41 months after I posed the original question, The Simply Good Foods Company has finally given me the answer I’ve been waiting for! So, I’ve been alluding to this “eat or be eaten” phase of The Simply Good Foods Company for the last 3.5 years. But only a few days after posting that January 2021 Simply Good Foods prediction, the company released its first quarter earnings report and then-CEO Joe Scalzo dropped some details on the conference call that I turned into another more detailed prediction mostly exploring plant-based protein convenient nutrition names...one of which was a relatively under-the-radar brand named Only What You Need (OWYN). And for those that haven’t seen last week’s headlines yet (and are confused by all that previous information), The Simply Good Foods Company announced that it had entered into a definitive agreement under which it will acquire OWYN for $280 million in cash. For my finance people that enjoy knowing the deal specifics, that purchase price represents a multiple of approximately 2.3x estimated 2023 net sales and 13.3x estimated adjusted EBITDA, including run-rate synergies. Seeing the gap in the protein beverages market, OWYN was created in 2017 to delivered enough plant protein and the right combinations of amino acids for muscle building and repair…plus enough calories to provide sustainable energy during workouts and training. In that same year, CPG legend Jason Cohen and longstanding partner Clearlake Capital invested in OWYN and helped fill key management positions with people who had deep industry experience…one of which, Mark Olivieri, was arguably the most impactful. He led brand marketing that evolved the brand purpose of OWYN to stand for truth and transparency and positioned OWYN as not just another plant-based option, but as a riskless plant-based option. He built a strategic narrative around the belief that the detrimental health impacts of over-claiming and under-testing is not just a marketing issue, but also is a social issue. Mark Olivieri would eventually become President and then CEO in August 2021, leading them through a few key investment transactions, and staying true to that quest to fuel bodies with cleanest nutrition…thus turning OWYN into a powerhouse brand across multiple sales channels, product formats, and pack types. In fact, within the last 52-week period ending March 24, 2024…OWYN is the fastest growing RTD protein shake brand in the market (growing 10 times more than the categorical average). Why I said OWYN “gets slept on” too much within the protein category is they are in the early phase of building a truly distinctive brand that has increasingly, mainstream appeal with a highly engaged, passionate core customer. But the remaining part of this content piece will focus on why (beyond the brand strategic narrative stuff that) I thought OWYN was a strategically compelling M&A opportunity way back in 2021 and why Simply Good Foods finally saw the light now...and then what does this mean to the convenient nutrition competitive landscape (Should market leaders like Premier Protein, Fairlife/Core Power, and Muscle Milk be nervous?)

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Who wins in a fight…Travis Scott or Kylie Jenner? No, this isn’t one of those weird man vs. woman fetish wrestling matches…I’m referring to an alcoholic beverage brand fight. It was recently announced that beauty CPG category mogul and “Kardashians” personality Kylie Jenner is launching Sprinter…a canned vodka soda cocktail. But if you remember…Kylie Jenner’s baby daddy (aka the talented rapper and cultural icon) Travis Scott launched agave-based hard seltzer brand Cacti with beverage giant Anheuser-Busch in 2020. While the liquid got meh-level customer reviews at the time, Cacti was abruptly discontinued at the end of 2021 after a crowd-crush incident happened during the Houston Astroworld concert. However, Travis Scott has been utilizing a subliminal marketing push since last December…suggesting Cacti will be returning with a new and improved product in 2024.

