MIAMI -- Coca-Cola, Pepsi and Cadbury Schweppes control 90% of the beverage market, holding sway over huge distribution chains that reach into restaurants, corporate cafeterias, schools and retail outlets. For startup drink makers, going against these beverage titans is a bit like slamming into a concrete wall, said the Miami Herald.
Pepsi and Coke have such a lock on the marketplace that products and brands like ours have to fight to get distribution, said Darius Bikoff, the founder and CEO of Glac aau, which makes VitaminWater, FruitWater and SmartWater. [image-nocss] They kept us out of the grocery channel for three years.
Still, Bikoff has not done badly, said the report. In 2005, industry analysts estimate his Whitestone, N.Y.-based company sold almost 40 million cases. That would not have been possible, he said, without the support he built in niche markets.
While the big players had the weight to keep him off the shelves at major retailers, Bikoff said he literally went store to store, account to account, selling his naturally-made and vitamin fortified products at organic food markets, health food stores and delis. Once he had clients hooked, they were the ones that started asking their local grocers for it.
The consumer response has been explosive, said Bikoff. And it was the consumers that pulled the product into retail outlets. It is now available at many Publix, Target and Wal-Mart stores, the report said.
When Ted Farnsworth launched the XStream Beverage Group in Fort Lauderdale, Fla., in 2001, he knew finding a distributor would be the biggest hurdleso he became one, buying smaller beverage distributors in the Northeast, Hawaii and South Florida. Owning the means of distribution has given the company a degree of flexibility most drink makers would envy, he said.
This way no one can kick us off the shelf and we can tweak our formula until we can make sure it works, he told the newspaper. It's a strategy that has worked very well for us.
The company carries its own brandsincluding Yohimbe and Chinese Rocket Fuel, which compete in the energy-drink sectorbut also carries third-party products. XStream sold close to a million cases system-wide last year and expects to see a big boost from its recent acquisition of exclusive distribution rights to Spa Water, a European brand.
Companies such as Glac aau and XStream are in the right place at the right time, John Sicher of Beverage Digest told the paper. They are at the intersection of two key beverage trends, he said. One is the growth of bottled water and the other is the growing interest in products and beverages which have a function; i.e., which do more than just taste good and refresh.
But it is coveted territory, the report said. All three of the heavies have started competing in the segment.
But Bikoff is confident that his growing base of health-conscious consumers will help Glac aau prevail. We have the ability to upset this fiefdom, he said. But they do have a 100-year head start.
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