The product, a four-flavor “aloe water,” has been gradually growing throughout the Southern California market. Aloe Gloe was the first in-house product launched by L.A. Libations, a company started by three former Coke employees that has become a key node in the development pipeline for brands in its Venturing and Emerging Brands (VEB) unit. VEB owns a minority stake in L.A. Libations, but until now it’s been the incubation house that has helped to grow VEB-owned brands like Zico and Illy. Now, VEB’s parent company is lending L.A. Libations a hand.
The launch is fraught with resonance for the L.A. Libations team — CEO Danny Stepper can not only name the four older Coke bottlers who were combined into the L.A. market unit of CCR, he has worked at or with all of them.
“A lot of our old friends are selling the brand for us now,” he said. “We all three (Stepper and co-founders Pat Bolden and Dino Sarti) started our careers as merchandisers. It’s kind of surreal to see Aloe Gloe getting dropped off with products like Coke, Sprite, Zico or Honest Tea.”
It’s an experiment that will yield two sets of results: both a measurement of the ability of the noted route-to-market experts at L.A. Libations to build their own brand, and for CCR, another indication of the capability of the Coke system to develop entrepreneurial products from within its own distribution network.
Best known for its ability to open doors to retail accounts for brands like Zico, Icelandic Glacial, and others, L.A. Libations started producing Aloe Gloe internally four years ago, and has leveraged its West Coast capabilities to grow the product to nearly $7 million while tweaking flavors, packages, and formulation (it recently received organic certification). The brand’s growth thus far is largely due to its founders’ ability to get its retailer network, which has long trusted the company, to take it on, even as it has played in a different set than more traditional aloe drinks — although as a brand, it is about equal in size to the those products put together in Southern California grocery channels, according to A.C. Nielsen. But the ability to establish a sustainable brand is one that has confounded its owners when it has tried to roll out its own products on a national basis, so it has kept Aloe Gloe close to home.
The alliance with this particular market unit of Coke, they hope, will bring extra merchandising and marketing power behind the brand in the chain accounts that L.A. Libations’ connections have already brought on board, while helping layer the product more heavily into its foodservice and independent store networks.
“No one can question our route to market capabilities,” said L.A. Libations CEO Danny Stepper. “But can we build brands? That’s a big, sensitive area for us. But we’re humbly optimistic with this one.”
Some of that optimism comes from the four years worth of insights that the company has already applied to Aloe Gloe — insights that may have been lacking with its last launch, Arriba, which went national in 7-Eleven at launch but has since undergone changes in packaging and formula. Still, the circumstances were different then — the company had an exclusive opportunity with a national retailer in that case, while with Aloe Gloe it has gone slow and local.
“We’ve learned what everyone else has,” Stepper said. “It’s not about building the revenue, it’s about building the brand.”
Meanwhile, in what may become a referendum on its own capabilities to work outside of core CSD brands, CCR is getting as much support as L.A. Libations can spare, providing a test case of how well the distributor can incubate a smaller brand when it is fully coordinated with that brand’s ownership. Entrepreneurs and their backers have criticized strategics in the past because they feel that smaller brands can get lost, but the hope on Stepper’s part is that their own knowledge of the market will maximize Coke’s vaunted reach and influence.
“We feel like the retailers are rooting for us,” Stepper said. “We begged for shelf space for Coke when we were 25 and working there; now we’re 40, and we’re doing it for our own brands, and they want to help us.”
Stepper and co. even convinced another mentor, powerhouse distributor Tony Haralambos to carve out an L.A.-shaped “doughnut hole” in his territory to allow Coke’s fleet of red trucks to take on Aloe Gloe (he controls the rest of the brand’s Southern California distribution).
After not spending on marketing for the first four years, L.A. Libations has now also invested heavily in the market, planning to spend $250,000 in sampling at events all over Los Angeles over the summer, giving away cold bottles of the 18-calorie drink. From L.A. Fashion Week to the Capitol Records Summer Bash, Stepper said, he expects to be at every event in town. Meanwhile, the company’s local marketing and merchandising team — which normally services L.A. Libations’ client brands — has been spending significant time riding along with CCR to help merchandising and sales. They’ve been joined by Stepper, Sarti, and Bolden, all focused on convincing the system that there’s a big future for Aloe Gloe.
“We know this model isn’t going to be scalable everywhere, that we won’t have this many people in any other city,” he said. “But it took us four years to get to where we’d even be ready for this. We’ve worked very hard to work out all of the kinks. We think we have proof of concept here, but for us, we’re hoping to find out how big a demand we can create for consumers when we really stretch it out in a market.”