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What’s brewing with RTD coffee?

Not even a pandemic can cool off the hot ready-to-drink coffee market. Sales are percolating well, with big-name players coming onto the scene and providing c-stores with innovative options for customers. Though RTD coffee business may seem small, it’s a robust one with expected growth of 20%. In 2014, it represented just 2.5% of the total coffee market, but that figure doubled to 5% by 2019, according to the Coffee Association of Canada.

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To a large degree, its Gen Z (those born between 1995 and 2007) leading demand with 46% drinking RTD coffee, as per September 2020 data from Mintel. Millennials are sticking with ground coffee, while their younger counterparts haven’t yet made that switch. 

In fact, COVID-19 also has played a part in the rising popularity of RTD coffee. Java enthusiasts are looking for ways to have café-calibre, coffee-sipping experiences at home, now that lingering over a cuppa prepared by a barista is less viable. 

“Pre-COVID sales were being fuelled by taste and time,” says David Schneiderman, CEO and co-founder of Two Bears Coffee. “Our lives had become busy without time to slow down. Now, RTD coffee gives customers something delicious with a great hit of caffeine without the line-ups at the local café.”

With wellness top mind for many Canadians, the door is open for c-stores to do well by stocking healthier versions of RTD coffees. Two Bears is the first Canadian company offering plant-based, ethically-sourced lattes and brew coffee made with oat milk. Its approach to retailer support is a multi-tiered system, which includes in-store promos, cross promotions with larger, more well-known brands and a digital campaign.

“Convenience stores have been selling RTD coffees for years with great success,” explains Schneiderman. “But they are losing out on the consumer who doesn’t want to drink something with as much as 48 grams of sugar and artificial ingredients.”

Station Cold Brew Coffee Co. will also be building on its roster, which includes top-sellers New Orleans-Style and Vanilla Nitro Cold Brews, with the new launch of its own plant-based, oat milk-based lattes. Mitchell Stern, company co-founder and VP, sales and marketing, says it is looking to expand into convenience stores and will support sales through in-store promotions, giveaways and price breaks. “We are constantly exploring new opportunities in this [c-store] space and, as the leading cold brew coffee brand in Canada, we want to own the space,” he explains. “Our biggest challenge as an independently owned, private company is competing with major companies with deep pockets who own the fridges.”

Clearly, competition is brewing in the RTD coffee space. Coca Cola with Coffee (made with Brazilian coffee) is set to roll out in Canada and the U.S. early in 2021. The beverage giant refers to the new offerings (available in 12-oz cans of Dark Roast, Caramel and Vanilla flavours) as “hybrids” in a new category it calls “refreshment coffee.” Joining the fray is Monster Energy, best known for its high-octane energy drinks. It already has Java Monster, which has performed well, but will bring on board Espresso Monster featuring a triple shot of coffee, plus natural stimulants like taurine and ginseng. It will come in two flavours, Espresso & Milk, and Vanilla Espresso, formulated to appeal to a market keen on embracing the cold brew coffee RTD trend.

Screen Shot 2020-11-30 at 2.40.38 PMThough the battle between brands will be steamy, there’s room in a category that has not reached its peak. “Canada is playing catch-up with the growth and popularity of our neighbours to the south,” explains Alfonso Tupaz, founder of Hatch, a Toronto-based company that produces private label RTC coffee available in the c-store space. “We would say that we’re four years behind, but it’s now reaching the level of where we think RTD coffee should be, compared to the U.S.”

The majority of Hatch’s beverage unit sales come from their private label business. According to Tupaz, 2020 has been its busiest year yet with cold brew. “Our clients fare well in the retail space.”

There’s still an unquenched demand above coffee enthusiasts. “Coffee is a daily routine for many people in Canada,” he points out. “By natural extension, we’re seeing coffee enter more point-of-sale areas, including convenience stores. RTD coffee, in particular, is a convenient pack format, and fits nicely with the convenience store model.”

 

Originally published in the November/December issue of Convenience Store News Canada.


