I want to welcome you back to another episode of what I’ve branded Pivotal since these interview-style segments tackle impactful CPG industry topics and lessons from the business leaders that live it EVERY DAY! At the end of 2022, when I pitched the idea to host these collaborative holistic categorical deep dive sessions with the wellness-focused data company SPINS, Scott Dicker (Market Insights Director - SPINS) and I knew we wanted to start close to our passions with a sort of sports/active nutrition industry “State of the Union.” Well…believe it or not, we are already on the fifth quarterly installment of this series…and figured it was best to give you an updated version of that original content where we run through a collection of different trending sports/active nutrition themes. In our conversation, we cover everything from the changing of the guard and fragmentation within massive categories like energy, hydration, and protein, to why the “Huberman Effect” is causing many to reorient their consumption behaviors towards healthspan optimization. Additionally, we explain how huge opportunities will come to unlocking the “post-work but before bed” wellness occasion. Moreover, we explore how overlooked ingredients of the past are getting a reframed second life with today’s active lifestyle consumers. But these are just a few of the insightful categorical themes in our recent conversation…

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During the 15-year stretch from 2004 to midway through 2019, the top three brands within the U.S. energy drinks market went unchanged (e.g. Red Bull, Monster Energy, and Rockstar Energy). But then Bang Energy blasted past Rockstar Energy that summer with a staggering 700%+ YoY growth rate…ending the 2019 calendar year at around $1.2 billion in sales. This sent shockwaves across the packaged beverage space for many reasons, but I want to focus on a particular aspect of the “Bang Effect.” It’s time we all give Bang Energy the respect it deserves for what the brand did in the late 2010s to totally disrupt the energy drinks market. A great tasting “carbonated water with sugar or sweetener, flavor, and caffeine” just wasn’t going to be enough anymore…because energy without the “plus” had started looking boring to the market! Bang Energy put Energy+ on the map, which forced Monster and Rockstar into defensive product strategy mode, and at the same time conscious (or subconsciously) inspired many sports nutrition brand entrepreneurs to take the leap from pre-workout powders to energy drinks. While I might be a bit biased considering my professional background, I've always believed the best and brightest sports nutrition brands could compete against any large CPG incumbent when it comes to functional food and beverage. Even if they won’t ever admit it publicly, large energy drinks incumbents are worried about the “often imitated, never duplicated” influential epicenter of the CPG industry…sports nutrition. Why? Well…it reminds me of something I said in a recent piece of content about the sports drinks market. Gatorade had been accustomed to fending off direct attacks from known competitors. However, what happens when the market leader must fend off a rapidly multiplying amount of legitimate indirect attacks from lesser-known competitors? Now…swap Gatorade for Red Bull and Monster Energy. What Red Bull and Monster Energy want is for new categorical entrepreneurs to follow existing energy drink category playbooks (that they created). Following that “build process” within today’s energy drinks market is almost guaranteed to fail because traditional category leaders understand how to compete against it. But now…sports nutrition brands have started to change the game. And the proof is in the pudding for how disruptively successful this “build process” has become within the energy drinks market. If we took the top 10 energy drink brands in 2023, you’d have half that were in one way, or another incubated within the sports nutrition space (e.g. Celsius, GHOST, C4 Energy, Alani Nu, and Bang Energy). If we just take those five “incubated in sports nutrition” market leaders…they generated over $3.6 billion in retail sales in 2023. Finally, consider the strong list of powdered pre-workout energy supplement platforms that are below those Top 10 energy drink brands…and in different phases of beverage commercialization strategies. A collection of names like RYSE Fuel, Bucked Up Energy, G Fuel, Recon1 Energy, and Jocko Go…that’s an aggregate of several hundred million more in energy drink retail sales. And I won’t even go one more a layer deeper because you get the point here…as this “changing of the guard” within the energy drinks space is only getting started.

