Expo West Review

expowestIt was the time of the big remix at this year’s Expo West, as key ingredients like plant-based protein, turmeric, probiotics and matcha took center stage in a variety of products that had been growing as their own verticals, driven by sustained consumer demand for natural functionality.

That’s not to say that verticals weren’t doubling down on their own core propositions. For Daniel Sullivan, for example, the evolution of his brand from Tumeric: Elixir of Life to Temple Turmeric, represents a deeper connection to its established positioning, that of “an awareness of the body as a temple.”

Unveiled at the 2015 Natural Products Expo West, the rebrand was several months in the making. While there had been some discussion about maintaining turmeric in the new name, Sullivan noted the pragmatic importance of maintaining the ingredient in the branding as a way to “own the segment even further,” particularly as it relates to Internet-based queries about the ingredient. Just as important, however, is the company’s access to a proprietary varietal of Hawaiian organic turmeric, which it recently trademarked with the name “Oana.”

As more brands use different functional attributes, for Temple Turmeric, Oana represents a critical point of difference from other brands that use and promote turmeric in their products.

“The special thing about this variety is that it’s so rich in curcumin, which is the active phytochemical in turmeric,” Sullivan said. “And if you look at the world’s predominant supply chain of turmeric, it’s mostly coming out of Southeast Asia. It’s a yellow Indira varietal. Our Hawaiian Oana varietal has four times the curcumin, 20 times the beta carotene and then multiple times all the other vitamins and minerals. And on the palatability side, it’s really delicious.”

templeturmeric

Sullivan noted that “we’ve been with same farmers since day one,” and that his company has gone from sourcing 300 pounds of turmeric at its launch to 100,000 pounds annually. Temple Turmeric plans to incorporate more about the story of its turmeric variety in marketing initiatives as well as its work and relationship with Boulder Brands Investment Group, which took an equity position in the company last year.

It’s a gamble that probably felt pretty good for Boulder Brands, particularly as the market for cold-pressed juices has expanded to the point where simply using high pressure processing as a way to kill bacteria and preserve flavors is no longer enough of a differentiator for most brands: Expo West featured more than 20 exhibiting at the event.

Forager.AvoGreen.FrontAmid that constant flow of new entrants to the category, cold-pressed brands leaned in on new and trendy ingredients, although they sometimes duplicated themselves. From broccoli leaf shots and avocado-infused smoothies to cashew milks and raw honey elixirs, companies showcased their latest wares in what became a veritable game of one-upmanship.

However, it was clear that many cold-pressed brands are also attempting to distinguish themselves via price and package variety. It’s a strategy in which Suja is fully immersed, with the category leader tailoring its three product lines to meet the needs of consumers in a range of retail channels.

The San Diego-based company now markets over 40 SKUs (with several more in the pipeline) ranging from three-bottle set of “one-day renewal” juices sold exclusively at Target, to a 59 oz. jug of its blends for sale in the club channel, to new everyday prices of $5.99 and $7.99 for varieties within its “Classic” 16 oz. products.

Along the same lines, a number of emerging regional brands, including Lumi and Daily Greens, unveiled new products and smaller package sizes with formulations and price points that are more in line with mainstream juice offerings and clearly intended to introduce cold-pressed juice a new cadre of consumers.

The rapid evolution of the category is remarkable, especially considering that only two years ago, pioneers like BluePrint and Suja positioned themselves largely as cleanses, with prices that topped out at $12-13 per 16 oz. bottle. At Expo West, however, “cleanse” was barely (if at all) mentioned by exhibiting brands, most of which preferred to promote their products as “better-for-you” contributions to overall daily health or as meal replacement beverages.

Meanwhile, a tier of value-priced offerings — most around $3.99 mark — has emerged and appears to be chipping away at natural channel shelf space for super-premium juice stalwarts Naked and Odwalla.

Outside the juice category, cold-brewed coffee was also getting a lot of attention — and, in fact, there were plenty of coffee blends being offered by erstwhile HPP juice brands. But only one, Califia Farms, has turned the corner from juice provider to coffee and alt-dairy vertical.

califiaCalifia Farms made its biggest statement with the debut of its “Califia Café” platform, which promotes at-home preparation and customization of coffee drinks by way of its new cold-brew concentrate and almond milk products.

Describing millennials as “leading the way now,” company CEO Greg Steltenpohl and his team are focused on an innovation and marketing strategy that targets consumers within the demographic set. Steltenpohl sees millennials not only as the primary consumers of Califia products, but the key to developing traction with older generations including Generation X and Baby Boomers.

