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- [00:00]
A
Foreign. This is the Breeze. I'm your host, Duane Stanford, the editor and publisher of Beverage Digest. The Breeze is where we bring you into the kinds of industry conversations we have every day at Beverage Digest. We dissect what's happening, connect the dots, and ask the most important question. What does this mean? I'm joined by industry expert Jon Sitcher, who is a former editor and publisher of Beverage Digest and in recent years has consulted for companies ranging from Coca Cola to Pure Circle. Today, we have a very special guest. Kamil Gajwala is a managing director at Jefferies, where he leads coverage of beverages, consumer products and health and wellness. He also has a particular interest in companies in what he and others call the head halo sector, which stands for healthy active lifestyle Outdoor. Carmel. Welcome to the Breeze.
- [01:01]
B
Thank you, Dwayne. Good to talk to you again.
- [01:04]
A
And how long have you covered Coca Cola? You covered Coca Cola, PepsiCo, Dr. Pepper, Monster for years. How long has that been?
- [01:11]
B
Well, I think Coke's 125 years old or something like that. Almost 20% of its history.
- [01:18]
A
Yeah. Nice. Good. Yeah.
- [01:20]
B
By the way, compared to John, is. Is like just coming around, just arriving.
- [01:27]
C
Thanks, Camille.
- [01:29]
A
He's got us both clipped. We've known each other ever since. I've been covering the industry, and I think it was around the same time that you kind of came in as well. So it's been a long time.
- [01:39]
B
I remember you and I buzzing around, trying to get people to pay attention to us.
- [01:42]
A
That's right. At analyst meetings and all that good stuff with Coke and Pepsi and everybody else. So you two. You guys are both based in New York. Anything in sports happening around New York these days? Anything exciting?
- [01:55]
C
Not. Not a thing, Dwayne. Just boring up here.
- [01:58]
B
Yeah. 9:30 was a little early to record this after last night.
- [02:03]
A
Yeah. Are you a Knicks fan, Campbell, or basketball fan?
- [02:07]
B
I. I'm a Lakers fan and a basketball fan, but I am. Everybody here is universally. It feels like Knicks fans is almost. I don't know if this is true, but. But it almost feels like it's happening broadly in the country because these comebacks, the way that they've played this year, it feels like you. We sometimes in beverages watch trends arrive on the coast and move their way around, but like New York's never been sort of loved for much. And this is. It just feels different. I'm probably wrong. Maybe I'm just. I'm here and that's why I feel that way. But it does feel different.
- [02:42]
C
You know, the Knicks have had such a long, long string of bad records, disappointing seasons. It's just, you know, I'm not a huge basketball fan, but it's just great for New York and great to see what's going on with the Knicks this year.
- [02:56]
A
It is kind of interesting. I don't pay a lot of attention to pro basketball, but it's, like, hard not to pay attention to this. There's just something kind of infectious about it. Maybe it's because it's New York. I mean, we all have kind of a connection in New York, of course, but it's just. It's. It is just a lot of fun to see them kind of come back in the city, kind of come alive around it.
- [03:15]
B
You know, it could be kind of like the Cubs some years ago when they had their first one, and kind of everybody was just really sort of rooting for them to finally have their moment.
- [03:25]
A
Yeah, it really does feel like that. You're so right. And the team, I don't know, people love this team, too. You know, they've got these, you know, some great players, some good personalities. So it's cool. Very cool.
- [03:37]
C
It sort of looks like it's the birthplace of Stample versus the birthplace of Dr. Pepper.
- [03:42]
A
That's right. That's right.
- [03:44]
B
Who knew that the two of them would end up at the same organization eventually?
- [03:50]
A
That's right. So, you know, Carmel, let's. Let's talk about. I mean, look, there's a tremendous amount of things to talk about right now in the first one, you know, let's get into the consumer because, you know, as these companies constantly say, it's all about the consumer. So I'm wondering, I'm sure, I mean, you and your team, a good bit of research into what's happening almost minute by minute, I would assume. What are you seeing right now in terms of this consumer pressure and specifically how it's showing up within beverages and. And when it comes to the sale of beverages, pricing, etc.
