Coca-Cola to discontinue ZICO: 'Their greatest strength is also their greatest weakness,' says founder
The beverage giant – which unveiled plans to discontinue juice and smoothie brand Odwalla in July and is reportedly planning to halt retail-store sales of Hubert’s Lemonade – told the Wall Street Journal that the decision to phase out ZICO “was not made lightly and comes at a time when we are focused on delivering on our consumers' wants and needs while driving scaled growth across a total beverage portfolio...”
While Coca-Cola did not provide any details on ZICO’s performance, US retail sales of coconut water have continued to slide in recent years, with SPINS data shared at the recent Kombuchakon conference revealing coconut water sales declined -4.4% in measured channels in the 52 weeks to June 14 while sales of overall non-alcoholic beverages rose +5.8% over the same period. (Performance has however varied widely in the category, with ZICO posting double-digot declines in recent years and rival Vita Coco posting double digit gains.)
ZICO founder: 'Consumer demand for better-for-you products is not going away'
Mark Rampolla, who founded ZICO in 2004, sold a minority stake to Coca-Cola in 2009, and the outstanding stake in November 2013, told FoodNavigator-USA: “Building healthy, natural brands is tough. So tough that even the mighty Coca-Cola Company struggles with it.
“Their greatest strength; getting Coke and a few other brands within arms-reach of billions of people is also their greatest weakness: they just can’t really do much else," added Rampolla, who is currently managing partner at growth equity fund Powerplant Ventures, which provides capital, strategic guidance and operating expertise to 'disruptive plant-centric brands.'
“Consumer demand for better-for-you products is not going away and there are many other partners and ways to scale brands. Great entrepreneurs will figure it out. They always do.”
‘Zombie brands’
Speaking on the company's Q2 earnings call in late July after posting a 28% decline in revenues, Coca-Cola CEO James Quincey said the company planned to prioritize "fewer, but bigger and stronger brands across various consumer needs," while at the same time "exiting some zombie brands, not just zombie SKUs."
"As a reference point, of our 400 master brands, more than half are single-country brands with little to no scale," said Quincey, who recently announced a reorganization that will include voluntary and involuntary reductions in employees.
"The total combined revenue of those brands is approximately 2% of our total. They’re growing slower than the company average but each one still requires resources and investments."
He added: "We believe the best way forward is to be more choiceful and target bigger, more scalable bets and be disciplined in our experimentation.
"We are leading with global bets like the continued opportunity with reduced-sugar offerings in brand Coke. We also continue a high potential regional and local bets like AHA-flavored sparkling water in the US. AHA captured double-digit retail value share in its first 18 week and has even more potential given its wide appeal."
Running ZICO - which he launched in 2004 and sold to Coca-Cola (outright) in 2013 - was “absolutely brutal… for the first nine years,” founder Mark Rampolla told delegates at the Expo West trade show in 2015.
Coca-Cola took a minority stake in ZICO in 2009 and acquired the outstanding stake in November 2013, for “way less" than the $4.2bn Coke paid for Vitaminwater in 2007, said Rampolla, who said the partners had “fought and struggled”, although Coke had “done a great job of keeping the integrity of the brand."
He added: “We recognized about four years into the deal that the structure wasn’t really working for our rate of growth and there were some ugly moments. I wouldn’t say we are divorced now, we just sleep in separate beds.”
