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EXCERPT FROM THE DIGITAL IQ INDEX®: BEVERAGES 2014 TO ACCESS THE FULL REPORT, CONTACT [email protected] DIGITAL IQ INDEX® BEVERAGES September 29, 2014 EXCERPT FROM THE DIGITAL IQ INDEX®: BEVERAGES 2014 TO ACCESS THE FULL REPORT, CONTACT [email protected] DIGITAL IQ INDEX® BEVERAGES Fizzle Beverages: Annual Per Capita Consumption by Category The “sugar water” business is going from bad to worse. U.S., 1987–2013 In 1998, the average American drank more than 50 gallons of soda per year.1 Fifteen years later, consumption 50 is down nearly 20 percent—with “diet” drinks declining 42.2 faster than any other beverage category due to increased 40 Soft Drinks scrutiny of aspartame and other artificial sweeteners.2 Although cola conglomerates have attempted triage by 30 launching anti-obesity campaigns, testing stevia-based GALLONS PER CAPITA Bottled Water 22.1 reformulations (e.g., Coca-Cola Life, Pepsi NEXT), and 20 20.1 doubling down on marketing expenditures—nothing can Beer 3,4 stem the tide. Last April, Coca-Cola announced its 10 Juices first global dip in soda volume since 1999, signaling the 6.9 4.3 5 spread of the disease beyond the United States. 0 Sports Drinks 1990 2000 2010 Source: Beverages Digest, July 2014. Too Little, Too Late? As reality sets in, beverage titans are slowly rethinking business Beverages: Change in Per Capital Consumption by Category fundamentals. In 2007, Coca-Cola embarked on a diversification U.S., 2003–2013 binge (e.g., Glacéau, Honest Tea, Zico)—culminating in a $2 billion investment in Monster Energy last August.6,7 In 2013, the company Sports Drinks reversed course by selling costly distribution operations it acquired +40% Bottled as recently as 2010.8 In September, Coca-Cola experimented with its Water first exclusive distribution deal with Amazon (see page 48). Although Wine Distilled Spirits such investments signal a positive shift away from denial, analysts +20% Tea 1. “Soda Losing Its Grip on America,” Jim Avilia & Serena Marshall, ABC News, April 2, 2014. 2. “Diet Sodas’ Glass Is Half Empty,” Mike Esterl, The Wall Street Journal, December 8, 2013. 3. “Pepsi and Coke’s new cola war challenger? Zevia.” Phil Wahba, Fortune, June 27, 2014. 4. “Coca-Cola Maintains Marketing Spend Amid Sluggish Demand,” Natalie Zmuda, Ad Age, July 22, 2014. 0% 5. “Coke Under Pressure as Sales Abroad Weaken,” Mike Esterl, The Wall Street Journal, July 30, 2014. Coffee 6. “Coke Confronts Its Big Fat Problem,” Claire Suddath & Duane Stanford, Bloomberg Beer Businessweek, July 31, 2014. Milk 7. “Coke to Buy Stake in Monster Beverage for $2.15 Billion,” David Gelles, The New York Times, -20% August 14, 2014. Juices Soft Powdered 8. “Coca-Cola to return some distribution to U.S. franchisers,” Martinne Geller, Reuters, April 16, 2013. Drinks Drinks Source: Beverage Information Group, July 2014. September 29, 2014 2 © L2 Inc., 2014 Circulation of the report violates copyright, trademark and intellectual property laws. EXCERPT FROM THE DIGITAL IQ INDEX®: BEVERAGES 2014 TO ACCESS THE FULL REPORT, CONTACT [email protected] DIGITAL IQ INDEX® BEVERAGES are asking if they are too little, too late.9 