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Presentation looking at the various success factors behind success in beverage innovation, and the future of beverages in 2010 and beyond.
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ENVISIONING THE FUTURE OF BEVERAGES
Another Decade of Change…
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NEIL KIMBERLEY
(914) 482 0534
Wh
o A
m I? • Born in the UK,
now live in Brewster, NY
• Moved to the US at 21, went to GWU
• Past careers include Audio Engineering and Advertising
• Last 18 years in beverages
Wh
y W
ou
ld Y
ou
Lis
ten
To
Me
? • Brand Director on Snapple 97 -00
• VP Strategy CSAB 00 - 07
• Foray into ownership in 2008
• Started FF&B in 09 servicing private equity investors, beverage entrepreneurs and Wall Street analysts
Wh
y A
m I
He
re? • Networking
• Business Development
• I want your thoughts and opinions
2
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OBSERVATIONS
1. The ability to exploit change is the
ability to win
3
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WINNERS HAVE EXPLOITED CONSUMER
CHANGE
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4
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$1,400
$95
$375
$1,600
$800
$237
$4,100
$2,000
$3,600
$400
$5,000
The Business Development Theory
BUT “WINNING” IS NEVER IMMEDIATE
-
20.0
40.0
60.0
80.0
100.0
120.0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
Vo
l (2
88
oz E
Q)
Source: Beverage Digest 2007
Innovation Brand Volumes Since Launch Through 2007
Frappucino SoBe AriZona Snapple
Glaceau Fuze Nantucket Nectars Propel
Red Bull Hansens Rockstar
5
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Value
Function
Health
Distribution Consolidation
InnovationTaste
Fun
SociabilityConvenienceDesign
Conversation
Wellness
Buzz
Relationships
More SKUs
Tech-Based Selling
Data For Everything
People
“Fact-Based” Selling
Fewer People
Retail Consolidation
Retail Discipline
…AND CHANGE HAS NOT JUST BEEN IN PRODUCT
1999 2009
Consumer
Drivers
Commercial
Drivers
6
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OBSERVATIONS
1. The ability to exploit change is now
the ability to win
2. A Unique Idea is Not Enough
7
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THE DRIVERS OF SUCCESS
Attribute Implication
1. Tenacious, but flexible
management
• Strong enough to have
strength of conviction
• Realistic enough to change
when it is needed
2. Consumer Relevant
Product Difference
• Easy to understand and
dimensionalize
3. Willingness to Drive own
Distribution Strategy
• Challenge conventions
when needed
4. Effective Capitalization • Focus on the business, not
the investors
6. The Right Marketing • Build a brand from a product8
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BIG BEVERAGE HAS THE IDEAS AND PROCESSES…
But innovation and
incubation run counter to
their business model
Fear of failure
Slow to respond
Over-Analytical
Impatient for success
Over-invest too early
Lack of Prioritization
Silo-ed Responsibility
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Ineffective Portfolio Strategy
Ineffective Incubation Strategy
9
COKE AND VENTURING
Acquisition Approach Investment
Approach
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Glaceau, Fuze, NOS, Honest Tea, Zico, Illy
The approach is a step in the right direction, but the brands are still vulnerable to the challenges that have always beset big beverage incubation.
No Scale = No Focus10
NEW BEVERAGE DYNAMICS
Big Beverage View
Easier to buy than Innovate
No More Bathtub
Millionaires
Needs to be a big idea
Overpay and Underperform
Portfolio Fit
Entrepreneur View
Build To Flip
Maximize Growth
Minimize Profit
When to hold, when to fold?
Set Up Bidding
Keep Investors Hopeful
11Portfolio Incrementality
Ability to SupportEase of
ManagementFair Share of Value
Distributor View
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OBSERVATIONS
1. The ability to exploit change is the
ability to win
2. A Unique Idea is Not Enough
3. Change is Inevitable
12
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MAINSTREAM BEVERAGES ARE BEING SQUEEZED
Health Functionality
Mainstream
Beverages
CSDs
Milk
CoffeeWater
Tea
Juice
Sports
Energy
Emerging
Medium Margin Low Margin High Margin
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13
Short Term
2010
- Bringing The Pain
- Consolidating for Success
- Slowing Innovation
SO, WHERE ARE WE GOING?
14
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BRINGING THE PAIN
Soft Drink Businesses have performed well in the recession
Retailers will look to increase their share of value
Input costs increasing
Consumer buying power flat – and willing to compromise
Short Term
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KO VS PEP VS SWY VS KR VS WMT
16
Short Term
DPS VS HANS VS SWY VS KR VS WMTShort Term
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ALUMINUM PRICES
19
Short Term
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CONSUMER VALUE INDICATOR - COTShort Term
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CONSOLIDATING FOR SUCCESS
Consolidated Model
Split Model
Opportunites Risks
Less
Dissonance from
Boardroom to
Shelf
More Distance
from the
marketplace
Ability to Be
Retailer Intimate
Held Hostage by
Retailer
Less Overhead
in Management
Less Nimble,
Less Nuanced,
Greater Portfolio Less Focused
Short Term
More
Value
Available
Less
Value
Available21
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SLOWING INNOVATION
Fewer innovations likely
Small Beverage Co’s Less Angel and Venture capital
available
Big Beverage Co’s More Risk Averse
Barriers to entry increasing Distribution and Retail
Consolidation
Consumer retrenchment More Risk Averse
Short Term
22
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Medium Term
2011- 2012
- New Model Marketing
- “Evil Sugar”
- Outsiders Take An Interest
- Distributor Leverage
SO, WHERE ARE WE GOING?
