Two Big Moves of Last Year Which Might Not Pay Off
If the folks at Izze and Stacy’s Chips, two big winners in 2006 of the “who wants to buy my company” contest have any sense of the twists of fate, they’ll thank their lucky stars for BOTH their own forward thinking efforts to get distribution in schools and school vending machines, and also the growing concern over the obesity epidemic, too.
Efforts to get high sugar, high fat low nutrition products out of school vending machines, was one major impetus for the high prices Pepsi paid for both companies. And while Pepsi seems committed to becoming a healthier food company’ NBN doesn’t believe that this commitment will stick or that both these purchases will pay off.
Carbonated rumors floated that Pepsi paid $75 million for Izze; the fruit juice based soda had estimated sales of around $20 million and sold in over 700 schools. Last October, during Expo East we guzzled at the Izze booth, enjoying some great tasting grapefruit Izze while pondering the fact that premium priced natural sodas have been forever fated to mediocre sales, at least when compared to Hansen’s.
Defenders of the deal point to the fact that Izze is primarily sold in single bottles and that customers don’t mind paying more for single serve drinks. And while sales in places like Starbucks (Pepsi has a distribution deal with the coffee giant guaranteeing lots of Izze options for those who don’t like lattes) and lots of other beverage coolers testify to this fact and make Izze a good alternative for those looking to give up their Snapple or their Latte we don’t think that translates to $75 million reasons to buy the company.
Pepsi stated it would leave the company to run itself and only assist with marketing. Yet NBN says look to Pepsi to renege on their word and either cheapen the product or sell it in down the road.
NBN wonders how many kids are going to be packing Mountain Dew in their backpacks as they go through the front doors of school?
That said, whenever NBN visits his mom he can’t help dipping into her ever present stock of caffeine free Diet Pepsi while eating some Garden of Eatin’ blue corn chips and Muir Glen salsa he picked up en route.
Speaking of chips, NBN believes that Stacy’s has a greater chance of success within the empire whose products range from Kentucky Fried Chicken, Taco Bell and the well intentioned but lousy tasting Frito-Lay Naturals. After all for those who don’t remember it was a woman who changed the taste of popcorn and later sold her new product, SmartFood to Pepsi and it’s still sold everywhere.
And after selling SmartFood, Annie created another great product, which went on to revolutionize the low-rent instant macaroni and cheese segment with Annie’s Homegrown.
Upon approaching the Stacy’s booth at Expo East, NBN told founder and namesake of the company Stacy Madison that she actually looked like she was having fun. She smiled graciously and said it was a relief to be focused on customers, rather than worrying about numbers.
As noted in Brand Week, Pepsi is wisely focusing on marketing Stacy Madison’s appeal in promoting the line of pita chips, bagel chips and soy crisps. Stacy’s, unlike Izze (which was formed by some major-league financial backers with some last names that included a beer rich Corrs) has been much more of a grass-roots effort and Madison’s charisma and smarts has played a large part in that growth.
While the price for healthier snacks isn’t so prohibitive that Janet Soccer Mom and Joe Football Fanatic won’t all balk at paying the higher dollar. That said we don’t expect Stacy’s to kick Chex off the coffee table at too many of Super Bowl parties or for Izze to replace Coke or Pepsi either.
Recent Super Bowl promotions for both Coke and Pepsi products were extraordinarily cheap. The price of 3 Pepsi 12-packs was just $8.00 and Coca-Cola products were selling for an even more extraordinary discount: Four 12-packs for only $11.00 dollars.
These rock bottom discounts left NBN wondering how much room in the pantry he had for his other favorite grapefruit soda, the anti-Izze, also known as Fresca. After asking a store clerk if the promotional price was good for a purchase of less than four 12-packs NBN bought two. After all, diet soda isn’t healthy, right? But sometimes we just can’t help ourselves.