Given that Sparkling ICE (zero calorie, lightly carbonated spring water sweetened with sucralose and fortified with vitamins) was a $10m brand hardly anyone outside of the Pacific Northwest had even heard of five years ago, you wouldn’t bet against him.
However, much will depend on whether Klock can grab space in c-stores and other channels serviced by direct store distribution (DSD) networks that have historically been dominated by soda behemoths Coca-Cola and PepsiCo, he told FoodNavigator-USA.
“From a channel standpoint we are firmly entrenched in food, drug and mass, and now we are making strong push into c-stores and foodservice,” added Klock, who will discuss his ambitions for the Sparkling ICE brand at Food Vision USA in October.
“The question is how effective our competitors are at preventing us from getting the market penetration and shelf space that should be allocated for a brand of this scale.”
But the potential is enormous, said Klock, who has just built an independent national DSD network with 252 distributors from Anheuser Busch and Miller Coors to large independents and scores of sub-distributors: “In c-stores, typically, for a large beverage company in measured volume, 40% of your volumes would be c-stores, and we’re only at 7% so there is a huge opportunity there.
“And in foodservice, we’re only just starting, but we’ve got channel specific team focused on that opportunity now.”
We are the #1 player in our category. The #2 and #3 players are both in decline
The challenge, he said, is not persuading stores to stock Sparkling ICE – its track record speaks for itself – but navigating around the contracts and relationships already in place when it comes to serving the ‘up and down the street’ channel.
“We are the #1 player in our category. The #2 and #3 players are both in decline. Fruitwater [Coca-Cola] is in a state of double-digit decline and the next biggest player in measured channels - Cascade Ice - is also in a state of decline. And Aquafina Flavor Splash [PepsiCo] is pretty much out of the market now."
The battle lines are being drawn
He added: “The big question is our ability to get into these alternative channels of distribution where people are locked into contracts; there are some potential customers that due to contractual issues may be out of reach, and that’s one of the biggest challenges to getting to the billion mark. What percent of the market is unavailable to us because of those contracts?
“The battle lines are being drawn but it’s not necessarily about products but long-term contracts and relationships.”
Coca-Cola and PepsiCo operate the two biggest networks, he said, “but they have thrown out most independent brands, with the exception of Monster and Rockstar, and then you’ve got Dr Pepper Snapple Group, but they don’t cover the whole country, whereas we’ve got an independent network that allows us to focus on what we want to do and not get caught up in someone else’s marketing cycles.
“Now we have the ability to service every major account in the country.”
We might acquire brands, or acquire new brands
From a product development perspective, meanwhile, recent moves into lemonade and tea have both been successful, he said, and more brand extensions are likely.
“As time goes by we have the opportunity to extend into new products, as long as they fit with the brand. It has to fit within the family, so Sparkling ICE branded products will probably always be carbonated, for example.
“But then again, now we are an established beverage company in the US and as we continue to expand we might acquire brands, or build our own new brands.”
International expansion is also progressing apace, he said. Talking Rain has launched a joint venture with Sun Rype in Canada and has struck agreements with distributors in Mexico, Australia and the Caribbean, while its sparkling essence water is on sale in Japan, Korea and Taiwan.
We’ve focused on refreshment
As to why Sparkling ICE has continued to gain momentum while competitive offerings in the sparkling flavored water category from extremely well-funded competitors have failed to make much headway, it’s partly to do with first mover advantage, he says.
As to the meteoric success of Sparkling ICE in the beverages market more generally, however, it serves as a reminder that while premium, natural and organic products have their place, a lot of consumers are just looking for simple, tasty, affordable refreshment on the go without empty calories, he said.
And the presence of a few artificial colors, preservatives and sweeteners (Sparkling ICE contains synthetic colors, sucralose, potassium benzoate and EDTA) is not going to send these consumers running for the hills, he said.
Look at the beverage brands that are growing
“Look at the beverage brands that are growing: Red Bull, Monster, Mountain Dew Kickstart and Frappuccino [none of which are marketed on a natural, organic, or even clean-label platform]. From our standpoint we’re focused on refreshment.”
With this in mind, does he think that sugar- and stevia-sweetened Pepsi True and Coca-Cola Life are going to transform the flagging fortunes of the cola category by offering consumers a more ‘natural’ alternative?
Not based on their performance to date, said Klock: “We have yet to see either of these brands gain any significant traction.”