BevNET Live Day One: The Capricious Industry

By Max Rothman

With a Midwestern palate, Jeff Church used to make Twinkies and Ho Hos vanish.

“I thought I got my protein from McDonald’s,” he said.

But he doesn’t chuckle at green juice these days. About a year and a half removed from launching Suja, Church, the CEO, has hoisted the juice company into an enviable locus:

A central figure in the high-pressure processing (HPP) movement.

Approximately 20 million in revenue in the first year, according to The Wall Street Journal.

The BevNET product of the year, announced Monday at BevNET Live in Santa Monica, Calif.

Yet as Church spoke in the morning of the conference’s first day, he considered Suja’s state in the context of the beverage industry. The tailwinds of swift success haven’t fogged his ability to reach pragmatism.

“As easy as it goes up, it goes right back down,” he said.

Speaking later in the day about entrepreneurs, Neil Kimberley, the founder of beverage consulting and advisory firm Foods, Fluids and Beyond, shared Church’s sentiment by reciting his take on Dickens.

“It’s the best of times and the worst of times,” he said.

Kimberley projects that as carbonated soft drinks continue to lose market share, the next five years will yield about $7 billion worth of opportunities for other cogs of the beverage industry. However, a blend of fickle consumer preferences, executive missteps or any other obstructions could quickly derail a company or a category.

The idea that a beverage company can spike or sink at any time carried over at the conference, indicating that entrepreneurs recognize the often uncontrollable factors at play. Church knows that, even now, Suja could continue to reach new levels of prominence or have about the same shelf life as the juice itself.

However, despite the cautious thinking, Kimberley’s lofty projections weren’t the only encouraging signs for beverage industry startups.

Andrew Black, the founder and CEO of BrandProject, an investment fund and brand development company, said that he’s looking for disruptive beverage ideas and willing to put $500,000 into a business. He believes that this investment, in certain cases, could jolt a startup in the first few months of funding.

Andrew Black, founder and CEO, BrandProject

When considering prospective investments, Black considers the product, team, target consumer, branding, target markets, distribution arrangements, supply chain, margins, retail partners and financial situation.

“Everybody seems to know the basics of blocking and tackling to make a business successful,” he said.

However, what isn’t as widely known is a state of quality that makes a product immediately ready for the market. Sometimes it’s a lack of resources, other times it’s a shortage of good taste and ancillary opinions.

Black also looks for a company that has a maximum of four to five employees. At an early stage, when fiscal responsibility and risk-taking is of the utmost importance, you don’t want to thinly spread profits among a list of cousins and friends posting on your company’s Twitter account.

Also providing encouraging news on Monday was Terence Fox, the president of M.E. Fox Distributing. The distribution company, which records about 25 percent of its revenue from Red Bull, has a strong focus in Silicon Valley, Calif., with a high-profile list of customers including Google, Facebook, Apple, Adobe and eBay, to name a few. Black said that these companies have a quick turn rate and search for beverages that can fuel their intense workloads and match their levels of innovation.

The nearly endless streams of wealth in the Bay Area are continuing to support emerging and innovative beverage companies. Fox said that the upscale, high-end consumer is still investing in products that match the proportions of their wallets. As of Dec. 1, in hopes of seizing the important Hispanic market on the West Coast, many beer distributors have taken on Jarritos. Fox said that the combination of a healthy upscale market and the introduction of Jarritos will help drop the dominoes. He said that these distributors aren’t going to consider just one non-alcoholic beverage brand.

“If it’s a profitable brand, a distributor will get behind it,” he said.

The numbers fortify these claims. Kimberley said that in the past 12 years, the beverage industry has jumped from $78.9 billion in sales to $117.4 billion. As the sales of carbonated soft drinks continue to wane, he said that Amazon estimates a 60 percent increase in beverage sales this year. While not fully immersed in the innovative side of the beverage category, Walmart and Target are making progress. All of this, along with Kimberley’s $7 billion projection, could leave significant opportunities for ideas that establish and polish beverage trends.

Bonnie Herzog, a beverage analyst and managing director at Wells Fargo, said that cola giants often look at smaller beverage companies for ideas. Those segments that haven’t yet compromised bold decisions in favor of national availability continues to offer the next stages of the industry.

“I see a lack of innovation on their part, which I think is an opportunity here,” Herzog said.

So what has this opportunity influenced? The New Beverage Showdown, which offers startups a chance to present their product and business model to a panel of judges, indicates that whether or not these beverages will make it big, Herzog’s take is an accurate one.

The 20 presentations featured skin products, water from trees, drinks that are supposed to make you look younger and bottles with QR codes. The winner will be announced Tuesday afternoon and chosen from the six finalists — vTrue Radiance, a liquid supplement for healthy skin, Happy Tree Maple Water, Health Ade Kombucha, Lumi Juice, a cold-pressed, HPP juice, Chimp Food, a blend of fruits, veggies, nuts and seeds that includes the peel and pulp, and Lyft, a caffeinated stir stick.

Matthew Mitchell, a judge of the competition and the director of business development with Venturing & Emerging Brands (VEB), said that he was impressed with the professionalism, story-telling and authenticity of the finalists.

And just as Church and others in the beverage industry understand the reality of a fast fall, the participants of the New Beverage Showdown and its judges recognize the potential of avenues not trampled.

“I would encourage people to keep pushing the envelope,” Mitchell said.

Source: Beverages