Brain Beverage Gets a $3 Million Kick

August 26, 2011

Brain beverage gets a $3 million kick

By David Nicklaus
ST. LOUIS POST-DISPATCH

For a couple of bucks at local supermarkets and drugstores, you can buy your brain a drink.

Nawgan, pronounced "noggin," is a St. Louis scientist's entry in the booming category of functional beverages, which are intended to have benefits beyond keeping you refreshed and hydrated. It has just received a $3 million stamp of approval from one of the world's largest beverage companies, Japanese brewer Kirin Holdings.

Kirin's investment will enable Nawgan Products, the Clayton-based seller of a "brain health beverage," to expand distribution beyond the St. Louis area. If Nawgan can stand out in a market crowded with energy drinks, sports drinks and vitamin waters, it will enrich a group of local investors and provide a much-needed validation for the region's efforts to nourish early stage companies.

The Nawgan story started in 2006 when Robert Paul, a neuropsychologist who had just joined the University of Missouri-St. Louis faculty, heard from a beverage company that was interested in his research on brain function. Paul started paying attention to beverage ads and decided that if he wanted to do a brain drink the right way, he should do it himself.

"I felt there was an opportunity to create a functional water that was truly science-driven and formulated from a scientific perspective, as opposed to a marketing-driven or classic beverage industry perspective," Paul said.

He enlisted a couple of businessmen friends to draw up a plan, and eventually was referred to the Biogenerator, which is dedicated to nurturing science-based companies in St. Louis.

The Biogenerator made a small investment and referred Paul to James von der Heydt, a former Ralston Purina executive who had built a consulting business around consumer-goods product launches.

After trying a couple of cans of Nawgan, von der Heydt decided to do much more than consult on this one: He would become the company's CEO.

That was early last year. Within six months, Nawgan had lined up $900,000 of capital from local investors, including members of the St. Louis Arch Angels and two former Anheuser-Busch executives; persuaded beer and liquor distributor Major Brands to handle its product; and landed on the shelves at Walgreens.

Nawgan has since been picked up by Dierbergs, Shop 'n Save and Straubs, generating a few hundred thousand dollars in sales. Going beyond St. Louis, though, would require a bigger staff and more money.

The Nawgan team talked to venture capitalists and private-equity firms before announcing this week that it had landed the investment from Kirin, a beverage and food group with $27 billion in annual revenue.

Tom Pirko, managing director of consulting firm Bevmark, says he's not surprised that Kirin would invest in a fledgling functional-beverage business. "They're pretty sophisticated," Pirko said. "The Japanese are probably the best in the world at understanding this space."

Plenty of other beverages are fighting for shelf space, though, and Pirko says Nawgan's scientific pedigree won't matter unless it's backed with plenty of marketing dollars.

"We're in a real soft, fuzzy area, so the products are less about the real nutritional components and more about the marketing," Pirko said. "It's a category that's like a land rush right now."

Paul hopes that science will set Nawgan apart. The drink's formula provides precise amounts of ingredients that have been shown to promote attention, focus, concentration and memory.

He says proudly that Nawgan "did things backward from the beverage industry," focusing on science first and worrying about things like production and marketing later.

Now, it's partnered with a mainstream beverage company that can help it with those important business details. That looks like smart thinking for a company that's all about improving the way people think.