, it has a reduced environmental impact, lowergreenhouse gases, less fossil fuel use.”

And on the back end, PLA is compostable, potentiallyreplacing a big negative of PET—the sizable amount thatends up as waste in a landfill instead of being recycled.Glasbrenner says the ultimate goal is to have a package con-sisting of a plant-based bottle, film and even closure, allow-ing for the entire thing to be recycled. “So the vision wouldbe that you have the bottle, the cap, the label, the entire pack-age and it all is made from Ingeo and when you recover it, it

EMERGING TECHNOLOGIES

Are bioplastics finally ready for prime time? By Andrew Kaplan

L


NATURALLY IOWA’S GREEN BOTTLE SPRING WATER touts the fact thatits bottle is “made from plants ... not oil.”

»

all becomes your source of lactic acid to feedback into polymer production,” he says.

But some obstacles still exist. For one, PLAstill needs a collection system to be in placefor it to be properlycomposted. Also, whenit comes to usage, thePLA material does notoffer good enough bar-rier protection when itcomes to moisture, oxy-

gen and CO2, for it to be a good fit forall beverages, especially carbonated softdrinks.

Nevertheless, adoption of plant-basedpolymers for beverage packaging con-tinues to accelerate. Glasbrenner esti-mates that Ingeo adoption rose by about75 percent over the last 12 months.

Some of the North American bottledwater companies adopting it in just thepast year include Green Planet Bottlingout of Chicago; Green Bottle SpringWater, in Washington, D.C. (it is avail-able in the House of Representatives);Nature’s Bottled Water, on the US WestCoast and +1 out of Montreal, Canada.

Dairy marketers in North Americausing Ingeo include Naturally Iowa,which packages milk and a drinkableyogurt in it, while juice brand NobleJuice, out of Florida, also has beenusing it.

Elsewhere, Italian bottled waterbrand Sant-Anna, New Zealand’s GoodWater and Australia’s Cool Change alsohave been using Ingeo bottles.

But Kaeb says that whileNatureWorks currently has the corneron the PLA market with its Ingeo bot-tles, this will soon change. “They arethe only producer, or let’s say relevantindustrial scale producer, of PLA today.This will change in the next two orthree years and will lead to both morecompetition in the PLA market andmore beverage applications.”

Adds Steele, “In today’s market it’smore expensive, but the thinking is

over the next five to 10 years the bio-derived materi-als will be less expensive than the synthetic resinsmade from oil just because the price of oil is going to

continue to increase on average as we draw more and moreof it out of the ground. It’s inevitable. So, at some point intime, these materials like PLA will have a home in our bever-age business.”

APRIL 2009_BEVERAGE WORLD_77

BW

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JUICES such as this one from Noble Juice, along with some dairybrands and bottled water, are finding plant-based bottles fromNatureWorks PLA to be an increasingly desirable alternative to PET.

»

[SUPPLYCHAIN]BEVSOLUTIONS


ith an economic downturn assevere as this one, it may seem

like the best thing to do is hun-ker down and just hope for

things to turn around. But experts say it isprecisely during these bad times that itmakes sense to take a close look at what canbe improved. Your company’s supply chain isa perfect place to start since usually a lot ofwaste can be uncovered and trimmed away,leading to significant cost savings.

But before you begin your supply chaintune-up, it might help to familiarize yourselfwith some of the more important and cut-ting-edge terminology and processes.

The following list is drawn from supplychain experts APL Logistics, ManhattanAssociates and Satellite Logistics Group.

ASN: Abbreviation for Advanced Shipping Notification, anelectronic message that notifies various parties about anincoming shipment before it arrives.

Carbon Footprint: The total amount of greenhouse gasemissions produced by a business, process or individual. Socalled because it’s typically measured in terms of the totalcarbon dioxide emitted.

Contract Warehouse: A warehouse or logistics facilityoperated by a company that provides logistics services as itsmain business. Also, a facility or portion of a facility dedicat-ed to a specific client that has a contractual agreement ofmore than 30 days with a company.

Corporate Social Responsibility (aka Sustainability): Abusiness that embraces responsibility for the impact of theiractivities on the environment, consumers, employees, com-munities and stakeholders. CSR affects consumer perceptionof a product/producer and can enhance market share whenexecuted properly.

