NACS: Bai Braces for National Test

When you ask Kat Haddon, Bai’s business development manager, about the most challenging aspect of breaking into the convenience store channel, she doesn’t exactly struggle with option overload.

“Space has always been the issue,” Haddon said. “There are always too many products vying for that shelf space in a very small format.”

It’s a problem that came into sharp relief this week as the fast-growing brand invested in real estate and an eye-catching booth at the NACS (National Association of Convenience Stores) show in Atlanta, hoping to find a larger audience in the world of 7-Eleven and QuikTrip.

So how does Bai plan to approach the C-store channel? Naturally, the company is searching for C-store owners who are willing to feature all nine Bai SKUs per store. Three to four SKUs are nice, but six or more, ideally nine, allows consumers to fully comprehend the brand and its variety, Bai CEO Ben Weiss said.

“It’s about finding that convenience retailer that’s willing to partner with us to let their consumers experience the breadth of the portfolio,” Weiss said.

And they’re starting to budge. He said that some of the same C-store owners that once took on three to four SKUs are now upping their stock. It’s a sign that Bai could be ready for what’s next.

Earlier this week, as Bai prepared to announce its arrival in Chicago, Weiss and Haddon detailed the company’s national ambitions, which they said will be keyed by a push in C-store and mass accounts. Bai is currently distributed in 14 states, mostly in the Northeast, but with distribution from the Dr Pepper Snapple Group, the company plans to enter the other 36 via 12,000 new retail outlets by the end of 2014. They call it “hyper-growth” and claim it’s a pace that hasn’t yet overwhelmed them.

“It might [be] a little bit more challenging,” Weiss said. “I would imagine it is as you open a national footprint and start activating national chains, but right now it’s been as manageable as a year that you grow 400 percent can be.”

The Bai team believes in two key components that have spurred the company and enabled this scale and pace of growth: the beverage itself and the road shows.

Taking after its name, per serving, Bai5 contains 5 calories, 35 mg of caffeine, 1 gram of sugar and antioxidants derived from coffeefruit, which is grown in Bali, Indonesia. The beverages, which are also vegan, gluten free, low-glycemic and kosher, come in nine flavors: Brasilia Blueberry, Congo Pear, Costa Rica Clementine, Ipanema Pomegranate, Malawi Mango, Panama Peach, Sumatra Dragonfruit, Limu Lemonade and most recently Molokai Coconut. Weiss said that from the best performing SKU to the worst, there’s only a single-digit percentage difference in sales.

“There’s not a brand that carries the portfolio,” Weiss said. “The reverse is there’s not a dog in the group.”

He created Limu Lemonade because he couldn’t find an appetizing lemonade with a low enough calorie count. He created Molokai Coconut because he wanted to be a part of the coconut water craze, but he didn’t like the taste profile of the category leaders. He also doesn’t think that he’s alone. Weiss believes that after some education, Bai’s combination of nutrition and variety can also translate with consumers outside of regions known for trendsetting.

The education begins, in many places, with the road shows. For three to four days, Bai shows up at a mass retailer with around four pallets of the beverage and brand representatives ready to offer and pour samples. These shows serve as a method for increasing brand awareness and for measuring consumer interest.

Haddon said that after starting with mass retailers such as Costco, Bai has already brought the road show model to grocery chains such as Whole Foods, Wegmans, ShopRite, Ralphs in Southern California and Nugget Markets in Northern California. The results have already begun to pay off. Haddon said that Bai is turning 500 units per week in large format grocery stores.

“Our velocity in large format grocery is unprecedented,” she said.

To maintain the national buildout, other retailers are starting to chip in. Bai will be featured in 56 Target stores in and around Los Angeles, Denver and New York as one of four brands in an enhanced water sales test being conducted by the retailer. If the test goes well, Haddon said that Bai could enter all Target stores in the U.S. by the first quarter of 2014. Bai is also launching with Jewel-Osco in the Midwest, expanding in Safeway and hoping to triple its business with by next fall.

Daniel Goodfellow, Bai’s vice president of marketing, said that the company has seen a dramatic increase in sales from Amazon and thinks it has the potential to be the fastest growing retailer in the company’s history.

“We just see a huge opportunity for that business to grow and as a result we’re sort of treating it like a pretty special part of the business,” Goodfellow said.

An expansion of this pace will require feet on the street, as evidenced by the steam generated from the roadshows and the quick entrances into mass retailers. Weiss said that he hasn’t yet been forced to pull from institutional money and that he’s talking with several strategic and investor groups, both new and existing. Some are big strategics, not The Coca-Cola Co., Inc. or Pepsi, he said, but still Fortune 500 companies. He’s also been able to raise non-dilutive support, such as lines of credit.

“There is going to be a raise that will fuel this next stage,” Weiss said.

The pieces are in place. Now Bai will find out if it’s ready for the rest of the country.