Earlier this year, Coke announced it was discontinuing Odwalla, the once-popular smoothie brand it purchased in 2001 for US$181 million.
More recently, Coca-Cola announced it was discontinuing its Zico Coconut Water brand. While Odwalla had almost 20-years to thrive within the Coca-Cola system before it's execution, Zico was given far less time to thrive: Coca-Cola's Venture & Emerging Brand business unit only purchased that brand in 2013.
The news that Zico was going away was tough for me to hear: I led the launch of Zico in Canada while I was at Coca-Cola. But I get it. Cutting poorly performing SKUs and brands isn't new, and it isn't a bad thing: doing so allows you to direct greater focus and resources to your core product offerings. In fact, I was responsible for the Odwalla brand in Canada for two years while I worked at Coke, and one of the first things I did when I inherited the brand was to rationalize the portfolio. We went from a dozen or so SKUS to just five core listings, and that decision helped us significantly reduce write-offs from product that were going unsold, maintain our core listings with key retailers, and redirect our Odwalla marketing support to higher-priority brands.
"Killing your Zombies" is a great thing to do... but it's only part of the solution.
The other part is figuring out how your brands became Zombies in the first place.
A few years ago, I completed a course from Harvard Business School Online called, Disruptive Strategy. The course was fascinating, and taught the theoretical frameworks necessary to understand how new companies are able to disrupt established companies... and why established companies usually fail to prevent their own demise.
I can't summarize the 8-week course in a single blog post. But I can use the Zico situation to illustrate some of the theory, including why Coke seems to always find itself with so many zombies.
Let's go back a few years. Coca-Cola (and it's rivals) are under increasing pressure from society for selling sugar-filled beverages that contribute to a growing obesity problem. And the pressure is hitting them where it hurts -- their revenues and profits -- as consumers are turning to healthier beverage options.
Enter Zico Coconut Water, an all-natural brand founded by entrepreneur Mark Rampolla. Zico eventually catches the attention of Coca-Cola's Venture and Emerging Brands group, a division formed for the purpose of identifying and making early investments in small companies on track to become the next big thing. Coke takes an 18% stake in Zico, with a firm commitment to eventually increase ownership to 1