Runa Steers Towards Natural Energy, Away from Tea

Nothing drives impact like dollars. It’s a simple idea, but, for Runa, it represents the seed of an entirely new business-focused outlook.

The Brooklyn-based company, founded in 2009 by college roommates Tyler Gage and Dan MacCombie, produces ready-to-drink iced teas and energy drinks made with guayusa, a plant traditionally used as a natural source of caffeine by indigenous groups in South America. Through its vertically aligned supply chain— in which it sources organic crops from Fair Trade Certified partner farms in Ecuador— Runa has made ethical business practices and sustainable farming a key part of its identity.

But in the first months after joining as CEO last April, Alex Galindez was charged with a different task. After spearheading a brand revamp and push into new beverage categories, including energy drinks, at Hain Celestial-owned brand BluePrint, she was drafted to help Runa balance the goal of driving positive social impact with the practical needs of a growing consumer packaged goods company. With both sides of the business so closely linked, the answer was simple: to better serve the social mission, Runa needed to focus on selling more product— specifically its growing line of 12 oz. canned “clean” energy drinks.

“One of the things we realized early on was in order for us to drive the impact, we have to have significant demand for our core ingredient, which is guayusa,” said Galindez, . “The more beverages that we sell, ultimately the more demand there is for guayusa and the more lives we are impacting in Ecuador.”

As Galindez reorganized the brand’s business priorities to further enhance its social impact, Runa’s three-SKU line of naturally caffeinated energy drinks was quickly identified as the primary source of growth. Despite limited distribution, the line has shown significant year-over-year sales growth in Multi-Outlet Channel, increasing nearly 60 percent last year. While still lagging behind rivals like HiBall and Rockstar Organic in total dollar sales, the brand has enjoyed the second highest sales per point of distribution of any natural energy drink.

“We are focusing on things that have worked, on the things that are already showing great growth potential and focus on that, rather than try to be all things to all people,” said Galindez.

To support the pivot towards natural energy, Runa recently launched five new flavors– two unsweetened (Mint Strawberry, Watermelon) and three lightly sweetened with 16g of sugar (Mango, Pineapple, Pomegranate)– last week through its direct store distribution (DSD) partner, Dora’s Naturals, in New York City. Galindez said the latter group is aimed at traditional energy drink consumers who are actively looking for an alternative, while the former will seek to appeal to audiences who have previously rejected the category altogether. She added that having a single caffeine source in brewed guayusa and having higher caffeine content per ounce (12.5 mg) than HiBall, Red Bull and Monster are significant differentiators for the brand.

The plan is to introduce the new SKUs to Runa’s existing retail partners and build off the line’s strong same-store sales — thereby avoiding slotting fees. After maximizing velocities in areas where the brand already has distribution, the company will look to enter new retailers later this year.

In making the shift to energy, Galindez is helping to usher Runa write a new chapter in its history. Under Gage and MacCombie’s leadership, the brand raised significant investment and interest by emphasizing the benefits of its unique ingredient. The co-founders also oversaw several brand revamps, introducing the then-8.4 oz. canned energy line in 2013, followed by redesigned packaging for both energy and tea lines under the callout of “focused energy” in 2014. MacCombie departed the company in 2015, while Gage moved to the role of chairman when Galindez joined and has since published a book, Fully Alive: Using the Lessons of the Amazon to Live Your Mission in Business and Life, about his experience building Runa.

Since April, the company has undergone an organizational overhaul that brought in hires with extensive CPG experience; John Schiaroli, VP of global operations, came from PepsiCo, while director of digital marketing Lisa Kim previously worked in interactive marketing at The Coca-Cola Company. Alex Simmons, former global category manager for Whole Foods, also joined Runa as national account sales manager in August.

Now the brand is ready to shift its consumer messaging to reflect its internal changes.

“Two or three years ago, it would have probably said something like we are a social impact organization whose mission is to bring guayusa to the world,” said Galindez. Moving forward, she explained, the social impact messaging will be less apparent, with the idea that consumers who “are going to go deep into our brand” will go online and discover more on their own, rather than at the point of sale. “The lead story is Runa, the second story is guayusa and the third is, as a function of our business, we drive tremendous impact.”

As the company looks to boost its sales and marketing initiatives, it is also preparing to incorporate some of its famous financial backers into its consumer messaging. Academy Award winner Leonardo DiCaprio joined Runa as a minority investor in May 2016, joining a team of celebrity supporters that includes actors Channing Tatum, Marlon Wayans and Olivia Wilde, as well as music producers Mike Dean and Dr. Luke. Those names have mostly served as unofficial spokespeople for the brand up to this point, but Runa director of digital marketing Lisa Kim said Runa would be revealing a more formal marketing role for a yet-unnamed celebrity backer this Spring.

“What was really necessary for us to figure out was what is the company going to stand for and what is the product line we are going to push,” she said. “As soon as we narrowed down as to what that was going to be, we were like ‘ok, this is the one that makes sense.’”

While Galindez said the brand is assuming double-digit growth from its energy line, the future is less clear for Runa’s six-SKU line of brewed guayusa teas, which have long been at the heart of the brand’s beverage strategy. She explained that the highly competitive iced tea category– which grew around 4.6 percent last year, according to data from Euromonitor International– in addition to the cost of filling in glass, dampened the prospects for making the large investment in sales and marketing that would be required to make it successful. Faced with the choice of focusing on energy or “spending time and resources and money to figure out what it is consumers are looking for in a RTD tea,” she opted for the former. The teas will remain on-shelf and maintain the same promotional levels from last year while Runa conducts an internal review of the line.

“We believe we need to go through a soul-searching journey with RTD teas,” Galindez said, adding that Runa is selling off its remaining inventory of loose leaf guayusa tea as that product line is phased out. “We have a very nimble head of marketing who knows how to optimize insights, so we are going to to be doing a little bit of research to figure out what it is consumers are looking for in an RTD tea. We may look to potentially reinvent it at some point, but right now it’s too soon to tell.”

Runa isn’t alone in recognizing an opportunity in the natural energy drink category, which has outpaced traditional energy over the past year with double-digit growth in most retail channels. Major conglomerates like PepsiCo and Anheuser-Busch InBev, with last summer’s acquisition of HiBall, market products in the space, while an early pioneer in the natural energy category, yerba mate brand Guayaki, recently took outside investment for the first time earlier this month.

Yet Galindez is confident that, in Runa, consumers will recognize a brand that has been deeply invested in natural energy for the long-term.

“We are seeing some of the traditional [energy drinks] go into organic and better-for-you, and I think some of those brands are going to have some trouble because they have been something else,” Galindez said. “For us it’s exciting because they are going to pave the way for that natural energy drink category and we’ll be happy to take their space when they fail.”