Market Trends, Part 2

In Market Trends, Part 1, I discussed the distilled spirits current market data and how companies use that to predicted trends in the industry. In Part 2, I want to look at an example at changes in the market and the role new small companies are playing.

Recently I read an article on Honest Tea, an independent beverage company that was established 7 years ago and has successfully carved out a segment in the U.S. nonalcoholic drinks market, which is worth about $105 billion a year. What is being found is consumers tastes and preferences are changing from the traditional soft drinks to non-traditional products and brands being introduced by smaller companies. Smaller companies are more agile, enabling them to adapt to consumer trends quicker than the cumbersome industry giants.

Charles Frenette, a former chief marketing officer for Coca-Cola Co. and Miller Brewing Co..states “Unfortunately, the consumer is not cooperating with big brands the way they have in the past,“ with many different drinks on offer now, “The consequence is they become more promiscuous -- people are now drinking dozens of brands.“

But the success of these new small start up beverage companies is not just coming from having a unique product, it is also in the way they market their brand. While the big industry giants that control the market, stick to their preferred T.V. advertising medium to get their message across to their consumers, new start ups are using non-traditional marketing means, such as the Internet and word-of-mouth, these mediums are more in touch with young consumers.

It’s the small new companies on the block that lead innovation, they are quick to adapt and due to them only carrying one or two bands will preserver with that brand longer. Generally large multi-national companies will inject millions into a new product and expect to see it catch on within a short time frame, if the product fails to take on in that short time frame they will scrap the brand and try something else. “Sometimes big companies don't have the patience to stay with something for year after year, when it hasn't caught on,“ said Gil Cassagne, chief executive of Cadbury Schweppes Americas Beverages. Where as a small company with only one brand on its books, will continue to promote the new product until it works or they go broke, as they have no other product to push. It is this mentality of small business that makes them succeed. “The beverage industry presents an interesting paradox in that it is highly consolidated ... yet time after time, small companies with entrepreneurial savvy and energy can still break through and create tremendous value,“ said Beverage Digest editor John Sicher.

I have talked with senior executives at several leading global beverage companies in relation to Mendis coconut brandy, while they agree Mendis coconut brandy is a very appealing product (that will take market share) due to its’ unique branding and taste, they don’t want to step out of their corporate box and try new products. They prefer to play it safe for fear of it failing and losing their job over it, so they go with the safe option, buy an already successful brand for multiply times its book value. The main thing is, small companies get the door shut in their face many times, before they find success, though perseverance and dedication pays off in the long run. Let negative feedback strengthen your will to go on, for we are all humans with individual thoughts, what one person thinks is insignificant in the grand scheme of things. It’s the collective thought that counts in the end and the buying power of the masses that determine whether a product is a success or not.