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Consumers crave immune-boosting foods and beverages

You may be surprised to learn that, until fairly recently, Coca-Cola was presented and sold to consumers as a functional food.

Screen Shot 2020-11-09 at 4.34.12 PMPharmacist John Pemberton’s prototype recipe, that evolved into Coca-Cola, originally included both alcohol and coca leaf (the source of cocaine). Prohibition in Atlanta in 1886 prompted the removal of alcohol from the formulation. Coca remained the main active nutraceutical in Coca-Cola until 1903, when it was replaced by caffeine. 

During the first 70-80 years of its existence, Coca-Cola, now universally viewed as an indulgence beverage, used nurses and doctors in its advertising to convince people of its wellness benefits.

The link to COVID-19 restrictions

Human nature being what it is, we are hardwired to seek shelter in a storm. The initial shock of COVID-19 initially translated into panic buying of household staples, but the more profound and lasting impact may be a heightened consumer interest in functional foods.  

The Ipsos FIVE daily consumer diary panel tracks what 20,000 respondents ate and drank yesterday across all categories, brands, occasions and venues. The Ipsos FIVE database quantifies shifts in both behaviour and attitudes. 

Screen Shot 2020-11-09 at 4.34.37 PMIn 2019 and the first two months of 2020, Ipsos Five was already tracking faster growth in consumption of functional foods compared to overall food consumption, roughly +8% to +9%, year-over-year. In the first month of lockdown, the rate of growth of functional foods consumption increased an additional 13% versus the pre-COVID timeframe. 

Kathy Perrotta, VP of market strategy and understanding with Ipsos, says: “The functional food choice is (generally) motivated by the need for specific benefits, like aiding with digestion. Beyond physical health and dietary requirements, consumers also opt for functional foods to meet personal emotional and lifestyle needs and beliefs (Exhibit 1)…. The rising focus on bolstering personal immunity is certainly a sign of the times and something we could expect to continue as a result our current health pandemic.” 

Perrotta suggests that this recent bump in consumer purchases of functional foods was “driven by young adults now eating in a highly homebound environment, who seem to be more focused on overall wellness benefits”.

Follow the crowd

The online app Pinterest refers to itself as a visual discovery engine. It is a platform where people go to find inspiration for food, fashion, hobbies, crafting and more. Pinterest, which started only ten years ago, currently welcomes nearly 400 million Pinners to the platform every month to explore and experience more than 200 billion ideas that have been saved.

Screen Shot 2020-11-09 at 4.33.54 PMA review of global Pinterest searches for the last two weeks of March 2020 versus pre-COVID-19 reveals that consumer searches for “healthy things to cook” increased 4X in the first weeks of the COVID-19 lockdown, when consumer interest in healthy eating spiked.

Pinterest searches in the month of June for healthy eating in Canada were way up, year-over-year: 

  •       Canadian consumer searches for “Healthy things to cook” increased 3.5X; 
  •       “Healthy cooking” searches were up 2.9X, and;
  •       “Healthy snacks” searches were up 35%.

 

Form follows function

Sophie Mir, associate editor at consumer and foodservice insights provider Technomic, confirms that Technomic research has been tracking growth in better-for-you “healthful” foods for the last several years. In Technomic’s 2018 Canadian Convenience Store Foodservice Consumer Trend Report, 41% of consumers reported that healthfulness of food/beverages is an important attribute in deciding to purchase prepared foods or beverages from a convenience store. 

However, Mir also notes a “shift in consumers’ definition of health moving away from the emphasis on nutritional benefits (such as lower fat or lower cholesterol) to functionality, that is, ingredients that provide holistic gains… (Including physical, mental and emotional benefits).” 

Screen Shot 2020-11-09 at 4.35.16 PMPractically, there are a significant number of examples of products for c-store operators to consider (Exhibit 2). Technomic advises its clients that “offering food and beverages with functional ingredients (aligns) with what consumers are looking for.” At the same time, c-store operators have an opportunity to, in partnership with manufacturers, draw awareness and educate their consumers on functional benefits via signage, POP information, online advertising, and social media channels. 

