Bevscape: The Latest Beverage Brand News

Liquid Death To Launch Iced Teas, Begin Shift to U.S. Production In 2023

Can a brand built on counterculture, rebellion and flaming skulls become the next big mainstream beverage giant? That remains to be seen, but Liquid Death CEO Mike Cessario is certainly up for the challenge.

In just a few short years, the former advertising executive has emerged as an unlikely visionary businessman, injecting a punk rock aesthetic and healthy disregard for ‘safe’ marketing tactics into a packaged water brand expected to clear $130 million in sales this year — and to double in 2023. According to internal company documents viewed by BevNET, Liquid Death has achieved

94% national distribution coverage via DSD and broadline partners, carrying the ability to service 346,000 doors across the U.S., while only clocking in at 13% brand awareness. To the chagrin or disbelief of many, Liquid Death has achieved a $700 million valuation by selling water in a can, generating a war chest of $195 million in investment — including October’s $70 million Series D — along the way.

If January’s $75 million Series C round was a confirmation of Liquid Death’s growth thus far, October’s round underscores the belief that the brand can go even further, mainly thanks to the performance of its flavored sparkling line released in January. Within three months of its introduction, the product had “gone nuclear,” according to Cessario, generating 40% of the brand’s total Amazon revenue without cannibalizing its existing business. In brick-and-mortar retail, the flavored line outsold all varieties of Topo Chico in Target and became the #2 best-selling sparkling water at 7-Eleven. Retailers that had initially been skeptical on stocking a Liquid Death product that strayed from the brand’s zero-calorie, zero-sugar roots were eventually won over.

To Cessario, that experience has underscored Liquid Death’s true point of differentiation as a beverage maker: bringing otherwise disinterested consumers into the better-for-you space. Beyond the various publicity stunts and provocative ads, the brand has created a connection with its audience that allows its waters to play at retailers as diverse as Whole Foods and Walmart at virtually the same price. The early success of the flavored line, positioned somewhere between a soda and a zero-calorie Sparkling Ice or Spindrift, suggests that consumers are eager to evolve alongside the brand. It’s also now seeing its first line extension since the launch with a fourth flavor, Convicted Melon, launching in the near future.

“What we’re seeing is that the brand can be a platform for healthy beverages,” Cessario said. “Healthy beverage categories typically don’t have the most exciting, fun marketing; it tends to kind of be all very the same kind of bland. I think there’s a possibility for Liquid Death to go into multiple healthy beverage categories and sort of be the cool, fun brand. And for me, outside of our ‘Death to Plastic’ mission, what we’re really trying to do is bring healthy beverages to people who don’t typically drink them.”

The first test of the brand’s broader viability is set to begin soon with the introduction of iced teas, Liquid Death’s first non-water product. The line was previewed at the National Association of Convenience Stores (NACS) 2022 show in Las Vegas with three aptly named flavors: Rest In Peach, Grim Leafer and Armless Palmer. The teas are expected to hit shelves this spring and will be available for $2.79 per 19.2 oz can ($17.99 per 8-pack case), with six grams of sugar from agave each.

Thanks to its large audience, healthy halo and dearth of recent large-scale innovation, the iced tea category “checked all of our boxes,” said Cessario. With just 30 mg of caffeine from black tea, the product allows Liquid Death to dip its toes in the general ‘energy’ space without going full force with a dedicated product, a move the CEO suggested was unlikely.

“When your brand is called Liquid Death, if you were to create an energy drink with 300mg of caffeine, and a kid could drink five in an hour and actually die, it’s not funny,” he said. “I think what makes us successful is taking something that is completely safe and having fun branding it as something extreme where it is very tongue-in-cheek and fun because it’s sort of two different worlds at odds with each other coming together. That’s what makes it interesting.”

The extension will also serve to test whether Liquid Death’s strong presence in on-premise channels can go beyond water. The brand is currently in over 400,000 restaurants, bars and other on-premise venues; through its exclusive partnership with Live Nation, where the product has found traction as a non-alcoholic option for partying and nightlife occasions. It’s unclear whether the iced tea will also be prominently featured in those channels or if it would be carried as the exclusive category product for Live Nation properties.

“For us, it’s more exciting to find products [where] maybe the category in general has never had the right kind of brand to bring, you know, more audience, or more different kinds of people into those categories,” Cessario said. “Places where there already are 100 cool, loud, exciting brands — it doesn’t make as much sense to kind of go [into those categories].”

Iced tea — and more potential innovations — are expected to help fuel the company’s march towards profitability and stronger gross margins. But operations are also set for a major overhaul next year, as Liquid Death transitions its sourcing from “mountain water” from the Austrian Alps to natural springs in the U.S. Cessario said the move was “always on our radar,” but a lack of U.S. co-packers who could produce spring water in cans forced the company to source from abroad. Now that Liquid Death has more options stateside, the transition is expected to begin next year and be completed by 2024-2025, by which point gross margins are projected at 46-47%. Moving production to the U.S. will also sidestep ocean freight, which weighed down both profitability and the company’s more-sustainable positioning.

