"We think what we're doing this week will be the largest mobilization of people ever for World Water Day," says Jonathan Greenblatt excitedly. "There will be happenings in 11 cities across the U.S." Greenblatt and his partner, Peter Thum, have reason to be excited.
In roughly four years, Ethos Water, the company they co-founded, has grown from a local bottled water company selling its goods through yoga studios and health-food stores in Southern California, to a nationally recognized brand. Last year, the company was sold to Starbucks (SBUX) for $8 million, giving it a new distribution channel and substantially greater reach.
That new market reach translated to more than just sales. It helps Ethos realize its underlying mission: to help children around the world get clean water. For every bottle that Ethos sells, Starbucks donates five cents toward solving the world water crisis, with the goal of donating $10 million by 2010.
In a crowded marketplace -- there are more than 800 different brands of bottled water -- Ethos sets itself apart through its social mission. BusinessWeek Online's Jessie Scanlon spoke with the founders about water, branding, and selling activism in a bottle. Edited excerpts of their conversation follow:
Bottled water is still water. It doesn't really vary that much from brand to brand. How did you set Ethos apart?
Thum: The Ethos brand came out of work that I was doing at McKinsey & Co. in South Africa. I spent a lot of time around people who didn't have access to clean drinking water. Following that, I consulted on a project in the bottled-water industry, and I realized that there was an opportunity to create a brand that people really cared about. The Ethos brand has an element of activism. Every buyer is opting into the community by the simple act of purchasing the product.
As a small company entering a crowded marketplace dominated by big companies like Nestle and Danone (DA), what was your initial brand strategy?
Greenblatt: When we launched the brand, we realized that it had to be more than a product with a cause. It had to be a great product. Our water comes from natural sustainable springs.
Next, we worked hard to develop a great package that would allow us to sell effectively against brands like Evian and Fiji. Finally, it had to be a platform for raising awareness. We looked to Newman's Own as a model. Newman's Own has been incredibly successful and given hundreds of millions of dollars away to charities. But people don't think about camps for sick children when they buy the chunky tomato sauce.
There were established conventions in bottled-water branding. Source and packaging were incredibly important to consumers. Peter and I took a very different approach. It's based on a very simple idea: Buy water, help children get water. From the beginning, we saw the brand as a platform for creating a community and spreading information about the world water crisis.
How did you approach marketing?
Thum: First what we did was think carefully about where we were going to distribute our products. We first sold the water in cafes, health-food stores, and yoga studios in Southern California. We tried to find places that had developed relationships with their customers already, so that we could borrow that equity. We were also influenced by [Malcolm Gladwell's book] The Tipping Point.
We launched the product at the high-end fashion retailer Fred Segal. We went to the Academy Awards and partnered with the company driving celebrities to the ceremony and stocked their cars with water. So Leonardo DiCaprio and Cameron Diaz walked into the awards carrying Ethos water. These associations helped us make the brand seem much larger than it really was.
How has that marketing strategy evolved as the Ethos brand has become established?
Thum: A few years ago, when Coca-Cola (KO) and Pepsi (PEP) got into the water business, you started to see serious money being poured into marketing. That hadn't happened before. Ethos depends on word of mouth.
That's one of the reasons that the Starbucks relationship made sense. There are 80,000 Starbucks employees who are essentially building that word of mouth campaign every day.
You saw Ethos as not just a product, but as a platform to build an activist community. How has that worked?
Thum: In the very beginning, we went and invested our own money in water projects around the world. We wanted to build relationships with those groups, and we wanted people to see the kinds of groups we were working with. Also, as we continue to build this community, that network will give people that want to get more involved good options for giving money or volunteering.
In 2005, Starbucks bought Ethos. How has that affected your brand strategy?
Thum: Now we have a real marketing budget and the resources to do some of the things that we always wanted to do. And Starbucks has significantly increased our ability to build this community. It was hard to do that when our distribution was limited to health-food stores in Southern California. Through Starbucks we have the ability to reach more than 40 million consumers a week.
Greenblatt: One of the biggest advantages of the relationship has been our ability to scale our work. Soon after we closed the deal, we announced a $250,000 grant to fund water-related projects in Ethiopia.
Does the close alignment of the brand with the world's water crisis limit your options for future brand extensions?
Greenblatt: Our brand is predicated on a idea, "Buy water, help children get water." It's that link between consumption and cause that has animated the brand. We think we've got our hands full focused on this problem today. In the future, I'm not sure. That link between the consumption and cause may lead to other exciting opportunities.
Critics of the bottled-water industry point out that much of the water being sold is no healthier than tap water, that the bottles themselves are made of toxic chemicals, and that the energy required to distribute the water is immense. As a company founded on a social mission, how does Ethos respond to these critics?
Thum: I don't think that we can answer for the entire bottled-water industry. What we're trying to do is make the American public aware of this problem [lack of access to clean water] -- a problem that kills more people than AIDS.
The bottled-water industry may not be perfect, but if you can take a sliver of the industry and turn it towards something positive, that's a good thing. The most important thing is to start a dialogue and to get people in the U.S. to start thinking about the world water crisis not just as something that affects people far away, but as a problem that we will face soon as well.
How many brands of bottled water can the market sustain?
Greenblatt: When we launched the business, there were more than 700 brands. Now there are more than 800. With the entry of Coca-Cola and Pepsi into the market, scale certainly matters, so we might see some small brands disappear. But there's always the opportunity for niche brands that have a high value proposition.