ATLANTA - A feature earlier this week in the Atlanta Journal Constitution described how Coca-Cola's Venturing and Emerging Brands (VEB) team, comprised of 15 people from Coke and others outside the beverage industry, meets twice each month to analyze beverage brands from around the world with one goal: "to never let Coca-Cola be surprised by trends."
"That's exactly why VEB exists, to try to identify the next big thing," said Deryck van Rensburg, the South African-born president and general manager of the group. "Look outside the borders of our company and partner with these entrepreneurs."
The group leads Coke's innovation efforts and its discovery of "hot niche brands," areas where the beverage leader has realized "a mixed record." For instance, while Coke Zero was a success, the company's teas and energy drinks lag behind market leaders.
It's no wonder, said John Sicher, editor and publisher of Beverage Digest, who said that large beverage companies have struggled to establish and grow niche products. "They're much better at growing their big, core brands."
While a decade ago, Coca-Cola overpaid for two brands that performed poorly €" Planet Java and Mad River Traders €" its VEB is set on doing things better for the company's future with an approach that's unique in the beverage industry.
In the three years since its inception, VEB has invested in entrepreneurial brands and imported others into the U.S. In a joint venture with an Italian company, it created espresso in a can. In another instance, it blended skim milk with sparkling water to create Vio, a "vibrancy drink." And borrowing an idea from its French operations, it produced Cascal, a soda available in flavors such as black currant and cherries.
Two years ago, the company purchased 40 percent of Honest Tea, a maker of organic bottled teas. And last year, it purchased a stake in Zico, a coconut water, for less than $15 million.
VEB seems to focus on products that emphasize health and wellness and social responsibility, and Van Rensburg said the group would even consider products in non-liquid forms, including snack bars and powders. It's part of the company's mission to revive its North American territory, where sales have gone down for more than two years before increasing in this year's second quarter.
Its goal is to gain footholds in niche categories without spending massive sums, such as it did three years ago when it paid $4 billion for Vitaminwater. "It was a good acquisition," Sicher said. "But in the future, they'd like to not have to spend several billion dollars to buy a brand."
"It's incumbent on Coke to take the kind of risk that it's taking with these small products," said Sicher. "It's very hard to know what the next big hit will be."