EO Nerve 2012 Keynote

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
2

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
4

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
6

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
10

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 &
equity & GM Insights, Supply
Chain, Selling & Distribution
Thought leader in Sustainability
12

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:
13

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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