wk10 - Assignment 5: Business Plan - Final

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Running head: GOGOLD CORPORATION Week3: Assignment 1: Company Description and SWOT Analysis Sub-title: GoGold Corporation Student's Name: Instructor's name: Dr. es Institution: Strayer University, NC Campus Course 's name: BUS 599 (Strategic Management) Date: 07-18-2017 1 GOGOLD CORPORATION 2 Introduction GoGold is my NAB Company of choice for drinks and beverages. A non-alcoholic beverage producer, the firm occupies a significant position within the industry. It manufactures a broad range of products including soda, distilled bottled drinking water, fruit juices, and tea beverages with unique flavors. GoGold corporation drinks and beverages have a significantly lower calorie count than that of other manufacturers in the industry; Moreover, management is keen on maintaining a high quality of commodities, hence the creation of a loyal and satisfied customer base. It is critical to evaluate GoGold's selection rationale, motto, strategy, SWOT Analysis, and distribution channel. Rationale for Selection First of all, the primary reason for selection of GoGold Company is the trends in the beverages industry. Over the years, there has been a general increase in the rate of child and adult obesity in the population. One of the major contributing factors to this condition is the consumption of unhealthy foods and drinks among other factors. Consequently, the focus is shifting towards the adoption of a healthier lifestyle, which will include an elimination of highcalorie products. GoGold meets this specification, with the lower sugar count in its products attracting a huge customer base. Besides, GoGold operates within a fast growing industry. Statistics indicate that the nonalcoholic beverages industry has steadily been growing at a constant rate. For example, in 2016, the sector's expansion was estimated to be 3.9%, and the trend will continue shortly. Since GoGold is in this market, it will reap the benefits of the industry's progressiveness in the future. GOGOLD CORPORATION 3 Mission Statement Additionally, GoGold mission statement "To nurture the human spirit-one person, one drink, and one place at a time" adequately describes various functions of the business. Although it is a brief statement, it provides all the critical details about the company. For example, it is evident that GoGold is in the beverages industry, and seeks to satisfy its customers' needs. Another outstanding feature of the mission statement is that it is memorable in nature, consumers and other stakeholders can easily recall the statement in their minds (Gharleghi, Nikbakht & Bahar, 2011). As a result, the general awareness about GoGold's product will continue increasing in the industry, thus enabling the firm capture a larger market share. Noteworthy is the futuristic nature of the mission statement. The management aims at capturing new markets in the region in a gradual manner. Moreover, the focus will be on taking the drinks to the market and winning over the customers, rather than waiting for the purchasers to go and buy the product. As a result, the management will greatly enhance the chances of the company's success. GoGold's Positioning Strategy GoGold will position itself in the market through the product differentiation approach. Due to the high competition in the non-alcoholic beverages industry, it is critical for the firm to use different avenues to overcome business rivals. GoGold will ensure the production of highquality products and subject all the merchandise to inspection by authorized government officers. Moreover, the administration will continue improving on quality through the use of excellent raw GOGOLD CORPORATION 4 materials, and adherence to the set standards. Through the enhancement of quality., the firm will penetrate into new markets, and solidify its advantageous position among competitors. Distribution Channel Additionally, GoGold has a well developed and coordinated distribution channel. The company outsources the delivery tracks from one of the most reliable firms in the country. The products transported from the manufacturing plant to various warehouses that strategically placed in different parts of the country. Wholesalers receive the goods promptly, and they distribute the products to the retailers in the market. Since the retail outlets found in closeproximity to consumers, the purchasers enjoy the place and time utility when buying the commodity( Christopher, 2016). Risk Analysis However, GoGold Corporations faces several risks that may inhibit its success. Firstly, it is changing in government regulations. Since the company operates within particular jurisdictions throughout the country, it should comply with the set laws and regulation (McMurray, 2016). Therefore, any regulatory change is bound to have a significant effect on the company. For example, if the state increases the tax rate, the company will record a higher tax liability and lower profits. Moreover, increases in licenses fees could also interfere with the operations of the business. Another significant risk is competition in the industry (McMurray, 2016). New firms continue to penetrate the market through the innovation of new goods and services. As a result, there is a high pressure to retain GoGold's market share and attract new consumers. Moreover, GOGOLD CORPORATION 5 the businesses also compete for talented employees, whose capabilities are essential to achieving a higher productivity in the market. The ability to deal with the two primary concerns will define the performance of GoGold Corporation. SWOT Analysis Lastly, it is critical to conduct a SWOT Analysis that is instrumental in defining the strengths, weaknesses, opportunity, and threats facing the company. These factors described in the bullet points below. Strengths High brand awareness of the company Production of quality goods Large distribution channel Weaknesses Lack of management-employee relationship in the company. Opportunities Penetration into new markets within and outside the country Introduction of more product lines Increase the number of flavors for each class of drinks Threats High competition of the beverages industry Rising costs of raw materials GOGOLD CORPORATION 6 References Christopher, M. (2016). Logistics & supply chain management. Pearson UK Gharleghi, E., Nikbakht, F., & Bahar, G. (2011). A survey of relationship between the characteristics of mission statement and organizational performance. Research Journal of Business Management, 5(3), 117-124. McMurray, D. (2016). 4. Business Plans.. NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Table of Contents Note #1 (Company Parameters)................................................................................................................................4 Note #2 (Equipment & Inventory).............................................................................................................................5 Note #3 (Personnel, Business Expenses, & Financial Matters)..................................................................................7 Note # 4 (Websites - Data & Statistics)......................................................................................................................9 Note # 5 (Market Research)....................................................................................................................................10 A guide to the non-alcoholic beverage industry..............................................................................................10 Industry overview.............................................................................................................................................10 Dominant carbonates category........................................................................................................................10 Major companies...............................................................................................................................................10 Understanding consumer craving for soft