Business Plan for 1999 December 1998

4905 Del Ray Avenue, Suite 304 Bethesda, Maryland 20814

Phone: 301-652-3556 Fax: 301-652-3557

Email: [email protected]

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TABLE OF CONTENTS

Mission Statement ..…………………………………………………………4 Executive Summary ..………………………………………………………..5 Company Story ..…………………………………………………………….6 Product.……………………………………………………………………….6 Product description ..…………………………………………..…….6-8

Flagship line of flavors and new flavors for 1999……………………..8-9 Production and manufacturing ..………………………………..……9-10 Market Opportunity …………………………………………………………10

Profile of target customer ……………………………………………12 Market research and market response ……………………………….13-16

Marketing and Distribution …………………………………………………..16 Distribution and promotion …………………………………………..16-17 Packaging and pricing …..……………………………………………17 International markets …………………..……………………….…….17-18 Product development and future products ……………………………18 Management …………………………………………………………………..18-20 Statement and aspirations for social responsibility ……………………………20-21 Financial Statements YTD and Projections ……………………………………21-23 The Investment Opportunity …………………………………………………..24 The Offering ……………………………………………………………24 Financing History ….…………………………………………………..24 Exit strategies ………………………………………………………….25 Investment risks ………………….…………………………………….25 Competitive Advantage ………………………….…………………….25-26 A Parting Thought .………………………………………………….……..…26

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Mission Statement

Honest Tea seeks to provide bottled tea that tastes like tea- a world of flavor freshly brewed and barely sweetened. We seek to

provide better-tasting, healthier teas the way nature and their cultures of origin intended them to be. We strive for relationships with our

customers, employees, suppliers and stakeholders which are as healthy and honest as the tea we brew.

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Executive Summary Honest Tea, a bottled iced tea company, has completed a strong summer of sales in the mid-Atlantic region and is now raising capital to fund the brand’s expansion across the United States as well as overseas. Since the all-natural tea first hit the mid-Atlantic market in June of 1998, Honest Tea has developed a loyal following of customers who have made the product the best-selling tea in its largest account, Fresh Fields/Whole Food Markets, significantly outselling Snapple and the Whole Foods 365 brand. In addition to success in retail channels, Honest Tea has also been warmly received in food service channels. Unlike the sweetened tea drinks made from concentrate or powder which currently dominate the $2 billion bottled tea market, Honest Tea is brewed with loose leaf tea and then barely sweetened with pure cane sugar or honey. The product is poised to take advantage of the rapid growth in the bottled tea, bottled water, and natural food markets, as well as the developing “tea culture” in the United States. It also has potential to tap into the large market of health-conscious diet soda drinkers. The target audience is an emerging subset of the population, which seeks out authentic products and is attuned to global and environmental issues. Toward the end of the summer and through the fall the company continued to penetrate large supermarket chains and is in the process of finalizing a national network of brokers and distributors for 1999. In September 1998 the company hired two sales managers, each of whom brings more than 15 years of experience and contacts to the business. Although there was an often painful and occasionally costly product development phase, the company has now perfected the brewing and production process to the point where it can produce several thousand cases in one shift with the desired consistency. In early 1999 the company will add a West Coast site to its current East Coast production site. In addition, the company will be implementing steps to consolidate its packaging operation which will widen the per case profit margin. The company has demonstrated an ability to gain free media coverage, including stories in the Washington Post, the Wall Street Journal, and Fitness Magazine. It has also cultivated a loyal customer base among some of the country’s most influential celebrities which it intends to publicize at the appropriate time. It has just entered into a contract with a well- recognized public relations firm, which has demonstrated its success with several early- stage companies. Finally, the company has finalized a partnership with a Native American tribe that will position Honest Tea to emerge as a leader in the socially responsible business movement. Honest Tea is looking to raise up to $1.2 million in equity capital to finance the national distribution of the product as well as the introduction of two new flavors and international sales.

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Company Story Honest Tea is a company brewed in the classic entrepreneurial tradition. After a parching run through Central Park in 1997, Seth Goldman teamed up with his Yale School of Management professor, Barry Nalebuff, to reignite their three-year old conversation on the beverage industry. While at Yale Goldman and Nalebuff had converged on the opportunity in the beverage market between the supersweet drinks and the flavorless waters. The energy they share around the idea of a less-sweet beverage leads to several marathon tea-brewing sessions. Their conversation is fueled in part by their extensive travels through tea-drinking cultures such as India, China and Russia. As ideas and investors for the company gather critical mass, Seth takes the dive. He leaves his marketing and sales post at Calvert Group, the nation’s largest family of socially and environmentally responsible mutual funds, and launches Honest Tea out of the guest room in his house. Using five large thermoses and label mock-ups, he sells the product to the eighteen Fresh Fields stores of the Whole Foods Market chain. Once the tea has been manufactured, the company moves into a small office and distributes tea out of U-Hauls until other distributors start carrying the product. By the end of the summer, Honest Tea has become the best-selling tea throughout the Fresh Fields chain and has been accepted by several national supermarket chains and distributors. The Product The Taste: Bottled tea that tastes like tea, freshly brewed and barely sweetened Somewhere between the pumped-up, sugar-saturated drinks and the tasteless waters, there is a need for a healthier beverage which provides genuine natural taste without the artificially concocted sweeteners and preservatives designed to compensate for lack of taste. Honest Tea allows people to enjoy the world’s second most popular drink the way hundreds of civilizations and nature intended it to be. Tea that tastes like tea -- A world of flavor freshly brewed and barely sweetened. The concept of Honest Tea is as direct and clear as the tea we brew – we start with select tea leaves from around the world, then we brew the tea in spring water and add a hint of honey or pure cane sugar. Finally, we filter the tea to produce a pure genuine taste that doesn’t need a disguise. Unlike most of the bottled teas in the marketplace, Honest Tea is not made with bricks of tea dust, tea concentrate, or other artificial sweeteners or acids. The tea has no bitter aftertaste or sugar kick, and does not leave a syrupy film on the drinker’s teeth. To make a comparison with wine, today’s leading iced teas are like jug wine and Honest Tea is like Robert Mondavi Opus One. But unlike fine wine, premium bottled tea is quite affordable, usually priced under $1.50 for 16 ounces. Although taste is the primary benefit of drinking Honest Tea, the product has three other benefits which enhance its acceptance and marketability:

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Low in calories: A 12-ounce serving of Honest Tea has 17 calories, dramatically less than other bottled teas or comparable beverages. We have found that the low-calorie profile of Honest Tea makes the drink attractive to three key audiences – 1) Disenchanted

bottled tea drinkers who think the drinks are too sweet, 2) Bottled water drinkers who long for taste and variety and 3) diet soda drinkers who are interested a low-calorie beverage that doesn’t contain artificial sweeteners such as Nutrasweet. The following table illustrates the difference between Honest Tea and the rest of the beverage market: There are three other players in the less-sweetened bottled tea market that can be considered among the competition for Honest Tea: TeJava, Malibu Teaz and The Republic of Tea. All three brands are currently based and primarily focused on the West Coast. We are heartened by their existence because it confirms our belief that there are untapped opportunities in the beverage market, particularly on the East Coast, where none of the new entrants has any significant presence. TeJava, which is enjoying a warm reception in California, is a mild-tasting, zero-calorie unsweetened tea produced by Crystal Geyser that comes in only one flavor. We believe this product, which has been described by a beverage consultant as “water with a tea aftertaste,” would be more flavorful if it were barely sweetened. While TeJava clearly competes with our product, we believe there is room for more than one product in the low-calorie tea marketplace. We also believe that Honest Tea has an edge over TeJava because our drinks are more flavorful and come in a wider variety of flavors.

Calories per 8-ounce serving

0 20 40 60 80 100 120 140 160 180

Honest Tea

Nestea

Tazo Tazoberry

Tradew inds Honey w / Ginseng

Lipton Lemon

Mistic

SoBe Oolong

AriZona

Coca-Cola

Snapple Lemon

Tropicana Pure Premium

Fruitopia Fruit Passion

Nantuckt Nectrs Pnpple Orng Guva

Starbucks Frappucino

Ocean Spray CranGrape

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Malibu Teaz is a company focused on lightly sweetened herbal tea, 35 calories for an 8 ounce serving. The products seem to have limited distribution and the label, which features a topless mermaid, seems designed to cater to a different clientele than Honest Tea. The Republic of Tea is a well-established producer of loose leaf teas which has recently begun selling unsweetened bottled tea exclusively through its catalogue and premium restaurants. The cost of a four-pack in the catalogue is $15.00, or $3.75 for a 17 ounce bottle. We believe that this price is not viable in retail channels and have spoken with several disillusioned distributors whose experience confirms that assumption. Even if the Republic of Tea changed its sales strategy, we still see room for more than one player in the low-calorie tea market. We also think the modest amount of natural sweetener in Honest Tea helps create a superior flavor. One other brand that can be considered competition is Tazo, which presents itself as “The reincarnation of Tea." While Tazo is enjoying some success in natural foods channels, we feel that Honest Tea is different from Tazo in three important ways: first Honest Tea is genuine tea whereas Tazo is usually tea mixed with juice or other sweeteners, (usually 80 calories for an 8-ounce serving). Secondly, Tazo’s packaging, with its mysterious symbols and discussion of “the mumbled chantings of a certified tea shaman” is designed to reach a New Age audience. In contrast, the colorful art on the Honest Tea labels are accessible to a wider audience, offering a more genuine tea experience. Finally, Tazo’s price point is significantly higher than Honest Tea in supermarket channels, selling for $1.69 versus Honest Tea’s price of $1.19. Where the two brands have competed head-to- head, Honest Tea has significantly outsold, and in many cases, eliminated Tazo from the shelf. Our response to Tazo’s “reincarnation of tea” is that tea doesn’t need to be reincarnated if it is made right the first time. Health benefits of brewed tea: The curative properties of tea have been known for thousands of years. Because Honest Tea is brewed from genuine tea leaves it imparts many health benefits not found in tea-flavored drinks. In addition to serving as a digestive aid, tea has powerful antioxidants, which impair the development of free radicals which contribute to cancer and heart disease. The antioxidants in green tea are believed to be at least 100 times more effective than Vitamin C and twenty-five times better than Vitamin E at protecting cells and DNA from damage believed to be linked to cancer, heart disease and other potentially life-threatening illnesses. Cultural experience of tea: Each Honest Tea flavor is brewed based on a recipe perfected over generations in a specific region of the world. As a result, drinking Honest Tea becomes a cultural experience, from the genuine tastes to the distinctive international art and information on the label. While some bottled teas seek to cloak themselves in a cosmopolitan mantle by including exotic-looking drawings on the label, the front of each Honest Tea label features authentic art from the culture of origin. Flagship line of flavors – Our flagship line of teas come from four different continents:

