Beverage Business INSIGHTS
Published 90 X a year Vol 12, No 57 Jun 9, 2015
Publisher: Benj Steinman Editor: Gerry Khermouch Senior Editor: Jim Sullivan
Legal vet of hundreds of capital transactions for early-stage food and bevcos offered financing clinic at last week’s BevNet conference in NY, exhorting listeners to opt for convertible financing if they can in initial round and to go with LLC corporate structure.
At issue in presentation by Nick Giannuzzi, founder of The Giannuzzi Group, was how to build strong foundation for your co without giving away rights inadvertently, getting overly diluted or finding yourself evicted from your own co. “It’s too late to think about this when you’re about to go down to 49% with the next round,” he warned. Of course, cos operating in desperate straits may have no choice but to give away rights, and even successful ones can expect plenty of dark days, he warned. “Every single entrepreneur who gets there (to exit) has to suffer,” he declared.
Giannuzzi is familiar figure in bevs, running 10-lawyer firm based in NY’s Meatpacking District that over past 10 years has focused exclusively on food/bevcos – 180 clients in total. This year co will likely do 120-130 rounds of financing. First client, he reminded audience, back when he was half the staff, was Vitaminwater marketer Glaceau. (Nick’s also investor in restaurants like STK and Bagatelle via The One Group, where he’s board member.)
Given need for feet on street, sampling, etc, bevs is capital-intensive biz in which founders generally must undertake a round of financing virtually every year unless they have a rich benefactor, Nick reminded. That constant demand is “ultimate challenge for the founder, because finding money is hard, finding people who believe in you is hard, finding people who believe in your concept is hard.” Even when you do, there are lotsa pitfalls to avoid.
First round, perhaps to raise $300K to $1 mil to fund first production run, typically goes friend-and-family route. Entrepreneurs confront 3 choices there. First, used often in tech sector, is convertible note round – say, $500K on terms where money loaned to co converts to next round of financing, generally at 20-25% discount. Advantage of convertible is “you don’t really have to deal with valuation, at a time your valuation is terrible because you haven’t sold anything yet . . . it’s one of the ways to kick that can down the road,” Giannuzzi offered. Some prospective investors reject convertible notes as way too speculative, he warned, but if anyone bites, it’s great. Failing that, founders should consider common equity round. To Nick, that’s much better choice than 3d option: preferred equity, which effectively gives investor downside protection. That means, if co needs to be sold at lower valuation, “they get their money back first.”
“My position is, if there is any way to do a convertible note on good terms, that can often be the right choice,” Nick exhorted. That flies in face of some lawyers’ view that, if you’re dealing with friends and family in first round, why not sell preferred? The trouble comes, Giannuzzi warned, when new investors want their round to be preferred, and superior to prior investors’. “Every time you give preferred, new investors say they want their B to be superior to A,” to point where, as rounds accumulate, “by time you’re done stacking all these preferred on top of each other, you have a board of 18 people and all kinds of blocking rights and other rights,” Nick said. “That’s why giving friends and family preferred sets a horrible precedent – I’ve almost never seen an exception to every other set of investors demanding preferred shares.” For those who go convertible note route, next round, maybe for $1 mil, is likely to involve common shares.
Problem with preferred is compounded in current climate where multinationals buy into promising cos earlier and earlier, “eating into rounds 4 or 5,” in turn pushing private-equity funds to start funding round 3 or round 2. That means you’re still small, untested co, not likely to get a great valuation, but now sophisticated funds are coming in writing $850K checks for 2 board seats, 16 blocking rights, preferred shares – all in round 2. That creates “really tough decision: Do you take the money at that cost?” Nick said he spends hours each day discussing issue with clients, but “it’s a person-for-person decision. Some of my founders will not be answerable to anyone, will fight for as long as they can to maintain full control of their company.” They’ll fight “like hell to get to round 4 or 5″ until a really great PE firm comes along with $10 mil and demands some concessions. This, of course, is for cos doing very well; otherwise, money may be hard to find on any terms.
