Innovation: A Game Of Inches And Niches

IN LOOKING AT THE entrepreneurial beverage space lately it’s become something of a rote bit of analysis that, despite the slow recovery of the economy and the ongoing interest in new functionalities and product styles, the culture of big-growth, big-money beverage brands we’ve seen emerge in recent years has hit a plateau.

Certainly, last year saw the slow gestation of new brands rather than the rapid consumption that took place in 2007 and 2008, when so many new consumers became mass users of products like vitaminwater and 5-Hour Energy. As we’ve discussed in this space before, many brands that were the toast of 2009 seemed to win that title more because they’d made it to the starting line of the growth process than because they were ready to get the cash in the winner’s circle.

It could be possible to find such a development dispiriting, if it wasn’t one that has been repeated so often. I was reminded of this notion after a meeting with Jim Koch of the Boston Beer Company. Koch started small – he planned small, even, fully expecting that the sales that would indicate a sustainable business would take him years to achieve; that it ultimately took him just a few months is impressive, but even at that point the sustainable number wasn’t one for a national brand at all: he’d figured it would take five years to reach sales of 5,000 barrels a year – a regional operation if ever there was one.

And don’t forget, some of those high-profile energy drink and functional beverage companies whose growth helped create the recent “Gold Rush” mentality around investment and distribution growth have actually taken years to become overnight successes.

So that’s why I tend to agree with brand consultant Jim Tonkin, with whom I recently discussed relaxation drinks like Drank, Ex Drinks, and Purple Stuff for this issue’s cover story, when he suggests that there’s a lost opportunity for beverages that don’t explicitly attempt to focus on and “own” their niche. Tonkin’s suggestion is to try to be “a mile deep and an inch wide” – i.e., become the brand that is synonymous with that product class.

And when you think about it, that description actually describes a lot of the best-known products out there – how much of the mainstream population, after all, knows the names of an energy drink beyond Red Bull, a sports drink beyond Gatorade? Or for that matter a CSD that isn’t a Coke or a Pepsi? It’s not that these companies became national brands immediately, but they didn’t try to be all things to all people, either. That came later, when the product’s core audience and function had been established.

Tonkin sees trouble, however, when brands attempt to build themselves another way, as a mile wide and an inch deep. Rather than grow as towering giants, they come off as patchy lawns, with poor distribution and grass roots that can blow away due to a drought or a stiff wind. (Tonkin has, apparently, been taking photos of my backyard to fuel this metaphor).

While it’s hard to tell which established niche products will grow into giants in the years to come, the sum of them still presents a much simpler set of choices than those that haven’t yet tried to figure out just which niche they can fill.

And that’s important when considering two of the niche products we explore in this issue, the aforementioned relaxation drinks, and also an emerging class of hangover recovery products. As with craft beer 25 years ago, both comprise specialty items that, if they work, answer a need, one that consumers haven’t yet realized they have. So even at these early stages, there’s a reason to listen, and listen hard, when a marketer comes to your store or your warehouse. When you sort through the “me-too’s” and the vanity products, you’ll find that they may really have identified a niche that might be able to work for customers; the question that must follow, after you hear the pitch, is whether the two of you are going to be able to dig those mile-deep roots together.