Nestlé SA

Nestlé Waters’ sales  basically were unchanged globally and account for 7.9 percent of sales for Nestlé, with 77 brands. Strong U.S. sales in 2004 made up for the poor summer weather in Europe. North America and Europe combined account for 90 percent of water sales, with 45 percent of that being North American sales.

North American sales bounced back and returned to the excellent growth seen two years ago with a 9.7 percent change, beating Nestlé’s market growth estimates of 7.5 percent. That’s despite the increasingly competitive water climate driven by the soft drink majors which resulted in a general reduction in prices in 2004. Nestlé Waters’ also had 15 percent growth in the small format segment.

Water sales in Europe decreased 8.4 percent for Nestlé, largely blamed on unfavorable weather conditions that followed the heat wave of 2003. Nestlé Waters’ is continuing its integration of home-office-deliveries in Europe in 2005.

The European market this year will see an expanded flavored water segment with no-sugar products to include Lime/Grapefruit and White Peach/Apricot for Contrex, Raspberry Cranberry, Lemon and Lime for Vittel and Raspberry for Perrier. The Contrex brand also will market a slightly carbonated water aimed at women, while Vittel is coming out with Vitalitos for children that features a new package size just for small hands.

Europe will also receive a downward price repositioning of Nestlé Aquarel to accelerate growth, as well as the arrival of Nestlé Pure Life.

The price repositioning started at the end of 2004 as part of a long-term strategy to bring Nestlé Waters into the value brand sector. It is also intended to let Nestlé Waters compete in multiple channels, including discount outlets, which have become key players in the European market.

Decreasing price to defend market share has become critical in North America, which is deemed Nestlé’s main catalyst for growth. Nestlé Waters’ reports compensating for lower pricing through increases in volume and market share, plus increased efficiencies and overhead savings. Nestlé’s value brand, Nestlé Pure Life “played an important defensive roll for our regional spring water brands,” the company stated.

In other beverage segments, new technology was rolled out in Europe last year to improve the taste of Nescafé soluble coffee and improve the creaminess of cappuccino. Nestlé is currently working to increase demand for coffee through a better understanding of the positive effects of coffee on the human body.

Nestlé also expanded Nesquik ready-to-drink in vending machines in schools and has a major initiative to strengthen nutritional benefits of brands. Benefits have been added in some products, like Nesquik Nutri Active B in Latin America.

Diageo

Diageo has had a busy start to 2005. The spirits leader extended its portfolio of premium wines in February with the addition of The Chalone Wine Group Ltd. (acquired for $275 million) to its U.S. wine operation, Diageo Chateau & Estate Wines. Diageo also formed a partnership with Heineken this year to produce and distribute Guinness in Russia and acquired Netherlands distiller Ursus vodka.

At presstime, Diageo was looking to continue its buying spree after news hit that Pernod Ricard made an offer for Allied Domecq. Diageo refinanced some $750 million in existing debt to free up its financial position. Although it would only be a small piece of Allied Domecq, the brands Diageo is interested in are Courvoisier cognac, Maker’s Mark bourbon, plus Allied’s wine portfolio.

Diageo has been involved in deals with both Allied Domecq and Pernod Ricard in the past. The biggest was the partnership with Pernod Ricard to buy Seagram’s drinks business from Vivendi Universal for $8.2 billion in 2001. That same year, per the Federal Trade Commission, Diageo sold Malibu Rum to Allied Domecq for $796 million.

Two of the big brands Diageo got in the Seagram deal were Chivas Regal and Crown Royal, plus Sterling Vineyards wines and The Monterey Vinyard wines.

Diageo credits growth of Crown Royal and Sterling Vineyards, plus its Beaulieu Vineyard, for offsetting mixed performance of other local priority brands in the past six months of 2004 for North America. [Diageo dubs local priority brands as market-level brands with limited geographic scale vs. global brands.] Crown Royal volume was up 7 percent and volume at the two vineyards combined to grow 27 percent.

Smirnoff continues to be Diageo’s most important global brand. Excluding ready-to-drink (RTD), Smirnoff volume was flat at the end of Diageo’s fiscal year, June 30, 2004. Net sales, however, were up 5 percent, which is credited to a pricing revision and new packaging.

Smirnoff RTD volume was up 15 percent for the fiscal year and another 10 percent over the last six months of 2004, largely driven by Smirnoff Twisted V.

The last six months of 2004 also brought strong performance results for Captain Morgan, with volume and net sales both up 12 percent driven by Original Spiced Rum and the launch of new Parrot Bay Flavors.

