Pepsi Launches Liquid Enhancers: Aquafina FlavorSplash

The new Aquafina FlavorSplash line-up: sparkling water and liquid enhancers.  Courtesy of facebook.com
The new Aquafina FlavorSplash line-up: sparkling water and liquid enhancers. Courtesy of facebook.com

It’s been a few years after Kraft MiO revolutionized flavor enhancers, but Pepsi has finally launched their own liquid enhancers under the Aquafina water brand.  Following a beverage portfolio evaluation that lasted nearly 12 months, Pepsi will overhaul Aquafina FlavorSplash to include new sparkling water flavors and liquid enhancers.  On the liquid enhancer front, they will have three offerings: So Strawberry, Berry On, and World Peach.  Pepsi’s offerings are targeted toward a younger demographic primarily aged 13-19 years old (more on that later).  After waiting so long to enter this beverage segment, will Pepsi see success?

With another household name entering the segment – be it Pepsi or Aquafina – liquid enhancers as a segment benefits from more media support.  Like Coca-Cola, Pepsi has their own distribution network as well as their own merchandising and cooler units.  Having your own branded equipment assets are important for consistent communication, and even more crucial to ensure flawless execution.  As we have seen Powerade Zero Drops and Dasani Drops merchandised within Coca-Cola coolers, we can expect Pepsi to do the same with Aquafina FlavorSplash droplets.  This will help Pepsi get prime location space within grocery channels and restaurant establishments to display their newest products.

Aquafina FlavorSplash Berry On flavor.  Courtesy of facebook.com
Aquafina FlavorSplash Berry On flavor. Courtesy of facebook.com

By targeting a younger demographic, Pepsi aims to introduce consumers to their beverages at earlier life stages.  While appealing to the product’s purchaser (moms) is a different challenge, Pepsi hopes teens will be able to influence the purchase decision.  If not, Aquafina FlavorSplash may be something teens can still buy in school.  AdAge’s article detailing the Aquafina FlavorSplash interviews Pepsi’s CMO Simon Lowden, which describes the possibility at getting Aquafina FlavorSplash stocked in high schools as well (article link here).  The younger demographic puts Pepsi’s liquid enhancer in a niche where no other competitive liquid enhanced is targeting.  So far, young adults, athletes, and tea drinkers have been the general target.

The product packaging itself will spur interest, as the candy-colored packaging is brightly colored that will attract the demographic’s attention.  With unique flavor names – unlike the many berry-pomegranates and mango-peaches on the shelf – the flavors should stand out among the competitive set as well.

As a new player enters the segment, retailers and consumers will benefit from all the healthy competition for their dollars and chance to quench their thirst.  Pepsi will see success within this segment, given messaging toward an audience where no other brand is explicitly communicating toward, their own equipment assets that allow for prime product placement opportunities, and a product that is on part with market trends.  Even with all the competition within the liquid enhancer landscape – Kraft, Dasani, Powerade Zero, Crystal Light, and Nestea to name but a few – Pepsi’s Aquafina FlavorSplash should be able to garner healthy sales.

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Nestea Enters Crowded Liquid Enhancers Space

Nestea's Liquid Water Enhancer - image courtesy of bevnet.com
Nestea’s Liquid Water Enhancer – image courtesy of bevnet.com

It seems that Nestea is primed to enter the liquid enhancers space soon (link here).  In a segment that grows increasingly crowded with strong brand names like Kraft MiO, Crystal Light Liquid, Dasani Drops, Powerade Zero Drops, is this the right decision by Nestea to enter with their own liquid enhancer?  Aside from the well-known branded players, a host of grocery retailers already have their own store brand (per this BevReview article, Walmart, Supervalu and Winn-Dixie all have their own versions).  Can this beverage segment sustain another branded player?  With various offerings available and finite space in the grocery aisle, will this launch actually be beneficial?  It depends on who you talk to.