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Kashmiri Chai – The people of Kashmir have mixed spices into their chai for generations. Our recipe is made with spring water, premium tea leaves, crushed cardamom, cinnamon, orange peel, cloves, pepper, ginger, malic acid and a touch of sucanat evaporated sugar cane juice. Approximately one third the caffeine of coffee. Black Forest Berry -- Our Black Forest Berry tea is a fruit infusion made with spring water, hibiscus, currants, strawberries, raspberries, brambleberries, elderberries, and a touch of unrefined organic cane sugar. Caffeine-free. Moroccan Mint -- Our Moroccan Mint is a tightly rolled green tea from China blended with a generous amount of peppermint, brewed in spring water with citric acid and a touch of white clover honey. Approximately one fourth the caffeine of coffee. Gold Rush -- Our Gold Rush tea is an herbal infusion made with spring water, rooibush, rosehips, chamomile, cinnamon, peppermint, ginger, orange peel, malic acid, and a touch of raw cane sugar, and a natural flavors. Caffeine-free. Assam – These golden-tipped flowery leaves from the Sonarie Estate gain their distinctive taste from being picked as tender leaf buds at the height of the season. Brewed in spring water with Vitamin C, malic acid, unrefined organic cane sugar, and a hint of maple syrup. Approximately one half the caffeine of coffee. In early 1999 we will be introducing two new teas: Decaf Ceylon -- In response to feedback from more than 500 sampling events where we continually heard requests for a decaffeinated black tea, we will be introducing a Decaf Ceylon with lemon grass. The label for this tea features original art which captures the cultural and relaxing attributes of the tea. First Nation’s Peppermint – After months of negotiation and a consultation with the tribal elders, we have developed an organic herbal tea in conjunction with a woman-owned company based on the Crow Reservation in Montana. This tea is exciting not only for its flavor but also for the partnership we have developed with the tribe. In addition to licensing the flavor and artwork from the tribe, we are also buying the tea from our partner on the reservation with the understanding that over time the community will develop the capacity to grow all the ingredients on the reservation. This unprecedented relationship should prove to be a valuable public relations tool. Production and Manufacturing Though we had our share of “learning experiences” along the way, we have developed several proprietary brewing tools and techniques which enable us to manufacture several thousand cases of tea a day on both coasts with the desired consistency. In addition, since we have a full-time brewmaster on staff, the company retains the knowledge of manufacturing the product, instead of relying on a co-packer for that information.

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The tea is brewed at a brewing and bottling facility located within driving range of the target market. The site was selected based on numerous criteria including capacity, reputation, quality control, production efficiency and willingness to invest in a long-term partnership with Honest Tea. All partners involved in the production process meet United States Department of Agriculture Hazard Analysis Critical Control Plant (HACCP) standards. We are in the process of obtaining Kosher certification from the Orthodox Union (“Circle U”). In early 1999 we will be making a change in our manufacturing process that will not affect the quality of the product but will have important ramifications for our profitability. Instead of a two-step packaging process, we will consolidate the brewing and labeling under one roof. This consolidation will save Honest Tea more than two dollars a case. Our tea leaves are provided by internationally known companies that specialize in tea buying, blending and importation. Our primary source is Hälssen & Lyon of Germany, the largest specialty tea company in the world. Another, Assam Tea Traders, has direct ties to tea estates in the Assam District of Northern India. The other ingredients are commodities which are in plentiful supply. As the Company grows in size, we anticipate dealing more directly with the tea growers. We intend to visit the tea estates so that we can verify that the labor conditions of the tea workers meet international standards and International Labor Organization conventions. We also aspire to ensure that the tea is grown organically. Market Opportunity Beyond Snapple – The Emerging Market for Quality Bottled Tea We have identified four market trends that are fueling demand for Honest Tea within the $72 billion non-alcoholic liquid refreshment beverage market. 1. Explosive growth in Ready-to-Drink (RTD) tea and bottled water markets -- Although carbonated soft drinks still dominate the beverage market, in the past ten years

Explosive growth in RTD tea & water markets

Boom in Natural Foods

Demand for a healthier, genuine bottled tea

Rise of Cultural Creatives

Emergence of tea culture

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Ready-To-Drink teas and bottled water have emerged as alternatives. Since 1992 the US tea market has enjoyed 60% annual growth, reaching sales of $2 billion in 1996. The bottled water market has grown to $2.4 billion, with most of the growth fueled by sales of single-serving bottles.

RTD Tea

(estimated)

Water Sof t Drinks

0

2

4

6

8

10

12

14

16

RTD Tea

(estimated)

Water Sof t Drinks

1997 U.S. Beverage consumption in billions of gallons*

*Water and Soft drink figures come from Beverage Marketing, Inc. The RTD Tea figure is based on 1997 sales estimate of $2.5 billion, which equates to roughly one billion gallons. 2. Beyond the tea bag -- The emergence of tea culture – Snapple and similar brands helped make tea accessible to a broader population. But now in the same way that gourmet coffees have become popular, consumers are beginning to develop an appreciation for finer teas. Over the last six years U.S. loose leaf tea sales have more than doubled, from $1.8 billion in 1990 to $4.2 billion in 19961. According to the Tea Council, there are over a thousand tea houses or tea parlors in the country, mostly opened within the last two or three years. These parlors focus almost exclusively on tea, products that go with tea as well as tea hardware. They carry names such as Teaism, TeaLuxe, Elixir Tonics and Teas, and Tea & Company. Even Lipton is opening a flagship tea bar in Pasadena, California. In addition to the burgeoning of tea cafes, tea culture is spreading in the form of tea magazines, tea-flavored ice cream, frozen tea ice bars, tea-scented perfume and bubble bath, tea jelly, tea calendars and even books about tea. The paperback Loving Tea was recently spotted as a “cash register book” at the bookstore, commanding prime space next to Dilbert and Chicken Soup for the Soul. 3. The natural foods boom – The natural product category has also exploded in the past 6 years. Fueled by an increase in health consciousness and rising environmental awareness, demand has grown for foods and products which are best when eaten or used as close to their original state in nature. According to Natural Foods Merchandiser, the natural products industry has nearly tripled in size since 1990 from $4.2 billion to $11.5 billion in 1996. And the boom is expected to continue well into the next decade. Analysts, such as Mark Hanratty of Paine Webber, are forecasting 15-20 percent annual growth over the next three to five years, reaching $50 billion by 2003.

1 Investor’s Business Daily, “Tea: Are you Prepared to Join the Party?”, January 30, 1998, p1.

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4. Rise of Cultural Creatives – Market research in the past three years has identified a consumer mindset which would seem to be particularly receptive to Honest Tea. A 1996 study by the market research firm American LIVES identified a subset of the population, roughly 44 million Americans, which they labeled “Cultural Creatives”2. Among the key characteristics and values identified for this group, the following seem to make them ideal customers for Honest Tea:

• Experiential consumers – they want to know where a product came from, how it was made, and who made it

• Holistic – they view nature as sacred; they form the core market for alternative

health care and natural foods • Aggressive consumers of cultural products, love of things foreign and exotic • Desire for authenticity – favoring high integrity over high fashion • Disdainful of mainstream media and consumerist culture which, in their view, is

too superficial, not enough attention to the full story

• Attuned to global issues and whole systems, have a sense of belonging to a global village

Profile of Target Customer – When we combine these four trends and compare them with the demographics of the Cultural Creatives study as well as other market demographic information3, we are able to develop a profile of our target customers:

• 60% women, 40% men • Median age 42, with a range from 30-65 • Likely to live near a concentrated urban area • Likely to have graduated college or have an advanced degree • Likely to currently be bottled water or RTD tea drinkers, occasionally drink

iced cappuccino • Interested in running, hiking and outdoor healthy activities • Average family income $52,000

Market Research – To test the receptivity of this audience to Honest Tea, we held two focus groups in New York. The sessions, facilitated by an independent market research firm, provided encouraging results and helpful guidance in terms of product line and label presentation. The first focus group consisted of health-conscious women between the ages of 30 and 60, all of whom occasionally drink bottled tea or bottled water. The second 2 American Demographics, February 1997, Dr. Paul H. Ray 3 1997 MRI Spring data, population weighted

