Over the past two years, the powdered beverage category has seen an influx of attention from strategics and investors, with sizable funding rounds and high profile acquisitions of better-for-you brands shaking up a category that had long been stagnant. Now, with new innovation flooding the category and ecommerce providing a direct route to market, a number of new startups entering the space with broad functional platforms are betting that the trend for convenient powdered drinks is going to stick.
Although many RTD brands have made SKU rationalizations amid the pandemic crunch, and supply chain issues have left companies scrambling to shore up can and bottle inventory, powder is providing a more flexible and affordable means for new companies with wide needstate-focused, multi-daypart platforms to enter the market. Brands like Zolt, MANTRA Labs and Plants by People launched during the height of the pandemic last year as ecommerce plays and are now establishing themselves in a period where consumers are seeking out solutions to stress, immunity and sleep issues. Meanwhile slightly more established players like the aforementioned Beam and Blume have seen sales spike online and embraced new innovation.
This new wave rises amid a backdrop of M&A activity in the powdered hydration space (Liquid I.V. to Unilever last year, Nuun to Nestlé in May) as well as notable investments in early stage brands (Cure Hydration raised $2.6 million in November, Beam closed a $5 million series A in February and Hydrant announced $8.5 million in April).
According to IRI, in the 52-week period ending August 8, sales of some powdered drink categories have risen significantly, driven by insurgent companies; sports drink mixes were up 66.9% to $188.2 million, with Liquid I.V. up 513% to become the leading brand, surpassing Gatorade (down -1.2%). Although powdered energy drink mixes overall were down -3.3% in the period, driven by declines in leading brands like Crystal Light, Liquid I.V., a new entrant in the space, was up 1398% in the period and Nuun rose 5.8%. Jel Sert’s Pure Kick brand was also up 40.1% in the period.
“We think of powder as the new liquid,” said Doug Siegel, co-founder and CEO of hemp-infused brand Zolt. “If we have the ability to create the powder first, I can always create the liquid version second. It’s very hard to start with the liquid and then create the powder.”
Building the Platform
Based in New Jersey, Zolt makes a line of hemp-infused single-serve powder sticks with various functional SKUs built around immunity, focus, balance and sleep. Each 10-pack sells for $32 and can be purchased individually or in variety packs. The company also makes a line of hemp-free Collagen Boost products, made with vegan marine collagen, which are priced at $25 per 10-pack.
Founded by Siegel, the former VP and COO of alcohol distributor Allied Beverage Group, and Ani Collum, a retail and consumer strategist who serves as the company’s CMO, Zolt launched last year as a direct-to-consumer product and has positioned itself as a “plant-powered superdrink” with ingredients including reishi mushroom, ashwagandha and GABA. Several of the flavors contain caffeine to give the user a morning or midday boost, while others are intended for afternoon and evening relaxation.
According to Allied Market Research, the global functional beverage market was valued at $110.1 billion in 2020 and is expected to surpass $200 billion by 2030, with a CAGR of 5.9%. According to Siegel, he was inspired by his own health journey to start Zolt and saw the rise of adaptogens and mushroom-based drinks as an opportunity to launch a new brand.
Though far from the first brand to build around a full-day regimen, Collum said Zolt’s broad platform is appealing to consumers who are inundated with choice and a variety of products from different brands across the market. Although offering more than a dozen different SKUs may appear complicated, the functional platform play is intended to reduce consumer confusion and anxiety by housing everything under a single brand roof and guiding them throughout their day, she added. The challenge, then, is to convince consumers to rely on one brand for everything.
“It’s a lot easier for a consumer to kind of glom on to that idea of ‘There’s so much choice out there, and this is totally distilled for me in this way that can speak specifically to my needs,’” Collum said.
Broad functional platforms are far from a rarity in the RTD space, with brands like LifeAID, Koia and Neuro establishing themselves through portfolios of differentiated, niche products. But as the powder category expands many of these RTD brands, including Neuro and LifeAID, are also entering the powder space with new single-serve stick lines. LifeAID last year launched its “Go!” line, built around adaptations of its top selling RTD SKUs. Initially Go! featured ImmunityAid and FitAid varieties, but it has since expanded to include versions of the brand’s FocusAid and PartyAid drinks, as well as a new sleep drink, DreamAid, available only in the stick format.
Collum noted that the powder format is ideal for new brands thanks to its lower production and shipping costs and smaller carbon footprint. As well, Siegel suggested that brands can innovate quickly with powder and are better positioned to respond to shifts in the market.
