From $1M To $500M In Five Years, Olipop's Explosive Growth Is No Accident

0:28Hola老朋友 ,民是 It's not a stretch to say that Olipop's explosive growth has altered the beverage landscape. The prebiotic drink company markets one of the fastest-growing beverage brands in recent years and pioneered the breakout category of functional low-calorie soda. Co-founded by industry veterans Ben Goodwin and David Lester in 2018, Olipop is expected to generate$500 million in revenue this year and is sold in over 35 ,000 retail stores across the U.S., including major chains Walmart, Target, Whole Foods, Publix, Kroger, and Costco. Remarkably, the company is also profitable. Olipop's rise, fueled by Gen Z consumers seeking a healthier alternative to legacy libations, spur the launch of dozens of new entrances into the space.

1:20Strategic companies have, expectedly, taken note. Olipop's ascent is not common, but the co-founders' adherence to business fundamentals, simple and clear messaging, and mission-driven values have given the brand a foundation on which it has flourished. In the following interview, Ben and David spoke about how Olipop's gradual embrace of the word soda has helped the brand's resonance with consumers, why marketing strategy doesn't lean heavily into education about the product's functional benefit, why they say that the brand's mission and economic outcome, quote, will forever be entwined, their perspective on alignment with or a sale to a beverage conglomerate, and why they strive to be, quote, experts in the leadership of their business.

2:11Hey, folks, it's Ray with Taste Radio. Right now, I am supremely honored to be sitting down with Ben Goodwin and David Lester, the co-founders of Olipop. Ben, great to see you. How are you? Ray, thanks for having us. Excited to be here. For sure. David, great to see you as well. You too, mate. Yeah, thanks for having us. Yeah, it's been a little over four years since we last had you on Taste Radio. Not much has changed in your lives. It's pretty much the same company that it was in 2020. And I just wanted to have you back for kind of a check-in on how things are going. Yeah, it's pretty quiet over here.

2:46So you're helping to break up our day. I appreciate that. David, where are you now? I felt like both of you were based in LA when we last spoke, but maybe I was wrong. We were in the Bay Area. Yeah. So both of us, we started out there and I'm now in Atlanta. We've been here for four years with the kids. It's really nice. Nice. Nice. And Ben, you're up in Portland, Oregon. Is that right? Close. I'm in Southern Washington on the Columbia River. So it's like 30 minutes outside of Portland, but the taxes are better on the side of the river. and I live in a really beautiful little farmy spot, which I like.

3:23Do you get to mix up some music out there in peace and quiet? Yes, I do. My studio is on the other side of this wall. It was like a bonus room that they unearthed while they were renovating the house. And it's just, it's concrete walls. And I was like, this is perfect. This is exactly what I was looking for. If listeners don't know what we're talking about, it's because Ben, unbeknownst to me until recently, is a DJ specializing in deep house. Is that right? Yeah. I mean, house techno, down tempo, not that anybody really cares, but it's not really the like EDME stuff that has taken off. It's more kind of underground.

4:03I used to throw raves and warehouse parties in my late teens and early twenties and the spirit has not died for me. But it's not necessarily rave music. I mean, it's the kind of music that you can listen to at your desk while you're doing some work. Just, you know, something to keep your blood going. Yeah, though, I will say I did DJ our end of year party last year. Oh boy. Yeah, I know. I was very nervous. It was something that got suggested and I turned it down at first. I was like, look, I don't want to be the CEO that forces everybody to like listen to his music. And, you know, maybe that still would have been the right call.

4:42I have no idea. At the end of the day, it was really fun. At least I had fun. And we actually got the dance floor pretty packed out. So I'm sharing the music where it seems reasonably appropriate. I can't tell, based on David's reaction, how the company felt about it. He's pretty stone-faced. I mean, like... No, it was lit. You know, all the younger people in the company were enjoying it. And I was on the dance floor as well. Ben and I actually, when we first met over a decade ago, and this is kind of typical of Ben and I, because we're quite, I imagine, to people. We spent a lot of time speaking about music and then a little bit of time speaking about how to start a company and then music again for a bit.

