A-B’s New Business Chief: “Get the Consumer Something They Didn’t Know they Needed”

Dear Client:

Recently we snagged a half-hour with Marina Hahn, New Business co-founder, at the A-B offices in New York. Recall that the New Business division incubates a handful of brands over there, so far including Cutwater Spirits, Swish Beverages, and HiBall non-alc sparkling energy drink.  

WHO IS MARINA? Marina is a brand builder and product incubator. Her body of work conveys her appreciation for the importance of differentiated brands, however they’re built. She started at Pepsi, where she ran advertising for five years (and “five Super Bowls worth of work”). She helped found Svedka vodka [which of course was sold to Constellation], cutting through the category clutter by “parlaying the cheap chic trend to spirits, and by bringing fun back to the category.”

She helped pioneer and market HotShot, a pre-workout, anti-cramp tonic invented by a nobel-prize winning neuroscientist, mostly sold through a subscription-based e-commerce model. And during a decade-plus tenure on the board of organic and natural foodstuffs juggernaut, Hain Celestial, she saw some 30 acquisitions, all before the natural movement came to the mainstream.  

She came to work for A-B after meeting ZX chief, Pedro Earp; she believed in his vision for the disruptor. Now Marina leads the New Business division, and is a member of the leadership team for both ZX Ventures and A-B.

OK, WHAT SORT OF BRANDS LIVE IN HER DOMAIN? The New Business arm has very specific criteria for brands it will foster. They target promising brands serving white space areas, but at a specific size and time: “not huge, not tiny; post seed stage,” says Marina. Once a brand has been validated with a demonstrated “sticky consumer base” beyond distribution push, it’s potentially fair game.

Ultimately, they “nurture and grow” these validated businesses, so they have the best chance of success once scaled more broadly into ABI (as is usually the goal).

OTHER MANDATES? We asked what other mandates they have for potential brand pick ups. Marina stressed that they should be offering solutions to consumer problems.

Also important: “Do they have real, differentiated brands?” particularly with high barriers to entry, i.e.: “there’s a moat around these brands for these reasons.”

“…And then, is the founding team fantastic?” Founders are critical to the division. Marina describes their brands as “very found led” and “almost standalone businesses.”  It’s the New Business Division’s task to help them figure out how to fill gaps, and “build their playbook to take great learnings, and replicate across markets.”

Founders are some of their primary marketing tools. These brands rely on word of mouth and grassroots marketing more than anything else.

“We don’t talk traditional media,” said Marina. It’s “Social. Digital. Grassroots. If we need to educate, sampling.” That all leverages “founders who are present.”

She notes though they’ve also placed people from A-B into these businesses “very successfully.”

IT’S ABOUT THE BRAND. But if they’re looking for underserved beverage arenas, we suggested there is precious little white space these days.

Marina’s take?

“Beverage is, yes, highly commoditized.”  But their specific charge is “more how to create sticky brand,” and there’s “plenty of room for that. … Lots of ways to creatively get the consumer something they didn’t know they needed and have them fall in love with you.”

She gives the example of Svedka. There are hundreds of vodkas every year. That doesn’t mean, “‘oh no, the vodka category is over’ … it’s, how do you differentiate, provide a whole new different brand that’s almost going to create a new category.

IT’S ALL ABOUT THE BRANDING GAPS, BABY: SEE, SWISH. She gave another example. “In the case of Swish,” founded by social media influencer The Fat Jewish, “it’s giving this younger consumer something they fell in love with, because it’s brought to you by one of the best influencers. And this person cares more about the consumer than anything else, and they have a brand that listens … a brand that loves you back.” That’s “a winning proposition for wine. So it’s about finding those gaps in the market.”

She points out that Swish’s Babe wine is “canned wine — but also an accessory. That has a personality, amplified by The Fat Jewish. … So it’s bigger than just a can of wine. It’s a cultural statement too.”

“WE LOOK FOR CATEGORIES IN SPACES THAT WE CAN LEAD,” Marina said. “Not just create, but lead.” Combining the high-growth energy and sparkling water categories in HiBall is one example. So is Swish: They want to lead the canned wine category, and be the no. 1 canned wine in the U.S.”

Canned wine is starting to proliferate, Marina concedes. But “not many lifestyle brands are doing what Swish is doing.” Of course, that starts with “a great product.”

HOW MANY BRANDS WILL THEY HAVE IN THEIR BASKET? Marina and co. seem to have a very specific directive. So how many brands will they foster? How big could this New Business division get?  

It’s “not about the number of brands; it’s about selecting the best,” she said. “We can be picky. And we see so many brands, and many founders want to work with us. But it’s about being selective, figuring out what brands have the best chance of becoming billion-dollar bets.”

We asked if they have an overall target sales number for the division.

