Coconut competition: Could birch water make a splash as LATAM's next 'super drink'?

Made from the sap of birch trees – a hardwood tree native to countries with a boreal climate – birch water is rich in electrolytes and antioxidants, contains trace vitamins and minerals and is naturally low in calories. Touted as a premium 'super drink' as the sap can only be tapped during a two-week window each year, birch water is primarily valued for its hydration, anti-inflammatory and detoxifying properties.

Estonia-based birch water startup ÖselBirch, established in 2016, has six organic beverages, including fermented and fresh variants. Currently stocked nationwide across Estonia, ÖselBirch is also available online to all DACH markets (Germany, Austria and Switzerland), with plans to enter retail in these countries by early Spring.

LATAM now on the 'interesting markets to enter' list​

Anne-Liis Theisen, co-founder and marketing manager of ÖselBirch, said the company was recently approached by interested purchasers from Brazil and Mexico at the 2018 Wabel Drinks Summit.

“It really did surprise us,”​ Theisen told NutraIngredients-LATAM, particularly as ÖselBirch had been totally concentrated on European expansion and upscale.

So, would the company be considering a Latin America expansion? “We are currently not actively planning to enter these markets,”​ she said, although the region was now on the “list of interesting markets to enter”.​

“The market is apparently saturated by coconut water, which is so common over there. Birch water could have a good chance, but the entry into the market would require a lot of explanation work and marketing activities,” ​Theisen said, given the lack of birch water knowledge there.

However, ÖselBirch would now keep a closer eye on the region, she said. “We're just going to check in every now and then and observe what happens there and should it, for some reason, be more friendlier to enter, then we would, of course, consider entry.”​

The biggest challenges? Distribution and pricing​

Tom Vierhile, a Fairport NY-based new products expert, said if a strong distribution network was secured, a birch water launch into LATAM could work.

“The beverage business is very much a distribution game. The more doors a brand can squeeze into, the greater the odds of success. If ÖselBirch can obtain a decent amount of distribution in new markets like Mexico and Brazil, the brand will have a shot at making it. But, that will undoubtedly depend on the resources of the distributors that the company will be relying on in these markets,”​ Vierhile said.

Certainly for a startup with crowdfunding roots, he said a shift into LATAM could stretch business too thin.

But would consumers get the concept of birch water? “While it is true that many consumers in Latin America may have no idea what birch water is, consumers in the region are increasingly open to carbonated soft drink alternatives like plant waters, including birch water. Relative to other beverages, birch water is very low in sugar and the unusual cocktail of trace vitamins and minerals in birch water make for an intriguing health story.”​

However, Vierhile said another challenge far bigger than consumer education would be pricing, given birch water was a “tricky product to produce” ​and therefore carried a premium price tag.

“We are seeing birch water brands like Sapp Birch Water and Yonale Birch Water in markets like the US retailing for between $3 and $4 per package – a major premium compared to most 'better-for-you' drinks, including coconut water. Will consumers in Latin American markets be prepared for this potential sticker shock?”​

Theisen agreed that even for some European consumers, the price tag remained too high. ÖselBirch's 330ml bottles, when ordered online including delivery, cost €4 – the equivalent to US$4.50.

“We definitely need to get our production price down but until we find a good production partner that won't be possible,”​ she said.

Birch water, particularly fermented variants, was proving too complex for many third-party partners to want to take on, Theisen said, and securing the right amount of birch sap was also difficult given there was just a two-week window in Spring to tap from the tree.

An eco alternative?​

Aside from all this, though, Theisen said shipping such long distances didn't align with ÖselBirch's founding principles on being an environmentally-friendly brand.

Serving the Americas would best be achieved by producing in Canada, she said. “You could get so much birch water from Canada and it's a country also known for it's real, pure nature. But, that would require a whole restructuring of the company and that might be a step too early right now.”​

Another option would be to develop a syrup or concentrated version for final production in-country, but she said that would take the product too far from its fresh and natural origins.

Vierhile, however, said this could be how Latin American markets start to see birch appear – as a “hero ingredient”​ where a small base amount is used and blended with purified water or fruit juice. Not only would this drive pricing down, it could also improve sensory appeal, he said.