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group was a mix of men and women who were selected based on their responses to questions which identified them as fitting the Cultural Creatives profile. The sessions began with a discussion of what was missing in the beverage market. Within 5 minutes, unprompted by the moderator, both groups agreed that they wanted something that was not as boring as water but didn’t have all the “junk” in commercial bottled tea. One important lesson from the focus groups was that most consumers have a limited understanding about the differences between tea varieties. The situation may be comparable to the way many consumers thought about wine several decades ago. At first people distinguished wines in terms of red and white wine, then in terms of rose and chablis, then in terms of California wines versus French wines, later by the kind of grape, and today some people select wines based on the estate. The focus groups suggested that the American tea market is still in the red versus white stage. One implication of this finding was that our labels and other communications needed to include some educational information about each tea, including health benefits, history and country of origin. Market Response -- More important than our pre-market focus group is the market response to Honest Tea, i.e. sales. In the eighteen Fresh Fields/Whole Foods Markets of the mid-Atlantic region Honest Tea has become the best-selling bottled tea, outselling Snapple and the house brand. During the month of August, when Honest Tea was promotionally priced at 99 cents, 22,417 bottles of teas were sold, with several stores averaging more than 100 bottles per day. Perhaps more important than the numbers from one region are the thousands of responses we have gotten from our customers via unsolicited emails, letters, phone calls, and conversations at hundreds of sampling events. The feedback we have received make it clear that we have created something that was missing in the marketplace. Every week we receive several unsolicited emails and letters from customers. Typical comments include the following (see Exhibit A for more tea-mail): Subject: BEST TEA EVER! Dear Honest Tea, I have never bought a product that I thought was so fantastic that I felt the need to write about it. I love tea, but I always would brew it myself and cart it around because I can't stand the syrupy-sweet "tea" that is sold most places. I saw your tea at Fresh Fields in Annapolis, MD. At first I was hesitant because I have it in my mind that all bottled iced teas = yucky sweet. But I was intrigued by the flavor choices and yes, the pretty bottles and bought one of each. Well, I went to my car and proceeded to drink all of them right then and there. The first one was so good and so different that I couldn't help myself and had to try the rest. It actually tasted like tea! THEN... when I turned the bottle over and saw how few calories were in it I flipped! There is no reason not to drink this tea! You guys have truly done it, this is quality stuff! So keep it up and get this tea out there! I wish you success and happy brewing! -Cindy W., Annapolis, MD RE: Help! I need Honest Tea!

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I just returned from a trip to Wash, DC (I live in Pittsburgh) and found that your tea is not available here. I love it and must have more. Can you ship it to me? Price is no object (to some degree). If you cannot ship it to me please advise me of any support groups or counseling that I may seek in order to recover from this lack of Honest Tea. I must warn you that I may get desperate, causing me to highjack an Honest Tea truck in the Washington area and bring it back to Pittsburgh. I am becoming a heartless, Honest Tea junkie. I hope that you can help. Thanks, EEOber Subject: Chai tea was great! I just came from my local Fresh Fields Market in Reston, VA after trying a bottle of your Kashmiri Chai tea. Fantastic! Imagine my surprise to learn the entire bottle was only 34 calories and 1/3 the caffeine of coffee! This is great stuff folks - my only complaint is that I can't seem to find anywhere that sells it by the case. I don't mind buying a couple bottles at a time for occasional consumption, but I would appreciate being able to purchase a case to bring to work and a case to keep at home. It would be a great way to replace soda and other sugary, high calorie drinks in my diet. Unfortunately, I cannot spare the time to stop at the store everyday to pick up a couple bottles. Any plans to sell by the case (hopefully at a slight discount)?? Colin C. Reston, VA Re: Honest Tea! Your tea is fabulous! I have never written a letter in support of a food product before, but ever since I stumbled across your Honest Tea last week at Fairway, I've been raving about it! At last, someone intelligent enough to realize that not all people like that syrupy junk that is on the market, and that nutri-sweet and artificial sweeteners taste like crap. I've grown so tired of "well, it's what the consumers are demanding." Not. The rest of us have spent the last decade or so brewing tea at home and keeping it in our refrigerators since traditional marketing researchers have been incapable of using their research to produce anything innovative. Bravo, bravo, bravo. Nice labels, too. Lisa P., New York City

The response from grocery buyers at the corporate level has been equally as exciting. The new products buyer for Wild Oats/Alfalfa Community Market approved Honest Tea for sale in all of the chains 60+ stores. Here is her comment to the grocery buyers which she sent out on the Product Approval Form (see Exhibit B):

Mark My Words: Honest Tea will be a success. The only bottled tea that is not loaded with sugars and tastes great. This is what people (like me) have been seeking for years. Too good to be true? No! I mean it now – BRING THESE IN!

The natural foods buyer for Harris Teeter chose to carry the product in all 140 stores. Her buying committee told her this was the first innovation in the iced tea market they’d seen in about five years. Some even said that Honest Tea represents a new beverage category.

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In addition to this feedback, Honest Tea has been presented with several promising opportunities to be plugged into several large supermarket chains. The status of these opportunities is as follows: Store # of outlets Region Status Penetration

Albertson’s 96 Florida December decision

Food Emporium 40 NY/NJ December decision

Genuardi’s 32 NJ/PA/DE Approved for all stores

Will go on sale in December ‘98

Giant 179 C/MD/VA/DE NJ/PA

Approved On sale in flagship store

Harris Teeter 140 NC/SC/GA/VA /KY/TN

Approved for all stores

On sale in all stores

Shaw’s 127 New England Approved On sale in test market store

Superfresh

78 NJ/PA Approved for all stores

On sale in some stores

Ukrop’s 40 VA Approved for all stores

On sale in some stores

Whole Foods 117 Nationwide Approved for mid- Atlantic and SE

On sale in 20 stores

Wild Oats/ Alfalfa’s

60 Nationwide Approved for all stores

On sale in 12 stores

In addition to success in the supermarket channel, Honest Tea is also being warmly received in food service and retail accounts. We have experienced strong repeat sales in cafeterias such as Bear Stearns, Lazard Freres and have just been approved for sale in the NFL corporate cafeteria. Honest Tea is the best-selling beverage at the Mangia gourmet eatery in Manhattan where it is priced at $2.50 a bottle. Honest Tea is also sold in well- known restaurants such as Legal Sea Foods. Finally, we have also had strong repeat sales from food outlets on the campuses of Boston University, Harvard University, Yale University and Wellesley College. As with Snapple and other bottled iced teas, there does seem to be a seasonality affect to the sales of Honest Tea, particularly in the supermarket channel. However, as we expand our distribution to the Southern states and to more upscale cafeterias, we expect to see less of a dip in sales during the winter months. Marketing & Distribution Given the above market trends, target customer profile and record of success in the mid- Atlantic natural and specialty foods market, Honest Tea’s marketing and distribution strategy for 1999 is as follows:

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1. National natural/specialty foods channels, working with brokers and distributors to

achieve full distribution throughout the Whole Foods and Wild Oats chains as well as natural foods buyers in mainstream supermarkets.

2. Higher end food service – working with large national food distributors such as Sysco,

Aramark and Marriott to penetrate restaurants and institutional eateries. 3. Opportunistic public relations and extensive sampling in health and natural food

settings to build the brand name as well as facilitate trial. National natural/specialty foods channels – We are in the process of finalizing national distribution and brokerage arrangements. We are currently working with Haddon House, the largest retail distributor of gourmet foods on the East Coast. In addition, we have recently contracted with numerous natural food brokers to represent our product for the East Coast, Midwest, West Coast and the South Higher end food service – We are working food management companies to expand our presence in business and institutional cafeterias. and has been approved for sale in Restaurant Associates and Marriott International. We are currently in discussion with Aramark and Sysco. We are also in conversation with several large restaurant chains and sports arenas. Promotion We recognize that because we are not as well-financed or as well-established as much of our competition, whenever we play by their marketing rules, we are at a disadvantage. Therefore, instead of spending a lot of money on advertising, Honest Tea relies instead on opportunistic ways to gain public attention and promote trial of the product. We have proven our ability to gain positive free media coverage in The Washington Post, The Wall Street Journal, Christian Science Monitor and Fortune magazine. (See Exhibit C). In addition to what has already been printed, several articles are in the pipeline, including upcoming articles in magazines such as Shape, Self, Fitness, Start-Ups, and Seventeen. We are currently finalizing a contract with a highly-regarded public relations firm, which has a proven track record of gaining extensive exposure for early-stage companies. Just as we have paid a portion of our label designer’s expenses in the form of equity, we intend to pay a portion of the PR firm’s retainer in stock to encourage their investment in our business. We also have developed a web page at www.honesttea.com which has regularly attracts 50 visitors a day and has helped attract several new accounts. In addition we have been very aggressive with sampling. Because Honest Tea started the summer as an unknown product and is unlike any product currently on the market, we took great pains to introduce as many people to the product as we could. During the month of August we organized demos as often as eight times a month per Fresh Fields/Whole Foods Market (See Exhibits D).

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Finally, we have developed a loyal following among several nationally-known celebrities which we hope to use to our advantage this coming Spring. For example, we recently rushed the delivery of ten cases to Oprah Winfrey’s studios at her personal request. Packaging and Pricing Honest Tea’s flagship line of products is sold in 16 ounce glass bottles. All of our labels feature culturally authentic artwork from the tea’s country of origin. All of our caps have a distinctive black matte finish which complements the black border on the front of the label. In 1999 our caps will have the “pop-button” seal. Our packaging communicates the attributes of the tea inside in three ways:

1) High quality – By using colorful and artistically sophisticated artwork presented with spot labels, (i.e. front and back instead of wraparound) our bottles evoke comparisons with a bottle of fine wine or other gourmet food.

2) Culturally authentic – By using artwork directly from the culture where the tea comes from, we are presenting the tea as is, without any “spin” or Westernized interpretation of what an Indian painting might look like.

3) Honest – By using the spot labels, there is more space for the consumer to see the tea. Since we use real tea leaves, we have nothing to hide inside.