Giannuzzi also waded into issue of fundamental corporate structure. Should you start out as corporation or limited liability co (LLC)? Tho in some industries it’s hard to find a buyer if you’re not incorporated, in food/bev “I’ve always advised clients to start as an LLC,” Nick offered. That offers 2 advantages: First, if you grow your co and instead of selling want to distribute your profits upward, you have a single layer of taxation vs corporation with 2 layers and “an absolute mess.” And 2d, LLC confers certain advantages with respect to retention of employees, consultants, celebrity investor/endorsers, etc. Unlike a corp, an LLC can award profits interest, rather than stock options, and recipients can get capital gains tax treatment. Of Giannuzzi Group’s 180 clients, probably 150-160 are LLCs. As for often-expressed fear that at some future time co will have to convert to corporate status, “in all our deals, only twice did we do a deal where somebody said you have to convert your LLC to a corporation,” Nick reassured.
Another issue pertains to mgmt control: derived from partnership law, not corporation law, LLC makes shareholders key, with general partner making all decision even if there are 100 limited partners, Giannuzzi said. Power can be put in a single person or, more likely, a mgmt board that decides everything. At start, agreement is put in place “that puts you in charge of your company – we call it our ‘god agreement,’” that all employees must sign acknowledging they have no rights at all. All other members are merely “along for the ride,” he said.
Technical aspects aside, Nick acknowledged during Q&A that it’s partly power game: “Are you hottest girl at the dance? You need to feel the market out . . . You need to be realistic with yourself.” As with another BevNet speaker, Sherbrooke Capital’s John Giannuzzi (BBI, Jun 4), Nick warned founders not to always reach for highest valuation possible. “That’s not always so smart. It’s better sometimes to bring it down a little bit to give away less rights,” he said. You may end up weighing several term sheets from prospective investors – the highest, say, at $27 mil valuation but demanding lots of rights. “Maybe the guy with the $20 million valuation will actually let you run your biz,” Nick suggested.
NEW YORK– The ONE Group Hospitality, Inc. (“The ONE Group”) (OTCQB:STKS) today announced that it has been featured by Crain’s New York Business as one of New York’s 50 fastest growing companies as part of Crain’s Fast 50.
Crain’s Fast 50 serves as a spotlight for the fastest growing and innovative companies in New York that have demonstrated revenue growth in excess of 150% over the past three years. With revenue growth of 204% generated over the past three years, The ONE Group is the only restaurant and hospitality company to be named to the list.
“It is truly an honor to be highlighted by Crain’s New York Business as a “Fast 50” company and I would like to thank the entire ONE Group team whose dedication and professionalism made this achievement possible,” said Jonathan Segal, CEO of The ONE Group.
Segal continued, “The ONE Group was founded with the vision of being a global leader in the hospitality industry by combining a vibrant and high energy ambiance with innovative and great cuisine to create a best in class dining experience for our guests. We remain excited about our robust pipeline of superior growth opportunities that we are building for many years to come.”
Based in the Meatpacking district of New York City, The ONE Group currently operates seven STKs throughout the United States and London, as well as fourteen additional venues operated under food and beverage hospitality management agreements.
About The ONE Group
The ONE Group develops and operates upscale, high-energy restaurants and lounges and provides ONE Hospitality, a turn-key food and beverage service for hospitality venues including hotels, casinos and other high-end locations both nationally and internationally. The ONE Group’s primary restaurant brand is STK. STK is a unique steakhouse concept with locations in major metropolitan cities throughout the U.S. and in London. STK artfully blends two concepts, the modern steakhouse and a chic lounge, into one offering a high-energy, fine dining experience with the superior quality of a traditional steakhouse. STK Rebel offers the same vibe-driven steakhouse with a slightly broader menu targeting both lunch and dinner guests at a more accessible price point. Additional information about The ONE Group can be found at www.togrp.com.
Don Duffy or Sheryl Freeman, 203-682-8200
Source: The ONE Group Hospitality, Inc.
Released October 15, 2014
By: David Segal, The NY Times
Like kale salads and Robin Thicke, coconut water seems to have jumped from invisible to unavoidable without a pause in the realm of the vaguely familiar.