Cross Docking: A material handling activity that involvesconverting product from one type of shipping configurationto another for added convenience or efficiency. It oftenentails consolidating shipments or breaking large shipments

into smaller ones. EDI: The commonly used abbreviation for electronic data

interchange, an electronic, real-time method of communicat-ing between one entity and another. It’s often used in thelogistics industry to relay orders, confirm receipt of ship-ments or provide updates on inventory status between com-panies and their logistics locations. Its benefits includespeed, heightened communications and improved accuracy.

FIFO: An abbreviation for first-in, first-out, a method ofsending product out in the order it arrived at a facility, or amethod of filling orders in the order in which they werereceived. FIFO is especially useful for items that mightexpire or go out-of-date. And it’s particularly important inindustries such as food and grocery, or pharmaceuticals,where products have a limited shelf life.

Flow through distribution: A process where goods frommultiple locations are brought into a central point, re-sortedby delivery destination and shipped in the same day.Typically involving a combination of truckload and less-than-truckload carrier resources, this practice eliminates ware-housing, reduces inventory levels and speeds order turn-around time.

Learning the LingoINDUSTRY KNOWLEDGE

WKeeping up with the latest supply chain terms and processes can provide a competitive edge in challenging times. By Andrew Kaplan

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GPS: The abbreviation for Global Positioning System. Inthe field of logistics, it refers to a device that enables com-panies to track and pinpoint the location of its transporta-tion assets (such as trucks or ships) via satellite.

Just-In-Time (also known as JIT): The process of timinglogistics so that materials or products arrive just beforethey’re needed. Done efficiently, it can eliminate or signifi-cantly reduce the need for storage, which reduces costs.

Lean: A formal process improvement initiative thatfocuses on achieving greater efficiency by removing wastefrom specific warehousing, transportation or other busi-ness functions.

Perfect Order Fulfillment: Delivering the right product,at the right time to the right place, damage-free, with theright documentation. This performance metric is frequent-ly used to define the effectiveness and efficiency of a sup-ply chain network.

RFID: The acronym for Radio Frequency Identification,a technology that allows companies to more effectivelyship, receive, replenish and trace products either actively(by scanning tags) or passively (via battery operated tags).

Shared Services: Companies are experiencing substan-tial cost savings by sharing back office or supply chainservices. Collaborating allows all members of the consor-tium to build economies of scale, and enjoy synergies thatwere previously unobtainable.

Simulation: An engineering practice that relies heavilyon computer-generated processes. In logistics, it allowscompanies to “test drive” various supply chain solutionsbefore they’re actually deployed in order to better predicthow those solutions will actually perform.

Supply-Chain Networks: The future competitive land-scape is shifting from competition between companiesthemselves to trading partner networks. New ways toorganize and manage supply chains and business relation-ships based upon interaction economics are being deployedthat are drastically changing the competitive landscape.Integrated, inter-operating trading partner networks withthousands of independent companies are operating andacting as one.

WMS: Abbreviation for Warehouse Management System,this is an IT tool that allows companies to manage productwhile they’re located within the four walls of the distribu-tion center.

Vendor-Managed Inventory: Also known as VMI. Atrade arrangement in which companies’ vendors maintainownership of inventory—and oversee the movement andmanagement of it—until it reaches or is close to a compa-ny’s factory, DC or retail outlets. VMI enables companies tomove away from the complexity of managing theirinbound supply chains—and improves their cash flow byenabling them to keep the cost of incoming inventory offtheir books until a later time. BW

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ransportation and warehousing arecertainly critical elements of a suc-cessful beverage business, but theyare far removed from the core ele-

ments, producing and selling the beverages.Increasingly, beverage producers are seekingto outsource non-core operations such astransportation and warehousing, enablinginternal resources to focus on product quali-ty, profitability and market growth.

The outsourcing can be as simple as con-tracting out maintenance of company-ownedtrucks, or opting out of truck ownership byusing full-service truck leasing, or at theopposite end of the spectrum, contractingout all transportation and warehousing to athird-party logistics provider.

Third-party logistics differs from com-mon-carrier freight by offering a wide rangeof warehousing, consolidation and distribu-tion services. Unfortunately, the transportation, storage andhandling needs of beverage producers are a bit more com-plex than those of the average widget producer out there.Temperature control, food-grade cleanliness and mission-crit-ical scheduling are just a few of the specialized logisticsrequirements of beverage producers.

