Brand New
Will this start-up be able to keep changing its brands to keep up with the ever-changing beverage market?
Anatomy of a Start-up
Peter van Stolk doesn't worry about having his brands knocked off. He's counting on it
OK, so Urban Juice & Soda is not technically a start-up. It's an application of the knowledge founder Peter van Stolk accumulated in 10 years as a beverage distributor. And the key lesson he's gleaned is that value doesn't always lie exclusively or even primarily in a product brand. Sometimes, of course, it does. What would the Coca-Cola Co. be worth without Coke? Or Anheuser-Busch without Bud? But those brands have sustained their values, and not all brands do.
Van Stolk has seen scores of beverage products come and go. "Sure, the beverage industry is competitive," he says, "but there aren't a lot of smarts." In the conference room of his Vancouver, British Columbia, company, a large bookcase is filled with the hundreds of juices, sodas, iced teas, and bottled waters whose makers used to come knocking on van Stolk's door, seeking Canadian distribution.
All that clutter is a sign of the trendy times for "New Age" beverages--a catchall phrase for the fashionably bottled chaos you see at the 7-11. Although the New Age category grew wildly in the late 1980s and early 1990s to become a $6-billion industry today, that growth is beginning to slow as powerhouses like Snapple and Clearly Canadian fizzle. Watching from his distributor's vantage point, van Stolk observed that you can build a viable business around creating New Age beverage brands, as long as you don't try to sustain them. When their time has passed, let them go, and be ready with the next one. Van Stolk believes he can turn his former distribution company into a creator and developer of soft-drink brands.
The Theory. As a distributor, van Stolk knew that one key to successfully launching a new brand was getting the right distribution. "Most beverages are created with the consumer in mind first, then production, then distribution," he says. "That's why there are so many losers. It doesn't matter what consumers want if they can't buy it." He also knew that distributors would take on a new beverage brand if it generated incremental sales for them--meaning it didn't cannibalize the brands they already carried.
Analyzing the strategies and performance of what he calls the "Big Five" New Age brands--Sundance, New York Seltzer, Koala Springs, Clearly Canadian, and Snapple--van Stolk saw commonalities, the most important of which was that when they were introduced, each of them did constitute a new beverage category. Sundance, for example, was the first of the carbonated fruit beverages, and Clearly Canadian began the short-lived clear-beverage craze. As new categories, each of the Big Five offered distributors incremental sales. The "me-toos"--like the 400-plus new iced teas introduced in 1995--didn't. "If I'm selling Arizona or Snapple," he points out, "another iced tea will just cut into the sales of my main line."
But even wide distribution of a product doesn't guarantee success for the company that produced it. Each of the Big Five had sales that rose quickly to a head and then went flat. And the decline of one hit beverage roughly corresponded to the rise of another. From that van Stolk concluded that New Age beverage success had little to do with product quality. Sure, the product had to be good, but beyond that "it's all fashion," he says, "like yellow power ties or acid-washed jeans."
Furthermore, van Stolk decided, the owners of the beverage hits eventually became their own worst enemies. Having ingratiated themselves with distributors, they abused that relationship by trying to grab more shelf space through line extensions. A fatal move, according to van Stolk. "Twenty percent of your flavors will generate 80% of a company's sales," he explains. "Snapple's Lemon Iced Tea is still its number one flavor. And it will sell 10 times more than Mucho Mango Muck." But when reordering, retailers don't restock the key flavors that sell, because they want to move their leftover inventory. The consumer comes in looking for a Snapple Lemon Iced Tea, sees everything but, and buys someone else's lemon iced tea instead. Snapple thinks it's leveraging brand equity to build market share, says van Stolk, "but it's really speeding up the demise of its products' shelf life."
In a business in which so many have made, and then lost, so much, van Stolk thinks he's found a better way to achieve long-term success. The rules, he says, are these: First, never fall in love with your brand, because it isn't going to be around forever. Throwing marketing dollars at a struggling brand merely forestalls the inevitable. Second, never name your company after your brand, because "that limits your company to the life line of your brand," he says. "That's why New York Seltzer is no longer in existence." And that's why van Stolk's company--producer of Jones Soda and Wazu bottled water--is called Urban Juice & Soda. And the third rule: Use a brand's power to create your next brand.
Rule three means that van Stolk proposes to build a company that's known not for the brands it markets but for its ability to create a continuing succession of marketable brands. Each new product from Urban Juice & Soda will constitute a new category. Not a line extension. Not a new flavor. A totally new identity. Van Stolk will create the product, build distribution, and if and when a buyer is interested, sell the brand. Meanwhile, van Stolk will be developing his next category-creating product.
Product Development. The grand assumption in van Stolk's theory is that Urban Juice & Soda can consistently produce a string of product hits. For inspiration, he has turned again to previous New Age hits, noting that their success has usually mirrored trends in the fashion world. Koala Springs, for instance, hit in 1987, after Crocodile Dundee had become a big box-office hit, at a time when America loved all things Australian. Arizona Iced Tea arose amid the Southwest chic of the early '90s.
So van Stolk began scanning Details, GQ, House & Garden, and the like, where he noticed numerous classic comebacks: three-button suits, Hush Puppies shoes, Day-Glo colors. He concluded, therefore, that his first product should be a "retro classic" soda: it would come in traditional flavors like grape, orange, and lemon-lime, but with a '90s edge. Old yet new, hip yet square, a blend he felt would appeal especially to the Generation X crowd. Even the name he chose for the drink--Jones Soda--was conventional but smacked of heroin chic (as in "I've got a jones for a Jones").