The stuff is everywhere — not just in supermarkets and convenience stores, but also on ads on buses (“Crack life open”) and bar signs (“Detox while you retox,” reads one in Manhattan, promoting a Vita Coco Arnold Palmer cocktail). It has turned up on television, as a question on “Jeopardy,” and it regularly makes cameos in glossy magazines, clutched by hydrating celebrities.
The battle for this market, worth $400 million a year and growing, now involves big players like Pepsi and Coke. But in the beginning, it looked more like a street fight between two guys. One was then a 29-year-old college dropout who rolled to Manhattan bodegas at night, on in-line skates, carrying samples in a backpack. The other was a former Peace Corps volunteer, driving a beat-up Econoline Ford van and fighting for the same turf.
Michael Kirban, who with a buddy founded Vita Coco, and Mark Rampolla, who founded its archrival Zico, happened to start selling nearly identical brands, in the same neighborhoods of New York City, at almost the same time — a week or two apart, in late 2004.
Those in the fray called it the coconut water wars. Each side quickly bulked up with sales teams and tried to win over Manhattan, one grocery store and yoga studio at a time.
The fighting quickly got ugly. It included simple acts of retail vandalism, like tossing the competition’s signs in the garbage, as well as attempts at psychological point-scoring that could charitably be described as sophomoric. Mr. Kirban sometimes placed a container of Zico beside a sleeping vagabond, took a photograph and then emailed it to Mr. Rampolla. And on more than a few occasions, the Zico sales force showed up outside Vita Coco’s offices, then near Union Square, and handed out free Zico samples.
“It was guerrilla tactics,” recalls Mr. Rampolla, talking from his home in Redondo Beach, Calif. “And not legal because you’re supposed to have permits. But if you were quick enough, no one would hassle you.”
Coconut water went from local skirmish to beverage fame despite what might seem like a major impediment: its flavor. Anyone expecting the confectioner’s version of coconut — the one you find in coconut ice cream, for instance — may be repelled. This is the juice of a green coconut, and the taste is a mix of faintly sweet and a tad salty. Some have compared it to socks, sweat and soap. And that group includes people crucial to coconut water’s success.
“When I tried it, I didn’t get it,” says Lewis Hershkowitz, the president of Big Geyser, which distributes Zico in New York City. “I thought it was disgusting.”
For many, the challenging taste is part of the appeal. Some are so smitten with the flavor they have created online forums that sound like support groups.
A decade ago, companies like Goya sold coconut water in stores catering to immigrants, and in quantities that hardly registered in market research. Today, more than 200 brands around the world sell “nature’s own sports drink,” as fans call it, and sales are rising by double-digit figures.
“This will eventually be a $1 billion-a-year category,” says John Craven, founder and chief executive of BevNet, a trade publication. “It’s the real deal. It isn’t a new flavor of Coke. It’s not Bud Light Lime-A-Rita. This has staying power. People put it in their diet and it stays there.”
The titans of the industry are on board. In 2010, PepsiCo acquired a majority stake in the distant third-place contender, O.N.E., and in 2009 Coca-Cola bought a 20 percent stake in Zico. Last year, it purchased the company outright.
Coke’s initial investment in Zico seemed like catastrophic news for Vita Coco, the only brand still controlled by its founders.
“I thought we were dead,” says Mr. Kirban of Vita Coco. “I didn’t tell anybody at the time, but I remember wondering, ‘How are we going to beat Coke?’ ”
The answer would involve Madonna, Hula Hoops, a family-owned investment firm in Belgium and a former professional tennis player turned salesman named Goldy. Vita Coco now owns more than 60 percent of the coconut water market, while Zico has less than 20 percent, according to Euromonitor, a research company. Two weeks ago, Vita Coco agreed to sell a 25 percent stake of itself to Red Bull China, giving it a head start in the world’s most populous country and valuing the company at about $665 million.
How a tiny, privately held company outmaneuvered the biggest players in the world is material for a business school case study. And to tell the whole story, you need to start in 2003, at a bar on the Lower East Side of Manhattan. There, Mr. Kirban and his friend and future business partner, Ira Liran, spotted two Brazilian women.
Nighttime Visits to Bodegas
What happened next happened fast. Mr. Liran fell hard for one of the women, and a few weeks later, when she returned to Brazil, he went with her. Mr. Kirban visited him in São Paulo not long after, and it was already clear that Mr. Liran was going to stay put and get married. All he needed was a job.
