This Week in CPG - KDP Makin' Moves

Author

CPG WIRE
December 10, 2022

The Big Story

For an enormous beverage company that posted revenue of $12.6B last year, Keurig Dr Pepper (KDP) has a considerable void in its beverage portfolio. Naturally they have a plethora of carbonated soft drinks: Dr Pepper, 7UP, Sunkist, Squirt, etc. They also sell sophisticated beverage options for more discerning, health-conscious consumers: Bai, Core Hydration, and Limitless. One category that's glaringly missing, shockingly missing even, is an energy drink with meaningful market share. 

KDP addressed this void on Thursday when it acquired a 30% stake in Nutrabolt, the owner of C4 Energy, for $863m. In addition to its investment, KDP also signed a long-term sales & distribution agreement. In short, C4 Energy now has the cash to support a serious sales push and a formidable distribution partner to help execute it, a prized one-two punch in a bitterly competitive category. 

Despite being late to the game — the best time to enter this space would've been four years ago, right after Keurig & DPS closed its mega-merger — there's still plenty of runway and opportunity for KDP & C4. 

First, it's a massive market that's projected to hit $85B by 2025. Moreover, it's growing quite fast for such a large market. Jefferies and Euromonitor anticipate a CAGR of 7%. 

Another reason KDP might've taken the plunge, besides the sheer enormity of the opportunity, is that the category is in a state of disarray. The once high-flying Bang Energy imploded due to a slew of lawsuits and debt. Bang was essentially sued into bankruptcy court. Rockstar Energy, which PepsiCo acquired in 2020 for $3.5B, is a waning brand with flat or declining sales year-over-year. Rockstar's performance has been so dismal that PepsiCo invested $550m in a competitor, Celsius, earlier this year. PepsiCo even had a short dalliance with Bang Energy, although that relationship ended in litigation. The only stalwarts with seemingly unimpeachable market positions are, unsurprisingly, Red Bull and Monster. 

Given the category disruption outlined above and KDP's distribution prowess, C4 Energy is poised to become a disruptive force. As a business C4 has an awful lot going for itself, too. It's a proven brand with hundreds of millions in annual sales, lots of brand equity, and it's on-trend in terms of its flavor offerings and nutrition label. 

KDP and C4 are a perfect match. 

Deals

  • Italian confectionery giant Ferrero Group – the owner of Nutella, Kinder, Tic Tac, Ferrero Rocher, and many other brands – acquired Wells Enterprises, a family-owned ice cream manufacturer based in Le Mars, Iowa. Wells also owns a number of ice cream brands like Halo Top, Blue Bunny, and Bomb Pop. Link

  • Japanese beverage firm Asahi Group announced a new venture fund to invest in US beverage startups: Asahi Group Beverages & Innovation Fund. Their initial focus will be on low-alc beverages, non-alc beers, functional soft drinks, and mixers. They expect to deploy $70m by the end of 2025. Link

  • Zenkai Sports, a sustainable performance apparel brand founded by former NHL player Doug Lynch and two apparel industry veterans, secured $1m in funding. Investors include former Under Armour executive Matt Shearer and the former CEO of the Canadian Olympic Committee, Chris Overholt. Link

  • Kenyan skincare brand Uncover raised $1m in seed funding. Investors include FirstCheck Africa, Samata Capital, Future Africa, and IgniteXL. Link

  • Swiss private equity firm Partners Group will increase its stake in luxury watch brand Breitling AG from 23% to around 50%, valuing the company at $4.5B. CVC Capital Partners purchased a majority stake in Breitling in 2017 at a valuation around $850m. An excellent outcome for CVC who will remain a minority shareholder (20%). Link

  • The parent company of From the Ground Up has acquired PopChips, the better-for-you snack brand founded by Keith Belling in 2007 and sold to VMG Partners in 2019. No details on the transaction but I have a sneaking suspicion it wasn't a major win for the seller. Obviously could be wrong. Link

  • Sula Vineyards, India's largest winemaker, will go public on Monday. The company was founded by Rajeev Samant, a Stanford alum now responsible for creating India's domestic wine industry. Verlinvest has been on the cap table since 2010 and will sell a portion of their shares on Monday. Link

  • Remember the instant grocery delivery craze? Every week a different 10 or 15 minute grocery delivery service received massive funded? Well two of Europe's largest players in the space —Turkey's Getir and Germany's Gorillas — joined forces to create a Pan-European cash incinerator. Link

What's New...

  • Tennis legend Serena Williams launched a new performance care brand, Will Perform. Her co-founder, Eric Ryan, has a long history of disrupting sleepy but large categories. He's the co-founder of Olly (vitamin brand), Welly (bandage brand), and Method (soap brand). This will be a fun one to watch. Link

  • A new cookie brand that's sort of a zero sugar version of Oreos with really fun branding – Sundays – is launching on...Sunday. Link

  • Chamberlain Coffee unveiled their latest products: a sparkling syrup and a vegan pancake mix. These folks just don't miss. Link

  • Iconic San Francisco Italian restaurant Flour + Water unveiled a line of organic pastas for retail. Link

  • Magazine turned lifestyle brand Playboy launched a line of denim... Link

  • Applied Nutrition introduced a new hydration brand, Body Fuel, to take on PRIME Hydration (good luck). Link

  • Loverboy, the canned cocktail and hard tea brand founded by reality TV star Kyle Cooke, underwent a brand refresh. As usual Thirst Craft did a spectacular job. Link

Distribution Quickfire 

  • Casa Azul Tequila Soda is now available at Ralphs in CA, Spec's in TX, and ABC Fine Wine & Spirits in FL.

  • Premium canned wine brand Archer Roose is now available at Target.

  • Hecho Tequila Soda will be available on GoPuff.

  • Clean label hazelnut spread brand tbh launched at Urban Outfitters.

  • Australian sparkling water brand Capi landed an exclusive distribution deal with 7-Eleven.

  • Clean cosmetics brand Nubyen launched at Sephora in the UK.

Personnel

  • Teremana Tequila, The Rock's tequila brand, has a new CEO in Richard Black.

  • Tyson Foods named Melanie Boulden as Chief Growth Officer.

  • Carbone Fine Foods appointed Tracy Garbowski as EVP of Marketing.

  • Jamie Leventhal stepped down as CEO of Beacon Wellness Brands.