Blog Entries by Andrew Kaplan

A Tale of Two Pepsis

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Category: General Blogs  |  Tags: soft drink

So we are supposed to believe that suddenly the entire world is shunning a refreshing Pepsi or Coke because they have a lot of calories, but can’t wait to get their hands on a Subway sandwich filled with Fritos, or an indulgent new nachos you can gobble up on the go from Taco Bell?

Which is it, because, at least in my mind, the two trends seem to be telling me two things at once—and this is driving me slowly crazy!

Are we really seeing consumers the world over suddenly turn against carbonated soft drinks, or is there something else going on here?

Activist investor Nelson Peltz believes it’s the latter. He would like to see PepsiCo split into two parts: one for its food business, the other for its beverages. And he wants this not because he thinks the beverage part of the business would then slither away into a corner and die like some zombie from “The Walking Dead,” but because he believes it would then be able to thrive under a more “focused leadership.”

I’m inclined to agree with him. And this is despite the synergies “The Power of One” — where PepsiCo’s food and beverages have been used together in some powerful promotions—have brought to PepsiCo. The reason is that in this day and age—“The Age of Creative Disruption”—it’s not hard to see why more intense focus can only benefit a beverage business.

I’m writing this, after all, in the days following the announcement that Comcast plans to buy out Time Warner. And the news just broke that Netlfix is paying Comcast to ensure its pipeline into homes remains free of disruption by the increasingly powerful Comcast. And NBC just noticed how a vast number of its audience turned to their iPads, mobile phone and computers, instead of their TV’s, to watch the Olympics live. And I can go on and on...

Talk about creative disruption!  

Our industry’s “creative disruption” can be seen in the interest in the handcrafted and the local over the distant and impersonal. It’s in the craft beer renaissance, where small brewers are giving entrenched global brands a run for their money. Case in point: I recently dined out at a newly opened gastropub in my Queens, N.Y. neighborhood and was able to savor the pub’s new house beer, brewed by the nearby, and newly opened, Queens Brewery. You can’t get much more local than that.

And that’s just beer. We haven’t even touched on the increasing number of new functional beverages—everything from beautifying drinks, to drinks that help you think better, sleep better, or stay alert longer. Or how about the premiumization of just about everything? Think Starbucks’ experimentation with handcrafted sodas.

So it may be that the pickle CSD finds itself in today isn’t so much about consumers running away from high-calorie sodas (as the mainstream media loves to so dramatically describe it) as it is about them just enjoying all the new choices they have.

Beverage companies that can focus 100 percent on navigating their way through all the new opportunities created by this creative disruption probably have a big advantage going forward.

The Future of Beverage Distribution

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Category: General Blogs

I can’t say I agree with a lot of what Newt Gingrich says, but when he raised the possibility of building a base on the moon during the past election, he got my serious attention.
Allow me to explain.

I’m a huge fan of science-fiction and that goes hand-in-hand with keeping an open mind. So while Newt’s lunar proposal generally was greeted with guffaws and accusations that he had totally lost it, personally, I found it to be one of the only lucid things he said during the election. I think the U.S. benefits in a whole host of ways by its ambitious space program, in ways so far-reaching most of us take it for granted. If you were growing up in India 30 years ago, for instance, and were interested in space exploration, you yearned to go to the U.S. where the opportunity was. The best and the brightest from all over the world wanted to come here because of our space program.

Along these same lines, when Jeff Bezos recently announced during his now infamous “60 Minutes” interview that he wanted to deliver Amazon products using flying drones, he was also generally met with guffaws and accusations that he had totally lost it. Again, my personal view is that such tech advances that seem crazy today often create the future, and maintaining an open mind is the best course of action. Imagine if you had told someone in colonial America that they’d be able to fly in 6 hours from New York to the Pacific?

So when an email recently appeared in my inbox from a company called Emulate3D with a link to a youtube video demonstrating the use of drones for material handling in a warehouse, I did anything but hit ‘delete.’ Qimarox of the Netherlands, a supplier of material handling system components, commissioned Emulate3D to make the video, the link to which is on my blog at beverageworld.com. It demonstrates how drones may soon offer a cost-effective and scalable alternative to traditional palletizing methods. With little superstructure or extensive hardware to install, a drone-based palletizing solution could be deployed rapidly, and should be capable of a relatively high-sustained load throughput, according to Qimarox. Imagine entering a warehouse with drones flying around, carrying bottles or cases of soda or beer or wine from one end of the building to the other? If there are supply chain efficiencies to be gained, this may not be science-fiction for very long. Live Long and Prosper.

