Karma Culture looks to national distribution

Troy L. Smith//August 10, 2012//

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Karma Wellness Water, a naturally enhanced flavored water launched in 2011 by Jolt Cola founder CJ Rapp, has started on the road toward national distribution within the next two years.

CEO Rapp said his Pittsford-based company, Karma Culture LLC, started in June by making Karma Wellness Water available online through the company’s website, DrinkKarma.com, and Amazon.com in cases of 12 bottles.

The company aims to have physical, national distribution in every major market within the next 18 to 24 months.

Karma is a functional beverage that contains airtight sealed vitamins stored in the bottle’s cap. The drinks come in five flavors that contain 110 percent or more of the recommended allowances of vitamins A, B-3, B-5, B-6, B-12, D and E.

Sealing the vitamins in the cap, Rapp said, keeps them from deteriorating in water, thus maximizing their potency when consumed.

"There are other enhanced waters out there, no doubt," he said. "The whole backbone to the Karma concept is to infuse the vitamins seconds before consumption to ensure the consumer of optimal potency levels. In terms of the amount of nutrition we are providing to consumers, it is unparalleled."

Rapp is perhaps best known as the developer of Jolt, a super-caffeinated cola he created in 1985. Rapp launched Karma last September with co-founders Darren Coon, chief technology officer, Jeff Platt, president, and Lowell Patric, chief financial officer.

Platt has worked on a number of beverage brands, including Snapple. Patric was chief financial officer for Wet Planet Beverages Inc., the company that produced Jolt. Rapp says the relationships the founders built through Jolt have been valuable in launching Karma.

"The route-to-market system we’re still working with involves progressive beer distributors that have expanded to include non-alcohol products," Rapp said. "That’s a system we have in large part built over the last 25 years. We’re a known entity in terms of our integrity and track record, which certainly helps."

Karma began its distribution in Rochester at Wegmans Food Markets and Tops Friendly Markets stores. Rapp said the company spent the first half of 2012 expanding to 19 selected grocery, convenience and drugstore chains in the region.

Rapp said Karma now is doing business with 80 distributors and a long list of retailers, including Wegmans, Tops, Rite Aid and Sheetz Inc. Though he wouldn’t give specific sales numbers, Rapp said the firm has seen accelerated growth over the last eight months.

The company hit a potential roadblock last October when Karma filed a complaint in U.S. District Court in Rochester against Rising Star Beverage Co. LLC of California, which sells Activate enhanced water.

Karma stated in the complaint that it sued Rising Star after receiving a letter from Rising Star claiming Karma illegally copied its packaging. Both companies claim to use a cap that stores vitamins to keep them from deteriorating in water until they are consumed.

However, Rapp said all matters involving the lawsuit were dropped by both companies in April. He would not discuss details of the lawsuit but said it did not slow Karma’s progress.

By moving toward national distribution, Karma takes aim at a functional bottled water industry that market research firm Euromonitor International said had a compound annual growth rate of more than 16 percent from 2006 to 2011.

Jonas Feliciano, a Chicago-based analyst for Euromonitor, said the firm defines functional bottled water as water that has been altered using vitamins, minerals, fruits and herbs. He said Vitamin Water is the industry leader in the category.

"Functional bottled water is one of the fastest-growing subcategories in the functional beverage industry," Feliciano said. "We do think it has reached a stage of maturity, but we are still forecasting a compound annual growth rate of 1.9 percent over the next five years.

"Functional beverages have become the future of soft drinks as consumers nowadays want more than just a specific flavor or taste they enjoy, or hydration. They want functionality and health benefits."

To separate itself from the pack, Karma has emphasized its innovative nutritional value, driven by its patented KarmaCap Technology. The delivery system cap was designed by Rochester-based ValTech Holdings Inc.

Karma has received recognition and awards for the technology of its packaging from the National Association of Container Distributors, Packing World magazine and Beverage World magazine.

"What is important is for us to properly communicate Karma’s belief in substance and style," Rapp said. "We believe there have been many beverages launched that have done a good job in generating a sense of style. We feel they have not done a good enough job conveying a sense of substance."

Going forward, Rapp said, Karma is focused on improving its manufacturing efficiency, expanding its sales and distribution and, perhaps most importantly, actively seeking growth capital.

"It takes time, money and a tremendous amount of effort to fully penetrate each market," he said. "When you grow a brand from local and regional to national, it requires a serious amount of capital."

Feliciano said the success of new products in the functional bottled water market usually depends on a company’s ability to achieve mass distribution and quality branding.

"Because the category is growing, we see new players coming in all the time," he said. "But it can be difficult. If the product is good, it has a shot, but it’s going to need tremendous distribution and branding behind it. There are a lot of competitors in that field."