Surprise Hits: Vitaminwater and the promise of Zen-like bliss
A decade or two ago, the idea of drinking "vitamin water" would have conjured up thoughts of swallowing a metallic-tasting dietetic -- essentially, drinking your vegetables. That's a far cry from being a soft drink refreshing enough to appeal to athletes and hip enough for a rap star to endorse. Or successful enough for the Coca-Cola Co. (KO) to purchase the start-up that invented it for more than $4 billion.
Therein lies the astonishing success of Glacéau (a.k.a. Energy Brands), a company founded in 1996 by J. Darius Bikoff in Queens, New York. Bikoff began by selling an electrolyte-enhanced bottled water called Smartwater. Two years later, he introduced Fruitwater. But it wasn't until he launched Vitaminwater in 2000 that his enterprise really took off. Glacéau promptly became the best-selling brand of enhanced water in the U.S. By 2006, its revenue had reached a reported $355 million, and a year later Coca-Cola, seeking a larger stake in the noncarbonated-energy-drink segment, bought the company and announced that Glacéau would operate as an independent subsidiary.
Bikoff's unexpected smash is a triumph of savvy marketing. Vitaminwater is packaged in an appealing spectrum of pastel colors, and its 15 flavors carry evocative names -- kiwi-strawberry Focus, raspberry-apple Defense, tamarind-pineapple Tranquilo -- that promise Zen-like bliss. But the message is more cheeky than earnest. Vitaminwater, its label states, is meant "to help you shine on those gods-have-forsaken-you days, yada-yada-yada conference calls, wind-sucking workouts, and chasers-are-for-weenies nights." Endorsements by "friends" such as rapper 50 Cent, Red Sox slugger David Ortiz, and country singer Carrie Underwood underscore the youthful appeal.
Vitaminwater's popularity prompted a category full of imitators. After PepsiCo (PEP) introduced its SoBe line of Life Water, Glacéau filed suit, claiming infringement of its packaging (or "trade dress"). As part of a settlement, PepsiCo agreed to change Life Water's packaging, although not its name.
Now Glacéau faces another challenge: a class-action lawsuit alleging that the marketing of its drinks as healthful alternatives to soda is deceptive and violates FDA rules. The activist group Center for Science in the Public Interest, which brought the case, argues that the 33 grams of sugar -- two heaping tablespoons -- in a 20-ounce bottle of Vitaminwater do more to promote obesity and diabetes than they do to improve health. It isn't the only health-based attack on Glacéau; nutritionists at New York University have pointed out that most Americans are not vitamin-deficient, and that many vitamins are not water-soluble, so consumers won't retain them after ingesting them from a fortified beverage like Vitaminwater.
The case is pending in U.S. District Court of the Northern District of California. But win or lose, Bikoff and his marketing team are sure to remain the envy of entrepreneurs the world over. What's next? Intelligence shampoo?
Be sure to check out all 20 recent products that became Surprise Hits.