Nutrition, naturalness and NPD: How TAPPED’s founder plans to grow the birch water category
Birch water is the sap directly tapped from birch trees. While the product is relatively new to markets like the UK, it has been consumed for centuries in the Nordics and Baltics as a traditional “rejuvenating springtime tonic”, Paul Lederer explained.
The founder of TAPPED decided to bring birch water to the UK two years ago. He believes the product taps into rising consumer demand for products that are natural and nutritional.
“We are seeing a huge consumer shift away from artificially sweetened, sugar-sweetened, drinks. People are looking for more hydrating drinks. Coconut water is a great example of premium hydration. We are operating in exactly the right space and the consumer is clearly interested in these new forms the hydration and refreshment.”
Nutritious, natural hydration
Lederer believes that while TAPPED’s target consumer can come from any age group or lifestyle, one thing they typically have in common is an interest in health.
“We have so far been targeting people who are actively interested in health and nutrition… In terms of the product’s attributes, you've got vitamins, minerals, antioxidants and it is naturally low in sugar. There's a real trend in terms of low sugar, low calorie, natural, sustainable as well. The overall balance of the product is what gives it that rejuvenating lift. But from a packaging perspective it is all about the antioxidants.”
Demand for healthy hydration is propelling sales of plant-based waters. Global sales increased by 21% in 2016 to reach a value of US$2.7bn. According to research firm Zenith Global, the market is expected to double in size to US$5.4bn by 2020.
Coconut water currently dominates the market – accounting for 86% of sales value in 2016. However, the sector is diversifying: alongside growing demand for birch water, consumer interest is also rising around products like maple water or cactus water.
The ‘naturalness’ that alternative waters like birch sap offer is appealing to this consumer group, Lederer continued. “People like something coming from a tree. It's reconnecting with nature.”
Because birch water uses “only natural ingredients” it also feeds into growing consumer interest in ‘clean’ labels and products that are free from artificial additives and preservatives. Alongside its pure birch water drink, which contains about 1% natural fruit sugars, TAPPED offers a number of different flavour blends, utilising juices and elderflower extract.
“It is absolutely clean label. No artificial stuff,” Lederer stressed. “The flavour products are between 15% and 25% juice. You get lots of flavour with a clean refreshing taste. Because we are not adding any sugar – it is just natural juice – it is also really clean on the teeth.”
As part of the PepsiCo innovation incubator, TAPPED is working alongside the beverage giant’s R&D team to develop new additions to the range.
“We still have to finalise which ones we will roll out but we have some new flavours on the table for 2018… We are looking at a variety of things. We could end up using juices and botanics or extracts. But we are keeping everything rooted in our Nordic European heartland. We won’t be seeing a mango and pineapple!”
The ability to create these flavour blends from the base of birch water also differentiates the product from other plant-based waters like coconut, Lederer suggested. “With our flavoured products we were able to blend juices and create tasty products in perhaps a way that things like coconut water doesn’t really work as well.”
The company is also developing new pack sizes to expand its penetration in different consumption occasions. TAPPED products are currently available in a 250 millilitre bottle – the group is preparing to add a 750 millilitre or one-litre option.
“That will enable us to have a more competitive price point. It would be something that can easily fit in the fridge door, be easily used for making smoothies or just simply just drinking at home. That will widen appeal and consumption as well.”
Working with PepsiCo
Lederer said that supporting TAPPED’s innovation capabilities is just one benefit of being part of the PepsiCo accelerator scheme.
“We were really keen to enter the greenhouse. It is a chance to really tap into [PepsiCo’s] vaster area of expertise. As a small start-up, the challenge you have is you're constantly jumping from task to task. It's great to work with people who are really focused on an area and who have the expertise and insight. And then PepsiCo have much greater resources. Our work with their R&D team is a great example of this.”
TAPPED has also been working with PepsiCo’s team to “refine” its marketing message. This was also supported through the €25,000 grant associated with the scheme. This cash enabled TAPPED to “up-weight” its marketing activity.
Sustainability and supply
TAPPED sources its birch sap from the Nordics, working in conjunction with partners who are “experts in the collection of sap”.
Forestry companies are increasingly turning over their land for birch sap collection due to declining volumes in the paper industry.
“The tapping process means you need to look after the trees. Landowners are now turning over the land to the tapping of the trees because they are seeing that as a viable proposition whereas in the past they might have used those trees for paper. When you are using trees for paper it is very much a one-off transaction. That land gets cleared, those trees get chopped down. It is transforming areas.”
Growing demand means birch sap suppliers are investing to scale up production, Lederer said. “There is definitely an increasing global demand for birch water and a clear scaling up on the supply side, which is what you need. There is a clear increase demand and the infrastructure is evolving to capitalize on that. We're not seeing any concerns around availability of supply - the ingredient is there.”
TAPPED is primarily focused on growing its business in the UK, although it does have a presence in international markets like Singapore.
The group launched its first products into Whole Foods Market two years ago. Since then, it has expanded into Planet Organic, Abel & Cole and Ocado. This year, TAPPED secured listings with Waitrose and Sainsbury’s.
Lederer believes that the birch water proposition is well-suited to UK consumer trends. “If you look closely the British consumer they are consuming food from all around the world. People are traveling, bringing new food experiences back. People are open to things from all over the world.”
TAPPED’s retail customers are also keen to take on new products that they can leverage as a point of difference. “Retailers are really looking at new trends they are embracing new ideas and innovation,” Lederer noted.
Nevertheless, the category is yet to truly tip to the mainstream and further consumer education is required to support growth. “It is the same challenge that something like coconut water will have had ten years ago when people will have thought you would get coconut milk from a coconut not water,” Lederer suggested. “We are constantly doing in-store sampling activity, supporting events, giving people the chance to try birch water, all supported by social media and online marketing."
The category is also benefiting from increased participation, with “a few” UK based competitors as well as a number of producers in Europe and further afield. TAPPED views this as a positive step that will help foster category growth. “We want to be in a market that is dynamic and lots of people are working to help grow the category. That the case here - it is all really encouraging.”
At the same time, as the category attracts more entrants, TAPPED must ensure it delivers a differentiated product. Lederer believes that TAPPED shines in this regard. “We have a really good brand identity, which is distinctive, and our range of products in terms of flavours, packaging, the activity we undertake in the market – the overall positioning in the market is quite differentiated versus the competition.”
With all this on its hands, international expansion is a “future thing” for TAPPED. “The stage we are at makes sense for us to be focused on the UK… Our focus has been on not jumping too far ahead of ourselves.”
TAPPED is striking a balance between expanding at a clip – but at the same time not overreaching, the group’s founder said. “You always want to be growing rapidly. Year one to year two we doubled the size of our business… The key thing is to ensure that there is focus and that you have the resource in place to support that.”