Smith – who joined Talking Rain in 2014 as chief financial officer, and took the helm in March 2017 after the sudden departure of Kevin Klock – said the company was not delivering the kind of triple digit growth rates it had experience a few years ago, but that this was to be expected given its increasing maturity.
“As you get bigger it’s all about the dollars, not the percentage growth figure,” he told FoodNavigator-USA.
Space allocation in retailers’ beverage sets, meanwhile, is beginning to more accurately reflect what consumers want – as opposed to the distribution clout and deep pockets of key players – he claimed.
“There used to be a big disconnect” [between space allocation and consumer trends] but some of the first bricks are starting to fall in the wall, and more space is being allocated to emerging categories and better for you beverages as CSDs [carbonated soft drinks] become a smaller part of the overall mix.”
Essence of… did not take off
That said, Sparkling ICE’s Essence of… unsweetened sparkling water range - launched in spring 2016 with just two ingredients: carbonated water and natural flavors – had not been a hit with consumers, he acknowledged, despite its clean label and zero calorie credentials.
“We wanted to explore is there a white space between a premium and a commodity water in that market, an opportunity to claim a bit more margin and occupy a mid-level positioning… and the answer was no, so the product is being replaced by more productive SKUs.”
The core Sparkling ICE proposition – a zero-calorie lightly carbonated beverage sweetened with sucralose that offered fun, refreshment and a wide variety of flavors – continued to resonate strongly with consumers, however, he claimed.
“We have a unique value proposition; we’re an alternative to CSDs for people that are trying to reduce calories, and while we don’t use natural sweeteners, consumers don’t paint all artificial sweeteners with the same brush… but we’re working to ensure we stay relevant with cleaner ingredient panels [Sparkling ICE’s US formulation contains artificial colors, sweeteners and preservatives].”
Growth opportunities in the convenience channel
As for growth opportunities, while it is “still early days for us in the convenience channel,” new products and packaging formats are needed to optimize the Sparkling ICE proposition for this channel, he said.
“On the liquid, right now we don’t address the caffeinated option, and from an operational perspective, we also need the right packaging and container, At this time we are exploring different sizing options that better fit the convenience channel."
Asked whether Sparkling ICE is planning a caffeinated product to appeal to consumers looking for a lower calorie energy drink, he said: “We’re gathering the evidence from consumers to come up with something that resonates… so you should stay tuned.”
There are also considerable untapped opportunities to get Sparkling ICE into more schools, he said: “In some schools in Texas our turnover is greater than the closest Walmart, so there are big opportunities there.”
Himalayan mineral water to hit stores in February
The partnership with The Tata Group to bring upmarket mineral water brand Himalayan into the US via Talking Rain’s national DSD system is also progressing well, with the brand due to hit stores in February in three test markets, he said.
“We have a unique advantage among most of the other beverage companies that aren’t Coca-Cola, PepsiCo or Dr Pepper Snapple Group, in that we have a national DSD distribution system that is pretty robust and can handle a lot more volume,” said Smith.
“Many of those distributors are asking us to come to them with solutions to expand their portfolio, so that was behind our deal with the Tata with Himalayan Mineral Water. We thought they had the expertise and capability to scale and could also open up opportunities for us outside the US – retailers are also excited to have something differentiated in the premium water space.”
He added: “We feel like we’ve got a lot of runway with our current product set, although we may expand partnerships like the one we have with Himalayan Water; but we are very picky, so it has to be right, everything has to be aligned in terms of strategy and objectives.”
UK: It took a while for us to appreciate the different shopping patterns there
International markets also present significant growth opportunities for Sparkling ICE, claimed Smith, who said the brand is now in 6,000+ stores in the UK and Ireland* after just 18 months on the market. “We just learned that we are already in more locations than Vitamin Water, which started there in 2008.
“We are also seeing tremendous growth in Canada and also entering some other markets in the Caribbean and parts of Central America.”
When it comes to differences between the markets, there have been some learning experiences, he said.
“The big learning for us in the UK was about the relative mix of purchasing across different channel types. I think it took a while for us to appreciate the different shopping patterns. When I was living there, I wasn’t shopping every two weeks, I was shopping almost every day, so we’re selling more single serve in the grocery channel, for example.
"In the US we have a 12-pack for pantry stocking, whereas in the UK we have a four-pack.”
*In the UK, Sparkling ICE bottles its product with a local co-packer. On the distribution front, it works with Red Star Brands in the UK and Richmond Marketing in Ireland.
What are the emerging trends in beverages?
Fermented? Plant-based? Low sugar? Adaptogenic? What consumer trends are the most successful beverage firms tapping into, and where are the growth opportunities in the next 3-5 years? Find out at our FREE-to-attend online beverage innovation event on February 21.
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