4) Simplicity – The essence of this millenia-old drink of water and leaves is its simplicity. Our packaging has no flashy slogans, advertising call-outs or marketing hype. The package helps condition the consumer for what they are about to experience, an honest taste of tea.

In 1999 we plan to introduce a “Varietea” pack which will contain a selection of flavors, and will help introduce consumers to our product. The Varietea pack will be sold at a modest discount to encourage first-time trial. The retail price for a 16 ounce Honest Tea varies between $1.19 and $2.00, slightly more expensive than Snapple, which usually sells for $.99. In food service accounts we have seen the price range from $1.29 to $2.50. International Markets Since tea is the world’s second most popular beverage, there is an intrinsic international appeal for Honest Tea’s world of flavor freshly brewed and barely sweetened. Although our primary energies are directed toward the US market, we have recently entered into a contract with a firm that has extensive international marketing expertise. They will be showing our product in the UK early next year with the intent to sell the bottled tea in the Spring of 1999. Product Development and Future Products In 1999 we will be introducing at least two new flavors in direct response to feedback from our customers. Our Decaf Ceylon will be the only decaffeinated black tea served in a Ready-to-Drink bottle. The decaf tea has a great taste and a captivating label.

Honest Tea Business Plan – December 1998

17

In addition to being our first organic tea, our First Nation Peppermint has a smooth taste and a compelling label featuring an intense photo of a Crow warrior. This product should also attract free media coverage for the innovative partnership we have forged with the Crow Nation. Despite the thousands of tea flavors that exist, we have taken a relatively conservative approach by identifying accessible flavors from different continents. In addition to Decaf Ceylon and First Nation’s Peppermint, several more flavors have been identified which will be introduced within the next twelve months. Some are as accessible as the flagship products, others may be more appealing to certain segments of the population. For example, Japanese green tea has a strong taste which can repel untrained Western tastebuds, but we believe this product has commercial viability provided it is strategically marketed and distributed. In addition to other bottled tea flavors, we are exploring related products such as “Tea”- shirts featuring art from our labels, tea bags sold under the Honest Tea name and other tea- related products such as tea marinade and even “tea bags” for the bathtub. Management The management team of Honest Tea has a proven record of entrepreneurial success and innovative business strategy and has recently added two senior sales managers with extensive experience in the specialty foods and beverage industries. They are, in order of seniority: President & TeaEO -- Seth Goldman launched Honest Tea after leaving the Calvert Group where he was Vice President of Calvert Social Investment Fund, the nation’s largest family of mutual funds that invest in socially and environmentally responsible companies. In this role, Seth managed the marketing and sales efforts, including a ground-breaking public awareness campaign that increased website traffic eightfold and doubled sales in the company’s flagship equity fund. His other work at Calvert Group includes active involvement in the company’s private equity portfolio and managing a corporate child labor initiative for the Calvert Foundation. His previous work includes directing a nationally-recognized demonstration project for Americorps, the president’s national service program, and serving as Senator Lloyd Bentsen’s Deputy Press Secretary for two and a half years. Before that he worked for a year in China (1987-1988) and a year and a half in the former Soviet Union (1989-1990), where he developed, among other things, an appreciation for the role tea plays in bringing people together. Seth graduated from the Yale School of Management in 1995. While at Yale, he and a classmate were winners of the inaugural Connecticut Future Fund New Enterprise Competition for a business plan they developed based on a diagnostic invented at the Yale School of Medicine. Seth is a graduate of Harvard College, where he was elected Class

Honest Tea Business Plan – December 1998

18

Marshal and was a member of the Varsity Track team. He serves as Chair of the Yale School of Management Annual Fund and the Montgomery Public Schools Educational Foundation. He is a former board member of Students for Responsible Business. Seth’s experience at Calvert Group has enhanced his contribution to Honest Tea in two important ways. As Calvert’s most visible presence within the community of socially responsible businesses, Seth’s contacts and connections help give Honest Tea a mark of credibility which is essential for the brand identity the Company is trying to create. In addition, the target customer for Calvert’s equity funds is very much in line with the Cultural Creative profile discussed earlier. Seth’s record of success in communicating with this audience while at Calvert Group has conveyed well to Honest Tea. Chairman of the Board – Barry Nalebuff is the Milton Steinbach Professor of Economics and Management at Yale School of Management. He taught at Harvard and Princeton before coming to Yale. He teaches competitive strategy, mergers and acquisition, political marketing, and decision-making and game theory at the management school negotiation at Yale law school, and social choice, political theory, and welfare economics to undergraduates. An expert on Game Theory, he has written extensively on its applications for managers. Barry is co-author of Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life. His new book on business strategy, Co-opetition, co-authored with Adam Brandenburger, was a Business Week bestseller. He has applied the use of game theory in consulting to companies in banking, consumer products, healthcare, high-tech manufacturing, insurance, oil, pharmaceuticals software, and telecommunications. A graduate of M.I.T. and a Rhodes Scholar, he earned his doctorate in economics at Oxford University. Brewmaster – George Scalf joined Honest Tea in March of 1998 to manage the production of the tea. As the founder of numerous natural beverage enterprises including, Blue Range Natural Foods and New Dawn Natural Foods, George brings more than 20 years of expertise and contacts in beverage manufacturing. He also has numerous contacts in the natural foods marketplace. National Sales Director – Jim Lambert joined Honest Tea in September from Stanley Foods where he was the Vice President of Sales for the DC/ Baltimore area’s premier specialty food distributor. Jim is a 15 year veteran of the food industry. His previous positions include Chain Accounts Manager at US Foodservice Baltimore and with Atlantic Foodservices. In his role as National Sales Director, Jim is responsible for overseeing all sales and distribution relationships, with particular focus on food service and mainstream supermarket accounts.

Honest Tea Business Plan – December 1998

19

Retail Sales Manager – Melanie Knitzer came to Honest Tea in October from her post as Director of Corporate Sales with Gourm-E-Co Imports, a mid-Atlantic specialty food distributor. Melanie also brings 15 years of experience to Honest Tea, including roles as General Manager with Dolce Europa and Gourmand. In her role as Retail Sales Manager, Melanie is responsible for managing all natural foods and gourmet foods retail accounts. Consultants and Advisors: Throughout the development of the Honest Tea business planning process, we have been fortunate to tap into a wealth of tea, beverage, natural foods, and entrepreneurial expertise. The people listed below have served as resources for us. Several of them may continue to play a role in the company in the future. Joe Dobrow – Director of Marketing Programs, Fresh Fields/Whole Foods Markets John May – Managing director, New Century Partners, social venture capital investment advisor Lawrence Omene – Quality Assurance Manager, Mid-Atlantic Coca-Cola Bottling Company Karin Schryver – Natural foods buyer for Harris Teeter, chain of l40 upscale supermarkets in the Southeastern United States Statement and Aspirations for Social Responsibility Although a statement of social and environmental responsibility is not usually found in most business plans, these issues are central to Honest Tea’s identity and purpose. Not only is the value of our brand based on authenticity, integrity and purity, but our management team is committed to these values as well. We will never claim to be a perfect company, but we will address difficult issues and strive to be honest about our ability or inability to resolve them. For example, we recognize that the labor and environmental conditions on many tea estates are below internationally accepted standards. We will strive to work with our suppliers to promote higher standards while recognizing the limited influence we have as a small company. We value diversity in the workplace and we intend to become a visible presence in the communities where our products are sold. When presented with a purchasing decision between two financially comparable alternatives, we will attempt to choose the option which better addresses the needs of economically disadvantaged communities. We have taken our first substantive step in that direction with the development of our newest tea flavor, First Nation’s Peppermint. After much negotiation with Itchik, a woman-owned company based on the Crow reservation, we have created a partnership that allows the Crow community to be economically involved in the production and sale of the tea. Itchik is serving as Honest Tea’s buyer for the ingredients, charging a modest administrative fee per kilo of tea with the understanding that over time Itchik will develop

Honest Tea Business Plan – December 1998

20

the capacity to harvest the tea on the reservation. In addition Itchik is licensing the recipe and artwork to Honest Tea in a royalty arrangement. A portion of the royalties will be directed to the Pretty Shield Foundation, a non-profit created to address the needs of foster Native American children. Financial Statements – Year-to-Date and Projections Exhibit E presents the monthly income statement and balance sheet for Honest Tea from January 1998 through November 30, 1998. Exhibit F presents the 1999 projected income and cash flow statement, with assumptions included at the bottom.

