The Sparkling Water Wars Are Just Getting Started

本站添加: 2026-05-10

[00:00:00]-The whole beverage category is atomized.

[00:00:04]At the end of the day, there's almost so much real estate in that grocery store that you go shopping down.

[00:00:08]Westin: Dave Berwick is now CEO of higher-end, fruit-infused sparkling water maker, Spindrift.

[00:00:16]After serving as CEO of Peet's Coffee and Boston Beer and spending 20 years at Pepsi.

[00:00:22]-All those brands have to prove themselves to those retailers who own those shelves that they're worthy of being on that shelf.

[00:00:28]So again, it's what makes the category really challenging.

[00:00:31]For me, it's what I love about the category because nothing worth doing in life is really easy, and this is not easy.

[00:00:40]Westin: If it's hard to succeed in the carbonated water business, why are so many companies going into it?

[00:00:49]Part of the answer is that it is easy to get a foot in the door.

[00:00:53]Adam Waglay is co-founder and CEO of Butterfly, a venture investment firm focused on all areas of the food industry.

[00:01:00]-It's become a lot easier, a lot lower barriers to entry to creating these brands than ever before because the infrastructure around creating these brands has enabled that in the last 10 years that we've kind of gotten into this space.

[00:01:14]This used to work in the past as you'd have to kind of do everything yourself from scratch from kind of developing the brand to developing the formulation, maybe even getting into manufacturing, finding out how to get your product placed, et cetera.

[00:01:28]Today, there are many different outsourced businesses that support this ecosystem.

[00:01:33]So you can, in fact, go to a co-manufacturer who can actually make the product.

[00:01:39]They can formulate it for you.

[00:01:41]They'll usually work with a packaging company that can help you put the packaging together.

[00:01:45]And then you can go to outsourced marketing organizations that can tell you how to launch a brand online or, you know, from a social media standpoint and kind of get going in those kind of formats, if you will.

[00:01:57]So there's this sort of infrastructure of companies that we call enablers here at Butterfly that actually support the different infrastructure that a founder or CEO needs to go create a business from scratch.

[00:02:10]Westin: The bubbly water business is part of a global beverage market that sold over a trillion dollars' worth of soft drinks last year.

[00:02:17]More than a third of that was sodas, ubiquitous Cokes, Pepsis, and their brethren.

[00:02:21]But those soda sales have come down 27% over the last two decades, giving up market share to various forms of water, which now account for over a quarter of all beverage sales.

[00:02:32]Carbonated water is only a modest share of that, but it is growing noticeably faster than its peers in the U.S.

[00:02:39]Among the driving factors, a desire for healthier alternatives to soda.

[00:02:44]That's what led Nicole Bernard Dawes to launch her product, Nixie.

[00:02:49]-While the snack aisle and the produce aisle, even the dairy aisle, were getting more and more healthier organic products, the beverage aisle was still filled with sugar and plastic and almost no certified organic products.

[00:03:03]I really saw an opportunity, and I also really felt it was important to have zero sugar because I think liquid sugar is just not a healthy thing for anybody.

[00:03:13]We knew we wanted to be a healthy beverage brand.

[00:03:15]Like, that's our mission.

[00:03:16]That's who we are.

[00:03:17]We started with sparkling water, which we felt was one of the cleanest.

[00:03:21]We felt it really defined kind of what we were trying to achieve.

[00:03:24]And then after we got that out into the market, we started working on a zero sugar soda.

[00:03:29]Zero sugar is still one of the largest drivers of even conventional beverage.

[00:03:33]For the conventional soda brand, zero sugar is their biggest part of the growth for their business.

[00:03:39]And I think that also was exciting to me because when you have a category that large, there's a segment of the population not being served by the products that are the number one or number two products.

[00:03:51]You're hearing the term modern soda a lot.

[00:03:53]And if you went into a grocery store a few years ago, you might have two or three feet for this new type of soda.

[00:04:02]And now you're going in and you're seeing chains like Walmart expanding from two feet to eight or 12 feet.

[00:04:08]Westin: That growth of the bubbly water segment makes more attractive a business that's easy to get into in the first place, a form of making it up on volume.

[00:04:17]-It's a great business, which is why I do it.

[00:04:20]I mean, I love big categories because, you know, think about it.

[00:04:24]If you're talking about a $10 billion category, you don't have to be a significant part of that to be a significant business.

[00:04:29]Westin: What is the opportunity you see for Spindrift?

[00:04:32]-When we came in about a year and a half ago, it was about a $300 million business.

[00:04:35]We'll be close to a half a billion dollar business at the end of this year, so after two years.

[00:04:40]And I think there's a clear path to a billion dollars and beyond for this brand.

[00:04:44]The sparkling beverage business is still growing 25 to 30% as more people come in.

[00:04:49]And when they do come in, they get to try our brand, which we think is better than others, and we like that.

[00:04:54]But we're also looking at other adjacent categories where we can take sort of that core equity with Spindrift is, which is real squeezed fruit.

[00:05:03]How do we take that real squeezed fruit and bring it to other categories?

[00:05:07]So most recently, we launched a non-carbonated tea product that we're really excited about.

[00:05:12]So between the core business of sparkling water, adjacencies like tea, we've also launched a soda, a healthier, better for you soda product that can get us to a billion dollars.

