Hydrant, the maker of a line of powdered hydration drink mixes, has raised $5.7 million in a Series A funding round led by Coefficient Capital, the company announced today, bringing its total funding to $8.8 million.
In addition to Coefficient Capital, the round also included Rx3 Ventures and prior investors Soma Capital and Sixers Innovation Lab, an incubator program run by the NBA’s Philadelphia 76ers. Also participating were several angel investors including Torch Capital managing partner Jonathan Keidan, Sir Kensington’s CEO Scott Norton, LIVELY CEO Michelle Cordeiro Grant, Michael Kline of Fandango and Good Culture co-founders Jesse Merrill and Anders Eisner.
Founded in 2017, Hydrant produces single-serve powdered hydration drink mixes, which includes a standard line featuring Lime, Grapefruit and Blood Orange flavors and a+Caffeine line with Lemon, Orange and Raspberry Lemonade varieties which contain 100mg of caffeine and 200mg of L-theanine per serving. Each variety is flavored with real fruit juice and contains no artificial sweeteners.
The fundraise comes as powdered hydration and sports drink mixes continue to grow, up 13.5% for the 52-week period ending March 22 according to market research firm IRI. Though the $100 million category is still dominated by PepsiCo-owned brands such as Gatorade and Propel (which have a respective 45% and 32% market share, per IRI), independent brands such as Liquid I.V., SOS, and Skratch Labs reported triple digit annual growth over the past year.
According to co-founder Jai Jung Kim, the investment will go towards supporting four key areas: growing the team, product development, supporting retail expansion and building out its analytics infrastructure.
Hydrant is currently available primarily through the ecommerce channel, including Amazon and direct-to-consumer, but has recently made inroads into brick-and-mortar retail with placement in the Northeast region of Whole Foods. Kim said the company will be adding several other “major retailers” over the next several months ahead of a more aggressive expansion in Q3 and Q4. He noted that the brand is taking an omnichannel approach to the retail landscape and will target accounts in natural and conventional grocery, specialty, drug and mass. However, Hydrant will also be selective about which retailers it works with in each channel.
“We want to maximize our awareness and increase trial,” Kim said. “Then secondly we will leverage that experience [in retail] to learn and double down on our Amazon growth efforts as well.”
He noted that Coefficient Capital will help Hydrant to develop its retail strategy, while Rx3 specializes in celebrity and athlete partnerships that the brand will be able to utilize for influencer marketing campaigns.
Kim said Hydrant currently has 11 full time employees and is finalizing the hires of a graphic designer and a supply chain lead. The company is aiming to hire an additional three to six people by the end of the year. Most of those new hires will be focused on the company’s brick-and-mortar strategy, including a retail account manager, a marketing lead, and a retention specialist. However, Kim said some of the roles may not be immediately filled, depending on how the COVID-19 pandemic impacts the brand’s rollout into stores.
Other new positions will focus on data analytics, including an addition to the brand’s accounting team. The company will also invest in new consumer tracking software.
According to Kim, Hydrant’s marketing strategy has focused on consumer education and pushing its subscription model to encourage a daily ritual use occasion. The brand has focused on social media and email marketing strategies to drive repeat purchases.
“We are obsessive with our cohort analysis,” Kim said. “Because our business was originally built off of our direct-to-consumer website, we want to know everything about our consumer…. We want to know everything about you, so we can devise our customer experience in the best way we can, so you’re not going anywhere and trying our competitor’s products.”
The company will also use the financing to explore new product innovation, though Kim did not specify what the products would be or when they would launch. Last month, the brand teased a possible ready-to-drink product with mockup images on its Instagram account, however Kim said the line was just an idea and the company was aiming to gauge potential enthusiasm.
“We like to tell people that we’re sort of like the Spindrift of the powder world,” he said. “We research and only focus on ingredients that have a purpose. Every single ingredient that is currently on our nutrition panel, and will be in our new SKUs, is for a purpose. We’re not adding trendy ingredients just to capture a market audience.”