5:24And we've been to see some good gigs together as well, including an infamous one going to see Underworld. But Ben was very annoyed that I was talking to him too much through the performance. It's a very rare treat to see one of David and I's favorite groups of all time. David gets a couple under his belt and then it turns into a discourse. and it turns out that you listen to music with your ears. So it really is shooting signals. Jeez, I always thought you listened to music with your eyes, but no. I know, not everybody knows, but... I'd love to see Olipop sponsoring a Tomorrowland at some point in the near future.

6:01That might be fun for you guys. Never say never, my friend. Okay, all right. Well, David, you referenced the kids and it seems like the kids love Olipop these days. Well, they've always loved Olipop. And it's not, I think, because it is a soda brand per se, but I think they consume it the same way that past generations consume soda. They do it often. They talk about it in a variety of settings, whether it's for lunch or just a snack or, you know, out with friends. And it's really interesting to me because when we first spoke, this word soda was actually a bad word. I was listening to that episode of ours and the description that you guys gave was it was the healthy alternative to soda.

6:51But I think it was just a few months later that you trademarked the term a new kind of soda. When did you guys realize that you needed to go all in on that four letter word? And what gave you the confidence that it was the right thing to do? Yeah, I mean, I'll take an initial crack, but I know David will have a lot of thoughts about this as well. I mean, it was interesting because, and maybe we discussed this on the last foray, you know, we, David and I had a beverage venture together prior as well called Obi, and we had actually called it a probiotic soda because more or less, we've been kind of tinkering in the space for a while.

7:30And Ollipop obviously launched the kind of current functional soda category, but there were kind of the early version of it in OB. And at that time, we actually called it a probiotic soda. And we were getting some pushback from our consumers. However, it was a substantially smaller company, about 500 times smaller. So we were mostly selling the product around when we had actually launched it, which was also the Bay area. And so we were predominantly addressing a coastal consumer. And we were addressing a coastal consumer that was, you know, this is like eight, 10 years ago or something along those lines.

8:09And at that time, it was the case that a lot of the especially the health conscious coastal consumers, our experience was they didn't like the word soda, but they they love the way it tasted. And they were open to the concept, we just had to finigle a little bit. So when we launched Olipop, we took soda off the pack. We called it sparkling tonic. That's also not untrue. That's just a different way to kind of describe what the product is. However, in the name Olipop, you've obviously got pop. And pop is the way that pretty much the entirety of the Midwest refers to soda. And we had kind of this hypothesis that the Midwest would actually be more open to the idea of a healthy soda, whereas the coastal territories probably needed more time to wrap their heads around it.

8:54However, as the category started to build up some momentum, I think there was actually a shift amongst even kind of your coastal consumers, where all of a sudden, the idea that this was a new category, that this was a thing that had healthy and function in it, generated that permissibility. And we were just able to switch over and say, look, we can just call it a soda for everybody now, because there's enough of a baseline understanding nationally to switch some of the verbiage. But you know what they call soda in the South, Ben? Coke. Can they call it Coke? I mean, I guess you could have gotten away with calling it Ollie Coke.

9:30I mean, maybe that'll be the name. We'll check. I'm sure it's fine. Okay. David, I'm sorry to interrupt you there. But yeah, I mean, your thoughts on the word and why it's such an important term for Ollie Pop these days. in my experience with innovation you're seeing consumer goods consumers going to put you somewhere right if they don't know where to put you it's too hard and from the beginning we were clear of leaning in semiotically to soda but we were a little you know hesitant events that around putting soda front and center on the pack and we've gained confidence in that i think change perceptions around it too i mean if you look at the history of the soda category you know it's gone through a couple of evolutions it it started off as a health tonic you know changed over the years and you know to a certain degree we're changing it back you know it's kind of a third wave of soda if you like so you know as the brand has grown as our awareness has grown you know as we've educated consumers around you know what soda can be we've really leaned into it and yeah i'd say consumers firmly understand us as a soda brand that's our main kind of source of volume and where people position us in the category as well.

10:47And obviously a huge opportunity with the addressable market there as well. But is a soda brand very different from what exists as a traditional soda out there? And the price reflects that. Olipop is a premium priced product and compared to a Coke or a Pepsi, it's significantly more expensive. That's the wrong term. I don't want to say significantly more expensive. It just costs more. And there's a reason for that. You use better ingredients. You use more expensive ingredients than what you might find in a traditional soda. But you have to explain that to consumers. How has your marketing evolved to the point where you're calling yourself a soda, but you're also having to explain to consumers why it's more expensive because of the ingredients inside?

