- Dr Pepper Snapple announced Lain Hancock has been named chief executive officer for Bai Brands, the company said in a statement. He takes over leadership from Bai founder Ben Weiss, who has left the business.
- The beverage maker did not say whether Weiss, who started Bai in 2009 in the basement of his New Jersey home, resigned or was asked to leave.
- "Lain knows how to inspire and lead winning teams and develop and execute business plans guided by data and insight," said Larry Young, Dr Pepper Snapple president and CEO. "As part of our executive leadership team for the past four years, he understands how to best bring Dr Pepper Snapple's full capabilities and resources to support Bai's sales, marketing and brand building efforts."
Young said in a statement that Weiss left Bai "well positioned to drive growth for the brand well into the future." While little is known about why he departed, the fact that Dr Pepper replaced him with a ten-year veteran from within suggests executives were looking for a change in direction and didn't believe Weiss or other officials at Bai were the answer.
Dr Pepper Snapple first acquired a stake in Bai two years ago for $15 million. Last November, the beverage conglomerate agreed to buy the rest of the company for $1.7 billion — a purchase price some analysts felt was too high. The deal closed on January 31. The risk is that without Weiss, who founded the brand and was the driving force behind it, Bai no longer has the creative vision that made it successful in the first place.
At the Beverage Forum in April, Mark Swartzberg, an analyst at Stifel, Nicolaus & Co., speculated that Dr Pepper Snapple is struggling to integrate the new business into its existing operations. This is a challenge that often confounds big companies who buy a smaller organization and try to instill their own operations and culture. Dr Pepper Snapple also is looking to be more innovative, create new products and expand Bai abroad — decisions that are not uncommon when a big food and beverage company integrates a smaller, newly purchased brand into their portfolio.
"My best guess is it is really execution — that we really do have a company that is more seasoned in making brands into the next 7-Up or Dr Pepper and so they are taking a different approach," Swartzberg told the audience at the event. Despite the near-term challenges, he expects Bai Brands "will be [a] successful" acquisition for Dr Pepper Snapple.
During its most recent earnings call, Dr Pepper said the biggest gains during the quarter came from Bai, with sales increasing 80% following the acquisition. Still, it's uncertain why, if things appeared to be turning around, Bai is now under new leadership.
Even though it continues to rely on soda, Dr Pepper Snapple has worked to lessen its dependence on the beverage that has long been its identity. As more consumers purchase juices and flavored waters, the company has increased the "allied brands" it works with — including AriZona, Fiji Water, BodyArmor and Vita Coco — in order access to faster-growing beverage categories coveted by health-conscious shoppers. Dr Pepper has publicly acknowledged it needs to move beyond soda, and buying a company like Bai outright, while a gamble, is one it had to take — particularly to prevent it from getting into the hands of a competitor.
Ultimately, Dr Pepper has time to more fully integrate Bai into the mix. At the same time, it's under some pressure to justify the high price tag it paid. It could look to soda rival Coca-Cola, which bought Glaceau, the maker of vitaminwater, for inspiration. Glaceau had sales of $350 million in sales in 2007 when it was acquired, and today they have increased to more than $1 billion. For Dr Pepper, the CEO change could be a big step towards reaching this goal.