From Cold Soup to Nutso Ideas

Need a clue as to why Tio Gazpacho came out the winner of the New Beverage Showdown? Themes throughout the rest of BevNET Live should provide clue enough.

On day one, Duane Primozich, EVP of Boulder Brands had spoken as to why a seemingly obscure drink like Tio currently has the potential for success in the beverage industry.

“These nutso ideas are what everybody’s looking for right now” Primozich said. “Weirdo ideas like putting soup in a bottle and throwing it in the beverage case.”

Fittingly enough, when the results were announced later in the afternoon, Tio Gazpacho had not only advanced to the finals, but the company also received the majority of the 500+ person audience vote.

Primozich wasn’t alone in encouraging beverage upstarts to separate themselves from the pack. In his opening presentation on the key elements of building a challenger brand, Tyler Ricks, CMO of Peet’s Coffee, stressed the need for such brands to truly disrupt their category conventions and change the ways consumers think. Ricks also spoke to the importance of taking the mentality of a challenger brand beyond a company’s mission statement.

“You have to drive that psychology deep into the mindset of the organization,” Ricks said. “It’s not enough to state it on paper. You have to live it and breathe it every single day.”

On a similar note, in a Q&A focused on navigating both strategy and passion, GT Dave, founder of GT’s Kombucha and a pioneer in the kombucha space, touched on the power of a company’s “soul,” calling a personal relationship with the consumer as vital to a brand’s journey as the strategic logistics of building a performing product.

“At the end of the day some people will say we’re just a product, but we always want to be more than that,” GT said. “We want to have an emotional connection”KatPeters

For companies that are doing so, there is tremendous opportunity, particularly with natural products. In a presentation on channel shifting and consumer changes, Brian Reed of IRI and Kathryn Peters of SPINS reported significant growth in sales for natural refreshment beverages both in the natural channel and the conventional food channel. For the former, the 13.5-percent growth was attributed to store count growth and distribution point growth. For natural refreshments in conventional food channels, it’s 9.1-percent growth was attributed to an increase in distribution and promoted units.

“These are not normal growth rates,” said Peters.” They’re typically at low, single-digit growth. So [mainstream supermarkets] really see this as an opportunity to grow their brand. [Natural beverages] are in demand across all channels of trade, without a doubt.”

Reed added “in 2014, one of the things we’re seeing is that beverages are better for you. “Better for you” used to mean nutritious, now it means better quality ingredients. People are saying they still want a carbonated soft drink, but they want one that isn’t what the old model was.”

In what was perhaps the biggest surprise of the day, Reed and Peters explored how despite its seemingly white-hot popularity, the sales of coconut beverages may have actually hit a plateau, with less than one-percent growth tracked in the past year. This was credited to the product’s servicing to mainstream channels in recent years, accelerating the product’s lifecycle. (Editor’s note: We’ll have more to come on this idea of the product lifecycle in future issues). Similarly, the sale of RTD teas have also gone flat. However the sales of kombuchas, vegetables juices and RTD coffees are experiencing impressive growth across both channels.

And there’s even more opportunity outside of conventional and natural grocers. Glen Figenholtz, Division Merchandising Manager of Beverages and Snacks for Walgreens spoke on how brands can win in the drug channels. Figenholtz reported an average of $25 million in sales as the threshhold for beverage upstarts to secure placement in major drug retailers like a Walgreens. Additionally, Colin Jones and David Johnson of CAJ International/ Omni Partners spoke on how companies can successfully utilize online store-fronts like Amazon, FreshDirect, and others.

On day two, veteran entrepreneur Greg Steltenpohl elaborated on ways that these “nutso” ideas can move forward: start with the retailer and work backwards.

Steltenpohl, the founder of brands like Odwalla and Adina, and now the CEO of fast-growing almond milk and juice maker Califia Farms, spoke during a panel on the ways larger companies apply trends to create innovation. He said that getting new brands to market and into the hands of consumers is, for entrepreneurs, largely a function of their ability to get the brands on the shelf. Meaningful innovation will only work if a company can deliver that and survive, he said.

“In earlier stage companies, there’s a lot of excitement around what we might be creating — but you have to channel some of that into what the world’s ready for,” Steltenpohl said, adding that because many of the products that sell do so simply because they are able to get into the market, the brands that are trying to break in “need to get in the game.”

“You might not have time to get it all figured out, but you know that it’s possible,” he said, but added that waiting for perfection can be harmful, because margin compression can occur. “When you’re enthusiastic, you just want to create something that tastes amazing, something that is functionally amazing,” but by looking at on-shelf prices first brands can also work with functional margins.

