A hint of success -- and looking for more

Kara Goldin used to get frustrated by the lack of healthy drinks available on supermarket shelves for her growing family.

She searched high and low, conducting her own informal research on every so-called enhanced or vitamin-enriched water she could find. None of them passed muster, she says, as they contained a ton of additives or worse yet, sugar.

"Any place that was selling beverages, I grabbed things," recalls Goldin, founder and chief executive of the small, but fast-growing flavored water company Hint Inc., during a recent telephone interview. "Everything had sweeteners in them."

So in 2004 the former AOL executive and mother of three decided to do something about it. She put in motion plans to commercially produce a drink akin to a home-made concoction of water infused with a touch of fruit - her own beverage of choice after weaning herself off Diet Coke. It was a drink that her friends and children (she now has four) also found appealing.

Goldin, 41, convinced her husband, an intellectual property attorney who had worked for Netscape and been involved with startups, to back her decision to pull $50,000 from their savings account for the production of the first batch of this new form of bottled water.

She had no background developing consumer products, but instead relied heavily on prior retail experience as former vice president of shopping and e-commerce for AOL, a business that Goldin grew from a startup to one with more than $1 billion in revenue in seven years.

"It cost a lot more than $50,000," jokes Goldin, who a year ago raised Hint's first round of financing from a venture capital group, adding roughly $2 million to an initial $500,000 from friends and family.

"I was going to load up my Grand Cherokee and go to Whole Foods and tell them that they needed this product," she says. "It was a lot more complicated than that."

Today, San Francisco-based Hint, which is backed by the slogan "drink water, not sugar," is betting on 2009 sales of about $6 million - roughly double those of last year. Goldin's husband now has a formal role in the company as chief operating officer, one of some 20 employees working to carve out a niche for Hint in the estimated $12.1 billion U.S. bottled water market.

Austin-based Whole Foods Market Inc. is now among Hint's largest customers. The company also sells all 13 flavors of its 16-ounce purified additive-free waters, including honeydew hibiscus, pomegranate-tangerine and cucumber, on its web site, drinkhint.com, at $44 for a 24-pack case. At retail, the drinks sell for $1.39 to $1.99, depending largely on the region.

CONVENIENCE, HEADWINDS

"Shopping is all about convenience," says Goldin, who is trying to build multiple outlets for her additive-free water. In addition to the organic channel, Hint is pushing into mainstream and mass groceries such as Ralphs, Kroger and Costco. The company is also working with a distributor to canvas independent sandwich shops, college campuses and mom-and-pop stores, with a primary emphasis on large markets such as Los Angeles and New York.

"The hardest thing for us - a lot of the stores are not keeping enough inventory on hand because they're nervous," says Goldin, acknowledging just one of the difficulties of building a brand during a recession.

Garima Goel Lal, a senior beverage analyst for market research firm Mintel, says that other hurdles include an increasing sense of consumer frugality and a growing environmental backlash targeted at plain bottled waters that could eventually spill over into the enhanced water category. Also working against Hint is the ability of big brands controlled by beverage giants to run heavy price promotions.

"Companies like Coke and Pepsi have quite a bit of leverage," says Goel Lal. Even so, she says Hint has some positive trends working on its behalf. According to Mintel, enhanced waters were the fast-growing part of the bottled water market between 2006 and 2008. Glaceau, the leading brand in the category, grew 156 percent during this period, with $500 million in sales in 2008.

Hint also has a no-fee licensing deal with the Walt Disney Co. that Goldin says helps to increase brand awareness for some of its products; it is preparing to introduce children's packaging for the product- complete with the addition of fluoride - in coming months. And while Hint has no traditional advertising budget to speak of, it has managed to create a buzz with the backing of celebrities such as Victoria Beckham, Miley Cyrus, and Sarah Michelle Geller as well as media coverage on national television such as CNN. According to Goldin, director Steven Spielberg is a big fan.

Goldin, who recognizes that competition in the water market is filled with choices, attributes much of her success to grass roots efforts to stay in close touch with the groups that influence products on store shelves - buyers and consumers.

"We're pretty aggressive about going into the buyers and showing them everything that's in the category," she says. "And at the store level, sampling is so critical."