[00:05:23]Westin: It's a growing business segment, but that doesn't mean it's easy to carve out a niche for any particular product, much less succeed over the long term.

[00:05:31]-The concern, though, is there are many out there.

[00:05:34]And to try to figure out, for us as investors, which companies are going to last and make it and really create something special, we've got to really be picky about what we get behind because many can kind of get in business.

[00:05:45]Now, to also scale and get to a substantial level will require a lot more than that.

[00:05:52]Westin: What about price?

[00:05:53]Where do you want your product to exist in the spectrum on price?

[00:05:58]-We definitely want to exist in the high end.

[00:05:59]As we know, it's been much talked about, we're a K-shaped economy right now.

[00:06:04]We serve that upper K.

[00:06:05]We want to bring everybody in, but you want to be in the premium segment.

[00:06:09]I think you want to focus on gross margin improvement because that's really the oxygen of our business.

[00:06:15]So when we sell at a premium price point, we can improve our gross margin, and then reinvest to grow the brand.

[00:06:21]Also, interestingly, like within the health and wellness space where we play, we're seeing more and more low and middle income households actually trading up to premium brands when it comes to health and wellness.

[00:06:32]Westin: And there are very specific ways of measuring, even day to day, how successful a company is, including how it's doing in the water competition wars.

[00:06:41]-Velocity is how many units of your product you sell in each store each week.

[00:06:46]And I think velocity is the truest measure of success.

[00:06:49]You can't fake velocity, you can't cheat velocity.

[00:06:52]It's if a customer's coming in and buying your product, and then they're coming back again next week and buying it again, you can tell the health and success of a brand.

[00:07:00]And it's how we gauge new products, it's how we gauge new chains.

[00:07:06]And I think it's very important for brands to watch their velocity closely and make sure that, you know, your velocity is where you want it to be.

[00:07:16]And if it's not, that you're learning why and fixing it as quickly as possible.

[00:07:20]-Looking at sales, obviously, are we selling in, you know, to our retail customers, so to Walmart and to Costco, and to Target and all those folks.

[00:07:27]We get a look at that every day with how the orders are building up.

[00:07:31]We also wanna look at syndicated data.

[00:07:34]Right now, we only have about 8% of households that buy us during the course of a year.

[00:07:38]And that's pretty low, but that's a good thing because that means there's a lot more places we can go with this brand.

[00:07:44]So we'll look at that.

[00:07:46]We also look at things like trial, how many people are trying our product and what's the repeat purchase.

[00:07:51]That's another really important one.

[00:07:52]Everybody will try anything at any given time, but the real measure is how many people come back to your product for the second time and the third time.

[00:08:00]So we also look at that.

[00:08:03]Westin: It's a growing segment with an awful lot of competitors, but can it be a good investment?

[00:08:08]Waglay finds that the very factor that lowers the barriers to entry may be the key to investing.

[00:08:14]-One third of what we do at Butterfly is investing in consumer brands.

[00:08:18]And we think we're good at picking them and finding winners and making it work.

[00:08:22]But two thirds of what we do is investing in those enablers.

[00:08:25]It allows us to not have to take the brand risk, right?

[00:08:28]We can just say, okay, we're gonna bet behind hydration and the flavors that go into hydration.

[00:08:33]And so let's go find a flavor company that powers all these different hydration brands.

[00:08:37]And we don't have to sit here and determine which hydration brand's gonna win.

[00:08:41]So if we can go against the packaging companies that supply those hydration businesses, I think it's a great idea.

[00:08:48]Flavoring, again, is a big... flavor is essence.

[00:08:51]Ingredients in general are another area where we play and find amazing companies that are supplying those different sort of vendors.

[00:08:59]And then finally, a huge ecosystem that we spend a lot of time on is co-manufacturing.

[00:09:03]So a lot of manufacturing has been outsourced to these companies that are very professional at doing it and can do it for big brands, small brands.

[00:09:11]Finally, I'd say there's also the distribution and logistics of moving these beverages around, which are really interesting players, both national distributors, but also regional distributors that might specialize in certain channels.

[00:09:25]Westin: Those so-called enablers may be good investments, but those at the center of the business believe there's no real substitute for doing it yourself.

[00:09:33]-I've always talked about how you wanna start sort of with this product truth.

[00:09:37]What's the truth about your product that's really special?

[00:09:39]For us, it's real squeezed fruit.

[00:09:41]It's been around since 2010, and it's really ridden the wave of consumers gravitating toward healthier, better-for-you beverages that happen to be refreshing, have a nice, has a nice flavor profile.

[00:09:53]Westin: In most businesses, saturation is a bad thing.

[00:09:56]Success usually comes from scarcity.

[00:09:59]And when it comes to carbonated water, the fact is that many of the brands will likely fail.

[00:10:05]But those devoted to the business believe deeply that in the end, despite the odds, there's room even for all those versions on your grocery shelf, provided they have the right taste.

[00:10:16]-The reality is that most things fail.

[00:10:19]You know, 80% of new products will fail just because just being, just showing up at the party doesn't make you interesting or relevant necessarily.

[00:10:28]-Taste always comes first, because if a product doesn't taste delicious, it doesn't matter how meaningful your mission is or how important all of the backstory of your brand.

[00:10:37]If people don't love the way they taste, they're not gonna come back again and again to buy it.