End of year musings

Michigan State finished the football regular season at 11-1, ranked #7 in the AP and USA Today polls. The Spartans will play Alabama at the Capital One bowl on Jan. 1 in Orlando, Fla. Former MSU head coach Nick Saban is the head coach at Alabama. It will be an interesting match up. What a great fall in East Lansing! Go Green!

Canada Dry Cranberry Ginger Ale is still available! But Diet Cranberry Ginger Ale is sold out. More than 10,000 two-liter bottles were distributed in November.

Happy holidays from the Canada Dry Bottling Co. of Lansing family!

November new customers: Biggby #291 - Chelsea, Biggby #295 - Hartland, Breaktime Snacks, CVS #8295 - Hartland, Corona Smoke Shop, Dollar General #12345 - Lansing, East Lansing BP, Fedco Super Liquor - Albion, Johnny D's, McNamara's Party Store, Nestle Toll House - Okemos, Potterville Public Schools and TNT Industry. Canada Dry Bottling Co. of Lansing values your business!

Industry News
Jeffrey Klineman wrote an interesting column about branding and change in the October issue of Beverage Spectrum. Follow this link to read: http://www.bevspectrum.com/first-drop/2010/change-and-its-discontents/.

Domestic beer sales are down a half percent through Oct. 3, although Pabst Blue Ribbon and Yuengling Traditional Lager posted double-digit growth. Half of the Top 10 Imported Beer brands are from Mexico.
source: Beverage Spectrum Oct 2010

Brand News
Three flavors of Holistics Zero, a new line of no calorie drinks from Adina For Life, should reach the Michigan market by Q1 2011. Flavor profiles include melon and citrus. Holistics is available at Target, Walgreen's, Better Health, Foods For Living and other local stores.

5-Hour Energy has the top six selling energy shots in convenience stores. Extra Strength is #1 across the nation. Sales have increased this year by almost 49 percent.

John Lennon is the new president of XYIENCE. Previously, he was CEO of Pabst Brewing Co. Lennon has more than 25 years experience in the beverage industry.

HOLIDAY Season is here!

We received our annual two-liter shipment of Canada Dry Cranberry Ginger Ale and Diet Cranberry Ginger Ale three weeks ago. Because of limited availability, these popular packages will sell out before Dec. 25.

The MSU Spartans continue to impress fans, pollsters and the national media! Currently ranked #10 in the AP and USA Today polls, the Spartans are 9-1 and leading the Big 10 followed by Iowa, Ohio State and Wisconsin. All four teams have one conference loss. The remaining home game is Nov. 20 vs. Purdue. Go Green!

October new customers: Dylan's Catering, Nestle Toll House - Lansing, One Stop Smoke Shop, Pure & Simple Catering, Rite Aid #4314 - Brighton and State Side Deli - East Lansing. Canada Dry Bottling Co. of Lansing values your business!

Industry News
AriZona is ranked the #1 RTD tea in the United States, with almost 7.5% growth compared to last year.

Hawaiian Punch remains the leading fruit drink with sales increasing this year by more than 1.7%.

Those "smooth" Keith Stone TV commercials have helped revitalize Keystone Light beer. Sales have risen more than 13.7% compared to 2009. source: Beverage Spectrum Sept 2010

Brand News
Jones Soda is offering their unique (and sometimes disturbing) fall flavors in time for holiday dinners. Consumers can purchase Bacon soda and the annual Tofurky & Gravy soda. Go to www.jonesoda.com and buy some today!

Summer transitions to Autumn

Summer 2010 was very hot this year ... which was good for beverage sales. Fall sales should remain strong with 70,000+ students (combined) returning to Adrian College, Albion College, Cooley Law School, Jackson Community College, Lansing Community College, Michigan State University and Olivet College.

July new customers: Curtis Grocery, Jugheads, Mancino's of Jackson and Nixon Park.

August new customers: Clinton Theater, GFS Marketplace - Okemos, Royal Liquor and S&S Party Store. Canada Dry Bottling Co. of Lansing values your business!

Brand News
O Water is now a separate division of Polar Beverages.
source: Beverage Business Insights

Xyience Xenergy is featured in the 2010 edition of Drink This, Not That. Xyience is listed in the "Drink This" category.
source: Bevnet.com

Adina Holistics was recently presented the 2010 Clear Choice Award for bottle design.
source: Bevnet.com

Exclusive Partnership with Nestle

We've recently partnered with the #1 food company in the world Nestle!

