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


DIY Kit Lets You Build Your Own Wooden Bike, Boat Or Caravan

Design & Architecture
Culture Today

Messaging Add-On Helps You Correct Your Friends’ Bad Grammar

An iMessage sticker pack will help you copyedit text messages

Automotive Today

Mercedes-Benz Introduces A New Electric Mobility Brand

The separate entity aims to simplify the identification of Mercedes EV products to customers


Get PSFK's Related Report: Future of Work

See All
Mobile Today

Tinder’s New Feature Makes Swiping A Group Effort

The dating app wants to democratize its gestural interaction by buying in to the social polling trend pervasive among millennials

Related Expert

Elon Musk

Solar Power, Battery Technology, Sustainability

Syndicated Today

Autonomous Garbage Drone Prevents Trash From Reaching Deep Ocean

The solar-powered WasteShark collects refuse closer to the source: the harbor

Automotive Today

Aston Martin Reveals Its Own Luxury Powerboat

The sleek AM37 echoes styling elements from the British brand's sports cars

Advertising Today

An Escort Website Fights Violence Against Sex Workers

The advocacy campaign from McCann aims uncover the human toll of the exploitative industry


Future Of Automotive
Scenarios Driving The Digital Transformation Of An Industry

PSFK Op-Ed september 28, 2016

Energy Expert: How American Consumers Are Taking Control Of Their Power Use

Jennifer Tuohy, green tech expert at The Home Depot, discusses green home technologies and developments for renewable technologies in US homes

PSFK Labs Yesterday

The 10 Steps To Discover, Hire, Develop Your Next Leader

PSFK's Future of Work report outlines key steps in the employee development path to empower next-gen leaders

Culture Today

LIFE Magazine Relaunches In Pure VR

The general interest periodical, which ceased publication in 2000, has turned into a portal for virtual reality content

Mobile Today

Reorder This Detox Drink With A Simple Text Message

Dirty Lemon is streamlining its communication by letting customers place orders, ask product questions and request help exclusively through chat

Op-Ed Today

The Future Of The American Workforce Requires Unbundling College Education

President of JetBlue Technology Ventures: developing corporate education programs for non-traditional students

Retail Today

Gilt’s Pop-Up House Is The Kind Of Store You’ll Want To Live In

The New York City townhouse plays host to the latest in retail inspiration, curation, and lifestyle activation (and some libations, too)


Future Of Work
Cultivating The Next Generation Of Leaders

Mobile Today

Registering To Vote Is Now Just A Text Away

A new bot aims to mobilize underrepresented groups this election season through SMS and Facebook Messenger

Africa Today

Virtual Reality Game Gives Lessons About Emergency Birth Care

LIFE is a serious tool that takes advantage of new technology to help save lives

Luxury Today

Shoe Repair Has Moved Onto Your Phone

Cobbler Concierge is an on-demand service to get your footwear fixed online

No search results found.