So I decided to pursue this line of thinking instead of researching the industry further: what was I thinking when I made a purchase? When you are looking to understand the consumer marketplace, you always have one consumer ready to give you endless amounts of time: yourself. Because I didn’t have the budget to conduct sophisticated or large-scale marketing tests, I decided to make a study of ourselves, which worked because I saw Maura and myself as target consumers for our coconut water brand. And it turns out that doing a deep dive on one consumer can tell you a good deal about an entire demographic.
Clearly the beverages I bought were about quenching thirst, but they were most often related to occasions or time periods in my day. I was looking for something to give me energy in the morning, to replenish and rehydrate me after a workout, or to give me a pick-me-up in the afternoon.
Remarkably, during my time in Central America coconut water had become my go-to drink during all those moments. It had pretty much replaced orange juice as my morning drink, especially as a base for the fruit smoothies Maura and I had almost daily. I drank it after a hike or swim instead of a sports drink in order to replenish, or in the middle of the afternoon to give me a boost of energy to get through the rest of the day. Plus, I found nothing was better to help my recovery after a rough night out on the town.
Of course, other, more intangible reasons determined why I picked one product over another. Many of those can be traced back to my particular generation and demographic group. Most sociologists would mark me as a vanguard Gen-Xer. My parents were undoubtedly influenced by trends that came from the activist 1950s Catholic community. They were dedicated to social justice, the women’s movement, and racial harmony. These forces influenced them as consumers as well. The Rampolla household of the 1970s and 1980s was ahead of the cultural curve when it came to healthy, natural eating. I remember eating homemade granola, natural peanut butter, and preservative-free jam from the monastery on whole-wheat bread. Dad made buckwheat and buttermilk pancakes from scratch with a little wheat germ thrown in for good measure. The reality was that healthy eating was cheaper, too. Raising six kids on one salary meant giant pots of homemade soups and casseroles.
Although my family’s eating habits were a little unusual in the working-class suburbs of Pittsburgh, I later realized that we were just slightly ahead of a major national trend. When I was a kid, the health food industry started to influence the public discussion about health and food in general, and it wasn’t long before it was leading the conversation. Similarly, during my childhood, the first health food stores started to appear. In their early days, they appealed to a very narrow consumer group—the true countercultural hippies. They had wooden shelves and a few hundred products: fresh fruits and vegetables, bins of whole grains and cereals, handmade soaps, tofu and soy milk.
By the time I was out of college in the 1990s, exercising, eating healthy food, and avoiding highly processed products was no longer radical. It was mainstream. The juice and smoothie brands born in the 1980s, Odwalla and Naked, were clearly riding this cultural wave. The same was true for soy milk. When soy milk was launched in 1978, you could only find it in health food stores as a dairy substitute for the granola crowd. It took decades but the maturing of the health food market helped products like Silk to become billion-dollar brands. Honestly, I had hopes that coconut water wouldn’t take as long to reach the mainstream, and I had good reason to be optimistic. After all, the new health food brands launching wouldn’t have to change the country’s attitudes about food and health, since a previous generation of health food entrepreneurs had already done that hard work for us.
The rise of the many companies in the once-ghettoized health food space was a remarkable and heartening achievement. For a hundred years, the beverage industry had made trillions of dollars playing only to a single innate human desire: sweetness. The taste for sugar is a powerful desire, but it is far from the only thing that people want or need. The major players failed to perceive other market demands. I realized that people, like me and our target consumers, want to have a long and healthy life. They want to know that what they put in their bodies will help them perform their best. They want to raise healthy children. They don’t want their teeth to fall out before they’re fifty. They want to maintain weight and fitness that suits their lifestyle. They want to look good and feel good, not just in the present moment but in the long term as well.
