Sell the Portfolio: Coke’s VEB Brands To Combine Sales Teams

Coca-Cola’s Venturing and Emerging Brands Unit (VEB) is planning to reorganize the sales forces of its wholly-owned entrepreneurial brands into a single unit capable of selling its portfolio throughout the Coke system, BevNET has learned.

The change  centralize selling responsibilities for the family of VEB brands with the hopes of building the nascent products’ visibility within accounts serviced by both Coca-Cola Refreshments and by other, independent Coke bottlers. The reorganization will not lead to more than a handful of layoffs, sources say.

Selling the Portfolio: VEB's Main Assets

“VEB is creating a single sales force for its wholly owned brands in order to accelerate smart growth,” said Coke spokeswoman Kerry Tressler, in response to BevNET inquiries. “The new and enhanced sales force will provide a more nimble and effective point of contact to the marketplace.  The spirit of the VEB unit will be to maintain an entrepreneurial approach and respect the individuality of each brand. The new structure will be effective January  1, 2014.”

While details are still being worked out, the change will most directly affect the roles of sales teams for Honest Tea and Illy Issimo, who would effectively be empowered to sell other VEB products to their accounts; it will also put Zico staff in line to have similar responsibilities when that brand is finally wholly owned by VEB.

The move is a delicate one because three of VEB’s four main brands – Honest Tea, Zico, and Core Power* (which VEB owns a partial stake in) – were originally independent entrepreneurial brands that have grown on their own while simultaneously embarking on a trajectory designed to gradually bring them into the Coke system following VEB investment. Coffee brand Illy Issimo is a product developed jointly between Coke and the Illy coffee company but has had a sales force that is largely native to VEB, while the other three have operated their own sales teams. Early on, brands that VEB invests in are expected to continue to grow as they had pre-investment — largely by servicing independent DSD houses and brokers, while building their profile in the retail channels, like Whole Foods, that are important for the development of smaller brands. The real acceleration is expected to happen when the brands are in the “Red System.”

Currently, all four of VEB’s main brands are now at least partially distributed through Coke bottlers as well as independent accounts, at varying levels of integration. While being on the vaunted Red Trucks is the kind of arrangement that most brands would consider a competitive advantage on an individual level, it has also proven to be a drawback — none of the brands are yet of a size comparable to even a minor brand produced by Coke itself, and therefore tend to receive less attention within Coke’s high-powered suite of products.

It’s a problem that is similar to what PepsiCo faced when it tried to incorporate its Learning Labs program for products like O.N.E. coconut water – it’s hard for small brands to get attention from a system designed to move large amounts of soda from one place to another. By creating a set of up-and-coming brands, the thinking goes, VEB may be able to create more leverage for them, as well as offer key accounts products that better fit consumer demand.

The idea of a portfolio approach leaves some major questions for VEB to wrestle with, however: first of all, there’s the issue of re-training workers on three largely independent sales teams that have grown with their brands — an issue for a unit that has tried to represent itself as friendly and supportive to the independents and entrepreneurs it is tasked with finding and investing in.

One more issue the unit has been wrestling with internally is that its brands are at various stages of maturity, and at least in the case of Core Power, seem aimed at different channels in the spectrum of retailers. Nevertheless, the thinking goes, if the unit can help build visibility for its brands incrementally within the system, they all win.

There’s also the question of the long-term perception of the group among entrepreneurs and their organizations if they are aware that the sales role will change as VEB becomes more involved – although those changes may already have been anticipated due to the switch in systems, it remains to be seen how sales forces will react knowing they could eventually have those broader responsibilities in their future. Also unclear is whether this means that brands will cut over to the Coke system more quickly from independent distributors.

To date, VEB has been supportive of those DSD houses and other wholesalers that have helped achieve significant growth for its brands. The migration of Honest Tea has taken place gingerly due to its loyalty to many core DSD outfits, and Zico and Illy have notably been able to accelerate their growth through partnerships with shops like L.A. Libations, which has helped those brands gain key accounts like Target, Costco, and several drug store chains. Similarly, natural products broker Presence Marketing has been a key growth engine in that channel. How those groups will interact with the new sales force is not yet clear.

Another independent distributor in a special position is Big Geyser, the New York-based DSD giant considered a key incubator of VEB brands within that important territory (in Southern California, Haralambos Beverage Co. plays a similar role). Big Geyser COO Jerry Reda told BevNET that he was aware of the pending reorganization but that it was unlikely to affect him because of his company’s important role in developing VEB’s brands at both the pre- and post-VEB takeover stage.

“They’re not taking anything off the table,” Reda said. “If anything, they’re saying they’re going to support us in the market even more.”

There is precedent for VEB to try to use stronger parts of its portfolio as leverage to increase sales of its other brands. In the natural channel, for example, Honest Tea sales ace Melanie Knitzer has had the responsibility of representing all of the VEB unit’s brands for several years.

Natural and specialty food stores like Whole Foods are considered a vital launch channel for entrepreneurial brands, but they don’t have enough outlets or customers to build the new “billion dollar brands” whose nurture is VEB’s prime directive.

Now, the unit is betting that a combined sales force will be able to get those brands better purchase in enough channels to finish the job.

*Note: This story has been changed to reflect the fact that Core Power is not yet “wholly owned” by VEB and will therefore not yet be part of the sales force integration.