CPG Week: Sweet Licensing Deals & Cannabis Sports Drinks

[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're discussing licensed and co-branded innovation and THC infused sports drinks. But first, I tried the Oreo flavored Coca-Cola this weekend. Have you guys had that yet?

[00:00:38] Brad Avery: No, but I absolutely will.

[00:00:41] Lukas Southard: I can't say I'm as excited. I'm not a big Coke drinker, but I do have a soft spot for Oreos. So I would have a sip. I don't know if I'd have a whole can.

[00:00:51] Brad Avery: All the rest of the can, it's fine.

[00:00:52] Lukas Southard: Okay, then we'll share.

[00:00:54] Monica Watrous: I had the zero sugar variety and it was really good. It tasted like Oreos. But what I really wanted to find was the Coca-Cola flavored Oreos.

[00:01:05] Lukas Southard: Now we're talking. So that's something I would try and I would probably eat too many of those and feel bad later.

[00:01:10] Brad Avery: See, I'll have them both at the same time.

[00:01:13] Lukas Southard: Would you dip your Oreo in your Coke Oreo?

[00:01:15] Monica Watrous: Absolutely.

[00:01:16] Lukas Southard: You got to double both flavors. Okay, now we're onto something.

[00:01:19] Monica Watrous: We've seen so much of these co-branded products rolling out over the past few years, but I don't know that I've ever seen a partnership that goes two ways like that, where there's Coke flavored Oreos and Oreo flavored Coke. It's kind of brilliant.

[00:01:31] Lukas Southard: Yeah, because you're hitting both sides of the market. For me, I'm not a Coke drinker, but I do love Oreos, so I'll try one and not the other. So it works for both the brands.

[00:01:40] Brad Avery: I also think that you have two flavors that actually are probably, at least in my head, going to go together really well. Sometimes you see these partnerships, and it's totally random, and it's just sort of a gimmick, and you're like, uh, it sounds kind of gross, actually. This, I'm like, ooh, I want to try that.

[00:01:55] Monica Watrous: I think it's going to work. Well, the fun part about the Oreos is it has popping candy in the cream to simulate the carbonation experience of drinking a Coke. So, yeah, it's a pretty cool partnership. I'm excited about it. They got me thinking, what other food and beverage brands should collaborate on a new product?

[00:02:14] Brad Avery: Flamin' Hot Tatina's Pizza Rolls.

[00:02:17] Monica Watrous: Oh.

[00:02:18] Lukas Southard: I did recently see there's a cannabis edibles brand that is doing flaming hot like Rice Krispie Treat edibles, which I was like, okay, that's interesting, not my thing, but I bet there's a subset of people that love their flaming hot and want it in edible cannabis format.

[00:02:36] Monica Watrous: Yes, donors.

[00:02:36] Lukas Southard: Dr. Norms, if you want to look it up there, you seem intrigued and interested. Personally, my collaboration that I haven't seen that I would love would be Nutella in a frozen mochi, like my mochi, but with Nutella inside, like a Nutella flavored.

[00:02:54] Brad Avery: Okay. What about Jolly Rancher energy drinks?

[00:02:58] Monica Watrous: That sounds good too.

[00:02:59] Brad Avery: No, thank you for me, but you know, I'm open to new things. Well, if you do decide to try it, C4 has officially partnered with Hershey's for a line of co-branded flavor launches. There's Jolly Rancher flavor of their 16 ounce energy drinks. There's also a pre-workout powder flavored like bubble yum. And for the first time in C4, they're doing protein powders with Hershey milk chocolate and Reese's flavoring. This is of course a continuation of C4's strategy of doing co-branded candy flavors. They've previously done Skittles and Starburst as well as Popsicle. We've seen this trend a bit in the performance energy space. Ghost has really pioneered it. They have Warheads and Sour Patch and a lot of other brands. There's also Rise that has done some of these similar types of partnerships. And I was able to talk with Kyle Thomas, the chief commercial officer for Nutribull, Seaforest parent company, about the strategy. And he said that these co-branded flavors can drive 60 to 65% incremental sales for energy.

[00:04:02] Lukas Southard: Wow. That's a lot of sales. It's interesting that the protein powder move, because I have seen that a lot in this kind of nutraceutical supplement space. Is this like an identity thing, or is this about bringing new, maybe younger consumers to the brand with these recognizable kind of sweet candy flavors?

[00:04:23] Brad Avery: The answer is yes. It is a little bit of both. And I thought what was interesting is that Nutribolt, the parent company, has done protein under the Cellucor brand. It's not that they don't have this, but it's the first time they put it under C4, which is traditionally focused on energy and pre-workout specifically. And one reason is the rise of GLP-1 drugs, the need for protein shakes for users of those drugs to maintain muscle mass, but also This extends the C4 brand into these categories and by co-branding with Hershey and Reese's you draw consumers in for that trial who are either have this childhood nostalgia for the flavors or just are curious about the novelty or just know that they like it and assume that hey if it tastes like Reese's I'm probably gonna like this so I'll give it a shot.

