Last year, when Coca-Cola was in discussions
with the AriZona Iced Tea folks
about an alliance, I wasn’t sure that such a deal
would prove to be a boon for Coke or AriZona,
or for that matter, the industry.
Despite the care both sides showed in structuring
things so the AriZona people would continue
to operate autonomously, there have simply
been too many cases where, despite similar
precautions and the best of intentions, new-age
brands acquired by big CSD players have quickly
gone inert on the shelf. There’s just a chasm in
corporate cultures and operating style.
In fact, I’ve had this little fantasy conversation
to reflect what an AriZona/Coke alliance would
have been like a few years ago, when AriZona
was launching its “Rx” line of fortified drinks.
“So, who’s this J.W. Lippincott apothecary
you’ve got signing all the labels?” the Coke lawyer
would have phoned to ask.
“Oh, just some guy I made up,” Don Vultaggio
would have replied.
Coke lawyer: “Can we talk to him?”
That’s why I was relieved when Glaceau negotiated
its newly announced deal with India’s
Tata Group rather than, as often rumored, Coke
or Pepsi or Cadbury. The deal, in which Tata
is investing $677 million to take a 30 percent
stake in the company, seems a milestone on two
counts. First, it insures the continued independence
of a group of brands that have been crucial
to the viability of many independent distributors.
Second, it shows that the market accepts
that – though it’s not so hard to knock them
off, as Pepsi’s Life Water foray showed – innovative
brands like vitaminwater won’t be so easily
dethroned by deeper-resourced rivals.
We’re at a point where beverage consumers are
groping for new alternatives, making it important
that innovative young brands find a route
to store shelves. The DSD channel still represents
the most potent vehicle to accomplish this,
and after a painful period of exclusion, we’re seeing
doors begin to open again. They’re opening
among beer wholesalers, including once-isolated
Anheuser-Busch distributors who may be looking
to build non-alcoholic portfolios around
Monster Energy. They’re opening among major
soft drink bottlers, who’ve begun to grumble
that they’ll look beyond their core suppliers, if
necessary, to fill profitable growth niches. And
they’re opening among independent houses that
are getting sustenance from the brisk growth
and strong margins of brands like Red Bull,
Monster, Fiji Water, Fuze – and vitaminwater.
Glaceau founder J. Darius Bikoff was emphatic
on this point in his conference call announcing
the deal. “We’re not in the Coke
system and we’re not in the Pepsi system domestically,
to speak of,” he told one questioner.
“But we are in what you’ve referred to as the
independent system, and I’m hoping that after
today’s announcement, we’re all going to agree
to re-brand that independent network the Glaceau
network.”
To his credit, though the Tata capital infusion
gives him the resources to undertake major initiatives among the chains and other mega-retailers,
Bikoff offered not a hint that he may meld
his DSD thrust with more direct approaches
under the “hybrid” rubric.
“It’s only been because of the relationships
that we have with our distributors that we’ve
been able to nurture the brand to the level it is
today, and we’re not going to make any change
now,” he promised.
These days, you don’t hear declarations like
that too often.
Mind you, this is no rant against Coke, Pepsi
and Cadbury, who all are undertaking serious
initiatives to buttress their internal innovation
and, given their resources and an urgency born
of CSDs’ woes, certainly should not be written
off. It’s just a reminder that, big guy or small
guy, competition makes us all better. Glaceau’s
decision to ally itself with a partner outside of
long-established soft-drink channels represents
a big step towards assuring the little guys that
they’ll have somewhere to go with their good
ideas. After that, let the best brands win.
Longtime beverage-watcher Gerry Khermouch
is executive editor of Beverage Business
Insights, a twice-weekly e-newsletter
covering the nonalcoholic beverage sector.