Finding Innovation in Beverage Processing

While rationalizing underutilized assets is the norm for declining categories, growth products require new technologies.

By Kevin Higgins, Managing Editor

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In the not too distant past, a beverage entrepreneur drew guffaws and some buyers at trade shows with his children’s drink, packaged in bottles resembling licensed characters like Scooby Doo and bearing the tongue-in-cheek name Belly Wash.

Today, it would be difficult to find a retailer willing to stock such a product, let alone a mother willing to buy it for her child.

The beverage stars today play to healthy eating and drinking trends, with superstars like Starbuck’s Evolution Fresh juices generating buzz and big sales. What beverage company wouldn’t want to command the premium prices of such brands? The story for carbonated soft drinks, on the other hand, is grim to dire. Declines in per capita consumption that began in 1998 now are a cumulative 18 percent, and absolute case volume has fallen 10 consecutive years.

As a result, at many existing beverage facilities, the “intensive capital investments in products that have fallen out of favor” need to be rationalized, points out Doug Newman, a partner in Cincinnati-based Myrtle Consulting Group. Pockets of growth products exist, but today’s beverage manufacturing norm is more SKUs, frequent changeovers and packaging reassessment, as companies focus on filling production schedules for underutilized assets squeezed between rising costs and declining sales.

Improved manufacturing performance and operational excellence are Newman’s specialty, and his client list reads like a who’s who of North American beverage companies (Nestle, Cadbury, Molson Coors, Coca Cola, etc.). Reorienting production and marketing away from maximum throughput and toward cost control, labor savings and scheduling changes is a challenge and often results in “bidirectional frustration,” he adds. “Sales and marketing is an inexact science, while operations has a well-defined process orientation.” Getting the two sides in sync on issues as simple as cap color can be daunting. “Sometimes the cop color matters to the consumer, and sometimes it doesn’t,” reflects Newman. If it doesn’t, fewer changeovers are warranted.

At Pepsi bottling plants, flexibility is discussed in terms of size, flavors and substrates, according to Rich Beck, head of manufacturing at Pepsico Inc., Purchase, N.Y. For example, a level of standardization of the neck, cap and base sizes of various bottles can minimize downtime during product changeovers. Flavor formulations are managed at the filler, and “those changeovers are done one after another,” he says.

Substrates determine if filling involves carbonated drinks, noncarbonated beverages and whether they are filled hot or cold. “That’s where we need different platforms” and therefore multiple lines at a given location to avoid unproductive downtime.

Hot-filling replaces hexametaphosphate

While the contents of a Belly Wash bottle wouldn’t fly today, the licensed character on the bottle itself still is a viable hook for a children’s beverage. True Drinks Inc., Irvine, Calif., recognized that in 2012 when it inked licensing deals with Disney Consumer Products and Marvel Characters in preparation of the 2013 launch of AquaBall, a stevia-sweetened water fortified with vitamins and positioned as a better-for-them beverage for youngsters.

True Drinks pegs the children’s drink market at $1.2 billion, a business dominated by brands such as Capri Sun and Juicy Juice with anywhere from 8g to 33g of sugar. “A whole army of bloggers are sharing the positive impact of AquaBall” and the B3, B5, B6, B12 and C vitamins it contains, boasts CEO Lance Leonard.

Unfortunately, platoons of bloggers are criticizing the potassium sorbate, sodium hexametaphosphate and malic acid that stabilize and preserve it. “We always had a plan to remove those preservatives,” explains Leonard, but the cost of hot filling would have forced the firm to price the product too high.

Cold filling by copackers in California, Texas and New York enabled modest sales of 4 million cases last year, but True Drinks is anticipating 60 percent growth in 2016 when it switches to hot filling at the Dallas facility of Niagara Bottling, one of the nation’s leading private-label water bottlers.

“They are so incredibly efficient, they do everything in house,” Leonard says of Niagara. Blowmolding, label printing, sleeving and even caps are made on site. “Filling a package is much different than making a package in terms of complexity,” Newman observes, but the investment in equipment and expertise pays handsome returns. “If you’re buying caps instead of making them, they’re coming in a trailer that basically contains air and adds cost.”

While bottled water is poised to supplant carbonated soft drinks (CSDs) as America’s favorite beverage, growth rates are slowing and capacity is catching up with demand. Firms like Niagara, which doubled its network to 24 plants in three years, are positioning themselves as the low-cost contract manufacturer that brand owners will turn to.

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