Episode summary
The Sparkling Water Wars Are Just Getting Started
Wall Street Week
· · Hosts: Chrystia Freeland, David Westin
Summary
The sparkling water aisle is crowded, but the guests argue that saturation is really a sign of a category shifting away from sugary soda and toward healthier, zero-sugar drinks. The host frames the market as highly atomized, with every brand forced to prove itself to retailers that control shelf space. One guest says the lower barriers to entry now let founders outsource formulation, packaging, marketing and manufacturing, which helps explain why so many new brands keep appearing.
The category’s growth is being driven by consumers trading up to better-for-you beverages, especially zero sugar products and so-called modern soda. One guest says the appeal of sparkling water is that it is a clean starting point, while another says premium positioning matters because it supports gross margin and brand reinvestment. A separate guest says one brand has grown from about $300 million to nearly half a billion dollars in two years and sees a clear path to $1 billion and beyond.
Investors in the segment are split between backing brands and backing the suppliers that support them. The venture investor says the smarter play is often the “enablers” — flavor companies, packaging firms, co-manufacturers and distributors — because they benefit no matter which beverage brand wins. Still, the brand-side view is that only products with real taste and repeat purchase will last.
Key takeaways
- The guest says sparkling water and modern soda are growing because consumers want healthier, zero-sugar alternatives to soda.
- The venture investor argues that the best risk-adjusted bets may be on enablers like flavor, packaging, co-manufacturing and distribution.
- One guest says a premium price point improves gross margin and gives the brand more room to reinvest in growth.
- The guest says one sparkling brand has grown from about $300 million to nearly half a billion dollars in two years and could reach $1 billion.
- The panel agrees that velocity and repeat purchase matter more than shelf presence alone; taste has to bring buyers back.
Notable quotes
“-The whole beverage category is atomized. At the end of the day, there's almost so much real estate in that grocery store that you go shopping down”
“-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”
“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”
“I think there's a clear path to a billion dollars and beyond for this brand”
“-Taste always comes first, because if a product doesn't taste delicious, it doesn't matter how meaningful your mission is”
How the episode opens
-The whole beverage category is atomized. At the end of the day, there's almost so much real estate in that grocery store that you go shopping down. Westin: Dave Berwick is now CEO of higher-end, fruit-infused sparkling water maker, Spindrift.
After serving as CEO of Peet's Coffee and Boston Beer and spending 20 years at Pepsi. -All those brands have to prove themselves to those retailers who own those shelves that they're worthy of being on that shelf. So again, it's what makes the category really challenging.
For me, it's what I love about the category because nothing worth doing in life is really easy, and this is not easy. Westin: If it's hard to succeed in the carbonated water business, why are so many companies going into it? Part of the answer is that it is easy to get a foot in the door.
Adam Waglay is co-founder and CEO of Butterfly, a venture investment firm focused on all areas of the food industry. -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. 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.
Today, there are many different outsourced businesses that support this ecosystem. So you can, in fact, go to a co-manufacturer who can actually make the product. They can formulate it for you.
They'll usually work with a packaging company that can help you put the packaging together. 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.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- sparkling water competition
- zero-sugar beverage shift
- beverage category growth
- venture investment
- brand scaling to sales
Companies and tickers mentioned
- Spindrift
- Nixie
Watch the episode
Watch “The Sparkling Water Wars Are Just Getting Started” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Wall Street Week
-
What American Manufacturers Are Telling the Fed about the Economy -
Europe’s Welfare State Faces a Reckoning -
How the Blue Wave Could Reshape America’s Economy -
Inside Alaska’s Oil Paradox -
Wall Street Week | Blue Wave Economic Impacts, European Welfare Woes -
The $40 Trillion Problem Washington Won’t Talk About
Wall Street Week, this episode and its artwork belong to Bloomberg. Octagon is not affiliated with the show; this page is an independent summary.