In creating endless variations on sugary drinks, legacy beverage companies not only failed to satisfy these other consumer desires, they actually made these other desires more salient and powerful. As the general population became less healthy—in part because of their addiction to sugary drinks—the demand grew around what was missing outside of sugary options. Meanwhile the health food sector had started gaining momentum and changing the public’s attitudes and preferences. The health food market had done much in a generation, but the work was not yet done. It was time for a new generation of entrepreneurs to keep the momentum going.
TANKS A LOT
That day of prowling markets in Manhattan had me feeling overwhelmed at first, but by the time I left I felt excited and hopeful. Given that I wanted to provide something new and innovative, I might have to compete for shelf space but I wasn’t competing against what was on the shelves. Upward of 95 percent of what was out there was a legacy brand, a copycat, or something that was narrowly derivative—and what I wanted to bring to market was entirely different.
Whether or not we’d be able to execute as well or better than some of the great beverage brands was a huge unknown. Coconut water might be unfamiliar to many Americans but it wasn’t new to the world. We would do our best to make sure our coconut water was great tasting and nutritious, but we didn’t own a coconut farm and didn’t have a proprietary source or strain of coconut. The goal was also to keep the product to a single or very few ingredients: coconut water. We knew we’d have competition (little did we know that there would be a hundred coconut water brands in the U.S. alone within a decade), especially if we were successful, and we would constantly compete with all beverages for the so-called share of stomach.
Did the countless product failures make me nervous? Of course. I can’t imagine who wouldn’t be unnerved by the fact that only a small percentage of new beverage offerings ever break through to make any real money. This was a market that not even the brilliant Sir Richard Branson could succeed in. Only a few years before I began to consider launching a coconut water company, Sir Richard rode into Times Square on a tank to launch Virgin Cola. Despite being backed by one of the most successful entrepreneurs in history, good luck finding that brand anywhere today (well, maybe Tunisia). Big-budget launches were mostly flaming out, and thousands of little entrepreneurial offerings were popping up and dying out so fast, no one could really keep track.
Entering such a market was daunting. But I looked at all this activity in a more positive way. After my afternoon walking those cramped Fairway aisles, I realized that a crowded marketplace is also an information-rich one. I still had so much to learn, but with tens of thousands of other brands throughout history and thousands more coming online each year, I had plenty of case studies to learn from. If I did my homework, I didn’t have to make their mistakes. No tanks for me. I couldn’t afford to rent one and wouldn’t know how to drive it even if I could.
CHAPTER 4
FINDING THE BRAND WITHIN YOU
As I started to think about creating a brand of coconut water, I studied one product closely: Vitaminwater. Everyone else in the industry was doing the same because it was taking the beverage market by storm. By 2003, industry analysts estimated the company had revenue approaching $100 million. Sales of the brand were rivaling Propel and even Gatorade in some markets, and it was growing by 30 percent per year in New York and more than 50 percent overall as it expanded to new markets. There was even talk about Vitaminwater becoming the next billion-dollar brand. Clearly, if I was going to be
a player in this industry, I had to understand why they were so successful.
During that same business trip to New York in 2003, I bought a flavor of Vitaminwater called Revive and sat down on a park bench to take a look. Their bottle and packaging was designed to look pharmaceutical, which appealed to a consumer who wanted to look smart and educated but also tapped into some interesting American lore—the days of old-time apothecaries. (Kiehl’s hits the same cultural note, to great success, in the personal care world.) I read the label, which had a catchy, sassy story: “HEY!! How’s it goin? IS THIS TOO LOUD FOR YOU?? OH SORry? there. better? . . . we’ve all been there: last night’s outfit doubled as last night’s PJs . . . on days like these we recommend hydrating with this bottle.”
I opened the bottle and took a sip. In terms of the drink itself—the ingredients, functionality, and taste—Vitaminwater was hardly an innovation. It was sweet and tasty but no more so than other products. What it did offer was a better story about itself at just the right moment in American culture, communicating a narrative of which consumers wanted to be a part.