- [04:26]
B
Yeah, well, thanks. First, we. We do do a boatload of research. In fact, we have our own index, our own Consumer Health Index, which looks much more. More broadly at things including delinquencies, auto loans. There's lots of different metrics that go into it and where we are. And you mentioned right now because we're all very sort of worried about the future, but in terms of right now, the consumer is actually in pretty decent shape. Because if you look more broadly, if you listen to the mastercards and the Visas and the payment processors or some of the banks, including a synchrony financial like which Lends to subprime. Because I know we'll probably talk about K Shape at some stage. When you put this all together, you actually find it's almost 50, 50 between companies that are saying the consumer's fine and companies that are saying consumer's not fine. Now, I think we're in one of those moments where there's enough evidence or enough statistics that one can find that if their business is underperforming, you can blame the consumer, not yourself. But when one's running around talking about K Shape, they probably don't have a great argument for why energy drinks are booming. They probably don't have a great argument. And so we can get into why some of that is, but it should be. It's very important to know that the biggest driver still is always unemployment. And then there's wages, and then that versus inflation. Now the unemployment continues to be really strong. Wage inflation. Wage inflation has been there. Inflation itself is coming to get them. So the right now versus later might be different. But if you look at. And actually we did a chart, Dwayne, after this, I can send you many of the data that, if you like, but we did a chart, for example, of how many minutes one has to work in order to afford a gallon of gas. And so if you look at the price of gas, obviously it spiked. If you look at it in the context of minutes worked, it's actually way down from where we were in 20, 23, 20, 24. Kind of tells you it's easy to say it's unaffordable, it's easy to say all those other types of things. But maybe there's a broader portfolio thing going on. Maybe they took too much pricing, which broke the value equation as opposed to an affordability equation, which I think is maybe one of the bigger things really across cpg and to some degree in beverages, not as much, but across cpg is they broke the value equations. Not. Not necessarily affordability.
- [06:49]
A
Yeah, you know, that's interesting. But, you know, we talk a lot about consumer sentiment and of course we know that there's a recency bias when it comes to consumers. You know, they may not remember that gas was that expensive, but, you know, they know that right now suddenly the gas spiked up and they have a cause that they can see for it, which is, you know, what's going on in Iran and the Middle East. How does that factor into that?
- [07:16]
B
Yes, I mean, if you look at the math between the amount of miles driven between Memorial Day and Labor Day and the increase in the price of gas it's around 1%. But that doesn't mean when you go and you fill your tank, sorry, it's around 1% change or impact, negative impact on discretionary, on discretionary income. That does not mean that when you go and you fill your tank and you see that move, you, you don't want to figure out how to be more efficient about it. So there's a little bit of that. But we're not seeing broad based pullbacks in spending. In almost every instance, when you look at the organizations that have talked about that, there's something bigger going on as well as it relates to the portfolio. Or maybe it's the category and not the it might not be market share, it might be category. But that doesn't mean the category issue is consumer.
- [08:04]
A
It's like some version of years ago when they would talk about the weather and they've learned not to do that anymore.
- [08:10]
B
Yeah, I mean, if you ever look at the retail folks, the weather was never perfect. It was either too hot and they had too many winter coats or it was too cold and the winter coats didn't arrive on time. Like the weather was never actually optimal for when you sell the most amount of product.
- [08:24]
A
Carmel, you talked about energy drinks in the K shaped economy. I wanted to go back to one thing you said about, you know, do they even have a good story as to why are energy drinks doing good in this environment? One of the things I've thought about lately is that, you know, you've had this kind of shift on the energy drink side to professionals and female consumers and sell kind of this new user group that's attributed, you know, that's basically created some of this growth. And I can see a scenario where if you've got some consumers that are struggling, maybe with gas prices, maybe they're going to the gas station, but they're skipping the trip inside. You might still see energy drinks growing because of that other consumer set that's replacing coffee with energy drinks. What do you see in that regard in terms of like, what is the reason in your mind why energy drinks are still doing good despite this?
