Going Beyond Coconut In The Great Water Wars
MAPLE WATER. CACTUS WATER. ALOE WATER. ARTICHOKE WATER? IN THE RACE TO BECOME THE NEXT VITA COCO, WATERS ARE GETTING WEIRD.
BY COURTNEY RUBIN
When Matt McKee and Melissa Reed launched CaliWater in January, they experimented with the prickly pear cactus drink’s placement on the shelves on an organic mini market in which they’re part owners. Should it be with the super premium juices? Or next to the detox and cleanses, since those are two of its health claims?
They quickly discovered the best sales came when it was next to coconut water–not a surprise, since they designed the packaging to be similar. (In fact, they’d actually first wanted to sell it in Tetra Pak boxes, which they decided were too expensive.)
“Next to Sambazon and Coco Libre, our product looks like it belongs,” McKee says. “It’s like, ‘It’s in the same family, it must be good.’”
If that’s family, get ready for some feuding. In the past year, at least a dozen startups began selling new plant “waters”–made from everything from artichokes to watermelon rind–in a race they hope will end in a market approaching the size of now-ubiquitous coconut water.
Can’t imagine who’s going to drink, say, artichoke water? Consider that in 2003–pre-Zico and VitaCoco, when only companies like Goya marketed coconut water to niche markets, typically immigrants–sales of coconut water were such a blip they didn’t even surface in market research. In 2013, sales were more than $400 million, with analysts even considering giving the drink its own category. (It’s currently lumped in with water, which includes fitness or so-called “enhanced waters.” “Coconut is a hard one for us because there’s coconut water, coconut as a flavoring–it’s a crazy one,” explained Sherry Frey, Nielsen’s vice president of perishables.)
Thanks to declining sales of soda and fruit juices, there is huge market share opening up for what Aarti Kapoor, an investment banker specializing in wellness at Moelis & Company, calls “good-for-you beverages.” But to reach coconut water heights, products need to be able to make the leap from natural and alternative groceries (Nielsen considers Whole Foods to be in this category) to mainstream grocers such as Target or Publix, the latter of which began stocking coconut water in 2010. To make that leap, Frey says the product needs to be adopted not just by people who are very focused on health and wellbeing (Nielsen refers to this group as “wellbeings”), but by customers Nielsen calls “The Magic Bullet” (people who aren’t committed to healthy lifestyle) and hopefully the “Eat, Drink and Be Merrys” (people who choose taste over health). And of course, it needs to make a blip on the tracking radar.
“There is no specific ‘It has to reach X point,’ for us to start tracking something,” Frey says. “But sometimes we see quick growth and it’s really just a fad. You want to see sustained growth in a product category.” Energy shots, she says, are an example of something that quickly peaked and have begun a rapid decline.
Kara Goldin, CEO of Hint Water, spent years in the trenches of Whole Foods before bringing her product directly to consumers via subscriptions, where the company now makes about 20% of its revenue. And she’s broken into the major grocery chains as well, signing on with Publix, the Florida-based chain popular throughout the South. Making the move to the nation’s largest supermarkets is not something every niche product can feasibly do, she says.
“You have to have a product with a mainstream profile. We grew up in Whole Foods because what we were doing was a brand-new category,” she says, adding that she believes some new “water” products are only using the word as a marketing ploy.
“There are words that are tricky…juice, water, ice,” Goldin says. “FruitWater has absolutely no fruit it in. Sparkling Ice, a sweetened fruit soda drink, is advertising itself as “The Bold Side of Water.” Aloe water has been shown to be linked to cancer in some tests. Maple water is touting itself as healthy, with absolutely no studies to back it up.”
So far, the drinks getting the most buzz are aloe and maple waters–drinks you may know better as “aloe juice” and “maple sap.” There are multiple companies making “water” from the soothing succulent best known for sunburn relief. One, Detox Water, far surpassed its $20,000 Kickstarter goal, with 291 backers pledging $31,030 in July. (The makers of Detox Water claim it has many health benefits, including being an anti-inflammatory, but topical aloe vera is going to be a better solution for that sunburn.)
There are also several entrepreneurs vying to become the leader in maple water, which is water that flows through maple trees in the spring, delivering vitamins and minerals from the ground up. Boil down 40 gallons of it–it’s roughly 98% water and 2% sugar–and you get maple syrup. North American explorers drank the sap, calling it “the wholesomest drink in the world,” or so the lore goes, and it’s long been drunk in rural villages in South Korea, where the tree is called the “gorosoe,” or “good for the bones.”
