When Doctor D’s co-founder and CEO Stuart Dimson first bottled his home brewed sparkling probiotic beverages in 2013, the market for kombucha was still nascent and the idea of ‘functional soda’ becoming a viable category was barely even conceivable. But as his brand approaches a decade on the market, both the industry and consumers have changed considerably as kombucha has moved into mainstream channels, while gut health friendly pre- and probiotic ‘Pop’ brands have rapidly emerged as a better-for-you soda format.
Amid this gut health breakout, Dimson now believes that Doctor D’s moment has arrived and the company has opened a new venture funding round as it anticipates more than 100% growth in 2022.
Based in Colorado, Doctor D’s makes a line of canned sparkling probiotic drinks available in eight varieties, including flavors like Lime Mint Mojito and Berry Lavender, as well as the extra functional Doctor D’s Plus+ line which adds Defense and Energy SKUs. The drinks retail for $2.50 per 12 oz. can and promo at two for $4. The brand was created by Dimson, previously a full time practitioner of Chinese medicine, and his wife Susan Maclachlan, along with co-founder Jim Beckmeyer.
Originally sold in darkened glass bottles, Doctor D’s Sparkling Probiotic grew slowly during its first several years on the market, operating off of sub $1 million annual revenue, even as the trend for gut health and probiotic products grew and kombucha brands broke out into the mainstream. Positioned as a better tasting alternative to kombucha, Dimson said the brand finally gained traction when it moved to a 12 oz. can format in 2020, noting that trial had been minimal as consumers previously associated the amber bottles with beer.
“Up until right before COVID it was a lot of uphill climbing,” he said. “We had some wins, we were able to get ourselves into Publix back in 2018, and we really kind of nurtured that as we didn’t really have a lot of other wins. But then, through that relationship, it became clear that we were in the wrong packaging.”
After the cans launched in Publix stores in June 2020, the company saw an immediate 3x sales spike, which has only continued to accelerate, Dimson said. In 2021, Doctor D’s reported over $2.8 million in revenue, up from $1.7 million in 2020. For 2022, Dimson said the company is projecting to more than double that at roughly $6.3 million.
The brand has now expanded its retail footprint nationwide to more than 5,000 accounts, of which about half have come online in the past six months, including recent gains in Stop and Shop, Food Lion, Giant Eagle, HyVee and Shoprite. The brand is also preparing for a regional rollout into about 900 Target stores later this year, Dimson said.
Single account sales have also continued to accelerate quarter over quarter, he added. In Publix, Doctor D’s reported around $500,000 in dollar sales in Q1 2022; in Q2 thus far sales have surpassed $900,000.
Run by a 15-person team, Doctor D’s also owns its own manufacturing facility, which Dimson said was important in order to retain the brand’s homemade craftsmanship and to better oversee the probiotic content of the drinks. The company is currently in the process of moving from a 6,300 square foot facility where production is at capacity – churning out around 18,000 cans per day – to a new 18,000 square foot plant, which will go online in August.
The new location, he added, will allow Doctor D’s to expand its canning line and fermentation capabilities, as well as add a cartoning machine (cans are still put into boxes by hands at the current facility) and will also provide the company with the space it needs to introduce new product lines.
“We’ve talked about doing co-packing, but we just don’t have the space because of the explosive growth that we’re experiencing,” he said. “We’re just keeping our eye on the ball, because we still, even with all the growth we have, by the end of the year we’ll probably be at about 10% or 12% ACV in the category. That means there’s still a tremendous amount of open whitespace for us to move into to continue to expand what we’re doing with our own line.”
Doctor D’s growth arrives as refrigerated kombucha’s sales growth has slowed, while consumers seek out more accessible, less polarizing gut health beverage solutions. Functional soda startups like Olipop and Poppi have rapidly gained retail distribution and attracted interest from investors, respectively raising $30 million and $13.5 million capital rounds within the past 12 months. Comparatively, refrigerated kombucha sales have slowed down, with the category up 3.9% in the 52-weeks ending June 22, per IRI data.
While kombucha brands like Health-Ade (up 27.1% to $100.6 million in sales) have continued to see strong growth, leading brands like GT’s (up 3.8% to $300 million) and Brew Dr (up 3.4% to $32.8 million) have had slower improvement while companies like KeVita (-7.2% for kombucha, -9.7% for its sparkling probiotic drinks) and smaller brands have seen declines. Meanwhile, shelf stable kombucha sales have improved 53.7% to about $12.9 million in the same period.
It’s within this shakeup that Dimson sees the most opportunity. He cited an opportunity to win sales from former KeVita drinkers, noting Doctor D’s move to cans makes it more versatile, and believes there’s an opportunity to share shelf space with kombucha.
“The consumer is just getting smarter and more savvy, and they are looking for something that tastes good, and that’s good for you,” he said. “It’s not just that you’ve got to fill out a couple of boxes now. You need to be in the right packaging and … it’s just good to be nimble, and able to pivot, I think, is the key.”
To support the growth, Dimson said the company is currently looking to raise $3 million in a new capital round, and has already brought in about $1.2 million thus far which is being used to open the new production facility. Additional funds would also go towards slotting fees, on-shelf promotions, regional marketing campaigns, and expanding the sales, marketing and administrative teams.
Doctor D’s previously raised a $2 million round primarily funded by angel investors and Dimson said he is being selective with this current round to ensure he’s partnering with the “right people” who believe in the brand’s mission.
“We’re looking for the right money, not just any money,” he said. “The things that you don’t know about when you jump into something like this is [beverage] happens to be one of the most competitive pieces of real estate in the supermarket. So, being up against the likes of Coke and Pepsi, and, you know, even GT’s … we’ve needed to support the growth at different stages, and we’ve been fortunate to have a really good team of angel investors to help us do that.”