- [09:23]
B
They're quite brilliantly set up because it's multiple things. But I'll go over that ladder of things. I mean, we first start with what you mentioned is it's becoming, if you think about the job of a Procter and Gambler, a Coca Cola. Their job is to increase occasions and add new consumers. It's sort of very simple in the grand scheme of things. Energy drinks have gone from Red Bull and vodka to Late night gamers to late night studying, to blue collar workers, to white collar workers, to female. Now they're opening up food service. You know, the floodgates are wide open on food service now with The Red Bull McDonald's deal sort of indicating that there's something to be done there. That that's just one component. The next component then is energy drinks are up over the last five years around 15% in price and coffee has doubled and carbonated soft drinks are up 40. So the actual value equation, the favorability value equation has also improved over that period of time. And then the innovation is great. These are some of the best performing or some of the best executing companies in the world really. And so you've had a lot of excitement, a lot of innovation. The innovation is incremental. Incremental in the context of bringing new people in, bringing in new occasions, going after segments of the population that was underserved before. All those things that are actually the core of what the job is for all of CPG seem to be aligning really well. Have an appropriately priced product where the value equation is very positive. Find incrementality, have innovation, that's innovation, that's exciting and that works. It's all sort of working. Which is why you see this category that technically, if you were an economist and you were looking at its current population and you were looking at maybe gas prices or you really believe in K shape, you would conclude that they should be under the most amount of pressure, as many of us were by the way, in 2024. 2024. There's a slowdown in energy.
- [11:15]
C
Let me ask you a question, Kamila. So when you walk around New York over the last year or two in the morning, you see, you know, construction workers basically getting ready to go in for their workplace for the day. And nearly all of them have energy drinks. A few have sports drinks, almost no carbonated soft drinks. Do you have any idea how the demographics work out for energy drink consumption between higher income consumers and lower income consumers? Because I mean what we're seeing right now is going to, I mean the Wall Street Journal I think had an article this morning about how inflation now is basically eating up workers pay raises. So I would think that unless something automatically, unless the inflation automatic quickly reverses, miraculously reverses that the energy consumption, the energy drink consumption, consumption by lower income workers is going to get hit and I would think pretty badly and pretty soon. Do you have any thoughts on that?
- [12:20]
B
I think it comes much later than a lot of other categories. So if you're going to go through the list of priorities inside of let's say a convenience store. It starts with nicotine. Whether it's cigarettes or nicotine pouches or whatever it happens to be. You roll down into lotto beer, if it's a beer occasion, then you get to the sort of coffee energy stimulus zone. Then you get into snacks, then you get into confectionery. And so as there's more and more pressure now, look, if inflation continues, eventually inflation will get everybody, right, if it continues. But from where we are right now, especially given the low unemployment, we're at the very beginning of inflation beating wage growth. But we haven't been there yet. And so I think it's still some time. Now again, it's very hard to predict if oil goes to 150 or 50 given the environment that we're in. But where we're in right now, the consumer's actually in reasonable shape and they will pay for what they want. Especially you see a lot of this on the discretionary side. Even with, can't remember what it was called, hantavirus or whatever it is, you can still see cruise bookings are off the charts. Many of the vacation companies are saying typically when we go into higher price, including the cruise lines which are often lower priced trips, they often say that people wait later to do their booking as there's more and more economic pressure. That's not really happened yet. So we're just not seeing it. But if you are in one of those categories that's struggling, it is very, very easy to immediately conclude it's a consumer issue. We could use snacks as an example. The snacks industry is struggling and many would say, oh, the consumer's really under pressure, they're not buying snacks. Now maybe on that hierarchy of convenience store sales I gave you, it's on its way up. So confectionary, then you get to snacks. Or maybe they broke the value equation in 2024 and once you lose a customer because your prices are too high, that customer is very, very hard to get back. You can't just push your prices back and assume that customers arrive. That consumer might just be skipping the snacks aisle and going straight to the energy aisle. So is there a risk? Of course. Especially when there's inflation, but we're just, we just don't seem to be there yet.
- [14:42]
A
Yeah, and so are you. So you're not saying, are you basically saying you don't think the K shaped economy thing is really all that relevant here necessarily? That what's happening on the lower end of the continuous consumer really has more to do with that broken value equation as you called it.