Founded in 2017, Vancouver-based Blume has witnessed many of those shifts firsthand. Available in 30-serving 100-gram packs, which sell for $20-$25 each online, Blume sold primarily to the on-premise channel before pivoting to an ecommerce-focused strategy last year during COVID. According to co-founder and CEO Karen Danudjaja, Blume’s line of functional powders — which includes Turmeric, Matcha Coconut, Beetroot and Reishi Hot Cacao blends to name just a few — has evolved significantly since the brand’s initial launch.
Danudjaja noted that the company’s small size (currently 10 employees, most hired within the last year) and its focus on the powder format has allowed Blume to quickly pivot and innovate with the whiplash of fast-shifting consumer trends.
“Many of [our drinks] now are really focused at unwinding, relaxation and being caffeine-free versus previously it was more about anti-inflammatory benefits,” Danudjaja said. “The other thing that’s shifted is not just the function, but the actual ingredients that are more relevant today. Adaptogens are a really fast growing category, I really do believe that mushrooms are the future of wellness. So that’s something that we’re seeing incorporated not just into our brand, but into the entire space as consumers are turning to things that have been used in ayurvedic remedies for centuries.”
Prior to the pandemic, Danudjaja said about 80% of Blume’s business was in brick-and-mortar retail, including selling the packaged products on shelf and being served as menu items in cafes. Today, about 60% of the brand’s sales are online and the emphasis on ecommerce has given Blume the opportunity to grow its U.S. business and draw in more loyal, repeat customers.
At Zolt, Collum said ecommerce is a valuable tool for early stage brands and the shift towards online shopping during the pandemic has allowed the brand to establish itself more easily. However, for brands targeting high growth, ecomm alone is not a sustainable model.
“Where growth is going to come, obviously, is through retail partners; That’s where the critical mass is and that’s where the game starts to change in terms of the economics of what you’re doing,” Collum said, noting that partnerships with distributors and retailers are also beneficial to securing supply chain and creating relationships throughout the industry. “We’re going to have more leverage [in the industry] when we’re working with the people that have more leverage with the supply chain. So online will always play a big part, and it’s a way for us to connect with our consumers, but we need to meet them where they are and they’re not just online.”
Standing Out from the Crowd
With the influx of new brands offering consumers that one-stop shop for health and wellness, differentiation is a significant factor in attracting customers. And in a product category rife with claims of clean label, high quality ingredients, identity also plays an important role.
Launched last year, Oregon-based Plants by People has approached the category through the lens of Asian herbal medicine and has made the Taoist concept of Qi as a balanced lifeforce an important part of its platform. Founder Jing DiPiero, who grew up in Beijing, said she modeled the brand’s products after traditional Chinese remedies.
Available in 0.35 oz. sachets, Plants by People’s organic certified tonics include Bloom (Awakening with caffeine), Glow (balance and stimulation), Harmony (relaxation), Shine (cleanse) and Thrive (immunity) varieties, each featuring a variety of fruits, ginger, roots and spices. The suggested retail price is $9.95 per 5-pack. According to DiPiero, the lineup is modeled after the Five Elements theory of Chinese philosophy that suggests a connection between cosmic cycles and the human body. On the brand’s website, consumers can take a quiz to determine which tonic best suits their individual needs.
“The Five Elements theory is embedded in my way of looking at things,” DiPiero said. “I feel that you have to create a balance, your body has to be ready to absorb all these nutrients in order for it to work. So we want to make sure that Qi, the vital energy, is flowing so after using our drink your Qi is moving and then you can really benefit from the nutrients that are the power of the plants.”
For MANTRA Labs, which closed a $1.5 million seed round in April, co-founder and CEO Paul Janowitz said the brand is built around a clinically-backed “Chrono-Nutrition System” intended to match consumers’ biorhythms and meet their needs morning, noon and night. He noted that while MANTRA was in development, there were few if any powdered brands with similar daypart strategies, but that the company has now debuted into a crowded set. To stay ahead, he said the best approach is to generate trust through efficacy and provide scientifically backed research to verify its claims.
With its existing line of Rise (focus, endurance and hydration), Go (energy, recovery and hydration) and Rest (calm and sleep) powders, the company has now introduced a fourth product: Hydrate.
“Our goal as a brand is to be looked towards as a thoughtful, considered, curated and trusted list of ingredients put together in novel ways that work better together,” Janowitz said. “So we ask ‘Where is there science around the ingredients that meet these functional needs?’ And we’ve got to have real human clinical trials, not a sample size of two petri dishes.”