drinks...........................................................................................11 What's a soft drink made of?...........................................................................................................................11 Stimulants in soft drinks...................................................................................................................................11 Ingredient facts..................................................................................................................................................12 Understanding the value chain of the soft drink industry.............................................................................12 Industry Partners..............................................................................................................................................12 Bottling and distribution network...................................................................................................................13 Distribution: Third-party products.................................................................................................................13 Pricing power....................................................................................................................................................13 Key indicators of the non-alcoholic beverage industry..................................................................................14 Factors influencing sector growth....................................................................................................................14 Consumption expenditure................................................................................................................................14 Disposable income and consumer confidence.................................................................................................14 Understanding the soft drink industry's key markets....................................................................................15 Income bracket..................................................................................................................................................15 Hispanics............................................................................................................................................................16 Millennials.........................................................................................................................................................16 Teens...................................................................................................................................................................16 The role of branding and advertising in the soft drink industry...................................................................17 Updated 2/26/2016 1 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO The importance of advertising.........................................................................................................................17 Global brands....................................................................................................................................................17 Strong individual brand portfolios..................................................................................................................17 Investing in brands...........................................................................................................................................18 Why the soft drink industry is dominated by Coke and Pepsi......................................................................18 A rivalry for the ages........................................................................................................................................19 Threat from new entrants.................................................................................................................................19 Significant investments.....................................................................................................................................19 Why growth is sluggish in the non-alcoholic beverage industry....................................................................20 Falling demand..................................................................................................................................................20 Key indicatorper capita consumption..........................................................................................................20 Health concerns.................................................................................................................................................21 The soda tax.......................................................................................................................................................21 In challenging times, soft drinks makers optimize and thrive.......................................................................21 Productivity measures......................................................................................................................................21 Cost-cutting initiatives......................................................................................................................................22 Soft drink industry now looking to still beverages to boost sales..................................................................22 Social pressures forcing change.......................................................................................................................23 Ready-to-drink beverages................................................................................................................................23 International growth opportunities for the soft drink industry.....................................................................24 Beyond borders.................................................................................................................................................24 Growth prospects..............................................................................................................................................25 Positive trends...................................................................................................................................................25 Competition outside the domestic market.......................................................................................................25 Strategic deals in the soft drink industry........................................................................................................26 Industry alliances..............................................................................................................................................26 Recent Pepsi and Coca-Cola deals...................................................................................................................26 Other deal-making in the sector.......................................................................................................................27 Investing in soft drink companies with ETFs..................................................................................................27 Packaged investing............................................................................................................................................27 Consumer staple ETFs......................................................................................................................................28 Note # 6 (History & Industry Data/Forecasting & Technology)................................................................................29 Updated 2/26/2016 2 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Cognitive health appeals to all demographics.................................................................................................29 Omega-3s popular ingredient for brain health...............................................................................................29 Mental