Fortunately, there is at least one third-party logisticsprovider that has focused its service offerings exclusively for

the beverage marketplace. From its inception in 1977, Napa,California-based Biagi Bros. was built by two brothers, FredBiagi Jr. and Greg Biagi, to serve the logistics needs of bever-age producers. Having learned the transportation businessgrowing up and working at their father’s (Fred Sr.) LTLtrucking company, the brothers were quickly successful intheir own enterprise, which grew dramatically along with theregion’s wine industry.

Long before third-party logisticsproviders were commonplace in thetransportation business, Fred Sr. fore-saw the expanding wine industry’sneed for storage, and the brothersbegan offering warehousing services in1986. Today, Biagi’s warehouses stretchfrom California, to Washington, toVirginia, to Florida, totaling more than2.3 million square feet of temperaturecontrolled, food-grade space. Later thisyear, the company will add another650,000 square feet of warehouse space

One-Stop Transportation ShopFLEET OF THE MONTH

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Owners: Fred Biagi, Greg BiagiOperations Executive:Andrea BiagiIT Manager: Nick BiagiFleet Manager: Stacey BiagiCorporate Equipment Director:Gregg Stumbaugh

Safety Manager: John FrancoHR Manager: Maria Duval

Warehouse Locations:Arlinton, TX; Benicia, CA;Jacksonville, FL; Napa, CA;Oklahoma City, OK;Ontario, CA; Richmond, VA;Tucson, AZ; Van Nuys,CA.American Canyon, CA -Opens 2009, Auburn, WA

Garage Locations: Fontana,CA; Napa, CA

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A THIRD-GENERATION TRANSPORTATION EXECUTIVE, fleet manager Stacey Biagi has been the drivingforce behind the “green” initiatives at Biagi Bros.

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[DISTRIBUTION]BEVSOLUTIONS

when it opens its newest facilityin American Canyon, California.

When Biagi outgrew its origi-nal fleet yard in St. Helena, amove to Benicia, Calif. put thecompany in close proximity toAnheuser-Busch’s Fairfield brew-ery, where the brothers soongained the beer giant’s logisticsbusiness.

The fleet that started out withone truck driven by both brothers,now numbers more than 1,400vehicles. Dry van trailers comprise the majority of the fleet,but the company also operates several tank trailers andflatbeds, which are pressed into near ’round-the-clock serviceduring harvest time. Tractors and drivers normally dedicatedto the downstream end of the supply chain are also shifted toproduction duty during harvest time, and the founding broth-ers have even been known to return to their roots behind thewheel during busier harvest years.

In addition to supporting harvest operations andhauling/storing finished product, Biagi Bros. also bringsempty bottles, cans and barrels to the wineries and brewerieson its inbound runs. In short,if a winery/brewery needs itmoved, Biagi will move it.

The Biagi family legacy con-tinues beyond Fred Sr. andthe brothers, as the third gen-eration takes an active role inthe business. Two of Fred Jr.’sdaughters and one of Greg’ssons hold key positions in thecompany, and another ofGreg’s sons will climb behindthe wheel when he graduateslater this year. Says fleet man-ager Stacey Biagi, “My sister,cousin and I are proud towork every day at a companythat our fathers built from the ground up.”

As fleet manager, Stacey has been the driving force behindthe fleet’s “green” initiatives. Last year, she led the efforts forthe company’s VinLux division to take delivery on the firsttwo hybrid trucks manufactured by Peterbilt, and is current-ly working on the deployment of a Class 8 hybrid, set to takeplace later this year.

The fleet saves bottom-line green in lower fuel and mainte-nance costs with an aggressive replacement cycle that tradesin trucks at the expiration of extended warranties.

While Biagi Bros. makes every effort to keep its fleet oper-ations as green as possible, being on the leading edge has

sometimes caused difficulties for the company. When thecompany’s 2007 trucks first hit the road, there was consider-able confusion amongst the drivers regarding the particulatefilter regeneration process. “We had to step up and insist thatthe dealers and manufacturers provide additional trainingfor the drivers,” says Stacey.

According to Corporate Equipment Director GreggStumbaugh, “problems with the (EPA ’07-compliant) emissionshardware have been our single largest cause of downtime.”Issues ranged from deployment errors such as locating adefeat switch too close to other controls where inadvertent

engagement would preventparticulate filter regeneration,to engine performance issuesthat prevented passive regen-eration, to widespread retro-fits of emission hardware onthe early ’07 engines.