The only other double-digit volume increase over that period was from Jose Cuervo, with a 10 percent increase. The brand had its first television ad campaign during that period.

The end of 2004 did not bode well for Baileys, which saw a volume decrease of 5 percent. The drop is largely the result of Baileys Minis sales tapering off after the 2003 launch.

Anheuser-Busch Inc.

The largest brewer is out to restore its volume momentum despite declining U.S. beer sales. That’s what president and chief executive officer Patrick Stokes declared during the company’s 2005 BUD Investor Conference at the end of May after first quarter domestic beer volume was below expectations. Domestic beer sales to wholesalers decreased 2.7 percent for the first quarter of 2005 vs. the same period in 2004.

Stokes identified four priorities to stimulate growth: improve the image and desirability of beer; keep beer fun and social; grow beer occasions; and improve retail execution.

Anheuser-Busch has had several new product introductions that started in test markets last year. BE officially became the first new national item of 2005. The more contemporary version of beer brings some of the same ingredients that have dominated new products in the alternative beverage category with caffeine, ginseng and guarana all on the list. In its sleek 10-ounce can, BE is targeted to go head-to-head with mixed drinks and Anheuser-Busch likely hopes it’s the answer to the popular Red Bull-plus-vodka drink.

Anheuser-Busch’s newest launch is Budweiser Select, an upscale beer on the market since February that is being supported with a massive promotional campaign. Bacardi Silver is also out with a new flavor — Watermelon — for the summer.

Last year closed with Anheuser-Busch’s new 16-ounce aluminum bottles hitting the market for Michelob, Michelob Light and Anheuser World Select.

On the global front, Anheuser-Busch continues to look to build a stronger international presence, which includes joint ownership of Grupo Modelo in Mexico. The company is expanding its presence in China, where it acquired Harbin Brewery Group in 2004. Anheuser-Busch increased its economic interest in Tsingtao Brewery Co. Ltd. to 27 percent in April 2005. It is the largest non-government shareholder in Tsingtao. The Chinese beer market is already larger than the U.S. beer market and is said to be the fastest-growing beer market in the world.

Also notable in 2005, investor Warren Buffet’s Berkshire Hathaway is now a “significant shareholder” in Anheuser Busch.

Heineken NV

During its 2004 annual results presentation, Heineken announced it would make a larger investment in marketing and packaging innovation in 2005. As promised, and just in time for summer picnics, Heineken introduced its new portable draught beer system in May in the United States. The portable 4.75-liter Heineken DraughtKeg is a pressurized, disposable system with a mini tap that keeps beer fresh for 21 days. The product follows the 2004 introduction of BeerTender, Heineken’s home draught beer system.

Heineken also started testing its new Heineken Premium Light Lager as of March. The new beer is lighter in taste and has fewer calories and carbohydrates than regular Heineken.

On the global front, Heineken is focused on growth in China as the most important developing beer market for the company. To focus on extending the brand there, Heineken started local production in China in 2004.

The company further strengthened its position in China this March when it acquired a 40 percent share in Jiangsu DaFuHao Breweries through its joint venture with Fraser & Neave. The acquisition was valued at $28.6 million.

Russia is another market in which Heineken anticipates to see beer gaining, estimating 5.5 percent growth this year. Heineken recently upped its position in that market with the acquisition of Patra brewery in Yekaterinburg, Russia. The move will grow Heineken market share in Russia to 8.3 percent.

Internally, Heineken initiated top management restructuring in early 2005 in preparation for the fall retirement of its chairman Thony Ruys and executive board member Brau Union. Jean Francois van Boxmeer will succeed Ruys as chairman and chief executive officer.

The regional president for the Americas region will be Massimo von Wunster, currently the managing director of Heineken Italia.

SABMiller

SABMMiller sales grew the largest of any of the Top 10 beverages companies, jumping $4.5 billion to $12.6 billion in sales for 2004. Some of the difference can be attributed to 2004 being the first full year that Miller Brewing Co. sales were included in the mix, 2003 totals only had nine months of Miller sales. That took North American sales from $3.4 billion in 2003 to $4.8 billion in 2004.

There are a lot of makeovers happening within the SABMiller family brands, starting with new advertising, promotions and packaging for Miller Lite and Miller Genuine Draft. The change was designed to maximize the impact of the Miller name on those brands. Miller High Life brand packaging also was changed to more clearly differentiate between High Life and High Life Light. And the Australian beer Foster’s got a facelift, basically an enhanced version, to again draw attention at retail.

