Getting the jump on the next big thing can mean the difference between success and failure for many startups. But hot consumer trends attract tough competition, and staying on top of the market suddenly gets a lot harder when a few competitors turns to dozens.
So how does a company rise above a saturated market? On the first day of BevNET Live Winter 2017, held in the Loews Santa Monica Beach Hotel in California, sought to answer that question by highlighting the gourmet coffee category, a sector of the beverage market that has experienced its own rapid growth over the past few years thanks to the ever-buzzing rise of cold brew. In his opening remark for the day’s presentations, BevNET editor-in-chief Jeffrey Klineman framed the category as an ideal laboratory for experimenting with different growth strategies.
“It’s changing fast, it’s drawing investment, accelerating through a variety of channel plays, while attracting consumer attention,” he said.
Kicking off the show, Peet’s Coffee president and CEO Dave Burwick sat down with Klineman for a one-on-one discussion illuminating how the company — one of several gourmet brands in the portfolio of coffee giant JAB Holdings, alongside Stumptown and Intelligentsia — has stayed on top.
“This category, no matter how you want to look at it whether it’s ready-to-drink cold brew all the way to selling beans in bags, it is not a zero sum game,” Burwick said. “There’s so much tremendous growth in the category. And honestly we feel like allies to a lot of players who are out there. We learn from them, they learn from us, there’s so much to be had and I think the competition’s really good.”
The real challenge in the category, he said, will be to see which companies have the funding to stay afloat.
Peet’s, which recently began self-distributing with its own cold chain network in California, is also looking for the next big thing in coffee. According to Burwick, kegs and on-premise are increasingly significant areas for growth. Burwick also discussed the company’s recent and seemingly unusual $7.5 million investment in Revive Kombucha, framing the move as a strategic choice to secure a place in a rapidly expanding category.
“Kombucha is the soft drink for the next generation,” he said.
Offering further insights into coffee and competition, reg Steltenpohl, founder and CEO of Califia Farms, chronicled how the company has become an innovation leader in both the coffee and dairy alternative categories.
Califia Farms has approached the question of differentiation with a rapid-fire innovation pipeline for launching new SKUs. About 80 percent of the brand’s new products succeed, Steltenpohl told the audience. The other 20 percent, as he described it, are there then they are gone; in his mind, there are no real lessons to learn from those failures, but rather confirmation to keep looking forward.
“Having some real independence allows us to play with that stuff,” he said. “There’s an aspect that if you go too far into systematics then you lose the heart and soul and the dynamism. If you go too far in the wild then you get too far ahead of where the commercialization can keep up with you. So at the same time you need something that has a situational consciousness that isn’t driven just by segmentation data but that is more about being in tune with where the market is and what it’s ready for.”
But it wasn’t all coffee on stage. The other key theme of the event involved the changing role of technology and dominance of e-commerce in the marketplace.
Jesus Delgado-Jenkins, EVP and chief merchandising officer for 7-Eleven, discussed how the convenience store chain is embracing premium brands, including companies coming out of e-commerce and seeking to break into traditional retail. Many brands, he said, are going to market online first, and it’s up to retailers to work with them to bridge the divide.
Having enjoyed major success in e-commerce, one meal replacement brand, which Delgado declined to name launched in retail with 7-Eleven in a limited 20 store run in the Los Angeles and Texas markets. The experiment was so successful that distribution is now being expanded across California. These types of limited introductions, he explained, are becoming more common and by embracing these smaller, regional plays it opens the door to an “explosion of opportunity in the marketplace.”
Betsy McGinn, founder of McGinn eCommConsulting, spoke to the impact of Amazon’s purchase of Whole Foods in her presentation. Differentiation among websites is one of the changes the online grocery market is experiencing, with Amazon, Jet.com, and others attracting different types of consumers with different needs.
Of course, many brands are still built the old fashioned way. Matt Thomas, founder and CEO of Brew Dr. Kombucha, shared his story of maxing out credit cards and failing-before-succeeding as he built his tea and kombucha company from the ground up.
And it was a similar entrepreneurial story that closed out the day’s keynotes with a talk with BevNET’s Person of the Year award winner, Todd Berardi, founder of HiBall. After selling to Anheuser-Busch InBev earlier this year, Berardi and his team proved themselves to be tireless workers. In an on-stage discussion, he noted that the company took eight years to become profitable.
“It’s so much more fun to run the company when it’s actually making money,” he joked.
On a more serious note, he said that while it’s tempting to try to grow fast, the road to success lies in being strategic. Selling to Anheuser-Busch was a weighted decision and he had to be sure they were the right partner for the brand, he said.
In addition to Berardi winning Person of the Year, his Alta Palla brand was selected as one of the top Brands of the Year by BevNET.
Coverage of BevNET Live Winter 2017 will continue to tomorrow, when the exploration of the coffee category continues with talks from the founders of Chameleon Cold Brew and La Colombe, along with presentations by representatives of Distill Ventures, Kroger’s, and Just Goods Inc.