January 19, 2021 10:29 AM
Protein2o launched a vegan protein water last month
Courtesy of Protein2o
Back in the 2000s, when Bob Kral was in charge of filling Walgreen’s shelves with product, he had a hunch about protein products.
Kral was at Walgreens when it launched VitaminWater and 5-hour Energy, and witnessed customers’ growing infatuation with beverages that do more than just hydrate. He left to work at GNC, where he watched the popularity of protein supplements skyrocket before leaving to start his own protein water company, Protein2o.
Seven years later, Kral has amassed a leadership team with decades of experience at beverage brands such as Tropicana and Gatorade. The company launched its first vegan protein water products last month and is attempting to tap into the swelling base of consumers adding plant-based products to their diets.
Though small compared to some of its protein drink competitors, Protein2o is growing. Revenue in 2020 was up about 60 percent to roughly $30 million, Kral said. But it is not all sunshine for the still relatively unknown brand. As COVID-19 sank its teeth in last March, Protein2o’s brick-and-mortar sales fell off a cliff, Kral said.
It was not alone. Smaller, lesser-known brands have suffered during the pandemic without in-store sampling, which typically serves as a major vessel for gaining customers. Simultaneously, grocery shoppers have reduced browsing and gravitated toward brands they know.
“For a brand like ours that’s relatively unknown, for so many customers, liquid to lips is really important,” said Andy Horrow, president of Protein2o. “When you can’t sample because of the pandemic, you’ve got to pull out every other vehicle you can and nothing really can substitute.”
Protein2o’s waters are infused with whey protein, and have flavors such as dragonfruit blackberry, peach mango and wild cherry. Its plant-based drinks use pea protein, and come in lemongrass chamomile, key lime coconut and blackberry basil. There’s also a line of whey-based protein waters that have added electrolytes and caffeine.
Digital and social marketing, influencers, brightly colored store displays—Protein2o tried it all, said Harrow, who worked for 13 years at PepsiCo, including as chief marketing officer of Tropicana juices.
Ultimately, Protein2o found strength in e-commerce as consumers turned to shopping for groceries online. Kral said online sales drove most of the company’s growth last year.
“We can literally go out and put 3,000 cases on Amazon (and) almost immediately we know whether we’re going to be successful or not,” he said. “That’s our advantage and that’s the only way we can compete against the billion-dollar companies.”
Even small wins against the protein water giants are exciting, Kral said.
“When I was at Walgreens and I was running merchandising there, it’s like steering a battleship,” he said. “This company is a jet ski. While that battleship is turning, we’re running the jet ski around.”
Now is a good time to be growing a functional water brand, said Paul Earle, an adjust lecturer of innovation and entrepreneurship at Northwestern University’s Kellogg School of Business.
The space has already been growing for several years, and consumers are conditioned to look for innovation and try new products, Earle said. He also expects that since so many consumers have been gravitating toward known brands, 2021 will bring pent up energy for experimentation.
A recent study on food and drink trends from Mintel also said the pandemic has made consumers prioritize well being and demand products that do more.
“We’re entering the ‘Yes and’ economy,” Earle said. “When it comes to products like this, it can’t just be water. It’s water plus.”
Indeed, the functional water market is expected to reach more than $18.2 billion globally by the end of 2025, up from more than $10.3 billion in 2017, according to data from market research firm Fortune Business Insights. The U.S. market will likely dominate that growth, as its functional water market is already well developed, and sales of bottled sodas continue to decline.
However, the beverages world is extremely competitive, Earle said. There are plenty of players who make a splash and then disappear.
“It’s one thing to build a brand from zero to some kind of critical mass. It’s quite another to scale it beyond that,” he said. “Because now you’re in the sandbox with Coke and Pepsi, and they, to put it mildly, do not like other people to come into their space.”