~ I WOULD LIKE TO HEAR YOUR THOUGHTS ON THIS !! ~

[Hattie the Hen]

I came across these articles this morning -- it surprised me...somewhat...!! So I thought I would ask you what you thought.....?

http://www.chewswise.com/chews/2008/02/interview-seth.html

http://www.washingtonpost.com/wp-dyn/content/story/2008/02/05/ST2008020503613.html



:rose Hattie :rose

 

[boggybranch]

The "change" will come in 3 years and 1 day.....Coke is waiting to pounce.
They will work to increase the sales on the eco-friendly factor and when they have complete control.......it will be all about the "bottom line".
This is all that matters to a "public owned" company........profits, dividends and stock prices.

 

[Ridgerunner]

Ask me in four to five years. We should have a good idea how it is working by then.

If it works, it will show a model for how things can change, working with instead of trying to destroy. And I like the point that it is the big boys that have the research and technology to make a change. They just have to have a will. I think the will comes through a chance to make a profit, otherwise the stockholders will fire the current board. That's just a fact of corporate life.

I think it shows just how hard it is to make a significant change in the consuming world. The required scale is immense. And note that Honest Tea has yet to make a profit. As much as it may have been growing, it could not continue for long without doing something dramatic.

I sure hope this turns into a major profit center for Coke. That would be a big win. I just hope Coke is not using the Bill Gates method, eliminate the competition. It sure worked for him. And big corporations like to use proven models. I'm cynical enough to not be convinced but hopeful enough to hope.

 

[Rosalind]

I'm going to go with "eliminating competition." Because Coke must do what is best for Coke's bottom line, they will test their products against focus groups who already have a preference for Coke and sugary drinks. When the focus groups raised on soda and Sugar Frosted Frooty Bombs select sugary tea laced with atrazine, that is indeed what will go in the bottles.

With respect to R&D: the R&D required to, for example, increase post-consumer recycled content in bottles is not only known, it is published knowledge that isn't under any kind of patent protection; it is now an ASTM standard method. ASTM standards are pretty much like a recipe book: You follow the recipe and get plastic food containers at the end. Changing the plastic formulation is a one-time cost of getting a small batch of bottles made according to the ASTM standard, then having that batch tested for leachables by a contract lab--that costs about $20,000 or thereabouts. Ever after, you simply have the bottle manufacturer sell you bottles made to that particular ASTM. That used to cost more when raw materials for plastics (i.e. petroleum distillates) were cheap, but now that oil has gone up virgin resin is no longer cheaper. Nor is the art of formulation particularly arcane knowledge; a few thousand polymer/materials science degrees are awarded annually, and Goodyear, DuPont, &c are always having some sort of layoff that floods the market with experienced folks. So I don't buy it that large companies have more or better R&D than smaller ones--they are about six of one, half-doz. t'other in my experience, it's all in whether the hiring manager has good judgment and how the company is run.

The distribution issue makes sense to me though, they want to be able to distribute their product better and get more market access, fine. But it does seem like there must be a better way to do that. I do have to wonder, if they are having problems from suppliers who say 30 million units aren't enough, why not shop around for suppliers? You'd think this is a trivial question, but I have seen lots of very large companies that don't shop properly and consider it a major big deal to switch suppliers, long after the original supplier's product has become nothing but a money pit. And then if there are no suitable mid-range suppliers, consider how much it would cost to bring that function in-house? They are a private company, so they should be thinking long-term and able to amortize costs over several years if need be--they will lose that capital flexibility with Coke. They are probably paying a 50-100% markup on bottles they buy, could the cost of equipment pay for itself over a couple of years? What about partnering with a small bottle-making company to help them expand, on the condition that the small company supply their bottles?

 

[Ridgerunner]

So I don't buy it that large companies have more or better R&D than smaller ones--they are about six of one, half-doz. t'other in my experience, it's all in whether the hiring manager has good judgment and how the company is run.

I'm afraid I'll have to disagree with this statement. Technology is not stagnant. It certainly does make a big difference in what the management focus is, but the larger companies have more money to spend on R&D. In my opinion, a smaller company struggling to survive just can't put the focus on R&D that the larger ones can. Oh a company whose business model is R&D is an exception, but I'm speaking in general. After all, Frito Lay came up with the fully compostable chip bag, it was not a small struggling-to-survive company.

I was speaking in general, not specifically about recycling bottles. While there may be a current government approved standard on how to recycle according to a certain technology, I feel confident somebody is doing research for ways to improve the technology, whether that is reducing the cost, increasing the recyclables content, make the final product function better, or some other improvement. From Hattie's articles, it is pretty clear that Coke's technology was considered a plus for this deal.