Overall, the company emphasized it had a more disciplined approach to Miller brand marketing in North America last year. Miller also did some internal restructuring in 2004 with more than 200 personnel changes in marketing and sales. Additionally, the United States was segmented into 88 market areas and then broken down to 33 high-focus markets. This year Miller Brewing celebrates its 150-year anniversary.

As of early 2005, Miller Brewing will start U.S. distribution of Peroni Nastro Assurro, the new name for SABMIller’s Italian premium beer formerly known as Nastro Assurro. It, too, has gotten a recent makeover to go with its new global strategy. As of early 2005, the new label has a more contemporary feel and longer neck bottle. The name was changed to Peroni Nastro Assurro for all international markets, save Italy were it will remain Nastro Assurro. In February, SABMiller increased its investment in Birra Peroni, Italy’s second-largest brewer, to 99.8 percent.

Like the other major beer companies, SABMiller is also seeking to stake its claim in China. This April, SABMiller associate China Resources Snow Breweries Ltd. announced it will be acquiring the assets of Fuyang City Snowland Brewery Company, a Chinese brewery in the Anhui province, for $15 million. That follows last summer’s 90 percent-interest acquisition of Shucheng and Liuan breweries.

InBev

With a new name and logo, the creation of InBev was final Aug. 27, 2004. It is the result of the combination of Interbrew and AmBev (Companhia de Bebidas das Américas).

The real transformation to InBev, however, started back in 2003 when Interbrew began integrating what had historically been a decentralized brewer under the leadership of chief executive officer John Brock. Brock joined Interbrew in 2003 from Cadbury Schweppes.

The AmBev combination served as a catalyst in speeding up the integration strategy. The new entity now seeks to move from “the biggest to the best.”

When AmBev came on board it brought to the table its domination of the Brazilian market, as well as its strength in Central and South America in both beer and carbonated soft drinks. InBev now has a large nonalcoholic brand portfolio in Brazil that includes Guarana Antartica (the No. 2 Brazilian soft drink brand, produced with guarana fruit), Gatorade, Pepsi-Cola and Lipton Iced Tea.

InBev’s primary focus is premium beers, led by global flagship brands Stella Artois and Beck’s. Acquired in 2002, Beck’s launched in Russia, Ukraine, Bulgaria and China in 2004. [InBev’s interest in China expanded in 2004 through the integration of 12 acquired breweries and six joint ventures.]

The Beck’s brand has not had a great run in the United States as share has continuously declined over the past decade. Now InBev believes it has turned the corner with Beck’s in the United States with a new sales and marketing campaign credited for the rebound.

Bass may also be seeing the early signs of a U.S. turnaround; it was down only 5.7 percent for 2004 vs. 14.2 percent in 2003. The refocus for Bass includes new U.S. distribution in major national on-trade accounts.

InBev had two major corporate changes last year that impacted the United States, the end of its relationship with the Dos Equis, Tecate and Sol brands, and the creation of InBev USA. InBev severed its partial ownership of FEMSA in the United States and Mexico in 2004. Dissolving the FEMSA relationship led to the formation of InBev USA by bringing together Beck’s North America and Labatt USA. It also gives InBev USA more flexibility and allows for “unencumbered focus” on its proprietary premium brands.

InBev USA got its first focus on a new brand in March this year with the global launch of Brahma in more than 15 countries.

InBev says Brahma will break existing beer paradigms with its Brazilian flavor and spirit — it is said to have a papaya afternote. It’s packaged in a contoured bottle that is designed to fit ergonomically into consumers’ hands.

PepsiCo Inc.

The biggest promotional effort for PepsiCo Beverages North America in 2004 went to the launch of its Smart Spot symbol, which identifies products that contribute to healthier lifestyles. It can be found on a number of beverage products, including Tropicana Pure Premium, Gatorade Thirst Quencher and Diet Pepsi. National promotions around Smart Spot continue for 2005.

The biggie in the summer line-up this year is the full national distribution of Pepsi Lime and Diet Pepsi Lime. There is also a newly reformulated Pepsi One on the market, made with Splenda. Gatorade will also be out with a new sub-line, Endurance Hydration Formula, following the 2004 subline launch of Gatorade X Factor. Gatorade continued to perform in 2004, achieving double-digit growth.

Other Pepsi brands out with new additions early in 2005 were Dole and Aquafina. Dole added a 50-percent juice line, Dole Lights, with half the sugar of regular juices; and Aquafina expanded with the carbonated Aquafina Sparkling and the flavored FlavorSplash line. Tropicana Light ’n Healthy also got a plug from WeightWatchers this year and now includes WeightWatchers Points values on its packaging. Tropicana Light ’n Healthy was launched in 2004 as part of the Tropicana Essentials subline of fortified beverage and juice products. They contain half the calories and carbohydrates of regular orange juice.

