It wasn’t a sale, it was an adoption.
That family vibe was what Bai founder Ben Weiss described the $1.7 billion tie-up between his seven-year-old beverage company and the much larger Dr Pepper Snapple Group (DPSG). The deal, announced on Tuesday, was something that will allow the extension of the brand into more categories while also benefitting the new parent company, and is the largest takeout of an independent brand since the sale of Glaceau to the Coca-Cola Co. in 2007.
“The platform couldn’t get everywhere it was supposed to go unless it was wholly owned,” he said. But it’s a delicate balance — the brand’s own development process had required independence, while access to the DPSG network had given it the opportunity to prove its value to the system.
“They allowed Bai to become Bai,” Weiss said of DPSG. “It is a mark of my admiration for [DPSG CEO Larry Young] that he was so willing to take a risk on a brand you don’t wholly own.”
Weiss discussed the six-month auction process as one in which the fast-growing independent brand — long dependent on DPSG as its key distribution network — and the larger company took the step needed to bring together the component parts of a family that could help fix both parts of the American diet and ongoing issues with the overall beverage distribution game.
“I didn’t put this up for sale,” Weiss said of the deal, which had ultimately involved at least six potential acquirers. “I started a process because people came to me.”
Even as the money on the table grew, Weiss said, Bai had been prepared to remain independent if that was the best decision. He pointed to the just completed addition of singer/actor Justin Timberlake as an investor and “Chief Flavor Officer” as an indication that “I was always interested in the brand, not that concerned with ‘oh, no, I might be making some guy some money,’” by letting the star into the capitalization table right before a sale.
But despite the willingness to remain independent, Weiss said, he added that he had openly hoped the winner would be DPSG all along, claiming he and CFO Ari Soroken “left money on the table. I wanted to be with DPSG.”
Weiss professed huge admiration for Young, saying that the older partner “shared my vision of the industry,” and that he was looking forward to trying to help develop Bai as a platform that could help move the business forward.
“One of the things I said to Larry was ‘you had me at hello,’” he added, referring to the CEO who had opened the checkbook for the independent brand. Weiss said he recognized that kind of deal was something that the larger company had tried to avoid for several years due to an increasingly inflated set of valuation expectations from entrepreneurial brands, so the willingness to commit on DPSG’s part was especially significant.
Bai as a brand, he said, had showed that a zero-calorie natural sweetener mix could taste good enough to cross over from a non-carbonated set of enhanced waters to teas and sparkling drinks.
“It’s always been about fixing the diet dilemma, then the distribution dilemma second,” Weiss said. “Our aspirations were bigger than just being an enhanced water model.”
That statement also squared a few controversial remarks Weiss had made in the last month leading up to the sales announcement, in which he’d told said the company was “Bai, not sell” and referred to the company has having “outgrown” the DPSG system.
“Those statements caused me some grief,” Weiss told BevNET, claiming they had been taken out of context. “Why would i ever talk bad about a system I’m reliant on.”
Internally, that reliance is being trumpeted to both sides of the partnership. Bai’s in-house studio produced a gauzy video called “Adoption” as a way of explaining the deal to both the Bai team and DPSG’s, as Weiss’ own voice narrated his company’s history as a kind of growth process that had, of necessity, taken place outside of a larger corporate environment before coming together this week.”
“There’s a beautiful future ahead of us,” Weiss intones. “One born out of friendship that’s been forged into family.”