First, let’s take a look at what Nestea is introducing to the marketplace.  Nestea Liquid Water Enhancer will arrive exclusively to Target in three flavors:  Iced Tea with Lemon, Iced Tea with Peach and Half & Half Iced Tea.  Another flavor will hit the rest of the market afterwards: Green Tea Citrus.  The Nestea Liquid Water Enhancers will be available in 26-serving bottles.  Because there is no other tea-based liquid enhancer in the marketplace, the Nestea product is unique and certainly adds value to the grocery aisle.  The consumer will now be able to find their Nestea drink mixes in both powder and liquid formats.  So Nestea benefits from this product launch, giving themselves a broader consumer reach.  Now that Nestea has a unique product, they just need to go and “sell” it to the grocery retailer that their product is beneficial for them too.

Retailers, however, may interpret this as more of a headache than anything.  With liquid enhancers expanding so rapidly, it looks like manufacturers just want to launch a product and get in on the gold rush.  With another product added to the overall consideration set, the retailers must decide which ones to carry and help them grow their business.  Do they maintain the same space in the grocery aisle for these products?  Or should they rationalize some other products?  The retailer may simply pass the problem on to manufacturers, and have them create the most compelling sell story to gain retailer distribution.  What may ensue should certainly benefit consumers and retailers: manufacturers will undoubtedly be offering some form of pricing and promotional support to get them to take their product in-store.

Coca-Cola's Powerade Zero Drops - image courtesy of coca-colacompany.com
Coca-Cola’s Powerade Zero Drops – image courtesy of coca-colacompany.com

For liquid enhancers and the consumer, Nestea’s entry is a positive addition.  Nestea’s entry carves out a niche for tea-based liquid enhancers, similar to how Powerade Zero Drops and MiO Fit created the sports niche.  Despite further fragmenting liquid enhancers into more beverage segments, this launch will be beneficial to the category.  As more marketing dollars get behind liquid enhancers, this may spell opportunity for even more product launches.  If consumers are willing to mix water with enhancers for caffeine, electrolytes, and tea, what else may they be interested in?  How about juices?  Or carbonated soda?  In due time, consumers may be able to find liquid enhancers for any beverage that is currently available in can or bottle format.

While the Nestea launch further crowds the liquid enhancer market, it still benefits everyone.  Consumers get another liquid enhancer choice.  Nestea improve their consumer reach.  And retailers linking these two groups together will be rewarded with more profits.

what happened to vitaminwater?

vw+vw0 canada line-up courtesy of @vitaminwater_bc

Since the explosion of vitaminwater on to the beverage scene years ago, momentum appears to have subsided for the brand and enhanced waters.  It seems that a variety of market conditions has reduced excitement for vitaminwater to just another product on the shelf.  There are certainly more reasons behind the brand’s continued decline, but BevWire will detail three major contributing market conditions.  

Market Condition #1 – vitaminwater has benefited and been obstructed by being a part of Coca-Cola’s beverage family.  As highlighted briefly in an earlier post about Zevia, vitaminwater saw immense benefits from the Coca-Cola acquisition.  The enhanced water brand entered a broader distribution network that vastly improved the brand’s availability.  At the same time, their initial marketing strategy was to be driven by “consumer demand”, relying on key influencers to spread word for the product.  This type of demand ensured that consumers and retailers were willing to pay a premium, and made discounting less unnecessary.  However, as Pepsi’s Aquafina Plus (in Canada) and SoBe Lifewater (in the U.S.) kept on promoting at enormous discounts, vitaminwater was compelled to react.  Without their premium positioning, vitaminwater became just another brand in Coca-Cola’s portfolio that had to fight for promotional dollars.  And with Coca-Cola focused on growing its sparkling business of Red (Coca-Cola),  Silver (Diet Coke), and Black (Coke Zero), a host of beverage brands lost promotional funding.  After initial success in the Canadian market from 2007 to roughly 2010, the vitaminwater has slowly lost market visibility as advertising support shifted more to other Coca-Cola properties.

