Brand Messaging Analysis NXT Beverages

Prepared For:

Frank Corsini, Managing Partner NXT Nutritionals MacKenzie Communications

By:

Introduction NXT Nutritionals, over a period of the last four years, has been in product development of a new, healthier ingredient formula suitable for both carbonated soft drinks and flat drinks. From time to time, MacKenzie Communications, under a non-disclosure agreement, has consulted with NXT Nutritionals and its principals on the issues of marketing and brand ing. NXT Nutritionals asked MacKenzie Communications to provide this look at brand positioning and associated brand messaging based on the unique characteristics of their product, particularly as it relates to its use in a carbonated soft drink, and the product/label claims expected to be allowed by the Food & Drug Administrations (FDA). NXT Nutritionals is considering aiming this drink at teens and pre-teens and is particularly interested in its impact as it relates to the areas of obesity and diabetes.

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

Summary Todays consumers, more informed and more health-conscious than ever, are turning away from traditional soft drinks and toward other refreshments including nutraceuticals (value-added sports and energy flat drinks and juices), fitness waters and bottled waters as they realize there is little nutritional value in soft drinks and, in some cases, consider a soft drink or a diet soft drink to be an unhealthy choice, especially for children.

It is significant that drinkers are not being driven out of the beverage aisle in search of a better taste, but rather in pursuit of a healthier beverage.

For carbonated soft drink companies, this presents two fundamental marketing challenges: 1. slowing the migration away from soft drinks and over to flat drinks, nutraceuticals, waters, etc., and 2. wooing customers who are becoming habituated to new brands and tastes back into the soft drink aisle.

NXT Nutritionals answers these two challenges with a remarkably unique ingredient formula for carbonated soft drinks (and flat drinks). The new formula from NXT Nutritionals has a broad spectrum nutritional efficacy and calorie/energy delivery system that is superior to all carbonated soft drink products currently being marketed. The product will be called NXT or NXT Drink for the purposes of this document.

The NXT carbonated soft drink delivers the same soft drink taste that consumers grew up on and in many cases prefer, with a nutritional load and make-up that is superior to any other soft drink.

NXT is, by any reasonable measure, the worlds first healthy soft drink.

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

In a taste-great formula for cola, lemon- lime and other flavors, a NXT carbonated soft drink delivers more nutrition, outperforms, by a wide margin, any other carbonated soft drink as well as nut raceuticals like Snapple, Gatorade & SoBe.

In fact, a serving of NXT contains more nutrition and a healthier sugar-profile than a serving of orange juice. This is a soft drink that parents can serve to children 24- hours-aday, seven-days-a-week;

NXT has the potential to change the way soft drinks are consumed. Considering the nutritional make- up of NXT, it is a drink that could be appropriately served at any meal, it is a drink that a parent would gladly pack in a childs school lunch box. It is a drink that school districts would welcome on campus either vended or as part of a school lunch program.

Covington & Burling, a Washington D.C. law firm and expert counsel in FDA labeling and product claim rules and regulations, has reviewed the NXT research and product development materials and opined that the product and product labeling claims proposed herein comply with FDA requirements. This provides significant marketing advantage to NXT Drink as no other carbonated soft drink meets this high standard of product integrity.

Of added benefit, the NXT ingredient formula for flat drinks and the associated nutraceutical category surpasses an increased standard of substance reliability and drink safety currently being considered by the FDA. It is speculated that this move by the FDA could spell trouble for some of the nations most widely distributed flat drinks.

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

FDA Allowable Claim s for NXT According to the FDA, in developing structure/function claims, not only must those claims be supported by an adequate inclusion level of a specific ingredient (s), but also in some cases, a rational, scientifically based discussion of how ingredients interact in your product for a specific benefit objective.

