Most consumer goods companies drive growth through gaining penetration (new users, new points of distribution), upping frequency (often through occasion based marketing) and trading up (premiumisation).
I’ve worked with many clients in multiple categories and there are always white spaces of untapped revenue, often close by. For many managers, sweating existing assets is less risky and faster than starting afresh with yet another new product.
That said whilst launching new products is not easy, it’s vital; vital as consumer tastes and preferences change, vital when regulations are moving, and vital as the trade likes new news.
Most big companies aren’t good at innovation. They’re bureaucratic and slow, approvals go through multiple processes; and often they try pleasing too many audiences.
When I started in the food industry, with a very large firm, it had no venture fund.
Now it seems everyone has one. Coca Cola has a separate division called Global ventures which was created to fast track acquisitions and accelerate start ups. Costa coffee, for which Coke paid $3b in 2018 is its centrepiece. It’s since been joined by Monster and Innocent drinks. Innocent a UK business has been taken by Coke into Asia, markets the company could not have penetrated deeply on its own.
Pepsico has a ventures fund and Nestlé last year started a “Life Ventures by Nestlé”. Diageo has distillventures, Tyson and Danone are also in on the act. Not all last the course, Evolv set up by Kraft Heinz no longer exists.
Coca Cola’s ventures division seems to be much more focused on executing innovations rather than creation of new concepts and technologies, the approach typically taken by others.
Its ventures division has sales of over $2.8b in 2021 and makes 10% operating income. It was created with the specific objective of ‘driving growth and having faster speed going forward.’ Costa is the main engine driver.
Certainly Coca Cola has taken Costa into far wider geographies than its UK owners could ever have achieved. It has also expanded into RTD and foodservice-take-away.
I understand Coca Cola’s global ventures team relies upon its existing Sales, Key Account management and bottlers to sell the brands. Therein lies a potential bottleneck, how do the sales team prioritise Costa versus say Georgia coffee? How many innovations can the sales team manage?
Let’s not forget a Ventures Fund looks good for senior management, especially when they are talking up the stock with investors. I am sure this is a key factor why so many large F&B businesses have embraced the idea.
For most businesses I work with, it’s less about the absence of ideas rather how to size, prioritise and execute the most promising.