Fla­vored-wa­ter star­tups still look to make in­roads with kids

South Florida Sun-Sentinel (Sunday) - - Money - By Matthew Boyle

The quest to im­prove on wa­ter per­sists.

Bev­er­age mak­ers are scram­bling to un­lock riches in the $1.5 bil­lion U.S. mar­ket for chil­dren’s juice boxes.

Most kids don’t drink enough wa­ter, ac­cord­ing to a 2015 study in the Amer­i­can Jour­nal of Pub­lic Health. But they’re so ac­cus­tomed to sug­ary drinks that they find clear, unsweet­ened liq­uids un­palat­able. En­ter a steady stream of star­tups and long­time in­dus­try play­ers who’ve left a trail of fail­ure in their wake.

“It’s the Ber­muda Tri­an­gle of bev­er­ages,” says Gerry Kher­mouch, founder of Bev­er­age Busi­ness In­sights, an in­dus­try pub­li­ca­tion. “They’ve tried ev­ery per­mu­ta­tion of recipe — unsweet­ened, juice-sweet­ened, nat­u­rally sweet­ened — and al­most all in­evitably fail.”

New com­pa­nies such as Re­think Brands, Hint Inc. and Hello Bev­er­ages Inc. are try­ing to re­verse the trend with sugar-free, zero-calo­rie bev­er­ages that are es­sen­tially fla­vored wa­ter in a box. Main­stream brands like Capri Sun and Mott’s have re­cently in­tro­duced bet­ter-for-you op­tions, while Coca-Cola Co.’s Hon­est Kids drinks are avail­able in McDon­ald’s Happy Meals.

The bev­er­age mak­ers are keen to dis­tance them­selves from long­stand­ing ac­cu­sa­tions that sweet­ened juice boxes are no bet­ter for kids than soda pop, which con­trib­utes to obe­sity. Their dream is to repli­cate the sur­prise suc­cess of Na­tional Bev­er­age Corp.’s LaCroix, the sparkling wa­ter em­braced by mil­len­ni­als.

It’s a tightrope. In or­der to sell to mom and dad, more than three-quar­ters of new kids’ juices touted lower sugar con­tent in 2018, ac­cord­ing to con­sumer re­searcher Min­tel, up from

just one-third in 2004. But kids love sweet drinks. And they can be fickle. Even Kraft Heinz Co.’s Capri Sun, long­time seg­ment leader, has gone through three straight years of mar­ket­share de­cline, ac­cord­ing to data tracker Euromon­i­tor, de­spite the in­tro­duc­tion of “Fruit Re­fresh­ers” and “Fruit & Veg­gie Blends” with no added sugar.

The broader in­dus­try’s U.S. sales vol­ume has fallen to half of what they were in 2007.

A cau­tion­ary tale is Wataah, which de­buted in 2008 with what its mak­ers called “nat­u­ral fruit essences.” The com­pany tried to “make wa­ter cool” by align­ing with pop stars like the Jonas Brothers and Ar­i­ana Grande. Wat-aah gen­er­ated a lot of so­cial me­dia chat­ter , but when the buzz died down, so did sales.

A rare suc­cess is Hon­est Kids, an or­ganic off­shoot of Hon­est Tea that hit the mar­ket in 2007 with less than half the sugar of most juice boxes at the time. Sales of Hon­est Kids, ac­quired by Coca-Cola in 2011, now eclipse those for Hon­est Tea. The brand has grown by push­ing into fast-food chains in­clud­ing Wendy’s and Sub­way.

“It’s very easy to say kids should drink more wa­ter,” said Hon­est co-founder

Seth Gold­man. “But kids need some fla­vor.”

Into that caul­dron leaps Hint, which prom­ises to “end the age of sugar wa­ter” with a prod­uct free of all the bad stuff. It’s avail­able at Costco Whole­sale Corp. and other re­tail­ers, but about 40 per­cent of its sales come from on­line or­ders.

“Ev­ery­one told me I would be road­kill do­ing an unsweet­ened fla­vored wa­ter,” said Kara Goldin, Hint’s founder and chief ex­ec­u­tive. “But it’s a sig­nif­i­cant busi­ness.” Sales grew 70 per­cent in the past year to more than

$100 mil­lion, she said. For its part, Re­think wants to fol­low Hon­est’s path. Founder Matt Swan­son, who worked at Proc­ter & Gam­ble Co. and Google, linked up with Todd Fletcher, an in­dus­try vet­eran who spent time at Red Bull and Vi­ta­m­in­wa­ter, and the pair tai­lored their ze­rocalo­rie bev­er­age, orig­i­nally tar­geted to adults, for the kids’ mar­ket.

For fla­vor, they use “or­ganic essences” de­rived from oils and aro­mas re­leased from or­ganic fruit dur­ing the con­cen­trat­ing process.

“We looked at kids’ bev­er­ages and there was very lit­tle in­no­va­tion,” Swan­son said. “When I was 5 years old, I drank Capri Sun. And

5-year-olds to­day are still drink­ing it.”

DANIEL ACKER/BLOOMBERG NEWS

Hon­est Kids is one of the few suc­cess sto­ries among drinkmak­ers’ ef­forts to cre­ate a health­ful drink kids like.

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