“We do,” she said, but that’s “less important than nurturing them in the right way and getting to the stage to scale up… this is more about careful nurturing to get to the right platform for hyper growth. That’s a different orientation than working on an established brand.”

ON LEADING WHITE SPACE CATEGORIES: RTDS, CANNED WINE, MORE.  Around the time of their deal with Cutwater Spirits, Marina mentioned they wanted to own and grow the nascent RTD category with the brand. So how much upside does she see in that space?

“There’s a lot of run room. Like with any new category, it’s nascent, but it’s happening. And we want Cutwater to lead the charge. Both create the category, and lead growth.”

“We think we can. These founders [former Ballast Point founder and sales chief Yuseff Cherney and Earl Kight] are geniuses; lightning doesn’t strike twice and … they were able to do it. That’s incredible, and gives us huge confidence that we can make it happen.

“And I also believe they have all the fundamentals to grow.” Marina compared Cutwater to Svedka, which “could go from Costco to [exclusive members only club] Soho House … same with Cutwater.” It fits in venues, club, on-premise, premium bars.

“If you have that perfect, democratic brand that appeals to the right target, it can go up and down – especially at the right price point.”  

CUTWATER SO FAR. We wondered what sort of traction they’ve made with Cutwater during these first couple months, post-acquisition. Are they rapidly landing new vendors, stadiums, distributors?

“It’s really early. It’s been two months,” said Marina.

But she thinks  they have an unparalleled opportunity with the brand.

“Both founders Yuseff Cherney and Earl Kight have impressive credentials and links to the industry which they have worked for years to cultivate and develop. They approached building the canned cocktail business off thoughtfully curated spirits, with an on-site facility that allowed for tremendous consumer intimacy. This further created a foundation of what works conceptually and with consumers, which would be exceptionally difficult for another company to replicate.”

For now, Cutwater’s distribution network is still a work in progress.

“Things are in flux. One size doesn’t fit all,” says Marina. Indeed, that’s a microcosm of their operation.

EUROPEAN UNION COMMISSION SLAPS ABI WITH $225 MILLION FINE

European Union antitrust regulators have hit Anheuser-Busch InBev with a hefty $225 million fine for “abusing its dominance in the Belgian beer market,” reports the Financial Times.

You see ABI owns a popular beer brand in Belgium called Jupiler, which makes up around 40% of the total Belgian beer sold domestically by volume.

A probe revealed that this extremely popular Belgian beer is actually cheaper in the neighboring country, the Netherlands, but ABI apparently restricted the ability of Dutch wholesalers and retailers to export or sell the beer across the border into Belgium.

“Exports were limited through both contractual restrictions and a change that removed French labelling from Jupiler beer bound for the Netherlands which meant that the Dutch beer could not be sold in Belgium, where packaging must have both official languages,” per report.

The restrictions, which were in place from February 2009 to October 2016, “deprived European consumers of one of the core benefits of the European Single Market, namely the possibility to have more choice and get a better deal when shopping,” according to the EU commission.

“Attempts by dominant companies to carve up the single market to maintain high prices are illegal,” EU competition commissioner, Margrethe Vestager, said. Therefore, they tagged ABI ABI with a $225 million fine for breaching our antitrust rules, she added.

Crazy, but ABI actually got a 15% reduction in the fine for cooperating with the investigation too. Still, that’s a whole lot of dough. Fortunately for ABI, they saw this day coming. Recall, just months ago reports started to surface that ABI had earmarked $230 million to resolve an antitrust issue arising in the EU [see BBD 03-04-2019].

FMBs HELP LIFT BEER PURCHASERS’ INDEX TO 59.3 IN APRIL

The National Beer Wholesalers Association’s Beer Purchasers’ Index, which charts beer distributorships’ monthly purchasing activity, stood at 59.3 in April, a near six-point bump over the April 2018 reading of 53.5.

It “marks the fourth month in 2019 that the BPI has surpassed readings from recent years, suggesting the industry is in slightly better health in 2019,” according to the NBWA.

Of course, we have FMBs to thank for that. The segment “continues to break the upper boundaries,” according to the NBWA, posting an astonishing index of 78.6 over the month, a significant jump above the 60.3 reading from April 2018. Indeed, the latest April reading “marks another record-breaking index for the category.”

Elsewhere, imports and craft cleared the 50-mark, posting a 61.4 and 58.9 reading, respectively. Craft’s reading was good enough to top last April’s (52.1), but imports’ fell short of their April 2018 index (69.3).

Premium lights, premium regulars and below premiums all topped their reading from last April, but the three segments “continue to struggle with below 50 index readings.”

Finally, cider fell below the 50-mark for second straight month, posting an index of 46.8. Still, it is “well above the 40.4 index from April 2018.”

Until tomorrow,

Harry, Jenn, and Jordan

“Everyone wants to be Cary Grant. Even I want to be Cary Grant.”

– Cary Grant

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