The meteoric rise of Waterloo Sparkling Water: 'We have a better tasting product, hands down...'
“We have a better tasting product, hands down,” insists Jason Shiver, a food industry veteran who has worked with brands from SkinnyPop and Arizona Iced Tea to Glutino and Atkins, and is working with a management team (see box) that’s been there, done that, and bought the T-shirt when it comes to beverage branding and distribution.
“If you look at this category,” he adds, “I think there are clear leaders on taste and we are one of them. Every time we sit down with a retailer and pitch our brand for the first time, we do side by side taste tests, where we compare our product and their #1 flavor [from a competitor in the set].
“We’ve yet to walk away from one of those taste tests and have someone tell us that they preferred the other brand,” observes Shiver, who acknowledges that the ‘classic’ look and feel of the brand (“it brings you back”) has also helped Waterloo stand out in the crowd:
“It looks like something that’s been around for a while, even though we shipped our first product in August 2017.”
‘Waterloo looks like something that’s been around for a while, even though we shipped our first product in August 2017’
Waterloo Sparkling - currently available in around 9,000 stores - is now manufactured at six different locations across the US, which has dramatically reduced freight costs, says Shiver.
“We probably use three times the flavors that competitors use, we’re non-GMO verified and BPA-free and we remain retail relevant, so we’re at [price] parity with, or within 40% of, the market leader in the category depending on the retailer, because we have people that know what they’re doing.”
‘We knew we could do something better’
Backed by CAVU Ventures, Austin, Texas-based Waterloo, has raised around $15m and has sold more than 100m cans since launching in September 2017. It’s on course to triple its 2018 sales in 2019, and is aiming to double 2019 sales in calendar year 2020, says Shiver, who says punchier flavors have been key to its success.
“LaCroix did a great job establishing the market; it had been around for a while and all of a sudden carbonated soft drink users started flooding out of that market and looking for something a little better for you, and LaCroix was the benefactor.
“And then all these me-too brands started coming in and followed the leader [sales of LaCroix were down -12.7% in the 12 weeks to June 15 according to Nielsen data collated by Wells Fargo] … But we knew we could do something better. All our founders had sparkling water in their refrigerators and just felt the taste was a bit faint. They just didn’t pack enough punch."
The white space in the category
He adds: “We talked to a lot of people about what they liked and didn’t like about the brands that were out there, and we kept hearing the same things: there was not enough carbonation, and there was a lack of flavor. It’s like you crack open a can and you’re tasting club soda with somebody whispering a flavor in the other room."
VP of Marketing and former Red Bull marketer Matt Voltoline adds: “We did some consumer research with category purchasers and once trial occurs, we’re two times more likely to become the favored brand. We have a low awareness level, but the highest conversion rate in the set, so as our marketing scales up, we’re confident we’ll have high rates of conversion and with that will come loyalty.”
‘We did a hundred iterations or more before we got that product right’
While Waterloo works with flavor houses, it didn’t just take something off a catalog, make a couple of tweaks and throw it on the market, he argues. “We take different ingredients and build up our own flavors with partners to create proprietary blends,” claims Shiver, who said the team was fanatical about getting the right strawberry flavor.
“We did a hundred iterations or more before we got that product right, and we’ve had so many people tell us it’s one of the truest flavors they’ve tasted.”
It also uses BPA-free can liners, and has gone through the non-GMO Project verified process, which was expensive, but gives it a point of difference in the market, says Shiver.
Given the heightened interest in the composition of ‘natural’ flavors – which have sparked lawsuits vs Hint and LaCroix, and Spindrift notably spurned on the grounds that they are something of a black box – the company has also secured assurances from suppliers about ingredients/incidental additives it doesn’t want in its natural flavors.
‘We’re the #2 sparkling water brand in Whole Foods with significantly fewer SKUs than the leader’
In general, says Shiver, all the leading retailers recognize that they need to allocate more space to sparkling water (a category up +16.3% in measured channels in the 52 weeks to June 15, 2019 according to Nielsen data collated by Wells Fargo) typically by cutting space given to carbonated sodas and juices, and they are moving in that direction, albeit slightly more slowly than consumers.
As for the go-to-market strategy, Waterloo began with a nationwide launch at Whole Foods, which gave the brand a ‘healthy halo’ and helped put it on the map with other natural retailers, but has also picked up conventional accounts at retailers such as Walmart, Kroger and Costco, and is gearing up to make an announcement about another major retailer in September.
“We’re the #2 sparkling water brand in Whole Foods with significantly fewer SKUs [stock keeping units] than the leader, so on a by-SKU or dollars-per-SKU basis I would say we are the top selling sparkling water brand,” says Shiver.
He added: “People only tend to talk about measured data, but we are excelling in many retailers that are not picked up in that data, such as Whole Foods, and I think people will be really surprised by how much we’ve sold.
“I think what’s given major customers such as Kroger and Walmart confidence is also how sophisticated we are when it comes to inventory management, analytics, [demand] forecasting and operations. We can’t afford to keep our capital tied up in product sitting in a warehouse. It’s a delicate balancing act.”
