Continuing its expansion into the global marketplace, Colorado-based New Age Beverages Corp. entered this week into a definitive agreement to acquire Utah-based multi-level marketing company ARIIX and four other international brands, bringing the company’s pro forma revenues to over $500 million with a footprint in 75 countries.
In addition to ARIIX, the combined company will also include supplements maker Zennoa, DNA mapping and wellness company MaVie, Indonesian skincare company Shannen and seaweed-based products maker LIMU. The deal comes less than two years after New Age acquired Tahitian noni juice maker Morinda for $85 million and just 13 months after it purchased Brands Within Reach, an agreement that gave the company licensing and distribution rights to global beverage brands such as Evian, NESTEA and Volvic.
Founded in 2011, ARIIX sells CPG products under several brand names — including Nutrifii, Slenderiiz, and Puritii — through an MLM direct selling model.
According to an SEC filing, NewAge will pay $25 million and issue 18 million shares of common stock for ARIIX. NewAge will also issue a convertible note for $10 million that will mature six months from the closing date and a convertible note for $141.25 million that will mature 24 months after closing. ARIIX CEO Fred Cooper will join NewAge’s board of directors. The deal is expected to close in Q3 this year.
The merger comes as the publicly traded company seeks to diversify its omnichannel strategy, placing an increased emphasis on direct selling business models through its subsidiaries. Prior to ARIIX, NewAge integrated a direct selling model with its acquisition of Morinda, since rebranded as Noni by NewAge. However, the company’s core beverage portfolio, including brands such as Bucha and Xing Tea, will continue to operate with traditional retail distribution and ecommerce strategies.
Speaking with BevNET, NewAge president for North America Olivier Sonnois said about 70% of the company’s revenue will still come from beverage, as the acquired brands provide NewAge with a portfolio of CPG products in beverage categories as well as beauty and supplements. The merger will also put deeper emphasis on international markets, with Japan and China representing roughly 50% of the total revenue stream. The Americas and Europe will comprise 20% each while the remaining 10% of the business will come from Southeast Asia.
“With the world evolving in a direction towards healthier products, healthier beverages, and also the COVID situation — which has accelerated the shift away from traditional retail — that meant there was a real opportunity for broadening the direct-to-consumer base of our omni-channel strategy,” Sonnois said.
NewAge also continues to assess its core beverage portfolio of “legacy brands.” Looking forward, the company plans to focus on Xing Tea, Bucha, NESTEA, Evian and Volvic, but others such as Coco Libre and Aspen Pure have been temporarily discontinued as the company explores potential divestment. Another brand, Marley, has also been placed on hiatus while NewAge looks to retool the products.
Speaking on a conference call this week, NewAge CEO Brent Willis said the company has had “multiple expressions of interest” in several of its brands and will offer an update on their status during the company’s next earnings report. He noted that while NewAge assesses some of its core brand portfolio, the company has continued to grow its DSD business.
“The bottom line is, regardless of what you do with those brands, the negative EBITDA drag goes away, the [operating expense] goes away,” Willis said on the call. “We’ve already made some substantial changes and improvements at the gross margin level, we’ve gained some incremental distribution. So we’ve made some good progress on those brands, but many of them are just too small for us and are just less strategic.”
According to Sonnois, no decisions have been made on the discontinued brands and NewAge is not looking to rush any of its trademarks to an exit.
While the traditional retail channel now makes up less than 20% of NewAge’s business, Sonnois said the company is now focused on expanding its ecommerce platform. He noted that NewAge has combined its digital and social media marketing team to cover all its products, from the core beverage portfolio to Noni.
Looking ahead, NewAge is also continuing to roll out new innovations on the core beverage brands. The company plans to launch powdered NESTEA products into retail later this year.
“We’ve done a really thorough job over the last 10 months about reviving the existing portfolio to focus on the SKUs that matter most and the brands that matter most,” he said. “I’ve been quite influential myself in making the decisions and choices about which ones should be focused on. Which ones should we potentially deemphasize? Which brands have the ability to carry the most profitability for the company moving forward? So it’s been a lot of reengineering work.”