NEW YORK (AdAge.com) -- By definition, startups have plenty of hurdles to overcome. For Owater, the greatest of those might be the shadow of Nantucket Nectars. The "healthy sports drink" is the second brand founded by Tom First. In the 1990s, he and Tom Scott put Nantucket Nectars on the map as the dynamic Tom & Tom. The brand reached $60 million in sales by 2001 and was purchased by Cadbury Schweppes in 2002. It's now owned by Dr Pepper Snapple Group.
Mr. First brought along a number of Nantucket Nectars alum when he launched Owater in 2004, including Kim Stewart, director of marketing. In the years between beverage forays, Ms. Stewart worked as an art director at Boston-based agency Boathouse Group on brands including Merrill Lynch and New Balance.
"You sometimes think that because you've done it once before it's all going to come together faster the second time," said Ms. Stewart, 39, referencing her time as creative director at Nantucket Nectars. "You still have to find your voice."
That means putting athletes and the athletically minded at the center of Owater's marketing and consumer-insight strategy. The brand, which works with an overall marketing budget of less than $1 million, uses its best real estate -- its label -- to highlight everyone from yoginis Ashley and Anne to the Sunday Hoopsters pickup basketball team to the Red Sox's Jacoby Ellsbury. For many of the amateur athletes, a taste for the brand and being featured on the label has been enough to inspire loyalty, even without compensation. Mr. Ellsbury is one of the only endorsers to receive a small amount of money as compensation.
"We've found that to be an incredibly powerful tool in getting marketing reactions from people. Ninety-five percent don't cost us anything, and they've become total advocates for the brand," said Ms. Stewart.
The company expects "to end the year just north of $5 million in sales, which amounts to 25% growth in a very tough economic climate," Ms. Stewart said. "We exceeded our adjusted expectations."
Here, she talks about why Owater shuns formal focus groups, why there's a need for new kind of sports drink, and how the beverage is tackling the competition.
Ad Age: You're a growing company in the midst of a recession. How has the downturn affected your ability to market and grow the brand?
Ms. Stewart: The recession has definitely made us more cautious in terms of spend. When you're a start-up, everything you do impacts the bottom line. We're thinking about more creative, less expensive ways to get the word out from a marketing point of view. We spend more time going to events and talking to people than spending in advertising dollars and traditional media.
Ad Age: What consumer data is informing your strategy?
Ms. Stewart: We're not a research-based company. We don't do focus groups. We do a lot of communication with retailers and consumers. The sales force is really active in going out there and talking to people in stores. We, as a marketing group, are out there all the time.
Ad Age: What happens as the brand grows? Does structured research become necessary?
Ms. Stewart: At Nantucket Nectars, we never did it. That's not to say that I'm anti-research, but sometimes brands get bogged down with it. We've created this network of athletes that we talk to. It's not an official focus group but a group of end-users that we trust.
Ad Age: Does it give you a competitive edge, gathering information the way you do?
Ms. Stewart: I've been in focus groups on other brands, and there are times when there's a strong personality in the room, and it sways people in another direction. I'm not saying Gatorade or Vitaminwater are doing it wrong. It's just not a way I've done it, so I'm skeptical. But probably a lot of others would say I'm crazy.
Ad Age: Owater is trying to sell itself as a healthier sports drink, somewhere between Gatorade and water. Is that tough to convey to consumers?
Ms. Stewart: It is tricky to describe a new category. And we really do consider it a new category. We talk about a "healthy sports drink" and get people thinking about a new kind of sports drink. We also feel supported by what the media is talking about in beverages. [Drinks high in sugar have been lambasted by the media as of late, in part related to a discussion about taxing soda and sugary beverages.]
Ad Age: Do you think Owater could eventually be a competitor to major brands such as Gatorade and Vitaminwater?
Ms. Stewart: Yes. It is reinforced to us at triathlons and races that people are looking for an alternative to the sugary sweet, [high-]calorie level of a Gatorade, a Powerade. That's not every athlete that's out there, but there is a huge consumer group that is really paying attention to the sugar they're putting in their body. We've met a lot of people that will pour half a Gatorade in a bottle with half water.
Ad Age: Don't G2 and Powerade Zero address that though?
Ms. Stewart: They may be cannibalizing themselves. How do you digest being told there's a healthier option being made by Gatorade? And what does that do to your feeling of the brand? Some are also using artificial sweeteners or new age sweeteners that are processed from natural sources, and those present different taste issues. We're still using pure cane sugar, and consumers select Owater over a G2 or a Vitaminwater 10 because they want that cleaner real taste of fruit.
Ad Age: You're relying primarily on radio ads and partnerships with "Owater friends." Does that generate enough buzz?
Ms. Stewart: We experiment in a balance of traditional and non-traditional. There are markets where radio is still a viable media. We've had success in Boston, for sure. Also, we've tried some non-traditional things, like social media. I think of that as a channel where people don't want to be marketed to. We struggle with how to attack social media. But we've really had success having athletes tweet about us and building our community through those types of things. Moving forward, with the economy getting better, we will probably experiment with some radio in other markets. And we'll probably look at outdoor in our more developed markets. We're not ready for a TV campaign, but you never know.
Ad Age: Tom First is a well-known name in the beverage and marketing world. How involved is he in the marketing space?
Ms. Stewart: Extremely.
Ad Age: Is that a good thing or can it be challenging?
Ms. Stewart: It's a great thing. He's a really smart guy. He's very passionate about brand-building and very connected. He is in the day-to-day, from designing labels and writing copy to brainstorming radio ideas. Having had a working relationship with him for over 10 years, we have our moments where we disagree about something, for sure. But it's great to have that passion and push there.
Ad Age: Will Owater ever have an ad agency?
Ms. Stewart: It might. Nantucket Nectars was proud of never having worked with an agency. But I left there and went to work for an agency and saw the benefit of agencies.
Ad Age: What are the benefits?
Ms. Stewart: I don't think you can knock the concept of having 20 creatives thinking up ideas for a brand. Fresh eyes are sometimes a really good thing. You have to be careful when you're small and have in-house teams working on it that you're not getting stale.