11:34You know, that's interesting because I don't know that we have ever actually gone through a crisis where we've felt like we have to explain it to customers. In fact, it's interesting. The more I've gone down this road, we'll be in retailer meetings and they're really well-intentioned. And I totally understand the place people are coming from. A lot of times it's going to get the question or it's taken as this kind of common sense thing like, tell me how you're going to educate the consumer. And you obviously can't have no plan to educate the consumer. But if the foundation of your ability to sell your product is actually tied to educating the consumer, you're actually like you're pushing a rock uphill.

12:20I think one of the things that's been very helpful about our product is the fact that as a concept, it's mentally intriguing, and it's a bit sticky, right? So what is this healthy soda that feels like a contradiction. But once you start to interact with it, it's actually incredibly self-explanatory. Like, oh, the pack design is telling me it's fun. It's telling me that it's healthy, but it's telling me that it's fun first. I drink it. Wow, that really matches that soda experience that obviously 97 % of households in the US interact with. And then, oh, I get it. It's like a healthier version for me.

12:55And then obviously, some of our more core customers are going to do a deeper dive and explore the ingredients more or understand, hey, this quantity of fiber actually makes a big difference. But I think a lot of times that exploration, to a certain extent, is self-guided. And a lot of it, I think, comes off the back of a customer that has already been provided value and has, to a certain extent, started to become enamored with your product. Whereas if you went out proactively and started trying to hammer people over the head with your health messaging or relied on, I need to drive education before I developed an emotional connection or value, then I think you'd actually have a much harder time of it.

13:34And, you know, additionally, I would say that the other thing that Olipop capitalizes on is the fact that there's a massive underlying demand that consumers have, right, which is, you do have this in the US$42 billion industry with, and David just referenced it, 150 years of history in the United States, It's extremely deep as a category. And so you have all these customers who love, love, love and grew up with soda, but now have a really conflicted relationship with it. And Olipop really helps to resolve that pain and really provide somebody with that full experience, but they're not trading in their short or long-term health.

14:13In fact, they're doing the opposite. They're investing in their health. And so you plop a pain resolution system like that into a category that has the second highest price in elasticity in beverage behind only coffee. And you actually have an equation that works pretty well. Ben, along those lines, I think about their customers, the typical customer, at least from my perspective of Olipop, and that's the Gen Z consumer, the Gen Z customer. And the whole idea of nostalgia as being important to that generation is really interesting to me. and the way that Olipop has incorporated nostalgia into its branding, its package design, into its flavors since the beginning seems like it was a perfect fit.

15:07But you were way ahead of it. I mean, you know, even before someone was saying, oh yeah, like the whole throwback nostalgia is really appealing to kids these days. I mean, you were already there. Did you know? I mean, did you have a sense that this was going to be an appealing characteristic and appealing part of the brand to this segment of consumers? 100%. I mean, David and I had a lot of conversations. One of the things that we landed on thematically was effectively like modern nostalgia. That is a framework that is really important to the brand. And yeah, it is the case that younger consumers do really enjoy things that seem retro, that have a nostalgic component to them.

15:55You know, it's interesting, the Ollipop flavors, they have nostalgic elements to the formulas. And then they also have these kind of redefinitions that are ownable for the brand. So there's that modern nostalgia actually takes place inside of the liquid as well. But, you know, nostalgia also and emotional comfort are very universal human need states, right? They affect so many different layers of our life and our existence. So you want to build your brand platform, especially if you're going after opportunities large as Soda. You want to build your brand platform so that it works with core audiences that are going to be important to you.

16:34But I also argue that you want to make sure that you're building a framework that is pretty universal and will stand the test of time. Something like modern nostalgia is going to work for the next generations that come beyond Gen Z and Gen Alpha. But it also works for in kind of a big tent way with millennials and up the chain as well. And that's, again, that's really important because we do technically over-index on Gen Z, but we also pull pretty significant numbers with older demos as well. And that's great because Soda itself is a big tent category, and you want to be able to play in all these different demographics.

