No one said “thaw,” but someone said “parity,” and several people pointed to a flurry of recent acquisition activity at the strategic level as a signal that there might finally be an upturn in growth capital for beverage brands on the horizon.
Brand-focused investors and deal advisors at the recently completed Beverage Forum conference in California this week offered a series of details that indicate that the outlook is indeed sunnier on the investment front. If true, it’s a sea change for an industry that saw announced deals drop quarter after quarter over the past three years, with few exceptions.
The recent sales of energy drink companies Ghost (to KDP) and Alani Nu (to Celsius) as well as the blockbuster exit of soda company Poppi to PepsiCo “has brought a lot of capital into the marketplace,” said Ryan Lewendon, co-founder of CPG specialist law firm Giannuzzi Lewendon, speaking on a dealmakers’ panel at the event.
He added that the firm had closed more deals in the $10 million to $50 million range in the first quarter of 2025 “than in all of 2023.”
Ahead of the event, signs of change at the growth level had already emerged – largely for energy drinks and other functional categories. Companies like Lucky Energy and Gorgie recently landed growth capital; on Tuesday, sports nutrition brand Don’t Quit also announced a $15 million raise as part of its launch of a protein soda. CSD companies Culture Pop ($15 million) and Nixie ($27 million), both led by savvy, dollar-conscious veterans, and emerging tea brand RYL ($15 million) have also confirmed substantial raises this spring. And don’t forget Olipop, which raised $50 million in February.
Other investors and investment bankers seemed bullish as well; if not immediately ramping up auctions, one noted, they were building a lineup of potential deals to shop to strategic acquirers or private equity heavily in the third and fourth quarters of the year.
For several years deal activity has been constricted. While there have been a variety of reasons cited, the overriding issue seemed to be a drop in investors’ willingness to absorb the risk within a beverage category that had long bet on volume growth over margin and profitability.
The companies have changed their approach with regard to growth-at-all costs, noted prominent PE investor Wayne Wu, general partner at VMG, an investor in Ghost, Humm, nutpods and Spindrift among other consumer brands. Wu noted that in the last few months he had seen “more high-quality, well-built companies” than he had in a long time – a reflection of the discipline investors sought after a period in the previous decade, where a surge in investment interest from other funds in less-than-profitable companies focused primarily on sales growth had driven valuations higher over riskier propositions.
During the recent COVID-19 pandemic, he noted, the move to fiscal discipline as part of a company’s DNA changed, but brands hadn’t fully adjusted initially.
It had taken brands about three or four years to fully adjust to the new goalposts, he said, comparing the change from the frothier environment to stages of mourning. Now, brands were through denial and acceptance, on to change and evolution, Wu said.
As part of that evolution stage, “we’re seeing higher quality companies than we’ve seen in a long time. I’m optimistic about the pipeline of strong investment opportunities for VMG and other investors.”
Lewendon noted that investment terms have evolved to reflect confidence in founders’ understanding of their backers’ risk tolerance.
In 2017 and 2018, investors were more likely to negotiate “founder vesting” agreements – designed to keep founders involved through the periodic issuance of shares in the company as it matures. With the risk profile down, “we’re seeing much less,” Lewendon said.
With more fundamentally sound companies available, he said, “there’s a lot more parity in the market. Minority investors get the minority of the board.”
While companies may have gotten the message to build on fundamentals, what’s not clear is whether the investors will feel comfortable continuing the pace of investment. At the same time that brands faced the slowdown on the VC end, many investors faced their own problems raising institutional capital for their funds, with larger capital pools moving away from backing alternative investments like VC.
With inflation still a presence, interest rates still high and tariff-related uncertainty a daily drumbeat – not to mention more stock market fluctuations affecting those same institutions’ investment strategies – it’s not clear whether the consumer fund side is going to find an easier time raising in the near term.