What to Watch

As we get into the new year and retailers start to prep their shelf sets for the crucial sum­mer selling season, it’s always fun to try to scope out what segments are the innovation hotbeds. So here’s my take on some areas to watch. In­terestingly, you can get to more or less the same spot from a different direction by analyzing what brands the astute minds at Bevnet have be­stowed with their “best of” accolades for 2007, so I’ll weave some of that into the mix, too. And I’ll offer a couple of mini-trends that also could bear watching.

For starters, with Coke and Pepsi ready to open the next front of the cola wars in enhanced waters with a Vitaminwater-SoBe Life Water battle, functional beverages should be a hot spot for retailers seeking the next high-margin, value- added niche. On that score, Function Drinks would seem to have it all going for it: a telegenic, working young doctor as creator, a murderer’s row of fi nance, marketing, packaging and fl avor talent as investors and advisors, a sales force that has earlier worked wonders for brands like SoBe and Fuze, and a proposition that goes Vitamin- water one further on the effi cacy scale. I have no problem with Bevnet’s crowning it as launch of the year, with one caveat: it’s still a work in progress. With the distribution void created by Coke’s acquisitions of Fuze and Glaceau having accelerated the brand’s rollout plan by a year, the Function crew in essence is building its airplane as it takes it on its fi rst transcontinental flight. Going to be fun to watch this one!

On the energy drink side, there’s healthy en­ergy – drinks devised to appeal to the estimat­ed two-thirds of American consumers who’re weirded out by the ingredients or macho postur­ing of conventional energy drinks. So far, we’ve seen lots of action here, but no single brand has ignited, meaning it hasn’t been demonstrated yet that this category really exists. Still, Bevnet’s two picks, Syzmo and Steaz, both are well-thought­ out, appealingly formulated brands that have garnered traction in the natural-foods channel and now are aiming more for the general mar­ket. Another brand that would seem perfectly positioned to crack this segment is Glaceau’s Vi­tamin Energy. So far it hasn’t set the world on fire, maybe because the packaging is too little distinguishable from the core Vitaminwater brand, but the company is far from giving up on the concept.

Kids’ drinks also seem ripe for an explo­sion, both at the retail and school level. As with healthy energy, no brands seem to have yet ignited here, meaning the game is still wide open, and we’re seeing a multiplicity of ap­proaches, from diluted juices to essence waters to nutritionally reinforced juices. Bevnet pick Bot – a lightly sweetened Vitaminwater for kids – is a beaut, but it’s still way too early to handicap this one.

Though the recent outpouring of concern about carbon footprints came as something of a ringer, high-end bottled water continues to be a rich segment driven by trade dynamics. Essentially, every distributor who doesn’t have Fiji would like to have something like it to get out of the profi tless morass of mass-branded waters, while beer and booze wholesalers increasingly view an elite water brand in a killer package as a way to strengthen their presence on-premise. Icelandic Glacial, another of Bevnet’s winners, was snagged fairly quickly after its U.S. launch by Anheuser-Busch for its wholesaler network, but other entries are on the way. An intriguing one that’s still in the works is Equa, sourced from an exceptionally pure aquifer in the Bra­zilian rainforest, thereby twinning exotic appeal with a better claim on purity than a water from the tropics. Expect lots more along those lines.

Now on to a pair of mini-trends. One gambit we’re seeing is marketers’ attempts at their own ingredient branding – RightSize employs App- emine, Crayons employs SugarGuard Protec­tion. Get the picture? These are clearly efforts to offer a value-added differentiator, but they also comprise a second brand that has to be built from scratch. It’s hard enough to establish the core brand! Still, as consumers grow more skep­tical of the questionable goodness claims ema­nating from many brands, these endorsements could find a receptive audience.

I’m also struck by the interesting efforts we’re seeing from total novices to the beverage seg­ment at a time that the major players, for all their strained innovation efforts, hardly ever bring anything with real personality to market. Bevnet designee Bombilla Gourd, launched by three 23-year-olds with little life or business ex­perience – let alone beverage experience – has offered a more accessible take on RTD mate than leader Guayaki. Equa is from a guy who made his mark in the Brazilian freshwater fi sh business. Hint and Ayala’s Herbal Water each come from a couple that made their fortune in the tech business. Memo to retailers: if the per­son who just showed up on your doorstep is an utter beverage novice – invite him or her in. You really never know.