- [14:58]
B
Yeah, I think the K shape economy has been around since the Romans, probably way earlier and it was probably a phrase invented by some MBA with a spreadsheet figuring things out. But as people who are on the bottom of the cade, they'll be like, yeah, this has always sucked. This is just life, it's okay. And they get by. And they're the most resilient consumers you'll ever find. They know how to maneuver and they make decisions and often those decisions. And remember, the first move is often the value move as opposed to a spend less money move. What that I'm spending money on do I actually feel is worth it in my life? And where you fit in answering that question is how resilient you are. There's tons of volatility around their income, but where you fit in, how important you are in their life is the resilience. And that's why some categories look so much better than others.
- [15:57]
A
So it's more like a company needs to have kind of a K shaped mentality. Deal with the consumers that can afford your products, but make sure you're also giving a good value equation to that lowering consumer that's always scrapping and always figuring out how to be efficient with their spending.
- [16:14]
B
I like to think of it as regardless of the price, when you're purchasing this product, you feel like you're getting more than your money's worth.
- [16:21]
A
Yeah.
- [16:22]
B
And if that is where you end up and the doubling of the price of coffee made energy drinks start to look a lot more favorable, the morning consult numbers will show that to you. In terms of value favorability for energy drinks, it's been up sort of every year for five years. The value favorability for coffee has done the opposite.
- [16:43]
A
And do you think carbonated soft drinks, do you think the soft drink value equation is broken at this point? I mean, what are your thoughts there?
- [16:51]
B
I don't think so. As much for a particular reason is carbonated soft drinks are one of the few industries that are so broad where the consumer is completely comfortable and understands that the price per ounce or price per liter for your international listeners is dramatically different and can be dramatically different on the same day. So if I have a Coca Cola at lunch and then I have a Coca Cola at lunch in New York from some sandwich shop and then I have a Coca Cola that I bought at a Walmart at night, my price per liter is massively different. But it's cool. We get that. We get it between cold versus not cold we get it between large pack small pack we and I think the you know this is obviously we all know led by FEMSA, they started this 30 years ago. But this revenue growth management concept, what data allows you to do in that with that reality of what the and how the industry has always been is so powerful. So I do think it's probably not looked at as the cheapest thing in the store. Massive foot track driver foot traffic driver that maybe it used to be 20 years ago. That's a good thing like as from as a from a business perspective you want to go revenue over that volume sort of story used to be so I don't think it's broken but I think it's not as favorable as where energy is let's take a quick break
- [18:15]
A
from the conversation so I can tell the audience about our Beverage Digest newsletter. If you're interested in going deeper on the topics that we discuss on this podcast, I encourage you to subscribe to our Beverage Digest digital newsletter and archive here. You will unlock exclusive insights that you won't read anywhere else. Plus you'll get valuable data snapshots for the industry's most critical categories. See where growth is happening before anyone else. And let me tell you about our Beverage Digest Factbook, which gives you a detailed look at annual category, company and product brand sales trends covering all channels dating back to the 1980s. That includes retail fountain up and down the street, everything. Want to see detailed territory by territory maps of The Coca Cola, PepsiCo and Keurig Dr. Pepper bottling systems? We've got them in a pair of resource guides that give you clarity and a visual reference for these three critical distribution networks. And don't forget our Beverage Digest Future Smarts Conference where top industry leaders discuss and debate the most critical industry topics all in a single day. This is your ticket to network with industry thought leaders and get set for your next critical deal.
- [19:37]
C
So Camille, let me ask you a question. If you look at the data in the US and you look at some other recent data, I mean carbonated soft drink volume in the US has been down pretty continued continuously for about 25 years. Per capita consumption has been down a lot more than that, down hugely several hundred servings a year per person. Coke last year 2025 reported flat global volume and negative volume in North America. Population continues to grow, which means per capita consumption continues down. If you look at the report you issued recently looking at the revenue growth of both the Coke and its bottlers, almost all of it's Coming from price mix. I remember a Coke bottler telling me quite a while ago when price, when the company started raising pricing, he said to me John, just remember the consumer is not going to pay $5 for a thimble full of Coke. Don't you? I mean I don't see and I don't see much in the Wall street analysts reports about concerns about per capita consumption going down, concerns about how, how much longer the soft drink companies can basically keep, keep, keep increasing price mix. Can you talk about that a little bit?
