Sparkling water’s next wave has a Southern feel to it.
While recent news in the category has been dominated by major moves by PepsiCo and Nestlé Waters North America along with the continued ascent of LaCroix, sparkling water is attracting interest from young and nimble startups looking to take a piece of the $2.5 billion market for zero-calorie fizzy water. And lately, a notable portion of those upstart brands are coming from down South in places like Georgia and Texas. BevNET spoke with three such up-and-comers about their approaches to the market and how they hope to find a place to grow in this explosive category.
Montane Goes Straight to the Source
When Hollis Callaway, founder of Montane Sparkling Spring Water, decided to leave his finance job at a large corporation, he recognized a business opportunity based around his family-owned spring in the Pine Mountains of Georgia. That’s not to say, however, that he envisioned starting a family business.
“I love my dad, we get along great and I want to keep it that way,” Hollis told BevNET in a call last week. To produce Montane, Callaway buys water from Blue Springs, owned by the his family since the 1930s and located on over 1,000 acres of protected watershed. While Montane and Blue Springs are separate entities, the source water — or, more broadly, the company’s deep local ties — are at the heart of the brand’s strong initial growth.
“The branding process began with the story of the spring,” Callaway said. “I wanted to communicate a sense of place, a story of the exceptional spring that is protected in perpetuity. We are embracing where we are from by using out regional flavors and advertising our source on the packaging.”
Callaway explained that, relative to springs that flow through carbon-based rock, like limestone and dolomite, the silicon-based quartzite bedrock in his family’s spring offers a unique taste and mouthfeel. The mineral content is considerably less, giving it a crisp, lighter taste that is enhanced with carbonation.
Montane’s three varieties — Original (unflavored), Cucumber Lime and Meyer Lemon Honeysuckle — are meant to further cultivate the brand’s connection to local tastes. Callaway said the brand focused on flavors that people in the South would be familiar with, noting how honeysuckle has a nostalgic feel for many who grew up drinking nectar straight from the plant.
The unique sourcing and regional flavors gives Montane a point of differentiation amidst the competition, while pushing it towards the premium end of the category. Callaway said an 8-pack of 12 oz. cans is priced between $5.29 and $5.99.
While Callaway said his plan is to build slowly, the brand’s local angle has already given it a fast start in its home state. Having established a presence at independent retailers and restaurants in Atlanta over the past year, in January Montane inked a deal with grocery chain Publix to carry the water at select stores in Georgia and the Southeast. The line was also added to the portfolio of Georgia-based beverage distributor Savannah Distributing Co., which services local restaurants, bars and convenience stores.
As Montane adds more retailers over the coming months, Callaway noted that the young brand will introduce a packaging refresh and a new flavor set to debut in March that will build upon what’s worked for the line so far.
“We want to continue to understand our market and what’s effective and hope to grow to the rest of the states in the South,” he said.
Big Swig Seizes Move From Beer Into Bubbles
As the fourth largest beer distributor in Austin, Texas, Austin Specialty has what many other startup beverage brands can only dream of: a mature and dedicated direct store delivery (DSD) network with boots on the ground every day. In launching Big Swig Sparkling Water, the company is attempting to leverage its existing distribution structure and retailer relationships to seize an opportunity in the non-alcoholic category.
“Having the power of the DSD network and the relationships on the street and be able to build displays and move displays and work different kinds of programs is really kind of what it takes to build a brand, and to be able to have your brand everywhere,” said Sean O’Connor, managing partner at Austin Specialty.
Through its work with about a dozen small craft breweries, O’Connor said Austin Specialty has developed a strong understanding of retailers’ pressure points and, by extension, how to help relieve them. In contrast to larger distributors, Big Swig has been able to build its brand by offering a full suite of DSD services, including building displays and executing different sales programs, that have helped it land placements in a variety of channels, including food service and convenience stores.
“We were able to be really cognizant of what kind of margin they were willing to work on, what our DSD services would look like, just because we are really in it,” he said. “As we grow, our plan is to be able to replicate that high-touch DSD merchandising services, which is a little bit of a different play.”
Rather than touting complex flavors or a special source, Big Swig is positioned as a brand with simple, familiar flavors and a touch of Texas personality. The line is available in three flavors — Original, Key Lime and Ruby Red Grapefruit — in 12 oz. cans which call out the brand’s roots from “deep in the heart of Austin, Texas.”
Perhaps more importantly, Big Swig is priced to move: O’Connor said the suggested retail price for a 12-pack ranges from $4.99 to $5.99, which fits well with the price-conscious approach of H-E-B, the dominant grocery chain in the Austin market. “We went aggressive with price because we are young and price is something that we understand as a distributor,” he said, adding that sales have been strong despite selling only off display so far. “We are really excited when we get the opportunity to get on to the shelf.”
O’Connor is targeting more steady growth in 2018, which will take Big Swig into Dallas, Houston and San Antonio. Along with Austin the cities together represent about 80-85 percent of the state’s population.
“Our growth plan is Texas,” he said. “Texas is a really big bite; it’s the tenth biggest economy in the world, and we’re happy to do that.”
Waterloo “Drinks From the Fire Hose”
Having made a splash upon launching last August, Waterloo Sparkling Water is looking to maintain strong momentum across retail channels in 2018.
The Austin-based brand set its target high from the start: following a $3.2 million funding round led by CAVU Venture Partners last year, the seven-SKU line launched nationally at all Whole Foods with an initial production run of just under four million cans. Nearly six months after describing the company’s distribution strategy as going “wide and deep as quickly as possible,” Waterloo co-founder and CMO Brandon Cason said that approach is paying dividends.
“It’s like drinking from a fire hose,” Cason told BevNET in a call last week, noting that the brand had just signed with another “major retailer” that morning. “There is good news everyday.”
While Whole Foods stores are serviced through UNFI, much of Waterloo’s distribution elsewhere has gone directly through the company, which Cason said was good for both parties. The brand also works with food broker Acosta’s natural and specialty sales division.
Though Cason noted the brand has run some temporary price reductions, he expects Waterloo to continue growing around its current suggested retail price of $5.99 for a 12-pack of 12 oz. cans. He voiced his confidence that the brand’s superior flavor proposition, which he characterized as “head and shoulders above anything that’s either out there or coming out,” will give Waterloo an edge over less expensive competitors like LaCroix. “We don’t necessarily see ourselves as needing to change our price point,” he said.
Even as a national brand, however, Waterloo has not forgotten its backyard. The brand is distributed at Austin-area bars and restaurants, including local favorite Stubbs B-B-Q, by Twin Liquors and Spec’s. Over the next 12 months, Cason hopes that hometown support will fuel Waterloo’s expansion onto more store shelves as the brand plans to debut a new BPA-free can with an updated look and unveil Non-GMO Project certification for its ingredients.
“Brands manufactured by big business will generally win the quarter but not the race,” Cason opined. “I think consumers recognize when entrepreneurial products are created, so it’s an exciting time to be in the [sparkling water] space.”