Enhanced Water Category is Booming!
Essentia Raises $3.2 Million in Convertible Debt; Projects $22-23 Million in 2014 Sales
Having recently announced its tenth consecutive year of growth, eight of which reached double-digits, Essentia is positioning itself for a booming 2014 — and well beyond. Earlier this year, Essentia, the top-selling enhanced water brand in the natural channel, raised $3.2 million in convertible debt and is perhaps prepping for a much larger round of funding later this year.
The debt raise, led by Silverwood Managing Partners, follows an impressive year for Essentia, in which the high-alkaline water brand saw sales grow by 52 percent in the natural channel, as compared to 2012. Ken Uptain, President/CEO, Essentia told BevNET that the new financing came from a private investment group and individuals that are “closely involved with the brand.” Uptain also said that Essentia has been in discussions with private equity firms, “for down-the-line growth,” and indicated that another deal might be coming soon.
“At some point, we’re probably going to need a partner,” Uptain said.
Essentia, which today reported record sales for Jan. 2014, leaping by 42 percent over Jan. 2013 sales, has proved to be one of the hottest brands in natural in recent years. SPINS, a leading provider of syndicated market research, pegs Essentia’s 2013 natural channel sales at $6 million along with a 35 percent share of the enhanced water category within the channel, according to Paul Curhan, Essentia’s VP of Marketing & Innovation.
However, the numbers do not include sales in Whole Foods, the number one retailer of Essentia water, which combined with retail sales of the brand in natural, grocery and online, totaled $15-20 million in 2013, Curhan told BevNET. Curhan noted that increased sales are mainly velocity-driven, with same-store sales, particular those in the Southwest, propelling sustained growth for Essentia. That said, Curhan pointed to the Northwest, South Central and Mid-Atlantic regions of the U.S. as fast-growing for the brand.
Although the majority its sales come from within the natural channel, grocery and e-commerce are quickly becoming significant drivers of sales growth for Essentia; Curhan said that sales growth is well over 100 percent in both channels. Essentia recently expanded its presence in Kroger by more than 750 stores and is currently the number one selling enhanced water brand on Amazon.com, according to Curhan. Among all bottled waters, Essentia is number two behind FIJI Water, in terms of total sales on Amazon, he said.
Essentia currently employs a hybrid distribution model in which the water is shipped via leading natural and specialty distributors UNFI and KeHE as well as direct to retailers in some markets. The company is, however, looking at select DSD operators as part of a broader hybrid distribution strategy, Curhan said.
In preparation for what the company believes will be another huge year for the brand — Curhan offered projections of 50 percent growth and $22-23 million in sales — Essentia has adopted a new tagline and is planning to significantly ramp up marketing efforts. Replacing “Superhydrating Water” with “Hydration Perfected,” Essentia is attempting to appeal to broader audience, Curhan said. The new motto is more consumer-friendly, he noted, and captures Essentia’s consumer proposition more succinctly.
“As we get into more mainstream retailers, it’s really important to explain our proposition well,” Curhan said. “This is a sharper way to communicate what we are doing to the water.”
Curhan said that while the marketing strategy is still in planning, the plan is to build awareness and increase trial of Essentia in key U.S. regions, “where the brand has the most upside and opportunity,” including the Northeast and Southwest. He said that the company would utilize sampling and some traditional media as part of the new strategy.
As for the new round of funding, Michael Burgmaier, Managing Director, Silverwood Partners, called it “the quickest raise I’ve ever done in my life.” Burgmaier said that it took only two weeks to raise the funds, as investors saw tremendous upside for Essentia given its track record and branding.
“Velocity, gross margin, brand, functionality — Essentia has all of that,” Burgmaier said. “The numbers are very, very impressive.”
How impressive? Enough for Burgmaier to mention the Essentia in the same sentence as the fastest-growing beverage brand in recent memory: Sparkling ICE.
“The proof is in consumer actions,” Burgmaier said. “Those who try Essentia over other brands repeatedly choose Essentia over and over. While Essentia has low ACV and low brand awareness, you can still have significant sales numbers. That’s where Sparkling ICE was a year or two ago.”
Source: BevNet, February 10, 2014