NOS: The Brand, The Business, And The Big Bad Wolf

NOS Energy DrinkYou have to be careful when you’re doing business with big companies. Even big companies have to be careful when they’re dealing with other corporate giants. Especially when they’re playing in that company’s back yard.

The Brand

If you know anything about fast cars, you know the name NOS (Nitrous Oxide Systems) which is a hugely successful brand owned by another well known brand; Holly Performance. Enter NOS the energy drink.

Energy drinks are the fastest growing category of the beverage market right now. The growth is like 50% year over year. Somebody had a brilliant idea to take NOS, a brand synonymous with fast cars, and roll it into a product that makes fast people!

The result: Leveraging an already successful name to an instant consumer base in a growth market. This stuff is flying off the shelves from what I’ve heard. It doesn’t hurt that the great packaging looks just like a nitrous oxide systems bottle.

The Business

Holly makes performance auto parts, they don’t make beverages. They put a deal together with Fuze Beverage to bottle and distribute the drink (Not sure what company came up with idea).

Fuze already had their own line of health and energy drinks. The branding was strong and they managed to get distribution through Coca-Cola. And then Coke bought Fuze, so Fuze is a great example of how you can build a company and a brand, and sell it to the big boys.

So what does this mean for NOS and Holley?

The Big Bad Wolf

With the purchase of Fuze, Coca-Cola attained a license to bottle NOS. It’s a very strong brand and I’m sure Coke will be able to take a bite out of competing brands like Red Bull with NOS. Coke likes to work with strong brands, but eventually their end-game strategy always kicks in …

Own it, or kill it. The strategy works like this:

They form a partnership with a strong brand to distribute it. This is great for a small brand because Coke has their own trucks and massive distribution network.

Once they suck the brand into their distribution machine, the independent distributors that the company first used tend to get bumped out. And now all your eggs are in one basket. The small company totally relies on Coke to get them out there and put them on the shelves.

The next stage is, Coke either buys the company, or they stop distributing their products. So the small company either cashes out big, or they die as they try to rebuild a complete distribution network from small independent distributors.

Holley will never sell NOS because it’s part of there core business (performance auto-parts). And the brand as an energy drink is only strong because of that core business.

The end result is this: If Holley doesn’t grab the reigns and start building an independent distribution network now, we’ll see it on the shelves for 3 or 4 years. Once the brand has done it’s job of hurting Coke’s competition in the energy drink category, it’ll be gone.

Big bad wolf? Not really. I thought it was a catchy title. It’s just business and a lot of smart companies are very strategic.

The games chess, not checkers.

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