From: Kristina Pezzei, Reuters
Published March 7, 2007 12:00 AM

The Real Thing? Organic German Soda Goes Global

FRANKFURT -- Is the world ready for an organic soft drink brewed in Germany?


With consumers increasingly concerned about wellness and quality, the makers of an all-natural fizzy soft drink called Bionade are planning a foray into new territories.


Some industry analysts predict the small company will have a tough time making an impact outside its home market, in a cut-throat global beverage market where choices abound.


"We plan to go into the whole of old Europe this year as well as the U.S., and the Canadian and Japanese markets," Peter Kowalsky, chief executive of the privately held firm, told Reuters.


In flavours including orange ginger, elderberry, lychee and herb, the self-styled "first and only non-alcoholic refreshment drink produced by a purely organic process" has become Germany's trendiest beverage, even though its makers shun advertising.


Kowalsky plans to pursue the advertising-free route abroad, and is determined the firm will not be bought out -- he says he has already spurned an approach from Coca-Cola.


BEER-BREWING PRINCIPLES


Bionade was founded in 1995 when Dieter Leipold, whose family brewery was on the brink of collapse, started work on his dream to create an organic soft drink that would be fermented on beer-brewing principles.


His soda had its first break at the end of the 1990s in Hamburg, the country's media capital, when a bar put the fresh-tasting, low-calorie Bionade on its drinks list.


The advertising-free approach has worked in Germany.


With its unusual colours and flavours, the sparkling drink caught on in Hamburg and spread to other bars and restaurants in Germany. Supermarkets followed and last year Bionade says it tripled sales of its 0.33 litre bottles to 70 million.


That's a drop in the ocean compared with Coca-Cola's 3.5 billion litres sold in Germany alone last year.


A middle-aged German Bionade-drinker, sitting in a Berlin bar, said she was drawn to try the drink by curiosity when she saw its unusual bottles on a supermarket shelf.


"Ginger is now my favourite," she said. What appeals to her most about the drink is its potential as an alternative to alcohol without the fizzy familiarity of sugary soft drinks.


Kowalsky told Reuters his company had already rebuffed a takeover approach from Coke, which has a distribution agreement with Bionade for Germany.


A spokesman for Coca-Cola in Berlin declined to confirm an approach had been made, citing a policy of not commenting on speculation. But he added that the companies' product lines complemented each other nicely.


WORD-OF-MOUTH


As Bionade -- situated in the village of Ostheim in the Rhoen hills in central Germany -- plans to expand into markets abroad it will continue to spurn advertising, Kowalsky said.


The company prefers to rely on word-of-mouth and local distribution partners, pepped up by media coverage about the small company's global ambitions.


"People in some foreign markets have a far better understanding of luxury foodstuffs than the Germans," he added.


Analysts noted Bionade faces a tough task.


"The United States in particular is a difficult market," said Patrik Schwendimann of brokerage ZKB in Switzerland. "It usually takes several years and a lot of patience to make any headway there."


Jens Pollmann, corporate consultant at PricewaterhouseCoopers, said the goal of entering the U.S. market was ambitious.


"The difficulty is to find a foreign distributor," said the Duesseldorf-based consultant responsible for beverages in Germany. "But I wouldn't exclude the possibility that it'll work out for them in the end."


ZKB's Schwendimann said launching in many countries at the same time could be fraught with risks.


Kowalsky said Bionade plans to expand its alliances with firms like Ikea and Starbucks, whose outlets in Germany recently started stocking the drink. He aims to continue brewing Bionade in Germany, but bottle it at partners' facilities.


Bionade appointed an international sales manager about six months ago, ramped up staff to more than 100 people from about 60 a year before, and plans to create more jobs to meet the growing demand at home and abroad.


Kowalsky said it might take several years to turn a profit abroad. He said he finds it hard to find the right words for his nine-year-old daughter when she asks why he travels so much and why he'll be on the road more in the future.


"We're a family company," he said, adding the answer doesn't always satisfy her. "We're always looking out for the next generation."


Source: Reuters


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