Diets and healthier sublines encompassed much of 2004 for Pepsi, tying in with its Smart Spot push. The company upped the ante on its Diet Pepsi advertising and promotions, changed the name of Diet Sierra Mist to Sierra Mist Free (as in free of sugar, calories and carbohydrates) and launched a new Aquafina campaign encouraging consumers to “Drink More Water.”

And then there was Pepsi Edge, the full-flavored soda with 50 percent fewer calories than regular cola that failed to find a niche. It will be phased out by the end of this year.

Limited-time products in 2004 included grape-flavored Mountain Dew Pitch Black for Halloween, and Pepsi Holiday Spice, with ginger and cinnamon.

On the global front, PespiCo is on the verge of strengthening its position in Germany. In May, PepsiCo announced it would acquire Punica Getranke GmbH, a German fruit juice and drink company. Punica’s range of brands includes fruit nectars, juice drinks, teas and schorles (fruit juice and sparkling mineral water).

Suntory

Suntory International Corp. out of New York acts as a holding company to import and market Suntory products in the United States. It is part of an even larger holding company, Suntory Group, which includes a large array of subsidiaries that cover ventures from managing Morrison Bowmore Distillers in Scotland to a biotech division trying to develop a blue rose.

Suntory International’s main activity in the United States is through Pepsi Bottling Ventures LLC, of which it has a 65 percent investment; and DS Waters of America, which was jointly created with the North American operation of Group Danone and includes regional brands such as Crystal Springs and Hinckley Springs.

The Japanese arm, Suntory Ltd., is most noted for spirits, wine and beer, particularly its whiskey. When it came out this May with a limited 50-bottle supply of special single malt whiskey dubbed Yamazaki 50 Years, named after the distillery where it mellowed for more than 50 years, it sold out in one hour to the tune of 1 million yen per bottle ($9,360 U.S.).

Suntory has a wealth of new products on the market in Japan, and like other Japanese brewers, is seeing growth in low-alcohol brews. Functional, health-related products are also growing in Japan, with Suntory launching a functional water for diabetics this spring.

The bottled water, Mizumizu-Shia, is supposed to help control a rise in blood sugar after eating. It contains deep ocean seawater and dietary fiber.

Suntory was one of the first major international brewers to enter the China market, back in 1984 with China Jiangsu Suntory Foods Co. Ltd. It entered the Shanghai market in 1995 and now holds more than a 40 percent share there.

Kraft Foods INc.

The biggest beverage news to come out of Kraft Foods in 2004 was its acquisition of juice producer Veryfine Products Inc. in March. Veryfine’s lineup includes fruit juices, cocktails, punches and nectars, along with Fruit20, a fruit-flavored bottled water.

Like PepsiCo, one of Kraft’s big initiatives last year was the introduction of its Sensible Solution program that flags better-for-you items. Kraft has gone as far as saying it will phase out advertising on all products that don’t meet the Sensible Solutions criteria.

Kraft had a big win last year through an expansion of its licensing agreement with Starbucks Corp. through which Kraft now distributes Seattle’s Best Coffees nationwide. The expanded agreement also landed Tazo Teas in the grocery channel nationwide.

On the new product side, Kraft introduced Crystal Light Sunrise with vitamin C and calcium in the United States. During the first six months 85 percent of the new item’s volume came from purchases that were incremental to the base Crystal Light business, Kraft said, with 25 percent of its volume coming from orange juice sales.

Coffee plays a large role in Kraft’s beverage portfolio. In 2004, a number of Kraft coffee brands launched coffee filter pods, including Maxwell House in the United States. The idea is that consumers can brew individual cups of coffee in single-serve pod machines. Kraft also introduced its new at-home hot beverage machine, Tassimo, which it believes will revolutionalize at-home coffee consumption. Tassimo makes cappuccino, tea and hot chocolate at the touch of a button. France is the leading market for the product.

In Canada, Kraft introduced shelf-stable Kool-Aid ready-to-drink sports drink. The product grew Kool-Aid ready-to-drink revenue by 37 percent.

Among Kraft’s worldwide markets, Tang takes center stage, now in 80 countries. China has become a focus for Kraft, and Tang is growing in popularity there. In 2004, Kraft introduced new flavored Tang Fruit Teas in China and Tang Milk Mixers, plus increased marketing support for Hot Tang. BI