Let 2017 forever be known as the year of the big weddin’. After fighting with his governing board and a bunch of investors who were interested in telling it who to marry, Whole Foods CEO John Mackey found a mate online in the form of mega-retailer Amazon. It was one of those deals in which a virtual business picks up a legacy brick-and-mortar concern much like the purchase of Newsweek by the Huffington Post, with the big difference being that people still buy groceries. The palpable concern that Amazon would go on the march and wreck all supermarkets was reflected in the share price reductions of most of the major chains – but a few months after the deal, we’ve seen a bounce-back from Walmart and from Kroger, with the former showing significant e-tailing power of its own through its Jet subsidiary, and the latter proving it could take it to Whole Foods on the discovery level with a new emphasis on local, up-and-coming brands.
As Fall descended, Coke struck at the last minute, picking up high-potential Mexican sparkling water brand Topo Chico and tucking it into the VEB portfolio. The product is on trend and has deep regional ties that transcend its ethnic resonance, and immediately shored up what has been an unsuccessful multi-front war on the indefatigable LaCroix. But there’s lots of heavy lifting for the Coke system yet to come if it wants to fully exploit its new pickup. Similarly, Anheuser Busch InBev crossed into the non-alcoholic space with the purchase of entrepreneurial stalwart HiBall, a sparkling platform that would seem to carry a lot of opportunity to take the next step in the AB system – if it’s given the right guidance and opportunity against all of the other new additions within the AB portfolio as well as its existing core brands. AB has tried to sell energy with Monster – a much better known brand – in the past; with HiBall, reps are going to have to work to introduce retailers to the product. If they do, they’ll likely find a lot of opportunity. If not, it could fast go the way of Eagle Snacks. Another large strategic deal found Nestle acquiring Blue Bottle coffee for more than $500 million. The company straddles on-premise and CPG – certainly an evolving business type that is working for Juice Served Here and Starbuck’s alike – but has a big consumer education gap to overcome. In a smaller acquisition, Dean Foods paid $22 million to pick up Uncle Matt’s Organic, giving it a line of organic juices and probiotic waters.
The year brought lots of venture capital to small businesses, particularly those playing in the plant protein space. Koia, OWYN, Soylent and Iconic each pulled in cash to grow behind pea- and other vegetable-based protein meal replacement or athletic recovery products. Kombucha brands also reaped significant growth capital as funds hurried to back companies like Revive and Humm, which have proven themselves capable of lasting despite the growth of GT’s and KeVita before them. With Health Ade in the First Beverage/CAVU camp, only Brew Dr. remains a top brand that’s free of VC backing. Funds also continued to invest in hot spaces like Cold Brew Coffee – BIGR showered $17 million on High Brew while JAB invested in cold brew shot line Forto. Crossing between both categories, Bulletproof pulled in $19 million in investment from CAVU as well. On the lifestyle/functional brand side, both LifeAid and Kill Cliff brought in money to continue to fuel their high-intensity workout platforms. Meanwhile, sparkling water brand Spindrift pulled in another $10 million to build a high-end alternative to LaCroix and Sparkling Ice.
There were some less-than-stellar returns that forced changes at some beverage companies. Chris Reed, the iconoclastic CEO and founder of Reed’s Ginger Brew, lost his leadership role at the brand, eventually replaced by CPG veteran Val Stalowir. With John Bello as the board chair at the publicly-traded company, expect fast changes. Later on in the year, high-tech play Juicero ran into a public relations nightmare that eventually caused the company to shut its doors. A few months after selling Bai to DPSG, founder and CEO Ben Weiss was forced out, while the force behind PepsiCo’s acquisition of KeVita, Naked Emerging Brands EVP Chris Lansing, also departed the company soon after the deal closed.
We’re not going to reveal our Best of 2017 winners here, but readers already know where the heat is – it’s in RTD coffee, which has become the fastest-growing category and is expected to continue to grow up to 67 percent over the next five years, with cold brew growing even more substantially off a smaller base and brands like Califia, Chameleon, and La Colombe becoming sources of inspiration for entrepreneurs. Meanwhile, sparkling water brands continue to advance, with big gains coming not just from LaCroix, but also longtime warrior brands like Polar and Perrier. It’s a change that has pushed even the venerable Nestle Waters North America to reach out to smaller distributors in the hopes that a carbonated set of its regional water brands can snatch share – or at least ride the wave. And beyond the bubble, high-end premium water brands are also performing well: Essentia crossed the $100 million revenue mark, while CORE isn’t far behind; Voss has leveled off at retail but just signed a significant deal for on-premise sales with PepsiCo. Kombucha is also still sparkling – with Humm and Health Ade starting to track in conventional channels alongside GTs and Kevita.