Columbia-based Rethink Water sees growth in boxed water for kids

Amid concerns about the use of plastic in bottled water, a relatively new Columbia-based brand might have found a sweet spot for rapid growth.

Three years ago, two college friends launched Rethink Water, a fast-growing brand of highly purified water sold in a recyclable box.

The brand got picked up by stores such as Giant Food, Wegmans and Safeway and saw strong sales. Now, they’re expanding with a kid-friendly line that will roll out to 10,000 stores in April.

As consumers increasingly seek out healthier foods and beverages and want them in sustainable, on-the-go packages, they also want the same for their kids, co-founders Matt Swanson and Chris O’Donovan said. Offering drinks free of sugar and sodium in renewable paperboard containers will appeal to parents, they said.

“We believe we’re going to be leaders in innovation and ultimately create a new category for kids’ beverages,” Swanson said. “The way that consumers are moving right now, especially moms and dads, is they’re looking for things that are zero sugar, zero calories, zero sodium, and, of course, they’re going to want that for their children.”

The company began experimenting with kids drinks last year but expects explosive growth in the kids segment after it launches Rethink Kids Water with five flavors this spring. Retailers include Walmart, with 3,000 locations, and Target and Kroger supermarkets, with 1,000 locations each.

Rethink Kids Water is designed to appeal to children, with cartons showing fruit-like characters playing water sports and flavors such as orange mango, fruit punch and berry.

Rethink is expanding at a time when Americans are drinking more bottled water than carbonated soft drinks, according to Beverage Marketing Corp., driven, some believe, by concerns over the health impacts of sugary drinks.

The company, which now has nine full-time employees, saw sales jump from $400,000 in 2016 to about $3 million last year and expects revenue this year of $7 million to $10 million. The kids line, which generated about 10 percent of sales last year, should account for about 80 percent this year.

Swanson and O’Donovan, both 31, are turning to the kids market at the suggestion of one of their Rethink Water retailers. They looked into putting water into a juice box and were surprised to find nothing similar on the market.

“It’s crazy to think that literally doesn't exist,” Swanson said. “It’s the biggest category in beverages, and there’s no legitimate option for a child to drink water. So when a mom wants to give a child water they’re either using plastic water bottles or having to fill up a sippy cup. The juice box is such an easy vehicle for a parent to give their child something to drink, and no one was doing it.”

Rebecca K. Trump, associate professor of marketing at Loyola University Maryland’s Sellinger School of Business, sees Rethink Water fitting into the rise of conscientious consumerism in which people seek out environmentally friendly or organic products or brands that promote fair trade,

“It doesn’t surprise me that there’s a market for products that have some of these features,” Trump said. “It sounds like drinks that might be appealing to kids and parents who might be more interested in a natural approach and not interested in artificial ingredients.”

Trends in packaging typically follow market trends for products, said Lisa McTigue Pierce, executive editor of Packaging Digest. In the beverage category, consumers want drinks that are portable and single serve, and not harmful to the environment, she said.

“Because we’re on the go as much as we are, we need to be able to consume products wherever, whenever,” Pierce said. In addition, “sustainability definitely is of interest in all types of packaging these days.”

Swanson, who grew up in Highland in Howard County and attended Mount St. Joseph High School, and O’Donovan, who is from Annapolis and went to Annapolis High School, became friends a decade ago at Washington College in Chestertown, where they both played baseball.

After graduating in 2009, Swanson worked for Procter & Gamble, selling P&G brands to retailers, including hair care products to Target in Minneapolis. He later worked for Google in San Francisco. O’Donovan, meanwhile, went to work for Maryland-based natural salad dressing maker Tessemae’s when it started in 2010.

“I wore every hat, in production to sales to marketing,” O’Donovan recalled.

He rose to manager of Tessemae’s Whole Foods account, then worked for sports drink maker BodyArmor, helping launch mid-Atlantic distribution.

Over the years, he and Swanson often talked about starting their own business. By 2015, they felt ready.

“Matt’s background was with big companies, calling up the biggest retailers,” O’Donovan said. “My background was how do you start a startup, how do you sell case one at Whole Foods.”

With a $500,000 infusion from angel investors, they quit their jobs and started Rethink Water in Swanson’s parents’ basement in Highland.

After researching water quality and packaging, they decided to put highly purified water into cartons made of 70 percent renewable paperboard. Plastic bottles, Swanson said, often are not recycled and end up harming the environment. The founders sold Rethink Water out of their cars.

“We took the idea from a piece of paper to five or six thousand retail stores in like 12 months. It was really, really fast growth,” Swanson said.

Since then the company has benefited from three additional financing rounds, including a $2 million round led by their first institutional investor, AccelFoods, a New York-based accelerator and fund that backs innovative food and beverage companies.

Wegmans has sold the original Rethink Water product in all eight of its Maryland stores and in several in Northern Virginia since spring of 2016. The company was attracted to Rethink partly because of its local roots, which fit Wegman’s practice of offering locally grown produce and products made by locally based businesses.

“The products do well,” said Valerie Fox, a Wegman’s spokeswoman. Additionally, “we’re committed to sustainability, and packaging is one of the things we look at.”

Rethink’s co-founders said retailers have shown strong interest in the kids drinks, which are flavored with the essence of fruit, or oils, and certified as USDA organic.

With the juice box category in decline, Swanson said, retailers are “seeing the way that consumers are shifting.”

lorraine.mirabella@baltsun.com

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