Honest Tea Business Plan – December 1998

21

Exit Strategies Investors in Honest Tea would be able to realize a return on the appreciation of their investments under any of the following scenarios: Investment by a strategic partner -- As Ocean Spray’s recent purchase of a significant share of Nantucket Nectars demonstrates, there may be opportunities for investors to realize their gains through the sale of their Honest Tea shares to a strategic investor who can help the company expand its production and distribution. Acquisition – There are numerous precedents of companies that might be interested in leveraging the integrity and purity of Honest Tea’s brand. Some recent examples are the acquisition of Mistic and Snapple by Triarc. Honest Tea has already been approached by some well-known beverage companies to discuss possible acquisition opportunities. Initial Public Offering – If Honest Tea meets our expectations for growth, the Company might consider some form of public offering to raise capital for expansion in the future. Investment Risks In addition to the economic and business factors which pose risks for most early-stage companies, an investment in Honest Tea carries several other risks: Product Risk -- Although we are insured for product liability, a health-related incident such as the one Odwalla experienced several years ago could do significant damage to the Honest Tea brand name. Of course, since our product is pasteurized twice, there is less of a risk that the same types of bacteria could emerge. Competitive Risk -- Republic of Tea, a company that has a well-established brand name among tea lovers, might decide to enter the retail market with a more competitively priced product. Such a move could dampen the uniqueness of our message. Crystal Geyser, a company which has deep pockets and preexisting distribution relationships, might decide to introduce additional products beyond TeJava and spread its distribution more aggressively beyond the West Coast. Management Risk -- At this point, the development of the company has been concentrated largely in the hands of Seth Goldman and Barry Nalebuff. If either of them were unable to continue to play a role in the Company’s progress, the growth of Honest Tea might be impaired. Competitive Advantage The results of this past summer clearly indicate that Honest Tea has tapped into a market opportunity. When we were planning the company’s strategy last year we entertained the idea of spending several years building up a strong presence in a local market before expanding nationally. We have chosen to grow in a more aggressive manner for several reasons:

Honest Tea Business Plan – December 1998

22

Market Niche – We have created a new beverage category and are currently the only company filling that category. If we hesitate, other companies are likely to move in. Compelling brand image and story – The packaging, presentation and profile of the Honest Tea brand fit together extremely well with the product. Although we may improve on the bottle design in the future, this is a package that comes close to selling itself. It is also a brand and a story, which has successfully gained free media coverage, and should continue to do so. Management Team – We have developed a team with the right combination of sales experience and market creativity that is capable of growing the company on a national, and even international, scale. A Parting Thought Prospective investors in Honest Tea are advised to keep in mind the words of Sung Dynasty poet Li Chi Lai who cited the three great evils that might beset the land:

the spoiling of gallant youths through bad education; the degradation of good art through incompetent criticism; and the waste of fine tea through careless making.

While we may not be able to have much direct influence over education and the arts, Honest Tea stands poised to restore integrity to a beverage that has brought people together for hundreds of generations and throughout dozens of civilizations. There has never been a time when consumers have been so overwhelmed with choices. And yet there has never been a time when integrity and authenticity are as cherished as they are scarce. There has never been a better time for Honest Tea.

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NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

(The NAB Company Portfolio will have lists of things that the BUS599 students would be able to sort 

through to conduct a SWOT Analysis and to apply to appropriate sections of the NAB Business Plan. )  

Note #1:

This is the compilation of Data, Notes, and Information that have been put together to create a Business Plan for a start-up company in the non-alcoholic beverage industry.

The goal of my business plan is twofold:

1. To help identify and outline all the issues I will need to address in starting this company. 2. To present to funders to help raise money to finance this company.

NAB Background: Melinda Cates has been selling her NAB at County Fairs for the past 7 years for $2 a bottle. She sells an average of 10 Cardboard cartons each weekend a County Fair is open. From her calculations, it takes $.56 to make a bottle of NAB when she calculates all the NAB ingredients and the cost of the bottle and cap. Her rich uncle, Bill, just died and left her a small monetary inheritance. However, since he so enjoyed her home-made NAB, he also left her equipment to start a small NAB business. Melinda and I have been close, trusted friends for years. She found out that I just earned my MBA from Strayer University, and she asked me to help her get her NAB business up and running. I have agreed to put together a NAB Business Plan, and I have agreed to be the CEO/President of the company for at least the next five years. NAB Today: Parameters for New Company Here are the parameters in which I must work.

 The business is a start-up: We are not yet in operation. We already have a “recipe” for a beverage, but we are not yet making sales at any significant level.

 Product: the only barrier is that it must be a non-alcoholic beverage (NAB). It is up to me to decide upon what type of non-alcoholic beverage I intend to make and market. It can be sold in individual sizes or wholesale.

 Market size. I will start marketing and selling the NAB in my geographical area within a 100 mile radius from my home address.

 Business size. I can grow the NAB business to any size in excess of one million dollars in revenue by year two. In other words, this cannot be intended to be a one- or two-person micro-business.

 I intend to raise money. I will be looking for funding, and I have already started with friends and family money. But at some point I will need funds from outside investors, either angels or venture capitalists, depending on how much I project I need to raise or receive from a group of individual investors on kickstarter.

 I intend to have employees and develop my own organizational hierarchy.

NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

 I do not need to raise money for my personal financial support for the first six months. In other words, I do not need to take a salary/draw for myself for six months of projections. I am assuming I can live off my personal savings.

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NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

Note #3 Personnel: Myself: I have collected $20,000 from friends and relatives who would like to either have their seed money returned by the end of this calendar year at no interest or by the end of the second year of operation with 5% interest. Stephen Job: Part Time (20 hrs/week) Computer Expert/Assistant: $10/hr Melinda Cates: NAB Creator & Master Mixer (owns the patent on the NAB): has $40,000 inheritance Other colleagues with specific skills and talents: Ian Glass: retired PepsiCo plant production line foreman. Ian recently retired with 35 years of loyal PepsiCo service in every position from janitor to production line foreman, and he and his wife moved into your neighborhood. He is tickled that you have asked him to help develop a plan to get the NAB Company’s production line going. He said he can help organize and sit on the planning committee as a non-paid member until the NAB company can hire its own Production Line Foreman. He hinted that he retired from PepsiCo with an annual salary of $55,000, but he says that’s just the starting salary that large companies pay their foremen who are in an apprenticeship program. He doesn’t think the NAB Company will have to pay top dollar for someone who has the willingness to join the NAB company as a start up! Mary Cates, JD: Melinda’s sister who was a senior executive with the Federal Trade Commission from 2001-2012. She left the FTC after a significant 30 year career with the federal government in which she lead the research and support of numerous federal court findings against companies that violated consumer deception and unfair practices laws. She would enjoy serving on the initial company planning group to make sure her sister’s recipe is successfully shared within the state!

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NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

Note #5

Health concerns

Another major reason is the shift in consumer preferences toward healthier products. Carbonated soft drink makers have faced severe criticism from health officials, governments, and communities alike for the ill-effects of high sugar content, artificial sweeteners, and other harmful ingredients in their products, including those in diet soda variants. Consumers are also more conscious of the health risks associated with soft drinks such as obesity and nutritional deficiencies, especially in youth. As a result, they’re opting for other beverages that are non- carbonated and have fewer calories.

The World Health Organization suggests that sugar should account for only 5% of total energy intake per day. That’s around 25 grams of sugar per day for an adult of normal body mass index. Health officials feel that this percentage should be even lower for a better quality of life. A single soda can contains around 40 grams of sugar.

The soda tax

Mexico, which has the highest rates of obesity in the world, has imposed a 10% tax on sugary beverages to discourage the consumption of these drinks. There is a strong possibility that many other countries will introduce a soda tax to reduce sugar consumption through carbonated drinks.

In the next part of this series, we’ll discuss how soft drink makers including The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr Pepper Snapple Group, Inc. (DPS), and Monster Beverage Corporation (MNST) are sustaining business under such challenging conditions. Coca- Cola and PepsiCo are part of the Consumer Staples Select Sector SPDR ETF (XLP).

D. Key indicators of the non-alcoholic beverage industry

By Sharon Bailey • Nov 20, 2014 12:09 pm EST

Factors influencing sector growth

The non-alcoholic beverage industry falls under the consumer staples category (XLP), which is non-cyclical in nature compared to the consumer discretionary sector. In this part of the series, we’ll look at the factors that impact the growth of the non-alcoholic beverage industry.

Consumption expenditure The Bureau of Economic Analysis (or BEA) releases the personal income and outlays monthly reports that indicate changes in individuals’ personal incomes, savings, and expenditures.

US consumption spending accounts for over two-thirds of the country’s gross domestic product (or GDP). The US real personal consumption expenditure for non-durable goods measures

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NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

we’ll discuss why CSDs have been losing popularity, and why sales of other beverages, including juices and ready-to-drink tea, are increasing.

Major companies

The non-alcoholic beverage market is a highly competitive industry that includes two behemoths —The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP). Collectively, these companies hold about 70% of the US CSD market. Dr Pepper Snapple Group, Inc. (DPS), Monster Beverage Corporation (MNST), and Cott Corporation (COT) are some other key players in the CSD market.

Many international markets are also dominated by Coca-Cola and PepsiCo, but include other companies such as Groupe Danone, Nestle SA, and Suntory Holdings Limited.

Non-alcoholic beverage manufacturers, like Coca-Cola and PepsiCo, are part of the consumer staple sector. You can invest in these companies through the Consumer Staples Select Sector SPDR ETF (XLP).

G. Statistics and facts on non-alcoholic beverages and soft drinks

The non-alcoholic beverages industry encompasses liquid refreshment beverages (LRB) such as bottled water, carbonated soft drinks, energy drinks, fruit beverages, ready-to-drink coffee and tea, sports beverages and value-added water.

This is a great site to find statistics: http://www.statista.com/topics/1662/non-alcoholic-beverages-and-soft-drinks-in-the-us/ H. NY Times Article, February 2015

BEVERAGES - NON-ALCOHOLIC TODAY 5 DAY 1 MONTH 1 YEAR MKT CAP

+0.16% –0.37% +0.67% +20.48% 136.1B

The Beverages - Non-Alcoholic industry group consists of companies engaged in manufacturing non-alcoholic beverages, such as water, fruit drinks, soft drinks, iced coffee and tea, as well as other flavored beverages. The Beverages - Non-Alcoholic industry excludes tea bags and instant coffee manufacturing, fruit juices and concentrates, classified in Food Processing.

Beverages - Non-Alcoholic

Defined by Thomson Reuters

Market

cap.

1-day

%

change

1-month

%

change

YTD

%

change

Low High 52-

week

Page: 1 | 2 | Next »

NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

Defined by Thomson Reuters

Market

cap.