Immunity is key

Andrew Wardlaw, of MMR Research Worldwide Research, recently noted that “research findings published in December 2019 by Wellmune, part of the Kerry Group, spanning 11,000 consumers across 14 global markets, found that nearly two thirds (63%) placed immune health ahead of supporting healthy bones and joints, good digestive health, improve energy levels and heart health.” This suggests that, even prior to COVID-19, consumers around the world were making food purchase decisions motivated by immune health. Further, “new research undertaken by MMR in association with TOLUNA in April 2020 found that immunity was now the number one health concern in China and South Africa, and only beaten by heart health in the UK and U.S.”

Don’t miss the functional foods train

With “live and active cultures” promoting gut health, U.S. Greek Yogurt brand Chobani, from its origins in an abandoned yoghurt factory in New Berlin, New York in 2007, has risen to be a market maker and the dominant player in the U.S. premium Greek yoghurt category. Chobani took a dormant commodity category upscale, and went from zero share to being a multi-billion dollar CPG player in about 10 years. It’s currently investing heavily in plant-based dairy in general, and oat milk specifically.

Consider the Canadian brand, Sapsucker, an Ontario-based new entrant to the wellness beverage market available across Canada. Sapsucker markets itself as a Maple Tree Water, a “tapped in Canada” naturally hydrating beverage that advocates for people to make healthy, mindful choices. The product is harvested sustainably from Canadian forests, and purports to be “plant-based and nutrient rich, powered by 46 naturally occurring minerals, vitamins and antioxidants.” Its lineup includes three lightly carbonated tree water beverages: The Original One, The Lime One, and the Lemon One. Like Coke, Sapsucker sells taste, lifestyle and feeling: its tagline is “Sip a Sapsucker, because there’s no time for regrets.”

Clearly, life as we’ve known it changed. The path forward demands that operators remain relevant with customers. The gap between seeing and embracing new functional foods, and achieving a return on these investments, is a bridge worth crossing for operators. 

Darren Climans is a foodservice insights professional with close to 20 years’ experience partnering with broadline distributors, CPG suppliers, and foodservice operators. His practice is to understand issue-based decisions by taking a data-driven approach to strategic decision making.

 

 


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Beyond beer: Molson Coors sales dip but brewer remains focused on future growth

UnknownMolson Coors Beverage Co. recorded a lacklustre third-quarter as ongoing COVID-19 restrictions and packaging material constraints curbed the brewing giant’s sales.

The Montreal-based company, which reports in U.S. dollars, said it recorded net sales of US$2.75 billion for the three months ended Sept. 30, down 3.1% compared with US$2.84 billion for the same quarter last year.

Molson Coors chief executive Gavin Hattersley said the pandemic has presented obstacles for the brewer.

“Like all other beverage companies, one of the biggest challenges this year has been packaging supply,” Hattersley said during a conference call with analysts.

“To put into perspective the scope of the challenges, we sold 300 million more cans of beer in the first nine months of 2020 than we did in same period in 2019.”

He added: “There have been times over the last few months when demand for tall cans was four times what it was in 2019.”

But Hattersley said there has been a steady improvement in supply over the last several weeks.

He said the supply of 12-ounce industry standard cans is stabilizing, and the company is starting to improve its inventory of tall cans as well.

Meanwhile, the company said Coors Light and Miller Lite grew 6% and 9.5%, respectively, in off-premise sales in the U.S. so far this year.

The combined U.S. segment share for Coors Light and Miller Lite has grown for 24 consecutive quarters – six straight years, according to data and market firm Nielsen.

Molson Coors’ said its so-called above-premium products made up a record portion of the company’s U.S. portfolio in the third quarter.

The brewer’s light citrus wheat beer Blue Moon LightSky was listed as the top selling new beer in the U.S. in 2020, according to Nielsen.

The company also recently launched Coors Seltzer at the end of August and sold over 500,000 cases in the first month.

Meanwhile, in a bid to expand beyond the beer aisle, the company has broken into the cannabis beverage market in Canada.

