Beverage marketers are drunk on innovation

Mark Willingham Uncategorized

Beverage marketers are drunk on innovation

Industry giants, including Chicago-based MillerCoors, are testing their limits with product blitzes that blur category lines.

Crain’s Chicago Business

By E.J. Schultz

November 20, 2019

For years, the closest beer giant MillerCoors got to liquor or wine was calling Miller High Life the “Champagne of Beers,” a long-used playful tagline for the economy brew. But starting this year, the nation’s second-largest brewer began dipping its toe into the actual wine biz with a three-city rollout of Movo, a line of canned wine spritzers that will go national next year with major marketing support.

Movo, which is made from wine, sparkling water and juice, is indicative of the shifting priorities of the nation’s largest beverage companies, which are rushing new products to market at a faster clip than ever before in hopes of remaining relevant to fickle drinkers. The new motto seems to be innovate or die.

Coca-Cola Co. alone has at least 20 new product launches slated for 2020 in North America—an all-time high—including a new sparkling water brand called Aha and Coca-Cola Energy, a new energy drink meant to compete with the likes of Red Bull and Monster, but with a Coke twist. Anheuser-Busch InBev in 2020 will triple its investment in its Beyond Beer division to more than $100 million, as it experiments with new seltzers, wines and spirits brands, a spokeswoman confirmed. Big bets include Bud Light Seltzer and Babe Wine, a maker of canned wines that the brewer acquired in June.

“Big consumer brands are starting to really catch up to consumers who for a number of years now have loved to explore … they like things that are different and interesting,” says Duane Stanford, executive editor of beverage trade magazine Beverage-Digest. “And one of the ways to make beverages more interesting is to create hybrid versions and blur categories and so that is a lot of what you are seeing from the companies now.”

SPEED BRINGS RISKS

The beverage giants are in many ways following the leads of dozens of startup brands that have been nipping at their heels for years with quick-to-market innovations. But for big companies, the product blitzes carry risks, considering they must integrate new beverages into complex manufacturing processes, as well as work with numerous third-party bottlers and distributors. “The success of this new approach remains unclear,” warned investment banking advisory firm Evercore ISI in a recent report. “What is clear is that it will likely put a lot of stress on salesforce, distribution and supply chain.”

The beverage giants are trying to strike the balance of doing sufficient consumer research to predict success but not be bogged down by processes that in the past have been measured in years, not months.

In a recent corporate blog entry, Coca-Cola boasts that its Aha sparkling water, which will hit stores in March, was brought from “concept to prototype in just over six months.” Rather than walling off new product development within R&D, Coke now assembles temporary teams covering multiple functions including marketing, retail management, supply chain and even third-party bottlers. “We are getting those different perspectives tabled earlier and able to work through different interactions faster,” says Shane Grant, president of the company’s “stills” business unit in North America, which covers water, sports drinks, tea and coffee.

The innovation tone is set by Coca-Cola CEO James Quincey, who since taking the top job in 2017 has pursued a strategy to become a “total beverage company” that stretches way beyond its namesake brand. “The Coca-Cola Co. has grown to be bigger than brand Coca-Cola,” he declared the year he took over.

BLURRING THE LINES

Coca-Cola’s Smartwater brand—long sold as simply a premium bottled water—this year added a variety marketed as containing antioxidants and another one that has alkaline, in moves that Grant described as appealing to demand for “functional” beverages. Soon, Smartwater will debut new flavored varieties, like Cucumber Lime and Pineapple Kiwi, which he said appeal to “sensory” demands. The Aha sparkling water brand includes two varieties that have caffeine: Citrus and Green Tea, and Black Cherry and Coffee. Grant says this “category blurring is only going to continue to accelerate.”

MillerCoors has blurred the lines with La Colombe Hard Cold Brew Coffee, a cold brew with 4.2 percent alcohol-by-volume that debuted in select markets in September in partnership with La Colombe Coffee Roasters. Next year, MillerCoors will tap into the hard seltzer craze with a new brand called Vizzy. Also on the horizon: an organic version of Coors beer called Pure, which will come in three varieties—“pure light beer,” citrus and berry—as well as a lower-calorie, lower-alcohol line extension of its Blue Moon brand called Blue Moon Light Sky.

To guide its new product pipeline, the brewer taps into a panel of 10,000 consumers that it connects with online, giving it the ability to get responses overnight on everything from a proposed brand name to a new flavor, says Sofia Colucci, VP for innovation. The brewer also tests products in the real world. It first debuted Light Sky at a tap room Blue Moon runs in Denver’s RiNo District. “We were actually able to capture consumer feedback on iPads,” says Colucci, noting the formula was tweaked several times based on responses.

MillerCoors parent Molson Coors this week boosted its presence in the non-alcoholic drinks sector by taking an ownership stake in beverage incubator L.A. Libations, known for developing brands such as Zico Coconut Water, Core Water and Body Armor.

But as it moves beyond beer, the MillerCoors is careful not to stray too far from its roots. It also wants to identify what it calls “white spaces,” meaning new offerings. Movo checks in at  5.5 percent alcohol-by-volume, which Colucci says has lower alcohol than a lot of canned wines. The drink, she says, can be consumed a lot like beer. MillerCoors is not “launching 750 ml bottles of cabernet sauvignon,” she says. “That is not where we have a right to play.”