“Dude, I’ve got to do something with my life,” Mr. Liran told his pal.
They batted around ideas. That night on the Lower East Side, the Brazilians had mentioned that what they missed most while in the United States was coconut water, which they said was more popular than orange juice in their native land. While in São Paulo, Mr. Kirban realized that they weren’t kidding. A small guy with a troublemaker’s grin and a hypercompetitive streak, Mr. Kirban was raised in a rural part of Connecticut and comes from a long line of entrepreneurs. After leaving the University of Alabama, he was co-founder of a software company that catered to property managers. It was a solid business, but by the time he visited Brazil, he wanted another challenge.
He and Mr. Liran found a coconut water factory in the state of Espírito Santo that would sell them some product. They came up with a name and signed a deal with a carton maker called Tetra Pak. The first shipment — about $100,000 worth of coconut water — was sent in May 2004.
“Two days before it’s supposed to arrive, the F.D.A. calls,” Mr. Kirban explains, referring to the Food and Drug Administration. “They say: ‘You have no registration numbers. This can’t land in the U.S.’ I thought you just ship in containers, it shows up and then you sell it.”
He diverted the product to the Bahamas and sold half of it, door to door, to bars in Nassau. It wasn’t until August that the first cases of Vita Coco landed in New York. With cartons strapped to his back, Mr. Kirban skated to 40 bodegas a day.
“I’d usually go at night,” he says, “because the owners were there, counting the money.”
About a week into Mr. Kirban’s new venture, a guy at a GNC store in Herald Square in Manhattan mentioned that he had seen another brand of coconut water. Mr. Kirban was skeptical, then aghast.
“I went and found it,” Mr. Kirban said of his first look at a carton of Zico. “I was like, how is this happening?”
Mr. Rampolla was just as shocked by the appearance of Vita Coco. He had fallen in love with coconut water in Costa Rica, where he was serving in the Peace Corps. He later became an executive in the beverage packaging division of International Paper in El Salvador. It was there, about a year before his future nemeses were flirting with Brazilians in the Lower East Side, that Mr. Rampolla and his wife, Maura, also an early investor, came up with Zico. The plan was to make a fortune, but a do-good impulse informed their ambitions.
“Part of it was the idea that the developing world needs as many alternative exports as possible,” he said. “And 85 countries around the world were growing coconuts. We thought this could be an industry that created millions of jobs.”
By August 2004, and seemingly overnight, many residents of the Lower East Side, Chelsea and other New York neighborhoods went from zero coconut water options to two.
The Dueling Waters
The timing was a coincidence, but not the setting. Many American beverage superstars — Vitaminwater, Snapple, Arizona, Red Bull and Mystic — began in New York City, mostly because no place has a greater concentration of independent stores. Instead of having to woo a national chain, and perhaps hand over a few grand in placement fees, you can talk your way into one store at a time.
Zico gained an early foothold with yoga fans, persuading the owners of Bikram Yoga NYC to carry the drink in what was then a four-studio operation. Vita Coco was the first in a Whole Foods Market, in the one near Union Square. But neither brand ceded an inch, and when Zico got into that Whole Foods, the shelves there became a kind of hot zone.
“There’s an old adage,” says Chris Michaels, a former Zico salesman. “If there is no price tag on it, it’s not for sale. The Vita Coco guys would throw away our price tags. Or they would toss all our product in a cart and leave it in the stockroom.”
Zico retaliated in kind. The sales force made crazy deals — buy 50 cases, get 25 free — loading a store with so much coconut water that there wasn’t room for Vita Coco.
“I really tried to take the high road,” Mr. Rampolla said, “but I can’t say the same for my team.”
During this period, he and Mr. Kirban never met, though they spent many of their waking hours anticipating each other’s moves and sparring. It was like a chess match in which you never lay eyes on your opponent.
Grabbing the attention of consumers was a big part of the game. Vita Coco bought a van, painted it ocean blue and loaded it with free samples and with women who would jump out and Hula-Hoop on the streets. Zico hired college students to roll coolers around the city.