Evolution Fresh - courtesy of drinks-business-review.comMarket Condition #2 – shifting consumer trends and preferences, highlighted by more juice, tea and energy drink entrants.  Since 2010, we have seen more product releases coming out from the juice, energy drink and ready-to-drink tea segments.  Starbucks was a strong force that expedited this trend.  Their acquisitions of Evolution Fresh and Teavana, along with their Starbucks Refreshers product launch gave them greater market coverage and allowed them to capitalize on the consumer trends.  In energy, the big three of Red Bull, Rockstar, and Monster all had product innovations enter the marketplace.  And also some negative media attention that led to consumers increasingly purchase these products to find out what whether all the extra attention was merited.  With consumers increasingly empahsizing health benefits – and vitaminwater also paying attention to this with their vitaminwater zero production introduction – the natural benefits of juice and tea became top of mind.  Because vitaminwater was relatively less healthy than these other products in the emerging segments, consumers shifted their purchase dollars from enhanced waters to juices, teas, and energy drinks.

 

via forum.smartcanucks.ca – just one of many Aquafina Plus coupons. This one is a fairly reasonable 33% discount.

Market Condition #3 – retailers react to new reality of people’s purchase habits.  Following the economic recession (that some still think we’re in), many Canadians buying behavior has focused more intensively on price.  That is not to say that they are not willing to pay more, but the value-benefit equation is more influential of their purchase decision.  Retailers have long pressured manufacturers for price concessions and finally Coca-Cola gave in to price promotions on vitaminwater in 2010 – around the time its descent began.  What happened next was more price cutting by its competitors to maintain their own sales – Aquafina Plus discounts became much deeper than before.  Ultimately this leads to the current situation, which is reduced segment value.  Since vitaminwater is no longer the premium brand that it once was, retail support started to transfer to other segments.  Shelf space for vitaminwater was compromised, and sku rationalization also start to slowly creep in.

While these three conditions do not represent the entirety of why vitaminwater is losing steam, it summarizes what is happening.  There are both internal and external contributors.  However, all hope shouldn’t be lost on the segment itself.  More competitors will look to redefine the value equation because the market leader is down.  Bottled water sales itself is on the incline.  And other vitamin beverages like Karma, Activate, and even Rockstar Energy Waters look to carve out their own niche in the marketplace.  Liquid enhancers such as Dasani Drops, Kraft MiO, Crystal Light Liquid are also seeing sales gains too.

Just wait to see how vitaminwater will react to the competitive pressure and what they might do to revive the one-time darling of the beverage industry.

MiO Sport: Fit For Any Occasion

Courtesy of funnycommercialsworld.com
The office worker is now a basketball celebrity.  Courtesy of funnycommercialsworld.com

MiO Sport is Kraft’s latest innovation in their liquid enhancers Canadian product line (MiO Fit is what is introduced in the U.S).  While the product has been available since their February 2013 Super Bowl ad, they had not implemented any video promotions in Canada.  Until now.  Re-positioning the product as “MiO Sport”, they have released two commercials to talk about MiO Sport in the Canadian marketplace.

Here’s the MiO Sport commercial “Swish” from early May 2013:

It doesn’t take long for the viewer to guess what is being advertised in these commercials.  Notice that neither of these commercials mentioned anything about it “changing everything?”  It is because they have already educated the consumer on what MiO is and how to use it; the video itself implies that MiO Sport changes everything.  The next step is to show different situations to use MiO Sport.

With regard to the Swish commercial, the commercial follows the same structure as their previous MiO ad spot.  The original video was based in an office setting and featured the same office guy.  Every time the scene cuts from one person talking to another person, something changes.  This commercial’s ultimate message is very similar to the original MiO video: squirting MiO Sport into your water changes everything.  And then you see all the crazy situations of how this regular office worker (definitely not athletic) transforms into an outrageously successful basketball player.  It’s so over-the-top that its believable.  MiO Sport is not advertising that squirting MiO turns you into a successful athlete, rather it is making fun of it.  And that keeps with the brand’s personality.

