Cool Factor: Can Aguas Frescas Seize Their Moment?

28 Feb 2019

Flavored water is not a universal language.

Ask for a “flavored water” at a U.S. grocery retailer, and you’ll be promptly directed to an aisle stocked with bottled products ranging from vitamin water to Hint to private label brands. However, ask for a “flavored water” at a store in Mexico and you may be directed to step outside and buy a freshly made “agua fresca” from a street vendor, who can often be found ladling it out by the spoonful from large glass containers.

Yet even as flavored water continues to be among the fastest growing beverage categories in the U.S., aguas frescas haven’t quite been able to enjoy the same success, despite repeated attempts by some of the industry’s biggest manufacturers to crack the market with a ready-to-drink product. Yet after years of fits and starts, that could be in the process of changing; one end of the spectrum has featured the entrance of several new independent RTD players with roots in Mexico, while the other has seen The Coca-Cola Company revive a legacy aguas frescas brand to serve as the platform for building the category in food service outlets. With momentum building on both sides, could now be the time for aguas frescas to finally form a wave of their own?

Fresh Ideas

While not as universally popular, aguas frescas, which translates to “cool waters,” are arguably as much ingrained into Mexican cultural identity as tequila. Typically either prepared at home or purchased fresh from street vendors, agua fresca is water and a sweetener (traditionally cane sugar) blended with fruits or botanicals. While a natural choice for refreshment during the hot summer months, the drinks also play an important role in the country’s food culture. Typical ingredients such as hibiscus (or ‘jamaica’), tamarind, guava and melon provide a light and refreshing taste to counterbalance the robust and spicy flavors in Mexican cuisine, making aguas frescas an ubiquitous presence in restaurants and on kitchen tables across the country.

Villán García, director of marketing for Los Angeles-based RTD aguas frescas brand Agua Lucha, recalled trips with his family to the local market in Mexico City, where families would dine on food from vendors on large common tables. His cousin Pedro, who now serves as Agua Lucha’s COO, often went as well.

“In these dining areas, on the one hand you had all the people who made the food, and on the other hand you have all the people who make the aguas,” he said. “When you sit down and eat, you eat terrific food, and then the juice people would come. They would have at least 8 to 12 different ones, and each was different. It was just as important what you were eating as what you were drinking.”

David Zapata, founder and CEO of New York-based startup Mex2o, grew up in Mexico drinking aguas frescas from the local market before emigrating to the United States at age 10.

“What I remember is that the drinks we would have were very light and always fresh,” he said, noting the contrast to Mexican sodas, such as the popular Jarritos brand. “It is something you can have and not feel heavy afterwards; just drink it and keep going.”

Together, Agua Lucha and Mex2o represent the latest brands to attempt to build a viable RTD aguas frescas category at U.S. retail. And if there was ever an opportune time for that to happen, sales data suggests it is now. According to market research group SPINS, non-carbonated flavored water is growing at 20 percent year-over-year, making it the fastest growing category (along with sparkling flavored water) in the $13 billion shelf-stable water market. Sales of flavored still water products are up double-digits across all retail channels, with the conventional multi-outlet stores growing at nearly 20 percent year-over-year. Within the market, according to Nielsen data, products from The Coca-Cola Company (Glaceau Vitaminwater) and PepsiCo (Propel) dominate, while rising independent brands such as Hint and Good 2 Grow have made inroads.

Despite the momentum behind flavored still waters, aguas frescas have had uneven results; in 2014, Califia Farms introduced a three-SKU line in 48 oz. multi serve bottles, which was pulled from production in 2017, while in 2011 Nestle USA launched a single-serve product in select markets that has also since been discontinued. Santa Cruz Organic currently sells aguas frescas in four flavors in 32 oz. glass bottles, and Frey Farms launched a line of frozen juice drink mixes labeled as “aguas frescas” late last year.

Keeping It Real

The reasons why some aguas frescas products have been more successful than others are varied, but both Zapata and García agree that previous iterations have struggled with authenticity, in terms of both formulation and branding.

For Agua Lucha, which translates literally to “fight water,” the Garcías are aiming to capture Mexico’s charm and unique personality right on the package. The product is sweetened with sugar, agave, and stevia, is available in three flavors — Mandarina, Limon and Tamarindo — in 15.2 oz. PET bottles. In a nod to their great uncle, who wrestled alongside legendary masked Mexican luchador El Santo, the bottles are stylized in the aesthetic of a wrestling match flyer, with bold typography and a different mask on each SKU. The brand’s messaging also spins the cultural quirks into humor, with phrases like “Jamaica is Not a Country, It’s a Flavor” and “Quieres Ser Chingon?” (“do you want to be cool?”).

“I really think where people have fallen short is in delivering that authentic message and that story behind it,” said García. “On top of having strong cultural roots, we also have a strong respect for what we grew up eating and drinking. I think we do a great job of relaying that message through our brand, and that’s the disconnect that I see from others.”

In designing Mex2o, Zapata is aiming to give the traditional Mexican drink a modern edge by adding functional ingredients like prebiotics, B-vitamins and fiber. Mex2o is packaged in 16 oz. PET bottles and is available in four flavors — Tamarindo, Jamaica, Horchata and Pipino Limon. Each SKU contains 12 g of sugar and 70 calories per bottle, and is sweetened with agave nectar and stevia.