That growth, along with a planned expansion into Europe, will require even more funding, and October’s announcement teased the potential for Liquid Death to go public in the future. Having been encouraged by the $5.5 billion valuation attached to publicly traded energy drink company Celsius, Cessario called the prospect of an IPO “interesting” but emphasized that his company was not committing to going down that road just yet.

As the brand’s reach and platform widens, though, Cessario said Liquid Death will stick to the marketing approach that has taken it this far by focusing on “insane ROI on every marketing dollar” the company spends. In other words, don’t expect the brand to splash the cash on an NBA sponsorship anytime soon.

“When you create something where a lot of people legitimately love it and think it’s the greatest thing ever, but then you’ve got some people who completely don’t understand it and think it’s the dumbest thing ever, that kind of a dynamic has been proven to lead to a tremendous amount of success,” he said.

VPX Files for Chapter 11 Bankruptcy Protection

Vital Pharmaceuticals (VPX), the maker of Bang Energy, has filed for Chapter 11 bankruptcy protection.

Florida-based company said in a press release in October, as it moves ahead with efforts to rebuild the Bang distribution network – now up to 269 DSD houses around the country – following the termination of the brand’s agreement with PepsiCo earlier this year. VPX has also received $100 million in loans from a syndicate of lenders to ensure operations are not interrupted during the Chapter 11 restructuring process.

“We are excited about our future, and particularly the new distribution system that we have spent the better part of this year assembling,” VPX founder and CEO Jack Owoc said in the release. “Utilizing our new state-of-the-art decentralized direct store distribution (DSD) will allow Bang Energy to get back to our pre-Pepsi meteoric annual success of several hundred percent year over year growth. We are coming like a freight train and cannot be stopped.”

The filing comes in the wake of a federal court ruling in September ordering VPX to pay $293 million in damages to Monster Energy Co. after a jury found that the company had violated the Lanham Act by falsely marketing its “Super Creatine” supplement as a functional ingredient in Bang that is superior to standard creatine. Those damages could be potentially tripled in a post-trial hearing, though VPX may appeal the decision.

During the trial, VPX’s attorney David P. Muth warned that a decision favoring Monster could potentially push the company into bankruptcy.

The legal blow came just months after VPX lost a separate trademark dispute with Monster and family-owned beverage brand Orange Bang, in which VPX was ordered to pay $175 million as well as a 5% royalty fee for every can of Bang sold.

Besides Monster, VPX has recently faced a spate of breach of contract lawsuits from PepsiCo, prior to a mutually agreed upon termination of its distribution deal this summer. It is also engaged in a trademark infringement lawsuit with Sony Music Entertainment, which alleged the beverage brand improperly used its music in social media advertisements. Last month, a Miami federal judge sided with Sony in a pretrial decision, following a similar decision in a lawsuit against VPX from Universal Music Group last year.

VPX acknowledged in the release that the lawsuits played a role in the decision to file for bankruptcy protection, noting that the cases “impacted the Company’s short-term outlook,” while the need to rebuild its DSD network led to a summer revenue gap. The company said it intends to use the Chapter 11 process to “recapitalize and emerge from bankruptcy well-positioned to continue its rapid growth in the beverage market.”

Though Bang has commanded a strong position in the U.S. energy drink category as the number three brand behind Monster and Red Bull – reporting over $1.1 billion in annual retail revenue – it has faced consistent and steep sales declines over recent months. According to NielsenIQ, retail dollar sales fell -21.3% in the two-week period ending September 24 and volume declined by -25%. Over the 52-week period, sales dropped by -8.3% and volume was down -9.7%.

But in the release, Owoc projected a positive outlook, vowing that the brand would one day see a return to the triple-digit growth numbers it experienced in 2019 when it first emerged as a significant national brand eager to unseat Monster as the largest energy drink in the country.

“This company was founded on determination and a relentless passion for giving our customers and consumers what they want – and we will continue to do so,” Owoc said in the release. “I know we will successfully emerge from this process as a stronger company.”

Essentia Founder, Former CEO Reteam for Enhanced Water Brand Yesly

After an exit to Nestlé last year, Essentia founder Ken Uptain and its former CEO Scott Miller are jumping back in the water with Yesly, a new brand of canned enhanced waters launching early next year.

The new venture, financially backed by Uptain with Miller serving as CEO, is targeting a white space for a zero calorie, better-for-you still beverage with functional benefits, the founders told BevNET this week. Billed on the 16 oz. cans as an “Enhanced Still Water Beverage,” Yesly contains vitamins B6, B12 and C and electrolytes and is sweetened with stevia. The drinks will be available in four flavors: Pomegranate Acai Blueberry, Lemon, Black Cherry and Kiwi Strawberry. Pricing for the line is still being finalized.