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Just when you thought Amazon couldn’t up its artificial intelligence game any further, the retailing giant introduced one of its most influential resources yet. No, Autofac…I mean Amazon isn’t letting the machines lose yet, but they did introduce generative AI to one of the oldest and most important features on Amazon…customer reviews! To see this in action, let’s look at Optimum Nutrition Gold Standard Whey. The first generative AI layer you’ll notice is with an overall review summary, which is super helpful when a product has over 200K customer reviews. The second generative AI layer summarizes reviews tied to a specific common trait and then allows you to easily see the positive vs. negative customer sentiment. For supplement brands selling on Amazon, don’t get caught sleeping because this will undoubtedly affect your conversion rates.

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The Simply Good Foods Company isn’t salty with the recent performance at Quest Nutrition, but it does want more. In this latest episode, I'll utilize the 2024 Q1 Simply Good Foods Company (NASDAQ: SMPL) earnings report, earnings call, and supplemental presentations that were filed on 1/4/2024 as the backdrop to provide broad nutritional snacking market insights. In Q1 of fiscal 2024, both Atkins Nutritionals and Quest Nutrition performed well against the categorical competitors in tacked channel retail takeaway, with Quest Nutrition specifically having strong YoY growth at 20%. What's at the heart of the Quest Nutrition success? Quest Nutrition is still known for the original Quest Bar. That means the company needs the bar business to be healthy for any of this innovation risk to make sense. Here’s the good news…the core bar business is growing. In fact, this year it had tracked channel retail takeaway growth of 16%. Additionally, Quest Nutrition has proven it's one of the few brands that can successfully extend across multiple product forms...and its customer base expects them to come into an indulgent snacking category and flip it into great tasting offerings that are higher in protein (and lower in the stuff that you don’t want like carbs and sugar). The snacks segment of Quest Nutrition, which now accounts for about 45% of all measured channel retail sales, saw retail takeaway growth increase 24%. But if we take this one layer deeper…the salty side of the Quest snacks segment had quarterly retail takeaway growth of about 45%. Quest chips now make up just over 20% of the total Quest Nutrition revenue. Furthermore, around 30% of new users to the brand have come from chips. Salty snacks are where I’d argue the most excitement lies, but it’s just one bullish brand layer stacked on many other categorical ones within the Simply Good Foods Company. I think most people forget about how innovative Quest Nutrition has been since the very beginning of the brand, and its constant product innovation that has been a key driver of new buyers into the brand and increased the household penetration. So, I'd expect Quest Nutrition to be eying up several sizable conventional salty snack categories that have multichannel potential. Finally, I run through the what all the weak brand performance at Atkins Nutritionals means and what actions the company is taking to change it…especially against the backdrop of GLP-1 weight loss solutions. As part of the new CEO’s assessment of what is needed to unlock the high potential of the Atkins Nutritionals brand, a comprehensive revitalization plan was developed based on extensive consumer research.

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Republican and Democrat congressional members can’t agree on almost anything anymore. That is unless we are talking about their favorite energy drink. Vending machines sprinkled across government buildings are stocked exclusively with CELSIUS. One government staffer noted, “Congress would probably go into a government shutdown without CELSIUS.” And maybe that’s the real reason Dunkin’ recently decided to authorize merchandising the energy drink brand in store locations…because they knew “America runs on CELSIUS.” So, not only are the energy drinks used to fuel workouts and celebrate life’s best moments, CELSIUS also plays an important role in providing our nation’s lawmakers with essential energy to carry out critical work. And that diverse fandom might seem like it happened overnight, but don’t get it twisted CPG industry entrepreneurs it took CELSIUS almost two decades to become the approachable lifestyle brand it is today!