Bodega owners were often the toughest audience. To make inroads faster, Vita Coco hired a ringer, a former Vitaminwater salesman named Michael Goldstein, identified on his business card and known to almost everyone as Goldy. One name. Like Prince.
“You’ve got to be a little bit of a psychopath,” says Goldy of life as a beverage salesman in Manhattan. “You’ve got to love pain, love being yelled at.”
He and his team memorized phrases in Spanish, Arabic, Korean and Hebrew and quickly learned to tailor their pitches to different ethnicities. Owners from the Middle East wanted to haggle. Dominicans wanted to know why they needed anything other than Goya. When all else failed, $20 was slapped on the counter, though that didn’t always work.
At the time, the standard pitch included preposterous health claims, made both to bodega owners and to customers. Vita Coco initially stated that its product would eliminate kidney stones, improve your skin, increase virility — basically, any upside that had ever been asserted in countries where coconut water is beloved, like Brazil, Thailand and Indonesia.
That era of magical boasting ended when Vita Coco was sued in 2011, accused of making misleading nutritional and marketing claims with phrases like “super-hydrating.” Such hype is gone. And while just about every brand of coconut water offers electrolytes and potassium — both beneficial to body processes — the category’s reputation as a natural elixir is undeserved, nutritionists say. Vita Coco contains about 5.5 calories a fluid ounce, a bit less than Gatorade, but still plenty.
“Don’t use it as a thirst quencher,” says Lilian Cheung of the Harvard School of Public Health. “People who get their calories from liquid tend not to cut back on solid food. So it would be a disaster to drink a lot of calories.”
By the time the lawsuit was filed, Vita Coco was in its international expansion phase and had pretty deep pockets, thanks to a number of investors. The company settled in 2012 for $10 million. Its spokesman, Arthur Gallego, cast the episode as a harmless error in describing and measuring ingredients. Goldy says it was a vestige of Vita Coco’s early ethos, which he sums up succinctly as “freestyle.”
Winning over stores and studios was only half of this contest. The rest was in delivering the product — and for that a brand must sign with a distributor, which owns trucks and employs drivers.
Both Vita Coco and Zico began with bantam companies, and in 2005 both wanted to sign with Big Geyser, the Queens-based distributor that had helped in the introduction of Vitaminwater. Mr. Hershkowitz, the Big Geyser president, was able to choose. He went with Zico.
“Our concern with Vita Coco was that it seemed extremely ethnic,” he said in a recent phone interview. “Zico seemed much more upscale, much more premium, sexier name.”
The decision was a major setback for Vita Coco, at least initially. But a former Big Geyser employee named Steve Gress soon started his own operation, Exclusive Beverage. In 2006, Mr. Gress says, Zico came calling.
“Mark Rampolla said he was unhappy with Big Geyser and wanted to leave,” Mr. Gress recalls. “We were in the middle of negotiating a contract, and Mark backed out. Well, I saw red. I got mad. I Googled coconut water and Vita Coco was the first name I saw.” (Mr. Rampolla says he approached Exclusive in large part to gain leverage with Big Geyser in a renegotiation of terms.)
With revenge in mind, Mr. Gress called Mr. Kirban. A week later, Exclusive had a contract with Vita Coco.
Unlike Big Geyser, Exclusive didn’t have a lot of other brands, so Vita Coco became a star offering. By July 2009, Vita Coco was selling 30,000 cases a month in the tristate area of New York, New Jersey and Connecticut, with additional sales in Boston, Miami and Los Angeles.
Zico’s expansion plans were a step behind, but the difference between the two brands was, by most accounts, minuscule. Five years in, the coconut water wars had been fought to a draw. Then Coca-Cola showed up.
Redrawing the Battlefield
Coke, the country’s largest soda maker, employs what it calls scouts, who look for up-and-coming brands. One of them spotted Zico in a yoga studio.
“People were buying it by the caseload,” says G. Scott Uzzell, Coke’s president of venturing and emerging brands. “Our group spends its time analyzing future consumer trends, and our model is to focus on brands that have been in the market for two to three years that will be hot for many years to come.”
Another imperative for Coke and other megabrands, industry experts say, is to scoop up companies before they become large enough to fetch high buyout prices. (By the time Coke bought Vitaminwater, for example, it had to pony up $4 billion.)
