Ready-to-mix (RTM) powder to ready-to-drink (RTD) liquid format expansion could very well become the dominant build model process amongst functional beverage entrepreneurs…though a recent hydration category example could be elemental in proving my strategic thesis correct. While I might be a bit biased considering my professional background, I believe the sports nutrition space has always been the “often imitated, never duplicated” influential epicenter of all ingestible CPG categories. But many years ago…when I said things like “the best and brightest sports nutrition brands could compete against any large CPG incumbent when it comes to functional food and beverage,” it got its fair share of laughs. But then the massive mainstream success of Bang Energy happened in the late-2010s…and suddenly, my early conviction around a non-consensus view began to not look so crazy. Moreover, it also consciously (or subconsciously) inspired many sports nutrition brand entrepreneurs to take the leap from powder supplements to beverage. And though it’s several years behind the energy category’s “changing of the guard,” the same “RTM powder to RTD liquid” strategic format expansion playbook is starting to pick up momentum within the hydration category. Yet, my “beverage identity crisis” thesis within the hydration category still needed that one “mega brand” example to really catapult it forward. What I didn’t know at the time was that a month later, LMNT would announce on its social media that after two years in development, the brand would launch LMNT Sparkling Electrolyte Water, an RTD version of its extremely popular powdered stick pack hydration supplement. According to audited financial numbers filed with the SEC, LMNT generated just over $206 million in net sales for the 2023 calendar year (up 162% YoY). In terms of profitability, LMNT had gross margins of 56.7% in 2023. And I give them major kudos for the initial online launch strategy, but the sports drink market isn’t won or lost over transactions on Shopify and/or Amazon. So, despite the perfectly controlled launch execution and online commercialization strategy…LMNT still needs to address its next big challenge within the packaged beverage commercialization gauntlet, expanding into large wholesale channels. Though by saying that, I’m not advocating that LMNT should go too-wide too-fast with that sales channel expansion. In fact, LMNT is sitting pretty right now…generating close to $42 million in net income last year. That means they can “fund” the digital-first beverage strategy and fail forward as they learn the offline retail sales and beverage distribution game. Similarly, LMNT has been frugal and scrappy in how it raised outside capital, which limits pressure to be aggressive for liquidity event timeline purposes. But saying all that…I think LMNT should consider a strategic investment from an industry leader that has the expertise and resources that can enable the brand to scale more effectively in this next format and channel diverse phase. Nutrabolt (owner of C4 Energy) wants to build the health and wellness version of Unilever. While some portfolio expansion might come from internal brand development, I believe most will happen because of accretive deal making and full-on acquisitions that extends Nutrabolt into more key consumer-driven wellness platforms. While Bloom Nutrition was Nutrabolt's first minority investment…it won’t likely be its last, and maybe LMNT would be a great second act to get more exposure to the hydration category.

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