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What happens when you combine the number one brand in the convenient nutrition category, a sales channel revenue diversification opportunity with 150K U.S. locations, and a beverage portfolio that’s recently shown an affinity for strategic partnerships? If you’re an avid follower of my quarterly content that analyzes the performance of the functional CPG brand portfolio BellRing Brands (NYSE: BRBR), that introductory word problem might sound vaguely familiar. And that’s because at the very end of last month’s video, I stated Keurig Dr Pepper (NASDAQ: KDP) needs to consider entering into a strategic sales and distribution partnership with Premier Protein. The protein beverage U.S. market size is estimated to be somewhere just north of $6 billion. Outside of private label penetration, the top five largest protein beverage brands in the U.S. market would be Premier Protein, Coca-Cola owned tag team of Core Power and Fairlife, Ensure (owned by Abbott Labs), Boost (owned by Nestle), and Muscle Milk (owned by PepsiCo). If you look at the entire protein beverages market, multipack SKUs drive the bulk of the sales activity...but I’m not sure that’s ideal long-term from a consumer or market outlook perspective. When you hear players like Premier Protein talk about how the protein beverages have less than half the household penetration of protein bars, it’s used to signal a huge long-term growth opportunity. While I agree with this…you also must realize a key driver of that is the consumer cost of entry. How can brands like Premier Protein create a lower cost of entry for consumers to trial protein beverages? They need to embrace a DSD distribution strategy. With stating that…I’m also acknowledging that’s easier said than done, and it’s a two-way street that requires more of the DSD distribution network to embrace the protein beverage category. I’ve been publicly predicting KDP needs to get more protein beverage exposure since October 2021. It's that 26-month-old YouTube video that’s a bit of a cult classic within the beverage CPG space because it correctly predicted the Nutrabolt/C4 Energy deal, the La Colombe deal, and the Athletic Brewing investment. Protein was mentioned as one of the five beverage categories KDP needed to invest in over the next three years, but I didn’t predict Premier Protein as the conviction M&A target. In fact, it was the only beverage category I didn’t give a prediction because I thought protein input type created too much strategic optionality. But with KDP CEO changes upcoming in 2024, I've adjusted my previous thoughts. KDP typically seeks out sizable deals that are more complex, resulting in portfolio expansion and distribution scale. As an example, when KDP did deals for C4 Energy, La Colombe, and most recently Electrolit to fill category white spaces…those new brands create more scale and expand the KDP portfolio, which makes its capabilities become stronger. So, its drop sizes get bigger, merchandizing gets more impactful, KDP can service each store more frequently, and its commercial relationships tighten. One of the biggest areas of impact from these recent deals has been in the convenience channel. Sounds like just the thing that Premier Protein can benefit from…and they’re also the type of brand that can help feed the KDP flywheel, right?

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After decades of Gatorade sports drinks market dominance, blurring categorical lines and emerging legitimate competitors have begun to create one of the most intriguing functional CPG spaces to watch in the coming years. The overall U.S. market size of sports drinks is just shy of $13 billion…growing around 12% YoY. Increases in total household penetration, average spending per household, purchase frequency, and spends per unit/trip are driving the sales growth. The current market leader is still Gatorade, at 60% of the categorical share. But there’s no shortage of action within the sports drinks, isotonic beverages, electrolyte packets, hydration products…or whatever else people call them category. And it’s that increasingly difficult task of labeling the functional CPG category that’s arguably at the center of this sports drink market shakeup. Because Gatorade both invented modern-day sports drinks and successfully maintained being the category creator for the beverage category's first half-century, the PepsiCo owned brand pretty much defined every aspect of that category’s rulebook. The biggest threat to Gatorade over the last decade had been BodyArmor. At the peak of its sales in 2022, it reached about one-quarter the size of Gatorade. But it was a few product and sports marketing incremental innovation moves at BodyArmor that created second- and third-order effects…thus opening a whole new world of opportunities for competitors. Here's something to think about…almost all hydration category consumers consider themselves to be living an active lifestyle, but almost every hydration category consumer also isn’t a professional athlete or competing in some sporting activity. That makes the current high-intensity sports marketing not super-relatable to their lives. So, where BODYARMOR took one small step, Liquid IV took one giant leap forward in democratizing the hydration category. And it was the “Liquid IV Effect” that splintered the hydration category even further and that's the big concern by Gatorade. So, even though Gatorade is still the clear market leader right now, PepsiCo is accustomed to fending off direct attacks from known competitors. However, what happens when PepsiCo must fend off a rapidly multiplying amount of legitimate indirect attacks from lesser-known competitors? The growth of PRIME has been rapid and impactful…surpassing Electrolit in sports drink sales after less than two years in market. Electrolit "was" an indirect attack from a realitively unknown competitor...that is until the recent Keurig Dr Pepper (KDP) long-term sales and distribution partnership announcement. Additionally, sports nutrition brands like GHOST to incubate hydration powdered supplement platforms that can in the future extend into beverages is scary. And then there's also a slew of other beverage brands like Vita Coco, that I don’t think usually comes to mind in the evolving functional hydration space. But don't count out Gatorade yet, as “a wise man gets more use from his enemies than a fool from his friends.” Gatorade has been the category leader for 50+ years because they take advantage of the information competitors give.