- [21:00]
B
Yeah, well, yeah. So the goal is and no one ever actually hits gold, the pendulum never sort of stops right in the center. But the goal generally, for example we use a Coca Cola is to be a six on top line with two on price, two on volume and two on mix. That's your general sort of, that's like your perfect scenario. But the pendulum seems to swing in both directions. You're right about sort of per cap. Consumption has bled for a long time. But keep it like, and you will be more familiar on this than anybody else's, how hard volume was being pushed when we went through the 90s. And then dealing with the beginning of sort of the role of full sugar. And so you're coming off of this world of cola wars focus on volume. Three liters to the arrival of bottled water, which we all sort of in the early 2000s were looking at as like this new sort of big volume risk to all of the things we've seen subsequently in terms of concerns about sugar, concerns about artificial sweetener, all of that. The idea to switch to revenue growth management, which is not necessarily just price. So price and mix is often very difficult to parse through one versus the other. In fact the way we've been talking about it is if the 2000s was about Brazil, Russia, India, China, BRIC expansion And if the 2010s was zero based budgeting, the 2020s is really about RGM. And that's not really just about price in some of the numbers that you're seeing though we do have to remember we have gone through really wild times over the last five years between Covid, between reopen, between the supply chain issues, between rampant inflation and then particularly in the Coke numbers, there was hyperinflation in many of the emerging markets that pushes into the price. So it's price but not really price in real terms. So there was a lot that's going on in there. I guess suppose these days we have to get used to the fact that there's always going to be A lot going on, but I do think the goal of the two plus two plus two is still very much intact. It may not be though. All carbonated soft drinks in that time period of the last 10 years. You think about Fairlife as an example of something that's really come and taken a lot of share. You've seen about energy drinks have come and taken a lot of share. These are large amounts of volume and not all of it is coming from CST's which is of course why I don't know how many years ago it was, but of course why James Quincy was like we better be total Beverage
- [23:32]
A
Kamel on this same subject when it comes to this PHMSA led change in the last couple of decades when it comes to how Coca Cola and its bottlers interact, pricing, et cetera, revenue growth, management, everything that's allowed all that. One of the things I wrote, you know, last month about, you know, bottlers and what they're dealing with now in terms of the cost side and fuel prices going up, transportation that flows into things like pet, all their costs are going up. One bottler talked about fuel price prices up 50%, another 30 something percent. They're all starting to feel that squeeze. What are you seeing in that regard? How do you see that playing out when it comes to, you know, the profitability of these companies? And, and more importantly, since you cover the big public companies, to what extent are they going to have to sort of share some of that pain with the, with their bottling networks, with their distributors who bear the brunt of those cost increases? I mean we just saw the producer price increase, it's rated spend it more than, you know, three years. So there's clearly a pinch happening here.
- [24:40]
B
Yeah, no, you're getting, we're, we're starting to see it. Surcharges are going through. You know, you're hearing we're seeing plenty of it at this very beginning, sort of stages of inflation. What's a little bit different about this time versus a couple of years ago is it felt more permanent a couple of years ago. I think that's why so much pricing was put in place. I think that's why the retailers allowed it to be put in place is it just felt like. And still nobody could really. We didn't really have our legs underneath us from all the reverb coming from COVID And so it felt more permanent and I think that's why big price increases and things were put in place. In this instance, we sort of know it's linked to an event and we don't know how long the event is going to last. And I think that makes it even trickier because do you make bigger fundamental changes in order to live in a new reality at these prices? Do you take price to do it? Can the consumer deal with this? Price, given what we know about inflation, is harder to do when there's a chance that all of a sudden oil drops by 30% when things are resolved. So I think we're in a more difficult situation than we were some years ago. But I also think the retailer position is not nearly as flexible on allowing pricing through as it was a few years ago. I think they're looking and saying, not this time, like you did enough and this time it's not. You're not going again. So the push on volume, the push on operating leverage via volume to offset it in terms of actual dollar returns will be the key area of focus. And who can win and who can lose that? You start fighting, you fight that fight a little bit harder than we were before. Then you have industries like energy that still has latent pricing power because of how little they took last time. So there'll be some moves from them that, that end up coming.
- [26:36]
C
Kamil, let me ask you a question. You mentioned the two to two model, which, you know, I agree with. I've heard it. I've heard that a lot over the years. If you look at your recent report on Coke bottler organic, organic sales growth for 2024, you had it about 13%. What, 12.8%? 2% was volume and about 13% was price mix. What happens to bother economics if that 13% goes down to 4%? 2% volume, 2% price, 2% mix. What if that 11% goes down to 4%?
