Admittedly, powdered beverage mixes aren’t new technology. Tang, after all, has been around long enough to have been used during NASA’s Gemini program in the 1960s, and, early on, Gatorade sold in canisters as often as it sold in bottles. But modern marketers have taken a new twist on powdered drinks. Instead of relegating drink mixes to tubs that sit in mom’s cabinet, new powdered beverages come in single-shot sleeves, called “sticks,” that can go everywhere that bottled water can.
“The stick is very portable,” said Ryan Alarid, co-owner of Zizzazz Explosive Energy Mix. “It’s not like the old Gatorade canisters… you can’t take that anywhere.”
That convenience, along with price, profit margin and customizability pushed the overall powdered beverage market segment to a respectable 7 percent growth rate between 2006 and 2007 according to Mintel market research –growth that, in all likelihood, hascontinued to increase in 2008. As powdered drinks near $1 billion in yearly sales, Gatorade, Propel, AriZona, Zizzazz, Jones Soda and others have added new single-serve options. While those companies package their powders in envelopes, some companies have taken a more innovative tack on quick-mix drinks, incorporating powders into cap-delivery systems or condensing the whole formula into an Alka-Seltzer-like tablet.
BIRTH OF A TREND
Before there was a trend, there was Crystal Light. The sugar-free mix debuted in 1984, and powered sales through its low-calorie status – and an endorsement from Dynasty star Linda Evans. (She played Krystle Carrington, don’t-cha-know.) Even though Dynasty ended in 1989, and big hair soon followed, Crystal Light pushed on with a revolving cast of spokeswomen and the banner of “I believe in Crystal Light because I believe in me.” Along the way, Kraft sold the product in both large canisters and in multi-packs of individually-packaged tubs pre-measured to mix with a pitcher of water.
As a brand in touch with its mostly-female customer base, Crystal Light noticed when its customers started carrying bottles of water everywhere. In 2006, Kraft introduced Crystal Light “On the Go” packs, now found in individual packs and ten-stick boxes. The brand also changed its focus from low-cal to low-cal and high function. Crystal Light pushes antioxidants in their tea mixes, vitamin-C in their “Sunrise” powders, and energy, hydration and immunity in their “Enhanced” line. That shift not only parallels the modern beverage industry, it also serves as a microcosm for the whole powdered-drink segment.
“The major growth has come from energy drink mixes and sports drink mixes,” said Mintel Analyst Garima Goel Lal. “Consumers are usually ready to pay higher prices for value-added products.”
Despite those higher prices, drink mixes still ring in as inexpensive refreshments and appeal to “price sensitive” consumers, Goel Lal said – which falls directly in line with the history of powdered drinks.
Kool-Aid, the first powdered drink, hit the market in 1927, according to the Hastings Museum. Long before cult suicides made “drinking the Kool-Aid” into a popular epithet for brainwashing, the brand rose to popularity as an attainable luxury, a step up from pedestrian water. During the Great Depression, inventor Edwin Perkins sold packets for 5 cents each, and cash-strapped families snapped the product off the shelves. Perkins’ company churned out as many as one million packets of the powder per day by the time he sold the brand to Kraft in 1953. Powdered iced teas, lemonades and other products arrived later, and firms also introduced the large-format economy canisters that gave rise to the American standbys of “bug juice” at summer camp and Gatorade showers at the Super Bowl.
But the segment had matured and slowed by the time Bevology co-founder Tom Hicks, about to leave Naked, first contemplated his drink mixes in tablet form. AC Nielsen’s scanner data showed that the segment actually shrunk by 1.1 percent in 2005 in food, drug and mass merchandiser channels (excluding Wal-Mart – a likely source of even more sales). Since then, there’s been an explosion of brands including Emergen-C, ZipFizz, Easy Drink Packs, and Zym. Nielsen’s data shows that the segment’s dollar value has grown by 25 percent in those channels, as marketers have pegged their powders to functional claims and rolled out individual servings.
A typical single-serve drink mix costs between 35 and 55 cents and tops out around 70 cents. Adding a bottle of water raises the total price to a range similar to that of an RTD, but tap water and a tall glass or reusable bottle works just as well as store-bought water in a 16.9-oz PET. That not only makes the carbon-footprint crowd happy, but also puts mixes within the reach of Goel Lal’s price-sensitive consumers. Because of that, she projects powdered drink mixes will add sales to their respective segments.
Zizzazz’s Alarid also noted that customers don’t have to use water as the base liquid for drink mixes. Other beverages, he said, make interesting options – especially alcohol. He pointed to the example of Red Bull. The brand holds a special place in bars where it makes up one half of the now-ubiquitous Red Bull and vodka Favorite or not, it doesn’t allow bartenders any room for creativity. Zizzazz, Alarid said, lets them experiment with four different flavors while still mixing caffeine with liquor.
While versatility with intoxicants might rank as a big perk in bars, consumers can also customize their drink mixes in most situations by simply using more or less water than suggested. Hicks said his wife, for example, drops one Zenergize tablet into a liter of water instead of the suggested half liter to create a drink with a lighter flavor.
Major RTD brands introducing powdered mixes might not like consumers tinkering with their formula, but Gatorade Spokeswoman Jill Kinney said powder extensions buttress the core product.
“With the Powder Packs, we’re providing our consumer with the opportunity to take their Gatorade on-the-go in the event the portability of a ready-to-drink product is a barrier to usage,” she said. “With placement in the powdered drink aisle, we have also created a new point of interaction with our consumers in-store.”
Consumers can find Gatorade Powder Packs near the brand’s sister-product, Propel Fit Powder. Kinney said Propel Fit Powder met at “extremely” positive consumer response on the strength of its low-carb and low-calorie credentials as well as its vitamin payload. She added that the product’s successful debut cleared the way for Gatorade to appear in a compact, quick-mix form.
While that’s all good news for beverage marketers, the benefits of powdered drinks extend to retailers and distributors.?
ALL THOSE INCHES
As ultra-compact products, drink mixes run at a higher price-per square inch than other beverages, and could translate to more coin in your cash drawer. AriZona’s Tea Stix, for example, come in 30-count counter packs that take up 18.75 square inches of shelf space – a space that could hold just three 16 oz. energy drinks – and yield total revenue of $10.50 to $15.00. Selling three 16 oz. energy drinks, on the other hand, would yield a total sale of $6-9. As a bonus, powdered beverages don’t need to be refrigerated, and can be strategically located in otherwise hard-to-use spaces. Crystal Light offers stick-holders that hang on cooler doors, but beverage mixes present a profitable use of space even in bulk. Bevology’s Zenergize products come in 10-tablet tubes that retail for $6.99 and occupy less than an inch of shelf space.
That compact nature offers an additional benefit to retailers – lowered transportation costs – according to Zizzazz’s Alarid.
“For the convenience stores, the margins are much higher than your average drink – mainly because of fuel costs,” he said.
Zizzazz’s 72-count retail boxes weigh less than two pounds, 30 pounds less than 72 8 oz. Red Bulls would weigh. Factor in the much smaller package, and the shipping costs for mixes approach zero when compared to RTDs. Where shipping costs fall, so do environmental impacts, and Hicks noted that the compact nature of the products reduces waste.
“Do you want to recycle one of these small tubes, or do you want to recycle 10 bottles?” Hicks said.
Some stores have even exploited this angle by selling his Zenergize tablets with Sigg, a fast-growing line of metal water bottles, he added.