17:10You know, there's a huge emotional reservoir in the Soda category. And for us, it was important to tap that. consumer behavior change is very difficult. And so if you're telling people, stop doing this thing that you're familiar with and do this completely new thing, that's hard. And so, you know, for us, we were changing one thing, which is the ingredients, but everything else, you know, that people love about soda, we're keeping the same. And we wanted to celebrate that and meet consumers where they are and, you know, not take away the aspects of the category that people love. so i gotta ask and i'm sure you get this question all the time if most people are buying your product because it's fun because it tastes great because it makes them feel a certain way and i don't mean functionally but just makes them feel a certain way in their in their daily lives as a part of their lifestyles then why is the functional ingredient so important why is it so important to keep as a part of the brand?

18:11Your chief rival has stated that they're going to remove that functional benefit from their product. So why keep it in there? There's a lot of layers to this answer to this question. And I'm sure David and I are both going to have something to say about it. But look, from our perspective, we are a mission driven company. So the mission and the economic outcome of this business will forever be entwined. And the thing that gives us the extra rocket fuel in our daily endeavors and for the team, and I also think with a lot of our customers, is the fact that we are looking to make an impact at scale.

18:52Now, arguably, there is some intrinsic impact in migrating consumers away from traditional soda by itself. And that's awesome. But the goal of functional soda, and again, we founded the category. So we feel pretty confident in our ability to speak to the goals behind functional soda is actually to not just be a neutral offering, but to be a contributory offering. And it certainly isn't going to negatively impact you to have that. In theory, it's higher risk. You actually have to do the work. You've got to do the research. You have to put adequate amounts of the right ingredients and store it correctly so that it's actually stable and gets to the customers in the way that you have communicated to them.

19:34But all that is actually the right thing to do if your goal is to shift human health at scale, which really is the framework behind our brand. Now, there's all sorts of business reasons that go along with that kind of underlying mission that have utility. So, for example, one of the reasons why we have invested so significantly in a scientific advisory board and in in vitro research and stability research with Purdue University is because we want to be able to continue to communicate around functional benefits. And we want to survive the scrutiny from regulatory lens and from a media lens deep into the future, right?

20:12We have so many customers that write into us that are pretty profoundly benefited by our product. And the last thing that I would be interested in doing is either hoodwinking them or letting them down by removing out something that they've actually come to rely on. So I think there's a lot of utility for it for the business in a myriad of ways. But most importantly, it's literally why we founded the category and why we founded our product. I think it's very well articulated by Ben there. And Ben and I have been working together for over 10 years. And, you know, one of the things that inspired me to join Ben was his focus on mission and impact.

20:54And it's inspired a lot of the other people who've joined our business and our investors and our customers, as Ben said. And, you know, talking to some of the sort of commercial benefits Ben was referencing, you know, you said yourself, right, like this product costs more than, you know, regular soda. And, you know, what we're proving out is we have a value proposition that works for people at that price point. We're selling at scale and mass retailers like Walmart and Target. And what is it that makes up the components of that value proposition? I mean, the product tastes amazing. Ben is a very gifted formulator.

21:29That's definitely the case. I think emotionally, there's real benefit there as well in terms of that little moment of joy that we provide people with in their day. And I think the function also plays a critical role in that too. And our viewpoint is that that will be increasingly more so. So it's allowed us to grow in a very sustainable way without a lot of discounting or trade spend. We're in a fortunate position that we're now profitable this year as well. So all these components and the effort that goes behind it, it's not easy, as Ben said. There's a lot of work gone into it over the years.

22:01But we think they're really important in terms of value proposition that we're providing and why consumers are so willing to spend on this product. And it kind of shows out in the data as well. I think in the category, eights of the top 10 SKUs within the functional sodium catch care or Ollipop. I definitely get a little, and I'm not, that's not what's happening in this environment, but there's certainly certain instances where I get a little bit frustrated with the cynicism. And I think we should all be a little bit frustrated with the cynicism. You know, the reality is that according to the CDC, 40 % of Americans have type 2 diabetes or pre-diabetes, right?

22:3870 % plus of Americans have weekly digestive distress. And the vast majority of Americans are on one or multiple prescription medications to try to address all these real world problems. And there really is a valid opportunity to shift public health at large, which alleviates a lot of suffering, alleviates a lot of revenue burden on the tax system, on the medical system. I mean, our levels of disease are so high, it is a national security risk. And so you have these opportunities to help address that with the food that we're putting into our bodies, and the drinks that we're consuming. And if we kind of spiral into this, this like cynical headspace of, well, most of the health and wellness products that are out there, they kind of they say one thing to build a big business off the back of it, then they get challenged, and they pull their claims, and they pull their functional ingredients, because it's safer.

