Talking Rain CEO Kevin Klock says his $400m Sparkling ICE brand targets broad US consumers who care more about refreshment than calories and warns that new stevias like Reb D could be considered artificial.
Speaking yesterday at Wells Fargo Securities’ inaugural ‘Beverage Buzz’ conference call, organized by analyst and managing director Bonnie Herzog, Klock said parent Talking Rain was still confident Sparkling ICE could achieve $1bn in sales by 2018, from $10m in early 2010, where it currently plays in the $350-400m ballpark.
Sparkling ICE is a zero calorie beverage sweetened with sucralose and made with natural flavors, vitamins, antioxidants and lightly carbonated spring water.
Key to maintaining the brand’s “explosive growth”, Klock said, was its move to a direct store distribution (DSD) model from last year that will see it cover every US county this month – and a boost in convenience store (C-Store) volumes.
Referencing the diet soda decline – Coke, Pepsi and Dr Pepper are all struggling – and speculation as to whether consumer distaste for artificial sweeteners could be partly to blame, Herzog asked Klock if Sparkling ICE was bucking that trend, since it uses non-natural sweetener sucralose?
Klock replied by referring to the “dilemma” of artificial versus natural sweeteners in beverages, and said Sparkling ICE had tried and failed to formulate drinks using stevia.
If you modify stevia, isn’t it artificial?
“But we can’t make a good tasting beverage with stevia. We can’t get away from the liquorice notes,” he said, adding that the brand was unable to work with stevia in its pure form.
“You hear a lot of attention to Rebaudioside D [PepsiCo is investing heavily ] and Reb X [subject to a Coke, PureCircle partnership ], some of these new modified stevias that are being worked on. Then the question becomes ‘are those really natural at that point’?” Klock said.
“Then if you start modifying it, how is it any different from any other that is considered artificial because then you’re trying to get the flavonoids out of it that are creating the issues?”
Klock said Sparkling ICE didn’t see a ‘silver bullet’ natural sweetener coming along, and had tried to formulate using monk fruit and other alternatives.
“But we’ve not found anything that, to create a refreshing beverage – and remember at the end of the day it has to be at a value the consumer is prepared to pay,” he said.
“We don’t see anything happening in that arena…some of the major players are now starting to realize it’s a long way out.
“If you want to get low to zero calories then you’ll have to use an artificial sweetener to make it taste good,” Klock added. “We’d love to have a natural sweetener, because that’s the holy grail.”
‘The US consumer has been missing refreshment…’
That said, the Talking Rain chief hinted to Herzog that the lack thereof did not harm the Sparkling ICE brand positioning.
“Our brand positioning is simple. It’s about refreshment. Our viewpoint is that the beverage industry went down this path – we did too, we worked on protein drinks, of all these functional beverages – but we feel the US consumer has been missing refreshment for a long time,” he said.
“Our positioning is great tasting and refreshing. As far as it being zero calorie, that’s great…but I don’t think zero calories is the reason for this growth rate. People are looking for flavor, not necessarily zero calories," Klock added.
“People are leaving diet drinks. Well the reality is that energy drinks are growing very rapidly, high calorie lemonades have grown very rapidly, heavier calorie teas too. So we think there’s a broader group of people who just want refreshment.”
Klock said Sparkling ICE was taking share from diet sodas, other waters and teas, but insisted that the brand was winning against “anything you consider refreshing” and enhanced waters in particular.
“The enhanced water category is taking a beating,” he said. “Probably that’s going to continue.”
Women aged 24-45 are the core Sparkling ICE consumers (24%), Klock said, but he insisted that the drink has a broad appeal with a slight female skew – its average shelf space rose by a minimum of 50% in 2013.