Cloud Water Brands, the New York-based beverage company behind a line of CBD-infused and immunity drinks, has raised $5 million as part of its Series A funding to support nationwide distribution expansion.
The round was led by Don Lockton, of insurance agency The Lockton Companies, and marks the brand’s largest raise to date. Cloud Water CEO and co-founder Marc Siden said the three-year-old company previously sought investment in “drips and drabs,” including a $2.7 million seed round last year that brought celebrity investors like actors Liev Schrieber and Malik Yoba, New York Rangers star Adam Fox and former Glaceau board member Bruce Nierenberg to the cap table.
According to Siden, Lockton is the sole investor in this round, which will be the first part of an ongoing Series A. The company is preparing to explore additional equity funding later this year with a goal of raising an additional $5 million.
The funding arrives as Cloud Water has quickly scaled its national distribution reach via its non-infused +Immunity line. Throughout 2022, the brand has added accounts like Walmart, 7-Eleven, CVS, Mother’s Market and Sprouts, as well as delivery platform GoPuff, bringing its footprint to about 4,000 doors nationwide with Siden expecting the brand will grow to around 10,000 locations by the end of 2023.
“Now with a lot of these retail wins, we now have a lot more resources to put behind that and our strategy is just to increase velocity,” Siden said. “We’re going to do that at the ground level with marketing programs, and at the brand level with awareness programs, and we feel confident – based on our direct-to-consumer data and our great repeat repeat purchase rate – that we just need to emulate that in retail, and I think the brand will start to enter into a hyper growth phase.”
Cloud Water launched in 2019 with its flagship line of CBD-infused beverages and expanded outside the category in 2020 with the Cloud Water +Immunity line that has helped open up conventional channel doors and become the brand’s leading growth driver; +Immunity is expected to increase revenue by over 200% next year, the company said.
Much like other CBD-focused brands like Recess, Daytrip, VYBES and Weller, Siden cited the lack of federal regulation around CBD as limiting the brand’s growth potential in the space and “stunting” the early momentum the category had when it first emerged several years ago. However, he said the infused line performs well in the accounts that carry it, like Erewhon and Sprouts, and the brand has experienced “a lot of great results online” through direct-to-consumer sales and has benefitted from DSD distribution with CBD-friendly houses like Big Geyser in New York and Breakthru Beverage Group.
“We feel like that’s where we have more control to grow out that line right now,” he said. “It’s still kind of messy out there in terms of distribution for CBD, so there’ll be a bigger emphasis put on our non-CBD functional lines. We have our Cloud Water +Immunity, and we’re planning to evolve our functional lines as we enter next year, add more SKUs and most probably another line of functional beverages that are in the innovation queue right now.”
He added: “Presumably, a lot of these retailers will take an interest in [CBD] and we’ll be able to come back and service that. But for now it’s just not a fertile ground to do that.”
Cloud Water currently has seven full time employees and is expecting to grow to 10 or 11 team members by the end of the year, Siden said. The company is currently seeking VP level sales and marketing leads and most recently hired former Liquid Death director of business development and strategic partnerships Ian Fine to lead its own business development.
Siden said Fine helped secure an exclusive sponsorship with New York’s SummerStage in Central Park as the event’s official CBD beverage through October and the brand has “already been invited back next year.” Going forward, similar partnerships and event marketing will be a key pillar of Cloud Water’s awareness campaigns.
The brand is also now looking to alternative channels including travel in accounts like cruise ships and airports, as well as music venues and stadiums, Siden added, which the distribution partnership with Breakthru is helping to open up.
“We want to be everywhere our customers are every day,” he said. “That’s really the key, because Cloud Water can be enjoyed on multiple occasions every single day, so why not be in this format? So, while we’re looking to open more retail stores and support it, we feel like building brand awareness in some of these alternative channels will only help the goal.”