Stumbaugh is considerablymore positive on the fleet’sforay into automated trans-mission technology. Citingimproved fuel economy andease of driving as key bene-fits, Stumbaugh has spec’ednearly a dozen of the fleet’sClass 8 tractors with auto-mated gearboxes, while all of

their medium-duty trucks are equipped with automatics.The fleet is also testing wide-base tires on some of its

trucks, but without being payload constrained, the benefitshaven’t been sufficient to outweigh the cost of conversion.Now that the wide-base tires’ low-rolling resistance featuresare available in dual-wheel configurations, and areSmartWay certified by the EPA, the fleet is opting for thenewer fuel efficient duals.

Emphasizing the company’s goal to “green” its operationsand participate in the EPA transport initiative, Stumbaughsays, “Stacey and I are working together on getting the Biagifleet to qualify for SmartWay certification.” BW


FLEE

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Type Quantity Primary Brand(s)Pickups 4 VariousCargo Vans 1 SprinterStraight Trucks 35 Peterbilt/16’ Refrigerated BodyMedium-Duty 2 PeterbiltTractors

Heavy-Duty 300 PeterbiltTractors

Distribution 1,000 Utility/48’ & 53’ Dry VanTrailers

Tank Trailers 19 Various/6,500-Gallon Food-Grade

Flatbed Trailers 45 Various

KEEPING AN UP-TO-DATE FLEET doesn’t get the credit it should for being eco-sensitive, but that’s not the only green benefit Biagi realizes by keeping itsfleet fresh. The fleet saves bottom-line green in lower fuel and maintenancecosts with an aggressive replacement cycle.

»

ven though there are a plethoraof proven safety technologiesavailable, our 2009 Truck TrendsSurvey found that fewer than 20

percent of fleets currently employ anyof the systems, and fewer still haveplans to implement the hardware inthe near future. This seems strange,given that roughly 80 percent of therespondents in the same survey chose“Vehicle Safety” and “Insurance Cost”as areas of serious concern.

Perhaps some of the reason for thisdisconnect can be explained by a fre-quent “wishlist” item cited by the man-agers of the fleets profiled here inthese pages. All too often, fleet man-agers are receptive to technologies thatcan improve safety and/or productivity,but they don’t want to rely on a“Frankenstein” combination of after-market products, each installed by itsown vendor, sometimes with little con-sideration of other OEM or third-partysystems already in the truck.

At the recent Mid America TruckingShow in Louisville, Ky., BendixCommercial Vehicle Systems made aseries of announcements that indicatethey’ve received the fleet managers’message loud and clear.

The featured announcement inLouisville was the debut of the BendixWingman ACB (Active Cruise withBraking) system. Using a radar sensormounted on the front of the truck, theACB system leverages Bendix’s ESP sta-bility control technology to assist thedriver in maintaining a time-based fol-lowing distance between the truck andthe vehicle immediately ahead of it.

The Wingman system delivers adap-tive cruise control with full vehicle and

braking system integration. Drivers acti-vate the system using the vehicle’s exist-ing cruise control switches and receiveinformation/warnings through the vehi-cle dash, avoiding distracting displays tolook for when a warning sounds.

The Wingman ACB system is built onfull-stability control technology, neces-sary because any automatic brake appli-cations on wet, snowy or ice-coveredsurfaces can result in directional insta-bility, including under-steer or over-steerevents that can lead to a jackknife orloss-of-control situation. By includingfull-stability, with its capabilities forreading driver steering intent and vehi-cle direction, the potential instabilityinstigated by the automatic applicationof the brakes can be mitigated.

The Wingman ACB system bringstogether technology from anti-lockbrakes, stability control, rollover mitiga-tion, cruise control and forward colli-sion avoidance as a fully integratedpackage, factory installed by the truckmanufacturer. Frankenstein, no more.

Not content to merely debut a prod-uct designed to improve safety andreduce driver fatigue, Bendix alsoannounced its recent acquisition ofSmarTire Systems to add tire pressuremonitoring to its safety portfolio, andthe acquisition of forward, side andrear collision warning technologiesfrom VORAD.