energy....................................................................................................................................................30 Focus on claims.................................................................................................................................................32 2016 New Product Development Outlook for beverages................................................................................32 Organic named top trend for new beverages in new year..............................................................................32 Buzzing about flavors...................................................................................................................................33 Creating success............................................................................................................................................35 Natural influence...........................................................................................................................................35 Sharing the work...........................................................................................................................................36 2016 expectations..............................................................................................................................................38 Beverage Industry launches new app..............................................................................................................39 Introductory video shows how to use Bev Industry Mobile.......................................................................39 (The NAB Company Portfolio will have lists of things that the BUS599 students would be able to sort through to conduct a SWOT Analysis and to apply to appropriate sections of the NAB Business Plan.) Updated 2/26/2016 3 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Note #1 (Company Parameters) This is the compilation of Data, Notes, and Information that have been put together to create a Business Plan, along with Pro-forma Financial Statements, for a start-up company in the non-alcoholic beverage industry. The goal of my business plan is twofold: 1 2 To help identify and outline all the issues I will need to address in starting this company. To present to funders to help raise money to finance this company. NAB Background: Melinda Cates has been selling her NAB at County Fairs for the past 7 years for $2 a bottle. She sells an average of 10 Cardboard cartons each weekend a County Fair is open. From her calculations, it takes $.56 to make a bottle of NAB when she calculates all the NAB ingredients and the cost of the bottle and cap. Her rich uncle, Bill, just died and left her a small monetary inheritance. However, since he so enjoyed her homemade NAB, he also left her equipment to start a small NAB business. Additionally, her uncle left her a facility that will allow growth to start the business. It has the potential for expansion in order to meet larger sales goals for the future. Melinda and I have been close, trusted friends for years. She knew I attended Strayer University and earned my MBA; so I agreed to assist her get the business up and running. I have agreed to put together a NAB Business Plan, and I have agreed to be the CEO/President of the company for at least the next five years. NAB Today: Parameters for New Company Here are the parameters in which I must work. The business is a start-up: We are not yet in operation. We already have a \"recipe\" for a beverage, but we are not yet making sales at any significant level. Product: the only barrier is that it must be a non-alcoholic beverage (NAB). It is up to me to decide upon what type of non-alcoholic beverage I intend to make and market. It can be sold in individual sizes or wholesale. Market size. I will start marketing and selling the NAB in my geographical area within a 100-mile radius from my home address. Business size. I can grow the NAB business to any size in excess of one million dollars in revenue by year two. In other words, this cannot be intended to be a one- or two-person micro-business. I intend to raise money. I will be looking for funding, and I have already started with friends and family money. However, at some point, I will need funds from outside investors, either angels or venture capitalists, depending on how much I project, I need to raise or receive from a group of individual investors on Kickstarter. I intend to have employees and develop my own organizational hierarchy. I do not need to raise money for my personal financial support for the first six months. In other words, I do not need to draw a salary for myself for the first six months of projections. Annual salary will be $55,002 1st year; adjusted to $110,004 2nd year; finally adjusted to $165,008 for all remaining years in position. Updated 2/26/2016 4 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Note #2 (Equipment & Inventory) The NAB Financial Worksheets will need to have the value of this equipment and inventory included. Some of the items we currently own: Owned Equipment: Two (2) NAB MixerBeverage Filling Machines (mixes up to 200 gallons each) - $28,500 each (value in current $) The Mixer Beverage Filling machine is a rinsing, filling, and capping (3-in-1) Monobloc machine, imported from Italy. Because it is equippedwith constant temperature controlling system, it can be applied to fill hot or cold fruit juice, tea and other beverageinto 16 oz.bottles. It is suitable for normaltemperature filling or hot filling 16 oz. bottles. It is one of the most advancedfilling machine at present. Two (2) Accutek AccuSnap Capper Bottling machines (for capping bottles) - $9,600 each (value in current $) See Auto AccuSnap Capper, below. Four (4) Vehicles (used panel vans) - $10,000 each (value in current $) Three (3) Computers (Apple Macintosh) - $1,200 each (value in current t $) Graphic Software -$$750 (value in current $) Leased Equipment: Labeling machinery - $450/month (in current $) Printers - $550/month(in current $) Current Inventory: Glass Bottles (16 oz.), 24,000 - $33,000 (value in current $) Labels, 24,000 - $840 (value in current $) Metal caps, 24,000 -$300 (value in current $) Cardboard Cartons (holds 48 bottles), 500 -$500 (value in current $) NAB-ingredients, enough to make 24,000 bottles - $600 (value in current $) Updated 2/26/2016 5 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO NOTES on EQUIPMEENT Accutek AccuSnap Capper - are continuous motion machines that replace the tedious work of manually pressing and/or placing snap caps. AccutekAccuSnap Cappers prevent costly spills by removing human error from this process. This machine can also help prevent repetitious motioninjuries and strains to your workforce that can result when manually placing snap caps. Accutek AccuSnap Cappers systems are available in three different styles, Belt, Roller, and Plunger in order to offer solutions to a variety of snap cap types. Milk jugs, dropperinserts, lip balm caps, over caps, \"top hat\" seals, twist cap with ratcheted rip seal, bar top caps, and a variety of other cap applications are all within the capabilities of AccutekAccuSnap Capper. Each machine is designed to accommodate a wide variety of container types. A variety of gripper belt optionsisavailable to stabilizedifferent types of containers. The Accutek AccuSnap Capper featuresan Accutek centrifugalbowl or cap elevatororientated arm. With anautomated delivery device, the AccutekAccuSnap Capper can reach speeds up to 120 CPM. SnapCap007 Dimensions Height: 94\" (238 cm) Width: 24\" (61 cm) Length: 32\" (91.4 cm) Weight 800 lbs. (363 kg) Speed Up to 120 CPM Cap Size Min: 10mm / Max: 660mm Electrical 110VAC 20 Amp (220 available) Air Requirements 120 PSI @ 2 CFM Updated 2/26/2016 6 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Note #3 (Personnel, Business Expenses, &Financial Matters) Personnel Requirements and Family Financial Investment Personnel Current Personnel: Myself(Student Name Here): Fulltime CEO/President; no salary for the first six months Stephen Job: Part Time (20 hrs/week) Computer Expert/Assistant: $10/hr Melinda Cates: NAB Creator & Master Mixer (owns