The next big innovation in RTD

The next big innovation in ready to drink beverages might not come in the bottle, but in the cap – at least if a handful of relatively new industry players have anything to say about it.

While it may seem counter-intuitive for beverage companies to ask consumers to mix their own drinks, delivery caps could fit comfortably into the industry’s trend toward new packaging ideas. Fuze recently added plastic bottles to its traditionally all-glass line to improve portability; Fiji aims to reduce the PET in its bottles by 20 percent to bolster its environmental credentials, and Jolt rolled out a battery-shaped can to have a little fun with the brand’s image.

In that environment, beverage companies may be wise to take a look at delivery caps. New technology automatically brings the “wow” factor with it and there’s something mesmerizing about watching colored powder disperse into liquid. But Ken Milligan, executive vice president of New Hampshire-based Liquid Health Labs, said the caps’ benefits extend beyond novelty.

Milligan said shipping the ingredients “ready to go” in the top of the bottle can save both energy and packaging. Bottlers don’t have to mix the beverages in house, he said, which saves them the energy of the hot-fill process, and skipping the boil also saves ingredients – none cook off – and means that co-packers can use lighter (and cheaper) cold-fill bottles.

The caps could also open the door for beverage companies to delve deeper into nutritional additives, according to Marco Saulle, director of marketing, research and design for Liteco. Saulle said many ingredients degrade in water – some at a rapid pace – and delivery caps aren’t anything new. “The concept of keeping ingredients separate has been widely used here in Italy for royal jelly, ginseng and vitamins,” Saulle said, “all those products that would become unstable or lose their potency.

”That concept never made the jump to the beverage industry, Saulle said, due to cost of the caps and the industry’s lack of interest in volatile ingredients. But today, more and more consumers are putting down their cans of Coke and Pepsi in favor of beverages that may provide real health benefits. That pushes beverage companies to consider ingredients ranging from vitamins to pantothenic acid – but not everything plays well with water. Some vitamins have been shown to degrade over time, and some ingredients fall out of H20, leaving you with a layer of grit at the bottom of the container.

That conflict between functionality and shelf stability has long intrigued Blast Cap Founder and President Michael Anderson. “I was always challenged with trying to add ingredients (while) trying to have that long shelf life,” Anderson said. Anderson devised a solution that replicated the tactics of Italian pharmacy brands: if you keep the volatile ingredients dry and separate, the beverage can achieve a long shelf life and maintain its functionality. Anders Eisner highlighted the latter benefit when he launched Activate – the first product using a delivery cap to reach the retail market.

Eisner’s four variety line of vitamin-enhanced water uses Liquid Health Labs’ PowerCap to store and deliver the drink’s ingredients Eisner – son of former Disney Chairman and CEO Michael Eisner – said his company would target high-end grocery stores and liquor stores in the Los Angeles area, and use in-store demos to introduce customers to the product, but some of those customers may already understand the concept.

While Activate is the first delivery cap product on shelves, it isn’t the first product using the caps to make it to market. BPI Worldwide, a multi-level marketing company, launched two flavors of stand-alone PowerCaps last October. Customers buy the caps, affix them to their own water bottle, and then release the ingredients and drink. Similar independent caps will make it to shelves this year, Milligan said, when a company called IV Science launches standalone caps for retail distribution under the brand names Aqua Thin, Aqua Surge and Aqua Essentials. That stand-alone potential, Milligan said, may offer consumers an additional measure of control over their beverages.

Milligan said powder mixes will be formulated for a specific volume of water, but consumers would be under no obligation to use that amount. If they prefer a stronger-tasting beverage, they can use a smaller bottle. If they prefer something more subtle, they can use a larger bottle. “I think it is a new category,” Milligan said. “It’s not an RTD, it’s an RTG (ready to go.)”

But this new category isn’t without its limitations. The caps store only a couple milliliters of liquid or powder, making them off-limits for companies that want to use bulky natural sweeteners. Carbonation may also present a problem, as it has not been fully explored. And don’t expect to see delivery-cap equipped beverages in the budget section of the cooler case any time soon. IV Science’s standalone caps will retail for somewhere between $0.99 and $1.50 – meaning beverage companies would be hard-pressed to offer a cap plus a bottle of water for less than $1.

However, Milligan said he expected most PowerCap equipped beverages to cost consumers between $1.99 and $2.49 each. That puts them in a similar price range as glaceau’s vitaminwater – owned by Coca-Cola – which is the kind of beverage Milligan believes delivery-cap-equipped drinks will compete against. That market positioning, though, could put Eisner’s Activate and other cap-equipped beverages in direct competition with the Coca-Cola empire. The beverage behemoth has crushed many competitors, and delivery caps will have to provide more than shot-lived novelty to survive. Milligan insists they do, but he and the other companies will have to wait and see if the sales figures bear out their claims.

Which Cap Company is Which?

Entrepreneurs interested in this category will find that they’re looking at three relatively-unknown companies. Here’s a quick who’s who.

Liquid Health Labs produces the PowerCap, which has already reached shelves in California. The company boasts that they offer complete turn-key solutions, but also know how to get out of the way – though there’s one area where they won’t budge. Liquid Health Labs requires that all beverages that use PowerCap include a nod to the cap product on the beverage’s label. Ken Milligan, Liquid Health Labs’ executive vice president, said that will actually help cross-promote geographically-disparate products, but the similar labeling could create marketing conflicts when products’ territories overlap. Milligan said he expects as many as 10 PowerCap equipped products to launch by the end of 2008, with announced products including X2 Sports out of Toronto and IV Science’s stand alone caps.

Blast Cap Technologies, run by inventor Michael Anderson, offers a wide array of delivery cap designs – some of which aren’t even caps. Anderson claims to have “hundreds” of different designs available, and the demo videos on his website – blastmax.com – suggest he’s not kidding. Some designs use twists. Some use plungers and some use dual-chambered pouches. However, Blast Cap Technologies does not currently have a product on store shelves. Anderson says he has a project in the works, but can’t say anything about it. “I have a real heavy-duty strict confidentiality (agreement.)” he said, but “I know that when it comes out, everyone’s gonna know about it.”

Liteco is probably the odd-man-out in this suite of early players. The Italy-based company has interests that expand beyond the beverage market and while Marco Saulle, Liteco’s director of marketing, research and design, has more experience with delivery caps than the other players, his efforts have been hampered by a patent lawsuit filed by Michael Anderson. Saulle insists that his patents differ from Anderson’s, and expects to be out from under Anderson’s injunction shortly, but he’s mum about what delivery-cap-projects he might be working on currently. “I don’t have time or money to waste for lawsuits at this time,” he said.