[00:05:12] Monica Watrous: This is a really common strategy that we've seen a lot with big brand innovation. I've been reporting on some of the major launches from big CPG companies and how startups can learn and adapt product development strategies from their playbooks. And one of the things that we've been seeing a lot of lately are big brands moving into new spaces via licensing and co-branding. Cinnamon Toast Crunch has been kind of a leader lately in this space. We just saw them partnering with Hormel on some bacon that's been rubbed with the Cinnadust, which is the official name of the seasoning, the cinnamon sugar. Wait, that's what they call it? They call it Cinnadust.

[00:05:50] Brad Avery: I had no idea.

[00:05:52] Monica Watrous: Previously, General Mills partnered with B&G Foods to release Cinnadust as seasoning that you could shake on popcorn and your cinnamon toast crunch from, I don't know what else you would put it on. Extra, extra cinnamon toast. That's right. But this is a brand that's moved into the baking mix aisle. We've seen it in snacks. We've seen it in a lot of different spaces, and it just shows that people are looking for familiar, trusted brands in new ways, new formats. To your point about C4 and Hersheybrad, that's kind of where the consumer is right now, especially amid ongoing inflation. They want to spend their money in something that feels like a safe experiment. So something that's a little new and novel, but familiar and comforting.

[00:06:40] Brad Avery: So for my story, I also decided to talks co Joshua Schall. He's an industry observer and owner of J. Schall Consulting. And he did make an interesting point that as these co-branded trends become more common, That is going to have an impact on retail sets. At a certain point, retailers are going to be thinking about how they are arranging these displays, how much space they're allotting to the co-branded partnerships, because they're becoming more common. And so right now they're very eye-grabbing, but eventually it is still going to revert to the old standards of CPG rules, which is, you know, is it getting sell-through?

[00:07:23] Monica Watrous: What is happening in the protein and energy categories or the sports performance categories? I've noticed over recent years, a lot of movement towards nostalgic, indulgent flavor profiles, cookies, candy, cereal.

[00:07:42] Brad Avery: Well, I think if you look at the recent history, as far as energy drinks go, you can maybe attribute part of the candy flavor rise to Bang, that embraced some of those flavor profiles without doing co-branding. And then that quickly turned into, let's just get the real brand name on the can. We've also been seeing it for much longer in the supplement space, and we know that Ghost in particular has done that in their whey protein with Oreo and Chips Ahoy and a lot more. So I think consumers want that flavor profile. whether it's co-branded or not. I mean, you can look at brands like Koya that have cereal flavor protein shakes. They aren't co-branded, but there is a sort of fruity cereal with what looks to be Froot Loops, but not officially on the bottle or a cinnamon cereal, much like the Cinnamon Toast Crunch Illusion. So brands are embracing these flavors, whether they have these licensing deals or not.

[00:08:44] Monica Watrous: And consumers are as well. Speaking of sports drinks, Lucas, you recently wrote about THC in the category. Can you tell us more?

[00:08:56] Lukas Southard: It's actually interesting. We had this conversation about sugar flavored energy drinks, because one of the brands I talked to Jim weed also has a candy shop flavor. And, uh, I believe it was a rainbow Sherbert flavor that they released.

[00:09:09] Monica Watrous: Yeah.

[00:09:10] Lukas Southard: So, so, uh, you know, this is, this is across the board in energy and now I guess in THC as well, which isn't surprising. So the feature I wrote working it out, will THC infused sports drinks improve category performance? Kind of was taking a look back at what we were seeing with CBD at the early 2020s when CBD seemed to be finding its way into a lot of hydration and sports drinks. Uh, defy was, uh, the big brand that I think was one of the trailblazers for this. Uh, and it was backed by, uh, NFL player Terrell Davis. As far as I can tell, Defy is no longer around. They would not respond to many requests for comment, and they haven't been posted on the social media for about a year now. But that being said, there's still a lot of CBD in sports drinks and hydration. What we are seeing is kind of an evolution. So we've got two kinds of paths that are happening. One is we have some CBD brands that are either pivoting away from CBD, Jim Weed being one of them. They launched with a hemp extract in their fitness focused energy drinks. And about a year ago, they realized that their non-CBD line of adaptogenic energy drinks were actually about 90% of their sales. So they took hemp out of their formulation and now just rely on ashwagandha as the calming, anxiety-reducing functional ingredient, as well as some other functional ingredients. And then you have like Adapt Super Water who launched with a bottled liquid beverage and pivoted into powders, hydration powders, all of which include CBD. gotten rid of their liquid bottles and are just solely in powders now, and they're on the cusp of launching a hydration powder that doesn't have CBD. Mostly because talking to Richard Harriton, the founder, he said, we just, without proper regulation from the FDA, which everyone was expecting like four years ago, they really can't get into a lot of mass retailers and it really puts a hindrance on how they can market the product if it has CBD in it. Now, on the other side, there are THC companies, both in the regulated dispensary adult use channel, as well as operators in hemp derived, uh, kind of DTC focused model that are incorporating actually low dose THC into their hydration powders and gummies and beverages. As, as part of the formulation for recovery and for focus one brand that, uh, has been around for about five years now is called off field. That's with three Fs. So mind your, uh, Googling, but, um, they, they do gummies. Both with CBD as well as with THC, they do beverages, canned beverages, and they do powders, all of which have CBD in them, some of which have THC and some don't, and they have kind of really marketed themselves on this run-high mentality, which they They link to the cannabinoid, the endocannabinoid system being intrinsically connected to the runner's high that people feel, which was attributed to endorphins.