As canned water brands like Liquid Death have fed demand for more options in the packaged water category, Yesly aims to provide a similar point of differentiation in the enhanced water set as its tall cans look to stand out on shelf from plastic- packaged national brands like Vitaminwater and Bai.

“After having successfully had the opportunity to transition the [Essentia] business to Nestlé, we sat down and chatted about what’s next,” Miller said. “We really thought that the water category had just continued to have such great growth with multiple consumption [occasions] throughout the day that Ken and I decided to start a new brand, which is really in the area of what I’ll call the ‘On-the-go lifestyle brand.’ Whether you’re taking a walk, whether you’re hiking or just on-the-go throughout the day.”

Uptain founded Essentia in 1998, leading the brand over the course of two decades as it became a nationwide premium bottled water player. Miller, the former CEO of Tampico Beverages, joined the company as CEO in June 2020 overseeing its final leg of growth leading up to the exit – reported to be in the high nine-figures – in March 2021.

While Miller’s tenure with Essentia was relatively brief, leaving the company in February, he and Uptain said they became fast friends who shared a business philosophy, making the creation of a new beverage brand a natural next step. Much like their Essentia colleague, former chief strategy officer Neil Kimberley, who jumped back into the industry this year to help launch enhanced sparkling water brand Bossa Nova, the founders said they couldn’t stay idle and were eager to get back into startup mode.

“I think it’s in your blood,” Uptain said. “Especially after a success like Essentia.”

However, in this new act Uptain said he is looking to play a supporting role. He is the sole financier providing a set amount that will fuel Yesly for the first two years, and he is also tapping into his network of industry partners to establish a strong grounding for the brand. Meanwhile, Miller will take the lead on day-to-day operations.

Other Essentia alumni are joining them as well; Essentia head of finance Justin Connell has come on board as Yesly’s CFO. Miller said the company is now looking for a full time brand manager to lead marketing and will be hiring for sales positions closer to the Q1 launch.

Yesly has secured a distribution agreement with New York metro area DSD house Big Geyser to begin rolling out in January, Miller said, and the company will take a regional approach to retail to start, also targeting the California, Florida and Seattle markets.

Jerry Reda, president and COO of Big Geyser, said he was excited for the chance to work with Uptain and Miller again, having worked with them while distributing both Essentia and Tampico. Reda called Yesly itself “clean, fresh and exciting,” suggesting the combination of packaging, formulation and brand positioning made it a unique opportunity that doesn’t compete with any other brands in the distributor’s portfolio.

“I have an endless amount of respect for both Scott Miller and Ken Uptain for their achievements in the business,” Reda said. “Ken was able to stay the course and be patient with Essentia and that paid off for him and many other people around him, so I applaud him for that. And, I look at Scott as being one of the top 5% of best operators and CEOs of this business, and I don’t say that lightly.”

As the brand establishes a national DSD network, Miller said ecommerce is also in the works and Yesly will likely begin selling on Amazon shortly after the brick-and-mortar launch, but direct-to-consumer will not be a priority as the company aims to be “efficient and effective.”

The Yesly branding and packaging was created in partnership with consultancy firm Retail Voodoo and Miller said messaging will focus around positivity, ideally serving as a broad net that can appeal across demographics.

“The name Yesly is this kind of positive expression of what we want to do to the consumer, we want to give them a great tasting product that’s better-for-you but also it’s fun and exciting for them,” Miller said. “We’ll say things like, ‘Say yes to what’s next’ and really it’s about a brand with inclusivity where everyone’s welcome. We want to serve every consumer with a mouth. That’s the goal.”

Laird Superfood to Shut Down Oregon Production Plant

Laird Superfood is shutting down its Sisters, Oregon production and fulfillment facility and laying off all workers at the end of this year, the company announced in October.

In a letter shared with employees, CEO and president Jason Vieth, who joined the company in January, cited “an inability to produce at this facility at a rate that is competitive with the industry,” which has intensified already existing financial pressures. The company markets a variety of food and beverage products across categories and formats, but the change only affects its powdered creamers and hydration products, which will be shifted to an unnamed copacker, according to a press release.

“This strategic pivot to an outsourced manufacturing model will significantly improve our financial profile by reducing fixed overhead and simplifying our business, enabling us to focus on maximizing our commercial growth potential,” said Vieth in a statement.

The plant, located on 275 W. Lundgren Mill Drive in Sisters, will be permanently shuttered on December 31, 2022. Around 46 employees are expected to be impacted, starting in mid-December.