Smith Electric Vehicles (SEV) U.S.Corp. plans to assemble all-electriczero-emission commercial vehicles inKansas City. The new assembly plantwill be located at a portion of anairline overhaul base at Kansas CityInternational (KCI) Airport and isexpected to create 120 jobs by 2010.

Production of the first zero-emis-sion commercial trucks is scheduledto begin in the third quarter of 2009.

SEV U.S. Corp will initially focus itsproduction on battery-electric-pow-ered vehicles for depot-based pre-dictable-route delivery fleets.

"We feel the greatest opportunityto have a major impact on the elec-tric vehicle industry is through fleetoperators who utilize commercialvehicles in a depot-based deliverymodel," says Bryan Hansel, chiefexecutive officer SEV U.S. Corp."As more truck fleets adopt thistechnology, it will drive advance-ments in battery technology, drivedown manufacturing costs and formthe foundation of a US-based supplychain that, over time, will also sig-nificantly reduce the cost of com-mercial electric vehicles. This willmake them a natural choice for fleetmanagers with a depot-based deliv-ery model."

The assembly plant will occupy80,000 square feet at the overhaulbase at start-up and will scale upbased on demand.

SEV U.S. Corp has already receiveda strong expression of interest fromfleet operators and, as a result, thecompany is building a highly scalableassembly operation.

IN BRIEFZero-Emission TruckProject Announced

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84_BEVERAGE WORLD_APRIL 2009

One Stop Safety ShoppingROAD WAYS

BEVERAGEWORLD.COM

Truck industry journalist TomKelley is a former fleet managerwho now travels throughout NorthAmerica to stay on top of the latestproducts, strategies and trends forefficient and reliable fleetoperations.

[DISTRIBUTION]BEVSOLUTIONS

by tom kelley

[BEVSOURCE]


Ultralightweight PETP.E.T. Engineering is pro-posing a 0.5-liter bottleweighing 6.6 grams. TheBottle Fly, as it’s called,was produced by theTechnological Center ofP.E.T. Engineering and waspresented at Brau Beviale/Nuremberg 2008. In thedesign, the traditional bot-tle shape, weight distribu-tion and thickness werestudied allowing the nor-mal industrialization of thebottle, according to thecompany. Horizontal ringsare designed to make han-dling of the bottle easier.petengineering.com

Load-Based Shift SchedulingAllison Transmission’s Load-Based ShiftScheduling (LBSS) for MY09 Allison1000/2000/3000/4000 Series models isdesigned to select between Economy andPerformance shift schedules based on thevehicle’s actual payload and the grade onwhich it is operating. This can optimizefuel economy while maintaining high pro-ductivity capability. By calculating real-time vehicle load and operating grade, itcan select the appropriate shift schedule.allisontransmission.com

COMPANY NEWSBoston Rack International, Inc. is joining forces withstorage solutions company BASE Manufacturing tobecome a full-service integrator and warehouse storagesolutions manufacturer. “By merging with BaseManufacturing we will be able to join forces and provideour customers the quality, efficiency and depth of prod-ucts that our competitors are not able to offer,” PeterMurphy, Boston Rack International’s founder and presi-dent/CEO, says. Following the merger, Boston Rack andBASE will operate as subsidiaries of a holding company,Elite Storage Solutions, in order to continue to takeadvantage of brand identities within their marketplaces.

New Products

Modular Conveyor SystemDematic Corp. has a new family of conveyor technology calledthe Rapistan Modular Conveyor System. Described as an inte-grated and flexible package conveyor system, it can offerimproved carton control, quiet operation and low energy con-sumption, says the company. Benefits of the system include: theaddition of right angle transfers and wheel sorters and the abilityto be retrofitted into existing systems. dematic.us

Wireless Remote ControlLantech’s Simple Automation stretchwrapping systems now offers a newClick-n-Go wireless remote control.Click-n-Go is designed to enable forktruck drivers to place a pallet load onthe stretch wrapper, back away a fewfeet and press a button. The remotecontrol is available for shipment onnew machines and for retrofit toexisting machines soon. lantech.com


Purging CompoundFor equipment used in extrusion blow molding, KautexMaschinenbau GmbH has developed Kautex Purge, a newpurging compound that is designed to boost productionoutput and improve product quality. The purging com-pound treats metal surfaces gently and does not affectany components that are in contact with plastic melt, saysthe company. The compound can be recycled and reused,is non-toxic and does not cause any environmental orhealth hazards, the company says. kautex-group.com

