CPG Week: Spindrift Soda and Alani Nu Acquisition

[00:00:05] Monica Watrous: Welcome to the CPG Week podcast by BevNET and Nosh, your source for the latest food and beverage industry news. I'm Monica Watrous, Managing Editor of Nosh, here with my co-hosts, Brad Avery and Lukas Southard. If you're enjoying the show, please subscribe on your listening platform of choice. On the podcast today, we are discussing Spindrift's Soda Launch and Celsius' Alani Nu acquisition. But first, how do we feel about Herphy's new LTO, a pepperoni pizza soda, which is made with tomato juice concentrate and some savory notes, I'm sure. I haven't tried it yet. It's, I actually think that, uh, I've got a box on the way to me, but Colin, our sample captain gave it a shot. He said it wasn't for him. What do you guys think? Pepperoni pizza soda, sip or spit?

[00:00:57] Brad Avery: Well, I'm going to have to find Colin after we're done recording and give a taste myself if we have any extra, because I'm so morbidly curious about this. It's calling me. It's a siren song. And you know what happens when you answer the siren song? They eat you alive.

[00:01:15] Monica Watrous: Oh. So that's what's going to happen with this?

[00:01:17] Brad Avery: I think so.

[00:01:18] Monica Watrous: It's going to eat you alive.

[00:01:19] Brad Avery: I think the pizza drink is going to drink me.

[00:01:22] Monica Watrous: Lucas, what about you?

[00:01:22] Lukas Southard: I don't know if I'm as interested in trying, but I do know at least one, if not both, of my children would probably be really interested, considering that they would, if given the chance, they would live off of pepperoni pizza. I'm tempted to just get some to bring it back for them, but I did see a post from Nate Rosen of Express Checkout trying it, and he said he seemed like he was into it. He said it was very interesting. I don't think he said specifically that he liked it, but he said it was very interesting and he was surprised at how much it tasted like actual pepperoni pizza.

[00:02:01] Brad Avery: None of that's a quality judgment, just be clear.

[00:02:05] Lukas Southard: But you know, there's something to be said if you're gonna try to do something like that. You better make it taste like a pepperoni pizza. Like if it just tastes like a weird soda, you're gonna be like, why would I drink this?

[00:02:16] Monica Watrous: Oh, I'm sure it tastes exactly as it's supposed to. I'm actually, I'm a really big fan of Perfy. I'm actually drinking a Dr. Perfy right now, which is the brand's take on Dr. Pepper. And this is my favorite soda. I drink it almost every day. I buy it by subscription. And it tastes a lot like Dr. Pepper, but in a way better. So I don't doubt for a second that the flavor masters at Perfy have nailed the pepperoni pizza flavor. I just don't know if this is something that I would be drinking every day.

[00:02:45] Brad Avery: I think for a brand like Perfy that is trying to distinguish itself in an increasingly competitive set, which is the functional soda space, it's an interesting play for sure. There we go again, using the word interesting. But it is a distinctive play, helps you get attention on the brand. We've seen a lot of the kind of funky, like this is meant to be provocative flavor innovations, but it goes back decades, the Jones Turkey and Gravy Soda. It definitely helped them get a lot of press at the time and every Thanksgiving they bring it back and people are always like, I'm going to do it.

[00:03:22] Monica Watrous: Oh yeah, it's the morbid curiosity that gets people trying at least once. But I also have to say Vaso Martinez, he's the founder of Perfie and the CEO, he is a marketing genius and a lot of the content around this launch is so fun. And speaking of soda launches, Spindrift, which notably has its sparkling water line, it launched a spiked line at one point, but now just a month on the heels of its acquisition by private equity firm, is launching Brad, can you tell us more?

[00:03:56] Brad Avery: Absolutely. Spindrift Soda is finally here. It's something I think that people have wondered if the brand would do for a long time, but had never heard any word one way or the other. So Spindrift, of course, is a sparkling water brand based in Boston. They make a sparkling water with juice infused in the product so that you get a little bit of sugar and real fruit juice for a fuller flavor. It's already sort of brought sparkling water a little closer to a soda. Now with a full flavor soda coming out, it comes a month after they were sold to a private investment group, Griffin Investors, and it's a bit of a new direction for the brand as they've been expanding. Monica, you mentioned that they previously did a hard seltzer, a spindrift spiked, and they've also been leaning a bit into the mocktail format with some of their flavor innovations like the Nohito and the Cosnopolitan. This now is a full new product extension for them and it's not functional.

