Entrepreneurs

New Tricks – Why A German Water Bottle Startup Has Attracted Investment From Pepsico

You could think of it as a novelty item. A premium water bottle that plays tricks on the senses, making users feel they’ve been drinking something rather more flavorsome than plain old H20. 

And yet Air Up has just closed a 40 million euro Series B investment round aimed at helping the company grow its market and (ahem) redefine hydration.  What’s more, in addition to Five Seasons Ventures, Ippen Media and Oyster Bay, the investment is co-led by Pepsico – a company best known for sugary drinks rather than water bottles.  

So when I spoke to Air Up co-founder, Lena Jungst, I was keen to find how out a company operating in the overcrowded premium water bottles market has managed to not only attract a decent-sized investment but also win the backing of one of the world’s major drinks companies.

Tricks Of The Trade

If you cast your mind back to school biology lessons, you were probably told at least something about the overlapping relationship between taste and smell. While basic flavors   – sweet, salty, sour, bitter and umami – register on the tongue, we also perceive taste via our noses. “In fact, 80 percent of our taste perception is defined by scent,” says Jungst. 

One byproduct of this blurring of the sensory lines is that our sense of taste can be manipulated. This was the basic idea that prompted Jungst and co-founder, Tim Jäger to study the possibilities of tricking the brain a part of a university product design course.   

The idea was that by applying a scent infusion to the act of drinking water, it would be possible to convince an individual that he or she was drinking something entirely different – say, orange juice or cola. A satisfying taste – but nothing more than water actually ingested.  “We thought this could trigger healthier behaviours,” says Jungst. 

Fast forward to the present day and a science/design class concept has been turned into a fully-fledged product that has sold to more than 1 million customers. What consumers have been buying since the launch in 2019 is a bottle plus cartridges containing a range of scent formulae that are designed to evoke flavours.  

Towards A Product

So how has the company got to where it is today?  Well, in some respects it has been a slow process. With their theses complete, Jungst and Jäger went their separate ways for a while and it wasn’t until a friend in Amsterdam – a chef – expressed interest – that the project began to take shape.   

One feature of the company’s progress was a willingness to expand the founding team. “Jannis Koppitz joined us to help with the business plan and we grew to a team of five – all from different backgrounds,” says Jungst. That made progress slow, but each member could bring to bear their own experience and expertise. Jungst says this has been a strength. And more recently, an experienced managing director has been appointed.

Initial investment came from angels who had been taking part in the German equivalent of Shark Tank (Dragons’ Den, in the UK). “The first investment was a milestone,” says Jungst. 

A Leap In the Dark

The first production run was something of a leap in the dark. “We produced 80,000 sets and we had no idea if they would sell,” she says. “In fact, they sold out in six weeks.” 

Initially, sales were largely online. “It was mainly driven by PR,” says Jungst. “Journalists liked the innovation and we also used influencers.”

Perhaps not surprisingly, the customer base – initially at least – was comprised of 18-34-year-olds – a group that is health conscious, mindful of the environmental damage done by single-use bottles and arguably open to the novelty of a water bottle that could make its contents taste like a flavoured drink.  “In the beginning, people were curious,” says Jungst. In addition, the product also attracted buyers who had health issues, such as diabetes.  

The market has evolved. The customer base has got younger – 18-25 – and the company has expanded its channels to market In addition to its own webshop, it has also selling through online marketplaces and offline retail, while also expanding out of German-speaking countries into territories such as the UK.

Surprise Bedfellows?

Turning to the latest investment round, Jungst clearly feels positive about the interest of Pepsico. 

“When they knocked on our door it was a joyous moment,” she says. But was it also a confusing one? Pepsi sells a lot of flavored, fizzy drinks in plastic bottles Was this a good fit. As Jungst sees it, the relationship with Air Up will help the US company diversify away from single-use plastic. “It knows it has to move away from plastic,” she says. 

Which probably says at least something about the forces currently sweeping through the consumer market. Generation Z – according to popular legend – is more interested in health and environmental impact than predecessors. Young companies are riding that wave and established big beasts are having to take note. Indeed, in its release to publicize its investment, Five Seasons Capital stressed that Air Up’s sales to date could lead to a saving of up to 85 million single-use plastic bottles and more than 2.465 tons of sugar. These are seen as key selling points to consumers. 

Meanwhile, Air Up is planning to enter the U.S, market while also bringing manufacture closer to home – Turkey to be precise. The aim is to create a sustainable supply chain.   

Does Air Up transcend novelty while also delivering health and environmental benefits. As a glance at the company’s Facebook page reveals, some customers love the product others are disappointed. But growth to date –  revenues are now running at more than $100 million – suggests that consumers are open to innovation. New consumption patterns are emerging, led by Gen Z.

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