The Coca-Cola Company is no rookie when it comes to brand licensing…that is unless we are talking about the kid from the Rookie of the Year movie. Heck…The Coca-Cola Company is basically an elaborate licensing company when you realize about two-thirds of its total revenue are generated by "concentrate sales" aka licensing of its secret ingredients in syrup form. But that’s neither here nor there, because ole Henry Rowengartner got something new up his sleeve. The Coca-Cola Company can be seen pretty much everywhere in the grocery store, right? Well…add the produce section to the list because the beverage CPG giant is entering into a licensing deal with an agricultural company to leverage the Minute Maid and Simply logos on select items. While the licensing revenue will help the petty cash fund grow…I think a bigger win is if this strategy helps boost branded juice sales.

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I was made aware of the Biosteel early in its history by my hockey sports agent friend, but the Canadian sports nutrition brand didn’t pop up in any of my content until October 2019 when the fully integrated cannabis company Canopy Growth Corporation paid $51 million to acquire 72% majority control. If you've seen Biosteel in the headlines recently, it's due to an ongoing SEC investigation surrounding the hydration company following improper revenue recognition standards that caused “material misstatements” in its financial reporting by overstating around $24 million in revenue within the last two fiscal years. While these accounting issues are "what" happened, I want to additionally explore possible "whys" that include a number of Biosteel underlying forces, sports drink market dynamics, and strategic decisions. This includes covering details around why the initial Canopy Growth M&A intent became challenged, how Biosteel pivoted hard into beverages with the help of Constellaton Brands, and the huge marketing costs accumulated by playing the game Gatorade invented/mastered and BodyArmor emulated (while PRIME is winning by playing another game). Finally, I'll breakdown what comes next...which includes huge cost cutting initiatives if they want to survive long enough to eventually leverage their cannabis market advantage against the major beverage companies that will one day be available in the U.S. market.

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Most beverage industry veterans’ thought was prediction was crazy months ago…but it looks like my super-secret Magic 8 Ball strikes again! Be honest...did you really believe my March 14, 2023 prediction that Monster Energy would eventually acquire the bankrupt assets of Bang Energy? But while I’ve already started to take my prediction victory lap, there’s still a legal hurdle and many business unknowns left that I want to talk about in this Bang Energy bankruptcy update content. The final legal hurdle will be on July 12th, at which hearing the Debtors will seek Court approval of the sale of substantially all their assets to Blast Asset Acquisition LLC in accordance with the asset purchase agreement. But barring some outlier reason that would almost certainly cause an immediate liquidation of Bang Energy…Monster Beverage Corporation is the new owner of the company’s intellectual property, goodwill, about $250 million in wholesale revenue producing DSD and retail relationships, everything involved with manufacturing and distribution facilities (even though some of that has been sold with or without a leaseback agreement), an owned DSD network (but from what I’ve heard…Huron Consulting recently cut that), and then human capital. So, what’s next? Well…little is known about what Monster will do with Bang, but the most UNLIKELY scenario would be Monster deciding to shut down the brand, effectively removing a competitor from the marketplace. While Monster Beverage and Monster Energy are used interchangeably sometimes…we can’t forget that Monster Beverage is a collection of many energy drink brands. Monster Energy is obviously the biggest, but they also own a collection of conventional global energy drinks that it picked up in the “trade” with The Coca-Cola Company that closed in June 2015. These brands include NOS and Full Throttle in the U.S. market, and names like Burn and Relentless that are used globally. I state this because it shows that Monster is willing to have a collection of similar products in each of the same global markets. That means Monster Beverage should be familiar with the strategies and tactics needed to support both its Reign Total Body performance energy drink brand and Bang Energy that created the energy drink sub-category. This performance energy drink market consolidation play is important because Monster is struggling to fend off upstart brands like GHOST, C4 Energy, RYSE, Alani Nu, and CELSIUS. So, I think positioning-wise…Monster uses Bang Energy as a low-cost performance energy drink offering to prop up price integrity and brand equity around its Reign Total Body brand. There’s also a question of distribution…does Bang Energy move into Coca-Cola DSD trucks or does Monster separate it out and utilize independent DSD networks? But the rise and fall of Bang Energy will certainly be a story that Harvard Business School will try to distill down into a case study for learning purposes. I’ve covered many bankruptcies over the last handful of years, but this one is about as unique as we will ever experience. I say that because the craziness in every aspect of life since 2020 has desensitized us to what is or isn’t an outlier. The Bang Energy story is an outlier in both the extreme entrepreneurial ups and the extreme business lows…both you can learn from.

