Coca-Cola’s acquisition of Fuze Beverage confirms its strategy of nurturing next generation brands
- February 01, 2007
||company acquisition agreement signed, Feb. 2007;
||Fuze Beverage LLC and its brands, enhanced tea and juice producer in the US;
||The Coca-Cola Company (USA), world’s largest beverage company;
||founders of Fuze Beverages;
||part of programme to expand beverage portfolio beyond carbonated soft drinks;
||having big strategic partner to sustain growth to next level;
||Fuze will operate as a stand-alone entity within Coca-Cola
A classic case of an entrepreneurial success being sold to a big multinational. Fuze was established in 2001 ‘in a basement’ by two people, one from the beverage business and the other a product designer. This acquisition comes only three months after Pepsico, Coca-Cola’s arch-rival, bought a similar company in the US, called Naked Drinks. We might see these players make a string of further ‘next generation’ drinks acquisitions in coming years, in developed countries especially.
Wisely, Fuze’s founders brought in two experienced managers, soon after starting up, rather than try to do everything themselves, which helped them to attract a major like Coke in such a short time.
The portfolio is full of delightful fruit concoctions, with more recent tea and energy drink additions. Health, refreshment, vitality, slimming, antioxidants are the themes. Also, bottle design is a major part of the Fuze proposition, which goes to show how important visual aesthetics are in today’s food business.
Such a ‘new generation’ acquisition will also relieve pressure on Coke from its bottlers who are eager for the company to expand its non-carbonated portfolio.
At the same time, Coke has wisely allowed Fuze to remain a stand-alone entity, to prevent it from being smothered within their system. This also suggests that the deal is part acquisition and part business partnership, at least in its first stage.
At this point, according to Coke, Fuze is ‘one of the fastest growing players in the categories in which they compete’, which suggests it’s still quite nichey.
What’s more, the fact that this has been achieved through forty new products and line extensions does raise some questions. Fuze’s value might be greater if it had a small number of SKUs, each of which had high repeat usage and usage frequency, rather than knocking out new delights all the time.
In both cases, Fuze and Pepsico’s earlier purchase of Naked Drinks, the core theme is new-generation healthy non-carbonated single-serving beverages. Although both deals are small in scale, they potentially provide transformational platforms for the two global giants.
However, because of the high risk of failure, as we’ve outlined in the case of Fuze, the groups will have to hedge their bets by buying a number of such saplings and see which ones grow into trees. So, more such deals will be sought out in various developed geographies.