And here’s their latest commercial “Eye of the Squirter” from July 2013:

Their second commercial “Eye of the Squirter” is different from their previous commercials.  While the main character is still the same person in the previous two ad spots, they are no longer set in the same environment that changes multiple times.  This time it is sporting activities in various environments, such as the track, the swimming pool, and the hockey locker room.   Notice that these sports also have a stronger Canadian tone to them?  While MiO itself wasn’t introduced outright from the beginning, it becomes obvious what is being advertised given the visual cues.  The advertisement’s goal is to show you that MiO Sport is a fitting hydration choice for any activities – even if it is power walking on the track.

Do either of these commercials spur you to hydrate yourself with MiO Sport?  After all, it does appear that MiO Sport is targeting a different consumer segment.  While Powerade and Gatorade are after the serious athlete, MiO Sport is only targeting the casual athlete and the average-fit consumer.  There are more people that match this consumer group than that of the serious athlete.  My guess is that the MiO Sport does have a strong appeal in the Canadian marketplace, and we should see sales taking off soon enough – if it hasn’t already.

It’s also an interesting note that these commercials are not strictly made for TV, rather it is made for YouTube and a version of it is released for TV (a topic I will highlight in a separate post).  If you don’t believe me, feel free to click into all the separate “hidden” commercials that they talk about.

Liquid Enhancer Segment Legitimized With Powerade Launch

Sourced from www.coca-colacompany.com
Sourced from http://www.coca-colacompany.com

Funny how just a few years ago, no one has ever heard of liquid flavor enhancers but now many people have heard about and possibly tried MiO.  This is due in no small part to Kraft, which created the product segment and put a lot of marketing support behind their MiO to introduce and educate consumers on how to use this product.  And as Dasani introduced their own liquid enhancer to capitalize on the market trend, Kraft innovated to stay ahead of its competition.  These innovations include employing a dual brand strategy by launching Crystal Light Liquid, as well as extending MiO’s platform by branching out to energy and sports drinks.  With recent news about Powerade coming out with a liquid enhancer, this segment appears to provide legitimate profitable returns for manufacturers.  However, is the segment itself big enough for so many different branded offerings?  Will this spur Pepsi to participate in some shape or form?  Possibly with a Gatorade drop to maintain their market share in sports drinks?

Courtesy of www.makeitmio.com
Courtesy of http://www.makeitmio.com

Liquid enhancers have enormous growth potential and despite its infancy, have extended across sports drinks and energy drinks.  This has certainly broadened its consumer appeal and increased the segment’s awareness and adoption rates.  However, the segment still appears to be crowded with four branded players: MiO, Crystal Light, Dasani, and now Powerade.  And it only looks that way because the segment itself is still small.  For all the excitement around MiO, it is still only a $200-$300 million brand.  Combined with Crystal Light, Dasani, Powerade, and even private-label offerings, the segment itself is not predicted to be over $500 million.  But with more advertising support behind each of these beverage properties as well as higher levels of consumer adoption, the segment will grow to be large enough to house these four liquid enhancer brands.  MiO will certainly be rewarded for being the first mover.  Consider this the initial stage of energy shots, when 5-Hr Energy was the only one in the segment and it took some time to gain sales.  As more companies introduced their own energy shots, the segment gained popularity and market size.  Through all this, 5-Hr Energy became the de facto leader in energy shots and rebuffed Red Bull, Rockstar, and Monster.  5-Hr Energy capitalized on the news that other energy drink manufacturers brought to the segment and benefitted from being the most recognized name among the consideration set.  So while it currently appears that liquid enhancers is congested, the potential size of the segment mirrors energy shots, and may even outpace it given less consumer backlash.

