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SMART ANSWERS
By Karen E. Klein

9.13.99  
Launching a Soft Drink Is a Hard Business
The cola kings won't want your idea, but some smaller players may

Q: I've got a great idea for a new soft-drink product. Can you help me find out who to contact and how to sell this idea?
--D.T., Cottondale, Fla.

A: Experts say you might as well forget about pitching your product to soft- drink giants like PepsiCo or Coca-Cola. These corporations have in-house product developers working around the globe full-time, doing nothing but dreaming up new soda formulas. It's more than likely that they've discovered your recipe already, and it's either in development, is being test-marketed, or has been tossed on the discard pile. Because of the enormous time and expense involved in a new-product launch, mega-corporations nearly always put their money behind ideas they've developed internally, experts say.

"It's virtually impossible for a company like Frito-Lay, Kraft, General Foods, or PepsiCo to launch a new product without the expectation that it will generate $100 million in first-year sales, because they have to put $20 million to $30 million into launching it," says Ed Engoron, president of Perspectives/The Consulting Group, a Los Angeles-based concept development and marketing research firm specializing in the food and hospitality industries.

A better strategy for you would be to approach independent bottling companies or perhaps a local dairy to see if they are interested in your soft-drink idea. Look for companies already producing similar but not directly competing products, companies that have the capacity to produce your soft drink without having to make large investments in new manufacturing equipment. Try to find companies that have synergistic products already on the market -- maybe iced teas or fruit drinks -- but nothing in the carbonated soft-drink niche. A company like this may be eager to expand into a related market but short on staff to devote to new-product development.

Of course, before you break down your formula for a manufacturer, make sure it is legally protected by patent and/or trademark. Entrepreneurs should not reveal any original idea without securing the intellectual-property rights to it first, or they will have no legal recourse if it is stolen. And you probably will not be able to interest anybody in the idea unless you've done solid test-marketing and you can put some numbers behind your contention that this is truly a great idea -- one that generates substantial, positive consumer reaction. Customers are pretty loyal when it comes to their favorite sodas, remember, so you'll need to demonstrate that your product is so terrific and unique that it will capture a share of a crowded, competitive market.

If you can afford it, you might do well to hire a new-product consultant who specializes in the food and beverage industry. These companies have laboratories and kitchen facilities and can help you refine your formula, figure out how to produce it in large enough quantities to make it profitable, run taste testings, and do large test-marketing surveys for you. They'll also give you an objective analysis of your idea. If they believe in your product, they will also help you make contacts with producers that will lend you the credibility you will need.

One last piece of advice on the food industry in general that may be helpful: "When it comes to new formulas, I'd advise you to try for ingredients that are as fresh and natural as possible, particularly using fruit and vegetable derivatives. We're not in the era of 'better living through chemistry' anymore," Engoron says. "People are looking for fresh, all-natural products. You see it from the upgrading of fast-food menus all the way up to the white-tablecloth restaurants. It's a trend that's very pervasive."

Have a question about running your business? Ask our small-business experts. Send us an E-mail at editors@businessweekmail.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.

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