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Trio of Ohio-based founders is betting that arrival of "modern soda" segment may have finally opened the door to offering a financially sustainable better-for-you kids bev. Under Roxberry brand name, they've launched canned sparkling fruit & veggie line that aims to keep the fun factor of mainstay brands like Capri Sun and Kool-Aid but with modest sugar and no artificials. Unusually, in segment where margins can be very compressed, they're taking DSD route to retail, starting in heartland states and Texas. Brand entered Walmart chain in Jan, starting with 2,200 doors with 800-900 more due by mid-summer, and this week is breaking in HEB in Texas. The brand also moves thru regional banners like Meijer, Harris Teeter and Kroger stores in Midwest. The co is closing a seed round now to fund the expansion. Operating as Roxberry Naturals is founding team of Dan Haugen and husband & wife team of Lauren and Andy Sauer, CEO of Garage Beer. Dan and Andy were colleagues at Abbott. Aboard since Jan to offer some DSD-specific expertise is Bill Bovett, whose career has included stops at beer brands Dogfish Head, Founders and Pabst and distributors Premier Bev in Fla and Ben E Keith in Tex. Those two founding families have 6 kids between them, Haugen noted to us on Fri, and were wondering whether they might crack the code of BFY kids entry that can keep premium to Capri Sun and Juice Box manageable while not squelching out the fun factor. "I grew up in the Capri Sun and Juice Box era. They're very nostalgic brands but they don't fit the modern-day parent. But they're still fun." In seeking to find that intersection, emergence of modern soda offered a path, he said. "There was nothing for the kids in there, nothing really fun like Kool-Aid." And the timing seemed right as healthier brands like Olipop, Poppi, sparkling waters and Annie's mac & cheese picked up momentum. The solution they came up with is a clean-label line that makes some concessions to flavor with 5 g of sugar and sneaks in some fruits & veggies, as Haugen put it. They go out in 4-pks of 7.5-oz cans in Pink Lava Strawberry Lemonade, Ocean Potion Fruit Punch and Galaxy Gulp Citrus. Several key brand attributes came out of preferences of the Sauers' 4 kids. They worked in their kitchen with their mom to devise those flavor profiles and picked up the brand name from a neighborhood street called Roxbury. (Note that this co has no connection to Roxberry Juice Co chain in Utah and Idaho.) The package graphics are colorful amalgam of spaceships, spouting lava and other eye candy, but parents are not to fear. The drinks contain "all of the yum, all from fruits and veggies - shhh...don't tell the kiddos," as co assures them. As we've often noted over the years, healthier kids bevs have posed pricing dilemma that few brands have been able to resolve. Charge too much of a premium to Capri Sun and moms will desert you, despite their preference for something better. Try to get too close, and there will be no margin left to support marketing, let alone DSD distribution. To Haugen and his partners, the arrival of modern soda has changed that. In that set, Roxberry's price per serving falls at the lower end compared to the gut pops. (Non-functional Zevia natural soda brand has anchored the bottom, price-wise.) At Walmart, where brand goes out at $4.87 per 4-pk, the data over first 3 mos has been encouraging: 90% of sales have proven to be incremental to modern soda set and 30% of Roxberry shoppers are new to that set, Dan said. Foto of modern soda set posted by Roxberry in Jan shows it at roughly eye level - if you're a kid - with one facing of each flavor aside Olipop's own 7.5-oz Mini cans, which might similarly serve as kids' lunchbox item. That pricing stance also makes DSD feasible. Haugen said Roxberry already has established a "robust network" to support regional retailers in Ohio, Mich and Ind like Kroger, Meijer and Pete's Fresh Market in Chicagoland area. Those are mainly Molson Coors houses like Superior, Bonbright and Stagnaro. In Texas, Roxberry has recruited the Bud network of beer houses like L&F. Some may already have the Good2Grow kids brand, which can command a premium thanks to its character head tops, but Haugen said that's no portfolio conflict, as Roxberry targets an older age cohort of kids age 4-12. He said co is pre-emptively in discussions with other wholesalers ahead of anticipated chain authorizations. "They see the white space," he said.

STRATEGY: How Roxberry Views Modern Soda Set as Wedge to Establish Healthier Kids Alternatives That Can Support DSD; Sets HEB Entry, Walmart Expansion

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