23
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A MARKETING MODEL FOR THE DIGITAL AGE
• Differentiation based in marketing
• Vulnerable to price-oriented promotion
• Awareness driven by one-way advertising
• Availability bought
Old Model
• Differentiation based in product
• Price-oriented promotion less effective
• Awareness built by consumer conversation
• Availability earned
New Model
24
Medium Term
24
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TRADITIONAL BEVERAGE MARKETING
APPROACH
25
Trial
Build Consumer and Retailer Experience
of brand
Availability
Get Distributors and Retailers to carry your
brand
AwarenessCreate a brand
with target consumers
• Prioritizing
Availability alone
is not enough to
generate success
• But generating
trial and
awareness are
considered
expensive and
inefficient.
Medium Term
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FEET ON THE STREET – RED BULL
Red Bull has been the master of resourcing street level “Feet on the street” activity.
Field Marketing Manager
On Premise Manager
Key Account Manager
Field Sales
Manager
Field Sampling Manager
Red Bull Micro Cell Plans and executes bar/club events
Executes Nationally Mandated
Off Premise Retail Events
Creates unpaid local exposure
• Coolers at radio stations
• Coolers at local tV news
• Locker rooms at local sports teams
Plans and executes local sampling
events at retail and events
Links to Distributor• Maintains link between
microcell and distributor• Develops driver sales people
Medium Term
26
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FEET ON THE STREET – GLACEAU
Glaceau’s marketing model
relied on product trial with
retailers and consumers
Market Blitz Momentum
forced availability
Developed distributor
confidence
Visible sign of
commitment
Trial + Availability
Consumer Events
Retailer Visibility
Distributor Confidence
H
u
m
a
n
R
e
s
o
u
r
c
e
s
Glaceau organized their model targeting the weakest links of the selling chain:
Point of contact with retail.
Medium Term
27
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A NEW WORLD?
Real Life Execution
Digital Activation
Business Strategy
28
A New Approach To The Old Issue…
Product
Positioning
Targeting
Efficient consumer delivery,
Drive to store (co -marketing),
Impel to purchase
Sales Calls
Store Promotion
Sampling
Medium Term
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EVIL SUGAR
New Tax is almost inevitable despite the inequities
Cause multiple complications for the industry
Will become a political football
The more we oppose, the more likely the tax will be poorly thought through
Medium Term
29
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DISTRIBUTOR LEVERAGE
Drivers…
Scale
Tactical Opportunity
Vanity
Medium Term
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OUTSIDERS TAKE AN INTEREST
One of the non-US global players will want to be
bigger in non-alcoholic US beverages
Medium Term
31
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Long Term
2012 – 2014
- Food is Medication
- The Big Shakeout
- Customer Evolution
SO, WHERE ARE WE GOING?
32
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LONG TERM
Long Term
Food is Medicine
• The next level of functional products
• Nutrigenomics
• Greater Understanding of Diet”
• Real, Believable approach to healthy
The Big Shakeout
• Ineffective pricing and promotional models put multiple retailers in jeopardy
• Failure of inefficient retailers results in even greater consolidation
Customer Evolution
• Fewer, more powerful customers at the top
• Multiple smaller customers in emerging channels at the bottom
33
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AN EXAMPLE OF A PROJECT LEVERAGING
THIS THINKING
Unmet Consumer
Need
Product Execution
Effective Capitalization
Flexible Sales
New Model Marketing
Trial
AwarenessAvailability
PhyGital Marketing
34
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APPETITE SUPPRESSION IS
THE NEXT BIG DIET TREND
•Research identifies that appetite suppression is a key need for dieters, but there is a lack of effective food or supplements - AND NO BEVERAGES!
“Focus is shifting towards foods and beverages that can be digested more slowly, reducing hunger pangs between meals and allowing dieters to consume less.”
Weight Loss Programs
• Example: Weight Watcher’s Momentum featuring Hungry
• “Control Hunger, Beat Temptation, Stop Dieting, Start Living”
Weight Loss Books
• The Volmetrics Weight Control Plan
• “Feel Full on Fewer Calories”
Even diet plans have begun to address the appetite suppression need…
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THE 1ST APPETITE SUPPRESSION
BEVERAGE LAUNCHES FEBRUARY 2010
underWAY is simple
and effective
Dow Superfiber stops
“gastric emptying” -
increases feeling of
stomach fullness -
without gas or bloating
Low GI Sweeteners
stop insulin and blood
sugar spikes that tell
the brain you are
hungry
B Vitamins increase
energy levels
underWAY - The healthy way to put hunger on hold™…
underWAY will drive awareness
through significant TV, Outdoor and
PR support at introduction and on an
ongoing basis.
Brooke Burke - Spokesperson
Winner – Dancing with the Stars
Host – Making the Band
CEO Modern Mom Magazine
More at www.under-way.com
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ENVISIONING THE FUTURE OF BEVERAGES
Thank You!
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