ATLANTA – If you like strong odds for success, being an entrepreneur in the beverage business might not be for you.

But if you like the risk-and-reward that comes with finding the next big thing, the opportunities are wide open.

“Innovation is very, very difficult,” said Scott Uzzell, president and general manager of Coca-Cola’s Venturing & Emerging Brands unit. “The most successful ‘overnight’ brands take six to eight years… You’ve got to have patience to make it happen.”

In today’s fast-changing consumer landscape, new beverages are arriving on the market at a rapid-fire pace. Coca-Cola’s global, multi-pronged approach to innovation includes the work of Venturing & Emerging Brands, or VEB.

Sandy Douglas, president of Coca-Cola North America, said VEB has helped the company innovate at a faster pace. “Innovation is a big part of what drives growth in the marketplace,” he said.

VEB is U.S.-focused and is tasked with identifying and incubating a portfolio of smaller, high-value brands. The goal is to put products on the right path to join the company’s roster of billion-dollar brands.

VEB

Sandy Douglas, president of Coca-Cola North America, speaks on Aug. 17.

Amy Sparks

Entrepreneurs build networks to deal with the unique concerns and challenges they face. VEB wanted to do the same thing, so it specializes in working primarily with people outside The Coca-Cola Company. Last week, VEB gathered a host of leaders from across the U.S. innovation, venture capital, retail and beverage landscape. They came to Atlanta to discuss the ins-and-outs of identifying emerging beverages.

The barriers to building a successful new beverage are daunting. There are more than 6,000 beverage trademarks in the market. An average of 500 new ones are launched each year. Only 3 percent of beverage brands ever vault past the $10 million mark in sales.

Nonetheless, entrepreneurs are thirsty to get into the business, and VEB works closely with some of the best of them.

For example, VEB’s initial investment in Honest Tea led to a full-on acquisition. Honest Tea is now a fast-growing part of Coca-Cola’s tea portfolio in the United States. The Honest brand is expanding, too, including the success of Honest Kids and the emergence of Honest sports drinks.

VEB's Four Roles

VEB plays four key roles at Coca-Cola: futurist, investor, incubator and integrator. The process starts with identifying promising categories.

VEB gets help from agencies like Ypulse, which focuses on understanding the consumers of tomorrow. “We study young people,” said Ypulse President Dan Coates. “They’re responsible for many of the inflection points in a society.”

The challenge is figuring out what trends will endure and identifying categories that have the potential to get big. VEB has a strong record in investing in brands that go on to great things, like Honest Tea and ZICO coconut water. VEB also works with partners that include First Beverage Group, which advises and invest in emerging brands.

“We make bets on particular concepts or categories and people who can pull it off,” said managing partner Tom First.

VEB

From left: Matthew Mitchell (VEB), Dan Coates (Ypulse), Tom First (First Beverage Group), Don Clark (Whole Foods) and Seth Goldman (Honest Tea).

Amy Sparks

The quality and appeal of a beverage is paramount. First said his staff does a huge amount of research. In the growing kombucha category, for example, the First Beverage team tasted hundreds of products before deciding to place an investment with Health-Ade. “We made a bet on an amazing brand,” he said.

First also looks for entrepreneurs who are never satisfied. “Paranoia is the best business talent,” he said.

Throughout the innovation process, retailers are a big piece of the puzzle. Many new beverages are targeted at health-conscious consumers. Whole Foods is, famously, a launching point for many new brands.

Seth Goldman, who founded Honest Tea, got his start by bringing five Thermoses of his home-brewed tea into a local store. “The whole company was me and these five Thermoses,” Goldman said. “We’ve been grateful and wonderful partners [with Whole Foods] ever since.”

Don Clark, global vice president of procurement for non-perishable items at Whole Foods, said part of the company’s approach is to create an atmosphere that encourages people to place big bets. It’s also important to look for long-term trends. He believes functional beverages are one of the biggest things on the horizon.

“That’s going to be a rapidly evolving business,” Clark said.

VEB

From left: Don Clark (Whole Foods), Seth Goldman (Honest Tea), Tom First (First Beverage Group), Dan Coates (Ypulse), Hendrik Steckhan (Coca-Cola North America) and Scott Uzzell (VEB).

Amy Sparks

Matthew Mitchell, vice president of investments and ventures for VEB, said the unit grew out of a vision 10 years ago. Today, VEB brands have already brought in approximately $1.8 billion in retails sales that Coca-Cola didn’t have before. VEB has touched 42 brands, either through innovation or investment in this period. Some of these didn’t work, but while managing the risk and cost of these new brands, the company was able to learn from all of them.

Sparkling beverages will continue to be a cornerstone of Coca-Cola’s business. But VEB’s work in fast-growing categories, especially in still beverages, fits with a global company strategy to offer more choices for consumers. This kind of innovation also continues the evolution of a business that has been changing ever since it began in 1886.

“After 130 years in business together, we know that innovative thinking, innovative ideas, are key to our growth,” Douglas said.