NXT Nutritionals has already prepared and progressed with scientific support for a variety of allowable and germane label and marketing messages including: 1. NXT delivers smart energy for leaner bodies 2. NXT delivers smooth, sustained energy release 3. NXT helps maintain healthy (blood) sugar levels 4. NXT optimizes energy (metabolism) 5. NXT minimizes sugar rushes 6. NXT optimizes calcium and mineral absorption 7. NXT is teeth, bone and heart friendly 8. NXT improves exercise recovery 9. NXT reduces body stress 10. NXT is antioxidant rich 11. NXT inhibits free radical production 12. NXT provides the soluble fiber of eight bananas 13. NXT is heart healthy

In short, NXT delivers leaner, meaner calories. It is a great-tasting, refreshing nutritional wallop that is great for kids (and adults) any time of day or night.

In positioning against mature products where there may be an accepted-but-not-admired standard of quality, sometimes statements about what a product doesnt have communicate the quickest or become the most powerful. In addition to the above

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

benefits and relating to NXTs contributions to maintaining a healthy diet, the following claims can be made: 1. NXT is phosphoric acid free 2. NXT contains half sugar of conventional soft drinks 3. NXT means no sugar crash 4. NXT means no empty calories

In further support of its healthy-body message, NXT Drink may list the following ingredients: 1. Calcium 2. Zinc 3. Vitamin C 4. Folic Acid 5. Vitamins B-6 & B-12 6. Magnesium 7. Soluble Fiber (inulin) 8. Citrus, Bilberry & Grapeseed (Polyphenols) T actical Ingredient Modifications and Claims Perspective: Increasing the use of one of NXTs ingredient components, Inulin (recommended total of 8 grams per day; 2.8 grams per 8 oz serving), further supports NXTs claim profile. For example, Inulins FDA approved structure/function claim helps promote mineralization further supports NXTs positioning for stronger bones and teeth, complementing NXTs nutritional architecture which adds key bone nutrients, lower sugar and the absence of phosphoric acid.

Another example is Inulins approved influence on helping to stabilize blood sugar, reduce insulin spiking and its consequences such as fat conversion and mood swings

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

combined with the specific presence of antioxidants deterring the effects of higher sugar intake.

Positioning For kids, NXT Drink is SoBe and Gatorade meet Coca-Cola. A taste kids love with the health and nutrition of a sports drink/juice. However, while NXT means consumers no longer have to bypass the soft drink aisle in search of healthy refreshment, NXT should not be positioned against flat nutraceuticals and fitness waters and the pure gulp-ability such beverages deliver.

In addition to its ability to claim a value-added, body-healthy drink profile, NXT Drink can also take a page out of the growing energy drink category dominated by Red Bull. These drinks are designed to deliver, among other things, increased physical endurance, a stimulated metabolism, and increased stamina, all of which are accomplished through NXTs healthy energy-delivery sys tem and optimized nutrient functionality.

Carbonated soft drink companies seem rudely late to the nutrition party, an action (or inaction) todays informed, skeptical and intolerant consumers seem to be critiquing with a shift in spending patterns. To date, industry solutions for category sales lost to nutraceuticals and fitness waters have been, for the most part, acquisition-based, or, if you cant beat em, buy em, as exampled by PepsiCos recent purchase of South Beach Beverages (SoBe) and Quaker Oats (Gatorade), and the Cadbury Schweppes purchase of Snapple.

Including Cokes recent release of a new lemon taste, there seems to be nothing to give consumers hope of any meaningful innovation happening in the carbonated soft drink aisle. Further and future marketing twists, which more often than not lead to brand cannibalization, are sure to fall on deaf ears; perhaps what the world needs least is yet

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

another flavor of carbonated soft drink NXT provides consumers permission to truly believe it is time to return home to soft drinks.

Another way of saying this is that the market seems ripe for new thinking. If purchase trends mean anything, consumers are poised to reward a company for understanding consumer actions and responding to consumer needs.

From a marketing perspective, this Gatorade/Juice- meets-Pepsi positioning delivers tremendous opportunity to differentiate in the marketplace.

