Category: General Blogs
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.”
The Second Big Battle against the soda industry ended on last month’s election day, November 4, with one win for the industry—and a big loss. First, the loss: In Berkeley, California, 75 percent of voters said yes to a new penny-an-ounce tax on sugary beverages. And then there was the win: just across the Bay, in San Francisco, a similar vote to enact a two-cents an ounce tax on sugary drinks lost because it could not garner the two-thirds of votes needed to pass (though it did get 55 percent of the vote).
Now I call this the “Second Big Battle” because it comes on the heels of failed efforts last year by former New York City Mayor Michael Bloomberg to pass a ban on sales of some sugary drinks larger than 16 ounces.
The Berkeley loss was greeted by some health advocates as a major victory or even a turning point in their battle against the industry. One of them, Jim Krieger, even called it’s a “breakthrough moment.” I am not so sure he is right. I think advocates may have overestimated this victory and may be in for a surprise in the coming months about how much opposition they, and not the soft drink industry, end up generating among the American public.
I feel this way because Berkeley has always been a unique place culturally, or perhaps I should better say, counter-culturally. Walk its streets today and it’s easy to feel like you’ve stepped back in time to the 1960’s—yes, it still even has hippies. It’s not hard to see why they embraced a measure that is so anti- business.
But much of the country is not like that. They dislike big government telling them what to do even more than they might a big corporation. And restrict their freedom of choice and you have crossed the line. Case in point was the outcry that erupted in Westminster, Mass. in November when the local Board of Health held a hearing over a proposal to ban the sale of tobacco products. A public hearing had to be shut down after just 20 minutes because the crowd was so infuriated by the possibility of the government restricting their personal choice—and we’re talking tobacco here.
In New York City, the soda industry cloaked its campaign against the sugary drinks ban behind a group that played off those anti-government sentiments. But New Yorkers, ever a cynical bunch, didn’t quite go along with it. But I have a feeling the industry won’t even have to go to that length in other parts of the country—like Westminster, Mass.—to defeat any proposals by government getting between them and their choice of what to drink.
The winners appear in the November issue of Beverage World. Here is the direct link: The total package
Thanks to everyone who entered this year and congratulations to the winners!