I know investors my age are thinking about the same thing I’m thinking. Bring back Ginger from Gilligan’s Island, but this is not the Ginger to which I refer. This Ginger is the root - and we all need Ginger. Medically, ginger has so many health benefits and acts as a cancer neutralizer that I am surprised they are not selling it along the side of the highway.
Ginger roots are embedded deeply in American beverage, so entrenched, that it is simple to return to the ginger well for the lucky beverage maker who captures the Red Bull crowd. Soon this demographic will realize they need to stop texting while driving - and drink something healthy. This fortunate publicly traded beverage company has a unique opportunity to strike directly the heart of this new millennial demographic providing they conjure up the right natural concoction and snappy marketing and branding play.
I expect that we will see a Super Bowl Commercial this season with a “Pull Down Tap” at your local Starbucks and the XY generation will flock to this health tonic to solve all the ills of the previous nights Vodka Red Bull hang-over. I envision the line forming and cappuccino’s flowing followed by a cold mug of Natural Ginger Ale to “remedy that ails you”. Howard Schultz CEO of Starbucks (SBUX) needs to diversify his business model a bit as Wall Street expectations for one of the worlds most recognized brand’s and SBUX needs more revenue streams because you can only sell so many Bob Dylan and Joni Mitchell records (CD’s now) and needs to stop pissing off 20 somethings by charging monthly fee’s for Internet.
Little does Howard realize that just because they take the laptop outside the range of their home wireless router they do not want to incur another “connection tax”, this will come later from Uncle Sam. Shame on yourself SBUX you should go green as we enter an election year.
Anyway back to beverages. Back to Ginger. The beverage industry is upside down once you leave the Coke (KO) corral. Warren Buffet must be wondering if megacap beverage makers are dead money. They cannot continue to buy up every competitor who takes shelf space.
It is clear from missteps by giant company’s like Quaker Oats who paid wayyyyyyyyyyyyy too much for Snapple that timing consumer demand as it shifts is a very tricky and expensive proposition.
I picture the fearless leader of Berkshire Hathaway (BRK.A) taste testing Coca-Cola acquisition candidates while sitting on some rental furniture from CORT with a bunch of suits hanging on his every word. Take a listen at the recent investor calls for Boston Beer (SAM) and Jones Soda (JSDA) and you will see a dynamic shift occurring. It occurs to me that the usual margin and bottom line killers are present (higher commodity prices driving up everything from glass to premium hops) but volatility in the beverage makers must be making Warren spit up his cactus soda demo drink in front of the image makers at Coke who are looking to drive back the smaller guys so they don’t’ have to buy them up and dilute the stock or spend that cash so they can continue to pay a dividend. I bet Warren has the Coke recipe locked in a safe at his office in Omaha.
The beverage industry has always been linked with Madison Avenue and nothing has really changed, watch any sporting event on TV, and count the number of beverage companies you see during the College Holiday Bowl Season. One thing I can tell you is that Megacap stocks in the beverage industry are losing their grip because they all know the Red Bull and Starbucks generation does not care about carbonated soda brands.
In fact they don’t buy them at all – they avoid them. If they knew they were buying Coke when they bought Dasani Water they would put it back and buy an off brand because they don’t like to pay the advertising premium in the same way they don’t like to pay for an Internet connection at a coffee shop, they also don’t like pop-ups, ad’s in their face or “The Man” subtly telling them that they need to drink this - or eat that - or adhere to conservative culture in general terms.
The Internet age has created an abhorrence to being force fed ad’s and at some point it will not work for Megacap public beverage companies.
It reminds me very much of the 1960’s and 70’s. This is why I think we should “Bring back Ginger”. I also think anyone who is following the beverage industry should take a hard look at Reed's (REED). Don’t take my word for it, try the product and call the CEO Cris Reed. I did… it was the only way I could stop thinking about Ginger from Gilligan’s Island.