The Power Of Diversification And Vertical Integration For Growth

by BZI CEO James Barlow, For Forbes Business Council

What makes a billion-dollar brand?

There are varying degrees of facts and opinions, but I think most billion-dollar brands have one thing in common: They do much more than they say they do.

Take Coca-Cola, for example. Many people think, “It’s just soda.” But that’s not true. Yes, their product line comprises a plethora of soft drinks, including Sprite, Fanta, Powerade, Dasani and Pibb Xtra. They have also acquired several successful beverage companies in recent years, including Vitaminwater, Topo Chico, Fairlife and BodyArmor.

Not as well known is that Coca-Cola has other strategic assets across the board, including system associates, bottling partners, system production facilities and retail customer outlets. They also invested over $9 billion in system capital expenditures in 2023. All these investments have paid off: “With an increase of 9% YoY, Coca-Cola was the only top-10 brand to see an increase in value in 2023.”

This investment strategy refers to what’s known as diversification and vertical integration. I run a multi-million-dollar company that is projected to grow more in 2024. Taking a page from Coca-Cola’s playbook, we have adopted the diversification and vertical integration strategy as we grow our business toward becoming a billion-dollar brand.

Diversification And Vertical Integration

What do I mean by diversification and vertical integration?

• Diversification involves entering new markets or offering new products to promote financial security, industry growth and a larger target audience.

• Vertical integration is a strategy where a company owns and integrates its supply chain, which can include two or more stages of production. The goal is to increase the company’s power in the marketplace and streamline operations.

Diversification is a broadening, and vertical integration is a lengthening. One gives you more product, and one gives you more power. Both work together to maximize their effect on your business. Yes, you can diversify your offerings and enter new markets without owning your supply chain. You can own and integrate your supply chain without bringing new products to market. However, your opportunities and outcomes can exponentially increase if you do both strategically and simultaneously.

Growth Through Investing

Building out your diversification and vertical integrations is not only beneficial for the health of your company; the impact can go beyond your business to your team members and community. When companies are growing and thriving, they can do more for those who rely on them. Some of the ways growth can enable companies to invest in themselves and others include:

1. Investing In Innovation (R&D)

I highly recommend investing in your business’s research and development (R&D). For example, we invest annually in our innovation center. A focus on researching, engineering and producing innovative technologies and processes ultimately provides a more comprehensive experience for your clients.

Anticipating your clients’ needs and taking the time and capital to meet them also sets you apart from your competition. So not only does this investment mean you are serving your clients better—it means you are elevating your company as well.

2. Investing Locally

Consider how you can support your community beyond the business. You can start by asking yourself how to bring more jobs and opportunities to the region where you work and live. For example, we helped launch a rural inland port to bring economic and growth opportunities to regional businesses and communities.

Projects in your community have the ability to impact the economic health of your entire region, elevating the opportunities for your neighbors, families and community at large. When you find ways to make a meaningful, positive impact, it can ultimately come back to benefit your company as well.

3. Investing In People (Most Importantly!)

Companies can improve team members’ lives by providing high-value employment and giving them the opportunity to thrive and achieve great things, both in their personal and professional lives. Every year we invest in our training division. Its continuing education initiatives are curated to enhance safety culture, elevate technical skills and build a strong leadership bench. I’ve found that investing in your team is the best investment you can make and ultimately benefits the company in addition to individuals.

Developing Your Brand Beyond Its Core

As you use the business principles of diversification and vertical integration to grow your company, I suggest you also develop your brand beyond its core. Here are some ways I’m leading this challenge that can be implemented in other companies:

• Ensure a solid leadership approach that clearly defines your business objectives. We hold a yearly event in January with all team members to review and celebrate the prior year’s accomplishments and discuss the upcoming year’s priorities. Bring your team members with you every step of the way.

• Don’t get stuck. CEOs tend to stick with the strategy that got them to where they are, and they don’t evolve their practices to get to and through their company’s next phases. In my previous article, I discussed this in more detail.

• Ensure the brand stays cohesive with a solid message. Your brand’s messaging should be consistent across all branches of your business. The messaging developed through a parent company should be reinforced throughout all vertically integrated affiliates.

By diversifying and vertically integrating your business, you can set the stage to move your company from a multi-million-dollar brand to a billion-dollar one.