STEVE NICKOLAS OF BEVERAGE SCIENCE LABS

Apani Turns Phoenix Tapwater Into Gold

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Phoenix Business Journal
by Paul Giblin

Entrepreneur Steven Nickolas has created a million-dollar enterprise from bottling and reselling Phoenix tapwater.

Yes, the very same water that flows from nearly any faucet in the city.

Nickolas purifies the water, packages it in stylish plastic bottles and labels it under the brand name Apani, which is an acronym for "as pure as nature intended."

Apani Inc., a four-year-old venture that recorded sales of $500,000 in 1991, is on track to turn $8 million in sales this year, Nickolas says. The goal is to top $100 million in sales by 1996.

Apani water is distributed in 22 states now and is scheduled to be on store shelves in 48 states by the end of the year, he says.

The potential remains to do even better, but the market for bottled water is growing more quickly than the company can. The work force at Apani's bottling plant at 2032 W. Lone Cactus Drive, Phoenix, has increased from five employees a year ago to more than 40 today.

The backbone of the company is its line of five-gallon bottles of purified water. The jugs generally are used with water coolers in offices and homes around the Valley.

"The real long-term money has been, and always will be, with the bulk water," Nickolas says. Yet that segment of the market represents only 15 percent of Apani's total sales.

The boom segment of the bottled-water market is the personal-size, nozzle-top bottles. That segment was nearly non-existent two years, ago but has increased dramatically.

"We in the industry have embraced this stuff, and we have bottled the hell out of it, and consumers have bought the hell out of it," says Nickolas, who previously launched The Water Man Co., a successful bulk bottled-water outfit in Kahului, Hawaii.

Apani water is marketed to the health-minded baby-boomer set. The water is labeled as "sodium free" and "purified by reverse osmosis and oxygenated for taste and purity."

The Phoenix tapwater goes through a seven-step purifying process that Nickolas claims removes calcium, chlorine, dissolved biological matter and a variety of other compounds that nature apparently never intended. The water is independently tested by American Analytical Laboratories, Phoenix.

The source for Apani's water offers no special advantage. Pittsburgh tapwater would work just as well as Phoenix tapwater, Nickolas says.

"Well water, tapwater -- it does not matter where we get out water from, because we make it exactly what we want it to be," he says.

"We could have an ocean outside the front door and we could drop a line into the ocean, and we'd get the same thing. It's a scientific process. We know exactly what's in the water: nothing."

The packaging is nearly as important as the water. The nozzle-top bottles come in three sizes: 16.9 ounces, 33.8 ounces and 50.7 ounces (half-liter, one liter and 1.5 liters).

The current Apani house brand label took about four years to design. It features the name in white letters against a blue field. It also sports Hawaiian flowers against purple-and-pink trim and a few strategically placed water droplets. The nozzle is pink and yellow.

The design could change overnight, says the former political campaign strategist.

"The marketing, the packaging, everything we do will be the hippest thing we can do at the moment we're doing it," he says.

Apani also distributes water with co-marketing labels. The specialty labels feature the logos of events or venues where the water is sold.

Apani has been co-marketed with the Phoenix Suns, Arizona Cardinals, America West Arena, the Phoenix 500 air races, West-World Biosphere 2, Old Tucson Studios and the Jim Bruner '94 campaign.

The co-marketing campaign also has caught on with Nevada casinos, including the Stardust, Lady Luck, Luxor and Ramada Express.

It has also worked with a number of professional sports teams and universities, including the Los Angeles Lakers, Los Angeles Kings, University of Arizona, Arizona State University, the University of California at Irvine, San Diego State University and Texas Tech University. Furthermore, the rights to the World Cup soccer games this summer have been secured.

Some of the co-marketing labels incorporate elements of the Apani house brand label. Others use altogether new designs, with the Apani logo in a corner.

The co-marketed bottles represent about 10 percent of Apani's total sales, Nickolas says. The concept will be allowed to grow only to 20 percent, in an effort to protect the Apani house brand.

The lone major limiting factor in the market is the lack of availability of plastic bottles. Apani uses several suppliers, which sometimes leads to slight variations in the shape of the bottles from one batch to the next.

"We buy them wherever we can. The bottles are in very short supply," Nickolas says.