With great potential, comes great competition.  We’ve seen Coca-Cola wait for Kraft to prove that this is a viable segment, and then furiously pursue them with their own offerings.  Why has Pepsi not done anything yet?  A Gatorade Drop would certainly gain lots of attention among athletes, not to mention give them another extension to complement their Gatorade Chew.  Pepsi could also come out with a tea offering to start off in a segment where there are no current liquid enhancers (though there are rumors that AriZona is coming out with one soon.)  Given that liquid enhancers can be sold warm and are so compact, they can be stocked on shelves and also at the cash register as consumers complete their purchases.  Pepsi would be missing out on a large opportunity if their only presence were in coolers or displays – far away from the point of purchase.  My guess is that they are likely in the works to launch their own enhancer soon, but only time will tell.

Liquid enhancers are here to stay and has proven to be rich opportunity for the participants.  As the segment gets bigger, it will spell of a missed opportunity for Pepsi if they remain on the sidelines.

Rockstar Energy To Launch Energy Waters

courtesy of Beverage Digest's Twitter feed - October 9, 2012

At the National Association of Convenience Stores (NACS) show earlier in October, Rockstar Energy revealed that they plan on launching a line of energy water.  While the timeline has not be revealed, the initial assortment listed on the sell sheet image include the following flavors:  Tropical Citrus, Blueberry Pomegranate Acai, Orange Tangerine.  BevNet has some more information and a quick video on Rockstar Energy’s new products from the show (link here).

This launch from Rockstar Energy pits them against Coca-Cola’s glaceau vitaminwater lineup, and PepsiCo’s SoBe Lifewater and Aquafina Plus lineups.  The question becomes how Rockstar Energy can differentiate themselves against these already established brands.  Despite their positioning as “energy water”, it will be difficult for them to be considered a dissimilar product from flavored water.  It is still an enhanced water beverage and may very well be shelved alongside Aquafina Plus or SoBe Lifewater (Rockstar Energy products are distributed by Pepsi).  And since consumers already have certain expectations for the price point, the new energy waters will have to be priced in a similar range.  There really isn’t that much room for differentiation given what we already know.

So with Product, Place, and Price (the 4 P’s of the Marketing Mix) already determined and largely out of their control, Promotion is the remaining lever Rockstar Energy can use to stand out.  Even then it is still a uphill battle.  In Canada, Aquafina Plus has constantly been on price promotions, to the point where there’s also expectations for feature price points.  In the U.S., many retailers had ran similar promotions but also drove unit sales with a “$10 for 10” feature strategy.  How can Rockstar’s Energy Water stand out?  Featuring on price – especially for a new entrant – will only upset the market dynamics and reduce profitability.

Rockstar Energy Water Lineup

One option may be co-promoting with their energy drinks, which has an established presence that is much stronger than that of Amped, Nos or Full Throttle (possibly only Amped and Nos in the future, read about Full Throttle’s de-emphasis here).  Leveraging on their stronger identity in energy drinks, they can offer consumers an alternative or additional Rockstar beverage when they are in-store.  Enhanced waters also do not carry the negative stigma that energy drinks have, so transitioning the “energy” equity from energy drinks to energy water may be a tactic to completely re-position themselves.

Another option would be to fully leverage their entertainment and sponsorship properties to feature this new product – in tandem with their energy drinks.  Offering samples of their energy water at their music and sporting events will increase their exposure to a captive audience.  Especially when their competitive products (vitaminwater, lifewater, aquafina plus) are shut out from these venues.  Especially when they offer a differentiated product than Red Bull and Monster Energy, should it be a multi-sponsor event.

While this is a very unique expansion from Rockstar Energy haloing off their “energy” brand association, it will be interesting to see how it can defend against the pressures of larger and more established brands.  This impending product launch has a chance to succeed, but only if they can carve out their own niche against glaceau, SoBe, and Aquafina Plus.

