More Labs, the parent company of hangover shot brand Morning Recovery, announced this week it has raised $10 million in a Series B funding round.
The round was led by Btomorrow Ventures, an investment arm of British American Tobacco (BAT), owner of cigarette brands like Camel, American Spirit and Newport. More Labs CEO Josh Groff told BevNET that the funding comes as BAT works to expand its product portfolio beyond nicotine. Through Btomorrow, the London-based company has invested in better-for-you and functional food and beverage brands, including adaptogenic drink maker Moment, baobab beverage Unrooted and energizing chocolate Awake.
“One of the things that made a ton of sense to us [about working with BAT] is that the c-store channel continues to be a really strong channel for us and a place that we want to continue to grow in the future,” Groff said. “And, no surprise, nicotine and tobacco in c-stores is a huge, huge category.”
Founded in 2016 by former Tesla manager Sisun Lee, More Labs (originally called 82 Labs) initially focused on the hangover recovery drink space with its flagship brand Morning Recovery, a 3.4 oz. shot recommended to be consumed before drinking alcohol. Since then, the company has expanded its portfolio into other functional shots, including sleep product Dream Well and nootropic energy shot Liquid Focus. The company also makes single-serve, functional powdered drink brand Aqua+, which is available in Immunity and Probiotics varieties.
According to Groff, Morning Recovery is now available in more than 25,000 stores in the U.S. and Canada, including 7-Eleven, Circle K, Casey’s, Whole Foods, Health Canada and Sobeys. The company has 18 full time employees and intends to expand the team in the coming months, with a focus on increasing sales and marketing efforts.
The new financing comes 10 months after Groff was named CEO in December, taking over the role from Lee. Groff initially joined More Labs as head of retail in 2019, having held past roles as VP of sales at Brew Dr. Kombucha and VP of marketing with Stumptown Coffee Roasters.
According to Lee, though he remains on the company’s board of directors, he chose to remove himself from day-to-day responsibilities in order to allow a leader with more CPG experience to take over.
The shift came amid a turbulent time for More Labs, as the company repeatedly came back from several “near death experiences,” Groff said. During the early days of the pandemic, the brand saw a 95% drop in revenue and had to take out loans to sustain itself during the spring of 2020. Calling it “pure survival mode,” Lee said the company fought to retain all of its employees and focused on ways to optimize its sales strategy.
Also slowing fundraising were twin challenges from the Federal Trade Commission and the National Advertising Division of the Better Business Bureau, both of which forced the brand to substantiate its functional claims; both agencies were ultimately satisfied with the brand’s data and arguments, Lee said.
“The frustrating part at the time was that we really believed that we were the most compliant [brand] with the most research,” Lee said. “So it was just one of those times where we were being super conservative with some of the messaging.”
As for sales, Groff said Morning Recovery began to see sales rebound in June 2020 and has since regained momentum and achieved profitability. However, the crisis forced the company to focus squarely on its leading brand at the expense of Liquid Focus, Deam Well and Aqua+. Moving ahead, More Labs plans to put a portion of the Series B financing towards scaling the rest of its portfolio, beginning by expanding its shelf space in existing accounts like Circle K, H-E-B and Raley’s.
“The focus is to expand our daypart usage for our consumers as well as upping the frequency,” Groff said. “Morning Recovery, you might use it between one and three times a week. But Liquid Focus, with some of the work we’ve done, they’re using it four to five to six times a week; and Dream Well, you know, everybody needs to get a good night’s sleep any day.”
More Labs will also continue to work on innovation, with potential extensions for Morning Recovery into new form factors “whether it be gels or gummies or things like that,” Groff said, as well as Morning Recovery branded products with additional functionality.
“Step one is moving tangentially within the category,” he said. “And then, in terms of things that are outside of the category, we’ve got a pretty deep pipeline that we’re researching — everything from collagen to mixers.”