1-day

%

change

1-month

%

change

YTD

%

change

Low High 52-

week

Coca-Cola Enterpri... CCE: NYSE 10.5B +0.54 +3.14 +1.11

Coca-Cola FEMSA, S... KOF: NYSE 6.0B +2.42 +1.91 +0.90

Dr Pepper Snapple ... DPS: NYSE 15.2B +0.77 +0.39 +9.96

Embotelladora Andi... AKO.B: NYSE 2.5B –0.97 +3.04 +1.82

Fomento Economico ... FMX: NYSE 31.0B +2.01 +2.06 +1.70

Monster Beverage C... MNST:

NASDAQ 20.3B +0.11 +1.63 +11.92

PepsiCo, Inc. PEP: NYSE 146.8B +0.34 +0.54 +4.76

Sodastream Interna... SODA:

NASDAQ 393.3M –0.37 –2.75 –6.91

The Coca-Cola Co KO: NYSE 183.8B –0.33 –3.09 –0.59

Coca-Cola Bottling... COKE:

NASDAQ 947.9M +0.44 –1.70 +16.14

National Beverage ... FIZZ: NASDAQ 1.0B –1.53 –2.77 –0.53

Youngevity Interna... YGYI: OTHER

OTC 94.5M +3.15 +1.00 +1.00

Alkaline Water Com... WTER:

OTHER OTC 14.4M +23.33 +78.31 +50.00

Cott Corporation (... COT: NYSE 748.2M +1.14 +0.88 +16.13

DNA Brands, Inc. DNAX: OTHER

OTC 24.0K 0.00 –50.00 0.00

Hangover Joe's Hol... HJOE: OTCBB 778.0K –21.67 +11.90 –12.96

NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

Defined by Thomson Reuters

Market

cap.

1-day

%

change

1-month

%

change

YTD

%

change

Low High 52-

week

Jones Soda Co. ( U... JSDA: OTHER

OTC 17.0M –0.36 +18.89 +18.86

Konared Corp KRED: OTHER OTC 8.0M +16.28 –6.54 –29.08

NOHO Inc DRNK: OTCBB 275.0K +13.60 –38.26 –71.60

Pulse Beverage Cor... PLSB: OTHER

OTC 8.4M –7.99 –13.46 –46.63

Beverages - Non-Alcoholic

Defined by Thomson Reuters Market cap.

1-day

% change

1-month

% change

YTD

% change Low High 52-week

Puresafe Water Sys... PSWS: OTHER OTC 383.3K 0.00 0.00 0.00

Reed's, Inc. REED: AMEX 71.1M 0.00 +0.37 –7.95

Uplift Nutrition I... UPNT: OTCBB 555.7K 0.00 –50.00 +28.62

Crystal Rock Holdi... CRVP: AMEX 15.8M 0.00 +1.37 –2.95

Global Future City... FTCY: OTHER OTC 19.1M 0.00 +131.82 +100.00

MOJO Organics Inc MOJO: OTHER OTC 3.4M 0.00 –4.81 0.00

New Leaf Brands In... NLEF: OTHER OTC 505.6K 0.00 –16.67 +36.36

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NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

Oceans Omega closely follows studies related to adolescents and brain health. For example, to determine the effects of algal DHA supplementation on reading and behavior in healthy school- aged children, researchers conducted the Docosahexaenoic Acid Oxford Learning and Behavior (DOLAB) Trial and reported that supplementation with 600 mg each day with algal DHA for 16 weeks improved reading and behavior in healthy school-aged children, aged 7 to 9 years old, with low reading scores.

“We work on educating the end producer,” says Karen Todd, director of global brand marketing at New York City-based Kyowa Hakko U.S.A. Inc. The company’s Cognizin product features citicoline, which increases cellular synthesis and energy, she says. Ingredients such as Cognizin are associated with boosting brain energy, supporting mitochondrial health, and boosting levels of ATP, according to the company’s research. This ingredient also is associated with increased focus and concentration as well as memory storage and recall.

“We do clinical studies on raw materials [with healthy subjects], and results of that help us identify what levels are appropriate to make claims,” Todd says. “The producer and finished product company do their pre-market test, but they’re looking at the science behind it to support their claims from the start.”

Kyowa Hakko is replicating clinical trials done with millennials, pre-menopausal women and baby boomers with more targeted groups including adolescents and athletes.

Futureceuticals, Momence, Ill., also sees the value of clinical trials and is in the midst of several that involve its ingredients including CoffeeBerry coffee fruit, a line of powders and concentrates of the fruit of the coffee plant, including the bean.

“We consider demographics when we’re choosing outcomes to focus on for our claims,” says Brad Evers, vice president of business development. “In the case of CoffeeBerry coffee fruit extract, we discovered that it has a unique capacity to increase serum levels of brain-derived neurotropic factor (BDNF), which is a key neuro-protein involved in cognition, mood and other key neuro-processes. We chose to focus on cognition and mood, given the enormous public interest in cognitive and mental health at all age levels. Baby boomers frequently cite cognitive health as their No. 1 concern, and younger people are motivated to take action now to help ensure a higher quality of life as they age.”

Major research facilities around the globe are focusing on BDNF, and Futureceuticals has two studies that indicate that coffee fruit stimulates the body to produce BDNF, which is something brewed coffee does not do, according to the company.

“Our research on our coffee fruit products is at the forefront of new discoveries for cognitive health,” Evers says. “CoffeeBerry meets the demand for functional beverage ingredients that are natural and offer a value proposition.”

NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

Focus on claims

Regulations as well as the flavor of the ingredients in their natural state can have an impact on beverages designed to improve memory and focus or reduce the impact of aging on the brain.

“The biggest trend with cognitive ingredients is really attention given to caffeine and energy drinks by the Food and Drug Administration (FDA) and [the decision to] crack down on amounts,” Kyowa Hakko’s Todd says. “Cognizin is a non-stimulant without negative side effects. Energy drinks use Cognizin [as a replacement for caffeine], and many companies are looking to reformulate and include it at the efficacious dose.”

But special treatment is required for cognitive ingredients to be beverage compatible, shelf stable, soluble and taste free. “Antioxidant beverages, focus beverages, and general brain-health and protein beverage ingredients are bitter, and [beverage-makers] have to figure out a way to mask [them],” Nutegrity’s Phillips says. “Another big challenge is solubility, and we’re finding ways through agglomeration or other techniques to make them suspend in a liquid.”

Oceans Omega is able to counteract the instability and protect them from oxidizing with new technologies, but aftertaste still is a challenge.

“Polyunsaturated fatty acids have the propensity to oxidize quickly and develop very repugnant odor and taste offnotes,” Berl says. “Many [omega-3] products still have a fishy or marine aftertaste, and their manufacturing requires an increased complexity in processing and handling these sensitive ingredients in the production processes.”

Certain nutrients also just don’t mix well, according to Russ Hazen, North American premix innovation manager for Fortitech Inc., Schenectady, N.Y.

“Certain iron compounds can have unfavorable effects on product quality and consumer acceptance by increasing the oxidation of polyunsaturated fatty acids,” Hazen says. “On the other hand, inclusion of suitable amounts of antioxidants, like vitamin E, is important to protect polyunsaturated fatty acids from oxidation. In liquid beverages, adverse interactions between calcium and phosphorus can be tricky and can result in unsightly mineral precipitation products under certain conditions”

When bitterness is a factor, masking agents can address this issue as well, according to Kyowa Hakko’s Todd. Futureceuticals, however, will provide its bitter CoffeeBerry products and extracts as-is because the more natural state is preferred by its customers, Evers says.

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NON-ALCOHOLIC BEVERAGE COMPANY PORTFOLIO

The right flavor mix

With all of the flavors that are out there, beverage-makers are not at a loss for options from which to choose. According to Beverage Industry’s survey, each respondent reported using on average 11.5 flavors in 2014.

When selecting which flavors they wanted to utilize, survey-takers opted for more traditional options in 2014, with orange, vanilla, lemon, strawberry and peach rounding out the Top 5. This is slightly different from last year’s survey in which the top flavors were vanilla, lemon, strawberry, mango and peach. Orange’s usage jumped up eight percentage points this year to 49 percent, compared with last year’s 41 percent. Tied with orange at 49 percent, vanilla’s usage remains fairly consistent with last year’s survey, seeing an increase of one percentage point.

Other flavors that also saw modest growth were lemon (up one percentage point), strawberry (up two percentage points), peach (up one percentage point) and chocolate (up four percentage points). Flavors from last year’s Top 10 that saw contractions in 2014 were mango (down three percentage points), raspberry (down eight percentage points), apple (down four percentage points) and fruit punch (down 17 percentage points).

Making up for some of these drop offs were lime (up seven percentage points), berry (up eight percentage points) and coffee (up six percentage points).

Although orange was the most-used flavor in 2014, it did not come in as the top-selling flavor for the year. Taking the top spot was chocolate at 29 percent. Although chocolate moved up only one spot from No. 2 to No. 1 compared with last year’s survey, its percentage point increase was 15. Taking a hit, however, was strawberry. Last year’s No. 1 top-selling flavor dropped out of the Top 10 as the percentage of respondents listing it as a top-selling flavor dropped from 25 percent to 7 percent.

However, not all flavors saw such a strong drop off in 2014. Vanilla moved up one spot to the No. 2 top-selling flavor after seeing its percent usage increase from 14 percent to 24 percent. Mango also had a positive year, jumping from No. 10 to No. 3. The tropical flavor saw its reported sales status increase from 10 percent to 22 percent.

This year’s survey also saw a handful of new flavors make the Top 10 list. Raspberry, coffee, black tea, orange and peach all made the top-selling flavors in 2014 list, knocking out apple, berry, fruit punch, lime and, as previously mentioned, strawberry.

