CBD-infused beverage maker Cloud Water had been preparing to make a broad retail expansion this year, aided by a new partnership with New York DSD distributor Big Geyser. But as the COVID-19 pandemic has slowed expansion in traditional retail channels, the company is adjusting its strategy in the hope that it can still hit triple-digit growth goals.
Earlier this year, the New York-based brand signed with Big Geyser and began rolling out to stores last month — allowing the two-year-old startup to pivot away from the self-distribution model it had relied on throughout last year. Cloud Water joins Daytrip, Recess, Sweet Reason and VYBES among hemp-infused beverages in the distributor’s portfolio. In Southern California, the brand has also made inroads with building a DSD network, adding HiTouch Distribution and High Premium Distribution and entering natural channel retailer Erewhon, Siden said. Meanwhile, in Florida, Cloud Water has entered the Cisco distribution system.
Despite the launch into sizable DSD houses over the past few weeks, Siden said the impact of COVID-19 has led to a “slow ramp up,” particularly in New York which is currently considered the epicenter of the pandemic in the U.S.
Cloud Water is currently available in about 200 stores nationwide, and though he still anticipates the brand to grow its brick-and-mortar footprint through its DSD partnerships, Siden said it has been difficult to secure new accounts as many retailers have discouraged salespeople from entering stores to pitch new products as they seek to minimize foot traffic. As well, some of Cloud Water’s independent accounts have closed during the crisis.
“We’re just kind of waiting [COVID] out,” Siden said. “We have gotten reorders from a bunch of our retailers, so they are moving product, but just not in a cadence that we aspire to.”
Despite the challenges in retail, Siden said Cloud Water is on track to report a 300% increase in online sales during April. He said the growth of the brand’s ecommerce business will, ideally, place the brand in an even stronger position than originally anticipated once the retail environment stabilizes and full expansion plans are resumed. To drive ecommerce sales, Cloud Water has reduced its prices and offered consumers free shipping while shifting its marketing budget towards targeted digital and social media ads.
Beyond retail concerns, the crisis stalled an open financing round for the company, though Siden noted it is a rolling round and Cloud Water was able to secure over half of its goal and enough working capital to sustain the business for most of the year. The coronavirus has also forced Cloud Water to halt hiring, he said, however the company (which has seven full time employees) will not need to lay off its current staff. Siden also noted that the brand has been aided by its advisors, including former Vitaminwater COO Carol Dollard, in helping craft its strategy for navigating the crisis.
“We went through our P&L and we found that without doing trade shows, retail activations and demos, we were able to pull a bunch of expenses off the balance sheet, focus on cash preservation and also reinvest in areas where we think we’re going to be fruitful,” he said.
Like many other food and beverage brands right now, Cloud Water is also looking to give back to the community. Despite the small size of the company, the brand has donated both product and cash to the New York City Food Bank.
“What I learned [working in real estate] during the 2008 crisis is that how we handle this — from our staff to paying our bills to how we act in the marketplace — is going to define this brand for many years to come,” he said. “So it’s not just about making it through quarantine and getting back to some normalcy, because there’s still going to be nuances. We have to remember that we’re kind of redefining the brand in some way.”