Coca-Cola adapts approach to expansion

24 August 2010

ATLANTA: Coca-Cola, the soft drinks giant, is taking a long-term approach when extending its portfolio, as it seeks to identify the global brands of tomorrow.

The company's Venturing and Emerging Brands division is staffed by approximately 15 employees, and combines the role of investor, adviser and trend-spotter.

"That's exactly why VEB exists, to try to identify the next big thing," Deryck van Rensburg, the president and general manager of this unit, told the Atlanta Journal Constitution.

"Look outside the borders of our company and partner with these entrepreneurs."

More specifically, the ambition of the organisation is to tap the manufacturers of rapidly-growing or niche products with significant potential.

According to Van Rensburg, Coca-Cola would consider acquisitions in sectors beyond the beverage industry such as snacks, should it prove a good fit with the rest of the business.

Having paid large sums around a decade ago to purchase two start-ups - Planet Java and Mad River - that ultimately failed to deliver impressive figures, Coca-Cola has adapted its strategy.

To achieve such a goal, the firm has drawn on best practice examples from other categories, as pioneered by firms like Cisco, Johnson & Johnson and Sony, to improve its performance.

The results of this process include the launch of Vio, described as a "vibrancy drink", and the introduction of a fruit-flavoured soda called Cascal, first developed in France.

In 2008, Coke also bought a 40% stake in Honest Tea, a maker of organic bottled tea, and has since sought to help the organisation feel at home in an enormous corporate structure.

"With large companies, in the past, if you were a small company without the resources and staff, you would just get lost," said Seth Goldman, co-founder of Honest Tea.

Elsewhere, Coca-Cola took a share in Zico, which makes coconut water, for a modest $15m in 2009.

"I didn't really expect them to jump right on it, because we were still pretty small," said Mark Rampolla, the founder of Zico.

But van Rensburg suggested this was the ideal time to get involved, as it provided for enormous flexibility and demonstrated a long term commitment.

"Traditional venture capital offers money, maybe a seasoned beverage executive," he said. "We're in it forever, not just to make the deal."

Data sourced from Atlanta Journal Constitution; additional content by Warc staff