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Soda Entrepreneur Jonesing for a New Opportunity

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It’s a common story in the beverage industry. An independent distributor works like hell to make a brand like Red Bull, SoBe, Snapple and Vitaminwater a hit. Then, once the middle man achieves success, the brand gets pulled away and given to a larger distributor. Either that or the brand strikes a deal with Coca-Cola or PepsiCo who have their own powerful distribution networks.

Now the small distributor has lost one of its top sources of revenue. Plus, it smarts because these “up-and-down-the-street guys” had done so much work to build the brand.

Enter Peter van Stolk. The former president and CEO of the Jones Soda Co. created a new company called Box B in June. (The name comes from the choices on a sushi menu.) What Box B does is create brands for the distributor that they can own.

The idea is a bit of a gamble for such an image-driven category. According to the Nielsen Co., the share for nonalcoholic private label beverages fell 1.1 percent last year to 23 percent for the 52 weeks ending Oct. 31.

But van Stolk—who recently bought himself out of a contract with Jones Soda Co., the company he founded in 1987 (“I walked away from my severance…It was just like a bad divorce”)—hopes he can spread private label in the category. He currently has five clients that have tapped him to create such custom brands.

Steve Gress of Exclusive Beverage Distributors in New York, for example, helped build the Vitaminwater and Smartwater brands in New York. Now Coca-Cola is reaping the benefits of his hard work.

In June, Gress launched his own water brand, with Box B’s help, called Water Street (after the street located in the financial district). The label reads “VH20-vapor distilled electrolyte enhanced water.”

The product is currently available in Duane Reade and other local retailers. “We wanted to come up with our own brand and build something ourselves with a New York spin without being too in your face with it. Peter came up with the look. We thought it was brilliant and ran with it,” Gress said.

Bill Sipper, senior partner at Cascadia Consulting, a food and beverage consultancy, said distributors are smart to push their own brands. “If you look at someone like an Exclusive Beverage, they build it to 40,000 cases a month, and they think ‘This is a home run,’” he said. “Then the brand says, ‘We want 80,000 so we’re taking it to [competitor] Big Geyser or Coca-Cola.’ Owning your own brand balances out the risks associated with building other people’s brands.”

Compared to losing brands like Red Bull, Monster energy or Muscle Milk “for a measly buyout,” creating your own brand is very alluring, said Gerry Khermouch, editor, Beverage Business Insights. Still, expectations should be tempered: “It’s doubtful any of these has the upside of a Fuze or a Vitaminwater.”

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