Companies in Quebec, Vermont, and New York are now bottling the water, which has about a third of the calories of coconut water and half the sugar. It’s a nerve-wracking business to be in: There’s a window of no longer than three weeks each spring to draw the water from the trees, and this year’s was very late because of the unusually cold winter.
“I feel like an accountant just before tax day,” says Ari Tolwin, the cofounder of Happy Tree maple water. Tolwin left his job at McKinsey to start the company after tasting maple water at his older brother’s farm in the Catskills two years ago. He says calling the product maple water–as opposed to sap–was “a no-brainer, if we wanted it to be a mass-market product.”
Analysts think health-focused consumers will like that maple water is sustainable and locally produced, and that it has about half the calories and sugar of coconut water. But it faces other obstacles to mass market.
Kapoor says one plus for maple water is that it would be easy to scale, but suggested that the companies might have a hard time wooing investors because something with one ingredient has so much concentration of risk. “And then the supply risk on top of that. If you back one very specific product, there’s a fad risk,” she says.
Coconut water made its name, and its fortune, as a health drink, with brands claiming–among other things–that it had 15 times the electrolytes of sports drinks. But a 2011 class-action lawsuit found that these nutritional benefits were exaggerated. Meanwhile, a 2012 study–funded by Vita Coco, no less–found coconut water was no better than plain old water at hydrating subjects after an hour-long workout. Not surprisingly, a lot of these new plant water startups were founded by entrepreneurs on the hunt for something better.
The cofounders of ARTY artichoke water–athletes and marathoners looking for a post-workout recovery drink–experimented with tree saps, cacti, and varieties of succulents, but settled on artichokes because they had a superior nutrition and flavor profile, says cofounder Kevin Kian. The drink is made from the whole artichoke, not just the leaves, and sweetened with blue agave and monkfruit, which adds 10 grams of sugar per serving. Coconut has 11.
Meanwhile, CaliWater’s Los Angeles-area founders are longtime coconut-water drinkers who wanted to make something with the prickly pear cactus they saw growing everywhere–something “lower in sugar than coconut water, lower in calories, that provides some kind of functionality,” McKee says. Originally they planned to open up a juice bar, but got seduced by the earthy berry taste of the cactus concoctions they whipped up in an old Jack LaLanne juicer in their kitchen, and decided to think big. Their drink has 32 calories and 7 grams of sugar. Says McKee: “We have a lot to thank for coconut water paving the way.”
One struggle the founders faced was sourcing the fruit even just to test it (the trees around their neighborhood were on private property.) Eventually they settled on a mix of prickly pear cactus extract and prickly pear juice from concentrate, the latter of which they’ve since learned will keep them out of high-end retailers. Currently they’re rolling out updated branding and a new formula made from the juice in puree form.
Stephen Nitkin, an early investor in Zico coconut water (and now an investor in Juice Press), says to be very successful, products can’t feel like too much of a reach. “You could climb up a tree, pull a coconut off it and drink it,” he says. “Whereas I’m not sure how you’d go about squeezing a cactus to get whatever out of it.”
New York City’s Wtrmln Water (apparently the company squeezes out all the vowels along with the nutrients) is available in Whole Foods in the
northeast and independent retailers such as Citarella and Gourmet Garage. It’s got the benefit of being an easy connection for consumers to make.
“Watermelon we’ve all had dripping down our chin at one point or another,” Nitkin says. The drink, which uses watermelon rind, has roughly the same calories and sugar as coconut water, but more electrolytes, cofounder Jody Levy claims. It’s also high in the antioxidant lycopene and the amino acid citrulline, which may be an immune system booster.
Levy says she was inspired to start the company after learning there are hundreds of millions of pounds of unused watermelon in America every year because customers will only buy perfect-looking fruit. Though the company sources so-called “seconds,” which are relatively cheap, the drink is expensive to make because of the high cost of hand-cutting and cold-pressing, she says. It sells for more than two times the price of other plant waters: $5.39 at Whole Foods.
Because diversified food and beverage companies are trying to get on the good-for-you bandwagon, Kapoor says any of these brands could draw in investors wanting to learn more. “Ultimately, though, it comes down to proof of concept and transferability of concept,” she says. “People will try it once, but can you imagine the entire world drinking it?”