Representing only $1 in every $100 dollars spent in supermarkets, online Beverages: Online Grocery Sales grocery remains in its infancy.10 However, future winners U.S., 2009–2018E ■ Annual Revenue ■ Annual Change and losers on Amazon Fresh, Walmart Grocery, and Google Shopping Express are being determined now. Four of the $12,000 +14% 10 top-selling soda brands (Mountain Dew, Dr Pepper, Diet $10,000 +10% Pepsi, and Diet Mountain Dew) are not present among the $8,000 +6% 20 best-selling soft drinks on Amazon—displaced by Zevia, IN MILLIONS $6,000 Fever Tree, and Hansen’s.11 +2% $4,000 With food and beverages products demonstrating the lowest $2,000 -2% customer loyalty of any category measured (approximately $0 -6% 40 percent of buyers identify as “not loyal”), it is imperative that 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E beverage brands reassess their online visibility and explore how 2013 Size 2008–2013 CAGR 2013–2018E CAGR 12 digital properties reward frequent buyers. Online $6.5 Billion +3% +9.2% Offline $574 Billion +1.5% +0.7% Digital IQ = Shareholder Value Source: IBISWorld. This study attempts to quantify the digital competence of 54 beverage brands in the U.S. market. Our aim is to provide a robust tool to diagnose digital strengths and weaknesses, Beverages: Online vs. Offline Grocery Product Segmentation helping managers achieve greater return on incremental U.S., 2013 investment. Like the medium we are assessing, our approach is dynamic. Please reach out with comments that improve our methodology and findings. $ Regards, Beverages Fruits and Meat, Fish, Dairy Other Food Frozen Delivery Other L2 (Including Vegetables and Poultry Products Items Foods Charges Nonfood Alcohol) Items 5% 5% Online $6.5 Billion 9% 15% 14% 11% 11% 30% 2% 0% 9. “Coke, Pepsi...These guys aren’t cracking beverage innovation,” Ben Bouckley, Offline 19% 8% 12% 32% 11% 15% Beverage Daily, May 16, 2014. $574 Billion 10. “How E-Commerce Is Finally Disrupting The $600 Billion-A-Year Grocery Industry,” Cooper Smith, Business Insider, September 10, 2014. Source: IBISWorld. 11. “Special Issue: U.S. Beverage Results for 2013,” Beverage-Digest, March 31, 2014. 12. “84 Percent of Global Respondents More Likely to Visit Retailers That Offer a Loyalty Program,” Press Release, Nielsen, November 12, 2013. September 29, 2014 3 © L2 Inc., 2014 Circulation of the report violates copyright, trademark and intellectual property laws. EXCERPT FROM THE DIGITAL IQ INDEX®: BEVERAGES 2014 TO ACCESS THE FULL REPORT, CONTACT [email protected] DIGITAL IQ INDEX® BEVERAGES GENIUS GENIUS GIFTED AVERAGE Red Bull Bud Light RANK BRAND DIGITAL IQ GIFTED RANK BRAND DIGITAL IQ RANK BRAND DIGITAL IQ Coca-Cola Budweiser Gatorade Pepsi Monster Energy 1 151 3 139 10 115 Mountain Dew Heineken Red Bull The Coca-Cola Co. The Coca-Cola Co. Diet Coke Samuel Adams Sprite Lipton Stella Artois 2 143 4 138 11 113 Dr Pepper AVERAGE Anheuser-Busch InBev Anheuser-Busch InBev The Boston Beer Co. Coca-Cola Zero Rockstar Powerade Coors Light Corona Extra 5 11 113 Miller Lite 137 Sierra Nevada Shock Top PepsiCo The Coca-Cola Co. 5-Hour Energy Snapple Guinness Michelob Ultra Vitamin Water 6 131 13 112 