BevNET Live Summer 2018 Day Two Recap: Exits, Acquisitions and Platforms

On the first day of BevNET Live Summer 2018, speakers explored how to build a brand from a startup to a category leader, with insights from companies like Essentia and Vita Coco that have remained independent even as they’ve experienced near exponential growth.

On day two, the featured presenters focused on exits, acquisitions, and platforms. The audience at the Metropolitan West in New York City heard from beverage and venture leaders at Nestlé and PepsiCo about how the conglomerates pick their brand investments. Other discussions included how to prepare a brand for acquisition, building an optimal growth platform, and building a community within categories to create an environment of healthy competition.

During the morning, Nick Giannuzzi, managing partner of The Giannuzzi Group, discussed how to cover the bases during a brand’s infancy to prepare for future acquisition. Even decades-old loose ends can come back to destroy a deal, he said, whether its a forgotten former employee who was promised a share of the company or that the basic building blocks of a company are on a shakier foundation than its founder realized.

Going through the sales process involves finding out what’s wrong with a company, Giannuzzi said, but that only means entrepreneurs should look inward and work to fix the issues. He warned against making bad deals with co-packers, distributors, and early investors who may demand more control over the company or its intellectual property than expected.

“The deal you made four years ago matters now,” he said.

Those insights are valuable for when a company like PepsiCo or Nestlé is looking to make acquisitions, a process that both companies pulled back the curtain on. Nestlé Beverage Division president John Carmichael and managing director of Pepsico Ventures Group Daniel Grubbs explain the rationale behind recent acquisitions and what founders can expect after the buyout.

Carmichael discussed working with Chris Campbell, the founder and CEO of the recently acquired Chameleon Cold-Brew, explaining that Nestlé did not want to drastically disrupt the brand’s internal culture, but instead is focused on “superfueling” its growth.

“When we think about acquisitions, what’s really important to us, which may be less [important] in other strategics, is portfolio management,” Carmichael said. “We’re buying something special, something with a value position.”

Later, Grubbs spoke about PepsiCo’s acquisition of sparkling probiotic drink maker KeVita, which he said filled a white space in the market for the soda giant and gave it a platform to build around probiotic beverages such as kombucha. PepsiCo, he said, has four main approaches in its brand investments: support and enable the brand; create a long-term partnership with a 10 to 20-year outlook; develop a partnership with other investors; and bring the company’s experience to the table.

With platform and portfolio playing such important roles in both company’s investment and acquisition strategies, the day’s panels also touched on knowing how and when to build out the platform. WTRMLN WTR CEO Jody Levy, Q Drinks CEO Jordan Silbert, and Brad Barnhorn — a board member of both KeVita and Chameleon — discussed how to approach adding SKUs and why having too little in the portfolio can be as bad as having too much.

Levy said the launch of the WTRMLN WTR BLNDS line helped bring in new consumers seeking function, while Silbert talked about using the failed launch of several line extensions as an opportunity to refocus his brand’s identity. Like Grubbs, Barnhorn discussed the versatility and potential of KeVita’s probiotic platform. Each new line and SKU, he said, has a job to perform and each should be judged individually.

In an emerging category, community and competition can help develop the platform. Four players in kombucha — Humm CEO Jamie Danek, Health-Ade CEO Daina Trout, Revive CEO Sean Lovett, and, as a last minute addition, Brew Dr president Marty Wall — discussed financing in the space, working with investors, and creating open lines of communication to assure sales reps aren’t working at each others expense.

“It has created an awareness we’re all gonna win in the end if the race we’re in is a bigger race,” Lovett said. “As a race car guy, I’d much rather go at it on a national level than a regional race.”

In a deep dive on the shifting trends in beverage, Euromonitor analyst Howard Telford spoke about how consumer focus on preventative health and wellness, transparency, and new kinds of indulgence are shaping the marketplace. The space has experienced 14 percent growth since 2012 and is currently valued at over $450 billion.

As the federal government begins to recover from nearly a century of reefer madness, cannabis beverages have massive potential to be a major category in the near future, according to Hiller PC partner Lauren Rudick and Erik Knutson, president of the American Trade Association for Cannabis and Hemp. The duo discussed legal efforts to declassify marijuana as a Schedule 1 drug under federal law and the small but growing market for cannabis-infused drinks, which includes beverages with both psychoactive (THC) and non-psychoactive (CBD) compounds.

Beverages currently make up between 7 and 10 percent of the existing legal cannabis CPG market, Knutson said. Rudick added that beverages have seen 70 percent growth in the medical market, to more than $35 million, with potential for that growth to cross over into the recreational space. As the laws change, prices will decrease, making products more accessible to mainstream consumers.

“This is only the tip of the iceberg for true understanding of [cannabis] as both an ingredient for food and the medical side,” Knutson said. “It’s an amazing plant with endless opportunities and functionalities. And the market is blowing up.”