As posted on Beverage Business Insights in Vol. 11, No 87.  29 Aug 2014.

Tho enhanced water biz has been graveyard of burst expectations for indie brands, group in Chicago has found new way to try to crack that store section and justify modest premium price in relentlessly discounted category: by putting meaningful amount of protein in highly drinkable liquid. That’s premise of Protein2o, which offers 15 g of hydrolyzed protein and dose of electrolytes in half-liter bottles that go out at 3 for $5 or even 7 for $10 to garner shoppers’ attention. Proprietary protein blend dubbed HydroLean melds whey and collagen, in light-bodied liquid in Lemon Splash, Grape Splash and Berry Splash flavors. It’s “beyond water,” declares label. Tho brand only is moving beyond Chicago test in recent months, it’s already aroused interest from “several” large CSD cos who’ve felt out co about potential partnerships, contends founder Bob Kral, former exec at Walgreens and GNC. Sucralose-sweetened line comes in at 70 calories per bottle. Bob views it as “lifestyle protein” drink deserving of being shelved in new-age bev set.

Recall that after Coke acquisition of Vitaminwater seemed to leave void in indie channel, numerous brands came to market boasting higher levels of nutrients, only to founder when consumers proved perfectly happy to continue purchasing Vitaminwater, despite its modest nutrient content, at 10 for $10. Another group tried to move consumers to back to premium by employing dosing caps to release nutrients at point of consumption for greater efficacy, but value of that has been hard to communicate and segment hasn’t dislodged many of those consumers either. Protein reps higher-value ingredient available in RTD form only via brands like Muscle Milk that are priced $1 or more above enhanced waters, so maybe that will do the trick.

Co was founded in Melrose Park, Ill, by father/son team of Bob Kral and Robert Kral Jr. Bob was merchandising svp at Walgreens during chain’s launch of brands like Vitaminwater, Red Bull and 5-Hour Energy, then garnered protein experience as purchasing evp at GNC. Robert handles marketing and procurement, while Bob is handling sales duties himself while co recruits sales specialists. Co numbers among key investors and allies David Baum, whose Convenience Valet distributorship is adept at tasks like repacking Tylenol into 1- and 2-count packs and has access to 50K c-stores. Protein2o drew $6 mil in funding from CK Capital last fall (tho arrangement was only just announced).

Good velocities at chains like Hy-Vee have confirmed that brand might work in grocery channel, not just specialty chains like Vitamin World, Krals believe. By now, Kroger has placed Protein2o in water set, and Target will inaugurate 55-store test in Jan. Promo strategy is to offer brand at 3 for $5 in grocers, 2 for $4 in c-stores, and occasionally go down to 7 for $10 so shoppers try all 3 flavors.

Bob Kral termed brand a “natural” for DSD distribution, but said co so far has stuck to non-exclusive agreements while it gets handle on preferences of chains, some of which are taking it directly thru own warehouses. Brand info at DrinkProtein2o.com.