BevNET Live Winter 2023 in Marina del Rey, California concluded Tuesday with a full slate of on-stage presentations offering insights – of both the data-backed and personal varieties – into the state of the beverage industry today, including presentations on disruption, non-alcoholic alternatives, M&A opportunities, and more. Here’s a sampling of what went down on Day Two. If you missed our Day One recap, you can read it here.
Identifying Disruption with SPINS
Entrepreneurial brands, quite often, are eager to sow the seeds of disruption – seeking to create innovative products that stand out and change the way consumers engage with whole categories. To start of day two of BevNET Live, Scott Dicker, Markets Insights Director at SPINS, broke down the characteristics of disruption in beverage and CPG today and how brands can better identify the opportunities to join, or lead, new waves.
Dicker began his talk by identifying the modern landscape for CPG as embodying the rise of “It Matches Me” products, defined by social media followings, instant delivery and constant connection to brands and the influencers who promote them.
There’s a number of trends driving this change, he continued. First and foremost is the mainstreaming of specialty and wellness: 25% of food and beverage sales in retail now come from that segment. As well, accelerated information access has increased massively – 46% of teens say they are online “constantly” and over 150 million Americans are on TikTok, compared to just 77 million who use Netflix.
Distribution barriers have also broken down. Amazon Prime membership grew by 134 million people between 2013 and 2022, to over 151 million. Around 79% of shoppers say they make an online purchase at least once a month.
“We’ve been saying this for years that the life cycle of innovation and brands has been speeding up, and it’s really at warp speed now,” Dicker said. “So, brands enter the market and make a big splash, and on the flip side it’s easier to be forgotten if you’re not executing right away.”
As far as more specific, product-level trends go, Dicker pointed to an embrace of “global” flavors helping to drive trial and discovery as American consumers look for more Asian, Mexican and other international cuisines in their food and drinks.
Indulgence has also continued to drive sales, albeit with more purposeful intent. During times of economic uncertainty (i.e. the past several years) consumers will look to treat themselves with a carefully selected luxury purchase, leading to sales growth for premium brands despite the larger challenges pressuring consumers’ wallets.
Dicker advocated that brands should innovate around trends like functionality, protein, low sugar and “perceptions of purity” like organic, non-GMO and other third party certifications. In particular, 27% of consumers said they were willing to pay more for a product with a third party verification logo and 37% will pay a premium for organic.
Disruption in one category can also create a domino effect, Dicker said, leading to additional disruption in adjacent categories.
“A lot of times we see something works in one category, it bleeds into the next one and you see that acceleration has already happened,” he said. “The opportunities there are still large for incremental sales.”
Looking for the Exit
As investors have become far more cautious in how they bring new brands into their investment portfolios, strategics have likewise become far less willing to take risks on M&A in the current economic environment.
As brands seek exit opportunities, panelists Caroline Levy, founder of consumer advisory firm CLAS, GroundForce Capital co-founder and managing partner Mark Rampolla, and Nutter partner Jeremy Halpern sat down with BevNET editor-in-chief Jeff Klineman to discuss the new focus of strategics and how brands might still stand out as attractive prospects for a sale.
“You’re looking at an environment where the traditional acquirers in beverage have shed a bunch of assets, they have not exercised options on a bunch of assets that they had and they’re really hunkering down in this environment to try and figure out what does their growth path look like,” Halpern said. “They’re thinking I don’t want to find out whether this brand is going to have product/market fit, I want to already know the answer to that.”
Rampolla suggested that the strategic beverage buyers today need to see at least $250 million in revenue and existing profitability in order to make an acquisition and what has long been missing between the larger players and small startups is a serious “middle market.” That market may be beginning to emerge, he said, where multi-brand management groups can successfully house numerous brands in the $50-$250 million range.
“It’s a very different type of outcome, very different type of expectations, but there will be an outcome for a number of brands,” Rampolla suggested, pointing to companies like Suja – with its acquisition of Vive – and the spun-off Tropicana brand which now operates multiple brands as examples of these middle market businesses that could serve as buyers for rising startups.
However, Levy noted there are still opportunities even among the larger players. Keurig Dr Pepper (KDP), she said, was one example of a strategic willing to acquire or partner with brands that are not yet “all the way there” to that $250 million line.
“I think it’s really important to hire the best people around you and understand your limitations and just be honest when you look yourself in the mirror [that] these are the facts,” she said.
Also on Day Two of BevNET Live
- Eat the Change founder and CEO Seth Goldman went deep into his decision to launch Just Ice Tea in the wake of Coca-Cola’s decision to discontinue his past brand, Honest Tea, including how maintaining relationships with the suppliers and former employees of Honest helped him to race the new brand to market.
- Entrepreneurs Rosa Li, CEO of Wildwonder, Jordan Bass, CEO of HOP WTR, and Chris Gallant, CEO of Chamberlain Coffee broke down their methods for transitioning from D2C exclusive to brick-and-mortar business models, including how listening to their consumers led them to make the leap in the first place.
- Dan Gasper, CEO of The Ardent Company, explained the non-alcoholic alternative trend and what’s driving consumer purchasing decisions when they’re no longer drinking, including misconceptions like Dry January and other theme months like Sober October being the only time of the year consumers are cutting back on alcohol.
- Former Rockstar Energy execs Jason May, now the founder and CEO of Weird Beverage Co, and Joey Cannata, president and co-founder of Daytrip, discussed their transitions post-acquisition to launching entrepreneurial brands. May also offered some advice for entrepreneurs looking to create distinctive, original brands: seek inspiration from everywhere, not just the beverage aisle, if you don’t want to appear as another me-too brand.
- Luke Emery, chief customer officer of Tractor Beverage Co., explored foodservice and the fountain, discussing how Tractor saw room for disruption in a format that has long been dominated by the leading beverage conglomerates.
- Finally, Nor-Cal Beverage Company’s Shannon Deary Bell, president of Manna Beverages & Ventures, and Pete Grego, VP of contract manufacturing, discussed their manufacturing company’s unique approach to entrepreneurial beverage brand building.