Bevscape: The Latest Beverage Brand News

Canopy Growth Launches CBD Sparkling Water in U.S.

On March 2, Canadian cannabis manufacturer Canopy Growth announced the online launch of its first CBD-infused drink for the U.S. market: Quatreau, a four-SKU line of flavored zero-sugar sparkling waters containing 20mg of CBD per 12 oz. can.

Quatreau’s initial flavor lineup includes Cucumber + Mint, Passionfruit + Guava, Ginger + Lime and Blueberry + Acai. The line debuted in Canada last year, where it has become the “top-selling ready-to-drink CBD beverage,” according to the company. In the U.S., Quatreau will be sold exclusively online (shipping to 32 states) for a suggested retail price of $3.99 per can.

Beer and spirits conglomerate Constellation Brands owns a 38.6% stake in Canopy, having initially invested in 2017 before increasing its share last summer. In 2020, the company introduced multiple THC and CBD-infused drinks in Canada including Tweed, Houseplant and Deep Space.

“We have proven our beverage strategy in Canada, where we are currently the market share leader in CBD-infused ready-to-drink beverages,” said Canopy Growth President and Chief Product Officer Rade Kovacevic in a press release. “Beverages are fueling growth in the CBD category and we believe this product will resonate with U.S. consumers looking for a naturally flavored, zero sugar option.”

According to the release, the launch date was chosen to coincide with the astrological event known as the “Age of Aquarius,” meant to herald the beginning of a “brand-new age.” As such, the brand has partnered with celebrity astrologist Susan Miller for a digital awareness campaign.

“Astrology has made a major pop culture comeback as people turn to the stars for guidance during what has been an unsettling, uncertain, and stressful time for many,” said Canopy Growth Vice President of Beverages Tara Rozalowsky. “With this campaign, we’re highlighting the role functional ingredients like CBD can play in helping people manage their stress, find moments of calm and prioritize wellness during this once-in-a-lifetime transitional period.”

The introduction of Quatreau marks the second U.S. debut for a major Canadian cannabis brand with ties to the alcohol industry in a matter of months. In January, Truss CBD USA, a joint venture between majority owner Molson Coors and Canadian cannabis manufacturer HEXO, launched its own zero-sugar flavored sparkling water (also with 20mg of CBD) in Colorado. Meanwhile, Pabst Blue Ribbon announced in October its plans to introduce a “sessionable” non-alcoholic cannabis-infused seltzer in California in partnership with processor Vertosa.

According to cannabis research firm The Brightfield Group, the U.S. CBD market is expected to reach $23.7 billion by 2023.

Oatly Files for IPO

Plant-based dairy alternative products maker Oatly submitted plans in late February for an initial public offering (IPO) to U.S. regulators.

“We’ve taken the first official step towards pursuing a potential IPO by submitting a confidential F-1 registration statement with the Securities and Exchange Commission in the United States,” said Oatly spokesperson Sara Fletcher in a statement to BevNET on February 23. “However due to the confidentiality of the process we have no further comments.”

The announcement follows reports in January that the Sweden-based company was exploring a potential $1 billion IPO. Oatly is reported by Reuters to have hired Morgan Stanley, JPMorgan and Credit Suisse as underwriters on the offering.

Reuters reported that the brand could be valued as high as $2 billion.

Oatly reported $51.2 million in retail dollar sales in the U.S. for the 52-week period ending December 27, 2020, according to market research firm IRI, up 241.7% year-over-year. A 2020 report by Mergermarket said the global company generated over $200 million in revenue in 2019 and was expected to have doubled that last year.

Though Oatly has been broadly recognized for bringing the oat milk trend to the U.S., exemplified by its on-premise launch strategy in 2017 that focused on placing the brand in premium chain cafes, the company’s oat milk business has faced stiff competition in retail. According to IRI, HP Hood-owned Planet Oat currently leads the category in MULO, up 203.6% year-over-year to $77.7 million.

