ReCap: 5 Questions on 989 On Demand

Taking its first crack at the ever-expanding health and wellness market, H2M Beverages recently introduced 989 On Demand, a new cap-activated enhanced water. The product boasts an innovative and proprietary twist cap that contains a reservoir of liquid ingredients, a key point of differentiation from competitors like Activate and Karma, whose caps contain a powder-based mix. In a creative convergence of marketing and math, 989 is named for its content of nine essential vitamins, 84 ionic minerals, and five electrolytes: 9, 84+5. The beverage is all-natural, stevia-sweetened, and contains no calories, sugar, or preservatives.

H2M, which also produces energy drink Liquid Lightning and Herbal Mist, a yerba mate blend, launched 989 in the Northeast earlier this month. The company is using Polar and Polar subsidiaries for distribution in New England, Exclusive Beverages in New York, Mohawk Dairy in the Albany region, Festival Ice Cream in New Jersey, and Croton Farms in New York state. 989 is also distributed by U.S. Foods in non-DSD channels. The beverage is authorized for retail in Honey Farms, F.L. Roberts, Henny Penny, Verk, Tedeschi’s (as of April), and Rite-Aid and is in the midst of a 40 store test in Xtra Mart. 989 is currently selling for $1.99 -2.49 per 20 oz. bottle, and H2M is hoping to maintain a retail price point of around $2.

BevNET sat down with H2M vice president of distribution Darren Matik, and Jody Piagesi, the company’s director of marketing, earlier this week to discuss 989 and the technology behind the product as well as H2M’s sales, marketing, and distribution strategy for the new beverage. We’ve condensed the interview into an edited question and answer format:

How does 989’s liquid format differ from competing cap-activated technology?

Matik: Powder [as opposed to a liquid reservoir of vitamins] is going to have a very difficult time winning in the end, because condensation, no matter how good you are, gets up into the powder and congeals the powder and makes the cap fail. The powder plops in, and you have to shake it up, and so it never mixes fully and you get a gritty taste in your mouth.

Can a $2 price point support the cost of 989’s rather complex cap?

Piagesi: It’s really important for us to get it out into the market and to have people try it. We’re thinking is that we needed to have introductory pricing that would make that happen.

Matik: The price of a case [at distributor level] is extremely manageable to get us to where we need to be that if, at some point, we choose $1.99 price point, we can remain profitable.

The cap does not add enough cost to render it uneconomically feasible in the marketplace. It adds some cost, but not enough to make us uncompetitive. Are we going to be 10 for $10? No. It will not allow us to be 10 for $10. But it will allow for us to be competitive with other premium New Age beverages.

You’re utilizing a number of dairy houses to distribute 989. Why?

Matik: We’re finding that dairy guys are very effective distributors, because most of them have been under the radar and most of them are encountering issues with their milk business declining because they are not able to service some of the markets that people buy milk in. Your Targets of the world, your Wal-Mart of the world, and places like that usually have their own distribution network. So [dairy distributors] have added other beverages.

How do you plan to leverage the Liquid Lightning distribution network with 989?

Matik: We hope to make it uniform. We hope to distribute 989 where we distribute our other two brands, and [for distributors of] Liquid Lightning and Herbal Mist, we hope that they will distribute 989, as long as it makes sense for them. As we build out the market, there’s going to be Red Bull distributors that are in certain houses that are prevented from taking Liquid Lightning, but maybe they’ll take Herbal Mist and 989.

What does that fact that you’re getting into the space say about the cap activated bottle segment when Activate is rethinking its cap?

Matik: [It’s my opinion that], Activate is going to have to change its cap if it is going to survive. And I would be surprised of another technology that existed that didn’t conflict with our patent. Any other company that came up with a twist cap would have to improve dramatically on our technology, which we don’t think is possible.