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Farewell To the Playaz
 NO
QUESTION we’re in a tough period as 2009 gets under way. And yes, we’re
all probably in for a long, hard slog. Still, without disguising the
difficulties that may lie ahead for all of us, I think it would be
salutary here to point to some good things that may emerge from the
current pain – not just the broad benefits that economists tells us to
expect, such as wringing inefficiencies out of the system and restoring
a greater sense of value to consumer offerings, but several specific to
the beverage business.
Let's start with bubbles. Not the ones that percolate in a Classic Coke
– whoops, I guess that’s just plain Coke now – but a financial beverage
bubble that, in its extreme manifestations, outdid anything we saw on
the housing front. I’m referring of course to the market frenzy that
saw the modest-selling Jones Soda attain a market valuation approaching
$1 billion and the not-really-selling-at-all Purple Beverage get to
$400 million. Those valuations – inspired by lucrative takeouts by
strategic buyers of Snapple, SoBe and Fuze and the possibly ludicrous
takeout of Glaceau – were both a symptom and cause of many of the
excesses that now need shaking out.
For starters, they seemed to draw to the beverage business a breed of
entrepreneur lacking any fundamental interest in the sector – let alone
passion for it – with a knack for raising excessive amounts of capital
to support slight, imitative ideas, all marshaled in the interest of
the quickest possible exit. “Playas," one distributor recently wrote to
me, "eyeing G5’s and Jags before they sell case one." That’s by no
means intended to tar all newcomers to the business with the same
brush, because lots of the most intriguing new brands continue to come
from outsiders, and often quite young ones at that. Those
entrepreneurs, chasing a genuine vision and displaying some interest in
mastering the intricacies of the business and simply dealing with the
day-to-day stuff, continue to be a boon to the business. I have no
doubt they’ll keep on a-comin’. But the many carpetbaggers, with their
short time lines and disingenuous promises, have done a lot to
compromise the business.
Another outcome of the crazy buyouts was the ease of raising capital,
whether through private investors, venture capitalists or the public
markets. With money so cheap and available, new brands would come to
market with outlandishly ambitious rollout plans. Usually, these
comprised a “DSD land grab,” in which the marketer would recruit a
cadre of sales vets from brands like SoBe and Glaceau and Red Bull and
turn them loose to sign up as many direct-store distributors as is
humanly possible, each promised intensive in-market support on the
marketer’s dime. Given the skills, history and contacts of the sales
guys, that part of the plan was easy enough to execute. But it put the
brand under an intense degree of pressure to generate the instant
velocity to support that overhead. That overlooked the fact that brands
take their time in developing, particularly in the alternative space;
when, inevitably, a landgrab brand fails to break out on the allotted
schedule, its owners are forced to step up the capital heist, thereby
intensifying the pressure and shifting power to capital people who have
even less interest in allowing a brand to find its organic growth
pattern.
A handful of marketers managed to make that scenario work – notably,
Hansen Natural with its Monster Energy launch. Brands like SoBe, Fuze
and Vitaminwater emphatically do not prove the case – they were many
years in development, and I wonder whether any of them ever got into
the black before its founders exited. Now, with capital scarcer, many
overambitious brands discredited, and even strategic acquirers like
Pepsi displaying second thoughts about buying their way out of their
innovation dilemmas, that scenario is in shreds.
Know something? That may not be such a bad thing. What could result is
a flow of new brands launched out of love and commitment. Maybe they
will be allowed the luxury of starting small, growing gradually and
postponing the national landgrab until all the kinks have been worked
out of their branding, packaging and formulation. If the buyout frenzy
subsides, it would allow independent distributors more time to develop
– and profit from – brands they bring in, offering crucial support to a
network that, whatever its limitations, still has proven to be the best
platform for nurturing cutting-edge brands. If you’re a retailer, that
may mean fewer marketers approaching you with dazzling Power Point
presentations which – let’s face it – you never found quite believable
anyway. Instead, you’re likely to see more of the old-style
sweat-equity entrepreneurs, perhaps based right in your region, backed
financially by local businesspeople and distributors and committed to
focusing intently on your market. It may make for less in the way of
grandiose fireworks (not to mention sales performance incentive funds
and other money on the table) but it may put you on the ground floor of
a truly sustainable brand phenomenon, one better attuned to your needs
and those of your shoppers. It may prove to be a more rational,
efficient way to attain the perennial goal of bringing innovative,
premium beverage brands to your customers. Now that’s not such a bad
thing, is it?
Written By: admin
Date Posted: 1/15/2007
Number of Views: 2474
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