J. Darius Bikoff, the brain behind Vitaminwater, had been messing around in the beverage industry for a few years by that time. He formed Energy Brands, Inc., in 1996 and launched his first brand, Go-Go energy drink, a female-focused beverage line. That brand struggled and was clearly too early (and perhaps too narrow with the female focus) for the energy drink boom, so Bikoff developed a premium water brand called Smartwater, under a parent company with the cool European-sounding name Glacéau (with meaningless accent mark, of course). Smartwater began to gain some traction in New York and the Northeast mainly in natural and specialty food stores, in part because Bikoff took cases in the trunk of his Mercedes door-to-door to retailers to gain shelf space. Glacéau then introduced Fruitwater, but it wasn’t until 2000 when they introduced Vitaminwater that sales started to really take off.
The timing was perfect for something to bridge the soda and water gap, and Vitaminwater was catching the wave at just the right moment. Consumers were becoming aware that too much soda was not good for them and they were looking for a change. Bottled water was suddenly on the rise even though most of it was just tap water and it was a bit boring. In stepped Vitaminwater. It positioned itself as healthier than soda but better tasting than water. A little dose of vitamins and fun names like Detox and Revive made it clear when, how, and why to drink them. The company turned to a leading flavor house to develop tasty and creative concoctions using ginkgo biloba, green tea, pomegranate: all things consumers had sort of heard about, sort of believed in, but weren’t sure how to use unless told how to do so. They tapped designer Philippe Starck to come up with a unique bottle shape and label design. They used bright, fun colors. They used natural flavors and real sugar (not high-fructose corn syrup).
The brand was designed to look authentic and smart, which was working well for Vitaminwater. The problem I saw was that it was mostly a fake message. As anyone who actually read the label would discover, Vitaminwater was basically sweetened, flavored water. Worse yet, they were capitalizing on an old trick in the beverage and snack industry: they served the stuff in 20-ounce bottles clearly designed for single use, but the requisite labeling showed that there were 2.5 servings in each container. So instead of getting the 13 grams of sugar stated on the label, you were getting 32.5 grams if you drank the whole bottle. That came to 125 calories, which is pretty near the 140 calories in a can of Coke. Oh, and that peppy feeling you got from the drink wasn’t from the vitamins and minerals; it was the 150 milligrams of caffeine (at least in the Revive flavor)—the equivalent of two strong cups of espresso and almost twice the dose in a can of Red Bull.
The folks at Glacéau had to be assuming customers weren’t going to read the label carefully. They also must have assumed that those who thought they were being smart and healthy would be so disconnected from the sensations and reactions of their own physiology that they wouldn’t notice how bad they felt after the sugar and caffeine wore off. I came to learn that this cynical subterfuge was widely discussed. The brand was built on hype and misrepresentation. Those vitamins in the water? “Pixie dust” was what Maura would call the minute amounts each bottle contained.
I was certain that Vitaminwater was due for a consumer backlash but I was wrong about how long it would take and how high the brand would climb first. For four or five more years the brand continued to be a juggernaut. The people at Coke thought that the trend would continue and would scale across the world, because in 2007 they bought Glacéau for $4.1 billion, more than ten times its revenue at the time. Bikoff reportedly made close to $1 billion on the deal. By 2013, BevNET reported “sales of Vitaminwater are in the midst of sustained slide, pointing to a consumer that wants something else.” (However, the sister brand, Smartwater, would more than make up for that loss.) In recent history, no other beverage brand achieved such massive success followed by such a stunning fall from grace as Vitaminwater (with perhaps Snapple under Quaker Oats’s “stewardship” a close second).
The lesson for me was that if a brand could tell a compelling story, it could change behavior. Vitaminwater told a great story, was beautifully designed, chose the right early adopters and cultural influencers, and appealed to the health aspirations of a generation. But it wasn’t authentic and it wasn’t honest. Vitaminwater was proof that consumers were looking for a healthy alternative to soda. What would happen, I wondered, if we created a brand of coconut water with an equally compelling cultural positioning that was actually natural and healthy, and that told a story that matched the product and was truly authentic?