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Does it matter that Liquid Death “swung on and missed” its first attempt at extending its platform beyond the ready-to-drink beverage category? If you checked out my “beverage identity crisis” content from last week, I had originally intended to include these Liquid Death format expansion insights in that piece. But there was a bit too much strategic nuance that I believed would create confusion with the previous content’s central focus. So, instead…I figured I’d give this important recent Liquid Death business activity its own content…because there’s honestly a lot to unpack (learnings wise) that I believe can be valuable to my community of CPG industry leaders. In typical Liquid Death fashion, the beverage brand shared an entertaining video in mid-February 2024 to promote it had created a new powdered electrolyte hydration supplement drink mix. Death Dust comes in three flavor variants, each were formulated with the approach of them being lightly and naturally sweetened and flavored. Liquid Death also leveraged known flavor IP from its flavored sparking water SKUs. The Death Dust powdered hydration supplement stick packs were launched on Amazon (and direct-to-consumer) only. From a marketplace perspective, dollar sales for sports drink mixes were up 53% YoY for the last 52-week period ending 3/26/24. So, that’s obviously an attractive adjacent category for a beverage brand with the “platform strategy friendly” tagline of “Murder your thirst.” And even though the billion-dollar sports hydration powder market is filled with heavy hitter brands owned by the likes of Unilever, PepsiCo, The Coca-Cola Company, and KDP…the unit economics of these products in terms of categorical gross margins (but especially net margins) are still quite desirable to Liquid Death. Now…for those pundits (that spewed hate when Death Dust launched), talking about Liquid Death profitability struggles and how this was a “Hail Mary” type move to save the company, come on guys let’s be real here! Liquid Death has only been around since 2019…achieving triple-digit growth for three consecutive years and generating $263 million in retail sales last year. It’s in over 120K retail locations and has become the fastest-growing brand in the water, flavored sparkling water, and tea categories. Liquid Death can pull that feat off because of its ability to achieve the rare feat of successfully building a truly distinct and memorable brand. Within the CPG industry, you’ll hear A LOT of entrepreneurs say, “our CPG brand this or that.” But few ever get past being simply a company that attempts to sell undifferentiated products. Yet, when you can sell a product that also brings someone an extremely desirable emotion like belonging/connection or status…you’ve done something special. But this isn’t just another one of those “I love the Liquid Death brand strategy” pieces of content…you’ve heard that story too many times already. Instead, I wanted to analyze nuanced strategic aspects about the Liquid Death “beverage identity crisis," which include the...CPG industry innovation paradox, double-edged sword effect of using known flavor systems, utilizing “lean startup” ideologies, leveraging the beautiful, underappreciated value of an online marketplace like Amazon. Liquid Death might not think “Death Dust” was a big swing, and by categorical size it wasn’t, but we are still talking about a relatively young CPG brand that missed on its first format (and I’d argue functional beverage) expansion.

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40,000 convenience store owners have spoken, and they had A LOT to say about the growing energy drinks category. And even if you aren’t super familiar with this beverage category’s sales insights, I’m sure you intuitively recognize that convenience stores are the most important in terms of channels for energy drinks in the U.S. market. But here are the top 3 biggest “categorical” takeaways from the recent Goldman Sachs Beverage Bytes survey. The first is a market reaction to what I coined “energy everything” years ago…with performance energy drinks taking share from the coffee category. The second is that CELSIUS is likely to win the most incremental shelf space in 2024…just slightly ahead of C4 Energy. And finally, is that Red Bull is losing cooler space because the brand’s proprietary coolers are being replaced by CELSIUS and C4 Energy coolers.

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I already predicted the massive MyProtein rebrand would face a “no pain, no gain” reality, so what is THG CEO Matthew Moulding all fired up about? THG (aka the company formerly known as The Hut Group) recently updated the public markets by releasing its 2024 Q1 trading statement. I’ll be utilizing that financial information, along with notes I took listening to the earnings conference call, and any relevant publicly disclosed information to obviously update you on the recent performance of THG Nutrition division that includes the world's largest online sports nutrition brand MyProtein, but also utilize everything to provide insights surrounding the global supplement markets. For those unaware, THG is self-described as “a vertically integrated, digital-first consumer brands group, retailing its own brands in beauty and nutrition, plus third-party brands, via its complete digital commerce solution, Ingenuity, to an online and global customer base.” During the first quarter of 2024, divisional revenue for THG Nutrition was approximately $188 million, which was down 5.8% YoY. Maybe what’s more concerning is that revenue dropped about 10.5% from last quarter. That’s a bit abnormal, as the “New Year, New You” Q1 seasonality boost of new buyers into the marketplace usually helps supplement companies grow revenues QoQ. So, what’s up with these poor growth rates when the overall global supplement market continues to grow? I'll dive into several things going on here at MyProtein including: its global digital sales channel strategy and retail partnerships in physical retail, integration of supply side acquisitions, the effect the previous pricing strategy had on the sports nutrition brand's customer file, and let’s just say A LOT is riding on the success of the MyProtein global rebrand. Early results of the biggest rebrand in the 20-year history of MyProtein is said to be promising in that brand awareness has grown four percentage points higher since rolling out in its home market of the UK. More importantly though…THG Nutrition leadership needs to pay close attention to key commercial metrics over the next year because to continue moving upstream in positioning (and unlocking sales channel diversification opportunities within the American market) it needs to ensure this rebranding decision is well received by and generates brand affinity with those less price-sensitive customers. Additionally, I've provided a few recent marketplace actions made by MyProtein that could be associated with unlocking future winning chess moves. Finally...I'll provide you with another funny Matthew Moulding LinkedIn moment that directly tossed shade at all the flip-flopping pundits and analysts for being stupid and suggesting THG should “sell or close the Beauty and Ingenuity divisions, and just keep Nutrition because then the company would be valued at least double.” I’m sure this is the type of stuff that the British media, financial, and business worlds hate…but it further supports my belief that it’s inevitable that all (or parts of) THG will be listed in the American stock markets soon enough.

