Gauging the Stage for Innovation Acceptance

Innovation energized Expo East in a way that surprised even us, and we’ve been tracking the burgeoning growth of a new set of innovation categories. But juices, probiotics, smoothies and kombuchas were at full froth, and so were a new generation of traditional products like CSDs and teas.

Even relatively mature coconut waters demonstrated running room – there’s a pricing structure evolving from products that are using value-added packaging and processing, as well as commodity-pricing focused canned and concentrate brands. The lack of appearances by Zico, Vita Coco, O.N.E. or Naked showed those brands have turned their attention toward more mainstream channels.

Meanwhile, less than a month later, an enervated NACS Show audience crossed miles of show floor in the bowels of the Georgia World Congress Center in Atlanta, as many of the entrepreneurs who had once looked to the show as a way to get traction now went deep into cost/benefit analysis and found the opportunity wanting. A telling detail: there were few brands there that saw value in coming to walk the floor, even if they weren’t renting a booth. Those from the entrepreneurial side that did shell out were either at an inflection point where a push to convenience made sense, or they were taking advantage of bargain basement booth prices on remaindered space.

So what does it say about the beverage business that the small companies on display at the little sibling of a West Coast show could generate more energy than those who were attending the annual showpiece fiesta of a giant organization?

It depends on your perspective. Both shows are big-dollar, big-preparation events that are needed as much to give brands visibility as they are to close deals; for smaller brands, yes, there’s always the chance that you’ll land your first big account, but everyone else on the block is there to do the same thing – you’re anteing up a lot of dough for a crapshoot.

But there were a lot more companies trying to do that in the natural channel; while that may say more about the overall consumer trends, it also indicates they know where the money is going to be made in the future. The brands that can migrate are the ones that will eventually win.

But to get to the edge, those new brands are taking risks. Case in point, a few days after Expo East, Blueprint Juice, one of the brands at the vanguard of the growing HPP (high pressure processing) movement, was sued by consumers who complain that the product is neither “raw” nor “unpasteurized.” For a company whose whole business model relies on it being perceived as a product that is in as pristine a state as possible, that’s a stumbling block that could derail the brand before it really takes off.

From another viewpoint, however, brands are sheltered and safe in the natural and specialty channels, where the required turns are lower and the brand message can be honed in relative obscurity. The big risk, one could argue, is to prove your worth on a bigger stage.

Innovation changes when you’re a bigger company: implementing supply chain efficiencies, decreasing the weight of the package, finding a cheaper set of ingredients, these can all increase profitability and help pay a lot more salaries. But the attempt to find those internal innovations can run counter to the greater good; the sweeter the drink, the easier it is to sell it, but the bigger the problem for the consumer over the long term.

The tradeoffs on innovation get bigger in the convenience channel as well: even with all the litigation protection and force of route to market that the larger channel offers, there’s less space to go around. Risk has to be mitigated because that space is that much more valuable, so big changes are made behind the scenes instead of in the cooler case.

For entrepreneurs, there’s a chance to innovate from both sides of the aisle – but you have to decide where you want to be. As one year fades into the next, from our own BevNET Live events to our online offerings to the printed page, we’re going to do our best to read those trends and help you make your choice.