Bringing a new product to consumers is challenging, risky and requires significant time and investment. Product breakthroughs often come from entrepreneurs – small, nimble teams with a different way of thinking and quick ways of adapting.
In the mid 2000s, The Coca-Cola Company realized that most of the disruptive growth in non-alcoholic beverages was coming from small- to mid-size companies.
That helped lead to the idea to create a new unit in Coca-Cola North America (CCNA), solely focused on identifying and nurturing innovative new brands. They would have the ability to move quickly, failing fast when necessary.
In 2007, the Venturing & Emerging Brands (VEB) team was born.
“A third of industry growth every five years was being generated from creation of things like energy drinks, enhanced waters, protein drinks—we were in many of these emerging categories, but we wanted to focus on ways to get in even earlier,” said Matthew Mitchell, vice president of investments and ventures for VEB.
This required a new approach to innovation. “CCNA was coming up with some really good and exciting ideas and we had a lot of great innovations in our pipeline between 2001 and 2007,” said Matthew, who has spent 10 out of his 22 years at Coca-Cola with the VEB team. The challenge was that the company didn’t always have the right models to win in a fast-changing marketplace.
“We used our traditional distribution and production methodologies, but disruptive ideas required a different model,” said Matthew.
Today, VEB wears four different hats. First, VEB focuses on the future, identifying longer-term consumer opportunities. Then, they put on a venture capital hat, which means deciding where to make investments. Third, VEB acts as an incubator, bringing brands to market – or to a wider market. Finally, in the integrator role, VEB aims to “graduate” successful brands out of VEB into Coca-Cola’s larger portfolio.
A Formula that Worked
In the 10 years since VEB launched, the unit has either built or invested in 42 brands. “The model worked, but it took a lot of vision and a lot of commitment from senior management,” said Matthew.
Honest Tea is one of the top success stories. VEB recognized that health and wellness was a growing trend and understood that consumers were looking for drinks that would align with healthier lifestyles.
With Coca-Cola’s help, the brand has expanded to more than 100,000 locations in the United States and debuted in Great Britain in 2016.
Some products like tea seem like a natural extension for the Coca-Colaportfolio. The company has also used VEB to diversify new categories.
The company’s joint venture with Select Milk Producers is an example. The JV’s brands include the fast-growing fairlife brand. “Ten years ago, no one would have believed that Coca-Cola would compete in the dairy business,” Mitchell said. “Now, we’re looking at a brand that has millions of dollars in revenue.”
The Future of Innovation
For Mitchell and the rest of the VEB team, the search for the next big hit is driven by consumer demand. “We have identified a sweet spot where we merge consumer macro trends with entrepreneurial work at the micro level,” said Mitchell. “And in our minds, when macro and micro collide, that is how disruption occurs.”
So what’s on the horizon for VEB and Coca-Cola? Many emerging beverages are considered functional – for example, Suja Juice, in which VEB has a minority investment. The cold-pressed juice is filled with nutrients from fruit and vegetables.
Even after 10 years of work, the need for VEB is greater than ever. The number of beverage trademarks in the market has doubled since VEB launched, leading to more competition and more innovation.
Technology is also starting to permeate the ways that people buy consumer packaged goods. The growth of e-commerce and other alternative channels like specialty gourmet means that brands are being built in different ways than ever before.
“The VEB team has changed enormously over the last 10 years, and we’ll need to keep changing in the years ahead,” Mitchell said. “The marketplace is incredibly dynamic. It makes this journey challenging and exciting every day.”