In 2019, Oatly expanded its U.S. business outside of beverage with the launch of a line of oat-based ice creams. The company has since added a line of non-dairy yogurts.

Last year, the company announced a partnership with Starbucks to place its oat milk in select stores around the country. Oatly has also partnered with coffee makers including Stumptown, Red Hat Coffee and most recently Intelligentsia to launch RTD oat milk latte lines in retail.

Last July, Oatly raised $200 million in an equity funding round led by Blackstone Growth, which also included investments from Oprah Winfrey, actress Natalie Portman and former Starbucks CEO Howard Schultz. Oatly CEO Toni Petersson told BevNET at the time that the company had a long growth runway with just 19% ACV in the U.S.

In addition to Blackstone, Roc Nation (owned by rapper Jay-Z), Orkila Capital and Rabobank’s Rabo Corporate Investments have also invested in the brand. A joint venture between Verlinvest and China Resources holds a controlling interest.

Coca-Cola In Talks to Acquire BodyArmor

The Coca-Cola Company has begun the process of acquiring a controlling stake in sports drink brand BodyArmor.

A spokesperson for Coca-Cola confirmed on February 19 that the company had notified U.S. antitrust regulators of its plans. Further details on the timing and terms of the deal were not disclosed.

“We can confirm that The Coca-Cola Company has filed a pre-acquisition notification with the Federal Trade Commission (FTC) relating to its intent to acquire a controlling interest in BodyArmor,” Coke said in a statement shared with BevNET. “In 2018, Coca-Cola became a shareholder in BodyArmor, in a deal that was structured to create value for both companies while also defining a path to ownership in the future. Until closing, both companies will continue to operate independently in accordance with their existing agreement.”

In an email statement to BevNET, BodyArmor co-founder and chairman Mike Repole said: “Although Coca-Cola buying a controlling interest in BODYARMOR is a distinct possibility, reports that Coca-Cola is purchasing a controlling interest in BODYARMOR are premature. While this is one scenario for BODYARMOR, there are other potential options for the future of the business.

He continued: “Our focus continues to be to build BODYARMOR into the #1 brand in active hydration. Our president Brent Hastie, our leadership team, 400+ passionate employees and I remain excited and committed to building this business with the Coca-Cola bottling system for future years to come.”

Over the last decade, BodyArmor, named BevNET’s Brand of the Year in 2018, has emerged as the leading challenger brand to sports drinks’ two dominant forces, PepsiCo-owned Gatorade and Powerade. The brand’s profile has been raised through affiliation with athletes like MLB star Mike Trout and the late Kobe Bryant, a growing range of SKUs (including the newly launched BodyArmor Edge with caffeine) and its aggressive positioning as a natural alternative to chief rival Gatorade.

According to data from Nielsen, dollar sales for BodyArmor are up 43.4% year-over-year through February 6, 2021, taking the company past the $1 billion mark. The brand has taken a 13.7% dollar share of the category during that time frame.

In August 2018, Coke, which also owns Powerade, became BodyArmor’s second-largest stakeholder behind co-founder and chairman Mike Repole; the beverage giant also began distributing the brand’s products through its nationwide distribution system. Keurig Dr Pepper, BodyArmor’s previous distribution partner, retains a 12.5% stake in the brand.

If completed, the transaction would consolidate Coca-Cola and PepsiCo’s collective control of the U.S. sports drinks market, which has grown 14.4% year-over-year according to Nielsen. Outside of the two giants, the rest of the category would represent somewhere less than 1% of total dollar share.

Flow Names Former Nestlé Waters Head Patarnello as CEO

Alkaline spring water company Flow has named former Nestlé Waters head Maurizio Patarnello as CEO to oversee the brand’s global expansion.

Patarnello joins Flow after more than 27 years with the Swiss conglomerate, most recently as CEO and chairman of Nestlé Waters where he oversaw brands including Nestlé Pure Life, Perrier, San Pellegrino, Poland Spring and Acqua Panna. He held the role from 2017 until his retirement in 2019.

