Full Sail IP Partners acquires Odwalla brand from Coca-Cola
"We're thrilled that Odwalla, with its long history of innovation, high levels of brand awareness and reputation for great products, will be our first acquisition,” said Full Sail CEO Alan Kravetz in a statement.
“We look forward to providing consumers with the best tasting, artfully crafted functional beverages and foods to allow them to snack well, feel well and live well," added Kravetz, who told Reuters he planned to revive Odwalla with a focus on health benefits and a lower sugar positioning, building a direct to consumer business, and expanding the reach of the brand into food and supplements.
Full Sail IP Partners – which launched as a joint venture between Warburg Pincus and brand licensing consultant LMCA in April - told Reuters that the deal does not include production and delivery of Odwalla, which Coca-Cola acquired in 2001 for $181m, but had struggled with in recent years, telling the Wall Street Journal last year: “We couldn’t figure out the cost-effectiveness of it… It really is the result of consumers changing what they want so rapidly."
Speaking to FoodNavigator-USA last summer, Odwalla co-founder Greg Steltenpohl - who passed away earlier this year - said it was a "bittersweet" moment for him to learn that the brand he started selling from the back of a van in 1980 had been axed.
"There is so much turnover in the beverages space, so 40 years is a pretty long run. I think Coca-Cola did a pretty good job for the first 7-10 years. They more than doubled the business from the acquiring revenue rates, but I think since then it's been a slow decline.
“The concerns about sugar really started kicking in around 2010, 2012, and HPP also took a bite out of the market, and then they had some business model challenges around the loss of company owned manufacturing. This also highlights how challenging chilled [direct store delivery] really is.”
COVID-19 forced all brands to take a long hard look in the mirror, added Steltenpohl: “You address your weaknesses or you lean into your strengths, and I think that’s what senior leadership at Coke is probably doing here.”
'It’s really hard to find executives with management skills and that mission-based passion'
While Odwalla had unveiled a flurry of innovations in recent years, from functional shots and ‘Smoochba’ (pasteurized kombucha and smoothie combo), to keto-friendly smoothies, they hadn’t gained much traction, with the bulk of sales still coming from the core portfolio, claimed Steltenpohl.
“If you’re going to continue innovation, you have to have a very strong connection to your consumer base, and the business models that some of these big companies put in is that they rotate the innovation groups with each marketing director or CMO.”
He added: “There’s a story here about how tough it is to maintain that connection with the consumer with some of these strategic acquisitions. You could argue that the rotational aspects of the acquiring company almost make a long-term strategy for a smaller acquisition factually impossible.”
“The new managers of an acquired asset are usually people that have worked their way up the corporate ladder. It’s really hard to find executives with management skills and that mission-based passion. You have to have people that have committed to risk taking in their careers, people that have experience of creating businesses as well as managing businesses.”
Brands with ‘billion dollar potential’
In a letter to customers sent last summer, Coca-Cola explained that it was focused on brands with “billion-dollar potential... Given a rapidly shifting marketplace and despite every effort to support continued production and delivery services, Odwalla will regretfully be discontinued and its chilled DSD distribution network, sourced by the Lineage facility, will be dissolved after July 31.”
Speaking at the Deutsche Bank global consumer conference last year, Coca-Cola’s CFO John Murphy said: “The reality is it's a lot harder to bring an explorer [brand] through to being a leader that I think many times we like to acknowledge… We are becoming a lot more disciplined and making the tougher decisions to prune back while we allow the ones that have the opportunity to grow to get the attention that they deserve.”
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