Industry brief: Beverages 2
Part 1 3 more
New age beverages
In the last part of our look at the beverage business, we noted that oligopolies Coca Cola, Pepsico, and Cadbury Schweppes had "flooded" a mature market, so that there was minimal growth potential in the carbonated beverages category. So, how can these companies grow, something all oligopolies are compelled to do? First, by expanding internationally. Second, by acquiring or adding new products in other beverage areas, which show both faster growth and less well-defined competition. In fact, other beverage types have only in the last decade come into focus as separate, important categories, each with a potential for growth.
So the search for new beverage footholds has become the second front of the Cola Wars. There is a scramble for new territories in beverage shelf space, and Coke and Pepsi are investing heavily. These alternative beverages areas were established by startup or small cap companies, including Snapple and Arizona Iced Teas, Ocean Spray and Nantucket Nectars, SoBe and Calistoga. The emerging categories began to look like both a threat and an opportunity for the big three.
In 2001, according to Beverage Age Magazine. the segments of alternative or "New Age" beverages ranked by order of sales, were:
- bottled water in clear plastic containers
- mildly flavored water (Clearly Canadian, Veryfine, Acqua Vie)
- fruit juices and drinks (some shelf-stable, like Ocean Spray, Mott's, DelMonte; some refrigerated, like Nantucket Nectars, Tropicana)
- sports and energy drinks (Gatorade. Powerade, SoBE Power, Red Bull, G-Up)
- iced tea (Snapple, Arizona, Lipton, Nestea)
- premium soda (Thomas Kemper Soda, Jones Soda)
- cold coffee drinks (Starbucks cappuccino drinks, PlanetJava, Arizona)
- vegetable/fruit juice blends, (V8, Odwalla)
- enhanced dairy drinks (Smooth Moos, Chocolate Moose Energy Shakes, drinkable yogurt)
- soy-based and other non-dairy beverages (Odwalla, Health Source)
- other nutrient-enhanced beverages, so called neutriceutical beverages (SoBe, Hansen, Naked Juice, Fresh Samantha)
The problem with this market, like most emerging categories in the grocery business, is an excess of vendors and products, making it hard for retailers to decide who to assign their precious shelf space to. This is accompanied with an even larger number of SKUs of different sizes and flavors, causing generally chaos in the market.
That makes for a great opportunity for the oligopolists, who have entered into these markets in a big way. We'll talk about the water category later, but here's some of the other alternative brands now owned in the alternative market by the carbonated Big Three. (The notation (lic.) denoted a beverage licensed from another company.)
| Category |
Coca Cola |
Pepsico |
Cadbury-Schweppes |
Notes |
| Iced tea |
Nestea (lic. Nestle) |
Lipton (lic. Unilever) |
Snapple |
Lipton #1, Nestea #2, Snapple #3 |
| Sports drinks |
Powerade |
Gatorade |
Mistic |
Gatorade #1, Powerade #2 |
| Health drinks |
KMX |
SoBe |
|
|
| Coffee Drinks |
Planet Java |
Starbucks (lic.) |
|
Starbucks #1, Planet Java #3 |
| Refrigerated Juices |
Minute Maid, Odwalla, Fresh Samantha |
Tropicana; Dole (lic.) |
Nantucket Nectars |
Tropicana #1, Minute Maid #2 |
| Shelf-stable juices |
|
Dole (lic.) |
Orangina; Mott's; Welch's (lic.); Clamato |
|
| Milk-based drinks |
|
|
Yoo-hoo; Raging Cow |
|
| Soy-based drinks |
Tropicana smoothies |
|
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Note that most of these products were bought or started in the last three years. The big three already have the salesmen, the vending machines, the bottlers, the money to advertise, and the international reach. With this power, they have managed to take over a second aisle in the supermarket, along with a solid section of the refrigerator case. And as we'll see, the biggest potential is in water.
7:38:32 PM 
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