Waterloo Sparkling Water announced today it has been acquired by a group of investment firms led by Flexis Capital and including Eurazeo Brands, Moore Strategic Ventures, JW Levin Management Partners and Waterloo Capital. Terms of the transaction were not disclosed.
The acquisition comes three years after the Texas-based sparkling water brand launched in retail in 2017, following a $3.2 million funding round led by CAVU Venture Partners. The deal marks the second exit this year for CAVU, which saw collagen-products maker Vital Proteins sell a majority stake to Nestlé Health Science in June.
The investment group includes several different partnership organizations, including Eurazeo Brands, which last year led a $40 million funding round for Q Mixers, and newly-formed Flexis Beverage Holdings, Flexis told BevNET in an email. All of the investor partners are part of a governance structure representing the controlling shareholders in Waterloo. Waterloo marks the first step into the beverage space for Flexis — which also has investments in Total Outdoor, Cybraics and electrical engineering company Hylan Group — but it is “not actively pursuing” any other investment or acquisitions in the beverage space at this time.
“Jason Shiver and [COO] Jeff Arnold have a history of success developing category-leading brands, and are deploying a similar playbook at Waterloo as they executed to help grow SkinnyPop and Amplify Snack Brands and achieve a sale to Hershey for $1.6 billion,” said Flexis managing partner Louis Friedman in a press release. “We’re incredibly excited to partner with them as the company embarks on its next stage of growth, tapping into new channels and reaching a broader audience across the U.S.”
JW Levin founding partner Stephen Sadove will join Waterloo’s board as non-executive chairman and Jerry Levin, also a founding partner at the firm, will join as a director.
According to Waterloo CEO Jason Shiver, the Flexis-led group came to acquire the brand after negotiations with CAVU earlier this year determined it was more advantageous for the brand to be sold outright than for Flexis to take a minority stake. Although talks stalled in March as the COVID-19 pandemic began, the brand continued to perform well in retail through the spring before negotiations could restart.
“That panic buying became an unintended sampling event for us,” Shiver said. “And once people have sampled our product, they traditionally have stayed with the brand — we have a pretty high conversion rate. So all of a sudden, we were seeing velocities that were rivaling midsummer velocities from last year at the same stores. And that was in April.”
Shiver said the new ownership will allow Waterloo to continue its nationwide expansion as it aims to overtake top competitors in the sparkling water category. Market research firm IRI reported that Waterloo 244.9% to $33.7 million in retail dollar sales for the 52-week period ending June 14, making it one of the fastest growing brands in the space.
However, Shiver said the company only has about 35% ACV, with about 13,000 doors nationwide. Although the brand is still chasing competitors such as LaCroix, PepsiCo’s Bubly and The Coca-Cola Company’s AHA in terms of overall sales, he added that Waterloo is rivaling and sometimes surpassing those brands in chains such as Whole Foods and Costco.
“When you give us the fair share and fair attention and allow us to operate on the same conditions as our competition, we’re able to rival or beat those big players,” he said. “Really, it breaks down to nothing more than distribution and awareness.”
Moving forward, Waterloo intends to increase its marketing budget, with Shiver noting that as board members Sadove and Levin will help guide the brand’s strategy. Since 2017, Shiver estimated that the company has spent less than $7 million on marketing, instead utilizing organic engagement — such as unsolicited Instagram posts from celebrities like Justin Bieber and Alec Baldwin — to drive brand awareness.
The company had also focused heavily on experiential marketing and sampling events, including partnerships with festivals such as Austin City Limits and Bonnaroo. With the pandemic shuttering those events, Waterloo will instead focus on social, digital and in-store campaigns
Waterloo is also working to expand its presence in ecommerce, including direct-to-consumer sales, said VP of marketing Adam Kost, with online sales up over 100% year-over-year.
“We’re seeing a lot of traction [online],” Kost said. “So a really big marketing effort for us in the future is to not just have a physical shelf strategy, but really an omnichannel strategy, as shopping behavior is going to continue to evolve.”
Earlier this year, the company also announced new flavors including Lemon-Lime and Peach. Shiver said Waterloo does not currently plan to extend innovation beyond the flavored sparkling water space and could potentially drop certain SKUs or feature certain flavors on a rotating basis as it analyzes its best selling products. Shiver said the brand does not want to spread itself thin by broadening the portfolio into functional products or other categories and will remain focused on the core as it chases new distribution opportunities.
“The beautiful thing about this whole thing is that all the hard working folks of Waterloo that have gotten us to this point, we’ll still be around,” Shiver said. “We’ll add some more expertise and some more structure around the business and we’re going to be fully focused on distribution and awareness in the coming months. But this is a brand that’s here to stay and is proving that you don’t have to be a multinational, multi-billion dollar company in order to be relevant.”