Still Infused with Faith

C.J. Rapp is the survivor of more than one beverage brand, and he’s out there with Karma Water, trying to make a go of it as the leading provider of products with a specialized cap that allows the consumer to inject a mix of powder or liquid ingredients into the mix.

He’s fought off a well-funded competitor in the sleek Activate brand, which, although backed by multinational juggernaut Tata, still ended up being sold at a bargain-basement price to a Canadian distributor. He’s played the sales-and-marketing game the best he knows how, recruiting DSD houses, collecting celebrity clippings of consumption occasions, even licensing his Karma Cap technology out to other companies, like a brand of pre-workout nutritional supplements. He can see the future, and it’s a home run.

Still, for the Karma Water brand itself, he said, “it’s mostly singles.”

To really score, he admits, Karma, and the rest of the cap-activated category, must develop a series of products that transcend vitamin-enhanced beverages, eventually encompassing a broad range of pharmaceutical, nutraceutical, and other high-function uses.

“The cap category hasn’t even started yet,” insists Mikel Anderson, whose Blast Cap Technologies develops and sells caps to other manufacturers. “It’s not even born yet. They haven’t been able to explain the technology and the features behind it, and they haven’t put in the next-level formulas they need to have an awesome beverage at time of use activation, to have formulas that haven’t been used in beverage history.”

STRATEGIC HITCHES

According to Rapp, the problems with building beverage brands around an ingredient-infusing cap are just like the problems with building all beverage brands, only more so.

The big issue, Rapp said, is structural – there’s the constant need to move tons of bottled water around via independent distribution networks and retailer approvals. But in addition, there’s also the added cost – in the millions – that has gone into developing or licensing the special dispenser that gives the product its snazzy point of differentiation. And there’s consumer education: beyond all the marketing a typical brand needs to develop, there’s the added difficulty of teaching consumers how to use the cap properly.

But Rapp is a hardy soul, raised on Rochester winters, and he’s got more than a few tricks up his sleeve. Where distribution may be a tough slog in the U.S., he’s got momentum in Canada, via Lassonde, which distributes his product nationally across several classes of trade.

If Karma had the same share in the U.S. that it had in Canada, he says, it would be a $60 million business.

Rapp is convinced that all he needs to make a similar breakthrough in the U.S. is a committed, capable, and widespread distributor who can stitch together a national network. He keeps talking with people, selling them on the idea that if you keep ingredients and flavors separated from the water below until the point of consumption, you’ll give the consumer more potent nutrition. He’s adding SKUs to his line, as well, rolling out a three-flavor shelf-stable Karma Probiotics sub-brand this spring.

For Rob Hobson, however, there’s the opinion of his wife, who recently told him that he needed to find a better way to make a living.

Hobson, who has worked in the beverage business for about a dozen years, was one of the dispensing cap dreamers, a guy who developed his own cap technology, one that even had a special point of differentiation: In addition to keeping a reservoir of liquid in the top, ready to be punched through into the water below, the cap also was capable of being screwed onto the openings of more than one kind of water bottle.

Since different stock bottles have openings that can vary by a few small but important millimeters, Hobson felt that having a cap that could fit them all would give him a leg up.

It didn’t.

“I just didn’t have the type of money that it would take to have people build an interest in the product,” said Hobson, whose Flavor Infusion brand of caps – used in a now-defunct line called CoolCaps and a few other active brands, including New York Spring Water’s VBlast product – have finally become a sidelight rather than a full-time gig.

“My wife said ‘you’ve got to go out and make a living again,” said Hobson, who has taken up consulting on projects while looking for something new. He isn’t bitter, he said, but he thinks that the time and place just weren’t right to create the funding that would make a major splash in the beverage aisle.

BUILDING A BETTER PAYLOAD

Hobson isn’t the only cap dreamer whose brand has failed to ignite. Activate burned through millions, with high-profile backers like Disney CEO Michael Eisner and high-powered distributors like Tony Haralambos on board. But the brand really only shined brightest at the start, unable to energize the consumer base much beyond its initial sleek look.

The products suffered from weak taste, problems with the actual cap mechanism, and, ultimately, according to critics, weak functionality as well, according to critics.

“You look at the Activate panel list, and it wasn’t that different from looking at a Vitaminwater,” Anderson said.

At its heart, Anderson and others say, the infusion cap could combine the benefits of advanced nutrition through fresher ingredients with the drama of the consumers themselves providing the final stage of production.

But the fire hasn’t lit – especially since other parts of the mix-to-drink segment have also utilized innovation. The category remains dominated by items like Crystal Light-type sachets and MiO liquid squirt infusers.

So what needs to happen to break the paradigm?

Rapp said that nutritional advances aside, he still believes in the potential for vitamin enhancement as the major function – and that Karma Water’s fate hinges largely on its quest to find the right partner.

But speak to Anderson, and he’ll tell you he’s already found them – they’re just outside the U.S. border right now.

He has taken the licensing route with his caps, and points to successes in New Zealand, with VitalZing, and Brazil, with a brand called BeautyIn, as businesses that have taken the technology and infused it into a worthwhile branded approach. And the products are closer in some ways to the more advanced uses the cap makers advocate: Collagen infusions. Alkalinity. Biotin. Green Tea.

And he’s bringing them to the U.S. – BeautyIn in the spring, VitalZing in September. There’s another deal in the offing, he said, as well as an intriguing idea that could tear down the distribution wall – selling a kit of ingredient-filled caps along with one reusable bottle in something of a razor-and-cartridge model. It’s a solution that seems perfect for e-commerce, and has environmental advantages, too, he said, by doing away with extra water bottles.

Hobson tried that approach himself, trying to sell boxes of his caps to retailers. But he, too, hit the same problems that Rapp has described – a system that makes it hard to introduce new products that require extra knowledge to justify the cost and effort on the part of the consumer and the retailer.

Rapp likes the cartridge model, he said, but he thinks that the brands need to be a package deal for a while. But he’s going broad as well, licensing his own cap technology to new partners and launching abroad himself – on the horizon are Australia, South America, the Middle East.

I see the future more today than I did two or three years ago,” he said. “There’s always frustration we aren’t larger, but we are in enough discussions with enough large companies for enough global opportunities that it will add up.”