When Ugly Drinks introduced a line of monthly limited-edition “soda-inspired” flavors to its range of sparkling waters, it helped the company grow its D2C business by 500% year-over-year. Now, the New York-based brand is looking to keep that momentum going offline.
Ugly announced today that the four most-popular flavors from the past year of special releases — Cherry Cola, Dr. Ugly, Orange Soda and Fruit Punch — will be the tip of the spear for a deeper push into brick-and-mortar retail, highlighted by its launch in over 6,400 CVS stores this May. Beyond simply adding more locations, the launch may spell a new direction for the brand as — bolstered by new hires and a high-profile seed investor — it leans into the combination of nostalgic taste profiles and zero-calorie/zero-sweetener callouts.
“Very much this is a company leaning into a new direction,” said co-founder and CEO Hugh Thomas. “We are adding a new dimension to the category and we’ve really found something that’s working well for us. As it progresses, we’ll see if we move the whole thing that direction but we are excited by it for sure.”
Bringing the new flavors into retail is the realization of Ugly’s “digitally incubated model,” according to Thomas. The brand’s roots in D2C has allowed it to develop a close relationship with its hardcore consumers, whose feedback and ideas formed the basis of the 2020 limited edition releases; the results revealed a younger audience eager for the familiar soda flavors — cola, grape soda, and root beer, to name a few — that many had given up because of sugar. Ugly’s fans responded by clearing out stock within a matter of hours after each launch, and the company’s efforts notched them a BevNET Best of 2020 Award for Best New Product.
That response in turn attracted the interest of retailers and strategic partners, and with a supply chain in place that allows Ugly to meet demand, Thomas said the company is able to bring the brand’s unique flavors and positioning to stores looking to shake up sparkling sets in need of innovation. The four soda-inspired flavors are launching in 8-packs of 12 oz. cans ($4.99) and in single-serve 16 oz. cans ($1.29) later this summer at CVS, as well as Fresh Thyme, Earth Fare, Hy-Vee, Harmon’s, Mom’s Organic and other retailers. The brand is partnering with Rainforest Distribution for DSD support in New York, and is currently in talks to secure local distribution in Los Angeles by next month.
While Ugly’s Gen-Z appeal and playful branding have been part of its identity from the start, Thomas noted that the soft drink-style formulations give the company room to expand that unique story through taste. While brands like La Croix, Jelly Belly and Phocus have introduced soda-inspired flavors of their own in the past, the range Ugly has already established (with more to come) provides a considerable base from which to build. That focus may mean that Ugly’s core lineup of fruit-flavored SKUs are at risk, though not necessarily in the short term.
“Our brand has always been well positioned to be fun and creative and to push the boundaries of where this category can go,” he said. “We feel our brand is uniquely able to lean into some of these more creative, disruptive flavors than maybe some of the other brands in the space that have done a great job of delivering classic fruit flavors. That’s where we see the big opportunity for the category to expand.”
That approach is already permeating into Ugly’s family of Energy Waters in 16 oz. cans. Three new flavors — Mountain Ugly, Mango Soda and Fruit Punch — are set to launch in stores and online in April for a suggested retail price of $2.49 per can, giving the brand a cold-box complement to its case packs on the shelf.
Ugly’s retail ambitions will be supported by two new key hires: Jason Villano as U.S. VP of sales and Brett Lanford as U.S. president. Villano is a 14-year Coca-Cola veteran with a deep background in sparkling beverages and DSD operations, while Lanford, who also previously worked with Villano at Coke, joins after a three-year stint as general manager at Pukka Herbs. With just 10 full-time employees spread between New York and the brand’s home base of London, Thomas said the brand has been careful in allocating resources as it scales.
Yet the brand does have a previously undisclosed backer with considerable resources to spare: ZX Ventures, the growth and innovation arm of global beverage conglomerate Anheuser-Busch InBEV. The group, which has previously backed non-alcoholic drink startups such as Take Two Foods and Wave Soda, participated in Ugly’s $3.9 million seed round in 2019. Thomas said that the group has thus far helped with distribution, product development and operations, with the potential for deeper investment to come.
“We’re really excited about the shared vision of democratizing sparkling water, and what I mean by that is taking sparkling water to places across the world where people aren’t drinking it currently,” he said. “We have the shared vision of making it affordable, accessible, tasty and fun. We’re really excited about learning the skill set that they have and continuing that partnership.”
“Ugly has shown tremendous innovation and agility over the past year,” said Tom Allison, General Partner, ZX Ventures. “They’re building a Company for the future and we’re proud to be their partner during this exciting time for the brand.”
What that future holds is yet to be seen; Thomas emphasized that Ugly has been built as a platform brand to serve multiple consumer needs, and didn’t shut down the notion of moving into on-trend sparkling segments like hard seltzer down the road. Having proven that its online business can fuel its offline ambitions, the company is keeping its innovation pipeline rolling with another 12 months of limited edition flavor releases this year.
“I think what we’ve built is an incubator in terms of our direct to consumer model, so that we can test and learn,” he said. “Ugly is able to play in multiple categories, so hopefully over time we’ll be able to test some of these exciting concepts.”