the patent on the NAB): has $40,000 inheritance (Volunteer) Ian Glass: Retired PepsiCo plant production line foreman. Ian recently retired with 35 years of loyal PepsiCo service in every position from janitor to production line foreman, and he and his wife moved into your neighborhood. He is tickled that you have asked him to help develop a plan to get the NAB Company's production line going. He said he could help organize and sit on the planning committee as a non-paid member until the NAB Company can hire its own Production Line Foreman. He hinted that he retired from PepsiCo with an annual salary of $55,000, but he says that is just the starting salary that large companies pay their foremen who are in an apprenticeship program. He does not think the NAB Company will have to pay top dollar for someone who has the willingness to join the NAB Company as a start up! (Paid Consultant) Mary Cates, JD: Melinda's sister who was a senior executive with the Federal Trade Commission from 2001-2012. She left the FTC after a significant 30 year career with the federal government in which she lead the research and support of numerous federal court findings against companies that violated consumer deception and unfair practices laws. She would enjoy serving on the initial company-planning group to make sure her sister's recipe is successfully shared within the state! Future Personnel: Production Line Foreman (Note: in order to meet goals of creating a $1 M revenue company by year two; you will need more than one shift of employees.) Projection Line Workforce - (see note above) Maintenance Workforce (see note above) Business Expenses: - Marketing - Paid services (professional in nature) - Telephone/fax - Business Insurance - Office Supplies - Mailings and postage - Printing services - Inventory purchases Updated 2/26/2016 7 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Capital Expenditures: - Additional equipment purchases to meet production goals - Additional computer equipment Facilities: Need monthly estimates for the following areas: - Building maintenance costs - Utilities: - Water/Sewer - Gas - Electricity - Trash removal Financial Matters: Family Financial Investment: Collected $20,000 from friends and relatives who would like to either have their seed money returned by the end of this calendar year at no interest or by the end of the second year of operation with 5% interest. (If you chose, the early payoff you must adjusted your BPF on worksheet 8 to read 12 months and 0% interest, so that you are not paying loan payments automatically. If you chose to pay back over 24 months than the original instructions on the BPF Worksheet Guidance.) Financial Decisions: - Employee raises - Owner draw - Taxes - Investors - Sales (local, regional, national, or global) Updated 2/26/2016 8 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Note # 4 (Websites - Data & Statistics) Here are some websites for your continued used in reviewing statistics and data on the beverage (non-alcoholic) industry: http://marketrealist.com/2014/11/strategic-deals-soft-drink-industry/ http://www.statista.com/topics/1662on-alcoholic-beverages-and-soft-drinks-in-the-us/ http://libdatab.strayer.edu/login?url=http://search.ebscohost.com/login.aspx? direct=true&db=bth&AN=102826573&site=eds-live&scope=site http://www.bevindustry.com/articles/88194-nielsen-identifies-consumer-health-concerns http://www.bevindustry.com/articles/88184-bai-brands-disrupts-cpg-space-with-low-calorie-all naturalsolutions http://wwww.bevindusstry.com/artiicles/86916-zzico-to-sendd-fan-to-sochhi-2014-wintter-olympic- games http://www.bevindustry.com/videos?bctid=946203236001 http://www.ameribev.org/minisites/products/ http://beverageindustries.com/ Updated 2/26/2016 9 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Note # 5 (Market Research) A guide to the non-alcoholic beverage industry By Sharon Bailey Nov 20, 2014 12:08 pm EST Industry overview The non-alcoholic beverage industry broadly includes soft drinks and hot drinks. Soft drinks contain carbonated or non-carbonated water, a sweetener, and a flavor, and hot drinks include coffee and tea. The soft drink category dominates the industry and includes carbonates, juice, bottled water, ready-to-drink tea and coffee, and sports and energy drinks. Soft drinks are sometimes referred to as liquid refreshment beverages (or LRBs). In the US, LRBs lead food and beverage retail sales. In this series, we'll focus on the soft drink or LRB market. Dominant carbonates category The global soft drink market is led by carbonated soft drinks (or CSDs), which had a market size of $337.8 billion in 2013. In the same year, CSDs were followed by bottled water, with a market size of $189.1 billion, and juice, with a market size of $146.2 billion. In a later part of this series, we'll discuss why CSDs have been losing popularity, and why sales of other beverages, including juices and ready-todrink tea, are increasing. Major companies The non-alcoholic beverage market is a highly competitive industry that includes two behemoths The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP). Collectively, these companies hold about 70% of Updated 2/26/2016 10 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO the US CSD market. Dr Pepper Snapple Group, Inc. (DPS), Monster Beverage Corporation (MNST), and Cott Corporation (COT) are some other key players in the CSD market. Many international markets are also dominated by Coca-Cola and PepsiCo, but include other companies such as Groupe Danone, Nestle SA, and Suntory Holdings Limited. Non-alcoholic beverage manufacturers, like Coca-Cola and PepsiCo, are part of the consumer staple sector. You can invest in these companies through the Consumer Staples Select Sector SPDR ETF (XLP). Understanding consumer craving for soft drinks By Sharon Bailey Nov 20, 2014 12:08 pm EST What's a soft drink made of? Soft drinks contain water, nutritive or non-nutritive sweeteners, and syrups. The primary nutritive sweetener used in the US is high-fructose corn syrup (or HFCS), a form of sugar. Internationally, sucrose is the main nutritive sweetener used in soft drinks. Soft drink makers also use non-nutritive or artificial sweeteners such as aspartame, acesulfame potassium, saccharin, cyclamate, and sucralose. So what drives a person to consume a soft drink? Stimulants in soft drinks People crave soft drinks because they contain two stimulantssugar and caffeine. Also, the water in soft drinks hydrates. Soft drinks contain considerable amounts of sugar, which is a form of carbohydrate. Consumption of excess sugar releases a hormone called dopamine, which induces pleasure in the brain. Updated 2/26/2016 11 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Caffeine, another key ingredient, stimulates the nervous system, and helps you to stay awake or restores alertness. With its slightly bitter taste, caffeine's also used to enhance the flavor of carbonated soft drinks. Ingredient facts The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP) are the leading soft drink manufacturers. A 12fluid ounce can of Coca-Cola contains 39 grams of sugar and around 34 milligrams of caffeine. A 12fluid ounce can of Pepsi contains 41 grams of sugar and 38 milligrams of caffeine. A 12-fluid ounce can of Dr Pepper, made by Dr Pepper Snapple Group (DPS), contains 40 grams of sugar and 41 milligrams of caffeine. Energy drinks made by leading companies such as Monster Beverage Corporation (MNST) contain higher amounts of caffeine. Despite the considerable demand for soft drinks across the globe, these drinks are facing severe criticism for the ill-effects of high sugar content. Beverages come under the consumer staple sector. The Consumer Staples Select Sector SPDR ETF (XLP) is one way to invest in soft drinks companies. Understanding the value chain of the soft drink industry By Sharon Bailey Nov 20, 2014 12:08 pm EST Industry Partners Soft drinks constitute a major part of the US food and beverage industry. Syrup or concentrate producers and bottlers play a vital role in the value chain of the soft drink industry. Updated 2/26/2016 12 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Bottling