Speaking to local media in October, Vieth said the Sisters facility was down from 147 to 83 full-time employees since the start of the year, saying the company had “over-hired” relative to the size of the business. The company will have 38 workers after further reductions are completed, 10 of which will remain in Central Oregon, based on reports.

“We are grateful for the support of the Sisters, Oregon community and our dedicated employees who have helped to build the Laird Superfood brand,” Vieth said in the letter. “Discontinuing our manufacturing operations was an extremely difficult decision. We are deeply committed to supporting our employees during this transition and will provide all affected team members with severance and outplacement services.”

Launched in 2015 by big wave surfer Laird Hamilton and his wife, former U.S. volleyball star Gabrielle Reece, Laird Superfood built a foundation for its flagship “superfood” coffee creamers online before making the transition to retail. As the company grew, it expanded into other product categories including kombucha, powdered beverage mixes, refrigerated RTDs, as well as granola, oatmeal and bars, the latter via its $12 million acquisition of Picky Bars last year. Danone Manifesto Ventures backed the brand with a $10 million investment in 2020.

The company’s production facility in Sisters was seen as a major component of its growth; in 2020, then CEO Paul Hodge told BevNET of plans to add a 30,000 sq. ft. building to the manufacturing campus, and said Laird was interested in helping Sisters to “build a more robust middle-class demographic” by developing affordable housing.

However, Laird has struggled with profitability and financing. Since going public in September 2020 at $22.00 per share, the value has tumbled to around $1.72 as of press time. In the spring, the company mentioned it had reduced headcount during Q1 through “a combination of automation and process improvements.” In Q2, net sales decreased 6% to $8.7 million, compared to $9.2 million in the same period the prior year. The company had around $25 million on hand at the beginning of Q3.

The company reportedly received an unsolicited, roughly $27.5 million acquisition bid from EF Hutton SPV this summer.

“For a company of our size in the current market situation, there is no doubt that protecting cash is the paramount strategic initiative. As I shared on the first quarter call, we’re taking aggressive steps to moderate our own cash burn, including cost improvement initiatives and balance sheet management activities,” said Vieth, according to a transcript of the call.

Suja Acquires Cold-Pressed Juice Shot Brand Vive Organic

Cold-pressed juice maker Suja has acquired California-based Vive Organic, producers of a range of 2 oz. juice shots, for an undisclosed fee. The deal is Suja’s first acquisition since its sale to private equity firm Paine Schwartz Partners in July 2021.

Founded in 2015, Vive Organic emerged as a pioneering brand in the refrigerated premium juice shot category, offering a range of
immunity focused, physician-formulated blends sold at retailers like Whole Foods, CVS, Target and other major national chains. The company secured a $13 million series B funding round led by Monogram Capital in July 2020.

Having emerged a few years earlier in 2012, California-based Suja helped seed the retail market for premium cold-pressed juices, operating out of its own 200,000 sq. ft. production and toll processing facility in Miramar, California, and eventually expanded to a wide variety of juice-based drinks, including kombucha, enhanced water, sparkling juice and shots with functional ingredients. At one point, The Coca-Cola Company was a 33% stakeholder in the brand with an option to buy the company outright within a certain timeframe. After Coca-Cola allowed the deadline to expire, Suja was picked up by Paine Schwartz for an undisclosed fee.

Under a unified portfolio, both Suja and Vive Organic will see “improved operational capabilities, enhanced marketing and sales efforts, extended innovation reach, and benefits of scale,” according to a press release. Wyatt Taubman, Vive’s CEO and co-founder, is expected to continue and “partner with Suja’s leadership to maintain the brand’s successful momentum in the market.”

“Ten years ago, Suja set out with a vision to make organic fresh-pressed juices available to everyone. The addition of Vive Organic strengthens our offerings and accelerates our mission to build one of theforemost healthy beverage platforms in the world,” said Bob DeBorde, CEO of Suja. “We have a shared focus on prioritizing sustainable, ethical extraction and production processes, as well as a similar purpose of helping consumers take charge of their wellness journeys. We are excited about building on each company’s momentum and, together, we will innovate the next generation of wellness offerings.”

Taubman praised the Vive Organic team for working “tirelessly to inspire more people to start their own holistic wellness journey.”

“In just five years, our team has built the fastest-growing juice shot company in the country,” Taubman said. “Becoming part of Suja will not only accelerate our efforts and enable us to grow the combined business to even higher heights, but also further amplify our mission with a broader group of consumers.”

Kevin Schwartz, CEO of Paine Schwartz, called the deal “an important next step in (Suja’s) evolution.”

“We continue to believe in the significant value creation opportunities in the better-for-you space, and with this transaction, Suja is even better positioned to capture them. We look forward to supporting the Company in this next phase of growth as it expands its product offerings, widens its distribution, and brings Suja and Vive Organic to even more consumers,” he said.