The beverage business has lost some of its fizz since John Bello sold his SoBe herbal-drinks brand to PepsiCo (PEP) in 2000 and, after a two-year transition, departed. Bello, known as the "Lizard King" (the SoBe emblem was a zen-like configuration of two lizards) had an in-your-face approach that sometimes rubbed rivals, distributors, and retailers the wrong way -- but brought the brand a degree of notoriety and consumer awareness that Bello's paltry marketing budget couldn't have managed on its own.
After scoring his first major career success developing the now-huge licensing business of the National Football League, Bello decided to try to make it as an entrepreneur in the "New Age" beverage sector, where brands like Snapple, Arizona Iced Tea, and Nantucket Nectars were winning young consumers bored by carbonated soft drinks.
VITAL INGREDIENTS. Bello launched his teas and juices under the name South Beach, but the line struggled until he hit upon the notion of adding herbal ingredients like ginseng and gingko biloba, restaging the line as the more Asian-sounding SoBe, and tying into up-and-coming sports like snowboarding and lacrosse. Styled as a "wellness" beverage (though skeptics noted that many of the herbal ingredients were there in just trace amounts), SoBe took off. In 2000, Bello sold his South Beach Beverage Co. to PepsiCo for a cool $370 million.
Since then, Bello has been under the radar, but he surfaced recently to talk up an early-stage venture-capital group he's launching, Quest Capital, to spot the next SoBe among fledgling "health and wellness" outfits in food, beverages, apparel, and health-and-beauty aids. Quest, which Bello is running with Ed Slade, the former president of boutique bottled-water brand Fiji, is a portfolio company of Sherbrooke Capital, a venture-capital fund with $100 million of committed equity capital, that focuses on healthy-lifestyle companies like tea maker Oregon Chai and health-care device maker HealtheTech.
Bello also discussed some of his other quirky ventures, such as reviving New York's venerable Rheingold beer, with BusinessWeek Marketing Editor Gerry Khermouch. Edited excerpts of their conversation follow:
Q: What's the rationale for launching Quest?
A: There are a lot of great ideas out there, and I remember from my own experience with SoBe that young companies need help financially and in building a business plan in their early stages, not when they're doing $30 million or $40 million in business. There are very few venture-capital companies out there that will do it very early-stage.
Right now, there are huge innovative voids in the beverage business -- I don't see much happening there. In food, the whole Atkins [diet] area has credibility. The market is more and more ready to accept these kinds of concepts than three or four years ago. The expertise I can offer is to take a commodity and put a new coat on it, because, ultimately, what you're selling is the brand.
Q: How are you going to find these entrepreneurs?
A: We're taking a multipronged approach, much like the tactics we used to build SoBe. Publicity is part of it, and I'm working with Ernst & Young, based on my involvement with their Entrepreneur of the Year program. I'm making presentations at master's programs at Tufts, the Yale School of Management, and other business schools. A unit we're setting up called Venture Quest will be inviting submissions to its Web site and organizing a tour across key U.S. cities late this year to meet with prospective entrepreneurs and review their submitted business plans. The first will be at Ernst & Young's offices in Boston near the end of October, but we also expect to make stops in Chicago and on the West Coast.
In anticipation, we'll work with some of the companies to smooth and improve their business plans so they can put their best foot forward. Our goal in Year 1 is to make five investments worth $3 million to $5 million in companies across the health-and-wellness sector. We'll even look at raw ideas -- and if seed money is required, we'll consider that.
Q: Having sold your beverage brand to Pepsi, are you free to get back into the business again?
A: If it's [nonalcoholic] beverages, I have a noncompete clause that says I can't individually invest in it or run it -- but Ed Slade can. I'll focus more on the food side.
Q: What have you been up to, besides setting up Quest? You seem to have had your hands in everything from beer to soup to chocolate. Start with the beer.
A: I'm trying to revive Rheingold beer. It's in a very tough business sector, with European brands like Stella Artois and Pilsner Urquell making a big push into the New York market. But I believe there's a huge opportunity for a regional beer when you look at what Yuengling has done in Pennsylvania. It's a chance to bring back a nostalgic brand and put a new coat on it.
Q: O.K. And the Soup Nazi of Seinfeld fame seems to have inspired one of your other ventures.
A: Yes. I'm also invested in Manhattan Soup Chef. Since that show, the soup sector has seen a number of major players, but there has been a lack of innovation. We're bringing an all-natural product to the point of sale, a kettle program.
Q: Tell me about the chocolate?
A: That's from the company that had the license to do SoBe-branded chocolate bars. HVC Chocolate [the letters stand for Hawaiian Vintage Chocolate] is a healthy indulgence chocolate with zero carbs. It's available nationally in 7-Elevens (SE) and at Wal-Mart (WMT).