Coke and Suja, it would seem, are at a crossroads. Not quite four years after the soft drinks giant made a $90 million bet on the HPP juice company’s growth, the once glittering upstart brand is reportedly being shopped around like a Mercedes whose lease is up.
The two partners aren’t happy with each other: Coke hasn’t been able to ignite the rocketship it thought it was helping to build, while the Suja team is understandably sad it’s not going to realize the payday that seemed inevitable with its $300 million valuation at the time of the investment.
It’s a bleak turn of events for what had been a long courtship, but then again, it feels like a story we might have seen coming. Right now there are a bunch of brands that haven’t been able to find their footing within a larger system after being acquired by big companies. Changes at the corporate level can cause big shifts in the character of an entrepreneurial brand, and a hard-working, focused team can quickly become someone else’s budgetary solution. It can fall apart quickly – think Bossa Nova – or, like Suja, it can take a little while: think about the problems Muscle Milk and Bolthouse Farms ultimately had within their companies.
But the unraveling of this particular entrepreneurial relationship is a discouraging development for an ecosystem in which entrepreneurial brands were supposed to pump fresh life into the flagging sales of larger food and beverage companies. For every Annie’s or Glaceau, there seem to be three or four brands that don’t grow into vital organs within the larger host. And in an environment where founders are extracting large valuations from investors eager to flip brands to those larger entities, it could be a warning sign that the equation doesn’t always work out. If the strategics don’t get better at integrating, or even if they just get more selective, the goal might not be worth the investment for the VCs, and that will leave entrepreneurs scraping for money.
Certainly, like all big entities, the strategics hedge their bets: it’s not unlike law firms or NFL teams signing up the best talent while knowing there’s going to be attrition. But it should reveal a real lesson for those entrepreneurs who get into the business with the intent of luring one of the CPG giants into their cap table: the host sometimes rejects the transplant, and fame and fortune don’t always follow the deal.
Still, it’s not like the founders, even when the graft is rejected, haven’t made out pretty well over the years. Look at Clayton Christopher and David Smith. Sweet Leaf tea might not have made the grade at Nestle Waters, but the pair made enough money and learned enough from their experience to launch and nurture multiple brands since then. Seth Goldman has stuck with Honest Tea even after leaving his leadership position, helping nurture the brand and maintain its role as the wise son in the Coke family. Elsewhere, General Mills promoted a crusader in Carla Vernon to help lead Annie’s even as John Foraker left to start a new business.
So who is to blame when things go wrong? In the case of Suja and Coke, there are problems evident on both sides. The brand has tacked back and forth across the chilled, healthy beverage set in an effort to find more revenue, pulling together probiotic enhanced waters, natural energy, plant milks, kombucha, and now even hemp shots as a way to grab a larger piece of the functional beverage set. But its original juice products are part of a declining category. Coke may look at Suja and wonder why it is over-SKU’d, but there’s a strong argument to be made that the investment came because of Suja’s bias toward innovation rather than its potential to develop a spear-tip product or two.
As brands try to go to the next level, personnel often bleeds away as well. At Suja, co-founder Jeff Church has stayed active, and his team is continuing to fight to be heard at a company that can simply keep dumping Simply Orange and its variants into cold channels. But there have been good employees who left along the way, either burned out by the push to get the company off the ground or else interested in taking their career momentum into new enterprises.
The larger issue is that the Suja deal may once again call into question the “two step model” that seems to drive a lot of corporate venture capital, particularly for Coke. Suja’s deal numbers were bigger than most of the early investments that Coke’s Venturing and Emerging Brands (VEB) division steered to its parent company (aside from its outright purchase of dairy brand Fairlife), but the two systems have failed to meet each other’s expectations. It’s mostly sad all around, but not completely.
Regardless of the deal issues surrounding them, the Suja team seemed united and youthful when last I saw them, traveling in a pack and headed to a nightclub, together, happily discussing a venture into the brave new world of full-spectrum hemp shots (i.e. dragging Coke into the age of cannabis). That night, you could feel a spirit that hadn’t been crushed, no matter who was getting shopped around to undo a less-than-perfect union.
But like many a morning after, no matter how great things looked the night before, you sometimes wonder how you ended up as part of such a mismatched pair. Still, there’s plenty of green juice for breakfast. Or Simply Lemonade, if that’s the way you’re leaning. Can this marriage be saved? I’m all for working it out, but as always, it’s up to the couple. And, most likely, the lawyers.