Beverage entrepreneurs jump on functional bandwagon

Filed under Product development

 By Ann Meyer

Bayswater Beverages makes Sleepyhead, a functional drink that helps consumers fall asleep

Chuck Hamman and Eli Galayda, co-founders of Chicago-based Bayswater Beverages, created Sleepyhead. Photo courtesy of Bayswater Beverages.

After tiring of wasting time trying to fall asleep, Chuck Hamman created his own liquid solution, a new functional beverage called Sleepyhead.

The beverage, which comes in a 5.5-ounce can and retails for abougt $2.39, has a milk-based consistency and contains melatonin, gamma amino butyric acid, calcium,  magnesium and valerian root to assist in relaxation. But unlike some relaxation drinks, Hamman said, Sleepyhead is “pointed at sleep.”

An $8 billion category

While consumers used to select drinks primarily to satisfy their thirst, increasingly they’re turning to functional beverages that deliver benefits beyond taste. Functional beverages account for more than $8 billion in retail sales, though the economic downturn has slowed the category’s growth, according to market research firm Mintel. Young adults are driving demand, and in Chicago, young entrepreneurs are contributing their own new concoctions as they battle for market share.

“Consumers are looking for more from their drinks. They’re more health-conscious and more lifestyle-conscious,” said Hamman, 29, noting that demand for functional beverages has spurred creativity in the category. “It’s completely consumer-driven. People are looking for different things.”

Scott Lerner hopes to appeal to consumers’ varied tastes by selling three distinct functional sparkling beverages under the brand name Solixir. Besides its own Relax beverage, Lerner’s two-year-old Highland Park-based company, Sol Elixirs LLC, makes Awaken and Restore. Each contains more than 1,400 mg of botanical extracts in formulas developed by a master herbalist, Lerner said.

The company is generating about $500,000 in annual revenue, Lerner said. Its products sell for about $1.99 per 12-ounce can and are available in 800 stores in all 50 states, including Whole Foods, Vitamin Shoppe and Amazon, Lerner said. The company’s next phase will focus on expansion to supermarkets, he said. For more information on Sol Elixirs LLC, see related story on SmallBizChicago.com.

A sports drink for the health-conscious

Mike Sider and his brother  Jon founded Greater > Than to make healthier sports drinks after being dissatisfied with the amount of sugar and artificial colorings and flavors that most sports drinks contain. “We wanted to create a healthy brand that stands for premium quality health improvement, doing the best you can,” said Mark Sider of Highland Park. “We always had aspirations of being greater than in sports,” he said, explaining the name and logo.

The product, which sells for between $2.50 and $2.75 per 12-ounce bottle, is made from coconut water and comes in lemon-lime, trpical and orange flavors. It’s now available in about 130 stores, Mark Sider said.

The company is selling about 700 cases of the product each month and working to boost awareness. “People don’t necessarily want to buy something they’ve never heard of,” he said. With a limited marketing budget, Greater > Than is sampling the beverage. During the football season, it created “Bears greater than Packers” banners and hung them throughout the city.

Hamman, who co-founded Bayswater Beverages with Eli Galayda, 27, started selling Sleepyhead about a year ago through personal sales calls to retailers. “When we first started, it was literally me driving around in my van” knocking on doors, Hamman said. “I had no contacts.” Now he does.

What he spent in gas and shoe leather has converted to sales, particularly at 7-Eleven and other convenience stores. Hamman is projecting sales revenue of about $900,000 this year, or about 1.2 million cans. The company, which recently engaged a distributor, expects sales to pick up as a result, Hamman said.

Three products, one marketing budget

For Sol Elixirs, offering three distinct beverages increases the chances that consumers will be interested in at least one, but it also stretches  the company’s marketing budget, Lerner said. “We have to spread our conversation across the three,” he said.

The company has relied on guerrilla marketing tactics, such as presentations at yoga studios, gyms and in-store sampling. “Because the category is so crowded and confusing to consumers, we have to enter at the point of purchase,” he said. “We try to educate consumers at the store level.”

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