Beyonce, fresh off one of the most elaborate record promotions in music history, is investing in a three-year-old startup that sells watermelon water, becoming the latest celebrity to take a more entrepreneurial approach to endorsements.
The entertainer on Tuesday announced an investment in World Waters LLC, which produces a sports drink made with watermelon juice processed at high pressure. The deal adds to Beyonce’s wellness-focused business portfolio, which also includes athletic-apparel line Ivy Park and an investment in 22 Days Nutrition, a vegan-diet kit.
Beyonce, 34, joins Oprah Winfrey and basketball star LeBron James in the growing ranks of celebrities eschewing traditional endorsement deals in favor of direct investments in companies. Winfrey bought a roughly 10 percent stake in Weight Watchers International Inc. in October for about $43.2 million, while James scrapped a deal with McDonald’s Corp. to become a partner in restaurant startup Blaze Pizza. Weight Watchers shares have doubled since Winfrey’s stake was announced.
Fresh Lemonade
Beyonce released her album “Lemonade” to great fanfare on April 23. The songs were featured in an hourlong special on HBO and subsequently made available for purchase and streaming on Tidal, a service owned by her husband, the rapper Jay Z. The promotion went viral on social media and generated glowing articles in scores of newspapers. According to Billboard magazine, “Lemonade” generated sales of 653,000 equivalent album units in its first week, more than any other release in 2016.
The drink company’s deal with Beyonce makes sense, said Rohit Deshpande, professor of marketing at Harvard Business School. Stars putting their money where their mouths are gives credibility to brand promotion that endorsement deals don’t, he said. Authenticity is what’s valued today, especially by millennials, according to Deshpande.
“If you are a paid endorser for a brand, there’s a skepticism on the part of consumers as to whether you’re showing this person with this product because they got paid for it or whether they actually use it,” he said. “When a person invests in a company, then there’s a feeling that that person is really interested.”
World Tour
As long as the personal image of a star lines up with what a brand stands for, celebrity investments can be a windfall for companies, he said. Winfrey’s deal with Weight Watchers brought more than 1 billion free media impressions — a feat that would have cost as much as $17.5 million to replicate, according to calculations by Apex Marketing Group Inc. James, who has 30 million Twitter followers, has taken to tweeting news about the pizza chain and wearing a Blaze hat after games. James also appeared in a YouTube video for the brand that’s been viewed 1.7 million times.
Beyonce, whose Formation World Tour kicked off April 27, has already created opportunities for the beverage, which is being marketed under the name WTRMLN WTR. It will be sold at concert venues throughout the tour and was featured in pop-up stores around the U.S. during the rollout of Ivy Park. Her investment will help accelerate the New York-based company’s reach and expansion: It projects 2016 sales will grow 385 percent from 2015, though it declined to disclose actual revenue.
‘Mission Level’
In talks with Beyonce, an old-school endorsement deal was never part of the conversation, said Jody Levy, co-founder and creative director of World Waters.
“That’s such an important differentiation between a traditional celebrity influencer connected to a brand, because this really comes at the mission level,” she said.
Beyonce cited that mission, which includes health and female empowerment, as central to her interest in the brand.
“I invested in WTRMLN WTR because it’s the future of clean, natural hydration; as partners, we share a simple mission to deliver accessible wellness to the world,” she said in a statement. “This is more than an investment in a brand, it’s an investment in female leaders, fitness, American farmers, and the health of people and our planet.”
‘Meaningful Shareholder’
While the size of the investment wasn’t disclosed, Knowles is now a “meaningful” shareholder in the company, Levy said.
Beyonce’s involvement is the culmination of a series of events that started on Dec. 13, 2013, the day her song “Drunk in Love” was released — a track that contains the lyric “I’ve been drinking watermelon.” That Friday was also the day WTRMLN WTR was first sold at a then-new Whole Foods store in Brooklyn. Levy said her phone started “blowing up” as friends and family heard Beyonce sing the line.
Levy, who used to work in the entertainment industry, made a couple of calls and got product samples sent to Parkwood Entertainment, Beyonce’s management company, and to the Barclays Center, the arena in which Jay Z was an early investor. The startup’s team sent similar packages on Valentine’s Day and Mothers’ Day.
“We were just in growth mode, and there was no intention to really bring in a celebrity,” Levy said. “I associated her with past endorsements like Pepsi that she had done, and I didn’t want anything in return.”
Unsold Fruit
When Parkwood approached World Waters the following year, however, the teams found they shared similar values.
“I really felt excited by the prospect of Beyonce being an investor and part of that curated group of aligned humans that believe in the bigger power of what we’re doing,” Levy said in an interview.
What they’re doing is capitalizing on the hundreds of millions of pounds of watermelons that go unsold in the U.S. — often because they are unsightly or sunburned — by turning them into a beverage. Juice that undergoes the high-pressure process, instead of heat pasteurization, is gaining popularity as increasingly health-conscious consumers move away from sodas and other sugary drinks.
Coca-Cola Co., the world’s biggest soft-drink maker, purchased just under 50 percent of juice maker Suja Life LLC for $150 million in August.
