Nestlé Acquires Hydration Platform Brand Nuun

Nestlé Health Science has acquired hydration tablet brand Nuun for an undisclosed fee, the company announced today. The deal is expected to close in Q3 2021.

How did Nuun get here?

Launched in 2004, Nuun is one of a handful of innovative brands that has helped revitalize the non-RTD sports hydration space over the course of the past decade by leaning into a science-forward approach. Packaged in 10-count tubes, the Seattle-based company offers its dissolvable single-serving tablets in a range of functional SKUs — including Sport, Rest, Vitamins, Immune and the recently launched Energy. With an emphasis on convenience and versatility, the company has established a strong presence in outdoors, sports and natural retailers — including Whole Foods, Dick’s Sporting Goods and REI — while cultivating close relationships with the running community through partnerships of events (Los Angeles Marathon) and athletes (Emma Coburn).

While its use of tablets remains unique, Nuun has also begun exploring outside the format: Last August, a powder stick called Instant. Similar to other recent disruptors to the powder drink space, the formulation is based on the World Health Organization (WHO) guidelines for Oral Rehydration Solution to treat individuals experiencing illness because of dehydration. The brand also released a three-part performance supplement system, called The Podium Series, last May, and has large format powder “tubs” for competition level athletes.

As it scaled, Nuun attracted investment from private equity firm TSG Consumer Partners, which took a minority stake in 2017. Houlihan Lokey is acting as the financial advisor and Perkins Coie is acting as legal advisor to Nuun.

“We are incredibly proud of what we have accomplished through our partnership with Kevin, the entire team at Nuun and Dan Nordstrom, Nuun’s early lead investor,” said Michael Layman, Managing Director at TSG, in a press release. “Since our investment in 2017, we have collaborated with Dan to support the company’s expansion into additional product categories and into new channels, which have resulted in a best-in-class portfolio of hydration offerings and significant top-line growth. Today, Nuun is a major force in the healthy hydration space that resonates with all types of consumers, and we are confident it will continue to thrive with the backing of Nestlé Health Science.”

According to data from IRI, MULO dollar sales for Nuun sports drink mix were up 29% to over $10.1 million through April 27, 2021. Category wide, growth during the period was 34.4% (over $141 million).

According to CEO Kevin Rutherford, after coming off a strong performance in 2020, Nuun was at an “inflection point” in which leadership felt it was time to test the market to see interest from investors and private capital matched their own valuation of the company. In fielding offers, Rutherford said the team believed exiting to a strategic buyer was the “best case scenario” to scale the brand, and they ended up getting their top preference in Nestle Health Science.

“Nestle Health Science is really helping transition that business to better-for-you-products,” he said. “What they do bring is this ability for us to raise our game from retail partnerships to category management to shopper marketing to helping tell our story. They’ve got the resources and sophistication that could really up our game and move our mission forward.”

Under Nestle’s leadership, Nuun will have a bigger international presence and access to the conglomerate’s robust science and R&D capabilities, Rutherford added. However, it will stay as a separate business unit in Seattle and the current management and team will remain intact, he said.

“The great part is that this is what Nestle saw in us as well,” he said. “I think they can help us make an impact in-store and online, and I think we can help take this brand and over time really scale this globally as opposed to just in North America.”

Why Nestlé?

The acquisition of Nuun by Nestlé Health Science is the latest transaction in what has been a busy first half of 2021 for the Swiss CPG conglomerate. In March, just weeks after agreeing terms for the sale of its North American Waters portfolio to One Rock Capital Partners and Metropoulos & Co., the company announced it had bought premium water brand (and fellow Seattle brand) Essentia for an undisclosed fee.

In announcing that purchase, Steve Presley, chairman and CEO of Nestlé USA, said that Essentia would give the company “an immediate strong presence in the high-growth, functional water segment and supports our efforts to capture opportunities with emerging consumer trends such as healthy hydration.” In his comments today, Nestlé Health Science CEO Greg Behar echoed that philosophy.

“Everyday, health-conscious consumers are becoming more aware of how functional hydration products can add to their overall well-being as well as support them during exercise by replacing the minerals that the body loses,” Behar said in a press release. “That growing awareness is reflected in the steady growth of the category. Nuun is a leader in the fast-growing functional hydration category with its high-quality, clean, plant-based products. We look forward to combining our companies’ expertise to bring Nuun to more people around the world.”

More specifically, adding Nuun to its portfolio will give Nestlé’s Health Science a differently positioned brand platform to complement Vital Proteins, the collagen-focused CPG and supplement brand it acquired last July. Vital Proteins markets a range of bovine collagen-based products, including powders (in tubs and sticks) and RTD waters and shots. Rutherford mentioned another recent purchase by Nestle — personalized nutrition brand Persona — as a potential source of synergies in digital marketing.

“I think the visibility of the brand is going to expand really quickly,” Rutherford said. “Basically (Nestlé) are going to say ‘Hey, this is what you guys showed us. We believe in your plan, and here’s how you can ratchet that up,’ That will manifest itself through just a really accelerated growth and awareness and growth in the market.”

Why hydration tablets and powders?

As BevNET readers likely know, despite being around for decades, recent years have seen the non-RTD (powders and tablets) hydration category enjoy something of a renaissance, thanks in large part to Nuun and a new generation of innovative and energetic brands that have been bringing broader functionality to the format. At the same time, the backlash against single-use plastic bottles, particularly waters, has helped the category strengthen its credibility as a more sustainable option.

“The ‘water enhancement’ category, I think, was really set to be disrupted,” said Nuun CEO Kevin Rutherford during a panel discussion for the March/April issue of BevNET magazine. “Looking back in time at some of the heritage brands from years ago, we’d say ‘these are a little bit outdated,’ and the trends of better-for-you have transitioned across the entire grocery store into all the aisles. Yet, here’s this section where it’s not really happening. So I think you’ve just come back to an overarching trend.”

As the space has grown, pioneering brands like Nuun are facing a new wave of VC-backed competitors — Hydrant, Laird, Cure — that are also positioning themselves as brand platforms that can offer powder products with more targeted functional benefits beyond electrolytes and hydration. Elsewhere, some RTD-centric brands like LifeAID, Recess, Sunwink and Celsius are looking at powders as a way to unlock new retail opportunities in e-commerce and c-stores.

But there are also indications that the segment may be ready to break through into a new growth phase altogether. Liquid I.V. — up 510% in sales and +18 in dollar share through April 27, according to IRI — hasn’t lost any momentum since it was acquired by Unilever in September. Meanwhile, Oregon-based, powder-centric brand Laird, which is backed by Danone Manifesto Ventures, has gone public in search of further growth capital.