From the January 2002 issue of Entrepreneur

In an era when a beverage's claim to fame is twice as much caffeine, and milk is going carbonated, it's hard to believe the next big thing is . . . water. According to Beverage Marketing Corp. of New York City, water is the fastest-growing major U.S. beverage category, expected to surpass coffee and milk to take second in volume only to soft drinks by 2004.

Now you've got four companies dominating the bottled water market-Pepsi, Danone, Coke and Perrier Group of America-but that's where the twist comes in. According to John Rodwan, editorial director for Beverage Marketing Corp., you're expecting too much if you're shooting for No. 1, but there's a good chance your product can attain underdog status and significant sales if you either try for regional success by touting the water's source, or add a special something-an ingredient or other element-to plain old water. Rodwan expects enhanced water fortified with calcium, caffeine or added flavors to grow "very, very quickly" this year. But he's not sure whether, over the long term, "that's going to satisfy consumers when they simply want water-or if it's an area that's just a little too peculiar."

Bob Lynn, vice president of marketing and sales for Le-Nature's, a Latrobe, Pennsylvania, company founded in 1992 that specializes in purified and fully pasteurized juices, water and teas, has no doubt plain old water will maintain its strength, but questions the longevity of infused water. He gives new entrants six, maybe nine, months. "It's H20. No matter what you do to it, it will try to revert back to being H20," Lynn says. "Americans are faddy and sometimes gullible, but they aren't stupid, so fads that grow and maintain in other [countries] tend to have a very short life span in the United States." That doesn't mean you can't garner success with fad-beverage businesses, as long as you're able to continually reinvent the fad.

And the Red Bull phenomenon? We'll have to wait a couple years to see whether energy drinks outlive their fad status, but, according to Rodwan, it's another exciting segment and the closest thing the beverage industry's got to a totally new category. Troy Widgery, 35, who founded Denver-based extreme sports apparel manufacturer Go Fast Sports Inc. in 1995 and Go Fast Beverage Co. last year, has been hard-pressed to keep up with demand for his energy drink. Still, the beverage company, which employs about 40 people and expects first-year sales of $3 million to $4 million, isn't yet profitable. But, says Widgery, "For our size and amount of [grass-roots] marketing we've done, I would say our margins are better than anyone's."

As for Widgery's "next big craze" prediction, he's betting on milk thistle, an active ingredient in Go Fast's 11 that acts as a liver detoxifier. Will it be the next green tea? Wait, is green tea out of fashion already?

A BRIEF BEVERAGE HISTORY
early 1800s: European and American businessmen bottle naturally carbonated water, claiming it helps indigestion and fever.
1886: Coca-Cola is created by a Georgia pharmacist.
1927: Kool-Aid inventor Edwin Perkins transforms the product from a syrup into its present concentrated powder form.
1972: Specializing in carbonated apple juice, a health food store owner and two window washers start Snapple in New York City.
1987: Red Bull is launched in the Austrian market.
1995: Starbucks adds Frappuccino blended beverages to its menu.
1995: Water Joe, caffeine-infused bottled water, is sold in convenience stores.
1996: Four health and fitness buffs start Sobe, making exotic herbs like ginseng, ginkgo and green tea mainstream.

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