Market Positioning

Health/ Performance Hansons Ginger Ale / Seven Up Orange/Root Beer Diet Coke/Pepsi Mountain Dew Coke/Pepsi Jolt Perceived Energy Boost or Kick Red Bull

NXT

Target Audiences Currently, NXT Nutritionals has prioritized target audiences as follows: Primary 1. Teens and Pre-Teens 9 17 Secondary 2. Students, Young Adults 18 - 25 3. Moms 35 54

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

Twenty years ago teens were drinking twice as many glasses of milk as they were soft drinks. Today they are drinking twice as many servings of soft drinks as they are milk, ingesting 10 to 15 teaspoons of sugar per day.

About 25 percent of all American children and adolescents are overweight, a 20 percent increase from 10 years ago.

School lunch programs now serve up the fat- laden foods of McDonalds and Taco Bell, among other fast foods.

The average student today receives less than 15% of the recommended diet of fruit.

And, in exchange for a financial contribution to a school budget for sports, art, music and similar programs, mo st schools have opened up their campuses and a gold mine of student-age consumers for harvest by vending machine companies serving popular sugarand caffeine-loaded carbonated soft drinks. As one can easily imagine, this trend by school systems across the country is under increasing pressure from parents and consumer groups. A carbonated soft drink based on the NXT formula would provide a company with strategic advantage in this developing marketplace, and supply school systems with relief in the area of social responsibility.

While NXT Drink would offer young consumers significant health benefits compared to conventional soft drinks, but under what conditions would they make it a drink of choice? Are kids ready for a healthy soft drink? Yes, if it were to be positioned with the right attitude, brand personality, and peer-group approval.

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

Brand Conscious, Peer-Group-Influenced Teens Since drinking habits are formed at an early age, 9 17 year-old adolescents and teens become a priority audience for NXT beverages. This is a notoriously fickle consumer group that typically buys brand image over product attributes and sifts all commercial messages through a dual (a) can I or should I believe this?, and (b) what will my friends think? filter.

Beverage products in favor by this age group must tap into that part of the youth psyche that meets a profile of high-energy with some sense of being all-powerful and indestructible. The skateboard-riding, sports-enthusiast, hanging-out-with friends kids of today are turned on by the over-the-edge extreme marketing promises of brands like Mountain Dew.

While these young consumers are aware of and allured by perceived performance enhancing drinks like Red Bull and Jolt, whether through a combination of parent and peer influence, or a lack of accessibility, they have yet to adopt them as a routine drink of choice. However, youth awareness of these buzz and performance brands combined with the psychology of youre not old enough for it messages are fueling the success of edgy product marketing messaging, and are contributing to the movement away from traditional soft drinks and toward those with real or perceived performance attributes.

It should be noted here that this movement is not being caused by a lack of taste satisfaction. While there is a move to flat/benefit drinks like Gatorade and SOBE by this age group, they still prefer the taste of sweetened, carbonated soft drinks an insight not lost of the brand marketers of Mountain Dews new Code Red product.

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

It is not hard to imagine that a carbonated soft drink with an edgy, performance-enhanced image, one that mom would rubber-stamp for the home refrigerator or even pack in the lunch for school, would be a homerun with this crowd.

Young Adults, College Students, The Beach Scene Older teens and young adults 18 25 can be nearly as fickle and brand conscious as younger teens but commonly take a more informed approach toward purchasing and will weigh good- for-your-body health claims, particularly tho se around performance and personal appearance areas such as sustained energy release and the minimization of fatcausing sugars and calories, as part of their purchase decision. What young adult, college co-ed, dating teen or twenty-something doesnt want to gain a competitive edge or improve their appearance? Much as Red Bull has captured the fancy of hard-cramming students around the world, a smooth, energy boosting, healthy and refreshing soft drink based on the NXT formula might not only be a smart alternative to Red Bull, but also a desired night-after restorative.

