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Pandemic delivers rich pickings for niche start-up

Last year we reported on an interesting beverage start-up based in Austria, Waterdrop, premised on sustainability. Here’s an update on its prospering fortunes…

Martin Murray wanted to disrupt the global beverage industry with Waterdrop, the company he established in 2015.

“The way [the industry] is structured is incredibly unsustainable,” says the former management consultant with Boston Consulting Group.

“Putting sugar water into plastic bottles and shipping them around the planet — it’s not only a lot of plastic bottles but a lot of carbon dioxide emissions for transport. In an ideal world, you don’t have to bottle anything any more.”

Waterdrop has yet to displace Coca-Cola or PepsiCo. But Murray’s creation — effervescent cubes with fruit and plant extracts that buyers drop into water — captured something of the zeitgeist.

While the water enhancer market is well established, most firms in the space are producing powders in packets (eg Liquid IV), tablets in plastic tubes (eg nuun), or squeezy plastic dispensers that contain multiple servings (MiO), none of which appealed to Murray, either aesthetically or practically.

“I dislike the syrups because of the packaging and all the preservatives, plus I did not see them as being a lifestyle brand that you’re proud of,” said Murray, who attracts a lot of new customers with a starter pack combining micro drinks and an upmarket glass or steel bottle or tumbler.

“We wanted to make something beautiful and easy to use like an Apple product. For the powders, the customer experience is not very nice and they float around in the water. The technology used in tablets is more interesting, as you’re basically using baking soda and an acid – when they react the baking soda absorbs the acid, so then you can add fruits and plants, add them to water and you don’t have to stir.”

Waterdrop dissolvable cubes combine plant extracts, vitamins, and natural flavours, colours, and sweeteners, with a base of citric acid, sodium carbonate, potassium carbonate and inulin.

By 2020, its revenues had reached €41mn, while its compound annual growth rate from 2017 to 2020 was almost 300%, making Waterdrop the most rapidly expanding food and beverage group in the Financial Times’ latest ranking of Europe’s fastest-growing companies.

‘Even as a teenager I never really understood why all these people were drinking sugar water in plastic bottles.’​

Martin Murray, founder of Waterdrop

In January this year, it raised €60mn of series B funding, led by Singaporean fund Temasek.

Waterdrop now has 200+ employees in multiple markets, and listings in 10,000+ stores, but generates the bulk of its revenues online via its website​, with 1.5m online customers, who are 70% female, aged 25-50, said Murray.

With its so-called microdrinks, the Vienna-based company has tapped into “the focus of an ageing population on healthier lifestyles, combined with a focus on natural ingredients”, says Mark Lynch, founding partner at Oghma Partners, a corporate finance boutique specialising in the consumer sector.

Some 20 food and drinks groups made the list, several of them going the route of direct-to-consumer sales — a common mechanism for consumer start-ups to bypass retailers and expand through an efficient digital marketing operation.

Rising input costs, however, are a key challenge this year for all food and drinks companies. Even before the Russian invasion of Ukraine drove up prices for key food ingredients, with wheat reaching record highs, a surge in commodity prices had already prompted multinationals such as Unilever to predict a squeeze on margins.

Another challenge, as for any fast-growing start-up, is deciding whether and when to sell.

At Waterdrop, Murray acknowledges that his business is “still a mosquito on the back of an elephant” of the global drinks business.

The company, which also sells reusable water bottles and bacteria-killing caps that measure customers’ hydration, is aiming for €400mn of annual sales by 2025, partly by expanding from direct sales into conventional retail.

Murray says he would consider listing or finding a “strategic partner” in the future, adding that his main goal is global expansion.

Source: Financial Times; FoodNavigator-USA.com

Caption top: Waterdrop founders Martin Murray, Christoph Hermann and Henry Murray.

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