23:31Okay, fine. But what are we going to do about all of these people who have really serious health issues? You know, our goal is simply to say, it has been from the beginning, so you can build an amazing, profitable, rapidly growing firestorm of a business. You can also do it the right way and put your money where your mouth is when you're delivering value to your consumers. And if you marry it correctly, that will actually be rocket fuel to your business, not a burden. And we want to set that standard for the health and wellness industry. So they've got a case study. They realize like, not only can we do it too, but actually be advantageous to our business to do it.

24:10And if we don't move to that place, CDC else predicts that by 2050, 1.3 billion people globally will have type 2 diabetes, a completely preventable or predominantly preventable lifestyle disease. So that's why it's so important to us that we actually make a real dent and kind to shift this narrative. You're preaching to the choir, Ben. I mean, we talk about this on the podcast often, which is healthy products aren't as ubiquitous as they should be. And a lot of it has to do, in my opinion, with the fact that big companies, big CPG, doesn't really have a vested interest in acquiring brands that are doing better for humanity.

24:52Let's call it what it is. But to be everywhere, to get to more places, it seems like an alignment with a strategic company is inevitable. It has to be. And I mean, I think this is the elephant in the room, right? You know, if Coke or Pepsi or Kirk Dr. Pepper is knocking on your door and saying, hey, we can take you from here to everywhere. I mean, that's pretty powerful, right? But the problem is they might turn around and say, oh, well, you know what? this whole fiber benefit isn't really going to work for us. And you can't control that. So when you're thinking about the future of Olipop, how much of that plays into your perspective?

25:32How much of that plays into your thinking that, you know, we have to be independent for as long as possible, because inevitably, if we do sell, it's gonna be a different brand, it's gonna be a different product. Yeah, that's a fair question. And actually, by the way, I really like how you framed that question, because we've gotten asked versions of that, but I actually really, really liked your framing. So I appreciate that. You know, look, for us, first of all, there are obviously a handful of different routes you can go. You know, when you've raised enough investor capital, it's difficult to stay private.

26:02But there's an exit, there's an IPO, there's a range of different things that you can do. And certainly where we sit now, we're keeping all of our options on the table. The other thing we're doing is we're managing triple digit growth every year. Back one year, we almost had quadruple digit growth. So that's kept us quite busy. Economic pressures and efficiency pressures are going to be levied against your business, irrespective of whether or not you enter into a strategic relationship or you go public. That's the nature of scaled business. But how you respond to those pressures or how you prep your business for those pressures, I think can make all the difference, right?

26:41So there are ways to scale efficiency against procurement, ways to scale efficiency against co-manufacturing. I think there's also ways to ensure that the consumer base, this goes actually right back to David's point, which I think was a really good one, around ensuring that there is a understanding in terms of the relationship that's driving your brand, right? Because I think oftentimes in these hypothetical scenarios where there's a bit of a gutting that can happen around the functional offering, there wasn't, for example, like a bunch of scientific research behind that functional offering. You know, one of the things that we're doing right now is we've actually, and you would have seen this in the Bloomberg spot, but we've entered into a handful of different insurance reimbursement networks.

27:25And there's two sides of those reimbursement networks. There's kind of the food is medicine side, and there's the food is engagement side. The food is engagement side allows you to actually work with insurance companies to kind of incentivize around preventative measures. And that's actually a really interesting business model there. But all of a sudden, if you build a couple hundred million dollar section of your business, in theory, that starts to go into these kind of differentiated spaces, but the functionality of your product, the ability for it to actually be proven out with real research is fundamentally tied to this really interesting routes to market growing and staying activated, you might find yourself in a fully different equation.

28:05So I think there are ways to really kind of mindfully build your business. And there's ways to build your distribution. And there's ways to build your brand and your communications to your customers. And so that is a cumulative whole kind of no matter where you go, can generate a differentiated outcome than what I agree with you does, sadly, often happen. I think it's worth noting as well that what is important for everybody commercially is they look at high growth brands and categories is, you know, what's the equation that's driving that growth? And nobody wants to kill that, right? So if you look at that energy category, for example, you have Red Bull as an independent company, you have, you know, Monster Celsius in partnership with, you know, Coca Pepsi, nobody has removed the functional ingredient from those products.