Kitchen Overlords Since much of a teen and pre-teens at-home diet is controlled by her/his 35 54 year-old mother, it is also important that the NXT nutritional messages reach and positively influence this gatekeeper, and do so in such a way that kids are not turned off. Media segmentation will help with this but the messages cannot be so disparate as to be inconsistent with the core brand personality.

Branding messages designed to just reach mom would stress health and nutrition claims the product integrity of NXT and its associated health claims are so strong, what good mom could resist?

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

However, the body- healthy language used to persuade care-giving moms could have just the opposite effect on teens and pre-teens. In the case of marketing NXT beverages, since adolescent and teen acceptance of products is formed within the peer group and rarely the result of a parents recommendation, no matter how wise and sound, it may be that target moms get most of their marketing messages over the shoulders of the primary target audience, their independent- minded, identity-seeking children.

Brand Messaging If 9 17 year-olds are the primary target audience, then core brand messaging must be designed to influence this group. This means attitude over attribute, brand over substance.

For kids, this is where great taste meets performance nutrition. The brand must be imbued with edgy, energetic, vital characteristics. Not that substance or attribute are unimportant; to the contrary. Kids today are extremely savvy regarding the manipulative traits of advertising and they must be given the permission to believe that NXT Drink is what it says it is. But, in order for them to make it a beverage of choice, it must fit a lifestyle image with which they can identify.

Narrowing the 9 17 target audience will help refine the marketing language. Messages may best be crafted to appeal to active teens involved in sports or other recreational activities. These are the most visible kids in school and are usually opinion leaders and trendsetters, as well as being those most likely to be interested in a healthy option in their favorite soft drink flavor.

Based on the intersection of product attributes and target audience, there is great opportunity and brand value to be built through the use of endorsements and spokesperson in NXT brand messaging. This would include male and female

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

professional athletes and health conscious celebrities with which the teen set can identify, including soccer players, professional skateboarders, snowboarders and X-Game athletes, baseball, basketball and football players the Jonny Moseley, Brittany Spears, Tony Hawk crowd, among others.

The secondary audience of young adults, 18 24, will respond favorably to many of the same marketing messages that will appeal to the teen and pre-teen audience, as long as those messages do not skew too young, or become child- like in nature. The other secondary audience, moms, 35 54, will, as caregivers, focus on the health messages, whether they come first or last or are big or small. Parents as a rule are delighted to buy or authorize purchase of practically any consumable as long as it is healthy for their children.

The NXT Cola It may be that NXT is first marketed as a single brand, a new healthy cola.

Although cola is the worlds most popular carbonated soft drink flavor, there is a clear perception that colas are not as healthy as other flavors. There have been rumors for years that a tooth or nail left long enough in a glass of Coke will eventually disintegrate due to the phosphoric acid content.

As discussed in the introduction, there is a wide range of highly differentiating label language that may be used to support NXT Cola as the worlds first healthy cola, but it needs to be stated in terms that would appeal to the 9 17 year-old, and that, in general, means nutrition with an attitude.

Although an assignment for copywriters and refinement by focus group, examples of how powerfully NXT differentiates include:

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

Example 1

Name: Tag/Positioning

Primary Claims:

Sub Claims

NXT COLA TASTE THE POWER REFRESHMENT OF COLA. ENERGY OF A SPORTS DRINK Strong, Sustained Energy Release Smart, Fat Fighting Calories Heart, Bones & Teeth Healthy Minerals Quick Recovery from Sports & Exercise No Sugar Crashes, No Phosphoric Acid, Contains: Zinc, Calcium, Vitamins C, B-6 & B-12, Magnesium, Soluble Fibers, Citrus, Bilberry & Grapeseed

Example 2

Name: Tag/Positioning

Primary Claims:

Sub Claims

NXT COLA TRUTH MEETS TASTE NXT ADVANCED FLUID SYSTEM Smart Energy for Leaner Bodies Nutrition for Stronger Heart, Bones, and Teeth Optimizes Calcium & Mineral Absorption Rich in Antioxidants No Sugar Crashes, No Phosphoric Acid, Contains: Zinc, Calcium, Vitamins C, B-6 & B-12, Magnesium, Soluble Fibers, Citrus, Bilberry & Grapeseed

With NXT Inside Another option for NXT is to use it as the Intel Inside power ingredient or power system to both leverage and elevate an established brand.

