KonaRed Corporation (OTCBB:KRED) is in the business of bringing the health and wellness attributes of Hawaiian Coffee fruit to the masses. KonaRed Corporation has developed an innovative, state of the art, proprietary process that produces extracts and powdered Hawaiian Coffee Fruit. The company is headquartered in Kalaheo, Hawaii. Investors can learn more about the science behind coffee fruit and follow the healthy, Hawaiian active lifestyle by visiting www.konared.com.
Hawaiian Coffee Fruit is the ripe red fruit that surrounds the world famous Kona coffee bean. Previously discarded as a byproduct of coffee production, the fruit surrounding and protecting the coffee bean (seed) is removed, dried and condensed into a liquid that is blended with other fruits to create the KonaRed beverage.
The coffee tree and its corresponding fruit need six specific conditions to thrive: rich soil, proper elevation (between 500 and 3000 feet is ideal), sunshine, cloud cover, rain and a moderate slope for proper drainage of roots. While some good coffee comes from climates which offer just a few of these conditions, the Hawaiian climate offers all six elements. This perfect blend of conditions provides coffee trees with the ideal environment, and allows Hawaii to produce some of the richest coffee in the world.
The juice from the region's coffee tree fruit has been scientifically recognized as an antioxidant powerhouse with robust wellness qualities including healthy energy, immune support, weight management, joint support and cognitive function. The company has secured an exclusive supply of Hawaiian coffee fruit via its relationships and alliances in Hawaii, as well as Indonesia.
KonaRed is the emerging leader in the functional Coffee Fruit category, recently introducing their sustainable, branded Hawaiian Coffee Fruit product. Utilizing its "Paradise in a Bottle" and "Wellness You Can Feel" tag lines, KonaRed(r) is marketed as premium functional wellness products in the emerging coffee fruit space.
Derived from the fruit of the Hawaiian Coffee plant from the world famous Kona Coffee region on the Big Island of Hawaii, KonaRed's Superfruit Antioxidant Juice is the Company's flagship product, designed to encourage regular consumption of highly bioavailable antioxidants. It's marketed in the produce juice cooler section as a premium functional wellness beverage (Functional Beverage Sector: $23.4 billion in retail sales), along with the likes of Naked Juice, POM Wonderful, Sambazon Acai, etc.
Multiple product offerings utilizing the health henefits of KonaRed include beverages, powders, on-the-go Packets, health bars, chews & more.
Available in 16 oz. and 10.5 oz "daily dose" bottles, the product is differentiated from other functional beverages by its "super fruit" ingredient: the powerful, antioxidant-packed Hawaiian coffee fruit, which has more antioxidant capacity than blueberries, pomegranates and acai berries.
Retailers offering the product include select Whole Foods, Kroger, Wal-mart, 7-11, & more. Areas where KonaRed is currently available through retailers incluide Hawaii, California, Arizona, Colorado, the Northwest, and Canada. The company is expanding eastward across America.
Splash Beverage Group is overseeing three third-party channels for US/Canadian distribution: (1) DSD Network (Paradise, John Lenore, etc), (2) Broadline (UNFI, DPI, KeHe), and (3) Direct to Retail (Albertsons, Wal-Mart, etc). The product is also available directly to consumers, via internet sales and authorized online-resellers.
Two provisional patents have been filed by the Company's IP counsel, pending finalization as a result of the Company's strident R&D efforts. One of these patents covers the proprietary extraction process, while the other covers the composition patent based on makeup of extracts. Management believes that patent coverage adds value to the business, particularly in the coffee fruit ingredients space bolstering credibility and acting as an additional barrier to entry.
KRED Outlook and Analysis
As interesting as the product and the company are, what's compelling are the milestones KonaRed has met and passed in recent months, and where it's going now that the company's got momentum.
In October, the company kicked things off by confirming - with sponsored scientific research - that the health benefits of KonaRed were indeed those being described by KonaRed. In early November made a deal with Verdi Consultants to launch a KonaRed RX line of nutritional supplements. In late November, KonaRed upped its publicity impact by becoming the official "wellness" beverage for 2014's and 2015's World Championship of Paddleboarding. In December, the company added organic green tea to its product line. In January, KonaRed entered into an agreement with distributor Splash Beverage Group, opening up all of the United States via Splash's outlets. Later in the month KonaRed inked a deal that would secure a supply of KonaRed fruit for the next five years. Two days later it was announced that the Defense Commissary Agency was selling KonaRed products in every commissary in Hawaii.
That's a lot of progress in less than four months. Indeed, the company has made more progress since October than it's made in the prior four years, yet KonaRed still hasn't fully accelerated into the growth machine it's going to become. And, it's all happening in the right environment.
A recent US survey showed 40% of consumers were willing to pay a premium for products containing added nutritional benefits. The same study ranked these benefits and found energy enhancement, illness prevention, heart health, anticancer effects, relaxation, mood enhancement and sexual enhancement were the most desirable. With interest in these kinds of products higher than ever, the future looks bright for this category... especially a budding brand like KonaRed.
Claims for many of these drinks have not been proven and the amount of added ingredients is neither standardized nor identified on the label. KonaRed, however, has confirmed that its drinks' claims do indeed offer the benefits described on the packaging.
And again, the market is more than receptive to the further expansion of this category. Between 2007 and 2012, dollar sales of fruit and vegetable juices and juice drinks barely budged, and the volume of juice and juice drinks consumed by households hardly kept up with population growth, according to a 2013 report from Packaged Facts ("Fruit and Vegetable Juices: U.S. Market Trends.") Exotic blends of fruit juices and antioxidant-rich "superfruits," unexpected combinations of fruit and vegetable juices, smoothies, coconut water and aloe vera juice continue to gain shelf space in conventional supermarkets, according to the report.
Functional juice drinks and kombucha posted impressive sales gain according to SPINS, reaching $715 million on 30% growth. Sales of refrigerated vegetable juice & fruit/vegetable blends also grew 19% to $76 million. As for shelf stable functional beverages, sports beverages and isotonic drinks gained 3% in the conventional channel to reach about $3.2 billion. While the natural channel sales are much smaller in comparison ($38 million), the category gained 17.6% from the previous year. Energy and other shelf stable functional beverage sales surpassed $2 billion in the combined channel on 6.3% growth.
In other words, artificial flavors are losing ground to drinks with all natural claims. Antioxidant tea products are now the rage. And at least one brand of coffee is adding herbs and minerals to its beans. Other market sectors are continuing to expand too. Enriched juices and juice-based drinks fortified with vitamins and minerals are gaining in popularity, as are herbal-infused beverages.
All of this bodes well for new ideas and flavors in the functional beverages industry, so much so that the functional beverages industry has attracted the attention of traditional beverage manufacturers focused on expanding their product ranges in the face of falling sales of old stand-bys such as carbonates. Pepsi's purchase of Gatorade and South Beach Beverages Sobe, Cadbury Schweppes purchase of the Snapple and Mistic brands and Coca-Cola's acquisition of Mad River Traders are a few examples.
KonaRed's wheelhouse combines (and redefines) three of the fastest-growing areas within the functional beverage world - coffee, tea, and juice - into a new and highly marketable product.
Bottom line? The premium healthy functional beverage market is big, and getting bigger. Nutraceuticals World Magazine estimates the market's annual sales at around $23.4 billion, and growing fast. Compared to the company's $63 million market cap, even carving out a small piece of that market would be a relative windfall for KRED shareholders. Small cap stock investors should consider this "right company, right time" opportunity now.