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It’s that kind of experience mixed with idealism that BevNET Managing Editor Ray Latif had expected when assembling the panel, which also included Julie Key, the Brand Marketing Director at Evolution Fresh and Alan Murray, the CEO of GoodBelly maker NextFoods, with the intent of helping newer entrepreneurs both innovate and survive.

Key, like Steltenpohl, suggested entrepreneurs step back from the oft-referred-to bleeding edge to consider the cutting edge instead. As an example, the Evolution Fresh brand has recently taken to adding avocados to some of its varieties — a step that might seem radical in conventional grocery, but isn’t that uncommon in incubation channels like Whole Foods or juice bars.

After recognizing the trend as something that some consumers were doing at home, Key said, “we said why don’t we put that in a bottle and put it on the shelf.”

And remaining nimble at a small size is also the key, added Murray. Small brands are introducing what might eventually be tidal wave-sized concepts, which is something Murray said he expects probiotics, GoodBelly’s stock-in-trade, to eventually become in the U.S. But, he added, in the meantime, the innovation for his company has largely come via marketing as much as it has from the product itself.

“This community sometimes thinks that ingredients” are the best form of innovation, Steltenpohl agreed, “But bringing things together with good design, with communications that are actually deeper and that educate the consumer, those are the things that might actually break ground.”

Throughout the rest of the day, ideas about how to bring those ideas forward – in a well-financed manner – would be discussed in depth.

HaydenDay Two started and ended with a colder set of soup-like products, with a kickoff talk from Pressed Juicery CEO Hayden Slater and the final, ceremonial hoisting of the New Beverage Showdown’s award check by Tio founder Austin Allan. That a pair of cold juices could bookend a day that covered ways for all types of beverage entrepreneurs to break in new products, new brands, and ultimately, new categories indicates the infinite importance of thinking of the consumer as much as the innovation.

A pair of discussions from the day pointed to that larger truth – that no matter how brilliant an idea might be, no matter if it’s coming from a new entrepreneur or an established multinational brand, it needs to provide the consumer with a strong experience that will draw them back to a product or brand.

So when Slater said he had sought, even with his compact but high-end set of stores, to make great tasting, nutritious, affordable products, he said, he made sure to weigh heavily the consumer experience side of the business.

“We didn’t invent juice, I don’t think anyone in this room invented juice,” Slater noted. “What we did is create exactly what we as customers wanted.”

The brand sold out by 11 a.m. during the first three weeks, after opening in a former broom closet – something that Slater recognized indicated that the product was good, the price point was right, and there was a pent-up demand for that kind of product. “But for me, it was clear that the products and the experience were keeping people coming back.”

Slater said that the brand was buoyed by a larger health and wellness movement, but that part of the experience was the lack of pressure and intimidation in the stores. Noting that health and wellness as a movement can be strident, he said, the company wanted to provide a way for consumers to engage as much or as little as they wanted.

“If you like it, come back,” he said. “Do whatever you can do to be better. Those baby steps are what really stick and last.”

While those ideas were being carried out by Pressed Juicery in a brick-and-mortar footprint, the emphasis on taking steps that are measured, meaningful, and consumer-focused was underscored by Coca-Cola executive Mary-Ann Somers, who is in charge of the company’s water, tea, and coffee brands.

Somers used the example of a rubber band – and line extensions for the Dasani brands as a case study – to illustrate ways that entrepreneurs could think about whether their ideas for growing their brands fit with what the market can bear.

MaryAnn“The one thing I know for sure is you all are not at a loss for opportunities,” she said to the audience. “The question is trying to figure out which ones make sense for you.”

That surplus of opportunity is something that small companies typically struggle with more than larger institutions, she said, noting that for bigger companies, the problem is too much focus on executing strategy, resulting in a more one-track view.  Entrepreneurs need to properly evaluate opportunities, she added, with the danger being to not over-commit.

The solution comes from measuring opportunities against three areas: brand equity, company resources, and timing, rather than being reactive.

“The worst thing you can do is be passive about the kinds of choices you’re making,” she said. “Many of us are doers, we want to make things happen, and we see an opportunity and we say, let’s go run it down, let’s go get it. Just be thoughtful about what you’re doing and when, because that’s a resource that’s not going somewhere else.”

Somers pointed to two examples, the electric cigarette and ready-to-drink brewed coffee in a carton as ideas that had once been regarded as innovation failures but are now, two decades later, part of growing brand categories, and the idea became clearer. Within the context of consumer demand, sometimes ideas just need time to simmer.

No matter how nutso they appear at first.