Molson Coors said Truss, its Canadian cannabis joint venture, has become a market share leader of ready-to-drink cannabis beverages, with an estimated market share of over 50% in Quebec.

The Company also launched Vyne Botanicals hop water in Canada.

Last October, the company announced a revitalization plan with the aim of strengthening its core brands, growing above-premium brands and expanding “beyond the beer aisle.”

Hattersley acknowledged there are questions about the complexity of the company’s revitalization plan, expansion of products and ability to execute the goals.

But he said the company is already making progress and seeing improvements in both core products and newer brands.

He said retailers are “hungry” for innovation, while 80% of its distributors already carry non-alcohol products and half carry wine and spirits.

“They’re actually ahead of us,” Hattersley said. “We’re playing catch up with them.”

From a supply chain perspective, he said the new products are not going through the company’s breweries and Molson Coors is expanding its warehouse capacity.

Still, Hattersley said the can shortage during the pandemic forced the company to make some decisions around slow-moving brands and stock keeping units.

“I would expect some of those SKUS won’t come back, so from a complexity point of view from a brewery point of view I would expect that we will have less SKUS when we come out of this pandemic than we did coming into the pandemic,” he said.

Molson Coors said it earned net income of $342.8 million or $1.58 per diluted share for the quarter compared with a net loss of $402.8 million or $1.86 per diluted share a year ago when it took a large goodwill impairment charge.

The brewer said its underlying net income for the third quarter was $350.8 million, or $1.62 cents per diluted share, compared with an underlying profit of $321.2 million, or $1.48 per share, in the third quarter of 2019.


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B.C. man’s lawsuit over marketing of Canada Dry ginger ale settled for $200,000

The maker of Canada Dry ginger ale has agreed to pay more than $200,000 to settle a class-action lawsuit launched by a B.C. man who alleged he was misled by marketing suggesting the soda had medicinal benefits.

A B.C. Supreme Court decision on costs released Monday shows Victor Cardoso claimed he bought Canada Dry on the basis it was “made from real ginger” but the marketing was false and it contained none.

The decision says Cardoso later conceded that the soda contains small amounts of ginger derivatives but he continued to allege that the company’s representations of its product were false.

The soda’s maker, Canada Dry Mott’s Inc., denied the allegations and any liability.

Under the settlement agreement, the company is not required to change its labelling or advertising for products marketed in Canada.

The settlement was approved in March for Canadians outside Quebec requiring that the company pay $200,000, which includes legal costs, plus $18,607 in other legal expenses.

The agreement means the remainder of the money will be paid to class members by way of a donation to the B.C. Law Foundation. The two lead plaintiffs receive $1,500 each.

Cardoso had argued Canada Dry advertised its product as being made from real ginger “in an effort to capitalize on the health benefits associated with the consumption of ginger.”

He said he purchased the ginger ale regularly for his family believing it was “natural.”

The class-action followed similar lawsuits in the United States, which saw the company drop the “made from real ginger” line from its products sold there.


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Coca-Cola recovery continues as it grows leaner in pandemic

Coke-Facebook-delivery-360x203Coca-Cola measured gradual improvement in the third quarter as it focused on emerging leaner from the global pandemic.

Revenue fell 9% to US$8.7 billion, edging out Wall Street expectations of $8.4 billion, according to analysts polled by FactSet. It was far better than the 28% drop in revenue in the second quarter.

Net income was $1.7 billion. Earnings, adjusted for one-time items, fell 2% to 55 cents per share. That also outpaced analyst forecasts of 46 cents.

Coke has been decimated with the closure of arenas, restaurants, theatres and other public places where it books about half of its revenue.

It has been making up for some of that damage as people buy more beverages, such as orange juice, at home. However, sales of sparkling soft drinks fell 1% in the July-September period; sales of trademark Coca-Cola grew 1% for the quarter. But other beverages struggled. Sales of enhanced water and sports drinks dropped 11% and tea and coffee sales were down 15%, hurt by closures of Costa retail stores.

So far this month, sales based on unit cases are seeing single-digit declines compared to last year; in April, those sales were down 25%.