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Maybe I’m just in the holiday spirit because our Christmas tree is right outside the door of my home office, but I’ve always considered this time of year as a high point for CPG industry marketing. I don’t think it has much to do with Christmas cheer though…instead it likely centers around the universally known fact that consumers typically buy more items…and CPG marketers must work extra hard to earn attention and dollars. That being said, one of my all-time favorite CPG marketing efforts combines Hip Hop artist Lil Jon, the Kool-Aid man, and a remix of a classic Christmas song. And if that’s not your sort of thing...maybe we show love to Coca-Cola, that has been featuring Santa Claus in holiday advertisements for almost a century.

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I consider myself extremely lucky that I didn’t ignore those topics, activities, and ideas that dominated a significant amount of my time throughout life. While I don’t think I have any special talents, I’ve been passionately curious about the intersections of those things…and that has allowed me to create this wonderful professional life today. That being said, I’m naturally drawn to people that have similar approaches to life. So, it shouldn't be of any surprise to you why Mark French and I have become friends. Currently, Mark is the CEO of the clean sports nutrition brand Don’t Quit, but his entire past is a masterclass on how living at the intersections of your passions can create massively successful results. In our conversation, we cover everything from how his intrapreneur spirit at one of the largest media companies in the world led him into his first CPG venture to those lessons being applied with the recent merger of X2 Performance and Don’t Quit Sports Nutrition. Additionally, we expand on how that business combination happened and why its synergies should be powerful within the beverage industry. Moreover, we explore the aspirational brand storytelling approach of Don’t Quit and where the powder supplement format might fit into his future strategic gameplan. But those are just some of the interesting topics we talked about in this episode...

Special thanks to Cognizin for supporting this awesome piece of content.

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What does the Republican Party’s 2012 nominee for U.S. President Mitt Romney, the thirteenth-largest global private equity firm, and a supplement brand portfolio that will likely IPO next year…have to do with each other? A LOT more than you might think! On December 13, Bain Capital signed a definitive agreement to acquire a significant stake in 1440 Foods. You might not recognize the brand portfolio name 1440 Foods, but it was created from the leftover sports and active nutrition division (i.e. Pure Protein, Body Fortress, and MET-Rx) that Nestle Health Science didn’t want in The Bountiful Company deal. Current 1440 Foods CEO is Azania Andrews, who had a 9.5-year tenure at the largest global brewer Anheuser-Busch. She most notably led business and commercial strategy for Michelob ULTRA, transforming the beer into the fastest-growing brand in America by repositioning it to focus on active lifestyles and better-for-you choices. in the last 20 months leading 1440 Foods, she has done a great job transforming what Nestle Health Sciences thought was trash by overhauling the Pure Protein and Body Fortress brands and growing all three convenient nutrition brands revenue in 2023. Yet, if all is good at 1440 Foods…why take on a major investment from Bain Capital? Last week, when any CPG pundit talked about the Bain Capital and 1440 Foods deal…they cited the PE firm’s existing CPG holdings Valeo Foods and Dessert Holdings. But that information seemed like one of those sentences thrown into a complex math problem from early grade school that tried to confuse you. Instead, the critical information (to decode what’s next) might be a bit more hidden. In the 1440 Foods and Bain Capital deal press release, they give the boilerplate reasoning for the investment…to fuel innovation, expand distribution, and build upon the strong brand momentum. Now…that might very well be the base case because, well that’s the strategic gameplan for any leading lifestyle nutrition company, but Bain Capital isn’t interested in hitting singles and doubles. The home run play is to utilize parts or all its previous Nutraceutical International (now known as The Better Being Company) playbook from the 1990s.

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