CRACKING THE RIGHT NUT
Despite having what might be a good idea, at the beginning of founding Zico (before it was even called Zico) I was hardly an insightful entrepreneur and really wasn’t much of a marketer at all. My first impulse in bringing coconut water to America was to target the Hispanic market beginning in Los Angeles or Miami. That quickly growing demographic was all the talk among the consumer products industry at the time. So I thought I had struck gold when on a plane back from El Salvador my sister, Mary Beth, met Jose Gonzalez, former president of Publicis Sanchez & Levitan, a prominent Hispanic advertising agency that had developed a marketing strategy to help mainstream brands go after the Hispanic market. He and his friend and fellow Hispanic marketing expert Roberto Ruiz had recently started their own marketing agency, and I hired them to develop the brand positioning and marketing strategy for our coconut water.
After examining the thriving marketplace, however, Gonzalez and Ruiz gave me advice that wasn’t what I expected. While Hispanics had more knowledge of coconut water as a beverage, they also had some solidly embedded cultural associations that would be hard to rewire. First of all, most Hispanics in the U.S. were now second generation. Since they were born and raised in the U.S., they had about as much firsthand experience with coconuts as I did growing up: next to none. For those who already liked coconut water and drank it regularly, they would gravitate toward the Hispanic brands they knew and could buy in specialty stores in the U.S. for a dollar. (I knew we’d need to charge much more than that for our higher-quality brand). For many others, the drink represented something that they had culturally moved on from—or something that only their parents or grandparents drank. Marketers had great success convincing young Latin American consumers that Heineken was cool, but that’s because that brand had already become a cultural icon itself. Selling a partially known quantity like coconut water and a completely unknown brand would be much harder. Their conclusion: if I wanted to build a mainstream brand like I hoped to, don’t target the Hispanic market first.
Gonzalez and Ruiz could have told me what they knew I wanted to hear, but thankfully they didn’t. If I had tried to appeal to the American Hispanic market, it would likely have been a disaster. As much as I felt connected to Latin American culture, my knowledge only ran so deep. Even with Gonzalez and Ruiz’s sage advice, I doubt
I could have hit the right cultural note for this community that would overcome all these obstacles.
Who was I creating this brand for, then?
BRANDING WITH VALUES
Living abroad gives you fresh eyes on changes in your home culture. When Maura and I came back to the U.S. from Central America for visits in the early 2000s, we’d point out to each other the new trends and products that had surfaced in the time we’d been away. We began to notice products that suggested something new was going on in consumer culture—people were tiring of the mass produced, and the overly processed and artificial. We were, too.
Consumers were increasingly gravitating toward products with character—things that were from a specific place with interesting stories. Maura and I found Burt’s Bees in the skincare product aisle, offering creams and ointments that defied the glamour- and youth-obsessed beauty product industry. These products had a personality and told a story of northeastern backwoods know-how and connection to nature. Like many families, we became devotees of the brand—trusting it enough to use on our girls. I don’t remember seeing any advertisements for Burt’s Bees but somehow it still communicated a sense of authenticity to us.
Burt’s Bees wasn’t alone in creating a brand that communicated purpose, passion, and values and gained our loyalty. Patagonia, which became a favorite of Maura and mine, fully embraced their customers’ commitment to the environment. The whole ethos of the company, from the quality of its products to its commitment to the environment to its origin story, all spoke to an utterly different way of thinking about clothing and business. It was founded by Yvon Chouinard—the most unlikely of clothing moguls in the most unlikely of places: a backyard blacksmith shop. At heart a tinkerer and inventor, Chouinard created a brand that was an expression of his fresh and quirky view of the world and his love of wilderness adventure. It not only brought enthusiastic consumers but also informed the entire enterprise. His management style was new and counterintuitive, as evidenced by his book on the topic, Let My People Go Surfing.
High-Hanging Fruit Page 5
