BOSTON — The ultimate vision that Dr Pepper Snapple Group has for the recently acquired Bai Brands is to be the leader of the healthy beverage segment, Michael Simon, chief marketing officer of Bai Brands, told participants at the UBS Global Consumer Conference held March 8 in Boston.
Princeton, N.J.-based Bai Brands, which makes a range of enhanced waters, has had a distribution relationship with Dr Pepper Snapple Group, Inc. since 2013. On Nov. 22, Dr Pepper Snapple announced an agreement to acquire Bai Brands for a total purchase price of $1.7 billion in cash, which includes a tax benefit for Dr Pepper Snapple of approximately $400 million from the transaction.
Now, Dr Pepper Snapple will look for Bai Brands to play a leadership role in bringing the healthy beverage segment together.
|Michael Simon, c.m.o. of Bai Brands|
“Anybody who is looking to be healthier, whether it’s in the foods they eat or the beverages they drink, we offer a portfolio of different product forms that deliver — or provides solutions to the different functional needs that somebody will see and want to address throughout the day,” Mr. Simon said.
Because Bai was built on a philosophy or idea, Mr. Simon said he believes the brand can play in almost every type of product form. The company over the past year and a half has introduced a fruit-based carbonated beverage as well as a better-for-you soda, called Bai Black, which has traditional soda flavors.
“We are just scratching the surface in every channel we can get our foot in,” he said. “So in terms of the basic blocking and tackling, we think there’s breadth of distribution, so getting our innovation into all outlets, getting our base business into small formats, and then there’s also depth of distribution. Even though we have a strong business with our base product, we still in any given store only have probably three or four s.k.u.s (stock-keeping units) out of a line that has many more s.k.u.s of solid distribution in large format, and with innovation, even where we may have distribution, there may be one or two or three s.k.u.s.”
Mr. Simon said Bai Brands has identified its core segment as “conscious authentic.”
“The sweet spot demographically is a slightly older millennial, 30 to 35,” he said. “They are highly educated, affluent, but these were the people who were really looking to be better to their bodies. They were looking for healthier options.
“But the definition of health for them has evolved from taking the bad stuff out to keeping the good stuff in. So purity, natural ingredients were key to them, but they also wanted flavor. They didn’t want to compromise on that. The other important characteristic of that segment is, they’re all very socially conscious, and they were looking to do business with brands and companies that they could trust that felt authentic.”
Going forward, Bai Brands is expected to act as Dr Pepper Snapple’s ninth “priority brand,” but the company expects to allow Bai to remain a strong, entrepreneurial organization, said Heather Catelotti, vice-president of investor relations for Dr Pepper Snapple.“It is very important for us that we are not going to bring Bai into our sphere,” Ms. Catelotti said. “We are going to allow them to operate independently, same as they’ve been doing, to make sure that they can continue to drive significant growth, disruptive innovation, do everything that they’ve been doing so well to date, and continue to be able to do that.”