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Soda’s ‘Big Three’ look to non-fizzy innovation

BY Barbara White-Sax

It’s been a summer of big news from the big three carbonated beverage companies. Coca-Cola created a stir when it ramped up its non-carb acquisitions. The company’s purchase of Fuze and Glacéau sent a clear signal to the industry that Coke is serious about innovation, and it will purchase brands if it can’t create them.

“Pepsi has a terrific non-carb portfolio,” said John Sicher, publisher of Beverage Digest. “They have Lipton, the leading tea, the No. 1 water, Aquafina, and Gatorade. Coke is aggressively expanding its portfolio and today has a much stronger portfolio than it has had in the past months.”

The gap between the rivals may be closing. “It’s no longer an open field for Pepsi, which has been regarded as a more innovative company. Coke … is in the game,” one analyst said. “They are getting a lot more creative and are developing better consumer and customer insights.”

In the carbonated arena, Coke Zero has been successful and the jury is still out on Enviga, but it’s clear that growth is coming from noncarbonated brands. Coke bottlers, in an effort to stay on top of the market, have been supplying their consumers with non-Coke brands through independent alliances.

Coke apparently is finding those brands much more interesting as the beverage giant looks to new segments to provide industry growth. The company has partnered with Caribou Coffee to launch three flavors of ready-to-drink coffee on a regional basis. A national rollout could follow. Coke also is considering a launch of a Godiva hot chocolate drink as part of its new partnership with Campbell Soup Co. and is rumored to be interested in AriZona iced tea.

Tea is an attractive area for growth. “Tea has been on fire for some time,” one industry source said. “Fruit- and juice-based drinks are also an area that’s underdeveloped.” Such beverages as Izzy and Naked Juice are an area that should see significant growth going forward—and look for more action from Pepsi’s Tropicana Squeeze brand.

Sicher expects to see more growth in the hydration segment. “I think we’ll see more waters that overlap with other categories, such as flavored waters and vitamin-enhanced waters.” Sports drinks might be touched as well—particularly with products that offer a point of difference.

Pepsi plans to introduce a lower-calorie version of Gatorade later this year. Volume growth of the monster brand, which owns 80 percent of the sports drink market, dipped slightly in the second quarter. Sports drinks may be feeling increased competition from newer hydration segments.

A lower-calorie profile seems to be a huge area of focus, and Sicher expects to see more innovation from all three carbonated players—including the ailing Cadbury Schweppes.

Cadbury Schweppes, which has long been a final finisher in the innovation game, is looking to sell off its beverage business in an effort to concentrate more fully on its confectionery business. “Cadbury has long lacked innovation across its portfolio and has been slow to step into what’s new,” one analyst said. “They have been slow to anticipate consumer needs.”

BY THE NUMBERS

$4.1bil.What Coca-Cola paid to acquire Glacéau

The company announced in March that it would split off its beverage unit, which markets the brands 7Up, Dr. Pepper and Snapple, either through an initial public offering or sales. Analysts estimate the division could fetch between $14 billion to $16 billion. Sicher said while the debt market has created a delay in any deal, the company will likely spin off or sell to a private equity firm.

While the “big three” focus more heavily on the non-carb business, experts say advances in sweeteners and sweetener enhancers could put the fizz back in the category. “Manufacturers are looking for all-natural sweeteners that have high sweetness but are light in calories,” said one analyst. “The technology is improving.” Sicher said the development is still speculative but experts agree that when the industry hits on the right formula, carbonated products will once again be front and center.

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Kroger appoints Going as Michigan division president

BY Adam Kraemer

CINCINNATI The Kroger Co. announced Wednesday that it has named Rick Going president of the company’s new Michigan division.

Kroger currently operates 138 stores in the state; Going will oversee operations in them, effective immediately.

During his 26-year tenure with Kroger, Going has held a number of district- and division-level leadership positions at the store and has served as vice president of Retail Operations and vice president of Merchandising for Kroger’s Cincinnati/Dayton division.

“Rick brings extensive experience in operations and merchandising to this new role,” said Don McGeorge, Kroger’s president and chief operating officer. “We look forward to his leadership as he works with our associates to build on Kroger’s growth in Michigan by focusing on our customers to create even better shopping experiences for them.”

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NACDS responds to “misleading” New York Times article

BY DSN STAFF

ALEXANDRIA, Va. The National Association of Chain Drug Stores has fired back at The New York Times after the publication ran an article in its Sept. 18 issue titled, “The ‘Poisonous Cocktail’ of Multiple Drugs.”

The NACDS said the article misrepresented the role of chain pharmacies in the prevention of harmful drug interactions. The article blamed, “places where chain stores have replaced independent pharmacies or when the patient’s drug plan requires that medications be ordered by mail.” The NACDS retaliated by stating that all pharmacists, no matter whether they work in a chain or at an independent pharmacy, counsel patients for drug interactions and rely on medication information for this purpose.

The NACDS said the article misrepresented the role of chain pharmacies in the prevention of harmful drug interactions. The article blamed, “places where chain stores have replaced independent pharmacies or when the patient’s drug plan requires that medications be ordered by mail.” The NACDS retaliated by stating that all pharmacists, no matter whether they work in a chain or at an independent pharmacy, counsel patients for drug interactions and rely on medication information for this purpose.

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