Patarnello became aware of Flow when he and the brand’s founder and former CEO Nicholas Reichenbach met in 2018 at the World Water Congress. Patarnello said he was impressed by Flow’s branding, design and flavor and believed the brand’s emphasis on sustainability was helping to “change the standard of the industry.” After his retirement, he wanted to take on the task of scaling an entrepreneurial brand into a global competitor.

“After 27-plus years of a corporate career, I wanted a new challenge,” Patarnello said. “The kind of challenge I was looking for was to take my experience in the category, and my knowledge and my passion, and to put it at the service of something completely different, innovative and with a strong purpose. So that’s where I am.”

Reichenbach will remain with the company as executive chairman. He said Patarnello’s experience in the global bottled water category will allow Flow to grow at scale without making major mistakes. Though Patarnello said there is no way to “copy and paste” his Nestlé Waters strategy, he noted his knowledge will allow the brand to move swiftly as it seeks to dominate in the premium water segment.

“I’m not stepping back, I’m stepping aside,” Reichenbach said. “Because Maurizio is a force of nature and I believe our partnership together will have a little bit of the yin and yang as we balance ourselves out.”

The appointment comes after Flow announced in February it would take the company public this year on the Toronto Stock Exchange (TSX) with a $50 million public offering. The IPO will be followed by a secondary offering on the NASDAQ within the next 12 months.

“When Nicholas says we want to take it all the way, that’s what he means,” Patarnello said. “The decision to go public is linked to having the resources available for the brand to fully use its potential.”

Flow is currently available in over 30,000 retail doors in the U.S. and Canada, with much of its sales driven by the natural and specialty channels. Sales increased 44% in 2020 to over $25 million and the company aims to achieve 65% ACV in the grocery channel by 2022. Flow raised $45 million in a Series D funding round last year.

In April, Flow is set to add 950 Target stores nationwide with four SKUs, including 1 Liter multiserve cartons, 500 mL six-packs and two flavored variations. As well, 480 locations will carry the brand’s functional Collagen-Infused and Vitamin-Infused lines. According to chief revenue officer Tim Dwyer, the rollout is part of a new phase of distribution expansion that includes partnerships with 40 additional DSD houses to grow Flow’s footprint across the U.S., including Polar Beverage in the Northeast.

Reichenbach noted Flow will also begin this spring tapping its celebrity investors and shareholders, including singer Shawn Mendes, with consumer facing ad campaigns to drive brand awareness.

In addition to the water brand, Flow also owns over $100 million in assets, including its two artesian springs located in Canada and Virginia, making it among the only premium bottled water brands sourced in North America. The company also operates a subsidiary, Planet A Co-Packing Solutions, which produces products for other Tetra Pak packaged beverage brands including Vita Coco and meal replacement orro.

According to Patarnello, Flow is also exploring two additional production sites in North America in the near future. He noted that in addition to giving Flow a strategic base to scale its own business globally, the company hopes to expand the use of recyclable packaging throughout the beverage industry.

“There are two strategic dimensions here,” Patarnello said. “On one hand this is taking Flow all the way. The other hand this is taking the packaging all the way. And that’s why we foresee for the future a potential expansion beyond the two premises that we have today and it will go hand in hand with the development to the brand.”

Spindrift Goes Hard with Spiked Sparkling Water Line

In its ongoing mission to be the leading premium sparkling water brand on the market, Spindrift is going hard.

The Newton, Massachusetts-based beverage brand announced the launch of Spindrift Spiked, an alcoholic hard seltzer line rolling out to stores in April. Following the brand’s core products, the new line is made with real fruit juice and contains alcohol fermented from cane sugar with a 4% ABV.

The drinks are available in Mango, Lime, Pineapple and Half & Half (lemonade and tea) flavors. Each 12 oz. can contains 82 to 95 calories. The products will be sold in variety 12-packs for $25. The company will donate 1% of all sales as part of its commitment to environmental campaign 1% For The Planet.