ClosuresBericap has enlarged its SuperShorty closure family withthe SuperShorty 35. SuperShorty 35 is designed for safeventing of CSDs containing up to 8 g CO2/l. Safe ventingmeans that the risk of blow-off has been reduced and alsogives a user-friendly element if consumers unscrew theclosure with excessive speed. The one-start neck corre-sponds with SuperShorty 35 and has a neck weight of 5gm. bericap.com

Detecting Microbial ContaminationCelsis International plc, a rapid microbial detection solutionscompany, launched RapiScreen Beverage. This rapid screeningtest kit screens Ultra Heat Treated (UHT) and Extended Shelf Life(ESL) beverage products for microbial contamination. The flexibil-ity and high-throughput of the Celsis Innovate system makes itappropriate for companies that produce beverage and dairy prod-ucts alike. celsis.com/rapid

[BEVSOURCE]

Roller ConveyorFKI Logistex’s NB200 Narrow-BeltDriven Roller Conveyor is part of thecompany’s new Logistex Case ConveyorSolutions (LCCS) product family. Theconveyor includes a self-tracking fea-ture that recognizes when the belt hasshifted and operates without the use ofa chain, making it suitable for beverageprocessing facilities. fkilogistex.com

Protective Liner FoilTo ensure wines and spirits arrive at their final destination inoptimum condition, JF Hillebrand has introduced VinLiner, aprotective liner foil, which is placed in dry containers to pro-tect wine against thermal shocks, bad smells and humidityinfiltration that might occur during transport, the companysays. jfhillebrand.com/uk


Thermal Transfer PrintersTharo Systems, Inc.’s THARO H-427 and H-436Series of Thermal Transfer Label Printers aredesigned for high volume printing. These all-metalprinters are available in 200 or 300 dpi. They feature a full backlit LCD display, a standard real-time clock and USB interfaces. The H-Series con-tains internal memory for storing downloaded label

formats, graphicsand fonts. Using thismemory the printerscan be operatedwithout being connected to a computer, accordingto the company.tharo.com/h400.php

[CLASSIFIEDS]


CONTRACT BOTTLINGWANTED TO BUY

We buy all food & beverage

out of code/overruns/pkgchanges we export cans/

bottles/dry/frozenJon at Wham Foods

Ph (954) [email protected]

CLOSEOUTS

LOOKING TO BUY FINISHED PRODUCTS OR RAW MATERIALS.

• short-coded• discontinued• overstocked

Call Jerry at (847)947-6128

$$$ $$$

AMERICAN WHOLESALE CO.USED WALK-IN-COOLER-FREEZER-BOXESREFRIGERATION SYSTEMS-EQUIPMENT.

Large Inventory, All Sizes• Buy • Sell - Nationwide

Wholesale PricesPhone: 216-426-8882 • Fax: 216-426-8883

www.awrco.com

ADVERTISE TODAY!CONTACT NADINE at 818-920-3185

Advertise in Beverage World’s Classified Section!

Contact Nadine Buccieri at [email protected] Call 818-920-3185


FOR SALE HELP WANTED

JUDGE INCAn Industry leader for over 35 yearswith a strong concentration in food/beveragemanufacturing.Contingency or Retained search • VPEng./Mfg./Quality • Plant Mgrs/Quality Mgrs •Warehouse/Distribution Mgrs • Engineers -Plant/Process /Project /Etc • Maintenance Managers/Supervisors • ProductionSupervisors//Quality Supervisors • SanitationSupv/Mgrs

To submit resumes or engage searches pleasecontact: Kristin GordonAssociate Vice President, Judge Inc888-819-3916,ext. 1106 Fax:[email protected] • www.judgeinc.com

http://www.judgeinc.com/brochure/Food_Flash/food_flash.html

We private label. Call for prices. Over 45 years in busi-ness. Contact Mel at Vineland Syrup., Inc. Vineland, NJ

1-800-642-9124www.vinelandsyrup.com• [email protected]

SYRUPS - Energy drinks and fruit juices. 11/2, 3 and 5gallon BIBBARBECUE SAUCES - Gallons, BIB or BucketsKETCHUP - BIB

PACKAGING

McCLAIN RECRUITING SERVICE: We are In needof job candidates for all positions in the beverage industry. Please send resume and salary information to Dianne McClain, or Brian Cupp at208 Bethel Drive, Salisbury, NC 28144. Telephone: 704-638-9710, Fax: 704-630-0754. All information confidential. Email: [email protected]

Buy, Sell or Trade 201b or 501b CO2 gas cylindersin test. Used fountain dispensing equipment,

5 gallon stainless steel syrup tanks reconditioned with stainless steel lids.