- [27:14]
B
I think there's a reason why those bottlers are trading at the highest multiples that they've had in sort of most of their history is because they have been crushing it, right? They've been doing really, really well. And you know, if you actually look in that note, we show such a substantial increase in the valuations of the bottlers, but Coke kind of hanging in there. You know, Coke also over 10 years increased its earnings by around 50%. And the bottlers grew nicely, they grew better, they grew faster. But the multiples move much more substantially in the bottles because their results have been so much better. That's probably not forever. Now keep in mind for bottlers that 222 is kind of a Coke thing. Bottlers, at least the public bottlers, many of them have a Lot more emerging market exposure, especially cch, femsa, some of them. So very different sort of growth dynamics. They're very different inflation dynamics as well. Other thing for the bottlers, very important is their economics on energy drinks contributes a lot more to their P and LS than the economics of how Matcha contributes to Coca Cola Co. And so you have just a couple of things there that are unique in comparison to the system.
- [28:26]
C
So in 2024 for Coke, for Coke's organic sales growth, you had again about 2% on volume and about 10.5% on price mix. Is that sustainable going into the future do you think?
- [28:38]
B
No, that number is going to be a mid single digit number assuming we don't have wild inflation in emerging markets or something like that. It's more of a mid single digits is the rate of growth for Coke. I don't think it'll be, I should probably say mid to high, like kind of a 6, 7. Their algo is 4 to 6. I'd probably say it should be a 5 to 7.
- [29:01]
A
All right, let's change gears now before we wrap up, we've got a couple of quick things we want to run by you. Really curious your take on the protein trend for one. I mean look, we're hearing tons about it. I sort of feel like maybe it's jumped the shark. I mean we've got pop tarts with protein now, you know, who would have ever thought we'd see that a few years ago? What's your take on protein right now?
- [29:28]
B
Well, I agree it is the biggest, hottest thing. But let's think about the building blocks to what got us there. Health and wellness today is very different from what we looked at as health and wellness 10 years ago. Ten years ago it used to be about restricting behavior and removing things from your daily sort of consumption habits. So less sodium, less trans fat, less fat, less carbs, less. It was all less, have less of everything. Today's world, the healthy consumer, the consumer who wants to be healthier is trying to figure out how much they can ingest, how much they can consume in order to live a healthier lifestyle. How do I get as many electrolytes as possible? How do I get as many grams of protein as possible? How do I have as much fiber as possible? This is things that you can, you know, the nutrients that come in juices, especially cold pressed juices, you know, how do you, how do I have as much of this as possible? From a business perspective, that's the best thing that you want. You don't want A consumer who's trying to have less things. You want a consumer who's trying to have more things. And we can actually. It's pretty easy to sort of identify what those trends are. Protein specifically has a few things going on and you probably, you saw our protein report is the first is that it's becoming more and more clear that we all need more protein. That's maybe the first piece. The second piece is the amount of people delivering that message has been very, very broad, including the government itself, which changed its recommended daily allowance for protein. Who actually listens to the government when it comes to what they eat? It turns out a lot of people because the same thing happened with vitamin D some years ago. And when they increased their recommended daily allowance of vitamin D, vitamin D exploded. The problem with protein is traditional protein is an expensive and convenient calorie. You can't just go grill a salmon at lunch in the middle of a workday. These things are hard to do. So this easy protein category, which, which would be protein shakes, of course, protein bars, of course, but even cottage cheese is on a tear. Greek yogurt's back. You know, like the, the deliverables of easy protein are doing really real, really, really well. So of course all of manufacturing CPG is chasing it with Pop Tarts and Cheerios and all these other types of things. They're gonna. And Doritos.
- [31:48]
A
And Doritos.
- [31:49]
B
They're gonna overdo it. Some will work, some will not. I think the incrementality for those mega brands with protein equivalents are, is, is, is going to be very marginal.
- [32:03]
A
Yeah.