Dasani Drops: Serious Competition For Kraft MiO

 Dasani Drops - courtesy of BevReview.com

I’m sure by now most people have heard of Coca-Cola’s entry into liquid flavor enhancer.  If not, Coca-Cola is launching Dasani Drops to compete with the Kraft MiO and is set to enter the U.S. market in October – you can read more about it at BevNet (link here).  BevWire had also previously written about the impending entry of Dasani Drops (link here), which should offer some top level insight to what this piece will focus on.  With a price point that rivals the MiO and more servings per package, Coca-Cola is ready to offer some serious competition to the original innovation.  What is the potential of this segment now that another branded player is entering the category?  Will Dasani Drops take away Kraft MiO’s share leadership and continue to grow liquid flavor enhancers?  Those are just some of the questions that comes to mind with this launch.

Liquid flavor enhancers exist as a natural transition away from the traditional delivery format.  Aside from the trade up story and the extra consumption occasions this product creates, it taps into the consumers today that want a customizable beverage.  The MiO’s Canadian messaging advertises on the fact of customization – that the user can squirt as much or as little of the MiO into their water to their liking.  The basis is that liquid flavor enhancers are geared toward a younger consumer, one that wants to choose the level of sweetness and flavoring in their beverage.  It would be much harder to do that with powder packets with limit the level of flavoring based on the pack size.

The liquid flavor enhancers market is believed to be worth slightly over $100 million dollars – contributed mainly by Kraft MiO sales with some minor contributions from store brands at the moment.  With another strong branded player, the segment is expected to have an accelerated growth rate.  And given the size of Coca-Cola, doubling segment sales double to $200 million may not be completely out of reach.  

Behind Coca-Cola’s distribution strength and their availability in all places with beverages, Dasani Drops may take away the MiO’s share leadership simply by being more widely available.  The immediate consumption and convenience/petroleum channels are just two areas that Coca-Cola will have access to that the Kraft MiO will not.  Kraft products may exist in the convenience store environment, but it will not be located in the same area that the Dasani Drops may be placed – by the beverage coolers.  Even within the grocery store environment, Coca-Cola may benefit by having the ability to exist in both the bottled beverage aisle and in the powdered drink aisle.  Given that both branded products offer the similar benefits and flavors, winning the liquid flavor enhancers segment really depends on which company can achieve strongest distribution at this time.

Price competition may not completely make sense from a category perspective.  However, beverage products are constantly featured items in the grocery channel and retailers may pressure either manufacturer to increase feature frequency and depth.  As long as both manufacturers understand that this is relatively new segment and a product innovation, neither would want to over-promote the segment since it would a longer time to recuperate their investments.  It’s just a matter of time before Pepsi wants to join the fight, and price promotions will be essential at differentiating each brand’s offering.

Kudos to Kraft for innovating and bringing something truly different to the flavor enhancers market, but now let’s see how well they can defend against a beverage manufacturer like Coca-Cola.

Kraft MiO Enjoying Exclusivity in Canada…For Now

Kraft’s liquid beverage enhancer MiO is now available in Canada, after being available in the U.S. for over a year.  My earlier post detailed the MiO’s impact on the American market, how it has led to line extensions as well as inspired copycats (link here).  While MiO is still in a state of infancy in Canada and offers very few challengers, it’s worthwhile to look at the example south of the border to see what type of impact it may have in Canada.  Here’s the first MiO commercial for Canada, followed by the American commercial link below.

American MiO commercial link here.  The differences are quite obvious in its message and communication, since each ultimately caters to different audiences.  Kraft Canada has decided to target 18-34 year old males with the MiO (article from Strategy Magazine details MiO’s Canadian strategy here).   With regard to the business impact, will the MiO inspire copycat products from Coca-Cola or Pepsi?  Will it also lead to caffeine-infused line extensions like MiO Energy?

While there exists a template in the United States, it’s important to note that the two markets are decidedly different.  As we’ve already seen, Canadians do not react to the same type of messaging and need customized advertisements.  Further to the differences, Canadian regulations also stipulate stronger focuses on health-consciousness (ie calorie listings on packaging) and product compositions (ie  mandatory nutritional tables).  This all boils down to the point that what may works in the United States may not work here in Canada.