As beverage-makers prepare for 2015, the top sellers for 2014 are expected to carry over into the next calendar year. Chocolate is listed as the No. 1 anticipated top-selling flavor for 2015, with 29 percent of respondents naming the indulgent variety. This is a strong increase from last year’s survey results in which only 17 percent of respondents listed it as a top-selling flavor. Also making significant gains is coffee, which entered the Top 10 in the No. 2 spot after being left off last year’s list. Making a more modest increase, vanilla’s anticipated selling performance increased one percentage point from 19 to 20 percent to round out the Top 3.

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For instance, the mean and median of the number of employees for this year’s survey are 201 and 63 employees, respectively. However, last year’s survey-takers reported a mean 1,278 employees and a median of 180 employees.

This team size also affected the number of employees who are working on developing new products. Last year, the survey found a mean of 60 employees and a median of eight employees working on new product development. This year, the teams are much smaller, with the mean and median at 10 and four employees, respectively.

Although the company sizes and new product development teams of respondents are from a smaller base than last year, their outsourcing portions did not differ too much. Twenty-nine percent stated they outsource a portion of their new product development versus the 35 percent that said the same last year. However, the main difference was the areas of new product development that they outsourced.

Sixty-two percent of respondents reported outsourcing prototype development, followed by 46 percent for concept and product testing, and 38 percent for market research. Last year, market research and prototype development tied for first with 46 percent naming those as areas of outsourcing. Concept and product testing rounded out last year’s Top 3, with 42 percent naming this as an area of new product development.

Holding steady with last year’s numbers, though, was the amount of respondents stating that a team approach is utilized in new product development. Ninety-three percent (the same number as last year) indicated using a team environment. Among those who use a team approach, 81 percent said sales and marketing are involved, while 79 percent listed R&D. This is slight flip from last year’s survey in which 80 percent of respondents named R&D, and 77 percent reported sales and marketing.

Upper management also remains a constant for survey-takers, with 62 percent listing their involvement compared with last year’s 61 percent.

Slightly higher than last year’s survey results, nearly nine out of 10 respondents whose upper management is regularly included on new product development projects have involvement from their chief executive officers. This is up from last year’s more than three-quarters of respondents. This variation could be reflective of the significant difference in the company size mean and medians between the two years.

Fifty-eight percent of survey-takers also indicated supplier involvement in new product development, compared with last year’s 61 percent.

The length of time to develop a new product also saw an uptick in this year’s survey, with mean time from inception to launch equating to 11 months. This is up from last year’s nine months; however, one-third of this year’s respondents noted that this is faster for them than in previous years.

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Perhaps reflective of the company size decrease from last year’s survey-takers, the mean number of products developed in 2014 was 24, compared with 40 in 2013. Following suit, the mean number of those released decreased from 17 in 2013 to nine in 2014. The number of successful new product launches also experienced contraction, with the mean equating to five in 2014 versus 11 in 2013.

What the future holds

Looking ahead to 2015, respondents remained optimistic about their new product releases, with more than half indicating that they plan to launch more new products in the market in 2015 versus 2014.

Planning and assessments also will be staples with survey-takers, as 60 percent said they have a defin-itive new product development plan. Post-launch assessment was even higher, with 76 percent having that in place. This is an increase from last year’s results in which 62 percent indicated they had a definitive new product development plan, and 65 percent reported having a post-launch assessment.

Total cost to new product development also experienced some fluctuations between the two surveys. This year’s had a mean and median of $209,080 and $37,500, respectively. Last year’s respondents had a mean of $348,717 and a median of $20,000.

However, when it came to R&D budget comparisons, the numbers were fairly similar, with 44 percent listing an increase in their budget versus 41 percent last year.

Beverage Industry’s New Product Development Outlook survey was conducted by BNP Media’s Market Research Division. The online survey was conducted between Sept. 29 and Oct. 13, 2014, and included a systematic random sample of the domestic circulation of Beverage Industry and its sister publications Dairy Foods and Prepared Foods.

Of the respondents, 44 percent process juice and juice drinks, 40 percent process coffee and tea, 33 percent process dairy-based drinks, 29 percent process sports drinks, 24 percent process water, 22 percent process energy drinks, 18 percent process spirits, 13 percent process carbonated soft drinks, 13 percent process wine, and 9 percent process beer.

Thirty-one percent of respondents were from companies with less than $10 million in annual revenue. Another 31 percent of respondents were from companies with revenue between $10 million and $50 million. A total of 9 percent were from companies in the mid-size range of $50 million to less than $100 million. Thirteen percent were from companies with revenue between $100 million to less than $500 million. In the $500 million to less than $1 billion range were 9 percent of respondents. Representing the large-size range of more than $1 billion in company revenue were 9 percent of respondents.

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Males accounted for 67 percent of the respondents, and the average age equated to 43. For industry experience, 20 percent indicated one to three years; 18 percent reported four to 10 years; 33 percent said 11-20 years; 20 percent listed 21-30 years; and 9 percent had 31-40 years of experience.

Regionally, 33 percent said they currently live in the South, 27 percent indicated the Northeast, 24 percent listed the Midwest, and 16 percent reported living in the Western portion of the United States.

K. Nielsen identifies consumer health concerns

ABA, brand owners proactive in offering solutions By Jessica Jacobsen

February 16, 2015

Aside from the Valentine’s Day candy and treats on the store shelves, the first quarter of a new year tends to be filled with diet- and exercise-related products to appeal to those consumers who resolved to lose weight or eat healthier in the new year.

For myself, my resolution to lose weight will likely come around mid- to late summer when I get the OK from the doctor to lose my baby weight. However, many other consumers have expressed the need to address their health and weight issues, which could become an opportunity for food and beverage manufacturers.

According to Nielsen’s Global Health & Wellness Survey, nearly half (49 percent) of the global respondents consider themselves overweight. Citing the 2013 Global Burden of Disease Study, the New York-based market research firm says that an estimated 2.1 billion people, or nearly 30 percent of the global population, are overweight or obese. However, Nielsen’s study shows that consumers are willing to take charge of their health and are willing to pay a premium to do so.

Because of the vast number of consumers who are concerned about obesity and other health- related issues, Nielsen suggests that brand owners should better align their offerings with these consumer need states in order to see growth benefits.

“There is a tremendous opportunity for food manufacturers and retailers to lead a healthy movement by providing the products and services that consumers want and need,” said Susan Dunn, executive vice president of global professional services with Nielsen, in a statement. “While diet fads come and go over time, innovative, back-to-basics foods that taste good, are easy to prepare, and provide healthful benefits will have staying power. The first step is knowing where to put your product development efforts.”

In the beverage space, we already are seeing brands and associations addressing this trend. This month’s Special Report article on health and wellness (page 18) details how leading advocacy groups including the American Beverage Association and brand owners such as The Coca-Cola Co., PepsiCo Inc. and Dr Pepper Snapple Group (DPS) have pledged to reduce the number of

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calories that each American consumes on a national level by 20 percent by 2025.

Beyond this pledge from non-alcohol industry leaders, the beverage marketplace is seeing more low-calorie brands find a home with consumers as their products expand distribution. In this month’s cover story on Bai Brands LLC (page 24), Chief Executive Officer Ben Weiss details how the company’s national distribution agreement with DPS has allowed the enhanced-water brand to share its Bai5 and newest innovation, Bai Bubbles, with a broader audience that was looking for a healthy beverage solution.

As some consumers search for solutions to their health and wellness needs, it’s great to see so many in the beverage space being proactive in delivering products that address them.

http://www.bevindustry.com/articles/88194-nielsen-identifies-consumer-health-concerns

L. Other ways to bottle our beverage. (NVE perhaps?)

http://www.bevindustry.com/videos?bctid=946203236001

M. Zico to send fan to Sochi 2014 Winter Olympic Games

Winner will meet gold medal skier Julia Mancuso November 5, 2013

El Segundo, Calif.-based Zico Beverages LLC’s same-named coconut water brand announced a sweepstakes through which fans can enter to win a trip for them and a friend to attend the Sochi 2014 Winter Olympic Games and meet 2006 Olympic champion Julia Mancuso.

The winner will receive round-trip tickets to Russia, a four-night stay in a hotel overlooking the Black Sea, and tickets to some of the most popular Olympic events including snowboarding, speedskating and alpine skiing. The sweepstakes runs through Nov. 21, and fans can enter at zico.com/sochi2014.

Mancuso, who will compete in alpine skiing at the Winter Olympics, will represent Zico as a brand ambassador.

“Zico has already been an amazing partner hydrating me on and off the slopes," Mancuso said in a statement. "Now, they're giving two winners a chance to come to Sochi. How cool is that?"

Chief Executive Officer and Founder of Zico Beverages LLC Mark Rampolla added in a statement: “Zico has always supported athletes at every level by providing them with the naturally replenishing powers of coconut water. We're honored to be part of the world's most prestigious sporting event and to be hydrating the top athletes in the world.”

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Bai has been disrupting the marketplace since August 2009 when it launched its Bai and Bai5 beverage lines. Since then, the company has seen its enhanced-water brand post strong year- over-year sales numbers, expanded its product lineups, and taken its distribution to a national level.

Delivering solutions

Emphasizing the widespread concerns related to obesity, diabetes and artificial ingredients, Weiss notes that the ideation behind Bai was to offer a healthy solution to these problems.

“For us, health and wellness is about delivering a truly flavorful experience but doing it in a very responsible way with ingredients that are pure and not artificial, delivering antioxidants as a functionality, and doing without the use of calories and sugar,” he says. “I think we’re doing our part to address an epidemic. The industry overall is looking for that solution.”

With 5 calories in each serving, Bai5 features a sweetener blend of what Weiss calls “smart sweeteners,” namely organic stevia and erythritol, but also offers fresh fruit flavor that is infused with antioxidant-rich coffee fruit.