and distribution network Companies in the soft drink industry reach the end market in two ways. One way is by selling finished products, made at company-owned bottling facilities, to distributors and retailers. Another, is by selling beverage concentrates and syrups to authorized bottling partners, who then make the final product by combining the concentrates with still or carbonated water, sweeteners, and other ingredients. The bottlers then package the product in containers and sell these beverages to distributors or directly to retailers. Also, both bottling partners and companies manufacture fountain syrups and sell them to fountain retailers. Fountain retailers include restaurants and convenience stores, which produce beverages for immediate consumption. Distribution: Third-party products The extensive reach of The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP) allows them to produce or distribute third-party brands. For instance, Coca-Cola is licensed to produce and distribute certain brands of Dr Pepper Snapple Group, Inc. (DPS) and Monster Beverage Corporation (MNST). PepsiCo sells Lipton and Starbucks brands under partnerships with Unilever and Starbucks, respectively. Pricing power Coca-Cola and PepsiCo's wide distribution network gives them significant pricing power. Carbonated soft drinks have similar prices due to the intense competition in the industry. Often, soft drink companies extend lower prices under promotional offers. In recent times, such promotional offers have been used to boost volumes of the carbonated soft drinks. That's because they're under pressure due to rising health concerns and competition from healthy substitutes such as tea, energy drinks, and water. The non-alcoholic beverage industry is part of the consumer staples sector. You can invest in this sector through the Consumer Staples Select Sector SPDR ETF (XLP), which has notable holdings in CocaCola and PepsiCo. Key indicators of the non-alcoholic beverage industry By Sharon Bailey Nov 20, 2014 12:09 pm EST Factors influencing sector growth The non-alcoholic beverage industry falls under the consumer staples category (XLP), which is noncyclical in nature compared to the consumer discretionary sector. In this part of the series, we'll look at the factors that impact the growth of the non-alcoholic beverage industry. Updated 2/26/2016 13 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Consumption expenditure The Bureau of Economic Analysis (or BEA) releases the personal income and outlays monthly reports that indicate changes in individuals' personal incomes, savings, and expenditures. US consumption spending accounts for over two-thirds of the country's gross domestic product (or GDP). The US real personal consumption expenditure for non-durable goods measures consumer spending on non-durable goods, such as food and beverages, on an inflation-adjusted basis. Disposable income and consumer confidence Consumption expenditure depends on disposable income, which is measured as personal income less personal current taxes. People tend to spend more with a rise in their disposable income. Increase in consumer confidence also increases consumption expenditure. In the US, the Conference Board and the University of Michigan each provide monthly reports on the consumer confidence index, which indicates the degree of optimism about the state of the economy as reflected in consumer spending and saving activities. According to market-intelligence firm Euromonitor International, consumer-expenditure growth in emerging markets has surpassed that in developed markets every year since 2000, and is expected to continue doing so. A favorable trend in consumer spending on non-durable goods is a positive indicator for the nonalcoholic beverage industry. It's also good for the performance of exchange-traded funds (or ETFs) that invest in the consumer staple sector. The Consumer Staples Select Sector SPDR ETF (XLP) has holdings in the major soft drink companies like The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr. Pepper Snapple Group, Inc. (DPS), and Monster Beverage Corporation (MNST). Updated 2/26/2016 14 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Understanding the soft drink industry's key markets By Sharon Bailey Nov 20, 2014 12:09 pm EST Income bracket The growing population and rise of the middle class, particularly in emerging markets, are key growth drivers for non-alcoholic beverage companies. Market intelligence firm Euromonitor International estimates the middle class around the world will include 1.5 billion households by 2020, a 25% rise over 2012. Hispanics Many companies are innovating products and investing in marketing campaigns that target fast-growing population segments, such as the Hispanic community in the US. Hispanics include people of Cuban, Mexican,Puerto Rican, Southern or Central American descent. People of other Spanish cultures or origins, regardless of race, are also considered Hispanic. Nielsen estimates that by 2015, Hispanics will have $1.5 trillion in buying power, reflecting a significant 50% rise from 2010. Millennials \"Millennial\" refers to the generation of people who were born between 1981 and 1996. According to Nielson, there are 77 million Millennials in the US, representing 24% of the US population. Millennials make extensive use of social media and mobile devices, and have more product awareness. Updated 2/26/2016 15 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Major companies in the soft drink industry, including The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr Pepper Snapple Group (DPS), and Monster Beverage Corporation (MNST), are focusing their marketing strategies on this influential demographic group. Teens The teen population is a core demographic for the soft drink industry. At the 2014 Consumer Analyst Group of Europe conference, Coca-Cola reflected on the importance of the 3.5 billion people who are in their teens and early 20s. Soft drink companies are part of the consumer staples sector. Investors can access this sector through the Consumer Staples Select Sector SPDR ETF (XLP). The role of branding and advertising in the soft drink industry By Sharon Bailey Nov 20, 2014 12:09 pm EST The importance of advertising The soft drink industry is marked by severe competition and declining demand for carbonates. Major companies in the industry sustain positions in this adverse scenario on the strength of company and product branding and advertising strategies. Global brands The industry includes companies that enjoy huge popularity all over the globe. Brand consultancy Interbrand ranked The Coca-Cola Company (KO) as the world's third-most valuable brand, with a value of $81.6 billion. Coca-Cola's closest competitor PepsiCo, Inc. (PEP) ranked 24th, with a brand value of $19.1 billion. Updated 2/26/2016 16 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Strong individual brand portfolios Coca-Cola and PepsiCo own impressive brands that generate more than a billion dollars each in revenues. Coca-Cola: The company owns more than 500 brands, and features 17 brands that generate more than one billion dollars each in revenues, including Coca-Cola, Diet Coke, Powerade, Aquarius, Bonqua, Dasani, Fanta, Schweppes, and Minute Maid. PepsiCo: The company's massive brand portfolio includes 22 brands generating revenues of more than one billion dollars each. Some of its better-known labels are Pepsi, Mountain Dew, Gatorade, Mirinda, Aquafina, and Lipton. Investing in brands Soft drink makers continually invest in branding. In 2013, Coca-Cola and PepsiCo spent $3.3 billion and $3.9 billion, respectively, on advertising and marketing activities. Updated 2/26/2016 17 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO The success of Coca-Cola's Share a Coke campaign is a perfect example of the importance attached to marketing in this industry. The Share a Coke campaign was first rolled out in Australia in 2011 and then extended to more than 50 countries. The campaign allowed fans to put their names or those of their family and friends right on the front of Coca-Cola bottles or