Bulking Up

Smaller beverage categories offer sales opportunities for retailers.

By
Steve Holtz, Online News Director & Beverage Editor

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For every strong and positive comment a retailer shares about Muscle Milk, it seems there’s one that suggests caution. “As expensive as it is, I can’t believe it’s selling like it does,” says Jim Barberio, marketing manager for Prima Marketing, a 7-Eleven licensee based in Fairmont, W.Va. During a 50-week period in 2009, Prima sold more than 2,000 cases of Muscle Milk in its 73 stores in West Virginia and eastern Kentucky.

On the other side of the coin: “It does just OK; some stores are better than others,” says Mitch Garber, director of retail operations for Auburn, Calif.-based Nella Oil. Nella operates 35 Olympian and Flyers stores in northern California, and it sells Muscle Milk at about 25 of them.

“Stores near a gym or workout place seem to have better sales than just a regular store,” Garber says, “but this year … we’re averaging about 1 to 1½ units per day per store.”

Garber isn’t complaining; such is the case in the current beverage environment. There’s no major new product lighting the cold vault on fire, and total beverage sales volume declined 3.1% in 2009, dropping for the second year in a row, according to a report from Beverage Marketing Corp., New York.

As a result, retailers are looking to smaller, niche products and categories that may not account for a large share of sales but are bright spots on an otherwise dreary beverage landscape.

MUSCLING IN

Such is the case for protein-supplement beverages, which used to be mere blips on beverage category managers’ radar screens.

That began to change in 2008, when a sci-fi-sounding company called CytoSport made a couple of strategic changes to its Muscle Milk product. First, it repackaged it from a Tetra Pak cardboard container into a PET plastic bottle; second, it widened its marketing strategy from a specific specialty-shop focus to include a greater range of retail channels.

“We started using some of our specialty distributors to test the waters,” says John Blair, vice president of sales for CytoSport, Benicia, Calif. After test marketing the repackaged product in independent convenience stores, “we started seeing an immediate pull. We realized right then and there, ‘Now we’ve got to go full-scale to get this thing going.’ ”

CytoSport was hardly the first company to make a move into c-stores with protein-supplement beverages. Slim- Fast, with its 15-grams-of-protein shakes, and Ensure, with 12 grams, arguably are the grandparents of the category. And certainly, CytoSport wasn’t the first to target the c-store channel.

In 2004—the height of the Atkins Diet craze—Solis Brands, a maker of nutritious foods based in Altamonte Springs, Fla., introduced Zoic, a 99%- fat-free “complete nutrition and healthy weight management” beverage with 15 grams of protein, with the specific goal of marketing it to the everyday consumer, rather than weight lifters and bodybuilders.

“If you go back five or six years, we knew that protein was going to be of growing importance to consumers, and that was right about when everyone else got into low-carb. But that was never what Zoic was about,” says John Serieka, president and CMO of Solis Brands. “Zoic … was built on nutrition and convenience, but the idea was to take it mainstream to the beverage aisle.”

Easier said than done, says Serieka, who ran into two very specific problems, the first being price point.

“You’re talking to traditional beverage buyers, [but] you’re priced at a premium, and it’s because you’re using very expensive ingredients to make a high-quality product,” he says. “So it’s not like you’re going to be selling at $2 for a four-pack or $2 for a six-pack. It’s just not possible.”

The second problem was capitalizing on timing.

“Consumer preference normally is well ahead of the curve in terms of what retailers stock,” Serieka says. “Most of the time you’re looking at a situation where there is a lag there. Consumers will begin to approach the product; there will begin to be a lot of preference and a lot of excitement about certain categories. And once that happens and once a big player jumps into the fray, then you start to get a legitimate amount of shelf space at retail. And it still is a challenge today.”

GETTING IN THE GAME

CytoSport overcame this problem by partnering with one of those “big players” and getting Muscle Milk onto Pepsi trucks.

