As the pandemic wreaked economic destruction on large portions of the global beverage industry, the fitness channel was among those hit hardest by lockdowns and stay-at-home orders. Public workout spaces shuttered and for sports nutrition and performance beverage brands, a key sales channel was strangled. Now, as the country returns to pre-pandemic mobility and state of emergency orders are lifted, gyms and the brands that rely on them are still looking down a long road to recovery.
According to LifeAID co-founder and president Aaron Hinde, about 25% of global gyms have permanently shut down in the wake of the pandemic. Meanwhile, the Wall Street Journal reported that lockdowns led to roughly 1.5 million job losses within the channel. Last year, a number of fitness chains filed for bankruptcy, including Cyc Fitness, YogaWorks, Flywheel Sports, Town Sports International (parent company of New York Sports Club and Boston Sports Club), 24 Hour Fitness and Gold’s Gym. While many of these companies managed to survive through restructuring or acquisition, the impacts of the pandemic still resulted in hundreds of shuttered locations.
Distributors also suffered, with leading sports drinks and supplements distributor Europa Sports Products restructuring amid the crisis, according to multiple brands that do business with the company.
But despite those challenges, gyms are now feeling some wind in their sails. This month, F45 Training closed an initial public offering, raising $279 million. While Europa Sports struggled during the pandemic, brands pointed to Muscle Foods as a distributor that managed to pivot and thrive last year. Other national chains, such as Crunch Fitness, are now planning to open new locations over the next year, according to the Wall Street Journal.
Fitness chains are also adapting to a post-pandemic environment, adopting hybrid virtual and in-person models with the anticipation that at-home workouts will be a permanent shift for the industry. Many gyms are also making physical changes to their buildings to accommodate outdoor and socially distanced classes.
For beverage brands, the landscape for gyms is still rocky and uncertain, with business conditions varying wildly state by state. Hinde noted that while states like California and New York, which imposed strict COVID lockdowns, are taking longer to recover, others like Florida are almost back up to pre-pandemic numbers.
LifeAID’s fitness channel business is currently at just 80% of its year-to-date 2019 sales, Hinde said, though with only 75% of the channel intact he suggested the company is actually “a little ahead of the game” in terms of returning to pre-pandemic sales. While the brand has continued to add new fitness accounts in recent months, many boutique chains had to go into debt to survive the pandemic and as a result the average order volume for beverages has decreased, Hinde said.
For established brands like LifeAID, this challenge is surmountable, but Hinde warned that early stage performance beverage startups are attempting to launch into an industry that is still picking up the pieces.
“I think [gyms are] very hesitant to really bring on new brands that aren’t tried and true within their community,” he said. “So there’s going to be more headwinds for new brands breaking into the gym space. But with brands that have been there a long time that they know sell, they have confidence. And we’re seeing that with our numbers.”
Existing relationships between brands and outlets were often tightened during the pandemic, as the industry went into overdrive to launch charitable giveback programs to support mainly independent gyms. Both LifeAID and O2 Natural Recovery each individually announced revenue sharing programs in Spring 2020, giving a portion of online proceeds back to partner gyms. In addition to protecting businesses, the campaigns also generated goodwill between the companies while helping grow ecommerce sales.
“When we announced the first of our support initiatives last March, we had no motive other than to help gyms,” said O2 founder and CEO Dave Colina in an email. “But, the fitness community got behind O2 in a huge way, resulting in our biggest year ever. We grew our direct-to-consumer business tenfold from 2019 to 2020, while our gym business actually stayed flat. We attribute that to how many gyms started selling O2 for the first time in 2020, which was driven by the trust and goodwill we built with gym owners.”
Diversifying Fitness
According to a January report by Bloomberg, the shift to virtual fitness necessitated by the pandemic could be a long lasting change for gyms. At the time, 72% of fitness centers said they were offering livestream group workouts, compared to just 25% in 2019, and only 75% of consumers said they planned to return to in-person workouts.
However, Hinde noted that even if overall attendance is down, per store attendance is up as consumers who lost their go-to gyms find new locations to attend. But the shift to virtual has gone both ways as CPG companies have diversified their channel mix through ecommerce and direct-to-consumer models. At LifeAID, Hinde said the company’s online sales have remained steady even as many consumers return to in-person workouts.
John Timar, CEO of KILL CLIFF, said his brand was in the middle of a transformative period when COVID hit, repositioning its products from pre-workout and recovery beverages to clean energy drinks and shifting from an event-driven marketing model to primarily ecommerce and digital-first strategies. Gyms still compose about 10% of KILL CLIFF’s channel mix and the business is still not quite at pre-pandemic numbers, he said, but the expansion of the online division has been lucrative for the company.
As consumers continue to work out at home, KILL CLIFF has seen steady online sales and has built portions of the business around these shoppers, who still want the same drinks they would buy when going to work out in public.
“There’s a lot of people that put a lot of money in investments that are home gyms,” Timar said. “But they still want to get out into a public environment to work out, to get motivation and to socialize. So I think it’s going to recover, but I do think that it might look different in the future.”
According to Timar, various sectors of the boutique fitness industry responded to the pandemic differently. While corporate chains like Gold’s and 24 Hour Fitness struggled, community-driven spaces like franchised Crossfit accounts bounced back rapidly as consumers rallied to support independent gym locations. Mixed Martial Arts and other combat sports gyms, which compose a significant portion of KILL CLIFF’s fitness channel locations, likewise barely slowed down.
“We never had a big business with the big box and franchise gyms across America, we were always with the independent, functional fitness, Crossfit gyms,” Timar said. “They continued to order product from us and so that business — with the exception of the first couple of months which were shaky for everybody — it rebounded right back in early summer last year and has stayed very predictable, linear and smooth.”