NOS Vitacoco PepsiCo Unilever Group Zico CHALLENGED Fanta 7-Up Arizona 7 129 13 112 Schweppes Fuze Nestea Monster Beverage Corp. Anheuser-Busch InBev FEEBLE Amstel Busch SoBe 8 128 15 111 Sierra Mist Hoegaarden Leffe PepsiCo Dr Pepper Snapple Group Natural Shasta Keystone Light AMP Canada Dry 9 127 16 109 Foster’s Modelo Heineken The Coca-Cola Co. Beck’s Kronenbourg Miller Genuine Draft Full Throttle September 29, 2014 4 © L2 Inc., 2014 Circulation of the report violates copyright, trademark and intellectual property laws. EXCERPT FROM THE DIGITAL IQ INDEX®: BEVERAGES 2014 TO ACCESS THE FULL REPORT, CONTACT [email protected] DIGITAL IQ INDEX® BEVERAGES GENIUS AVERAGE CHALLENGED Red Bull Bud Light RANK BRAND DIGITAL IQ GIFTED RANK BRAND DIGITAL IQ RANK BRAND DIGITAL IQ Coca-Cola Budweiser Gatorade Pepsi Monster Energy 17 108 24 95 29 91 Mountain Dew Heineken Rockstar Living Essentials The Coca-Cola Co. Diet Coke Samuel Adams Sprite Lipton Stella Artois 18 106 24 95 32 89 Dr Pepper AVERAGE The Coca-Cola Co. Dr Pepper Snapple Group The Coca-Cola Co. Coca-Cola Zero Rockstar Powerade Coors Light Corona Extra 19 105 33 Miller Lite 26 93 88 Sierra Nevada Shock Top Molson Coors Brewing Co. Diageo Dr Pepper Snapple Group 5-Hour Energy Snapple Guinness Michelob Ultra Vitamin Water 20 99 27 92 34 85 NOS Vitacoco Zico Constellation Brands Anheuser-Busch InBev AriZona Beverage Co. CHALLENGED Fanta 7-Up Arizona 20 99 27 92 35 81 Schweppes Fuze Nestea SABMiller The Coca-Cola Co. Suntory Holdings FEEBLE Amstel Busch SoBe 22 98 29 91 36 79 Sierra Mist Hoegaarden Leffe Sierra Nevada Brewing Co. The Coca-Cola Co. The Coca-Cola Co. Natural Shasta Keystone Light AMP Canada Dry 23 96 29 91 37 72 Foster’s Modelo Anheuser-Busch InBev Nestlé Beck’s All Market Kronenbourg Miller Genuine Draft Full Throttle September 29, 2014 5 © L2 Inc., 2014 Circulation of the report violates copyright, trademark and intellectual property laws. EXCERPT FROM THE DIGITAL IQ INDEX®: BEVERAGES 2014 TO ACCESS THE FULL REPORT, CONTACT [email protected] DIGITAL IQ INDEX® BEVERAGES GENIUS FEEBLE Red Bull Bud Light GIFTED RANK BRAND DIGITAL IQ RANK BRAND DIGITAL IQ RANK BRAND DIGITAL IQ Coca-Cola Budweiser Gatorade Pepsi Monster Energy 38 67 45 56 51 49 Mountain Dew Heineken Heineken National Beverage Corp. Carlsberg Group Diet Coke Samuel Adams Sprite Lipton Stella Artois 38 67 46 53 53 42 Dr Pepper AVERAGE Anheuser-Busch InBev Molson Coors Brewing Co. SABMiller Coca-Cola Zero Rockstar Powerade Coors Light Corona Extra 47 54 Miller Lite 38 67 52 17 Sierra Nevada Shock Top PepsiCo PepsiCo The Coca-Cola Co. 5-Hour Energy Snapple Guinness Michelob Ultra Vitamin Water 41 63 48 51 NOS Vitacoco Zico PepsiCo Dr Pepper Snapple Group CHALLENGED Fanta 7-Up Arizona 42 61 49 50 Schweppes Fuze Nestea Anheuser-Busch InBev SABMiller FEEBLE Amstel Busch SoBe 43 49 50 Sierra Mist 57 Hoegaarden Leffe Anheuser-Busch InBev Constellation Brands Natural Shasta Keystone Light AMP Canada Dry 43 57 51 49 Foster’s Modelo Anheuser-Busch InBev Beck’s Anheuser-Busch InBev Kronenbourg Miller Genuine Draft Full Throttle September 29, 2014 6 © L2 Inc., 2014 Circulation of the report violates copyright, trademark and intellectual