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Coca-Cola: ‘A third of beverage industry growth could come from disruptive brands in categories that do not exist today’

1 commentBy Elaine WATSON , 26-Mar-2013
Last updated on 26-Mar-2013 at 13:47 GMT2013-03-26T13:47:06Z

Coca-Cola's VEB team, which first invested in ZICO Coconut water in 2009, increased its share in April 2012 and Coca-Cola now has a controlling interest in the brand
Coca-Cola's VEB team, which first invested in ZICO Coconut water in 2009, increased its share in April 2012 and Coca-Cola now has a controlling interest in the brand

A large chunk of the growth in the beverage category in North America over the next decade will come from products in categories that do not even exist today, predicts Coca-Cola’s Venturing & Emerging Brands (VEB) team.

Created in 2007, Coke’s VEB team is on a mission to identify the firm’s next generation of billion-dollar brands in North America, with recent investments including NOS energy, FUZE  juice drinks, Honest Tea, Zico coconut water, Core Power protein drinks and illy issimo ready-to-drink coffee beverages.

In a Q&A with VEB president Deryck van Rensburg and director of business development Matthew Mitchell running on the Coca-Cola website, van Rensburg said:

“We estimate that as much as one-third of our industry’s growth in North America over the next five to 10 years could come from disruptive brands in categories that do not exist today.”

You won’t find the next big thing by studying third-party research reports. You have to be out in the market

Echoing comments made by Coke’s chief procurement officer Ron Lewis at the Supply Side West show in which he said Coke has to "think and act like a lean start-up company", van Rensburg said VEB was looking at brands making waves in “places our red trucks don’t visit”.

Bosses are also aware that they won’t identify the next big thing by “studying third-party research reports”, he said.

“We spend a lot of our time outside the office at conferences, expos and trade shows such as Natural Products ExpoWest, and meeting with distributors, retailers and entrepreneurs.  

We can’t ignore the small, entrepreneurial brands popping up in unconventional outlets – such as health and beauty spas, natural food stores, gyms, yoga studios and other places our red trucks don’t visit.”

We can’t ignore the small, entrepreneurial brands popping up in unconventional outlets

Speaking at the Supply Side West trade show last year, chief procurement officer Ron Lewis said Coke is on a mission to double the size of its business by 2020 (vs 2009), which would require “disruptive innovation, by which I mean [innovation that’s] new to the world, not just new to Coca-Cola”.

Meanwhile, the VEB team is also taking a longer-term view today than it was when VEB was first set up, he added.

We’ve learned to be patient. New brands need several years of attention and nurturing. In the past, if a new product didn’t meet our business plan expectations in its second year, we’d exit.

“[But] building a billion-dollar brand is a marathon, not a sprint. For example, it took glaceau VitaminWater seven years to get to $75m in revenue, which is in our view the minimum needed to justify distribution on our scale.”

We’ve learned to be patient

As for what the VEB team is looking for, it is only really interested in brands that have already notched up revenues of $10m, said Matthew Mitchell.

By investing in a brand at this point, we minimize much of the initial risk and partner with a team that has ironed out its launch challenges, refined its marketing mix and brand positioning, and developed a loyal consumer base.

“When the time is right, we then introduce our expertise and capabilities – distribution, procurement, R&D, marketing insights and more – while preserving the brand’s entrepreneurial instinct and flair.”

At any given point, the VEB team is watching 25 brands, and is in active discussions with two or three, he said.

Click here to read the Q&A in full.

Click here to read about Ron Lewis' presentation on 'disruptive innovation' at Supply Side West.

1 comment (Comments are now closed)

Interview with Coke's VEB marketing head

Check out my interview with Mary-Ann Somers who heads up marketing for the VEB team: http://deniseleeyohn.com/bites/2012/04/20/mary-ann-somers-on-coca-colas-new-ventures/

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Posted by denise lee yohn
31 March 2013 | 01h332013-03-31T01:33:14Z

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