Check out this blurb in the Lansing State-Journal:

Canada_Dry_Bottling_adds_Nestle_lines

Wanna start a beverage company?

So Long To a Grand Year of Golden Egg Hunting
By Mike Weinstein

My inability to find employment in any other industry has offered me a unique opportunity to see the evolution of the soft drink business. And there have been 4 major changes that I believe have really impacted the "bottom of the pile." For starters, in the old days there were dozens of independent middle-size beverage brand owners. Now we have just 3 big ones: Pepsi, Coke, and Dr. Pepper Snapple. Also, there used to be lots of independent distributors. Every city had a few, all competing to distribute new products.

Now we have 3 big ones - PBG, CCE, DPSG - plus some terrific large regionals like Polar and Honickman. And only a handful of small, local guys. [Canada Dry Bottling Co. of Lansing is one of the small, local guys!] Third, there used to be hundreds of large independent retailers with beverage buyers who would put the governor of Illinois to shame. Now they've consolidated dramatically and generally want their money above the table.The one thing that's deconsolidating is SKUs. Most bottlers and distributors used to carry just a limited number of brands and package sizes. Now there are thousands and thousands of SKUs, a dizzying array of choices for the consumer.

So if you were thinking about going into the beverage business today and hired some consultants - and if this recession keeps up there are going to be a lot more beverage consultants - this is probably how they would summarize the situation. "Let's see, there are fewer companies, which means there are fewer buyers for brands and maybe no exit strategy. There are fewer distributors, so the remaining ones hold all the cards and are going to cut really tough deals if you want them to carry you. There are fewer retailers, so they have a lot more leverage and it's going to be harder and more expensive to get shelf space. And the competition keeps expanding which means consumers have many more brand and category options.

"The question the consultant would then undoubtedly ask is: "Given all this … why would you EVER start up a beverage business?"There is a simple answer: the Golden Egg, just like in the story. Like the $220 million FUZE egg. Or the slightly larger $385 million SoBe egg. Or the very big $1.7 billion Snapple egg. Or the really gigundo $4.2 billion Glaceau egg. All great stories. Everyone who wants to get into the beverage business has the golden egg dream. But let me give you egg hunters a dose of reality. I keep a list of 25 publicly traded beverage stocks with small market caps under $25 million in valuation, most well under. The combined annualized revenue for these 25 companies is around $125 million and their total combined market cap is $100 million. Not the traditional 4-times-sales multiple that investment bankers bandy about. And here's why 4x isn't happening for them.The total operating expenses of these companies is $150 million, which exceeds their sales revenue by 20%. Their annualized operating losses of $95 million are almost as great as their sales. Not one of the 25 is profitable.

So who would invest in these companies? There seems to be no shortage of people who are willing to plunk down big money for that 1 in 100 shot. But think about this: If you purchased 100 shares of each of these 25 companies at their peak price over the last 3 years - that's 2,500 shares in total - it would have cost you $13,424, an average of $5.37 per share. But if you bought those same shares at their closing price on Dec. 12, you would have paid $678, an average of 27 cents per share - a decline of almost 95% from the peak.

Here are two examples from beverage companies you may be familiar with. In April 2007, Jones Soda traded at over $32 a share, creating a market cap closing in on $1 billion. Today, less than 2 years later, the company trades at 47 cents, with a $12 million market cap. Or how about Purple Beverage? In the first quarter of this year, Purple reported just $250,000 in sales when its stock reached $8 a share - creating a $400 million market cap. Today you can buy a hundred shares of Purple for $2.60, which is slightly less than the cost of buying a bottle of Purple in the local deli. I get calls from people every week wanting advice about turning their incredible new beverage idea into create a huge golden egg. I have met with lots of people, everyone from Michael Eisner to Monica Lewinsky, and I give them all the same advice: It's really not as easy as it looks.

But I've found most entrepreneurs don't want to hear that. They think their idea is fabulous and unique and won't miss despite how crowded the field is or how complex the route to market is or how challenging the production process is. Funny thing is, a few of them turn out to be right. Most don't. We're really excited about how far we've gotten on Hydrive in such a short time. Our dream is that it's going to be a big success and so far it's looking great. If you want to follow your dream then welcome to the bottom of the pile.

Published Dec 31, 2009
Beverage Business Insights
Benj Steinman, Publisher