How a Start-up is Beating Pepsi

In June 2015, a severe heatwave struck southern Pakistan causing over 2,000 deaths attributed to dehydration and heat stroke, with the majority of cases being the former. And while global warming was the cause of the heatwave, the cure to dehydration is of course was rehydration, something that was ruled out for the majority of Pakistani's that practice Islam and were fasting at the time coinciding with the Holy Month of Ramadan.


Among the first respondents on the scene, were the followers of Jibran Nasir, a lawyer and social activist, and one of the few Pakistani's with the gall to speak against the chief minister .. to his face.

Activade Production
Photo: From file



Brands also jumped in to offer help, with wholesale rates for the NGO's and individuals taking charge to care for and tend to the victims of heat stroke. Chief among them was Activade, a rehydration beverage designed for athletes. Active Foods was founded by Hamza Ahmed in 2014 to challenge Pepsi's Gatorade and SEALE's Vitamin Water, two big-name players in the sports drink market. With most of raised funding being directed towards product development, research and market testing, it is because of the mass distribution strategy, and not a marketing strategy (strictly speaking), that Activade has been able to penetrate the market and exceed volumes of its competitors combined. It also helps that retailers prefer brands that are willing to invest in attractive shelf space, following the most repeated phrase in Pakistan's business circles:"What is Seen, Sells".

I had a chat with Hamza about his business & journey.

This is a really saturated space, with huge pre-existing players with tremendous mind share. What compelled you to get into it?

From 2009 to 2011, I was pursuing an undergraduate degree in business from the University of Texas and was a frequent consumer of energy drinks. After returning to Pakistan after graduation, I was really surprised to see energy drinks launching and failing to carve out a niche. It was then that I knew that the gap had to be filled, but before doing so I needed hands on experience and started working at garments business called Global Exports.

3 years later, I started researching the energy and sports drinks category in depth and found a R&D lab in California that could formulate a beverage that considered the unique palette of Pakistani's. After raising the bare minimum funding, we launched in mid 2014 and have been growing astronomically ever since.

Given the questionable quality of bottled water and packaged milk in Pakistan, research conducted early on reflected that there was market gap that needed to be filled and any existing players were over pricing their product to achieve Gatorade's premium positioning. While its great for branding, its not affordable to the user that needs 2-3 bottles a day. We invested time into learning about procedures and protocols on how to improve shelf life and use packaging to sustain said shelf life.

Activade
Activade. Photo: From file

Your competition sticks to billboards that can cost between USD 10,000 to 15,000 per month for premium placement. How did you market Activade?
Our first product hit the shelves on the 15th of September 2014 and we did this by signing on five distributors in Karachi. Given that most of our funding was directed into product development, we had budgetary constraints with regards to marketing, so our cheapest alternative was Facebook. We quickly realized that Facebook is great for engagement and terrible for conversions. To generate trial we found avenues to take the target segment to sports grounds and started sponsoring sport activities with our product as the official beverage partner, most notably doing so with "Wheelchair Cricket Finals" held in Karachi.

We recently hired a sales team in Lahore as stage one in enticing & capturing the Punjab province, with our biggest win in getting shelf space at LUMS.

There had to be a reason Pepsi hadn't invested in the energy drinks space for Pakistan like your numbers suggest. Did you get a hint of why early on?

Pakistani's are signing up for short term gains in every avenue in life without considering long term gains. They want the benefits of a fruit & vegetable packed smoothie without the sour taste. Our initial product was packed with the right stuff but the flavor didn't fly off the shelves. We had to take it back quickly and make adjustments in order to reach the volumes necessary for growth. If he hadn't done so, retailers would ask for ridiculous margins and be unwilling to stock our product.

Active Foods Team
The Active Foods Team. Photo: From file

Energy drinks in Pakistan are currently priced at USD 1.50 and yours is a third of that. What was the rationale behind the pricing for SKU's and how will you maintain it?

Market perceptions. Soft drinks and bottled water that are 500 ML are priced at USD 0.50 and we know that the market, whether it be retailers or consumers, have accepted this. Going over creates reluctance and going under communicates a quality gap.

We started off with a capabilities driven strategy, which means that product development, mass bulk ordering of the key ingredients and purchase minimums had to be made in order to produce six flavors at 4,000 bottles per hour. Given those numbers, it's important that this product is consumed by the mass market and any pricing outside of their perceived range alienates them.

What's next?
We're exporting next week in the Middle East, starting with the Kingdom of Saudi Arabia and also United Arab Emirates at under USD 1.00 per bottle. Distributors are positive that it could be a raving success and we're thrilled to have made it this far.