Standing out in the crowded bottled water category is no easy task. But in just over two years, alkaline water brand Perfect Hydration says it’s experiencing rapid growth in the Southern California market. This year, the brand is aiming to replicate that regional success as it moves to scale nationwide and begins competing head-on with some of the segment’s biggest names.
Developed by brand portfolio company Stratus Beverage Group, Perfect Hydration launched in December 2016 in 33 Los Angeles area Costco stores. Speaking with BevNET this week, Stratus VP of sales Jared Smith said the brand, which features a pH of 9.5, has managed to compete against other alkaline brands such as Essentia and CORE through its “simple branding” and use of a proprietary blend of minerals added to ionized municipal water that excludes sodium, fluorine, and chlorine, which have “negative connotations” with consumers.
“Where we’ve been able to grab the market share is really aligning ourselves not necessarily with the other alkaline waters but almost more in this greater premium water category and going after the bigger players in a much larger space like electrolyte water rather than specifically alkaline water,” Smith said. “What we feel we’re doing is creating parity with electrolyte water through added functionality.”
Perfect Hydration markets a 1L bottle for $1.99, and is preparing to launch a 20 oz SKU in July. According to Smith, the company is developing additional innovations in the alkaline water space which it plans to launch next year.
Although the company took a slow approach to its rollout, Smith said Perfect Hydration “caught fire right out the gate” — selling more than one million bottles within its first six weeks in Costco. By that summer the brand had expanded into all 59 Costco locations in the region. Staying “hyper focused” on the Southern California region, the brand shortly thereafter entered retailers including Smart & Final, Vons, Albertsons, and Pavilions, along with a pilot test in 7-Eleven. In the first quarter of 2018, 7-Eleven expanded Perfect Hydration to all of its 1,100 Southern California stores.
According to Smith, Perfect Hydration has since grown rapidly in 7-Eleven through promotional pricing, noting that the brand’s 2-for-$3 deal can lead to an average of 12 units sold per store per day during the summer months. According to the company, Perfect Hydration is the convenience chain’s top selling branded water, and is set to expand its presence at the store in July with the launch of the 20 oz bottle.
“You’ll see that we’ve gotten very aggressive on our promotions, and we’ve gotten very aggressive on our margins to our retailers and distributors,” Smith said. “Everybody makes full boat. We feel in the water category you really cannot squeeze people, so if you’re not squeezing people you get much better reception and more openness to bringing you in.”
Over the past year, Perfect Hydration has grown its total distribution to about 3,000 stores nationwide, adding retailers including Ralph’s, Food 4 Less, Fry’s Food and Drug, King Soopers, The Fresh Market, Stater Brothers, and Redner’s Markets. The brand has also entered nine Kroger divisions, including Atlanta, Delta, Louisville, and Nashville. To support its expansion, Stratus has partnered with an East Coast copacker which will begin producing product within the next four weeks, Smith said. The company has also hired 10 new team members within the past year, including merchandisers and sales managers. By the end of the summer, the brand anticipates it will be in about 5,000 stores.
Perfect Hydration has also partnered with Amazon through its Launchpad venture arm. Smith noted that the partnership guarantees the brand will receive at least one billion impressions in 2019 on Amazon alone.
According to Smith, to date Perfect Hydration has invested most of its revenue back into its retail strategy. But as the company scales the brand is looking to broaden its marketing efforts. In Los Angeles the company has launched billboards and digital campaigns. It is also working with influencers and athletes to promote the brand, including Arizona Cardinals quarterback Kyler Murray and viral skateboarding star Dan Mancina.
“We’re not looking to keep it all within just sports, we’re really looking to be more of a lifestyle brand and incorporate it into everybody’s daily life,” he said.
Alongside Perfect Hydration, Stratus Beverage Group also owns KÖE Organic Kombucha, a shelf stable canned kombucha brand which launched last year. The company also briefly sold a cold brew coffee brand Bowery Coffee Co. — which was on shelves in Target in 2017 — but was discontinued shortly after its test launch. Smith said the company takes different strategies with Perfect Hydration and KÖE, emphasizing a regional approach for the water brand while taking a first-to-market leadership approach with KÖE.
“We know that there’s a lot of other people coming into this shelf stable kombucha space so we know it’s really important to get out ahead of everybody,” he said. “So we will look to expand quickly with KÖE and not keep it as regionalized as we did with the water.”