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Nestle will transform into a "health and nutrition powerhouse.” That’s at least what I predicted in an August 2021 YouTube video. Since then, Nestle has acquired the plant-based supplement brand Orgain, Brazilian supplement brand Puravida, New Zealand supplement portfolio The Better Health Company…plus buying a coffee brand from Starbucks and increasing nutrition-related manufacturing investments. That’s A LOT of activity, but an investor group with $5.3 trillion in assets under management isn't happy with the speed or progress of the Nestle transformation. Why? Despite all those recent major investments, about 60 percent of Nestle's total sales (excluding pet care and specialized nutrition within Nestle Health Science) still come from products that are considered “unhealthy.” That causes harm to public health, but maybe more importantly to these investors…it creates systemic risks to returns.

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Fresh eyes on challenges, promising health and wellness brands, can’t lose…right? In this latest episode, I'll utilize the 2023 Q3 Simply Good Foods Company (NASDAQ: SMPL) earnings report, earnings call, and supplemental presentations that were filed on 6/29/2023 as the backdrop to provide broad nutritional snacking market insights. In Q3 of fiscal 2023, both Atkins Nutritionals and Quest Nutrition performed in the top-tier of categorical competitors in retail takeaway, with Quest Nutrition specifically having strong YoY growth at 25%. What's at the heart of the Quest Nutrition success? Quest Nutrition is still known for the original Quest Bar. That means the company needs the bar business to be healthy for any of this innovation risk to make sense. Here’s the good news…the core bar business is growing. In fact, this quarter it had tracked channel retail takeaway growth in the quarter of 25%. Additionally, the Quest Nutrition snacks segment (e.g. Quest Chips, Quest Cookies, Quest Peanut Butter Cups, etc.) is now nearly 45% of measured channel retail sales for the brand and specifically the Quest Chips are now around 20% of the total brand revenue. Finally, I run through the new CEO's strategic gameplan that has very different focuses for Quest Nutrition and Atkins Nutritionals...with the latter needing to figure out where the legacy brand sits inside of an evolving weight management category that has a growing consumer interest in weight loss drugs like Ozempic.

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As your CPG brand grows bigger, something naturally happens that has a divergent relationship with customer intimacy. In the CPG industry, scaling your brand usually involves onboarding more intermediaries. The fact is that creating long-term close bonds between customers and CPG brands isn't easy given the nature of the industry. The examples are plentiful within the CPG industry, but the bigger a brand gets, typically the further it wrongfully distances itself from those core customers. And that’s becoming a bigger issue in today’s market where customers expect CPG brands to add value to their lives beyond simply providing a great “made to stock” product. So, CPG brands must focus on building in a company culture that rewards the creation and adoption of unscalable customer-centric strategies. The goal is to prioritize customer intimacy even as your brand goes through the typical legacy growth construct of the CPG industry. This business strategy increases customer loyalty and fosters customer-driven revenue growth…and companies that excel in customer intimacy combine detailed customer knowledge with operational flexibility. While there are tons of different customer intimacy building strategies across departments, many of which have become more scalable by leveraging technological and social platforms…I want to focus on a specific product development one that I’ve dubbed “Creatively Small.” I will also share a Siete Family Foods (Siete Small Batch) case study that will really drive the "creatively small" strategic points home.

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One of the greatest investing minds in history is also an avid Coca-Cola drinker. Besides owning billions in Coca-Cola stock, Warren Buffett also has a theory on why the soda brand is the global leader...and it has to do with "taste memory." The Oracle of Omaha believes the taste of Coke doesn’t accumulate in your mouth like other types of soda. Warren Buffett goes on to say that he’s never seen a word written about this phenomenon. Well…maybe because it’s more made up than Nessy and Big Foot. I asked a few of the top certified flavor scientists in the world…and they called bullshit. Coca-Cola’s popularity is simply because consumers enjoy all the sensations that come along with it…including the nostalgia, great taste, sugar, and caffeine content…not some hidden secret.

