Soft-drink bottlers are cashing in by adding New Age herbs to their beverage recipes and touting the health benefits to consumers. Will the FDA continue to look the other way?
Herbal-tonic bottler has healthy start
A buttoned-down marketer is the unlikely apostle of New Age beverages that 'uplift the mind' while energizing sales
John Bello could barely tell ginkgo from ginseng from guarana three years ago. But Bello, the manic marketer behind some of the hottest new drinks in the beverage business, sure sounds like an expert now. "They uplift the mind, body, and spirit," says the voluble Bello, referring to his company's line of herb-spiked teas and tonics. "And they're cool."
Bello's bottled brews, some of which carry exotic names such as Jing and Qi, have uplifted his business, South Beach Beverage Co., based in Norwalk, Conn.
Bello, the company's founder and CEO, started out four years ago selling conventional cold tea drinks. But that line flopped. So in early 1997 he mixed up a whole new "healthy refreshments" product line--in effect, restarting his company from scratch. Since then revenues have skyrocketed, increasing from $2.1 million in 1996 to $67 million in 1998. With sales projected to more than double this year, Bello boasts that the company, whose brand is popularly known as SoBe, could become "another Snapple."
South Beach is hardly the only beverage maker cashing in on health-conscious consumers' yen for herbal supplements. But SoBe's seductive packaging and energetic marketing have made the company a trailblazer. It has been leading a pack of spirited start-ups and established bottlers in creating a new product category: so-called nutrient-enhanced beverages. "Suddenly, it's big-time," says Gerry Khermouch, who tracks the beverage business for Brandweek.
Bello, 53, is an unlikely sort to be singing the praises of St. John's wort and ginseng. A buttoned-down executive, he worked at PepsiCo and was president of NFL Properties, the National Football League's marketing arm, for 14 years before he launched South Beach in 1995.
The company's original line of flavored teas failed to catch on in a market that was already flooded with similar drinks. But there was one bright spot. One of South Beach's health-oriented drinks, its Orange Elixir with beta carotene, was selling briskly. Meanwhile, Bello kept seeing news stories extolling the health benefits of herbs such as ginkgo and kava, and this inspired him to revamp his strategy. But first, South Beach, which was staggering under $2 million in debt, had to find the money to bankroll it. Bello managed to persuade his glassmaker, flavor supplier, and packers to extend his credit line. To obtain a bank loan for another $1 million, he signed over his house as collateral.
This time his timing was right on. When the new line of SoBe drinks--including 3G Black Tea, laced with ginseng, ginkgo, and guarana--reached the market, sales took off. "We knew we had a hit on our hands," says Bello.
In fact, Bello's timing benefited him in a way he couldn't have foreseen. His company's reincarnation came just as Snapple, the hottest line of drinks of the early 1990s, was slumping. Fifteen Snapple distributors on the East Coast were scouting for the next hot product, and Bello latched onto them and about a dozen former Arizona Beverages distributors in Los Angeles. With that bicoastal distribution network, Bello had the critical allies he needed to blitz SoBe into convenience stores and major supermarket chains like Safeway and ShopRite.
To capture its target consumers--hip Americans aged 18 to 34--South Beach relies on eye-catching labeling (bold lettering and bright lizards) and splashy marketing, such as "lizard fun buses" that will call on music and adventure-sports festivals this summer. South Beach is "not subtle," says Joan Holleran, editor of the trade publication Beverage Industry. "That's why they're getting all the attention."
Whether the 75-employee South Beach can keep attracting that attention is another question. There are plenty of eager start-ups, not to mention more established companies, such as Hansen's Beverage Co. and Triarc Beverage Group, the makers of Snapple, that are selling their own herb-enhanced teas and juice drinks.
And while nobody can argue with the success that South Beach has had, some competitors predict that it may not last. "The beverage market is very fickle," points out Marc Johnson, head of Mad River Traders, a South Beach rival based in Stowe, Vt., which recently rolled out a line of microbrewed teas containing ginseng, ginkgo, and echinacea. "The consumer is always swayed by new and different things." Bello, the self-proclaimed "lizard king," concurs: "You've got to keep at it. The war in the beverage marketplace is never over."