Unpacking the 'Enhanced Water' Opportunity

Mazarine is bullish on opportunities at the intersection of water, sports, and physical/mental health. New to Mazarine, we quickly recognized one can't get far in this realm without coming across the term 'Enhanced Water", which many are also calling 'Functional water', 'Precision water' or 'Performance water'. Whatever you call it, this space is expected to be one of the fastest growth stories in 'water' in the next 5 years. Buckle up.

What is the 'Enhanced' Water Industry?

Adding electrolytes to drinking water or adjusting water' pH are not new. Decades of business success and failure have resulted in an entire aisle in our local supermarkets with this or that tweak to 'regular' water. The industry has reached some level of maturation, with offerings falling into on of 3 verticals*, namely:

1) Overall Health & Wellbeing

2) Sports & Athletic Performance

3) Cognitive Enhancement

*Important note: Some offerings easily move between 2 of these, and some make claims to meet the needs of all three verticals. Needless to say, these verticals are not hard and fast, and serve the purposes of a VC looking to better understand trends, opportunities, and potential exits. Hence, the following taxonomy could be seen as pragmatic.

1) Overall Health & Wellbeing Water

This vertical's offerings include several subverticals, including:

Electrolyte-Enhanced Water: This water is designed to help replenish essential minerals like sodium, potassium, and magnesium, which are lost through sweating during physical activities. Electrolytes play a critical role in maintaining fluid balance, muscle function, and overall hydration. Electrolyte-enhanced water is popular among athletes, fitness enthusiasts, and active individuals. The growth of the fitness industry has fueled the demand for products that promote hydration and recovery. Smartwater, Gatorade’s Propel are players in this realm.

pH-Adjusted or Alkaline Water: Alkaline water has a higher pH (usually between 8-9) and is believed to neutralize acid in the body, promoting better digestion and reducing acid reflux. While scientific evidence for these claims is limited, it remains popular among health-conscious consumers. With the rise of wellness trends, alkaline water is marketed as a detoxifying and anti-aging product. Brands highlight benefits like enhanced hydration and improved energy levels. Essentia, Flow, Alkaline88 are players in this realm.

Flavored Water: Flavored water provide a tasty alternative to 'plain' water without the calories and sugars found in traditional soft drinks or juices. They may contain natural fruit flavors, vitamins, and antioxidants. Consumers are looking for healthier, low-calorie options that still offer flavor. "Functional flavored waters" are gaining popularity, particularly among people who find plain water unappealing. Brands include: Hint, Bai, LaCroix, and dozens more.

Health/Beauty Focused Additives: Offerings in this subvertical are mostly infused with additional health-promoting ingredients like antioxidants, collagen, probiotics, and vitamins. These ingredients are marketed for their potential to improve skin health, digestion, and overall wellness. Functional waters with added health benefits appeal to consumers focused on wellness and beauty. These waters often target specific needs such as skin hydration, gut health, or immune support. Brands include: Vitaminwater, Skinade, Karma Wellness Water, and more.

While consuming this vertical of enhanced water will certainly help one's athletic perforance and cognitive abilities, these above offerings often include essential nutrients like vitamins, antioxidants, and trace minerals aimed at boosting immune function, promoting hydration, and maintaining general health. With 75% of Americans chronically dehydrated, there is a growing need for convenient and effective ways to stay hydrated. These health-focused water products offer a inexpensive solution for daily hydration, without the performance-focused additives, catering to consumers who prioritize wellness and daily vitality over athletic performance.

2) Sports & Athletic Performance Water

This vertical's offerings are tailored to support physical activity by replenishing key electrolytes and minerals lost through sweat, such as calcium, magnesium, and potassium. These minerals are crucial for muscle function, hydration balance, and recovery, making them indispensable for athletes and active individuals.

Research shows that athletes can lose as much as 1-3 liters of sweat per hour during intense physical activity, which can lead to significant losses in electrolytes, resulting in muscle cramps, fatigue, and decreased performance. Some brands have taken this specific approach to hydration — London based Sküma Water offers a unique solution in this vertical by allowing users to customize the mineral content infusions for their water, ensuring optimal hydration that aligns with their individual activity levels. This approach enables athletes to replenish the specific electrolytes lost through sweat, such as calcium and magnesium, while maintaining proper muscle function and recovery. Additionally, just like Sküma, many ready-to-consume enhanced waters may contain performance-enhancing ingredients like beta-alanine, vitamin D, and vitamin C. Studies have shown that beta-alanine can increase muscle endurance during high-intensity exercise, with athletes experiencing an 8-15% improvement in their performance. Vitamin D supports bone health and muscle function, while vitamin C aids in immune support and helps with recovery by reducing oxidative stress in the body.

Sports-enhanced water is optimized for active performance, replenishing electrolytes and supporting muscle function and recovery. These offerings are ideal for athletes or fitness enthusiasts who need targeted hydration during and after workouts.

3) Cognitive Enhancement Water

As the newest offering in Enhanced Water, this vertical's offerings include drinking water products that enhance and benefit the mind, including products with caffeine, nootropics, adaptogens like Ashwagandha, Shilajiit, and Choline compounds like Alpha-GPC which support brain health, enhance memory and focus. This vertical is also sometimes referred to as NeuroBoost Water, MindSharp Water, BrainPower Water, and many more.

Companies in this realm are targeting a wide spectrum of customers from health optimisers to professional gamers, and is seeing fast growth with brands like Sneakenergy, Spacegoods, Britedrinks to name a few.

Some call this "Cognitive Fuel", which also begs the question of what exactly can qualify as "Enhanced Water?

Opportunities in the Enhanced Water Industry

Personalization and Customization: Consumers are increasingly seeking personalized health and performance solutions. The ability to tailor water with specific nutrients or flavors based on individual preferences and health/sport/ or cognitive goals offers significant potential. This could include customizable bottles with different additive options or personalized hydration formulas.

Sustainability and Eco-Friendly Packaging

As environmental concerns grow, there’s a strong opportunity to capitalize on sustainable packaging solutions such as biodegradable bottles or recyclable materials. Brands that focus on eco-friendly practices are likely to attract environmentally conscious consumers.

Plant-Based and Organic Additives:

There is growing demand for products with plant-based or organic credentials. Water enhanced with natural plant-based ingredients, like coconut water, natural flavors, or herbs (such as turmeric or ashwagandha), appeal to consumers looking for more natural, clean-label beverages.

Cross-Category Innovation:

Blending functional water with other beverage categories, such as energy drinks, sports drinks, or beauty supplements, creates hybrid products that offer both hydration and targeted health benefits. There is room for innovation in creating multi-purpose beverages that address hydration, energy, beauty, and wellness simultaneously.

Direct-to-Consumer and Subscription Models:

Offering 'functional' water through subscription services and direct-to-consumer channels can provide consumers with the convenience of regularly receiving personalized hydration products, fostering brand loyalty.

Market Growth:

The global Enhanced Water market is expected to experience continued growth , with some research suggesting a 7% compound annual growth rate (CAGR) over the next 5 years. This is driven by rising health awareness and consumer demand for the broader catetgory of so-called 'functional beverages'.

Conclusion:

The Enhanced Water industry is evolving rapidly, with innovation in ingredients (eg: electrolytes, vitamins, minerals, etc), functional benefits (eg: hydration, pH balance, etc), and sustainability (eg: eco-friendly packaging, etc). Opportunities for growth lie in the increasing demand for health-conscious products, personalization, and eco-friendly solutions.

For questions about the this realm, please contact Mazarine here