NEW YORK (AdAge.com) -- Coca-Cola may be ubiquitous with billion-dollar soda brands that appeal to the masses, but it's betting its next big thing could be decidedly more niche.
Mary-Ann Somers, VP-strategic and operational marketing at Coca-Cola, is a leader in the company's Venturing and Emerging Brands group. At the Idea Conference on Thursday, Ms. Somers said the nonalcoholic-beverage category is filled with entrepreneurial startups. Some 3,000 brands exist in the category, though only 3% ever achieve $20 million in sales, a milestone Coca-Cola refers to as "proof of concept."
In looking at the industry's growth over the last decade, Ms. Somers said the company realized that half of the growth was being driven by those smaller brands, with one-third driven by segments -- such as energy drinks -- that barely existed a decade ago.
Out of 3,000 brands in the nonalcoholic category, only 33 are billion-dollar brands. Ms. Somers' group is hoping to identify and cultivate the next brand to crack the billion-dollar mark. To do that, VEB is looking for entrepreneurial brands with potential and identifying overseas brands that could be successful in the U.S.
"Plenty of products at Coca-Cola play in the middle of the distribution curve," Ms. Somers said. "At VEB, we really live on the left. We will develop things that not everybody will like, and that's OK."
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Admittedly, Coca-Cola has had trouble in the past cultivating smaller brands. Now, however, through the VEB group, the company is taking a longer view, developing small brands slowly. One way it's doing that is by being "distribution-agnostic," Ms. Somers said. Some brands, such as Honest Tea, are put into Coca-Cola's massive distribution system, while others fare better when taken to market by independent distributors.
For inspiration, the VEB group spends a lot of time in influencer markets such as New York and Los Angeles. Ms. Somers said that most people in her group aren't in the office -- they're in the marketplace. "We want to hear firsthand," she said. "I'm not going to sit in my office and only read research reports."
The VEB group's first investment was in Fuze and Nos. But since then it has also invested in brands such as Zico and Honest Tea. Ms. Somers highlighted two of the VEB group's latest products, Sokenbicha and Cascal. Sokenbicha, an unsweetened line of wellness teas, was developed with a Japanese company. Cascal is a fermented all-natural soda created with Coca-Cola's partners in France and Whole Foods.
"We think we're creating a new segment here," Ms. Somers said of Cascal. "We believe this can be a new segment that we drive."