September 11-15, 2017

Blog Entries by Andrew Kaplan

Playing hard to get

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Category: General Blogs  |  Tags: craft, artisanal

I admit it. I can be a sucker for a good marketing ploy just like the rest of them. But some of them work better on me than others. For me, it usually depends on what kind of consumer product it is. Being a techno-geek of sorts, I’m currently in the midst of daydreaming about how that Apple Watch will look on my wrist. My current obsession began after I ordered one and realized it will be on back order for a month. Somehow, that four week wait made me want it so very much more.
Desiring something, and not being able to get your hands on it, can make you want it so much more than if it was readily available. It’s human nature and good marketers have always understood this. In some industries this marketing tool is used all the time—and with great finesse. The film industry is a good example. What do you think all those “teaser” trailers are for anyway? 
Beverage marketers have used this tool every so often as well. But, until recently, it seems it was used more as a fallback measure than as part of a strategic marketing plan. Case in point is a big anniversary the industry recently marked—that of the introduction of New Coke on April 23, 1985. The leading soft drink company was able to actually turn around what otherwise is generally remembered as a marketing debacle by rebranding its original formula Coca-Cola Classic, and then making consumers feel all special that they were able to have it again. The result was sales of the original actually increased! Again, make something hard to get, and people want it so very much more.
It’s been tougher to play hard to get in the beverage industry because so many brands have been virtual commodities, relying on the vast movement of volume to stay profitable. Some segments, notably wine, have always been different. But they have been the exception not the rule. 
But in recent years this is now changing. With the continued growth of craft beverages, categories like beer, spirits, coffees, and increasingly even soda, are shifting from a mass-produced culture to one where small batches are playing increasing importance. Craft beer geeks, for example, know that come February it’s time for Pliny the Younger, which will be around for just a couple of weeks. And each year we read about fans lining up to get their hands on it like they would to watch the next Star Wars film or buy a new Apple product.
I’ve been struck in recent years by the number of beverage entrepreneurs who tell me they are “taking it slow” when I ask about their future plans for their brands. They say they want to build demand in a small geographic territory first and then carefully expand from there. They understand that playing hard to get today for a beverage can make those millennials want you so very much more. 

Dreaming in La-La Land

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Category: General Blogs  |  Tags: beverage

There was one quote that impacted me more than any other in the profile of Coke CEO Muhtar Kent that The Wall Street Journal ran on March 18th. It occurred during a section about a planned meeting Coke was supposed to have in Silicon Valley with the likes of Google, Facebook and other high-tech companies.

Of course, it piqued my interest when I read that sentence to begin with. Such meetings, after all, don’t happen very frequently in the beverage industry. While this industry is—slowly—changing, I think most observers would agree that it won’t win many awards for being on the cutting edge of technology. Sure, there are examples here and there of beverage companies that are embracing the latest technology—whether it comes to production, marketing, packaging what have you—but rarely these days are we being blown away by a technological breakthrough that we watched first emerge from the beverage industry. Usually, it tends to be the other way around. We in beverage borrow a lot from other industries.

Anyway, back to the quote. During the section on the meeting we learn that it ended up being canceled because Kent thought it more important that his people focus “on quarterly results instead.”  The article then continues, “In an interview, Mr. Kent explained his logic. Coke needs to equip itself with the “right technology,” he said. “But we can’t, you know, go and dream in La-La land.” 

If Coke fails to turn itself around, I think such, what I’ll label, short-term thinking, may have a lot to do with it. 

I read the Journal article having recently come back from what I guess could also be considered La-La Land—Los Angeles, after having attended the Natural Products Expo West. Yes, I will admit, some of the things I saw at the Expo were a bit ‘out there,’  but the immensity and excitement of this trade show is simply without compare in the beverage industry today. Heck, it even had mega-movie-stars pitching beverages! 

There is just no doubt that the beverages at Expo West, and there were plenty of them, are trendsetting and positioned where many of the younger, up-and-coming consumers are today: natural, transparent, healthy—and young. In fact many of the beverages at Expo West were either founded by young entrepreneurs or are brand new inventions of industry veterans who can see which way the wind is blowing.

Does Muhtar Kent see which way the wind is blowing? Well, he scores points for in 2011 going ahead and finishing the purchase of all of Honest Tea, a company I consider one of the most forward thinking in the beverage business today. But the “La-La Land” comment is reason to be concerned, especially when placed into context about focusing on next quarter’s sales possibly at the risk of losing sight of the bigger picture, as the Journal article so correctly suggests.

Lights! Cameras! Beer?