Coffee fruit, the fruit that grows on the coffee plant and contains the coffee bean, is an attribute that helps Bai5 deliver on its health and wellness promises. The all-natural ingredient had not been widely used in beverages until recently, and the coffee fruit that Bai uses is rich in antioxidants, Weiss notes.

Until recently, this fruit commonly was discarded during the coffee-farming process, he adds. Understanding the antioxidant power within the fruit, Bai saw an opportunity to harness this into an edible commodity.

“Personal health benefits are only part of the mission,” Weiss says. “Eliminating waste wherever possible is the duty of every person on this planet; as is helping your neighbors achieve a better life. When traditional — wasteful — coffee-harvesting methods are used, the discarded fruit ends up in waterways by the coffee plantation. Massive amounts of rotting coffee fruit pollute surrounding streams with a buildup of ochratoxins, aflatoxins and caffeine. By turning this composted material into a consumable product, Bai is keeping the waterways clean and the ecosystem in balance, generating a new revenue stream for local farmers, and blazing the trail for a healthier environment.”

In finding what Weiss calls its “holy grail” with Bai5, the company also made a strategic decision in 2012 when it discontinued production of its mid-calorie product, Bai. Although the mid-calorie product contained some of the company’s strongest-performing flavors, Weiss decided to discontinue the line in order to avoid consumer confusion. “It was really an intent to not confuse our consumer, and it was a belief that what we had at that time [in Bai5] was becoming a bigger part of our portfolio,” he says.

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Even though it was a difficult decision to discontinue the mid-calorie offering, the company has not looked back and has posted approximately 300 percent growth each year dating back to 2011, Weiss says.

The Bai5 lineup now features 10 SKUs: Brasilia Blueberry, Malawi Mango, Ipanema Pomegranate, Molokai Coconut, Costa Rica Clementine, Tanzania Lemonade Tea, Sumatra Dragonfruit, Congo Pear, Panama Peach and Limu Lemon. Molokai Coconut and Brasilia Blueberry are the brand’s Top 2 performers, followed by Tanzania Lemonade Tea, which has a more limited distribution model than the other SKUs, Weiss notes. However, the top performers are not runaway leaders, as the difference between the 10 SKUs is in the single digits.

“When you have a portfolio of 10 drinks that has single-digit variance, that says something,” Weiss adds. “Our shopper shops across the lineup.”

Although Weiss believes Bai5 offers the perfect balance between low calories, full flavor and all-natural ingredients in the still beverage market, the company took those same principles and applied them to the sparkling beverage segment.

In late 2014, the company put an effervescent spin on its Bai5 beverages with its new Bai Bubbles line. Originally available in the New York City metropolitan area, Bai Bubbles blends antioxidants from coffee fruit with exotic fruit flavors and natural sweeteners and contains 5 calories and 1 gram of sugar in each 11.5-ounce can. With nationwide distribution planned for early 2015, the new lineup is set to consist of seven flavors — Bolivia Black Cherry, Peru Pineapple, Gimbi Pink Grapefruit, Waikiki Coconut, Jamaica Blood Orange, Indonesia Nashi Pear and Guatemala Guava — each of which pays homage to popular coffee-growing regions.

Weiss notes that the inspiration for launching Bai Bubbles stemmed from his time exploring the market and looking at what consumer need states needed addressing. “I spend a lot of time in the market, and I tend to think like a consumer,” he says. “I just saw a marketplace that was moving away from artificial ingredients, and I knew that we were addressing that market with Bai5, but I didn’t see that solution out there in carbonated.”

Adding that the company is filled with innovators and disruptors to the marketplace, Weiss explains that the idea-to-shelf process for Bai Bubbles took only three months. “When we focus on what we want to do, and it’s the right time to do it, we can get it done pretty quickly,” he says.

Although it still is too early to call out any variety leaders for the sparkling line, Weiss says because of its planned national launch through its distribution network and an agreement with national retailers including Target Corp., Minneapolis, the company is anticipating Bai Bubbles to be a $25 million business in its first year.

With 17 total SKUs between its two lines, Weiss adds that the company still is no stranger to flavor innovations. Although he can’t share any specifics, Weiss notes that the company always is developing new flavors and new innovations.

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National news

The announcement of Bai Bubbles wasn’t the only big news Bai was able to share in 2014. The company also signed a distribution agreement with Plano, Texas-based Dr Pepper Snapple Group (DPS). The companies had previously worked together in the two years prior to the agreement, but the new agreement allowed Bai Brands to further capitalize on DPS’ direct-to- store and warehouse delivery capabilities on a national level. New retailers that were added following the agreement included Kroger, Target, Sam’s Club, Walmart, Publix, Stop & Shop, Duane Reade and Safeway, plus more than 100 additional Costco stores throughout the country.

“We have tested the Bai brand in select markets with great success over the last several quarters,” said Jeff Conrad, vice president of market development for DPS, in a statement at the time of its announcement. “There is no question that Bai fits exceedingly well with our portfolio of leading brands, and we expect this new choice to be very well received by consumers from coast to coast.”

Weiss notes that the deal signed with DPS was finalized in late January/early February of 2014, which resulted in Bai Brands missing out on the 2014 planning meetings. However, that aspect didn’t hamper the expanded relationship with the companies.

“We still had this amazing year of growth; still very disciplined,” Weiss says. “It was highlighted by our emerging relationship at the time with Target, which was the first national retailer to really go aggressive with the brand. They’re coming off a great year with Bai, and we started 2015 in a very aggressive way with them as well. But this is where we’re taking all of our learnings, we’re in true scale-up mode, and we’re going to build out our [all-commodity volume] (ACV) across all channels. It’s an exciting year for Bai.”

He adds that to be able to have full national distribution is every beverage company’s goal, and to have that by year five is a feat he is very proud of. “Not many brands can say that,” Weiss says. “I’m very proud of the pace at which we did that now that it’s up and running. DPS will cover close to 70 percent of the country, so there are still distributors that we have engaged to provide full national distribution.

“When you are looking to activate chains, you’re going to need to prove to that chain that you have the ability to get to every one of their stores,” he continues. “If you can’t do that, you’re not going to get much support from that chain. To be able to check that box and say, ‘Yes, we have a route to market [and] we can deliver to every one of your locations, whether you’re Sam’s Club, Costco, Target [or] whomever,’ is critical.”

Because DPS does not cover all regions across the United States, Bai also has agreements with many other distribution networks including Hensley Beverage Co. for Arizona, John Lenore & Co. for the San Diego market, Polar Beverages for the New England area, The Honickman Group in the mid-Atlantic, and Admiral Beverage Corp. for the mountain regions.

Through this expanded distribution network, Bai has learned that the key to reaching this success is all about winning at retail.

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“It’s all about developing a relationship with a consumer that’s stronger than any other relationship,” Weiss says. “If you and your consumer are aligned, then everybody else will fall into place, whether it is the retailer and ultimately the distributor.”

Weiss adds that in the competitive beverage market, Bai is able to stand out because of the promises it delivers on health and wellness. “The beverage category is extremely competitive with new brands emerging almost routinely,” he says. “However no one has delivered on consumers’ needs like Bai. In a world increasingly seeking healthier options, Bai provides consumers a variety of beverage options that not only have great flavor but [make] people feel good about drinking. Bai’s ability to uniquely satisfy customer’s desires is reaffirmed in its strong sales growth across all retail channels. Bai’s performance paints a compelling story that has enabled solid increases in distribution.”

Additionally, if a brand is able to be data driven and show through sales reports how it’s performing in the market, the distribution will follow, Weiss explains. Those on-paper numbers were crucial to Bai Brands achieving its distribution success.

“When you look at the numbers, you’d have to be foolish to not stand strong behind the brand, and that’s what’s happening,” he says. “The retailers see Bai’s strong momentum and say, ‘Wow I get it. You’re my salvation to enhanced water, and I’m going to now give you this,’ and then you take that to a distributor and say, ‘We’ve got to deliver,’ [and] it becomes a lot easier.”

The support tool

With so much in place for 2015, the company is expecting more great things to come this year, Weiss says. “You’re going to see the product become ubiquitous in all channels. I truly believe that this is the next iconic beverage in the making, and everyone else is going to get to hopefully share in that opinion this year.”

Beyond the expanded lineup, the increased distribution network and the industry accolades, Bai aspires to have a voice: a voice that addresses the dilemma.

“I founded Bai because I believed that building a great beverage experience would improve people’s lives,” Weiss says. “Over the past five years, I have marveled at the serendipitous timing of this idea and the way our customers have accepted what Bai stands for and responded to the way we go about bringing it into their lives. As a team, we have pushed hard to increase our sales velocity and improve our retail execution while focusing on the ‘big bets’ that will make a difference within the lives of our consumers.”

When it comes to innovation and Bai’s future, Weiss remains optimistic about what is to come. “Bai Bubbles is an example of how our continued innovation can play a very relevant role in providing a breadth of health and wellness with great flavor and unmatched purity to a beverage experience,” he says. “There is no doubt that a cultural shift is happening within the beverage industry. This shift is unprecedented in magnitude and will change the course of beverage for generations to come.

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“Bai is at the precipice of this change and, in many ways, is defining the ‘smart-age’ of beverage,” Weiss continues. “What will we make of this moment? How will we engage with an emerging beverage culture, defined not by age or income but by the people determined to change the practices of the businesses that bring beverages into their lives? The answer is simple: We will disrupt. Today the opportunities are greater than ever, and Bai is innovating in an attempt to capture the potential of this moment. By doing so, we are reshaping our company, reshaping our industry, and along the way, finding our voice.”

http://www.bevindustry.com/articles/88184-bai-brands-disrupts-cpg-space-with-low-calorie-all- natural-solutions