This week's beverage industry headlines revealed some interesting news for private label beverage maker Cott (NYSE: COT ) , maker of the popular Keurig machine and K-Cups Green Mountain Coffee Roasters (NASDAQ: GMCR ) , organic food company White Wave (NYSE: WWAV ) , and energy drink company Monster Beverage (NASDAQ: MNST ) . Also, energy drinks and aspartame may not be bad for you after all.
Beware of private labels
No doubt the carbonated soda category keeps getting squeezed due to the global conversation surrounding its possible ill effects. According to Beverage Digest, case volume for the category declined 1.2% accelerating from a 1% decline in 2011. That decline seems exacerbated for private label soda. An improving national economy and aggressive marketing from national brands recently revived consumer's love for national brands according to Beverage Industry. This trend negatively affected Cott which sells private label sodas such as Stars & Stripes and Vess Cola. Its year to date revenue and net income declined 7% and 37% respectively. Cott faces the double whammy of an improving economy and headwinds from the healthy lifestyles movement. So far in 2013, Cott only gave its investors a 2% return versus a 30% total return for the S&P 500. According to Beverage Industry, "national brands gained share in 40 of the 100 largest CPG categories in 2012."
In an interesting contrast, Green Mountain Coffee Roasters faces a loss in market share from the private label K-Cups category. The Tea & Coffee Trade Journal, predicts that private label coffee pods could increase market share from 8% to 12% in 2014. The acceleration of private label brand introductions by major U.S. grocers and mass merchandisers serve as the culprit. Beverage Industry says that you can purchase 24 private label coffee K-Cups for around $12 versus $16 for a national brand. This contrast suggests that while consumers may want to pay up for national brands such as Coca-Cola consumers still hold back on spending money for what they see as a luxurious convenience. Finally, Green Mountain aggressively seeks partnerships with major brands in an effort to appeal to the national brand loving consumer .
White Wave moves into vegetables
Until recently, White Wave sold mostly dairy based beverages such as soymilk, almond milk, coconut milk, coffee creamer, and "plant based food and beverages". On Dec. 9, White Wave bought "organic produce company" Earthbound Farm. Earthbound Farm sells fruits, vegetables, nuts, and herbs. White Wave could utilize this new asset by making and selling fruit and vegetable based juices and by integrating them with its current offerings. So far in 2013 White Wave provided its investors with a 41% total stock market return versus a 30% total return for the S&P 500. The company will probably realize the benefits of the healthy lifestyles movement. The stock market agrees with this sentiment as evidenced from its P/E ratio of 40 doubling the S&P 500's P/E of 20 giving indication of market enthusiasm toward the company.
Taurine and aspartame aren't dangerous?
In a press release , Monster Beverage was quick to dissuade claims of a research report presented at the Radiological Society of North America's annual meeting. Most notably, Monster Beverage stated that the amino acid taurine contained within energy drinks may actually prove beneficial to your health:
Taurine helps the heart function more efficiently by improving the pumping force of the heart without any changes in blood pressure or heart rate. This effect of taurine, called contractility is widely considered to be beneficial. In fact, peer reviewed studies demonstrate that taurine has been used effectively to treat patients with congestive heart failure and to improve athletic performance.
Monster's press release links to a Forbes article with both highlighting the society report's "big mistake" and disputing the report's claim that energy drinks contain more caffeine than a Starbucks' coffee when in fact it's the other way around. In essence, the Monster press release and the related Forbes article imply that energy drinks do not pose as great a risk as you were led to believe.
In related health news the European Safety Authority concludes that Aspartame is safe for consumption, according to Beverage World. This coincides with findings by American regulators and echoed by American beverage trade groups such as the American Beverage Association according to BevNet. Bonnie Herzog, a Wells Fargo Beverage Analyst, predicts a gradual turn around in diet soda as a result of these conclusions. The Center for Science in the Public Interest or CSPI came off as a naysayer by stating that the "consumption of the sweetener is linked to increased risk of cancer in humans" based on "independent" sources.
Health, happiness, and perception guide consumer choice. A better economy will steer consumers away from private label companies such as Cott and toward sellers of national brands such as Coca-Cola. Positive news and doubts about ill health effects of soda and energy drinks can only help companies who sell them such as Monster Beverage. Of course, people will continue to desire to eat healthy benefiting companies such as White Wave.
The Motley Fool's Top Stock for 2014
The market stormed out to huge gains across 2013, leaving investors on the sidelines burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!