The First Drop: Not All Sequels Are Equal

It’s always interesting to me when there’s a big rush into a category after the big deals get done: I’m always forced to wonder if it’s a fight over scraps or if there’s still meat on the bone.

Take, for example, energy drinks and sports drinks, two of the fastest-growing product types in the beverage industry. You’d think that after a brand like Body Armor was picked up by Coke that there might not be much of an appetite for entrepreneurs to go after the hydration space, knowing that one of the biggest beverage companies on the planet had already picked its horse. But in fact electrolyte drinks continue to inspire entrepreneurs across the country, with products like Biolyte, BioSteel and Electrolit continuing to grow, alongside revamped companies like Hoist; meanwhile athletes and entertainers have also launched drinks like Logan Paul and KSI’s PRIME and the new Ready Nutrition platform from NFL player Aaron Donald and former basketball star Pat Cavanaugh.

And while Body Armor is continuing to make its way inside the Coke system, there have been clear signs of a slowdown in growth alongside the usual concerns around whether the company overpaid for a brand when it hadn’t fully figured out how to maintain its momentum. That’s Coke’s problem now, of course, and not necessarily anything inherent in the strategy that made Body Armor such a hotly pursued acquisition, but it does kind of make one rethink the old attitude that there are only two or possibly three real takeover targets in any particular category.

Then there’s the energy drink space – where Red Bull is ensconced as a strong, independent brand leading the category, Monster is aligned with Coke and Rockstar is owned by PepsiCo – there’s been plenty of jockeying among the rest of the beverage world to get ahold of a growing generation of new companies. First Bang opened retailers’ eyes to the possibility of the “fitness energy” adjacency, and now a cadre of brands like Celsius, Nutrabolt, Ghost, and Zoa have found partnerships with their own beverage giants, while once again there’s share and buzz coming into the category from “creator brands” like Alani Nu and even newcomer Gorgie.

What about water? It would seem to have finally exhausted itself with the sale of premium brands like Core and Essentia, but those companies being taken off the table has just brought on a whole new cohort intent on subdividing the category even more. A bunch of the Essentia team migrated quickly to the funky bottles of Eternal Water, while other startups are pushing aluminum and paper-based alternatives to the traditional PET. Meanwhile, no sooner do LaCroix and Sparkling Ice right their ships and Spindrift and Topo Chico establish the high end of the sparkling range, than a whole new crop of carbonated upstarts enter the fray.

So is this kind of proliferation okay? For years, I’ve been wary when an entrepreneur approaches BevNET attempting to sell us on the potential of a “me-too” brand, one that largely knocks off an existing product while offering a tiny slice of difference. Often, they seem to be aimed at a group that’s too small or esoteric to create a major marketplace or else the founders seem to interpret the business as just another fashion statement, and are just trying to make the same green juice that the rest of the cool kids are drinking. But this is different – these are companies that are taking the energy of categories that are still largely mainstream and offering, well, more.

In the case of sports drinks, formulas are advancing – many of these brands are offering heavier doses of their rehydrating formulas (Biolyte and Hoist both market themselves as IV bags in a bottle). The energy products are also adding a host of gym-ready ingredients and ramping up the caffeine past what the established brands offer, while water brands continue to find different vehicles to soak up the share of stomach that might have once gone to soda. There’s still variety and differentiation to be found – although there’s also the possibility that the sheer volume of that variety might overwhelm consumers.

Still, taken together, they’re more likely to impress than bewilder. In a recent Beverage Market Buzz report, Rabobank analyst Jim Watson applauded the energy that has gone into these categories, singling out sports and energy drinks as “a story of big innovation and vibrant startups,” and are categories that “have benefited from an aggressive update to core products, driven by the success of newer category entrants.”

Entrepreneurs should be applauded when they can look at a category that might appear played out, and still find a new approach that stirs the imagination. Some of us might see the wall, but we can all admire those who, every once in a while, see the cracks, and push on through.