“I was really slow to bring it [into my stores until] Pepsi picked it up,” says Fred Faulkner, director of sales and marketing for Jaco Oil, dba Fastrip Food Stores, Bakersfield, Calif. “We thought, ‘We don’t need that stuff.’ But if you promote it, like two for $5, it will sell.” That’s a strategy CytoSport will promote for several months this year.

 “We front line at $3.49 [for a 14- ounce bottle], and we feature it at $2.99 for convenience stores,” says Blair. “In grocery, it’s primarily $3.20, with a $2.99 feature. And then this year we have an aggressive two-for-$5 feature. … We have five feature months that we’re promoting with our partners today. In grocery, three are at $2.99, two are at two for $5. Our convenience-store feature is three months out of the year.” These prices run contrary to other beverage categories in the cold vault, where more and more manufacturers are looking for a 99-cent price point. But beverage developer Marty Brown, who has developed many functional beverages as president of Power Brands Consulting LLC, Van Nuys, Calif., says U.S. consumers are prepared to pay these higher prices if they feel the product is worth their while.

“What consumers are willing to pay for these [types of beverages] is amazing,” he says. “Starbucks has convinced us it’s OK to spend $4. That’s the greatest thing that could ever happen to this industry.”

And as Muscle Milk sees success in convenience stores, other brands are seeing it as the foot in the door they needed to make a move as well. Magazine ads and Web sites for brands such as BSN’s Synthe-6, EAS’ Myoplex, VPX Sports’ Redline and Labrada’s Lean Body typically list specialty retailers such as GNC and The Vitamin Shoppe as buying destinations, along with major gyms and exercise facilities. And so does Muscle Milk. But increasingly, each of those brands is looking to expand its reach into other retail channels.

“We are currently building a national distribution network to service the convenience and gas retailers for EAS,” says Monica Hysell, division vice president and general manager of global performance nutrition for Abbott Park, Ill.- based Abbott Laboratories, maker of the 14-ounce ready-to-drink Myoplex Strength Formula sports nutrition shake. “Currently, the distribution net- work … covers over half the geography in the United States, including most major metropolitan areas.”

The target consumer for the EAS product, with 25 grams of protein per bottle?

 “In addition to athletes, primary consumers for the EAS brand today are fitness enthusiasts, those individuals who are highly active and take an interest in nutrition and fitness,” says Hysell. “Whether it’s going to the gym regularly or participating in sporting activities, fitness enthusiasts are focused on their sport or training regimen and are nutritionally conscious.” Others in the category are targeting a much more general audience. “It’s male-skewed. It’s high school to college. That’s our core consumer in the convenience channel,” says Blair of CytoSport. “A lot of our competition in the specialty market … are still caught up in that market and advertising around bodybuilders, power lifters, etc. We realized that we needed to get away from that to appeal to the mainstream.”

That effort has led CytoSport to “look for endorsers that are more recognizable to the general public and didn’t have that stereotypical bodybuilder, steroid-user image,” he says. “We intentionally went away from that, went toward the high-profile, recognizable athlete that people can see on TV.” This has meant endorsement deals with NFL great Adrian Peterson and NBA all-star Brandon Roy.

GETTING IN THE COOLER

With any new category comes a question for retailers: Where do I put it? Those interviewed for this story overwhelmingly have made the dairy door home for these protein-supplement “shakes,” even if many of the products espouse that they’re lactose-free.

The manufacturers, however, would like to see some space open up near isotonics or energy drinks, the two categories with which they feel they are most compatible.

“How we look at the brand is as the next evolution in functional delivery with emphasis on protein,” says Blair, “so [we’re] like the energy category, like vitaminwater and like other functional beverages, with attributes from vitamins to energy, where we can get in that door. … [Muscle Milk] does extremely well today in that dairy door, with Frappuccino [and meal-replacement-drink] adjacencies. But when we can get into that functional door, that isotonic door, is where we do best.”

One protein-supplement beverage that welcomes placement in the dairy door is Rockin’ Refuel from Shamrock Farms. The milk-based product, with 20 grams of protein in a 12-ounce bottle, comes from a dairy, one that’s held space in c-stores with its single-serve milk drinks for year.