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In today’s functional CPG market, how would you categorize what is (or isn’t) a beverage? There’s a growing format expansion trend within key functional beverage categories that's causing most consumers to provide a widening variance in definitions. But the mainstreaming version of the “beverage identity crisis” was something I started talking more about publicly during the “Great Shutdown” period because there was this perfect storm of converging factors that provided an extra tailwind for this format expansion trend within key functional CPG categories. Yet, it’s that reversed format expansion playbook direction of “ready-to-mix (RTM) powder to ready-to-drink (RTD) beverage” that I want to unpack some more for you. That’s primarily because it could very well become the dominant build model process amongst functional CPG entrepreneurs…one that we will begin seeing play out repeatedly within other growing functional CPG categories, thus causing more “beverage identity crisis” scenarios in the future. The massive mainstream success of Bang Energy consciously (or subconsciously) inspired many sports nutrition brand entrepreneurs to take the leap from pre-workout powders to energy drinks. See…those tens (or hundreds) of millions in high-margin energy drink adjacent categorical retail sales were now seen as more than numbers in a spreadsheet or bank account, but members of an audience. And it’s those powerful audiences that have become defensible competitive moats and valuable business assets for CPG brands. Admittedly, sports nutrition brands (like C4 Energy, GHOST, and Alani Nu) didn’t invent the “build an audience first strategy,” but they’ve perfectly leveraged it by also operating within the shadows of harder to track sales channels like specialty and ecommerce…where they can incubate powdered pre-workout energy supplement platforms that can then be extended into the beverage format. And the proof is in today’s retail sales data for just how disruptively successful this “build process” has become within the energy drinks market. And what should be even more scary (for at least categorical incumbents), is that below the Top 10 energy drink brands, there’s many more strong powdered pre-workout energy supplement platforms that are in different phases of beverage commercialization strategies. Oh…and surprise-surprise, this “changing of the guard” isn’t just isolated to the energy category. Albeit a few years behind, the same thing is starting to play out within the hydration category. Beyond energy and hydration, I'll also cover the last of the “Big 3” mainstream functional beverage categories because protein is a bit different. While sports drinks and energy drinks are several multiples larger in total market size compared to hydration and energy powdered supplements, ready-to-mix protein powders outsell RTD protein beverages when you consider the entire multichannel sales landscape. So, it probably begs the question…why don’t we then see the highest number of “powder to liquid” format swapping sports nutrition brand disruptors in the protein category? I'll explore those differing barriers-to-entry considerations...but explain why 2024 and 2025 could end up being filled with impressive launches by sports nutrition brands “protein powder market leaders” that have strong audiences of loyal customers. Finally, I'll analyze three other functional CPG categories (greens, relaxation, and gut health) that each should see similar blurring of categorical definitions in the next handful of years.

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Will insurgent CPG brands capture an even greater share of category growth as innovation by large companies remains limited and consumers seek meaningful value propositions? While accounting for less than 2% of market share in their respective categories, insurgent CPG brands captured nearly 20% of incremental category growth last year. And you might be asking yourself, what is an insurgent CPG brand anyways? Bain & Company defines them as those that generate more than $25 million of annual revenue in tracked sales channels, have growth more than 10 times the categorical average growth rate over the past five years, and have maintained at least 10% growth over the past two years. That analytical rubric recognized 97 brand names…some of which you’ll recognize (like GHOST, Celsius, Bloom, and RYSE) because I’ve recently recorded long-form content with its founders.