cans, effectively personalizing the product. The campaign increased the volume of the Coca-Cola brand's sales. In 2013, it generated 5% and 1% full-year volume growth in Germany and the Northwest Europe and Nordics region, respectively. Peers in the industry such as Dr Pepper Snapple Group, Inc. (DPS) and Monster Beverage Corporation (MNST) also focus intently on marketing. Dr Pepper Snapple, the third-largest company in the US soft drink market, spent $486 million on advertising in 2013. Monster, a leading player in energy drinks, incurred $181.8 million in advertising expenses. Soft drinks come under the consumer staple sector. You can access this sector through the Consumer Staples Select Sector SPDR ETF (XLP). Why the soft drink industry is dominated by Coke and Pepsi By Sharon Bailey Nov 20, 2014 12:09 pm EST A rivalry for the ages The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP) have dominated the non-alcoholic beverage industry for ages. Coca-Cola is the world's largest non-alcoholic beverage company with more than 500 brands, including 17 brands that generate more than a billion dollars each in revenue. PepsiCo owns leading brands across its snack foods and beverage portfolio, including 22 brands that generate more than a billion dollars each in revenue. According to Beverage Digest, the companies have a combined share of about 70% of the US carbonated soft drink (or CSD) market. Updated 2/26/2016 18 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Both companies have a wide geographic presence in more than 200 countries. The rivalry between these two companies, popularly called the cola wars, is legendary. Both have spent huge sums of money on mutually targeted advertisements over decades. Threat from new entrants The industry does not face any major threats from new entrants because Coca-Cola and PepsiCo each have an extensive bottling and distribution network and huge economies of scale. For example, CocaCola has about 250 bottling partners and 900 plants worldwide. It would be difficult for a new entity to make the substantial capital investments required to compete with these firms. Dr. Pepper Snapple Group, Inc. (DPS) has seen impressive growth in the US CSD market, yet it lacks the international presence of these giants. Significant investments Coca-Cola and PepsiCo spend enormous amounts of money on innovation, advertising and marketing, and on strengthening their distribution network. Since 2010, Coca-Cola and its bottling partners have invested more than $50 billion in new facilities, distribution infrastructure, equipment, and retail customer activations. PepsiCo spent 5.9% of 2013 net revenue on advertising and marketing. Other companies in the non-alcoholic beverage industry include Cott Corporation (COT) and Mondelez International Inc. (MDLZ). You can also invest in the non-alcoholic beverage sector through the Consumer Staples Select Sector SPDR ETF (XLP) that has notable holdings in Coca-Cola and PepsiCo. In the next part of this series, we'll look at the reasons for disappointing growth in the non-alcoholic beverage industry. Why growth is sluggish in the non-alcoholic beverage industry Updated 2/26/2016 19 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO By Sharon Bailey Nov 20, 2014 12:09 pm EST Falling demand The non-alcoholic beverage industry is facing challenges. Carbonated beverage volumes are falling, primarily in developed markets. Beverage Digest indicates a 3% fall in 2013 overall carbonated soft drink (or CSD) volumes in the US, making it the ninth straight year in which demand has declined. Previously, US CSD volumes declined by 1.2% and 1% in 2012 and 2011, respectively. Key indicatorper capita consumption The per capita CSD consumption in the US fell to about 675 8-ounce servings per person in 2013, from 701 8-ounce servings in 2012. Reduced consumption reflects the declining volumes and a slower rate of US population growth. One of the reasons for the continued decline in soft drink volumes over the past few years is weak consumer spending, caused by adverse macroeconomic conditions, especially in the US and Europe. Health concerns Another major reason is the shift in consumer preferences toward healthier products. Carbonated soft drink makers have faced severe criticism from health officials, governments, and communities alike for the ill-effects of high sugar content, artificial sweeteners, and other harmful ingredients in their products, including those in diet soda variants. Consumers are also more conscious of the health risks associated with soft drinks such as obesity and nutritional deficiencies, especially in youth. As a result, they're opting for other beverages that are non-carbonated and have fewer calories. The World Health Organization suggests that sugar should account for only 5% of total energy intake per day. That's around 25 grams of sugar per day for an adult of normal body mass index. Health officials Updated 2/26/2016 20 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO feel that this percentage should be even lower for a better quality of life. A single soda can contains around 40 grams of sugar. The soda tax Mexico, which has the highest rates of obesity in the world, has imposed a 10% tax on sugary beverages to discourage the consumption of these drinks. There is a strong possibility that many other countries will introduce a soda tax to reduce sugar consumption through carbonated drinks. In the next part of this series, we'll discuss how soft drink makers including The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr Pepper Snapple Group, Inc. (DPS), and Monster Beverage Corporation (MNST) are sustaining business under such challenging conditions. Coca-Cola and PepsiCo are part of the Consumer Staples Select Sector SPDR ETF (XLP). In challenging times, soft drinks makers optimize and thrive By Sharon Bailey Nov 20, 2014 12:09 pm EST Productivity measures Companies in the soft drink industry are taking several initiatives to streamline operations and cut costs. These measures are needed to offset declining volumes in the carbonated drinks category and the challenging business conditions apparent in Europe, North America, and other key markets. Cost-cutting initiatives Updated 2/26/2016 21 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Significant optimization measures allow soft drink companies to make it through challenging times. The Coca-Cola Company (KO) is streamlining its operations and restructuring its global supply chain. In North America, the company's optimizing its manufacturing footprint. It recently announced plans to expand its productivity program, through which it aims to save $1 billion by 2016, $2 billion by 2017, and $3 billion by 2019. The company intends to reinvest these savings in brand-building initiatives, mainly media spending. PepsiCo, Inc. (PEP) is on track to achieve $1 billion in savings globally in 2014. It's cutting costs across procurement, research and development, and other functions. The company recently extended its $1 billion annual productivity savings target through 2019. PepsiCo is focusing on enhancing its operations through automation, including automated packaging, case picking, and forklift transportation. Another major US soft drink maker, Dr Pepper Snapple Group, Inc. (DPS), commenced its rapid continuous improvement program in 2011 and achieved $169 million in cash productivity over the 2011 to 2013 period. These measures are helping companies protect margins in adverse market conditions. The soft drink industry also includes Monster Beverage Corporation (MNST) and Mondelez International, Inc. (MDLZ). You can also invest in this industry through the Consumer Staples Select Sector SPDR ETF (XLP). Soft drink industry now looking to still beverages to boost sales By Sharon Bailey Nov 20, 2014 12:09 pm EST Social pressures forcing change The carbonated soft drinks (or CSD) category of the soft drink industry has witnessed declining volumes in the past few years. Mainly, this is due to challenging conditions in developed markets and increased health awareness among consumers about the side-effects of sugar and