![]() ![]() It is also a narrative very common to public firms today who, for the most part, don’t do much internal innovation anymore. This is essentially a B2B sales-led growth strategy, despite the distracting overtures to innovation. The critical variables in this standard upside narrative are: adding UPCs and increasing distribution. ![]() announce intent to sell internationally for easy upside as a global CPG company.highly profitable line extensions) for easy topline surges and also to increase profits (by eliminating any existing co-man tolls) expand the ‘brand’ into multiple manufacturing categories where the strategic owns plants (i.e.invest in an emerging brand with profit expansion potential.Here’s the structure of this stock narrative (not sorry for the pun): Public statements from the head of Danone Manifesto Ventures fall right into a typical acquisition ‘narrative’ meant to excite investors. Brand extension mania killed its growth for the same reasons they will decelerate Harmless Harvest.ĭespite the admirable patience of European markets, this investment in Harmless Harvest is a real head-scratcher. Yet, this premium functional beverage strategy did not work for Suja, which just slipped into private equity hands days ago (at only about 185M in annual sales). Of course, Harmless Harvest claims to have other beverage lines in development with which it can pursue growth. Will anyone create a $500M coconut water brand in the U.S.? It doesn’t seem very likely, if Vita Coco hasn’t pulled it off yet inside a private holding company. Along with relaxing unit prices carefully.īut let’s come back to the addressable market of the category. ![]() penetration is the primary reason brands keep growing at this point. Inserting new trademarks into local culture through field marketing is critical to accelerating across the doldrums between $100 and $250M (industry insiders know this all too well). Instagram ‘influencing’ is not what I’m talking about and is wildly oversold as a tactic for primarily brick retail brands. Too little fieldwork: Finally, Harmless Harvest has done very little out-of-store marketing compared to the brands I listed above.This makes forward-looking distribution much less productive than it does for the latest flavor of Cheetos. Why? The brand is headed into more and more down-market, off-target points of distribution. As premium-priced, healthy brands get past $100M in trailing annual sales, the productivity of each added point of ACV distribution generally goes down. distribution to get to this scale (excluding convenience). Excessive MULO %ACV capture– Harmless Harvest has already used up 50% of its potential U.S.The form and trademark become synonymous, allowing for highly productive out-of-store marketing efforts. Category focus allows a trademark to absorb strong collective meanings in any culture it’s a function of how word-of-mouth between consumers works. Kashi is the exception that proves this rule, although its brand extensions eventually killed it as a Kellogg growth engine. Ingredient platform brands like this have rarely scaled, though many have tried. Loss of category focus – hydration beverages and yogurt have little in common when it comes to, well, anything.Although it’s common for brands to decelerate as they cross the $100M threshold, Harmless Harvest reveals specific, common reasons for it: It has decelerated far earlier than famous beverage predecessors like Fuji Water, BodyArmour, Bai, and even Essentia. The point here is that Harmless Harvest is no Skate Ramp brand. Not bad, but 19% is far from an exponential growth rate that the highest multiple acquisitions garner. Yet, it is actually about the same growth rate as the global coconut water market (depending on whose projections you believe). Better than General Mills stock, for sure. My point is that Coke doesn’t see Zico as a brand with billion-dollar brand potential, most likely due to its core category AND because of its recent, failed experience using brand extensions to pump up Suja.Īlthough Harmless Harvest is selling less than $100M in trailing annual sales now, it claims to be on track to have doubled the business by the end of 2021 …over a trailing four-year period. This might excite the sales team at Harmless Harvest, but when BigCo kills a brand to free up distribution space, it’s because its internal analysts have determined the long-term scale potential is not worth investing in anymore (if it can recapture the original investment through a fire-sale). Coca-Cola then killed off Zico last year. The pandemic was a gut punch to any brand anchored to hydration/electrolytes, because it subtracted tons of outdoor beverage occasions during lockdowns. Because coconut water is not growing anymore in the U.S. Danone’s recent majority stake in Harmless Harvest is a curious market event. ![]()
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