“It’s been a great product for us,” says Blake Atkinson, brand manager for Shamrock Farms, Phoenix. “It’s opened a lot of doors for us in the category because it’s … all-natural. It’s 100% real milk. … It tastes like chocolate milk because it is chocolate milk.”

Atkinson says the product probably had an advantage when it was launched in late 2008 because many c-store retailers were already using Shamrock Farms for their dairy needs. And for Rockin’ Refuel, the dairy door is a perfectly good fit.

“We’re sticking with the dairy door,” he says. “If we could get into those other spots, we wouldn’t say no, but we know we’re dairy and people know where to find dairy products.”

So what’s the future for the protein-supplement-beverage category? It’s different things to different retailers. Garber of Nella Oil takes a pretty even middle ground, acknowledging the products’ momentum but echoing an overriding challenge.

“I do see some growth there. Growth is evident by other people getting into the category now,” he says. “And the challenge I see is they don’t have the distribution channels. They need to find the distribution channel to get it in first.” That could be one way to bulk up. —Linda Abu-Shalback Zid contributed to this story. 

TALES OF BRANDING

Darrell Duchesneau never aimed to become an activist in the beverage industry. Duchesneau, CEO of Funktional Beverages, Spring, Texas, wanted to make beverages and possibly launch a new category in the process.

Since introducing Purple Stuff in late 2008, the relaxation category has taken on a life of its own, often with a wink and a nod in the direction of the Houston drug culture, the Dirty South in the urban parlance, where “purple stuff,” “drank,” “sizurp” and any number of other street names equate to a drink made by mixing prescription cough medicine containing codeine with soda.

While Duchesneau understands the confusion—and even takes responsibility on some level—he’s trying to distance his product from the drug connotation. In Duchesneau’s mind, “purple stuff” comes from an old Sunny D TV commercial where a teenager, when looking for something to drink in a refrigerator, mentions “soda, OJ, purple stuff.” “The first thing that popped in my head was, ‘Well, that’s Welch’s grape juice,’ ” says Duchesneau. “Then I’d ask other people what they thought of. I’d hear, ‘That was Nehi Grape’ or ‘That was grape Kool-Aid.’ That’s when I thought I could do an [enhanced] drink where every flavor is [the color] purple.” It was while pitching the drink to potential investors that Duchesneau first caught wind of the drug reference.

“In Houston, there was a company that … was looking for a product to sell [so I told him my story about ‘purple stuff’]. … This guy said, ‘Cough syrup, I’ve got cough syrup in my fridge!’ Well, that guy ended up raising the money but leaving me out of it because I didn’t want anything to do with the drug [culture].”

Now Duchesneau finds himself defending his product. “I feel an obligation to fight what [other beverage makers] are doing with my brand because what they’re doing is harmful, potentially to the whole functional business, because once they start regulating things because people did stupid stuff, it affects you in so many other categories,” Duchesneau says. 


OTHER CATEGORIES TO WATCH

Protein-supplement beverages aren’t the only small category seeing growth. Here are some others that are worth keeping an eye on.

Relaxation Beverages/Shots

Sometimes called “anti-energy drinks,” these beverages and shots have found regional acceptance under a variety of, um, interesting, brand names. Hudson News is said to be making hay with relaxation shots, particularly Tranquila, in its airport stores. Talk about a place where people need to relax!

Brands to Watch: drank Dream Water Ex Chill iChill Koma Unwind Lean

Calorie-Burning/Appetite-Suppressant Beverages What better marketing campaign than an elixir to aid the battle of the bulge!

Brands to Watch: Celsius Enviga Fuze Slenderize Meltdown Skinny Water VPX Meltdown

RTD Green Teas Hardly a new beverage. But what is new are the frequent news reports about what great things green tea does for the body. Let the antioxidants flow!

Brands to Watch: AriZona Honest Tea MADE Peace Tea Steaz Sweet Leaf Liquid Relaxx Mary Jane’s Relaxing Soda Purple Stuff RelaxZen Tranquila ViB (Vacation in a Bottle)

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