Chairman and CEO James Quincey said the company had accelerated a planned reorganization that would put more emphasis on fast-growing brands.

In August, the company began offering voluntary buyouts to around 4,000 people, which it hopes will reduce the number of people it eventually lays off. Coke is reducing the number of individual business segments from 17 to nine.

Coca-Cola Co. also announced last week it was retiring several products this year, including Tab, Zico coconut water, Diet Coke Fiesty Cherry and regional offerings such as Northern Neck Ginger Ale. In July, the company announced it would retire Odwalla juices.

Coke plans to reduce its brands by half, to 200.

Coke said it would use the savings to invest in growing brands like Minute Maid and Simply juices and fund the launch of new products like Topo Chico Hard Seltzer, Coca-Cola Energy and Aha sparkling water.


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PepsiCo Beverages to distribute Evian in Canada

PepsiCo Beverages Canada and Danone Waters of America (DWA), the U.S. and Canadian importer and distributor of Evian natural spring water, have entered into an exclusive alliance for PepsiCo to distribute Evian in Canada.

As of January 1, 2021, PepsiCo Beverages Canada will sell, distribute, and merchandise Evian across Canada.

“We are thrilled about this new partnership with PepsiCo Beverages Canada,”Henri de L’Épine, CEO of Danone Waters of America, said in a release . “Their extensive Direct-to-Store Delivery system, strong selling capabilities and a complementary brand portfolio will undoubtedly increase Evian’s ability to serve our business partners who want to offer Canadian consumers an exceptional natural spring water.”

“In the bottled water category, Evian has thrived as a premium and innovative brand,” said PepsiCo Beverages Canada president, Richard Glover. “This alliance plays an important role in PepsiCo’s overall hydration strategy and enables us to use our distribution networks and sales capabilities to accelerate the growth of Evian in the Canadian marketplace.”

The company said that PepsiCo’s presence in all key channels will allow Evian, which has a portfolio of single serve and multi-pack options, to further reach consumers in both the retail and foodservice segments.


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Molson and Hexo backed cannabis drinks company launches five new brands

Competition in the cannabis beverage market is due to heat up as a company backed by Molson Coors Canada launches a group of pot drinks brands over the next few months.

Truss Beverage Co., a joint venture between the brewer and Ottawa-based cannabis company Hexo Corp., unveiled five brands today that it hopes will conquer the market and appeal to emerging tastes.

Truss chief executive Scott Cooper says his company’s new brands include Little Victory naturally-flavoured sparkling beverages and House of Terpenes sparkling tonics with botanically-sourced terpenes. All the brands will offer beverages infused with either CBD or THC.

Veryvell, an existing Truss brand that currently offers cannabis extract drops, will centre around cannabidiol products and wellness, while XMG and Mollo will focus on drinks that are perfect for special occasions.

Truss entered the pot drink space in December, when it partnered with Flow Alkaline Spring Water to launch goji-grapefruit and raspberry-lemon waters infused with cannabidiol, a cannabis compound.

Other cannabis retailers are already selling infused drinks from Canopy Growth Corp.’s Tweed, Aurora Cannabis Inc., A1 Cannabis Co., actor Seth Rogen’s Houseplant brand and Fluent Beverage Co., a joint venture between Anheuser-Busch InBev and B.C. pot company Tilray Inc.


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Coca-Cola discontinues Odwalla juice brand

Odwalla-Facebook-e1593787412194Coca-Cola is shutting down Odwalla, its juice and smoothie brand, at the end of this month.

In 2001, Coca-Cola acquired U.S.-based Odwalla for $181 million, but, according to reports, had struggled with the business in recent years, due to consumer concerns about sugar content in juices, as well as a waning interest in smoothies.

In addition, the wholly-owned subsidiary of the beverage giant involved logistical challenges, as products had been delivered to retail locations via a fleet of more than 200 refrigerated trucks. The distribution network will also be shuttered.

In all, the closure at the end of July will result in about 300 job losses.


