This document discusses strategic brand venturing in the U.S. beverage industry from 2001 to 2009. It notes that the industry grew 30% in retail sales and saw 19% growth in the number of brands over $1 billion during this period. One third of total industry growth came from categories that barely existed 5 years prior. The document outlines how entrepreneurs are driving disruption through new beverage categories and products. It also discusses the risks involved in venturing, noting that the average time to prove a disruptive concept is 4-10 years and success rates are low initially. The document advocates for companies to establish a distinct venture unit to identify and nurture brands with $1 billion potential through incubation and investment strategies.

1. Strategic Brand Venturing
Entrepreneurs’ Organization - NERVE 2012
“Dream – Lead - Challenge”
April 20, 2012

2. U.S. Beverage Industry
2001 - 2009
Retail $ Sales # of TMs Retail Sales
> $1B $85
33
$350 - $1B 40 $27
$5 - $350 mm 391 $22
< $5 mm 2,899 $1
Total Industry 3,363 $ 135
+19% +30%
Net 12 New 1/3 of growth in Over 3500
TMs categories that brands (20% of
Entered the barely existed total) driving
ranks 5 years ago 50% of the
of $1B Brands growth
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3. Industry Benefit Structure is
Evolving
Non-Traditional
Competitors
Social &
Environmental
N
E
Categories Blurring
X
T
?
Functional &
Lifestyle Brands
Health &
Wellness
Source: Beverage Marketing Corporation 3

4. Entrepreneurs are Driving Disruption
1st New
Age Drink 1st 1st Protein
1st
RTD Enhanced Drink
Coffee Water
1st Energy 1st Soy
Drink Drink 1st Energy
Shot
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5. Incubation Takes Time
Avg. Disruptive
Revenue
($MM)
Avg.Successful
$75
$20 Proof of Concept
4-10 Years
1 2 3 4 5 6 7 8 9 10
5

6. Risk of Failure is High…
Phase 1 Phase 2 Phase 3 Phase 4
Experiment- Proof of Pain of Scale to
ation Concept Growth Win
Retail Revenue $0 - $20 $20 - 50 $50 - 150 $150 - 350
Success Rates 3% 16% 17% 30%
…And Need New Capabilities
Flexible Art of Entrepreneurial
Route to Emerging Sales &
Market Marketing Activation
Influencer Flexible Incentives &
Performance
Customer Supply & Management
Relations OTC
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7. Innovators are Sourcing Growth from
“Outside”
Source: Mason & Rohner, 2002
The venture imperative
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8. Need Distinct Unit to Pick &
Build Future Winners
• Small team, tight resources
• Action bias, quick to respond
• Ground level approach to marketing
• Long time horizon
• Distribution agnostic
Adopt entrepreneurial models while leveraging
scale when appropriate
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9. Two Core Strategies
Identify and Nurture Brands with $1 Billion Potential
INCUBATE INVEST
Importation / Minority Investment and/or
Innovation Acquisition
“SWEET
SPOTS”
Replicate Entrepreneurial Model Retain Entrepreneurial Model
Capabilities
9

10. Dedicated, Loose-Tight Autonomous
Business Unit
CEO
President
North America
President President President
Sparkling Still VEB
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11. Revenue ($MM) Respect & Leverage the Curve
Commit for Global
Brand Portfolio
Leverage
Distribution, Sales,
Supply Chain, and
Brand knowledge
Invest at “Proof of
Concept”
Time
VEB Focus
Traditional VC Focus 11
Classified - Internal use

12. Investment Example: Honest Tea
Innovative Deal Structure
Opportunity • Minority investment with call option
• Founder retains • KO Marketing & Insights,
equity & GM Supply Chain, Selling &
Distribution
Thought leader in Sustainability
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13. Incubation Example: illy issimo
Opportunity Innovation
• Category $2.2B, up 10% • Seed in influencer cities
• Starbucks unchallenged • Hybrid RTM
• Illy brand premium positioned • Brand missionary (intrapreneur)
• Opportunity to Capture Share • Feet-on-the-street
• High risk/reward incentive
programs
Replicate Entrepreneurial Model; Think Big, Start Small, Prove, Expand
Incubator: Equity:
Phase 2:
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14. Venturing Scorecard:
Capture Tangibles & Intangibles
Source: Citi Growth & Innovation
Incremental Equity Value
Strategic
Revenue Investments Created
Value
and Valued
Profit Created
2
Cost
Savings
% of Company Growth Business value • External perception of
vs. investment innovation capabilities
# of scaled brands • New channels/cust./models
Revenue Growth
• Expanded relationships
• International expansion
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15. Thank You !
Q&A
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