other ingredients present in carbonated drinks. Updated 2/26/2016 22 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Soft drink makers are facing severe pressure from civil society groups and governments to reduce the calories in soft drinks. In the September 2014 Clinton Global Initiative, the three largest US soda companiesThe Coca-Cola Company (KO), PepsiCo, Inc. (PEP), and the Dr Pepper Snapple Group, Inc. (DPS)pledged to reduce the number of sugary drink calories that Americans consume by 20% over the next decade. To achieve this target, the three big players plan to expand low-calorie product portfolios, introduce smaller portion containers, and educate consumers about healthier alternatives. The change in consumer preferences has provided a new opportunity for CSD manufacturers to grow into the still beverages, or the non-carbonated category of the ready-to-drink market. Ready-to-drink beverages The non-alcoholic, ready-to-drink (or NARTD) market is projected to grow at a compounded annual growth rate of 5% between 2014 and 2017. A large proportion of this growth will come from emerging economies. Since 2010, NARTD retail value has increased by $135 billion and Euromonitor International estimates this category will grow by more than $200 billion by 2020. Updated 2/26/2016 23 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO In the first half of 2014, ready-to-drink tea and coffee, sports and energy drinks, and bottled water recorded strong growth. Coca-Cola and PepsiCo have a strong presence across these categories and are investing heavily for further portfolio expansion. Other companies including Dr Pepper Snapple and Monster Beverage Corporation (MNST) are also investing in product development in these categories in an attempt to cater to changing consumer tastes. This new focus on healthier and nutritious products based on changing consumer preferences and increasing health consciousness will be a key growth driver for the non-alcoholic beverage industry. The Consumer Staples Select Sector SPDR ETF (XLP) provides an attractive avenue to invest in soft drink companies. International growth opportunities for the soft drink industry By Sharon Bailey Nov 20, 2014 12:09 pm EST Beyond borders The soft drink industry is looking for growth beyond developed markets like the US, where the reach of carbonated soft drinks has reached a saturation point. The Coca-Cola Company (KO) derived 58% of its 2013 revenues internationally. PepsiCo, Inc. (PEP), which is a leading food and beverage company, generated 49% of its revenues outside the US. Updated 2/26/2016 24 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Growth prospects The per capita consumption in a region measures the average number of 8-ounce servings consumed each year. For Coca-Cola, per capita consumption in 2012 was 745 in Mexico and 401 in the US, as the chart above shows. But per capita consumption was comparatively low in countries such as China and India, indicating that in many countries, soft drinks are not consumed as widely as in the domestic market. Companies including PepsiCo and Coca-Cola are focusing on these growth regions to increase per capita consumption by investing in manufacturing and distribution networks, as well as advertising. Positive trends Growing populations and better standards of living in emerging markets will drive demand for beverages. Rising health awareness among consumers across the globe is moving them toward better options including ready-to-drink tea, bottled water, and low-calorie products. The long-term prospects for growth in emerging economies are promising. In the short-term, however, there might be certain impediments such as lower-than-expected consumer spending growth in countries such as China. Competition outside the domestic market Coca-Cola and PepsiCo compete with local niche players and private labels in developing markets. For instance, in China, Hangzhou Wahaha Group Co., Ltd., Hebei Yangyuan Zhihui Beverage Co., Ltd., and Guangdong Jiaduobao Beverage & Food Co., Ltd. are some of the key players in the soft drink market. Updated 2/26/2016 25 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Other soft drink manufacturers such as Monster Beverage Corporation (MNST) and Mondelez International, Inc. (MDLZ) are also looking for international growth opportunities. An alternative way to invest in the soft drink industry is through the Consumer Staples Select Sector SPDR ETF (XLP). Strategic deals in the soft drink industry By Sharon Bailey Nov 20, 2014 12:10 pm EST Industry alliances Major companies in the soft drink industry are looking for strategic deals to expand product portfolios or to strengthen distribution networks. These alliances will help companies offset declining demand for carbonated soft drinks. Recent Pepsi and Coca-Cola deals In 2014, The Coca-Cola Company (KO) announced a long-term partnership with Keurig Green Mountain, Inc. (GMCR). The deal will allow people to enjoy ice-cold Coca-Cola beverages at home with the soon-to-be-released Keurig Cold machine. In August 2014, Coca-Cola announced the purchase of a 16.7% stake in Monster Beverage Corporation (MNST). The $2.15 billion deal will help both companies leverage their respective strengthsCocaCola's bottling system and Monster Beverage's position as a global energy player. Under the terms of the partnership, Coca-Cola will transfer ownership of its energy business, including drinks such as Full Throttle, Burn, and Relentless, to Monster Beverage. Monster Beverage will transfer Updated 2/26/2016 26 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO its non-energy business, including drinks such as Hansen's Natural Sodas, Peace Tea, Hubert's Lemonade, and Hansen's Juice Products, to Coca-Cola. In October 2014, PepsiCo, Inc. (PEP) and home carbonation maker Sodastream International entered into a short-term agreement to test a limited number of PepsiCo flavors for SodaStream machines. Other deal-making in the sector In 2014, Dr Pepper Snapple Group, Inc. (DPS) acquired Davis Beverage Group and Davis Bottling Co. to enhance its distribution network. In November 2014, Cott Corporation (COT) announced the $1.5 billion acquisition of DSS Group, Inc., parent company of DS Services of America, Inc., a leading water and coffee direct-to-consumer services provider in the US. With this acquisition, Cott, a leading producer of private-label soft drinks, juices, sparkling water, and energy drinks, will expand into growing markets. Examples of growing markets include water and coffee home-and-office delivery services, water filtration services, and retail services. The soft drink industry is part of the consumer staples sector. You can invest in the soft drink industry with the Consumer Staples Select Sector SPDR ETF (XLP), which has notable holdings in Coca-Cola and PepsiCo. Investing in soft drink companies with ETFs By Sharon Bailey Nov 20, 2014 12:10 pm EST Packaged investing Exchange-traded funds (or ETFs) are capital market instruments that are designed to track an index, a commodity, or a basket of assets. Soft drink companies come under the consumer staples sector. There are many consumer staples sector ETFs that help investors access stocks in the soft drink industry. Updated 2/26/2016 27 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Consumer staple ETFs Consumer staple ETFs provide exposure to companies that produce essentials, including food, beverages, tobacco, and household items. The above chart shows the exposure of some of the consumer staples ETFs to beverage companies, both alcoholic and non-alcoholic. The Consumer Staples Select Sector SPDR Fund (XLP) tracks the S&P Consumer Staples Select Sector Index. The Vanguard Consumer Staples ETF (VDC) tracks the MSCI US Investable Market Consumer Staples 25/50 Index. Assets under management of the XLP and the VDC are $9.64 billion and $2.35 billion, respectively, as of November 17, 2014. The expense ratios for the XLP and the VDC are 0.16% and 0.14%, respectively. Both the XLP and the VDC have The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP) in their top ten holdings. Coca-Cola and PepsiCo are the