“At the end of the day, I don’t want to say that (other brands) are doing it the ‘wrong way,’” he said. “There’s probably a market for them. What I’m saying is that what we are doing, no other company is doing right now. Not only does it have a more traditional feel, but we are also thinking of how we can make this a healthier product, by having low sugar, plus fiber and vitamins.”

Can Coke Crack the Category?

When the world’s biggest beverage company decides to dive into a new category, it means something. In the two years since The Coca-Cola Company announced the launch of Barrilitos, a line of fountain service aguas frescas designed exclusively for food service retail, the results indicate that the move has begun to pay off.

According to Melinda Pritchett, senior manager for category strategy and innovation at Coca-Cola North America (CCNA), Barrilitos is currently available in approximately 2,700 foodservice on-premise locations and has seen its year-over-year sales grow 256 percent. The product, which contains 3 to 5 percent juice, comes in two forms: a bag-in-box mix for fountain dispensers and a frozen concentrate for use with a proprietary bubbler, the latter of which Pritchett credited as a distinctive asset for the brand.

“The fact that Barrilitos can be served from a proprietary bubbler also differentiates the product in the marketplace in general, as the equipment has an authentic feel and communicates freshly prepared ingredients and handcrafted products,” she said. “The transparency of the bubbler helps position Barrilitos as the fresh, artisan-inspired, craft beverage option that today’s consumers are seeking.”

While the fountain product has only been on the market for about 22 months, Barrilitos brings some authenticity to Coke’s venture as well; the brand first launched as a sparkling soda in Mexico in 1938 before it was acquired by the Atlanta-based beverage giant in 2008. Pritchett said CCNA has drawn on that awareness thus far by focusing on the West Coast and specifically Mexican restaurants and convenience stores, as it seeks to cultivate both Latino consumers and millennial foodies.

“Our goal for Barrilitos is to have the brand be more mainstream and not targeted at one demographic group,” she wrote. “In other words, we aim to appeal to people who are looking for new beverages in the mid/low calorie range and that are bold in flavor.”

Beyond flavor, however, Barrilitos brings the powerful backing of CCNA’s marketing and distribution capabilities; because of this, according to Pritchett, the brand “has the potential to become the first national aguas frescas brand.” The next step is for Barrilitos to move into the central and eastern parts of the U.S., as well as introduce new innovations such as a frozen Strawberry Hibiscus slushie this summer. Though an RTD line is not in the works, Pritchett wrote, “We’re always exploring options to grow and give people the drink they want in the most convenient ways possible.”

Growing the Family

As they seek to go deeper into the U.S. market, both Mex2o and Agua Lucha are taking different tactical approaches to achieve a similar goal: establish credibility with Latin consumers before taking their respective brands mainstream.

To begin building their brand, the Garcías looked to develop the connection between aguas frescas and Mexican cuisine. While Pedro said the company is “being careful with what we share” regarding its strategy, he noted that Agua Lucha started selling first to taco trucks in the Los Angeles area.

“There so much attention to chefs and to the strength of Mexican food culture right now,” he said, adding that the buying power of the city’s large Latino population is also growing. “We are talking about the whole experience, including food and pairings. A lot of people want to grab our culture but they didn’t grow up drinking this since they were young and knowing the differences and how the [aguas] pair with food. That’s where we are having a lot of resonance with the chef because they say, ‘This is the real deal.’”

Agua Lucha has leveraged that early success with taco trucks and Mexican restaurants to move into the broader food service channel, which represents the majority of its 120 current clients. Vilian said the brand intends to continue to develop mainly in food service as it grows, but also with a limited presence at independent grocers, c-stores and liquor stores. The next step for Agua Lucha is to make the jump from one food-loving audience to another — millennials, of course — through sampling and targeted activations, as the brand did with staff and security at Coachella last year.

“Millennials are very food-centric — we care about what we eat and where it comes from and that plays to our advantage in that sense,” he said.

On the East Coast, Mex2o has teamed with Brooklyn-based Master Beverages to begin seeding the brand in select stores in predominantly Latino neighborhoods in New York City, while also selling the product direct to consumers through its website. Zapata said that while Hispanic consumers will likely already be familiar with the brand’s proposition, Mex2o will aim to capture mainstream customers who may have heard of aguas frescas or its flavors but haven’t been presented with them in an approachable, ready-to-drink format and at a competitive price.

“We are going to position ourselves like the Vitaminwater of the ethnic beverage market,” said Aleks Veyg, the co-founder of Mex2o’s Brooklyn-based distributor Master Beverages. Vegs, who also helped Zapata develop the formulation and branding for Mex2o, said the combination of flavor and functionality will help extend the brand’s customer base.

“In terms of formulation, you can add ingredients in there that will improve the buying capabilities and attraction of the product besides just the fact that it is Latin American themed,” he said. “By adding the nutritional/functional value, taken it from only those consumers to something that is more broad and that more people interested in purchasing.”

Ironically, one place you may not find either Mex2o or Agua Lucha is in Mexico; according to García, RTD aguas frescas aren’t very prevalent or popular in the country because most people prefer to purchase it fresh or prepare it at home themselves. However, even in a crowded U.S. market for flavored waters, he’s confident that the unique qualities of aguas frescas — and the passion of those who make them — won’t be lost in translation.

“This isn’t some MBA who came up with this,” he said. “This comes from who we are.”