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Juicing For Growth

Monday - 4/8/2013, 5:15pm  ET

Today, while looking at a few cold, hard numbers, I'm also taking a more contemplative look at what some major companies are doing to drive growth. More specifically, I'm looking at how Starbucks , PepsiCo , Coca-Cola  and even Campbell Soup  are juicing for growth.

Starbucks acquired the Evolution Fresh juice brand in 2011. The company is seeking growth via juice outlets that focus on healthy beverage drinks. As Julie Jargon reported in a Wall Street Journal article (Nov. 11, 2011), "The coffee chain is buying a small, upscale juice maker Evolution Fresh Inc. for $30 million—a deal that pushes Starbucks well beyond its coffee roots and shows how serious the company is about transforming itself into a consumer products player with a large presence outside its own stores."

Why is this important to potential Starbuck's investors? Aside from being a new revenue stream, this acquisition highlights Starbucks' commitment to tailoring their growth to trends. Health foods and drinks are more "in'' than ever. Companies like Starbucks must drive growth through offering "on trend" products in addition to their core products. While there's still room for innovation and growth in the coffee and tea category, there's probably greater room in the health drinks category.

Consider that, in Jan. 2013, Starbucks reported their financial results for the fiscal first quarter (ended Dec. 30, 2012) and their focus going forward. They believe they will have sustainable profitable growth due to two major factors. These are the quality and diversity of their growth drivers, in tandem with ongoing concentration on operational excellence. Evolution Fresh is one of those quality and diversity growth drivers.

The company started out small with Evolution Fresh initiatives. However, by the end of 2013, their goal is to have this line of bottled cold-pressed juices in roughly 8,000 locations. Starbucks will open a juice processing facility this year in Southern California. Investors should note that this will quadruple production and distribution capacity.

Investors should also note that Starbucks has a history of successful initiatives like their ready-to-serve instant coffee powder (although they refrain from using that term), elaborate in-store coffee concoctions and Verismo machines.

Consider that for 1Q 2013, total net revenue grew by 11% to $3.8 billion, which is a record for the company. Their global comparable store sales increased by 6%. The company has a history of growing sales and, no doubt, has plans to aggressively market healthy juice offerings.

PepsiCo has plans for their breakfast beverage under the Mountain Dew brand. This is the company's "Kickstart" product offering. This 16-ounce product (80 calories) is a caffeinated sparkling juice drink.

Mr. Greg Lyons, VP of Marketing for Mountain Dew, said, "Our consumers told us they are looking for an alternative to traditional morning beverages…"

Here's another major beverage player, catering to the desires of its customers. They're being innovative as per the demands of the marketplace. Who would have thought of PepsiCo as a morning beverage purveyor? Investors should research companies that aren't afraid to be creative with respect to additions to their storied product families.

PepsiCo's Organic Revenue (sales streams, which are a direct result of an entity's existing operations) increased 5% in the fourth quarter and full-year 2012. PepsiCo Americas Beverages market share movement in the United States advanced chronologically in the fourth quarter. The company stated that this was because of "disciplined execution and significant investments in advertising and marketing."

Of importance to potential investors is that the company is targeting mid-single-digit organic revenue growth and 7% core constant currency earnings-per-share (EPS) growth for 2013. For income-loving investors, PepsiCo announced a quarterly dividend increase of 5.6%, which will begin this coming June.

Coca-Cola's "Simply Orange Juice" brand is also pursuing growth. This brand of juice blends has three new flavor additions to their family. Again, here's a traditional beverage company, constantly innovating based on consumer desires.

Allison Higbie, Group Director of Marketing for Simply Beverages, stated recently, "To meet the demand for new flavors, we are offering refreshing new twists on classic favorites."

Coca-Cola, for the 2012 fourth quarter and full-year, increased worldwide volume and value share in nonalcoholic ready-to-drink (NARTD) beverages. This category includes their Simply Orange and Minute Maid Juices To Go. Overall, the company experienced volume and value share growth across almost every beverage category. Coca-Cola reported global volume growth of 4% for the full-year (3% for 4Q).

In addition, it's not all "soups" for Campbell Soup; they've juiced up their product portfolio with the Bolthouse Farms offering. This is a newly-acquired business for Campbell's. Bolthouse Farms product line-up consists of beverages, carrot products and dressings. Juices include carrot, pomegranate, acai, mango, coconut and others.

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