Most plastic manufacturers reserve most of their production for soda companies. Only about 5 percent of all plastic bottles produced nationwide are used for water.

Apani has struggled against the crimp in supply. The lack of bottles remains the only cap on a business that otherwise is overflowing, Nickolas says.

Entrepreneur Steve Nickolas

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Steve featured in Beverage Industry Magazine

Fortified Beverages
By JOANNA COSGROVE

Fortified beverages have been around for some time, but believe it or not, industry experts say further growth is attainable if ingredient suppliers, beverage manufacturers and consumers could all get on the same wavelength. As Steve Nickolas, president of Scottsdale, Ariz.-based Beverage Science Labs, puts it, “no one really knows what they want.”

Can that really be true? In this time of harried consumption, when manufacturers have seemingly penetrated each beverage segment with fortified options to help healthy-minded consumers guzzle good-for-you nutrients on the go, how can no one know what they want?

Nickolas explains that while the applications are innovative, ingredient efficacy and consumer understanding still haven’t gelled. “As an industry we are not assuming a leadership role in providing the consumer with a selection of fortified beverages that have an impact on consumers’ health,” he says. “Consumers, on the other hand, have no clear concept as to what they want their beverages to do; the term functional has virtually no meaning for them.

“For years, all a beverage had to be was thirst quenching and good tasting, not necessarily healthy,” he says. “I see many more years of trial and error until the category matures.”

Paul Dijkstra, executive vice president at InterHealth Nutraceuticals Inc., Benicia, Calif., believes the fortified beverage segment is poised for growth; however he argues that true growth potential can only be realized if beverage manufacturers commit to bridging the chasm between understanding the benefits of functional ingredients and sourcing high-quality ingredients that will deliver the benefits consumers crave.

“We are finding that many beverage manufacturers are knowledgeable about mainstream ingredients like caffeine, but have not sought out proprietary functional ingredients that have sound science backing them up and provide regulatory insurance,” he says, encouraging beverage manufacturers to place more stock in their ingredient suppliers who have already done their due diligence and can provide turnkey, efficacious solutions to consumer-relevant problems.

But Dijkstra warns against fortifying beverages simply for the sake of added label buzz. “New beverage products will need to differentiate themselves beyond just adding a new flavor or offering zero-calorie options,” he says. “If consumers are looking to shed pounds, they not only want zero calories but something to help them curb their appetite, burn fat and help reduce their body weight. New beverages that can address this and help consumers manage their weight-loss goals will continue to gain acceptance by mainstream consumers.”

Fortified waters

The American obesity epidemic is one of the most predominant trends impacting the beverage segment. Logically speaking, consumers who are lowering their food intake are almost predisposed to healthy-drink applications because of their ability to curb hunger without sabotaging a sound diet.

In addition to desiring portable and convenient beverage propositions that dovetail with consumers’ consumption habits, Dijkstra says healthy-minded consumers want beverages that deliver benefits with a good taste that don’t overtly scream “diet.”

Of all the fortified beverage categories, water continues to lead the way in terms of growth. “All other fortified beverages seem to have a short burst in the market and then flatten out quickly (teas, dairy-based beverages and fruit-based drinks),” Nickolas says. “Consumers seem to gravitate toward water, or beverages that are close to what they perceive to be water (Propel or Vitamin Water) because they already look at water as a healthy alternative, and will try products that are labeled ‘A Better Water.’”

“InterHealth consumer research found dieters use beverages — particularly water and no/low-calorie beverages — to curb their hunger,” Dijkstra comments. “We also found there is a long-term potential burnout for plain water, hence the growing popularity for flavor-enhanced still and carbonated alternatives — again, fortified with beneficial functional ingredients.”

One prototype product called Weight Loss Water, from Orafti North America, Malvern, Pa., contains water, sodium citrate, citric acid, natural flavor, sucralose and acesulfame potassium, and also is fortified with Raftiline Inulin to provide the satiety of fiber, caffeine to boost metabolism and calcium lactate to promote weight loss. The resulting product is sugar free and contains only 10 calories.

Another fortified water, already at market, is Jana Skinny Water from Creative Enterprises International Inc., New York. The no-calorie, flash pasteurized, lemon-flavored water is enhanced with a combination of ingredients — most notably InterHealth’s patented Super CitriMax Hydroxycitric Acid — to “help people lose and maintain their weight.”

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