Amid a challenging post-pandemic market environment, two Oregon-based beverage startups are going out of business as water kefir brand Goodwolf and Anheuser-Busch InBev-backed barley milk maker Take Two both announced they will cease production this month.
Goodwolf Shuts Down Due to Insurmountable Pandemic Setback
Water kefir brand Goodwolf is shutting down, founder and CEO Keenan Smith announced this week, as sales declines sustained during the early months of the pandemic proved to be insurmountable for the Oregon-based startup.
Founded in 2016 by Smith, a natural foods broker with over a decade of experience in the grocery industry, Goodwolf had aimed to build its brand as a sparkling, probiotic-rich alternative to kombucha. The brand produced its first commercial batch in 2017 and in 2019 it was named the winner of the Natural Products Expo East Pitch Slam. That year, Smith quit his day job to work on the brand full time.
But now, Smith said in a LinkedIn post that Goodwolf is closing up shop and seeking a buyer for its IP and assets. He wrote that the brand had been on the rise in Q1 2020 and had begun negotiations with Nike to put the brand on tap in its Beaverton headquarters, but when pandemic lockdowns began in March, that deal was put on ice and Goodwolf found itself struggling to survive across all channels.
Speaking to BevNET today, Smith said Goodwolf’s sales fell 20% in 2020 and although they rebounded the next year, up 40% in 2021, the recovery only brought the company’s revenues back to early 2019 levels.
Prior to the pandemic, Goodwolf’s revenue was largely fueled by its keg business with corporate accounts, which he said supplemented the lower-margin RTD line which was sold to restaurants and cafes and in grocery retail. As lockdowns left only the latter channel open, Smith said the brand was at a disadvantage as an unknown brand in a niche category. Despite pantry loading, new product discovery was severely impacted and, at one point, Smith’s supplier relationship manager for KeHE told him grab-and-go sales were down around 75%.
“There’s arrows on the floor. You’re waiting in line at New Seasons to get in because only 100 people [are allowed] in at a time. You’ve got your mask on, maybe it’s fogging up your glasses. You’ve got a list,” Smith said. “There’s no people in offices grabbing a sandwich and a kombucha or a water kefir. There’s nobody grabbing one to go out to the park in the summertime – the park’s closed. There’s caution tape up. It was just a nightmare for discovery at retail.”
Despite measures to cut costs and pivot the business, including SKU rationalizations and launching a powdered magnesium product, Smith said the lost momentum from 2020 “has proven too much to recover from” for the capital-tight brand. While many beverage companies saw ecommerce sales surge in 2020, cross-country shipping was out of reach for Goodwolf’s refrigerated RTD products and the powder launch arrived too late, he added. Focusing on grocery also created new challenges: a rebrand of its drinks from water kefir to “probiotic tonics” led to category confusion, with some buyers placing the brand in its dairy sets next to yogurt.
Goodwolf had been mostly bootstrapped, only raising under $200,000 total via friends and family and “a couple small microventure crowd note raises,” he noted. Meanwhile, potential financiers weren’t willing to take a risk on the company and several potential deals fell apart after months of discussion and due diligence.
Although Goodwolf had been recovering, and the deal to service Nike’s offices had also returned to the table in a reduced capacity, Smith said he was personally fatigued and as the company’s office lease came up for renewal this summer he made the call to shut down.
“There’s always something else that pops up, some other reason to keep it going. And there are reasons now, there are people reaching out now like, ‘Well, hold on, what if we just…’,” he said. “It’s just like a mirage in the desert.”
However, Smith still believes the Goodwolf brand has potential in the right hands and is currently shopping the company to small buyers. The company recently completed a packaging refresh that never launched and the established distribution could provide an acquirer a foot in the door. He said he will accept a “fire sale price” and is not aiming to profit, but simply hopes to get enough money to pay off debt.
“There’s some good IP, there’s some good distribution, it’s a seed that started to sprout. It’s a little sprout,” he said. “I think it’s a completely viable business, especially if you have something established, and you have some funding, and you have the energy to take it and create something, versus trying to create something from scratch. I think it’d be great for the right person.”
Take Two Barley Milk to Close
Anheuser-Busch InBev’s barley milk experiment appears to be over, as its upcycled beverage brand Take Two announced on social media that it will cease production over the coming weeks.
Without citing specific reasons for its exit, Take Two said in a statement posted to its Instagram and Facebook accounts on May 11 that it would cease production “over the coming weeks.”
“While Take Two’s chapter is ending, we are committed to continuing the work of protecting the planet and contributing to climate change solutions by giving food waste a second chance through up cycling,” the company wrote.
At its height, Take Two was available in 1,300 points of distribution. The company is currently offering a 50% discount to consumers on all direct-to-consumer sales while inventory lasts.
The announcement puts an end to the Portland, Oregon-based brand’s nearly five year journey. Take Two first emerged from AB’s Zxelerator program in 2017 as Canvas, an upcycled beverage made using spent grain waste from beer brewing as a sustainable ingredient source. After being briefly repositioned as a “fiber + protein shake,” Canvas was later pulled off the market and was reformulated and reintroduced under its new name in 2020.
During that time, sustainability advocate and entrepreneur Jerek Theo Lovey joined the company as CEO and co-founder alongside Matt Olsofsky.
Take Two’s closure also represents a setback for Take Two’s supplier, St. Louis-based spent grain processor EverGrain, which is wholly owned by AB. That pipeline was envisioned to grow Take Two into a plant-based platform brand; discussing its relaunch in 2020, Lovey noted that new shakes were on the way, along with broader plans for non-dairy yogurt, cheese, ice cream and butter products in the longer term.
But it was also critical for EverGrain in achieving the commercial scale required to become profitable. The company has contracts with supplement maker Garden of Life and Bright Future Foods, a subsidiary of Post Holdings aimed at creating climate-conscious CPG. It has also invested $100 million to upgrade its production facility to hit capacity targets.