Mountain Dew is the unofficial drink of gamers…or at least that’s the stereotype, right? So, why did the energy drink version of Mountain Dew called Game Fuel end up failing? Mountain Dew is essentially the base of the food pyramid for people who spend marathon gaming sessions in front of a computer or console. The practical reason is obviously because Mountain Dew has more caffeine than Coke or Pepsi. And while not as much caffeine as coffee, a packaged drink has less effort and minimal upkeep. Caffeine consumption is something that all professionals enjoy but especially computer programmers in the mid-90s during the start of the Internet age. The direct connection to computer culture can be traced to an integral software development and coding manual published in 1995 that said one of the main ways a manager can support his programmers “is simply buy large quantities of Mountain Dew.” But when does the relatively cheap, brightly colored, caffeinated, and fun beverage get directly involved with the esports and gaming community? That would be in 2005 when Mountain Dew ran a promotion called “every 10 minutes” where they gave away Xbox 360 consoles. But the more famous linkage was in 2007 when Mountain Dew promoted the launch of Halo 3 with a new flavor called Game Fuel. So, here’s where the story of Mountain Dew, gamers, and a product called Game Fuel really starts. The energy drink version of Mountain Dew Game Fuel (or should I saw MTN Dew Amp Game Fuel) wasn’t launched until January 2019, but that limited-edition flavor history, annual gaming-themed promotions, strategic partnerships with game developers, alignment with gaming personalities, consistently increasing esports sponsorships, is important in that MTN Dew didn't overlook the community cost barrier to entry into the esports and gaming market. Even though MTN Dew would be seen as one of the positive non-endemic brands that didn’t simply “buy a seat at the table” only after all the writing was on the wall that esports had massive potential...why didn't MTN Dew Game Fuel work out?

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If you ain’t delaying…are you really Chapter 11 bankruptcy auction banging? Believe it or not…it’s been something like 250 days since Bang Energy filed voluntary petitions for protection under Chapter 11 of the Bankruptcy Code. That might seem like a long time, but Chapter 11 bankruptcy cases, especially complex ones involving creditor claims in the billion-dollar range, are not quick…and that doesn’t consider the hostile takeover element that’s relatively unique here. But this isn’t a piece of content about how the Bang Energy bankruptcy proceedings have amounted to almost 1500 document filings that equal 10s of thousands of total pages…thus likely making this one of the most expensive cases in Florida bankruptcy court history. Instead, I want to focus on the recent delays to the bankruptcy auction announcement. To be honest, it’s hard to keep up on how many delays they’ve had, but it’s probably up to four or five at this point. Now…there are two schools of thought on why this has been happening. The first one revolves around the theory that Bang Energy was such an attractive asset that the initial bankruptcy auction was filled with many strong and diverse bids. And so, to make the best decision for creditors, it would require a longer review period. That makes sense, right? But what if the most recent delay is due to an outside regulatory agency...which can only mean that my original prediction in mid-March that Monster Energy would acquire Bang Energy (https://youtu.be/Kr_PMyydlCw) is still alive. Because something I hadn’t noted in earlier content was the potential regulatory hurdle that Monster Energy would face because of its leadership position in the U.S. energy drinks market. Finally, I’ll talk through a few hypothetical scenarios based on what would happen next if each of the different diverse categories of acquirors won the Bang Energy bankruptcy auction.

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Did anyone else have former First Lady Michelle Obama starting a kid’s nutrition CPG brand on their Bingo Card? Well...you can check those December 2021 receipts on my YouTube video named HollywoodHouse Foods (https://youtu.be/-zXXmAS7bFI). But all jokes aside, I'm glad to see the Michelle Obama continuing her White House efforts to bring this next generation of kids into a healthier future. Beyond her ownership in Plezi Nutrition, Michelle Obama will “position the company to be a change agent and model for how food and beverage CPG brands can support the childhood health." If that sounds like big checks to cash for a first time CPG entrepreneur, it’s important to remember that Michelle Obama is no rookie in the space…as she previously held a Board of Directors seat for six years at the largest private label food manufacturer in America.

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