Our panel included: Seth Goldman, co-founder & TeaEO, Honest Tea; Janie Hoffman, founder & CEO, Mamma Chia; Shaun Roberts, founder & CEO, KonaRed; Chris Reed, founder & CEO, Reed’s; Valentina Cugnasca, co-founder & CEO, Vertical Water; and Bill Moses, co-founder & CEO, KeVita.
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WHICH NEW BEVERAGE TRENDS HAVE LEGS?
Chris Reed: We’re still very excited about kombucha, but the category has gotten pretty hot and heavy. We’ve been looking at proteins, but HPP is also very interesting. On probiotics and digestive health, I think there’s a lot of runway there, a lot more avenues and angles that haven’t been explored yet.
I’ve got to believe that blended sugar and stevia and/or monk fruit is the way forward, but it’s a long term play. I don’t think these new mid-calorie products are going to just bowl everyone over immediately.
Bill Moses: We’ve recently introduced an exclusive line for Whole Foods, an apple cider vinegar based tonic… which is kind of the ultimate functional drink that has probiotics but also a lot of other multi-layers of functional ingredients.
Seth Goldman: Almond milk is interesting, HPP juices have been doing well, although I’m not sure how far they can go. There’s still a lot of interest around zero calorie, and that combined with the organic certification is a powerful opportunity.
Valentina Cugnasca: Consumers are looking for simple natural and real foods and beverages and maple water is a naturally occurring beverage. Many people assume it’s maple syrup mixed with water, but it’s simply the water that maple trees filter naturally that flows up through the root system into the trunk at the end of the winter.
WHAT KEEPS YOU AWAKE AT NIGHT?
Janie Hoffman: For us it’s figuring out how to grow quickly without growing too quickly.
Chris Reed: I’ve been doing this for 25 years; stuff happens and you just have to keep rolling… We have Prop 65 fun from time to time, and class action lawsuits over evaporated cane juice - you get upset the first time, but by year 25…
On the alcohol kombucha issue, it feels like the government is turning a blind eye. Most of the products are still over the [legal 0.5% abv] limit [for kombuchas classified as non-alcoholic].
Seth Goldman: I used to lose sleep over distribution, but now I worry more about how to make sure our product is accessible and relevant to people; for example, what is the value of organic and fair trade? It’s more of a marketing challenge.
Bill Moses: I get really caught up in the weeds. Is the tactical execution right, is our merchandising really cost effective and does it drive our objective to increase SKU placement, drive ACV, and manage out of stocks and voids?
[On the kombucha alcohol issue] It’s the white elephant in the room and people don’t want to address it, because money rules.
[On the Safeway/Albertsons deal] Safeway is a single category review and a single buyer and now they are breaking up like Whole Foods into 11 distinct regions across the country, so now you’re selling into 11 different buyers with 11 different points of distribution versus one, so it’s going to be a lot more work to get on shelf and stay there.
Valentina Cugnasca: You can only source maple sap one time in the year, so you need to have the right inventory in place so you’re not forced to make inventory-based decisions.
HOW EASY IS IT TO GET ON THE SHELF AND STAY THERE?
Chris Reed: Once you get a foothold you have the ability today to go considerably further than anything we could imagine 25 years ago. Generally you still have to prove yourself in natural foods but not necessarily, we’re seeing big retailers like Target and Kroger coming in and wanting to bring in very early innovations.
Seth Goldman: It’s hard to get on the shelf, but it’s even harder to cross over. You see companies in the nether land, between $8-10m, neither growing so fast they can generate profits from their sales but that are not so new that it is easy to raise money, and there’s the danger, that’s the Bermuda triangle. There are 4,500 beverage brands on the market but only 3% that grow to more than $20m so the real test is can you cross from that start up to the $8-10m range and then break out beyond that?
Janie Hoffman There are lots of ways to grow a company; you can hire tons of people and spend lots of money into marketing, but we’ve stayed very focused and disciplined on building the Mamma Chia brand and not chasing every opportunity that comes our way. We are also very mindful in our spending which is a key factor in being a profitable company.
Valentina Cugnasca: We needed to build a scalable business model before we started, but now we're in the market, the challenges are around consumer education.
Bill Moses Staying true to the natural channel is very important … to continue to give them something unique while you move your existing lines through other channels.
Shaun Roberts: The critical piece is education - everyone knows coffee but we are taking a by-product of that and putting it into food and beverage products in premium functional beverage space. We started in Hawaii and moved to the West Coast and brought on mass distributor Splash Beverage Group and they have been able to build out our distributor network across the United States, but we also work with UNFI, KeHE and others and also do stuff direct to Walmart, so we are in the natural and conventional space. It’s surprising, but we’re doing very well in Walmart, and Kroger chose us to go into their new set last year.
HOW COME YOU SUCCEEDED WHERE SO MANY OTHERS FAIL?
Bill Moses: The probiotic aspect of KeVita gives people a reason for trial but repeat usage is based on the fact that it is sparkling and low calorie and has lots of flavor. Folks have found a refreshing alternative to traditional carbonated soft drinks, so they can be healthy and happy and not drink their calories.
We now have 94% acv in the natural channel and 25% in conventional … and probably 50% by the year end; but what’s really clearly enabling us to win across all channels is the icon on our label that says no sugar added, and low calorie.
HOW BIG A CHALLENGE HAS FINANCING BEEN?
Chris Reed: I read the fine print of what was being offered [by venture capitalists] and it scared me. We wanted to stay more in control of our own destiny, so we went public. This is my ‘have my cake and eat it plan’ where I've gone public but I still hold some stocks and can still do what I love doing.
Seth Goldman: Angel capital is crucial for early stage companies; it gave us the ability to build our enterprise with the maximum latitude. If you handle it right, they come in write you a check, put on their seatbelts and they are in for the ride. They are not trying to steer you, or second guess you, they are just cheering you on.
[So why get into bed with Coca-Cola?] We needed to scale up distribution; we had access to capital but we wanted a way to gain access to more customers.
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