Call for prices 800-642-9124, ask for Mel ext. 112or [email protected]

P.O. Box 1326, Vineland, NJ 08362-1326.

ADVERTISE TODAY!

We Buy and Sell Beverage Trucks(877) 238-8757

www.buckstrucks.com

Buck's Trucks, LLC

Mark Your CalendarsMay 2009

• The Food Marketing Institute’s MARKETECHNICS trade event slated for May 6-8 at theDallas Convention Center in Dallas, Texas, focuses on the world of technological products andservices specific to the retail/wholesale community. This event features hundreds of exhibits,cutting-edge educational workshops, networking activities and specialized tours. fmi.org

• The 16th annual Beverage Forum is slated for May 20 and 21 at New York City’sWaldorf=Astoria Hotel. The Beverage Forum will discuss the most challenging issues facingtoday’s multi-national, billion-dollar beverage business. Attendees will hear from keynotespeakers, panel discussions and have the opportunity to attend breakout sessions gainingknowledge that will further enhance their perception of the ever-changing beverage landscape.beverageforum.com

• The Brewer’s Association’s SAVOR: An American Craft Beer and Food Experience is for craftbeer aficionados and foodies alike. Slated for May 30 at Washington, D.C.’s National BuildingMuseum, the second annual SAVOR event will feature a selection of food and beer pairings,networking with craft beer professionals and educational salons. savorcraftbeer.com

June 2009• Institute of Food Technologists (IFT) is holding IFT 09, slated for June 6-9 in Anaheim, Calif.,which brings together buyers and sellers from all corners of the food science and technologyworld. With more than 1,000 exhibitors and 500 ingredient companies, great ideas, professionalconnections, new opportunities and profitable relationships are all possible. ift.org

[CLASSIFIEDS]


CONTRACT BOTTLING ADINDEX 5-Hour Energy 23

Advance 70

Ajinomoto S4 - S5

Beverage Marketing Corporation 80 - 81

BI Nutraceuticals 73

Blue Horseshoe 15

BW Circulation 26

California Custom Flavors 75

CF Napa 64 - 65

Dak Americas 6

Dematic 55

Döhler 5

Dow Low Temp 13

Freightliner Trucks 92

Funktional Beverage S16 - S17

Glazers Oklahoma Family of Companies 62

Innovative Beverage 56 - 57

John Koss 86

Labrada Nutrition 91

LANXESS 79

Messe Muenchen 51 - 53

Northeastern Pennsylvania Carton Company 86

Pak Tech 77

QIC Inc. 68

Robertet 9

Satellite Logistics 74

Swisslog 17

Twinlode Corporation 87

Unione Italiana Vini–SIMEI 14

VPX Sports 2 - 3, 7, 11, 19, 25

Welchs 67

Xing Tea S12 - S13

Be Seen Online! Place your ads today! Contact Nadine

Buccieri at 818-920-3185 or [email protected]

NOTHING BEATS A TRUCK THAT

NEVER QUITS.

freightlinertrucks.comCompetitive financing available through Daimler Truck Financial. For the Freightliner Trucks Dealer nearest you, call 1-800-FTL-HELP. FTL/MC-A-906.

Specifications are subject to change without notice. © 2009, Daimler Trucks North America LLC. All rights reserved. Freightliner Trucks is a division of

Daimler Trucks North America LLC, a Daimler company.

MAXIMIZE PRODUCTIVITY, PERFORMANCE AND PROFITABILITY. The more your team gets out of a truck, the more

successful your business will be. The M2 offers outstanding driver visibility and a wheel cut of up to 55 degrees for confidence-

inspiring maneuverability. Plus the M2 Hybrid is available for even greater efficiency. It all adds up to more productivity in

less time. And that’s good business sense taken to the max. Learn more about Business Class® M2 at www.M2ToTheMax.com.

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