- [32:04]
B
But I do think if you're, if you're in the, almost like what we're seeing in alcohol. So we know that ready to drink canned cocktails are taking off in almost every instance though it needs to be an authentic brand for that category. It's very hard to have even the most iconic of them all, Jack and Coke is only just kind of doing okay. But like if you look at the version with Crown Royal, if you look at all these other. It's not doing anywhere near what a Surfside or a High Noon or a Cutwater or any of these sort of like new to world versions are. And I think protein is the same. You kind of have to be in this very authentic to that category as a protein deliverable. You can't just add it to your, your Cheerios, your Doritos or your Pop Tarts or whatever it is. But I didn't, honestly, I didn't know about the Pop Tarts and If they're delicious, like, I'll give it a go.
- [32:56]
A
Rock it, baby.
- [32:59]
B
As long as they have it in the cinnamon. As long as it's in the cinnamon.
- [33:02]
A
I've seen it in fruit flavors, but yeah, they better have cinnamon. You're right. Or brown sugar.
- [33:07]
B
Brown sugar. You're right, brown sugar.
- [33:08]
A
Real quick. So does that, what does that mean for coke? Fair Life, if everyone's racing into protein and giving consumers all these options, does that lift Fair Life even further or does that somehow cut into people doing shakes instead of pop tarts, et cetera? Just real quick.
- [33:24]
B
No, I think, I think it, I think it, I think lifts the whole, it lifts the whole category forward. FairLife, as given their size, given they're the leader, given their support, will probably be the biggest beneficiary. It also means there's going to be tons of competition as we're already seeing start to emerge, emerge. And the problem with protein is a little bit like the problem we have with craft beer, which is when there's so much of a chase of something that's kind of complicated to really get right, you start to get a lot of bad product. And I don't know if you ever tasted a not very good protein shake like it is, you really don't want it.
- [33:58]
A
Yeah,
- [34:01]
B
we're going to have to watch. You know what happens, you know what happens there.
- [34:05]
C
Camille, let me ask you a question about non alcoholics. At least in New York restaurants, I've seen it go from a few years ago to don't have it, never heard of it, to yes, we have three different varieties. Is this growing strongly? How big is it in terms of a share of the beer industry and do you think this cuts into. Given they're refreshing and they're relatively low in calories and they're not marketed as diet, do you think non alcohol alcoholic beer begins to cut into soft drinks?
- [34:37]
B
So I do think non alcoholic everything is a real category with tons of growth. I do also think that the we're about a year away or a year ago was kind of peak when it was cool to talk about how you don't drink. You know, it's just like the sort of anti drinking culture. Dry January, interest plummeted this year versus the.
- [35:02]
C
I never thought that was cool, Camille.
- [35:06]
B
But, well, you're, you're our generation. Like it's, it's confusing. You know, it has always been confusing to us. But you know, you know, if you think about the, the last days of the Biden administration, you had the surgeon, surgeon general come out and saying alcohol causes cancer. And then a year later you have the government coming out and saying drinking in moderation is fine. And has confirmed the J curve, which has been confirmed a million times over 50 years, which it shows that moderate amount of consumption of alcohol actually increases lifespan. Not the opposite, not in a biological perspective, but from a social perspective. I guess those people are more social. Which actually seems to be happening is we went through a very weird social experiment with COVID and it cracked what was a very sort of reliable trend in terms of how much people consume and how much they socialize based on what their age is. Now we're getting further and further away to see people start to revert back to where that how they always sort of consumed. So it's just, you know, Covid wasn't a moment of time. It was a moment of time where the, you know, you dropped the rock in the lake and the reverb was for a while. And I think the reverb was a lot of it. Also. We drank a lot during COVID so maybe it was just a massive hangover for the entirety of the country, but the emergence of non alkali in that time period has actually. And I will answer your question on is it a threat to soft drinks? The answer is absolutely yes, because it's a new occasion. World cup starts today. The amount of non alcoholic beer that's going to be consumed at 3 o' clock East Coast Time of people sneaking out of their offices, popping into a bar in New York to watch the game for 90 minutes is going to be quite like very, very substantial compared to what it would have been 10 years ago. And I'm sure it would have been, I don't know, the number, twice as much as it might have been four years ago at the last World Cup. So would people have gone in there and had just as much, just as many soft drinks? I don't know. Probably not. But certainly there's some cannibalization there.
