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September 18, 2012

Innovation in Liquid Concentrates in the US

IntroArticle_blogAnalyst Insight By Rick Haffner, Head of Global Beverages Research at Euromonitor International

Recent liquid concentrate developments in the US demonstrate that effective new products can stem from combining existing technologies in innovative ways.  Kraft is leading this innovation with its MiO brand. 

MiO was introduced in March, 2011.  It is sold in 1.62 ounce (48ml) containers that can fit in a pocket.  The container allows the liquid concentrate to be dispensed into water one drop at a time.  It is available in fruit flavour and functional energy enhancer sublines.  Also, it is calorie free, sweetened with sucralose.

Following the preparation instructions, each container prepares 24 eight ounce (240ml.) servings.  The average price per litre (on a reconstituted basis) is about US$0.70.  This compares to US$0.60 per (reconstituted)  litre for liquid concentrates in Western Europe.

While the product itself is a liquid concentrate, Kraft refers to it as a liquid water enhancer.  In addition to the unique reference, there are two innovations.  First is the packaging that makes MiO portable and also allows for precise control of the amount of concentrate added to water.  The second innovation is in the positioning of the product.  MiO is positioned as a liquid water enhancer that allows water to be customized to individual taste at any time. 

Despite the current niche nature of liquid concentrates in the US (US$27mn.  in retail sales in 2010-prior to MiO’s introduction), the category appears poised for rapid expansion.

This is evidenced by Coca-Cola introducing a competitor to Kraft’s brand.  Coca-Cola recently announced it was introducing Dasani Drops in October.  The major characteristics of Dasani Drops are similar to MiO.  It is a liquid concentrate in a portable squeeze bottle (Coca-Cola’s press release states “perfect for those on the go”) and is sugar free.  The number of drops added to water can be controlled so consumers can customize the flavour intensity.

The new competition most likely is good news for Kraft and liquid concentrates.  Kraft appears to have succeeded in finding an effective positioning for the category (otherwise Coca-Cola would not be entering) and they have had one and a half years to establish a brand identity for MiO.

Coca-Cola’s marketing and distribution muscle will raise the category profile at a faster rate than Kraft could do alone.  This most likely will cause liquid concentrates to grow at a faster rate than Kraft could accomplish.  While Kraft will lose share, sales for MiO should be higher than if Coca-Cola did not enter. 

Kraft and Coca-Cola have identified a set of relevant characteristics for success in liquid concentrates in the US (portable container able to dispense sugar free concentrate one drop at a time).   Assuming the category expands rapidly, there should be room for more than two competitors.

This may present an opportunity for European liquid concentrate manufacturers to enter the US market.  These companies already have the technology to make the product (although it may need to be made in a more concentrated format to fit in a smaller container).  Kraft and Coca-Cola have demonstrated how to position it to consumers.  Now is the time to enter, while consumer buying habits are still developing.


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