[00:04:58] Lukas Southard: What I like about this launch is that they somewhat bucked the trend on the flavor varieties that they put out. They had some common ones like Concord Freeze, so your grape soda, an orange cream float, like orange soda, ginger ale, a favorite of mine. But then they also had strawberry shortcake and Shirley Temple. The Shirley Temple is kind of like a cherry citrus

[00:05:21] Monica Watrous: These are nostalgic flavor profiles, and I think that's going to be a really big hit with millennials who are probably a big target of the flagship lineup.

[00:05:31] Brad Avery: So this launch is also coming when they have a new CEO in Dave Berwick, who previously led Boston Beer, you know, a pretty experienced industry veteran. And the founder, Bill Krillman, is moving into a more back-end role after serving as CEO since the brand's founding. It will be interesting to see the new direction that the company goes in, a different category and one that has a lot of competition. We've seen a lot of brands try to make extensions into this soda space as better for you soda set. Suja Life rolled out with the Slice relaunch. HealthAid has its SunSip. A lot of brands have tried to go to better for you soda as their core line extension. Spindrift being a sparkling water may have some more room to play there, some more legitimacy in the set. It's always been a little adjacent as a result. And this is not that much more sugar from what I can see. 8 grams of sugar per 12-ounce can. Some Spindrift flavors go up to 4 grams.

[00:06:34] Monica Watrous: It's not a big leap for at least the core Spindrift consumer. You see cans of their sparkling water in a lot of fast casual chains and fast food restaurants. So I wonder to what extent they'll leverage those relationships to introduce this new line in restaurants. And I wonder if this could even be a dispensed option in fountain drinks for places that do focus on better-for-you offerings.

[00:07:17] Brad Avery: Be curious to see that.

[00:07:37] Monica Watrous: From soda to energy drinks, last week we reported on Celsius Holdings' acquisition of competitor Alani Nu for $1.8 billion. What do we know about this deal, Brad?

[00:07:49] Brad Avery: These two brands have been big pioneers in opening up the category that used to be incredibly male-dominated. And Celsius, as the number three player, is now bringing in a brand with a run rate of over $800 million in retail sales. This is a pretty sizable deal and gives them a much bigger share of the entire shelf.

[00:08:11] Monica Watrous: I do wonder, though, if there's potential for cannibalization, because I do tend to think of Alani Nu and Celsius as pretty similar whenever I see them on shelf. What incrementality could Alani Nu bring to the Celsius lineup?

[00:08:24] Brad Avery: It's not just energy drinks that Celsius is getting with this deal. Illani has a lot of different product lines and protein and bars and supplements. And not all of those are spaces where Celsius plays or where they do play. They're not nearly as strong. So it brings in that element as well. But on the energy drink front, Alani Nu Drinks grew 63.1% last year, according to Sarkana, and the only other brand in the space still growing at that level was bucked up at 63.2%. But that's a fraction at $50.6 million in sales versus Alani's $830 million. This is a huge get. It's the number four brand getting folded into the number three brand.

[00:09:06] Lukas Southard: I think one of the big questions that we're all waiting to see is what does this mean for distribution? Because Celsius has aligned with PepsiCo as their distributor. But, you know, with KDP acquiring Ghost and then also doing distribution for C4 and having stake in C4, there's a lot of unknowns that could happen with what this means for distribution for both Celsius and Elaninu.

[00:09:42] Brad Avery: Another big unknown is where does this leave Congo Brands, which was the manufacturer of Alani. Congo also makes Prime, and we know that Prime has been struggling in sales lately. Its energy drink and its core sports drink are both down double digits in sales. It's been fighting to turn things around after its explosive year a couple years ago. And Alani was their big grower. So I'm curious what this does for Congo now. Obviously, it's got a big windfall from the sale. I'm not sure exactly who gets paid what, but certainly Congo is getting some payment from this acquisition. So whether they'll be investing that into new brands, into growing Prime, into other parts of the business, we'll have to wait and see. They've got a pretty strong system over there that's been able to rapidly grow two major brands that were unheard of just a few years ago. So we will be watching to see what they do next.

[00:10:44] Monica Watrous: Yes, we will be watching. And insiders who want to read more about this deal can go to BevNET.com. The story is Analysis, Alani Nu and Celsius Deal Sparks Distro Realignment, Possible KDP Rethink. And here are some other notable bits of news from the week. Why protein bar brand David is adding more artificial ingredients to its formulation, what actual veggies plans to do with its new $7 million Series A funding, and Inside Halfday's refreshed brand identity. For these stories and more, become an insider at BevNET and Nosh. That wraps up this edition of CPG Week by BevNET and Nosh. Thank you to our audio engineer, Joshua Pratt, our director is Mike Schneider, and our designer is Aaron Willette. If you enjoyed the podcast, please subscribe on your listening platform of choice, and we will see you next time.