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Is it time for protein bar brands to party like it’s 2019 again? I was recently asked about shifting convenient nutrition marketplace dynamics…including some questions directed towards delivery formats. And it was the bar delivery format that seemed to draw the most curiosity within that conversation. Maybe it’s because of what happened to the protein bar category because of the “Great Lockdown.” Maybe it’s because out of bars, liquids, and powders…it has the lowest current retail sales growth rate, but the highest household penetration. Or maybe it’s because of the sharp contrast from five short years ago when the protein bar M&A market was arguably at its peak. But during 2020 and 2021, many of us industry analysts/strategists looked past the near-term categorical struggles and pointed to the fact that underlying drivers (feeding long-term secular trends) were unchanged, and the inevitable consumer behavior normalization would continue to support bar format growth. Admittedly, some of that bounce back was slower than consensus expectations, but in this content I wanted to review several “signals” that I’ve been watching over the last 15 months which could be telling us that the protein bar market is ready to party again. These flashing signals include...several converging macro-economic data points, product-based differentiation, second-order effects from the rise in GLP-1 weight loss solutions, and then the final two are more focused on the attractiveness of the space (and format) to “build within” and then dealmaking and liquidity event probabilities and possibilities.

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Sharing is caring, right? I believe that commercial-scale precision fermentation facilities will be like data centers, which eventually became ubiquitous. And, like data centers, these commercial-scale precision fermentation facilities could one day be relied upon to make a vast array of vital products. But that future might hinge on how open or closed this food technology eventually becomes. Most precision fermentation startups are heavily funded by tech billionaires and venture capitalists. Why? Boilerplate “fight climate change” answers might be used publicly, but it’s about betting on the potentially enormous upside that comes with market domination of whole commodity groups and categories. But it’s those massive private investments that subsidize early deals that help overcome consumer adoption challenges around price. So, the debate over open-source food tech research is “complicated” and I’m sure global regulatory agencies will make it worse soon.

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If you were comparing the beverage brand PRIME to a childhood toy franchise, which one do you think would be the best fit (and why)? Prime Hydration grew 510% YoY, reaching just shy of $660 million in U.S. tracked channels. If you combined with non-tracked channels (and international markets), that number would likely be north of $800 million in 2023. Furthermore, it was announced before the end of 2023 that the brand sold its one-billionth bottle in less than two years. PRIME is (or maybe the appropriate verb tense now would be “was”) a rocket ship brand. But as PRIME blasts towards officially reaching billion-dollar brand status, in terms of U.S. tracked channel retail sales in 2024…it inevitably faces the immoveable object in business finance called the “law of large numbers.” So, when you see these PRIME haters regurgitating NielsenIQ retail sales data that shows sales volume being down over the last four weeks in early March 2024…that is what’s going on, as the brand is now facing tougher comparatives. And I think I saw similar PRIME hydration retail sales data trends in the UK, so regardless of what side of the pond you’re on…it’s likely a similar storyline being propagated across mainstream (and social) media. But this content isn’t about simply providing you retail sales data trends…those numbers were just a required contextual base of knowledge that allows me to explore possible underlying drivers more easily without having everyone confused. Also, to spice things up…I’ll bring most of these underlying driver possibilities to life through a storytelling analogy with children’s toys. That being said, the celebrity/creator packaged goods trend is one that sees the most popular talent of today…becoming the biggest CPG brands of tomorrow. It’s because when you hit on the “right celebrity + right product” element, you can pull forward brand awareness to a level that takes competitors years or many millions of dollars. The major benefit of the creator packaged goods trend is that Logan Paul and KSI are masters of at winning consumer attention through today’s kingmakers…aka digital platform algorithms. Moreover, PRIME benefited from the “Liquid IV Effect” democratizing the hydration category…and because a large share of the most diehard audience of Logan Paul and KSI are under 18 years old, they’ve proven to be extremely powerful individuals in creating commercial value by injecting a level of youthful energy that made the beverage category fun, thus introducing it to a new younger demographic that wasn’t originally passionate about the sports drink market. Which brings us back to the connecting PRIME and kids toys with consumer behavior principles. And why I made the analogy with kid’s toys is that there’s well-marked patterns that created massive successes in the past. Think about key features that drive toy franchise fads…limited supply (or perceived supply constraints) that create rarity, elements of collectability, low price, and usually “made cool” because of an influential group. Do those sound like they relate to the PRIME growth story as well?

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