dominant companies in the soft drink industry and together, hold 70% of the US carbonated soft drink market share. The First Trust Consumer Staples AlphaDEX Fund (FXG), using the StrataQuant Consumer Staples Index as its benchmark, selects stocks from the Russell 1000 Index. The FXG has $2.11 billion in assets under management and has an expense ratio of 0.70%. Monster Beverage Corporation (MNST), a leading energy drinks maker, features in the top ten holdings of the FXG. Dr Pepper Snapple Group, Inc. (DPS), the third-largest soft drink company in the US, is also a part of the XLP, the VDC, and the FXG ETFs. ETFs are an efficient way to gain diversified exposure to various sectors and broad markets. To learn more, you can read Market Realists Macro ETF analysis (http://marketrealist.com/analysis/etfanalysis/) page. Updated 2/26/2016 28 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Note # 6 (History& Industry Data/Forecasting & Technology) The non-alcoholic beverage industry plays an important role in the U.S. economy. Our industry has a direct economic impact of more than $169 billion, provides nearly 240,000 jobs and helps to support hundreds of thousands more that depend, in part, on beverage sales for their livelihoods. Beverage companies and their employees, and the firms and employees indirectly employed by the industry, provide significant tax revenues $13.6 billion at the state level and $22.9 billion at the federal level. In addition, the beverage companies that produce and distribute non-alcoholic beverages in the U.S. and those they directly employ contribute nearly $1.6 billion to charitable causes in communities across the nation. The American Beverage Association (ABA) is the trade association that represents America's non-alcoholic beverage industry. ABA was founded in 1919 as the American Bottlers of Carbonated Beverages, and renamed the National Soft Drink Association in 1966. Today the ABA represents hundreds of beverage producers, distributors, franchise companies and support industries. Together, they bring to market hundreds of brands, flavors and packages, including regular and diet soft drinks, bottled water and water beverages, 100 percent juice and juice drinks, sports drinks, energy drinks and ready-to-drink teas. ABA provides a neutral forum in which members convene to discuss common issues while maintaining their tradition of spirited competition in the American marketplace. The Association also serves as liaison between the industry, government and the public, and provides a unified voice in legislative and regulatory matters. As the national voice for the non-alcoholic refreshment beverage industry, the American Beverage Association staff of legislative, scientific, technical, regulatory, legal and communications experts effectively represent members' interests. Cognitive health appeals to all demographics Omega-3s popular ingredient for brain health By Jamie Popp (Feb 2015) An estimated 5.2 million Americans suffer from Alzheimer's disease, and although the majority are older than 65, younger-onset Alzheimer's impacted 200,000 people last year, according to the Alzheimer's Association, Chicago. Furthermore, total payments in 2014 for all individuals with Alzheimer's disease and other dementias were estimated at $214 billion, the association adds. Updated 2/26/2016 29 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO Increasingly, attention is being put on brain health and preventative measures such as diet and exercise in line with consumers, particularly baby boomers, expressing concerns about memory loss and dementia. However, ingredients that help consumers maintain their cognitive abilities are emerging to help all age groups to support brain development, focus and more. \"Cognitive health applies to all ages, as newborns and children develop cognition early, [middle-aged people] count on it for their careers, and the older generation strives for maintenance for as long as possible,\" says Volker Berl, founder and chief executive officer at Oceans Omega, Montvale, N.J. \"Consumers are naturally interested in maximizing intake of the right ingredients to maintain cognition for a lifetime, supporting memory, alertness, attention, mood and focus.\" Many ingredients are associated with cognitive health, but omega-3 DHA has the strongest body of scientific support, according to Berl. But vitamin D; coenzyme Q10; phosphatidylserine; magnesium; resveratrol; pycnogenol; vitamin E; and botanicals such as ashwagandha, ginkgo biloba, vinpocetine, ginseng and curcumin also are considerations, he adds. Oceans Omega offers a range of stable omega-3 ingredients that are water soluble and clear because of its stabilization technology and sustainable sources of omega-3s from ingredient partners such as DSM Nutritional Products, Kaiseraugst, Switzerland, and Nutegrity, Irvine, Calif. OTEC 300LDHA delivers life'sDHA from DSM, a fish free, vegetarian and sustainable source of DHA from algae, the company says. OTEC 250CL-K delivers OmegaActiv from Nutegrity, a pure, sustainable, vertically integrated source of omega-3s from menhaden that contains a balanced level of omega-3s DHA, EPA and DPA, according to the company. Used in clear beverages and liquid nutritionals, OTEC ingredients increase shelf life for finished products at ambient temperatures, the company says. They also are compatible with most beverage processing conditions such as hot fill, cold fill, carbonation and pasteurization, according to the company. Mental energy Nutegrity closely follows the advent of brain health and the focus of today's consumers on products that provide a memory boost or afternoon edge. \"The [brain health] category is interesting to us because of aging baby boomers and challenges from cognitive function, but millennials and their brains are hardwired to go fast, and they are looking for some type of edge,\" says Matt Phillips, chief commercial officer at Nutegrity. The focus is not only on memory and improved cognitive function, but also on general brain health as well as antioxidants and anti-inflammation specific to brain inflammation in relation to diseases, he says. Nutegrity, a division of Omega Protein Corp., Houston, focuses its primary business in fishing and omega-3s, Phillips says. From a beverage standpoint, milk companies can use omega-3s in their formulations, but the company also produces dairy protein as well as a line of nutraceuticals. \"Most of the work we're doing is focused on antioxidants and higher concentrations of omega-3s,\" Phillips says. \"At one time, most companies were doing product development and spending time on Updated 2/26/2016 30 NON-ALCOHOLOIC BEVERAGE COMPANY PORTFOLIO ingredients, and now they are looking to ingredient suppliers to ... come to the table with a turnkey solution.\" Focus formulas and energy drinks openly tout the cognitive benefits of the ingredients to appeal to a wide audience, but the claims have to be backed by scientific evidence or beverages risk being pulled from store shelves. As a result, many companies dedicate considerable time substantiating new and existing claims and discovering ways to use their ingredients based on findings in clinical trials. Oceans Omega closely follows studies related to adolescents and brain health. For example, to determine the effects of algal DHA supplementation on reading and behavior in healthy school-aged children, researchers conducted the Docosahexaenoic Acid Oxford Learning and Behavior (DOLAB) Trial and reported that supplementation with 600 mg each day with algal DHA for 16 weeks improved reading and behavior in healthy school-aged children, aged 7 to 9 years old, with low reading scores. \"We work on educating the end producer,\" says Karen Todd, director of global brand marketing at New York City-based Kyowa Hakko U.S.A. Inc. The company's Cognizin product features citicoline, which increases cellular synthesis and energy, she says. Ingredients such as Cognizin are associated with boosting brain energy, supporting mitochondrial health, and boosting levels of ATP, according to the company's research. This ingredient also is associated with inc