Figuring Out Flavors

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Category: General Blogs  |  Tags: alcohol

 

 

Flavors—sometimes you want ’em, sometimes you don’t. At least that seems to be what is going on in the beverage business these days. For some categories, the greater variety of flavors a beverage can come in, the better. For others, coming out with a bunch of new flavors may actually do more harm than good. The trick is figuring out exactly where your brand falls when it comes to flavor innovation.

So, which beverage categories are ripe for more flavor innovation and which appear to have peaked in this regard?

One category that could see more flavor innovation in this new year is CSDs. It’s a category that could use some new excitement to help reverse declining sales, and some innovative flavors—tastefully done, mind you—could be just what it needs. So far, much of the flavor innovation in soda has been designed to appeal to younger drinkers. But I’ll bet that some grown-up flavors, using more wholesome ingredients, could catch the interest of older drinkers.

On the alcohol front, the new year brings some very interesting developments when it comes to flavors. For one thing, a study released just as 2013 was coming to a close revealed that flavored vodkas—an enormously popular trend which has really boosted this category—may have already peaked in popularity. Restaurant Sciences LLC, , an independent firm that closely tracks food and beverage product sales throughout the foodservice industry in North America, reported that the sales of on-premise flavored vodkas fell 11.7 percent from Q3 2012 to Q3 2013. Analyzing more than 170 million drink orders, the organization uncovered that flavored vodkas lost nearly one percent of their on-premise spirits market share from Q3 2012 to Q3 2013. So, it appears that while flavored vodkas remain quite popular, consumers may not be open to any additional flavors for their vodka in 2014.

Another spirits segment where flavors can be tricky is whiskey. The Wall Street Journal reported that Brown-Forman Corp. Chief Executive Paul Varga plans to take a “conservative” approach to rolling out new flavors for Jack Daniel’s. While Tennessee Honey, introduced in 2011, has done great, Varga and his team have correctly realized that for some beverages, too much flavor can go too far.  After all, when it comes to a heritage brand like Jack Daniel’s, already savored so much for its inherent flavor, too much tinkering can probably do more harm than good. 

Saving Time in a Bottle

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Category: General Blogs

 

As I write this, in the middle of November, it seems that time itself is weighing heavily in the air. There is a strong feeling of nostalgia over the 50-year anniversary of the Kennedy assassination. The Congress just overhauled its filibuster rules for the first time in a generation. And (as editor-in-chief Jeff Cioletti so richly detailed in our last issue) the beverage alcohol industry in the U.S. reflected this year on the 80th anniversary of the Repeal of Prohibition—its meanings and its lessons.

And then, of course, there’s the issue you hold in your hand. As you see, it contains our HIT List, our annual roundup of the (mostly) winning things that happened in the beverage business in the past year.

Al of this, as you could imagine, had me thinking about “time” itself and the special relationship the beverage profession has with it. For the beverage business is one of the oldest ones in existence. If anyone asks you what you do for a living, you could say, “Well, I work in one of the oldest professions,” and have them give you a funny look.

This is especially true of the beer business. The Washington Post began this year—on Jan. 7, to be exact—by publishing an article which suggests that beer may have been the crucible of civilization! Ok, I may be exaggerating a little, but not by much. The article, entitled “Discovery of ancient breweries offers clues of primitive lifestyle,” details the recent discoveries of ancient brewing and feasting halls dating back 11,000 years (in Turkey) and 3,500 years (in Cyprus). It then cites archeologists who suggest the social lubricating effect of ancient beer may have served as the glue that helped rival villages bond and merge into larger communities.

So what’s different about the beer business today and the one that helped give rise to civilization thousands of years ago? I’d bet you its pace, as in, one was pretty darn slow, while the other is scatter-brained fast! And this doesn’t just hold for the beer business, but the entire beverage business.

It all makes me wonder: have we reached a point where our sense of time is so compressed that we are hurting our companies’ chances of success?

Case in point, I attended a trade show recently where I was chatting with the owner of a new beverage startup and asked him how old his company was. He told me two years and I matter-of-factly said, “Oh, so you’re pretty new.” His point-blank reply:  “Not really.” It struck me that his sense of time was different than mine. As an entrepreneur doing business in America today, he considered himself a tried-and-true veteran after just a couple of years in business.

Maybe he’s right? My gut was that he’s not. I still think it takes years and years of hard-work to really build the support structures that result in a successful beverage business, one that lasts and isn’t fly-by-night. It takes time to cement strong, deep relationships with consumers, distributors, and retailers. We may live in a fast-paced world, but relationships take time to build.

Or, am I just stuck in the past?