By John Craven
With a surprising number of new beverage brands to choose from, Coke’s newest innovation unit has to see proof of concept — about $10 million in sales — before it will invest in a company.
Deryck van Rensburg, president of The Coca-Cola Co. Inc.’s Venturing and Emerging Brands unit, offered that developmental threshold, as well as other insights Tuesday, into how Coke uses his group to address the fast-moving entrepreneurial beverage scene.
van Rensburg told a crowd of 300 beverage company executives gathered at the BevNET Live conference in Santa Monica that, while his company controls the top beverage brand in the world, one third of the beverage industry’s 2009 growth has come from “areas that barely existed five years ago.” Additionally, there are more than 2,600 beverage brands in the U.S., and small brands contributed 50 percent of the overall beverage market’s growth.
To address that environment, he said, the VEB unit operates under a three-pronged strategy. VEB will create its own new products (like its Vio carbonated milk drink), find international Coke properties that may work in other markets (like Cas Cal, a French natural soda Coke recently introduced via Whole Foods) and, most famously, it will acquire independent brands.
van Rensburg said the unit invests in brands that have reached the “proof of concept” phase (about $10-50 million in yearly sales) or the “pain of growth” phase (about $50-100 million in yearly sales), and willingly takes a small role in those products’ early development. For example, the unit recently invested in ZICO Coconut water, and Mark Rampolla, the company’s founder and CEO, reported that Coke has been willing to play hands off with his brand. Van Rensburg added that the unit does not intend to invest in duplicate products.
“We’re not interested in the next product in a category that already exists today,” he said.
But an investment from VEB isn’t a guarantee that the product will join the Coke distribution system. van Rensburg said the unit prefers to develop products in a more intimate setting than Coke’s bottlers. It introduced Illy, a premium canned coffee, through Big Geyser in New York, and ZICO has yet to announce distribution through the Coke system. The reason for this, van Rensburg said, is that small brands need more attention. As a promotional video he brought said: “Too much mass marketing too soon and the magic is gone.” And some of those products may never make the transition. van Rensburg said the unit formed with the expectation that some of the products it incubates will fail.
In 2010, van Rensburg said, VEB plans to announce four new products. Three will come from internal sources, he said, with one coming from an overseas market and two coming from internal innovation. The unit also plans to acquire one new independent brand, he said.