Spindrift has seen high, double-digit growth in the past year, up 78.9% to $77.7 million in the 52-week period ending February 20, according to market research firm Nielsen. In that time, the non-alcoholic sparkling water category has grown 22.8% to $3.3 billion, while the hard seltzer space has grown to $4.1 billion, per NielsenIQ. According to Spindrift founder and CEO Bill Creelman, the combined categories are expected to surpass $15 billion in retail by the end of 2022.

While hard seltzer is a crowded category largely dominated by a few brands, namely White Claw and Truly, Creelman said he sees the space as an extension of the overall sparkling water space where Spindrift has been able to carve out market share as a premium alternative to the leading brands.

“Sparkling water is the most important category in beverage in our lifetimes,” Creelman said. “Whereas flavored sparkling water was sort of where it started as the domain of carbonation lovers fleeing soda, we really see that as alcohol coming into sparkling water. You have, in the case of Spindrift, this profile of low calorie, really delicious, two ingredient product and the consumer is not willing to compromise anymore.”

Spindrift, Creelman said, is orienting itself to be a “total sparkling water company,” playing in all areas of the category. In February, the company launched a line of lemonade sparkling waters, the first time in the brand’s history it unveiled a full subline.

To stand apart from Spindrift’s core line, Spiked is packaged in slim cans and features numerous callouts on the packaging to its alcohol content. Creelman said the company aimed to develop a package that is “very distinctly Spindrift” while also feeling different than its current product.

Spindrift Spiked aims to differentiate itself from competing hard seltzers much in the same way Spindrift’s flagship products set themselves apart from the sea of naturally flavored sparkling waters: through the use of real fruit juice and no artificial ingredients. The liquid is colorful, unlike nearly all other hard seltzers which are clear, and the packaging and marketing call out its clean ingredient label.

Creelman said that the company expects to draw early sales for Spiked from its existing consumer base, which it has tapped for feedback through its Drifter newsletter program and social media channels. While brands like White Claw and Truly may have carved out the bulk of the market share for hard seltzer to date, Creelman said Spindrift Spiked is targeting consumers who have yet to enter the category. Spindrift’s consumers, he noted, “overwhelmingly” requested the brand introduce a hard product, however, only 15% had even tried hard seltzers in the past — let alone on a regular basis.

Sales of Spindrift’s core line, Creelman said, are 90% incremental to the sparkling water category, a point that the company hopes to duplicate in the alcohol space.

“Among our followers, almost none of them drink hard sparkling water today,” Creelman said. “They’ve told us that there’s not a product that they really identify with out in the market. So this is our opportunity to offer that.”

Spiked will launch mid-April in the Northeast and in Southern California. To support the rollout, Spindrift has partnered with California-based Stone Brewing and Massachusetts-based alcohol wholesalers Horizon Beverage Group to handle distribution.

While many hard seltzer plays from established brands have come through partnerships with strategics — including AriZona and Heineken USA, Topo Chico and Molson Coors Beverage Company and Polar Seltzer and Harpoon — Creelman said the company has opted to handle the venture itself and plans to “engage in a small, but deep way in the market.” Creelman himself is no stranger to the alcohol space, either: he co-founded mixer brand Stirrings prior to launching Spindrift in 2010.

As the line rolls out, Creelman said the company’s strategy is multi-pronged. First, Spindrift aims to launch Spiked in its existing accounts which also carry alcoholic beverages, including upwards of 2,500 accounts in the Massachusetts and Rhode Island area. Creelman himself said he will be driving around personally, much as he did when the brand first launched 11 years ago, to meet with accounts and sell the line. The company will also gauge interest from its national accounts prior to expanding outside of the test markets.

“There’s going to be no point in time, going forward, where consumers are going to be willing to go back to putting lots of sugar or chemicals into their bodies,” he said. “So while spiked sparkling water sits in a different part of the store and it’s distributed very differently, from a consumer standpoint, they don’t see it that way. They have made a decision, many years ago, that they’re not going to put soda in the middle of the table anymore. And now they’re making that decision when it comes to hard sparkling water.”