Category: General Blogs
It’s an issue that a good many beverage companies have faced over the years, some with success, some with failure. And for those who haven’t yet faced it, somewhere deep down they probably have at least a passing wish that they will one day. The issue I am talking about is how to maintain your company’s culture when being swallowed up by a much larger company. What do you do when you find yourself suddenly a small fish in a much bigger pond?
The beverage world is notorious for putting companies in this position. Like a minor league ball player hoping to one day make it to the big time majors, many smaller beverage companies—especially in the non-alcohol space—hope to one day be bought out by a Coke or Pepsi.
Our Disruptors ranking, which begins on page 27 of this issue, refers to several instances where this has happened. Mergers and acquisitions is a constant part of the beverage industry as many of the categories face maturity.
But how does a smaller company maintain its carefully crafted culture when suddenly being bought? One of the Disruptors on the list—in fact, our No. 1 Disruptor, Seth Goldman—has much experience in the matter. Honest Tea, which he cofounded with his partner Barry Nalebuff, was bought by Coca-Cola in March of 2011 after an initial 40% investment in 2008. At first, there were many concerns all around about what the joining would mean to Honest Tea. The company received its share of critical comments from consumers right off the bat, concerns that it had sold out, for instance.
While the relationship continues to be a work in program four years later—Honest Tea just this past year graduated from Coke’s Venturing and Emerging Brands (VEB) portfolio to its water, tea and coffee group, and as a result is now being included in plannograms with other products in Coke’s portfolio—Goldman did share with me some words of advice for other beverage entrepreneurs.
“First of all, I think it’s great that Coke has had the Venturing and Emerging Brands model,” Goldman says. “You often see companies that get bought where there is not really an infrastructure to support the brand or to help steward the brand.” By this he means VEB colleagues are able to deal with a lot of the bureaucracy of the vast organization that is Coke that otherwise he and his people would have to spend time focusing on. “One good way to kill an entrepreneurial organization is to make them sit through meetings all day,” Goldman says with a laugh.
The way Coke began as a minority investor in Honest Tea, and maintained that for the first three years, also wins high praise from Goldman. “It meant that we still ran the business with our own team in place and Coke was a supporter and followed the conversations and was an advisor, but they weren’t dictating how we did things,” he says. “Call it a dating period.”
During this time, both organizations got to know each other closely and were able to scale the Honest Tea business as well. “So when it came time for Coke to exercise the option and to buy the company, we realized what we wanted the organization to look like was what it looked like. We didn’t try to change what was already working. This was a much more gradual exchange of DNA and I would say a healthier one, too.”