By Elaine Watson+ 04-Nov-2015
KonaRed – the Hawaii-based company on a mission to make coffee fruit the next big thing in functional foods and beverages – has similar challenges to those POM Wonderful faced when it first got started, but has the potential to be equally successful, says its new president and COO.
Speaking on a call with analysts last week, Kyle Redfield – the former POM Wonderful general manager who joined KonaRed in August – predicted that “coffee fruit will be the next major category in the food and beverage industry,” but acknowledged that many consumers still don’t know what it is, despite the success of brands such as Bai5, which has built a highly-successful beverage brand utilizing coffee fruit extracts.
“POM was faced with a challenge to educate the consumer on what a pomegranate was early on in its business, and also why it was good for you and why you have to pay a high price for it,” said Redfield.
“We are faced with the same challenge today at KonaRed and the coffee fruit category, and a similar stage in our business. This is a good challenge to have in our business today, because once we are able to convey the message to consumers, they get it and they want it.
“Functional beverages offer tremendous opportunities for innovation and is the fastest growing sector of the functional food market… I am confident in the mass appeal of coffee fruit.”
A great origins story
Coffee fruit – the fleshy fruit that surrounds the coffee bean (ie. the seed) – is “essentially a super fruit that is high in antioxidants, which is comparable to the antioxidant capacity of blueberries, pomegranates and acai berries”, said Redfield.
And KonaRed is particularly well-placed to lead efforts to build a brand around it, he said.
First, it’s got a great origins story. It’s based in Kalaheo Hawaii (with a distribution center is in San Clemente, California), and sources its fruit from Hawaiian coffee plantations, which are widely acknowledged as producing some of the best coffee in the world.
Second, it has teamed up with VDF Futureceuticals, which owns the patent-protected CoffeeBerry technology and ingredients platform. VDF has also pioneered clinical research into the health benefits of coffee fruit bioactives that could enable KonaRed to move beyond generic ‘antioxidant’ type marketing and drill down into more specific health benefits backed by clinical research on proprietary ingredients and manufacturing methods, he said.
"Walmart has started to change its terms with over 10,000 of its suppliers. We were one of those. And we were given some very unfavorable terms with Walmart over the last 90 days that just did not make sense for our business." Kyle Redfield, president and COO, KonaRed
And third, like POM, KonaRed has a vertically integrated US supply chain that gives it control over consistency, traceability and product quality, and means it is in a strong position to scale up to meet rising demand, he said.
KonaRed products are in 2,500+ stores in the US and several hundred locations overseas
So what progress has been made to date?
KonaRed, which was launched in 2008/9 and went public in late 2013, now sells its products (beverages and superfruit powders) in more than 2,500 locations in the US from Safeway, Target and Kroger to Vitamin Shoppe and its own website, and is making solid progress overseas with listings in Canada via UNFI and in leading Japanese retailers such as Aeon Retail, Kinokuniya, and Lawson Inc (Japan’s second largest c-store chain), said Redfield.
”The Hawaiian culture and coffee roots of our company are a great fit for the Asian health-conscious consumer, and we’ll continue to focus on its growth segment. We are also now in discussions with international distributors in South Korea, Taiwan, Australia, New Zealand and to continue to other international expansions.”
Asked why KonaRed was no longer on shelf at Walmart, he said: “Walmart has started to change its terms with over 10,000 of its suppliers. We were one of those. And we were given some very unfavorable terms with Walmart over the last 90 days that just did not make sense for our business.
“Since then, we have been able to renegotiate those terms with them. So we're looking at potentially being on the shelves again.”
However, KonaRed did recently strike a national deal with Target, which was “a nice replacement for that business at Walmart, and makes a lot more sense for our company financially,” he added.
KonaRed original coffeeberry superfruit juice contains: Pineapple juice from concentrate, purified water, KonaRed Hawaiian coffee fruit liquid extract, apple juice from concentrate, fruit & veg color, malic acid (fruit extract), ascorbic acid (vitamin C), natural flavors, and stevia leaf extract. Each 10.5oz bottle contains 100 calories.
On the innovation front, the company is also working on several new products, including coffee, which will launch in January 2016, said Redfield.
“We are currently in the R&D phase of some exciting new product line extensions, including cold brew coffees to expand our beverage shelf presence and take advantage of the fast growing consumer demand for these products.”
The company is also launching a line of 100% Kona Coffee products that will include coffee fruit, he said. “This ties directly into our coffee roots and allows us to have a diversified portfolio focusing on the coffee berry.”