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Category: General Blogs  |  Tags: distributors, distribution

Warner Morris may be  the vp of operations for the Norcross, Ga.-based beer wholesaler Eagle Rock but part of his job has been keeping up to date on the latest TV shows being filmed in Atlanta. Because in a rather unique endeavor for a beer wholesaler, Eagle Rock is taking more than half of its new 800,000 square foot warehouse and committing it to the television industry, as the soon-to-open largest-under-one-roof television production facility in the U.S., Eagle Rock Studios Atlanta.
Talk about business ingenuity! It means taking something that’s been right under your nose the whole time—in this case, hundreds of thousands of square feet of extra warehouse space you recently bought but didn’t have any use for— and finding a lucrative new use for it. 
When the company was trying to lease one of its warehouses a few years ago after consolidating into its current Norcross facility, Eagle Rock crossed paths with television industry folks who were desperately in need of a place to shoot. It just so happens that Georgia has been quite successful in wooing Hollywood over the past several years—to the tune of becoming the third largest production location after California and New York in the U.S. And what’s more, the Hunger Games movies were also filming in town, gobbling up all the available studio space, putting even more of a squeeze on local television production.
Eagle Rock, an A-B wholesaler (featured in our March 2015 issue beginning on page 88 for the automated system at its new facility), quickly learned that Hollywood producers were virtually biting at the bit to get into the empty warehouse it was leaving as it consolidated into one facility. But Eagle Rock’s big Hollywood moment didn’t just end there. When it moved to its new facility in Norcross—a massive 800,000 warehouse previously occupied by Kraft Foods—this beer wholesaler only had need for about 350,000 square feet of that (the refrigerated side of the facility). What to do with the other 450,000 square feet? Turns out, Hollywood could use that too—big time. “Just from the connections and the relationships they built at our previous Stone Mountain facility, we realized, well we got this big giant 450,000 square foot thing, we can film more TV shows there,” explains Morris. And thus was born Eagle Rock Studios, which the company describes as a “Separate new entity and business endeavor, with common ownership with Eagle Rock Distributing.”
All of this makes for a rather entertaining thought: on one side of the wall will be conveyors running thousands of cases of beverages, while on the other, actors and actresses in costumes take to sound stages to rehearse and film their TV shows. I asked Morris if his workers will ever be allowed to take a break to watch the latest show being filmed?  “I think we might get to go over occasionally if we promise to be very quiet,” he says with a laugh. “At our old facility they film the TV show Devious Maids and they have basically rebuilt houses inside of our warehouse. I mean you walk around in them and you feel like you’re in somebody’s house. So it’s pretty interesting.”  Yes, Morris and his team have become true Hollywood insiders, a pretty glamorous proposition for a wholesaler with some extra space.
You can check out their new studios at  BW

Don’t trust ‘the future’

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Category: General Blogs

Maybe it’s partly because I am writing this just after “the biggest storm in New York City’s history” never quite made it past the airports, but I have been thinking for a while now about all the predictions about the future that are supposed to be certainties. But what if they’re not quite as certain as we all think?
Everyone, for example, predicts that consumers are moving to digital devices—digital this, digital that. That future shopping will be via the Internet, on a mobile phone, or on a website. Or, that the way we learn about new products will also be over our mobile devices, as will be the way brands send offers to consumers. Quite frankly, with all this computer screen staring, it’s enough to give you a headache. 
Sometimes you really want to unplug from it all.
I’ve been thinking about my Kindle, for example. I’ve been reading books from a Kindle for years. So far, I’ve gone through two versions of the device. Now, my second iteration is starting to act up and seems to be dying. Is it time to just abandon what was “supposed to be the way to read in the future” and go back to what effortlessly works, is able to last for decades—or even longer—and has more charm to it that a black and white screen? A regular, printed book?
I love my iPad and use it for countless things. But I’ve recently realized that I also love picking up a printed magazine, holding it in my hands, feeling the texture and listening to the pages crinkle as I turn them. I have never quite taken to reading long-form articles on my iPad. It’s not as easy on the eyes, and, let’s face it, there are too many other distractions just a click away that somehow interrupt. 
In the cover story I wrote for this issue of Beverage World, beginning on page 36, there is a lot of talk about the future. How the millennial generation is reshaping consumption patterns and literally giving the big, iconic, venerable brands a run for their money, so to speak. They’re proving elusive to these big brands and harder to appeal too for a variety of reasons. But there are also some signs that the venerable brands are marshaling themselves to the challenge and even in some cases growing again. It may, in fact, be too soon to write them off. 
Even the expert consultant quoted in the story admits at one point, “It’s the future, nobody knows.”
Maybe all the predictions we’ve heard about the beverage industry aren’t quite set in stone. Maybe we’ll be surprised to find the categories and brands we think will grow, and the ones we think will decline, may end up surprising us.
I used to field phone calls almost every day from people looking for information about smoothies. This was several years ago and it was predicted to be the next big beverage category. I don’t get those calls anymore. 
People have moved on to the next “big thing.”  BW

Becoming a small fish

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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.”