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Nestlé Canada selling bottled water business to local family owned company

Nestlé Canada Inc. says it is selling its Pure Life bottled water business to Ice River Springs as Ontario prepares to give its municipalities veto power over new water bottling permits.

The sale for an undisclosed price is expected to close in the third quarter and is contingent on regulator approval. The sale includes two factories located in Puslinch, Ont., and Hope, B.C., along with a well in Erin, Ont.

Company president Jeff Hamilton says it began to explore the sale of its water business in late 2019 after deciding to focus on its international brands of San Pellegrino, Perrier and Acqua Panna.

Ice River, a Canadian family-owned bottled water producer, says the acquisition fulfils its ambition to expand beyond its private label business for retailers.

Ice River Springs runs a plastics recycling operation, BMP Recycling, that takes bottles and plastic food packaging collected by municipalities and produces food grade recycled PET plastic.

Canada’s most populous province recently announced new rules for taking groundwater, three years after the former Liberal government enacted a moratorium on new and expanded permits to take water for bottling.


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Tilray misses analyst expectations in Q4, following February layoffs

UnknownTilray Inc. has revealed the company hit a rough patch in its latest quarter, just weeks after announcing it was laying off 10% of its staff to help better achieve profitability.

The Nanaimo-based cannabis company said that its revenues had dropped and its net loss increased in its fourth quarter, which ended Dec. 31.

Even its recent acquisition of hemp foodmaker Manitoba Harvest and growth in international medical cannabis markets were not enough to save the company from reporting revenues of US$46.9 million, a roughly 8% drop from the US$51 million it announced the quarter before. Financial markets data firm Refinitiv said analysts had expected Tilray, which keeps its books in U.S. dollars, to report a revenue of $55.4 million.

Meanwhile, the company’s net loss for the quarter was $219.1 million or $2.14 per share compared with a loss of $31 million or $0.33 per share for the same quarter of the year prior.

But on an earnings call with analysts, Tilray chief executive Brendan Kennedy did not appear to be letting such numbers get him down.

“The challenges in the Canadian market have been well-documented over the past few quarters. Primarily, the legal cannabis market has been slower than expected in taking share from the elicit market due to lack of points of distribution and product availability, but we are encouraged by recent announcements and actions taken by provincial governments to increase the pace of retail licensing,” he said.

“The market has been volatile over the last 12 months, but I remain extremely bullish on the long-term opportunity in Canada.”

Looking forward, Kennedy said Tilray would be focusing on investing in its facilities that manufacture products linked to Cannabis 2.0- a term used to describe a second wave of products like edibles, extracts and topicals that hit the market earlier this year.

Tilray has partnered with Anheuser-Busch InBev, the world’s largest brewer, to introduce cannabis-infused drinks to the Canadian market.

Its subsidiary High Park Holdings Ltd. runs confectionery brand Chowie Wowie, which makes cannabis-infused chocolates and gummies, and has beverages brand Rmdy, which makes non-alcoholic, ready-to-brew teas and sparkling beverages with all natural flavours.

The company is making a lot of new items for the first time and that is never done efficiently the first time, said Kennedy.

“The first time you make a chocolate bar, the first time we made a beverage and canned it, it’s not as efficient as the 10th time or the 100th time you operate that particular facility, so we’ll optimize our footprint, optimize our yield, optimize our unit costs throughout the course of this year.”

While many companies announced edibles they were researching and developing long ago, many have yet to launch in stores. Those that have hit the market have sold out quickly as consumer demand outweighs supply.

Kennedy said Tilray was “surprised” by the demand, but also by the lack of “competition” generated by licensed producers.

“We’re racing at this point to increase our supply of vape, edibles and beverage products and so we’re expanding our manufacturing lines and increasing our shifts, so that we can get more of those products to market,” he said.

Kennedy’s remarks came as Tilray said the company’s average net selling price per gram increased to $8.78 from $7.52 in the prior year and as it recorded non-cash charges of $112.1 million related to a revenue-sharing agreement it signed with Authentic Brands Group LLC, which is behind the Juicy Couture, Frye and Aeropostale brands.