Brand Watch: Tampico to embark on aggressive global expansion
Author: Rob Walker
Date published: 3 Sep 2008
Tampico Beverages, a leading player in the global fruit-flavoured drinks category, was acquired last month by Kentucky-based Houchens Industries, which runs discount grocery retailers in the US.
In the aftermath of the deal, Daniel Espinosa, International Business Analyst at Tampico Beverages, told Euromonitor International that it was “full steam ahead” for Tampico, adding, “We will aggressively look to expand into new markets and grow the brand”.
The acquisition, which comes on the back of Houchens' sale last year of Commonwealth Brands (the fourth biggest cigarette producer in the US) to the Imperial Tobacco Group for around US$1.9 billion, could prove one of the most value-enhancing soft drinks deals of 2008. Specifically, the current economic slowdown in Western markets is applying downward pressure on the 100% juice category (see Euromonitor comment, 100% juice squeezed by credit crunch) and Tampico, as a value-for-money brand, is ideally positioned to pick up some of the slack. Indeed, Tampico will not only be looking to dethrone archrival Sunny Delight as the fifth biggest brand in the US fruit/vegetable juice sector, it will also be gunning to win market share from premium juice brands such as Tropicana, Minute Maid and Dole. Espinosa confirms that the potential fallout from premium juice is an important opportunity for Tampico. “We've noticed that as the price of 100% juice increases people are switching to more economical juice drinks”, he said.
| United States: Fruit/Vegetable Juice Market: Top 10 Brand Rankings 2007 |
| Brand |
Company |
Market Share |
| Tropicana |
PepsiCo |
11.2 |
| Minute Maid |
Coca-Cola |
9.9 |
| Capri-Sun |
Wild GmbH & Co KG |
8.8 |
| Ocean Spray |
Ocean Spray Cranberries Inc |
5.2 |
| Sunny Delight |
Sunny Delight Beverages |
3.4 |
| Dole |
Dole Food Co Inc |
3.3 |
| Tampico |
Tampico Beverages Inc |
3.2 |
| Florida’s Natural |
Florida’s Natural Growers |
2.9 |
| Hawaiian Punch |
Cadbury Schweppes |
2.5 |
| V8 |
Campbell |
2.5 |
| Euromonitor International |
International expansion
Tampico was introduced to the US market in 1989 and over the past two decades has significantly raised its global profile, with a strong presence in Latin America and the Caribbean, especially Mexico, as well as niche penetration in Africa, Asia and Australasia. The management of the brand was the target of a radical overhaul in 2005 and, according to Espinosa, the new-look executive structure remains in place after the recent buyout. Citrus Punch is the brand's flagship format and under new leadership Tampico Beverages has sought to drive a more dynamic flavours portfolio, notably with kiwi-strawberry-guava, launched in the immediate aftermath of the management shake-up, which is now a top five flavour for the brand in its home market.
In an international context, Tampico operates through a licensee network. “We look for partners with the right packaging capability and efficient low-cost production (because) we need to be competitive on the retail price. We also look for licensees with a good marketing staff and good marketing synergies”, explains Espinosa. Dairy companies, in particular, tend to meet the right type of operational framework for Tampico. In bigger markets, the company will also look to sign up multiple partners, a strategy that proved important in Mexico in 2005 when a licence was withdrawn from Grupo Lala, the giant Mexican dairy company. Although Grupo Lala accounted for an estimated 60% of Tampico's sales in Mexico at the time of the licence termination, a potentially disastrous situation was averted because Tampico already had in place eight additional partners, geared to specific channels and regions. Multiple partners also mean that Tampico can positively play off one distributor against another.
Going forward, the company is largely ruling out any significant product segmentation, focusing instead on innovation in flavours and packaging. “We have tried Tampico Plus, which was a fortified Tampico drink, and Tampico Energy, but we found that it just was not a viable part of our portfolio”, said Espinosa. The brand heritage of Tampico is firmly embedded in the fruit-flavoured drinks category, which is likely to be at the heart of why Plus and Energy failed. It might be unwise, however, for Tampico Beverages to rule out functional drinks altogether, especially in international markets. The key to successful diversification would be in developing a product that does not threaten the Tampico heritage nor cannibalise its volume. This is a big challenge strategically and would require the bold approach of developing a brand that has its own unique identity. Too often, beverage companies believe they can leverage the equity of a flagship brand by using its name at the stem of a new product. This strategy will often work for low-calorie spin-offs, but it is less effective when trying to break into new categories. Imagine, for example, if Powerade had been named Coke Sport. In such a guise, it would be far more likely to steal volume from the flagship cola format as well as distort brand heritage. As a rule, small portfolio beverage companies need to take a bigger leap of faith when they launch new brands. Developing a product behind the shirt-tails of the dominant brand might seem an attractive low-risk option, but it rarely succeeds.
Over the short to medium term, the core strategic objective of Tampico Beverages will be to expand its brand globally. “We're taking a look at a lot of countries and all countries are basically on the table”, said Espinosa. Away from beverages, the company is also looking at developing a line of ice pops, with test marketing currently on stream in the US. This could prove an attractive niche business, but the company will remain first and foremost a beverage player. Crucially, in the current context of global credit volatility, the value-for-money concept that drives the Tampico fruit drink has potential to propel the brand into the world's soft drinks major league. Almost certainly it will be a brand to watch over the next five years. Industry competitors would be wise to take note.
Related Research
Soft Drinks reports in 82 countries
For more insight, please contact Rob Walker, Senior Non-Alcoholic Drinks Analyst at: rob.walker@euromonitor.com