Coke put up $8 million in 2009 for a 20 percent stake in Zico. The news sounded like the grim reaper’s knock for Vita Coco. Not that the company lacked cash. In 2007, Vita Coco sold a 20 percent stake to Verlinvest, an investment firm based in Brussels that was an early Vitaminwater backer. The deal netted $2 million.
“I met Mike in the summer of 2006,” says Frédéric de Mevius, Verlinvest’s chairman, of Mr. Kirban. “At the time, he said they were doing $600,000 a year in sales. I said, ‘When you’re on course to do $1 million a year and break even, call me.’ A few months later, in mid-January of 2007, he phoned and said, ‘Hey, do remember me?’ ”
But Coke altered the game and Vita Coco had to act. In January 2010, a few months after the Coke-Zico announcement, Vita Coco raised an additional $5 million by selling a 10 percent stake to a group of celebrities, including Madonna, Demi Moore and Anthony Kiedis of the Red Hot Chili Peppers. All were said to be fans of the brand.
The money helped, as did the buzz. Vita Coco was part of a feature in OK! magazine called “How to Live Like Demi Moore.” But the real breakthrough came in June that year, with an event that only insiders would have noted: Vita Coco signed with the Dr Pepper Snapple Group, the nation’s third-largest beverage distributor.
When your rival has teamed up with the No. 1 distributor, signing with No. 3 sounds like the booby prize. But it wasn’t. Because Dr Pepper Snapple is smaller, Vita Coco was a sizable part of its portfolio, says Mr. Kirban, which made the brand a priority. Just as important, Vita Coco retained the right to sign additional deals with 45 independent distributors around the country. Today, more than half of Vita Coco is sold through those indies.
That matters because Vita Coco has a sales staff of 200 who either ride along with those distributors or tour markets on their own during what are called sales blitzes. On either mission, the staff is supposed to get Vita Coco better placement in stores where it’s sold and to have it stocked in stores where it’s not.
This is shelf-by-shelf work, and it requires diplomacy, energy and charm, as Goldy demonstrated during a recent trip to Minneapolis-St. Paul. In four frenetic hours, he persuaded a manager at a Target store to give Vita Coco prime real estate near a cash register and convinced a manager at a Walgreens to display a Vita Coco floor stand.
He also made an impromptu stop at G&H, a convenience store in St. Paul near some homeless shelters. The store didn’t carry any coconut water. Goldy put a couple of Vita Coco cartons on the front counter and pitched the owner.
“This is 100 percent coconut water,” he said, a statement that was about 99 percent true. “Comes from Brazil. Summer, this is going to turn very well in your store. Winter as well, because people like to drink it as a hangover cure.”
The owner, who gave his name as Sam, was friendly but unmoved. “It’s just too expensive,” he said.
Goldy kept talking, and five minutes later, after offering a buy-three-cases-get-one-free deal, they shook hands. Goldy got back into the car, invigorated.
“It’s like being in a football game,” he said. “You’re not playing until that first hit.”
Zico doesn’t employ people like Goldy — well, not any longer. The last 30 or so members of its sales force were either laid off or quit after Coke completed its purchase of Zico last year, Mr. Rampolla says. (Coke would not comment about personnel.)
Without a Zico-focused crew, according to Mr. Kirban, the brand is getting lost in the vast sea of Coke’s big sellers.
“It was the kiss of death, Zico’s deal,” he says. “Look at the numbers over the last two years. It’s just not working out.”
Asking Coke to manage a brand as small as Zico, in Mr. Kirban’s telling, is like asking the Hulk to do needlepoint — it’s too brawny for the task. Mr. Rampolla, who is still technically a consultant, but not active in the business, used a slightly different metaphor.
“It’s like Coke is a giant and Zico is an infant and Coke wants to dance,” he says. “Well, we need to grow up and at least be a teenager. Otherwise, the giant will kill the infant.”
Mr. Kirban says he believes that his onetime foe sold out too quickly. Today, he’s not just nostalgic for the old days of the coconut water wars. He wishes that Zico was still a serious threat. He wants a competitor, throwing elbows, playing Monster to his Red Bull, a melee that goosed energy-drink consumption to new highs.
