COCA-COLA
CO. has never lacked for energy in its efforts to wrestle with the
innovation demon. In the past, though, those efforts have been futile:
Never mind attempts to reverse the slide of its core sodas, even in
fast-growing emerging segments, where a rising tide could make the task
easier, Coke hasn’t fared very well. It has developed purportedly
cutting-edge products that were rejected by consumers (Fruitopia, OK
Cola), launched middle-of-the-road knockoffs (Gold Peak), made
ill-advised acquisitions (Planet Java and Mad River, respectively) and
fumbled licensed brands like Nestea, Godiva and Caribou (or perhaps
chose the wrong licenses in the first place).
The problems weren’t hard to intuit: a cumbersome bureaucracy and
warring constituencies that make it difficult for fresh concepts to
make it to market without fatal compromises, overkill on the marketing
side preventing new brands from comfortably finding their audience,
reluctance by the bottlers to make space on their trucks for niche
brands that require a hand-sell. The bottlers, in fact, sometimes
remind me of kids at Christmas: they clamor relentlessly for shiny new
brands like Vitaminwater, Fuze and V8 but, once those brands
materialize under the tree, promptly lose interest in them. We make
more from Dasani in the cold box, they grumble.
Is the company now writing a different script with its Venturing &
Emerging Brands unit? While it’s still early, so far VEB has made
several intriguing moves and no obvious miscues to my eye.
In contrast to Coke’s past need to own brands it acquires, VEB has been
willing to seed minority investments intended to prevent the
entrepreneurs’ mojo from getting quashed by the relentless Coke
bureaucracy. It’s followed Coke’s minority investment in acai bev
marketer Bossa Nova with a 40 percent stake in Honest Tea, and also
placed a minority bet on the New York brand incubation house launched
by Planet Java’s creator under the name Brain-Twist.
More startling, VEB is quite agnostic about how new brands go to
market. It may have acquired 20 percent of Brain-Twist but it hasn’t
forced the company to put its Slap Energy into the hands of Coke
bottlers. And I find it positively shocking that the internally
developed Illy Issimo line of ready-to-drink coffees (via Coke’s joint
venture with Italian roaster Illy) launched without any bottler
involvement, starting with independent houses Big Geyser in New York
and Haralambos Beverage in Los Angeles. Presumably, VEB execs had come
to appreciate those distributors’ capabilities from their deft
stewardship of Vitaminwater, Fuze and Honest Tea.
VEB can even claim to have launched a brand that skeptics can’t deride
as another day-late-and-dollar-short me-too item: The Vio carbonated
dairy line that’s testing in New York (again via an independent
distributor). A familiar enough genre in Asia, Vio is the first launch
of a similar product in the U.S. that I’m aware of, and its aluminum
bottle and subtle fruit flavors are intriguing. Though VEB mustered
squadrons of samplers to hand out Vio in New York, very much in
big-company-style, it’s been selective about its initial retail
accounts, again in a manner we don’t usually associate with Coke.
Of course, even a virtuosic performance in finding and incubating
brands only gets VEB’s parent so far. Long term, Coke needs big brands
that can sustain its massive infrastructure. And the handoff to the
bottlers remains a challenge. In the case of Glaceau, acquired for a
staggering $4.2 billion, it hasn’t gone so smoothly, with the bottlers
quickly reducing it to a commodity that can be seen at 10-for-$10 in
supermarkets. That’s not on VEB’s watch, because the outsize
acquisition didn’t go into the small-brand unit, but it seems clear VEB
is doing some valuable learning on that one, too.
Fuze is more of a mixed bag: it seems to be thriving, though it’s
swapped a lot of indie presence for grocers and foodservice, while the
licensed NOS energy line devised by Fuze Beverage prior to the
acquisition has been one of the growth stars of the energy segment.
(And to think some Coke bottlers had to be bullied into taking it!)
Under Coke, Fuze even beat Monster, Rockstar and Red Bull into the
energy shot business. That’s testimony to its leaving Fuze relatively
unencumbered to pursue its destiny. And Honest Tea’s transition to the
bottlers seems to be going even better, thanks to a region-by-region
approach that allows Honest Tea to parachute in legions of staffers to
help get each market off to a solid start.
So VEB is a success, right? Not necessarily. To me, the true test may
not come for several years, after it’s patiently nurtured a brand or
two that have grown to scale, at a premium price, and successfully
transitioned to the bottlers. Then we can nickname the unit “Very
Effective Brand-building.” For now, though, it’s hard to fault the
methodical, complacency-busting approach the crew has taken.
Longtime beverage-watcher Gerry Khermouch is executive editor of
Beverage Business Insights, a twice- weekly e-newsletter covering the
nonalcoholic beverage sector.