I don't know what Coke's current intensions are. I certainly don't know what the intensions of whoever will be in charge three or four years from now will be. I do not buy in that all people at the top of big corporations are bent on destroying the world, no matter what. They are human beings and as such are complex beings. Some I despise for their morals, but I can think of a few people very active in churches that I despise for their morals. It is not limited to big corporations. I'll use Dave OReilly as an example. He is the former CEO of Chevron. Despite what you think of big oil, he had a strong personal commitment to safety on the job site. That went beyond people not getting hurt to protection of the environment. He had to sell it to the board of directors and his top management as helping Chevron's bottom line, but it was obvious he also thought it was the right thing to do. The number of deaths and injuries as well as the number of incidences and the amount of hydrocarbons spilled dropped tremendously under his guidance. I'm not just talking about gas stations where you fill up your car. I'm talking about drilling, production, refining, and distribution operations. Do I claim he was a saint every way? Absolutely not. He was good enough at the political infighting to become CEO. But once he got to a position where he could make a difference, he made a change for the good of the environment in the way Chevron operated. And because he became top dog at Chevron, he was in a position to do some good.

I realize this example may turn this thread into a rant against big oil. Hattie, if it does, I apologize. I'm just trying to use a real life example that I have some personal knowledge of to make a point.

More of my personal opinion, but I think we can come up with a better results working with the big corporations in getting them to work with us instead of automatically creating an adversarial relationship where people are trying to destroy them. Yes, it is a lot harder to work with them than work against them. This approach is not as politically correct. Yes, you have to show that this change will help the bottom line, whether it is a more cost efficient way to operate or it improves public opinion of them enough that people will preferentially buy their product, even at a higher cost. Yes, you still need people jumping all over the big corporations whenever they mess up so public opinion makes a difference to their bottom line, whether it is Big Oil, Coke, Walmart, or many, many others. They have to be held accountable. I am cynical enough to expect the worst, but I am not totally without hope.

 

[Rosalind]

It certainly does make a big difference in what the management focus is, but the larger companies have more money to spend on R&D. In my opinion, a smaller company struggling to survive just can't put the focus on R&D that the larger ones can.

Eh...I've been in R&D myself for longer than I care to remember (let's just say it's given me grey hairs and leave it at that ) and in my experience, it's all in who you know. Smaller startups can collaborate or form partnerships, get SBIR grants that the bigger companies don't qualify for, and if they stay well-connected to universities and similar places that do all that stuff, it's not difficult for them to get research done on the cheap. They also follow up better on projects, there's less leeway for messing around. Bigger companies tend to hire their R&D outright, and because many hiring managers are very impressed by Ivy League degrees (as opposed to, you know, projects that actually worked), they end up with a lot of dead wood in their R&D departments. What I am saying is, yes, someone probably is doing quite a bit to improve the tech, but they most likely are not at Coke--they are at either some other company that specializes in plastics/glass materials, or they are at a university that has a strong materials science program. Small companies like this one tend not to know which companies are doing what, how to approach them, how to find a good university partner to do the work; they don't have a huge amount of experience forming that type of partnership, and it's not a simple business deal. Yes, Coke has technology now, but I can guarantee you they hired a contract research group to build it and install it for them. Their own research is all food science stuff, flavor chemistry type of work.

 

[Ridgerunner]

I took this quote from a University of Arkansas site. I just happened to drive by this building today. It is a nice building, at least from the outside.

The poultry science department and the Center of Excellence for Poultry Science include a complex of teaching, research and extension facilities at the Arkansas Agricultural Research and Extension Center and the John W. Tyson Poultry Science Building on campus.

I think this kind of demonstrates why some universities have strong research and development programs in certain areas. I doubt that the University of Arkansas named their Poultry Science building after a Tyson because they thought it was a neat name. I think money might have had something to do with it. Maybe a large sum of money.

There are many different ways to do R&D. Some companies do it in house. Some work through universities. Some work with R&D companies. Many use a combination of several different approaches. You are right, a lot of it is outsourced. In any case, somebody has to foot the bill. Smaller start-ups can take advantage of some of these methods, but a smaller start-up is not going to be footing much of the bill. If you are not footing a significant portion of the bill, you are not going to influence which direction that research takes.

According to the interview, Honest Tea expects to get something from Coke that gives a better chance of making a difference. Some of those things are a distribution system and enough of a size of scale to be able to influence suppliers. Things he cannot do on his own. Once you outgrow your business model, it is time for a new business model.

I still think he probably sold out for the money but wouldn't it be neat if Coke is a big reason that organic tea actually makes it big in the mainstream instead of just a niche market.