PepsiCo (PEP) Locks Distribution Deal for evian in Canada
PepsiCo Inc’s PEP subsidiary, PepsiCo Beverages Canada, signed an exclusive distribution agreement with Danone Waters of America to supply evian natural spring water across Canada. Danone is the importer and distributor of evian natural spring water in the United States and Canada. PepsiCo expects to start distributing the evian brand in Canada from January 2021.
Danone expects this partnership to further expand evian’s reach and accelerate the brand’s growth. It anticipates benefiting from PepsiCo’s distribution system, sales capabilities and complementary brand portfolio to reach more customers in Canada.
As for PepsiCo, this partnership is an extension of its overall hydration strategy. It expects to bolster growth of the evian brand, using its distribution networks and selling capabilities.
We note that shares of this Zacks Rank #3 (Hold) company have gained 1% year to date against the industry’s decline of 9.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This deal comes at a time when beverage companies are exploring options to expand their product portfolio to overcome the impacts of the coronavirus pandemic. PepsiCo, earlier this month, stepped forward to launch its latest beverage in the functional category — Driftwell — to help consumers deal with stress, relax and promote good sleep. The company expects to launch the health and wellness drink nationwide through its online portals in December 2020. The drink is likely to hit store shelves in the first quarter of 2021.
Driftwell is an enhanced water drink, containing L-theanine, which is an amino acid often found in green tea, black tea and mushrooms. It is usually used to relieve anxiety and improve mental health. Additionally, the new drink contains 10% of the daily value of magnesium. The company plans to launch the drink in small cans of 7.5 ounces and in one flavor — blackberry lavender. Additionally, it is a calorie-free and sugar-free drink.
PepsiCo is not the only one revamping its product portfolio this year as the pandemic takes a toll on the revenue streams of most beverage companies. Last week, Coca-Cola KO announced the launch of Topo Chico Hard Seltzer in the Latin America countries, including Mexico and Brazil. Moreover, the company plans to roll out the brand in the United States in the following months. The Topo Chico Hard Seltzer will be launched in three gluten-free flavors, including Tangy Lemon Lime, Strawberry Guava and Pineapple Twist, in sleek aluminum cans.
Earlier this year, Coca-Cola revealed plans to exit its Zombie brands to streamline its portfolio, which will help divert resources toward brands with more growth potential. The company noted that of the 400 master brands in its portfolio, nearly 50% accounted for 98% of revenues, while the remaining 50% contributed just 2% to revenues. However, these brands with less potential attracted significant financial resources in the form of salaries, advertising expenses and other overhead costs. By exiting these Zombie brands the company is looking to redirect resources to explorers and challenges with the most growth potential.
As part of the first elimination of these brands, the company shut its Odwalla juice brand and its chilled direct store delivery effective Jul 31. The company expects this brand exit to provide flexibility to support investments in brands like Minute Maid and Simply as well as improve scale for leading brands like Topo Chico sparkling mineral water.
Another company that proactively took to revamping brand portfolio was Molson Coors TAP, which announced plans to roll out its first non-alcoholic innovation in partnership with L.A. Libations. The company plans to launch four innovative non-alcoholic brands from its emerging growth division on the lines of health, wellness and social responsibility. The first of these brands to hit the market this fall is HUZZAH, a full-flavored seltzer with probiotics to support a healthy gut, with lesser sugar and calorie content. Other brands lined up for launch under the plan are MadVine and Golden Wing as well as a fourth brand, which is a nootropic performance beverage, yet to be named.
Additionally, Boston Beer SAM intends to launch Just the Haze, an India pale ale with 0.5% alcohol by volume, in early 2021.
Clearly, beverage makers are scrambling for ways to scoop on the altered consumer preferences due to the pandemic, which calls for investments in drinks with healthy ingredients. Undoubtedly, PepsiCo’s latest ventures, including the latest partnership and the launch of Driftwell, are poised to fortify its market positioning and boost revenues.
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