MUSKEGON — The origin of HyVIDA Brands Inc. goes back six or seven years when Rick Smith took a taste of sparkling water.
His wife, Kasey, had brought some home one day as they were trying to break the diet soda habit. He quickly acquired the taste.
“I loved it,” said Smith, who a few years later learned from a business associate, Hiroyuki Funamoto, about the health benefits of infusing hydrogen into water.
Smith traveled to Japan to research it and came away with an idea for creating a business around producing hydrogen-infused sparkling water.
Today, the 47-year-old Smith is building a company that looks to tap into a growing consumer taste for so-called “functional” and healthier beverages, particularly as younger generations lack an appetite for sugary drinks and diet sodas.
In hydrogen-infused sparkling water, HyVIDA Brands aims to give consumers a “guilt-free” carbonated beverage that offers health benefits beyond hydration.
“People are moving away from the traditional sugars and sweets and junk that comes in a soda,” said Smith, HyVIDA’s co-founder, president and CEO who returned home to Muskegon three years ago after working for 12 years in Pittsburgh, Pa.
“Sparkling water gives that crisp, clean feel,” he said. “We’re carving out a really interesting path offering stores premium sparkling water to customers looking for new products.”
Smith and his partners, including Funamoto, formed HyVIDA Brands in early 2018. They launched production that spring and HyVIDA began selling in retail outlets in August 2018 with organic raspberry, organic lemon lime and unflavored products.
The company today sells cans of hydrogen-infused sparkling water in more than 1,500 retail stores in 46 states, as well as on Amazon.com, Smith said. Outlets include health stores in the region, plus 30 Meijer Inc. stores in Michigan and at SpartanNash Co.’s D&W Fresh Market and Family Fare grocery stores.
HyVIDA, which uses a contract producer in New Jersey, expects to generate “well over” $1 million in sales by 2020, he said.
After a prior career in the medical technology and semiconductor fields, Smith invented the method to infuse sparkling water with hydrogen. He has three patents pending and plans to file next year for a fourth.
Smith and his partners initially raised $800,000 to launch HyVIDA Brands. The startup capital went to the design and development of equipment that infuses the sparkling water with hydrogen without disrupting the traditional canning process.
As he recently sat in his office in the Grand Valley State University Innovation Hub in downtown Muskegon, sipping a can of his product, Smith described a $3.5 billion market for sparkling water that’s growing 15 percent to 20 percent annually in North America, and 10 percent globally, as consumers migrate to healthier drinks.
“It’s abundantly clear the cat is out of the bag,” he said of the growth in the sparkling water market. “It is an overwhelming shift.”
That shift occurs as large beverage companies also invest in the sparkling water business. For instance, PepsiCo in early 2018 launched its Bubly brand of sparkling water to compete with the likes of industry leader LaCroix.
In an example of the beverage industry’s high hopes for sparkling water, PepsiCo Chairman and CEO Ramon Laguarta told investors in July that Bubly was “the brand of the future.”
“We’re going to be innovating in this brand not only flavors but other occasions that I think we can attack. You’re going to see mini cans, you’re going to see larger cans. It’s going to be a no-plastic brand and I think that is a very good positioning that we can have for this brand going forward for the modern consumer, the millennial and the younger mother that I think is adopting this brand for her kids,” Laguarta said. “This could be one of our next $1 billion brands.”
In a recent story, the trade publication Beverage Industry noted a report from Chicago-based research firm Mintel that reported sales of sparkling water grew 118 percent from 2013 to 2018. The report quoted a senior analyst who noted that sparkling water “is one of the fastest-growing categories in the entire beverage industry.”
Amid that growth, the market differentiator for HyVIDA Brands comes through infusing its sparkling water with hydrogen for antioxidants, as well as with magnesium, to provide its health benefits, Smith said.
“With hydrogen, I saw the ability to infuse antioxidants without bringing in calories or baggage,” he said.
Another key for HyVIDA Brands is producing a product that offers health benefits at an affordable price that’s below the cost of many premium sparkling waters. A 12-pack of 12-ounce cans was recently selling for $24.99 on Amazon.com.
Setting the price for HyVIDA at a level that consumers find affordable should help partners in the company to scale the business, Smith said. He envisions growing to where HyVIDA has contracts with multiple canners across the nation.
HyVIDA presently seeks to raise $2 million to $3 million in capital that would go to grow the business, including the development of next-generation infusing equipment that can produce more than 1,000 cans a minute, which compares to its present capacity of 400 cans a minute. The company has investor commitments of about $500,000 so far, Smith said.
As Smith looks to the future, he sees the potential in taking his hydrogen-infusing process to other parts of the beverage industry, such as energy drinks or craft beers.
“I’ve played around with that with some local microbreweries,” he said.
Vying for funds
HyVIDA this month was named one of 24 statewide semi-finalists in the annual Accelerate Michigan business competition for startups.
Selected from nearly 300 companies that entered the 2019 program, HyVIDA will compete Nov. 13 to become one of six finalists vying for Accelerate Michigan’s $350,000 grand prize. The competition’s runner-up receives $150,000 and the third-place company gets $50,000.
Other West Michigan-based startups that are semi-finalists in this year’s Accelerate Michigan are 86 Repairs Inc., a Grand Rapids-based service provider that essentially acts as a third-party contract maintenance manager for restaurants, and Apres Beverages LLC in Battle Creek, a startup company behind the Cask & Kettle brand of single-serving, ready-to-brew hot cocktails used in Keurigs and other coffee machines.