- [37:03]
A
So do you think we're going to see beer and soft drinks on the same trucks? Is that going to be increasingly. So is it inevitable or. Or raise has said they're not doing it and they're one of the biggest beer distributors around and seemingly buying everything in sight. Where do you come down on that?
- [37:22]
B
It's definitely gonna happen. It's probably gonna take longer than it's going to take. Let me. I'll pause and then. Rigo.
- [37:30]
A
Yeah, go.
- [37:32]
B
It's definitely going to happen, but it's going to take a long time and it's going to be piece by piece, state by state. And the licensing is complicated, obviously, but. But it's a lot less complicated putting the soft drinks in the beer on the beer licenses than the opposite. So I think once Rez would be a good example of once the real footprint. Right now we're building a footprint, then you have the footprint, you figure out how to make it efficient and then the next move becomes how do you put these things together? And this could be decades before we get there, but we're going to get there. I think there's the. If you just think about how even from the context of logistics, what technology is providing or offering logistics companies today is so much more substantial than it used to be. You'll have far fewer idle trucks. You will have. There's just. You can do so much more with so much less. You know, what if it's the same truck that on one route is all soft drinks and then the next route that same truck is all beer, Is that considered commingled, is it not? How does the licensing work? Those things become complicated. But also what if nobody was driving that truck? So you could see how this stuff, you can see where it's going. It is hard, very hard to know how long it's going to take to get there.
- [38:50]
A
Yeah, it's almost like we know where it's going but where it actually ends up and exactly what configuration we'll see, right?
- [38:57]
B
Exactly.
- [38:58]
A
Yeah, yeah. What do you see when it comes to beer convergence? Buffalo Rock just, I mean released a beer that is a collaboration with a Belgian brewery, you know, to basically produce this beer. They co, they co created it. That's, that's new and interesting, kind of a next step in this whole convergence. What are you seeing there?
- [39:22]
B
There is. So you can see the pockets of growth in beer. Buschlight is doing spectacular not because it's low priced, but because it's authentic. Hiking, fishing, hunting, outdoor blue collar lifestyle romance. That it's been authentic its whole history and that's really resonating with today's consumer. Busch Light's doing great. Michelob Ultra is doing great. Very authentic. On the healthy lifestyle fitness that they. Very authentic. As it relates to their lane. Mexican imports were doing better but that's got complicated in recent years for I guess obvious reasons. So there are these very strong lanes of growth within beer. But your traditional domestic mainstream light beer, which is still a huge amount of the category, continues to seed share, continues to have very substantial negative volume. And so that's something for everyone else to sort of feed off of. But then this emergence of Ready to Drink spirits based cocktails. If the best way to think about it is like a fourth category, like it's for our whole lives there's been beer, wine and spirits. Now there's beer, wine and spirits and Ready to Drink. These things are spirits based, but they kind of walk and talk and act like a beer in a can, move in boxes that make sort of sense that they would move around. And beer, beer distributors are getting more involved in it. The consumer will purchase it in sort of a similar cycle versus buying a handle of Tito's and then working through it over some period of time. So that's really changed buying habits within beverage alcohol. And, and actually you see it. I mean, the spirits industry is trying to figure it out. It's a struggle for them. The beer industry is trying to figure it out. It's a struggle for them. Most of the top 10 are brands that didn't exist five to seven years ago in earnest. Many of them are not owned or were recently acquired by the big companies. So it just shows you that within beverage alcohol things are just shifting. And they seem to be shifting. You know, we've seen these types of shifts before. By the way, in the year 2000 was around when Sex and the City was taking off. Grey Goose had unbelievable advertising campaign and young people for the first time were entering the alcohol market with spirits. Now young people are entering the alcohol market with Ready to Drink. So you're going through another one of these sort of generational shifts of what is long term consumption.
- [41:44]
A
Yeah. Carmel, great to have you. Thank you so much. John, great to be with you again. Looking forward to the next time. Guys.
- [41:52]
B
Talking to you guys.
- [41:53]
C
Take care, Dwayne.
- [41:54]
A
The Breeze is produced by Beverage Digest.
- [41:57]
B
Visit our website to learn more about
- [41:59]
A
our products and subscribe to our newsletter. That's www.beverage-digit.com.
- [42:09]
B
sam.