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

Example 1 Peps PLUS Or 7-Way- Up n/a Contains NXT Advanced Fuel System Optimizes Energy, Minimizes Fat Sustained Energy Release for Maximum Endurance Promotes Quick Recovery from Sports & Exercise Rich in Antioxidants & Soluble Fibers No Sugar Crashes, No Phosphoric Acid, Contains: Zinc, Calcium, Vitamin C, B-6 & B-12, Folic Acid, Magnesium, Citrus, Bilberry & Grapeseed

Name: Flavors: Tag/Positioning Primary Claims:

Sub Claims

A New Master Brand A third option is to introduce a new line of carbonated soft drinks, the worlds first healthy carbonated soft drinks, with its own name, one that does not influence existing product perceptions. Example 1 Name: Flavors: Tag/Positioning NXT SHOT Cola Lemon Zing (Other) BUY IT FOR THE TASTE, DRINK IT FOR LIFE Smart Energy System Sustained Energy Release for Maximum Endurance Inhibits Free Radicals Nutrition for Stronger Heart, Bones, and Teeth Optimizes Calcium & Mineral Absorption Rich in Antioxidants & Soluble Fibers No Sugar Crashes, No Phosphoric Acid, Contains: Zinc, Calcium, Vitamin C, B-6 & B-12, Folic Acid, Magnesium, Citrus, Bilberry & Grapeseed

Primary Claims:

Sub Claims

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

Example 2

Name: Flavors:

Tag/Positioning

Primary Claims:

Sub Claims

NXT KICK Cola Lemon Zing (Other) LIFE ENERGY SYSTEM Or LIFE FUEL Sustained Energy Release for Maximum Endurance Inhibits Free Radicals Nutrition for Stronger Heart, Bones, and Teeth Optimizes Calcium & Mineral Absorption Rich in Antioxidants & Soluble Fibers No Sugar Crashes, No Phosphoric Acid, Contains: Zinc, Calcium, Vitamin C, B-6 & B-12, Folic Acid, Magnesium, Citrus, Bilberry & Grapeseed

A Cross-Over Brand The biggest strategic and pre-emptive move may be to ramp NXT into a master brand associated with unique nutritional and taste qualities, the providing the foundation to migrate the brand from the carbonated soft drink category into flat drink category.

For example, as a product ingredient benefit such as a NXT Advanced Energy System , or the NXT Advanced Fluid System becomes recognizable as a self-standing brand feature it becomes possible and often advantageous to leverage that ingredient in new marketplaces, in this case markets such as a sports or energy drink line.

SUPPLEMENT I

Research Protocol Proposal Dr. Joe Vinson

Example 1 NXT GULP NXT FORCE NXT FUEL TBD TASTE THE POWER Advanced Energy System (AES) For: Optimized Endurance Leaner Body Mass Quick Recovery Healthy Heart, Bones & Teeth No Sugar Crashes, No Phosphoric Acid, Contains: Zinc, Calcium, Vitamin C, B-6 & B-12, Magnesium and Soluble Fibers

Name: Flavors: Tag/Positioning

Primary Claims:

Sub Claims

Continuing Research and Claim Support Despite the ability to use such powerful and differentiating language, NXT recommends continuing research to expand the opportunity to evolve and protect the uniquely positioned framework of claims supporting NXT as a nutritional delivery system in good taste. Please refer to the proposed study by Dr. Joe Vinson, Supplement I.