Zico doesn’t currently inspire much fear in Vita Coco’s headquarters, now in the Flatiron district of Manhattan. On one recent afternoon, a copy of Zico’s new ad, featuring Jessica Alba, was sitting on Mr. Kirban’s desk. His assistant had scrawled “ha ha ha ha!” all over it.
By: Darren Rovell, ESPN.com
Kevin Durant has signed another major endorsement deal since switching agents to Jay Z’s Roc Nation Sports.
The Oklahoma City Thunder forward signed a deal Monday to endorse Sparkling Ice, a zero calorie carbonated water drink that is one of the fastest growing beverage brands in the U.S.
Terms weren’t disclosed.
“I’ve always challenged myself on the basketball court, but this offseason is really the first year I’m challenging myself off of it — on the business side,” Durant told ESPN.com. “This is a brand I drink every day that I love and I wanted to be a part of it. I want to help them get to the next level.”
Sparkling Ice for the past couple years was a sleeping giant in the beverage industry, going from $25 million in 2010 to expected revenue of $500 million in 2014.
With a target on their back, knockoffs abound and international expansion on the horizon, Kevin Klock, CEO of the brand’s parent company Talking Rain, said the time was now to join forces with a major sports star.
“We frankly hadn’t moved into athlete endorsements because we craved authenticity,” Klock said. “Things fell into place when Kevin came to us.”
Michael Yormark, president and chief strategy officer of Roc Nation Sports, said that Sparkling Ice came up in an initial meeting with Durant and his agent Rich Kleiman.
“He told us that this brand was already a part of him and he wanted to have an official relationship,” Yormark said.
Klock said the plan is to use Durant as the company begins international expansion outside of the U.S., Canada and Mexico. He also said the company will use Durant to get into other segments of the beverage marketplace.
Durant had been an endorser of Gatorade until last September. Other deals Durant signed include Kind bars and the “NBA 2K” popular video game series.
By: David Gelles, DealBook – NY Times.com
The coconut water craze is coming to China.
Vita Coco, the biggest seller of coconut water in the United States, agreed on Monday to sell a 25 percent stake in itself to the owner of Red Bull China for about $166 million.
The deal, which values All Market, the parent company of Vita Coco, at about $665 million, is an important milestone for the coconut water market. Once seen as a passing fad, coconut water continues to gain in popularity around the world as soda sales weaken.
Coca-Cola owns the second-largest coconut water brand, Zico. But Vita Coco has emerged as the industry leader, and will now be available in the world’s most populous country for the first time.
Vita Coco was founded in 2004 by Michael Kirban and his friend Ira Liran. Since then, Vita Coco has established a sophisticated supply chain throughout the tropics, allowing it to efficiently harvest, process and package coconuts. The co-founders continue to own significant stakes, along with Verlinvest, a Belgian private equity firm.
Celebrities including Madonna and Matthew McConaughey also own small stakes. The deal will allow some early employees and investors to cash in on the soaring value of the brand by selling shares to the Reignwood Group, the parent company of Red Bull China.
“Vita Coco’s growth in the U.S. has been well documented, less so the brand’s exponential growth in Europe and more recently, Japan,” Mr. Kirban, who is chief executive, said in a statement. “We expect China to follow suit.”
Vita Coco has found a powerful ally in Red Bull China.
Red Bull China is a separate company from Red Bull, the Austrian company behind the popular energy drink. Red Bull China acquired the rights to sell Red Bull products to Chinese consumers in the early 1990s. It has increased sales of the energy drink there to more than $2.5 billion a year with a robust marketing and distribution operation.
Recently, Red Bull China went looking for other brands it could sell alongside its staple energy drink. Chanchai Ruayrungruang, chairman and founder of Reignwood Group, wanted to secure an equity stake in Vita Coco, believing the value of the company would continue to rise over time.
“We immediately recognized the potential for the Vita Coco brand in China,” Mr. Ruayrungruang said in a statement. “We are confident health-minded Chinese consumers will quickly embrace and remain loyal to the Vita Coco brand.”
Barclays advised Vita Coco, and the Giannuzzi Group provided legal advice.