“The relationship that a lot of Baby Boomers have with their millennial children, that whole transference around what’s cool and what’s good to drink or eat… is driven by the millennials, but adopted by the other two generations,” he said.

The development of its new cold-brew coffee concentrate speaks directly to that approach, Steltenpohl noted.

“The truth is that this product was adopted first already by the hip millennials, and we’re just trying to make it easier to access, give it a better price point and keep that quality at the same level that they will endorse,” Steltenpohl said.

But if interest in dairy alternatives is soaring, there are still white spaces between the soy and the almonds. J.C. Hanley, the co-founder and COO of cold-pressed juice brand Forager, saw an opportunity to introduce a new multi-serve package for his company’s nut milk offerings via cashew and sees. While Hanley initially set his sights on an almond milk-centric line, a conversation with Errol Schweizer, the Global Executive Grocery Coordinator for Whole Foods Market, nudged him in the new direction.

Taking into consideration California’s sustained drought and concerns about the amount of water used to grow almonds in-state (an amount that is hardly out of step with most plants, however), Schweizer suggested an alternative plan for Forager. The result is a new line of 28 oz. cashew milk and seed milk products that recently launched in Whole Foods Northern California division and are coming soon to the retailer’s stores in the Southern Pacific and Rocky Mountain regions.

artyThe nut milks are, like all Forager products, high pressure processed (HPP) and made with organic ingredients. Sold at $6.99 per package, the beverages are value-priced in comparison to single-serve varieties on the market, and while the products are sold in refrigerated coolers, Hanley noted that they’re placed in a different part of the store that pasteurized nut milks from Califia and Silk, among other brands.

The addition of the new products follows the launch of Forager’s new 40,000 sq. ft. facility in Indio, Calif. Despite only recently beginning production in the new space, Hanley said that the company has since added new equipment to keep supply in line with growing sales of Forager products. Hanley expects to see even greater demand for the brand’s juices and nut milks with a planned distribution expansion in the Northeast.

There were more brands zigging while others zagged in the Expo’s top floor space, where a tour of its lower-priced, smaller booths easily lent insight into some of the bleeding-edge trends in the entrepreneurial beverage business, as well as key ingredients as well: drinks containing adaptogenic herbs, fat-rich coconut milk, high-end cocktail mixers, cold-brewed “coffee juice;” oddly sourced products like artichoke water and camel’s milk; alternative energy sources and strong-bodied products made from seeds, nuts, and chocolate.

In all, there were hundreds of new beverage brands, re-branded products, new sub-lines and changed formulations at the Expo. And while HPP juices got their due, on-trend products like yogurt drinks, kombucha, and even a surprising new cola-flavored addition to National Beverages’ LaCroix line drew attention.

There were also interesting new products from larger companies as well. PepsiCo’s Izze launched a three-sku line of sparkling waters for release into its own distribution network, for example – likely aimed at Hint, Spindrift and LaCroix, all of which are growing behind unsweetened essence waters. On the coconut water front, Zico and Bolthouse Farms showed samples of products that deploy the product as much as an ingredient in a smoothie or a juice as it does as a standalone product. Meanwhile, Bai showed — but didn’t sample — a new “Anti-Water” to try to compete with Essentia and AquaHydrate.

colaThe hyper-charged environment for investment lent a crowded, almost frenzied feel to the event and the boozy nights that followed, particularly during Expo’s Friday opening, when many potential investors rushed across the floor to attempt to unearth potentially winning brands in need of growth capital. As one longtime investor explained, for an event that may have been spawned by the counter-culture, he no longer felt out of place in a sport coat.

Despite that environment the weekend passed without a major beverage transaction in the days immediately preceding or during Expo West. Juice maker Suja did convert a round of $23 million in private equity toward the end of 2014, but the most significant market-making event leading up to Expo West had come on the food side, with Hershey’s purchasing meat snack maker Krave Jerky for a reported $200 million. But event without a signature beverage transaction to fuel speculation and envy, the weeks leading up to Expo West saw several small transactions, as well as a mini-merger between organic juiceries Project Juice and Ritual Wellness.

Still, the apparent ready availability of funding from the investor population certainly didn’t result in cash raining on the brands in attendance — with so many companies having entered the natural food and beverage space in recent years, there were plenty of horses to bet on. With brands often underestimating their working capital needs, no matter the excitement, there was, for the money players, lots of due diligence left to be done.