[00:12:41] Brad Avery: Is there any benefit to performance that they're pitching as, or is it more just that it's fun?

[00:12:49] Lukas Southard: It's a little both, I think. I definitely had some sources say, look, when you have a little low dose THC in you while you're out for a run or doing a sport, it does increase your focus. And there are some recovery benefits to THC. It can be seen as an anti-inflammatory. It can be seen as a pain reducer. And so there are some perceived benefits. Personally, someone who does like low-dose hemp-derived THC beverages, I don't really want to be using it before I work out, but I will gladly have a drink after I've went on a long run or something. But, you know, to each their own. I think more than anything, a lot of what the sources I talked to were saying is that The proliferation of low-dose THC, whether in the regulated market or in the hemp-derived, is really kind of easing the prohibition on the functional ingredient, THC, in many different iterations. And now we're seeing it kind of spread out into outside of the alcohol alternative category, but into sports drinks and hydration and being used in other ways. And I think that is an interesting point to this.

[00:13:57] Brad Avery: Where are these brands selling right now? I mean, how wide is their distribution? Are they going through dispensary channels? Is this Delta 9? Are they going for sporting goods stores?

[00:14:07] Lukas Southard: I don't think there's a lot of sporting goods stores, but there's definitely a little of both. So one brand I talked to is called Vibations, and they are purely in the regulated dispensary channel. They do another powdered hydration with a low dose of THC, and they're operated by a company called Merimed, which does a variety of cannabis products solely for the adult recreational use category and the medicinal. Not hemp-derived. This is a marijuana product. Now, Offfield, as I was talking about, is a hemp-derived product. And so they're operating mostly through D2C because that is the best mechanism to get products to customers in the hemp-derived category. As we have seen, uh, last week, uh, with, or two weeks ago with California. And then last week with New Jersey, it has become increasingly difficult to get hemp derived products into retail channels. Um, so New Jersey last week passed a similar law to what happened in California. This time it went through the state legislature and was signed into law by the governor, basically putting all intoxicating hemp in the hands of the cannabis, um, control, uh, regulatory body and the forcing everything to go through dispensaries, which is slightly different than California. But then you have something out of North Carolina that happened this week, which basically North Carolina, somewhat similar to what happened in Minnesota, inadvertently legalized smokable intoxicating hemp. in their state farm bill, and you just had basically the states say, hey, this kind of happened, we weren't intending it, but it also really hasn't caused anything bad, so we're gonna keep it. It's interesting.

[00:15:54] Brad Avery: Who would have thought that accidentally legalizing weed would be so chaotic for the country?

[00:16:01] Lukas Southard: It really is a state-by-state approach.

[00:16:04] Monica Watrous: I went to a race expo in April and I picked up something called Hydration, H-I-G-H-dration, and it was made with Delta 9 THC and electrolytes. It was stick packs, but I was too scared to consume it before the race. It has 40 milligrams of CBD and 10 milligrams of THC per serving.

[00:16:26] Lukas Southard: That seems like a lot to me. Most of the ones that I was looking at and the brands I was talking to were somewhere in the like three to five range, which I consider more of the low dose. 10 seems a lot unless you are a regular THC user. But again, this is the problem with THC in that everyone has their own tolerance.

[00:16:46] Monica Watrous: I'll just stick to Fireball in the race. But again, I wasn't about to test my tolerance while running a half marathon.

[00:16:56] Brad Avery: Well, I watched a YouTube video the other day of a guy taking like 50 milligrams in edibles and then running 13 miles around Manhattan. So, you know, to each their own. Some people like it. Not for me.

[00:17:06] Monica Watrous: Here are some other notable bits of news from the week. General Mills selling North American yogurt business for $2.1 billion. June Shine adds non-alcoholic kombucha to portfolio. And Inside Fancy Pants Baking Company's plans to scale its new cookie line. 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.