Ed Cotton: Buying A Cool Brand?- Don’t Nuke Its DNA

Ed Cotton: Buying A Cool Brand?- Don’t Nuke Its DNA

It must be something of a relief that you've found a way to scale your business by riding on the back of one of the world's largest corporations, but despite all the good news, it's when the problems really start.

Ed Cotton, BSSP
  • 13 july 2010

Imagine you are a smart guy in your mid-30s and you’ve come up with a brilliant concept for a beverage that’s the antithesis of giant soda corp? You call that company Honest Tea and you nurture it for years until it blossoms into something amazing, generating some serious revenue and growing beyond your wildest dreams. You end up putting ten years of hard work and sweat into your “kid” and then it happens, the call you’ve been waiting for, it’s Coca-Cola and they want to buy a minority share for $40 million.

It must be like winning the lottery and something of a relief that you’ve found a way to scale your business by riding on the back of one of the world’s largest corporations, but despite all the good news, it’s when the problems really start.

The New York Times has an interesting article about the challenges ahead of Honest Tea:

“In late 2008, Mr. Goldman traveled to Coke headquarters in Atlanta to seek a solution. “I met with various people in the company who explained their belief that high-fructose corn syrup is comparable to sugar in its health impact.”

Mr. Goldman decided against trying to resolve the scientific point. “Our point of view was that we were not going to get into the debate over whether high-fructose corn syrup is the same as sugar,” he said. One option Coke presented, he said, was simply to eliminate the “no high-fructose corn syrup” banner. But Mr. Goldman argued that including the notification was a key signal to buyers that there were no hidden ingredients in the drink, an important issue given the growing chorus questioning whether high-fructose corn syrup contributed to the risk of obesity in adults and children.”

There are hundreds of ice tea companies out there, some of which Coke could have brought 100% share of for less than the $40 million it took to buy the minority stake of Honest. The bean counters at Coke obviously did a lot of homework as they poured through Honest’s books and were probably impressed by the rate of revenue growth and profitability. When they ran their forecasts, they obviously thought there was considerable growth potential with the brand and then probably contemplated some ideas of how the costs in the business could be reduced leading to greater profitability, using corn syrup was an obvious cost cutting tactic.

This is the problem with classic financial analysis for businesses, despite tons of discussion over the last 20 years, there’s still no real place or discipline to measure the intangible brand value. Ad agency holding companies, who’ve had access to ample resources and had the discipline in this space seem to have failed to get this critical idea across to client CEO’s and their boards.

If there was a clear understanding of how to value the intangible elements of the Honest Tea brand, no one would even mentioned the words corn syrup.

New York Times: “Can Honest Tea Say No to Coke, Its Biggest Investor?”

Ed Cotton is the Director of Strategy at BSSP, and is curious about all things relating to brands, marketing and culture. Read more at influx insights

influx insights banner


Fitness Advocate: Paving The Future of Workouts With Audio

Fitness & Sport
Advertising Today

A Compelling Brand Purpose Is Never Born In The Boardroom

Strategist and Designer Anna-Rae Morris shares why she believes all brands exist for a reason, and how Snapchat has upended our behavior

Fitness & Sport Today

Editorial Roundtable: The Xs And Os Of Performance-Enhanced Sports

WHOOP, ShotTracker, Rithmio, PlaySight, STYR Labs, EverybodyFights and Lift / Next Level Floats explain that we're only at the iceberg's tip of performance enhancement


Get PSFK's Related Report: Sports Debrief

See All
Technology Today

Kodak’s Smartphone Is Inspired By A Retro Camera

Ektra is an Android phone with a powerful lens aimed at photographers

Related Expert

DJ Roller

Explorer, Filmmaker, Visual artist

Sustainability Today

Modern Home Created Entirely Out Of Modular Shipping Crates

A project in Ecuador used the ubiquitous material to design a spacious and industrial-chic house

Retail Today

Retail Concept Offers Food Hall Inspired Space For Online Brands

The store will offer a lower cost way for internet entrepreneurs to try physical retailing

Arts & Culture Today

Disney Retells Beauty And The Beast On Snapchat

In a partnership with LACMA, the entertainment platform drew from over 130,000 works in the museum's collection


Future Of Automotive
Scenarios Driving The Digital Transformation Of An Industry

PSFK Op-Ed Today

Creative Leadership Expert: Experiencing A Seismic Shift From Brand Loyalty To Interface Loyalty

Marc Shillum, founder of Chief Creative Office, explains why product designers must rethink the way they capture consumer attention

PSFK Labs Yesterday

The Keys For Exceptional Performance On And Off The Field

PSFK Labs' new report highlights five important insights for businesses to perform better than the competition

Automotive Today

Honda Has 3D Printed A Fully Electric Minivan

The car manufacturer partnered with product developer Kabuku to create the small versatile vehicles

Innovation Yesterday

After The Initial Success Of AR Gaming, What Does The Future Hold?

With Pokemon GO earning up to $10m a day, R&D departments are busy searching for the next phase

Arts & Culture Yesterday

The Next Great Art Movement Will Come At The Swipe Of A Finger

An improved app, optimized digital display and monthly art discovery service round out Electric Objects' renewed commitment to democratizing the art world

Media & Publishing Yesterday

A TV Streaming Service Is Designed Just For Kids

Toca TV is a new platform offering thousands of original and curated children's videos for a monthly subscription fee

Travel Yesterday

Bus Stop Transformed Into A Fitness Station For Commuters

Sports drink company Lucozade live-streamed an athletic trainer working out at a stop in Manchester to encourage travelers to get moving

Beauty Yesterday

Shiseido And Microsoft Have Created A Makeup Filter For Women Who Telecommute

The Japanese cosmetic company built an augmented reality app that works alongside Skype for Business

Mobile Yesterday

Samsung Is Using AR To Help Beachgoers Stay Safe

Pocket Patrol utilizes a phone's camera to promote beach safety and educate people about hidden hazards

No search results found.