Kraft Canada will work to grow the category of liquid flavor enhancers, and this will lead to copycats.  With Kraft bearing the education costs and the initial market research, other beverage organizations will be able to see what type of opportunities exist in this category.  Judging by how the American market is performing, the category does have growth potential and can sustain more than one branded manufacturer.  Understanding their own production & distribution capabilities, the entry of Coca-Cola, Pepsi, and even Dr Pepper Snapple Group in Canada seems just like a matter of timing.  Currently on grocery store shelves, the MiO sits by itself with powdered drinks like Crystal Light, Kool-Aid, Nestea without any store brands.  It would appear  that at this time, even private labels are hesitant of coming into the market and are watching to see how the MiO will perform first before jumping into the category.

How about the MiO Energy, will it enter Canada?  It is an intriguing product because the user can personalize their beverage and control the amount of caffeine they would like in their drink.  However, with the increased attention on energy drinks, their high caffeine content, and their adverse effects, will this product be successful if launched in Canada?  My perception is that it will extend into Canada, but their success hinges on their market positioning. Positioning it as a customizable caffeine drink against coffee, rather than energy drinks may be more successful.  Coffee is generally more acceptable as a caffeinated beverage over energy drinks due to their lower caffeine concentration.

In the meantime, Canadians still have the regular Kraft MiO to enjoy in four flavors pending more introductions.  Enjoy the exclusivity while it last MiO, because it appears that you’ll have to defend your shelf space soon enough.

Kraft To Launch New Liquid Water Flavorers

Kraft MiOKraft is set to launch it’s first new product in 15 years, and it’s a zero-calorie, liquid water flavor enhancer called Kraft MiO.  Available in six flavors (berry pomegranate, fruit punch, mango peach, peach tea, sweet tea, and strawberry watermelon), MiO is packaged in a water droplet-shaped plastic bottle that will yield 24 servings.  Nutritional information on the Kraft MiO’s Facebook page (link here) says that it’s no calories, no artificial flavors, and no caffeine.  However, as USA Today pointed out in their report on MiO (link here), it does contain artificial colors, sweeteners, and preservatives.  The product – which is similar to Kraf’ts Crystal Light powder – will launch March 7 in the United States, but no word yet on whether it will come up to Canada.

While some the news reports and Kraft propaganda claims that this product will revolutionize the water enhancers category, I’m not fully convinced.  Will consumers see this only as a novelty item, try it once and not re-purchase?  And since water enhancers are mainly in powder form (with Kraft having a large market of the powder water enhancer category), how much cannibalization will occur?  Kraft MiO GlassWill consumers want to trade up from the less expensive powder format, for the more expensive liquid format?  The idea of a liquid water flavor enhancer is fantastic, and if Kraft is able in getting consumers to adopt MiO beyond the trial stage it will be a huge success for both the product and the category.  Right now, Kraft is not only trying to introduce a new product, but educate the public on the new method of flavoring their water.  The majority of consumers that flavor their water uses a powder, so changing behaviors and habits might take a lot of marketing.  And on the cannibalization factor, getting consumers to switch away from powder to liquid will see consumers leaving Crystal Light (hopefully for MiO), just how many will be the question.  In the end, anyone consumer that trades the powder format for liquid will likely be trading to MiO since there are not too many other substitutes on the market right now.  However, unless the cost to product MiO is significantly lower than Crystal Light, Kraft may actually be taking in less profit.  A package of 30-count Crystal Light currently retails for $13, working out to 43cents each serving, while a 24-serving of Kraft MiO will retail for $3.99 (breaking down to 16cents each serving).  Consumers that work out these calculations will see that MiO gives more value than Crystal Light and switch to MiO, leaving Kraft with savvier consumers, but less profits.

MiO can work, but you really have to wonder if it’s in Kraft’s best interests to have it work.