Bill Lange is coming up to two years as CEO of Roar Organic, the US hydration drinks business.
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In March, the Pennsylvania-based company secured more funding from existing backer and local investor Factory.
Roar Organic is using that fresh investment on marketing to boost distribution of its “functional” beverages, which come in ready-to-drink and powdered formats.
Just Drinks sat down with Lange to discuss Roar Organic’s growth strategy, how the way US consumers view better-for-you products is changing and the efforts by larger brands to win back market share.
Dean Best: Roar Organic has received a fresh injection of funding from local investment firm and existing backer Factory. What are your priorities for the investment?
Bill Lange (BL): I would put marketing up there first. The stat we key in on as excited as we are – and, you know, we drink our own Kool-Aid and feel like we’ve got something going – is when you look at external data, less than 1% of US households buy us today. While we’ve got great strength and great repeat, we’re still tiny and it’s good to remind ourselves of that.
We need to grow marketing, grow household penetration, grow trial. That’s the first thing but that itself unlocks the additional points of distribution. In the US, you’ve got club, convenience stores, the drug channel, mass. You’ve got fitness centres and offices. We’re not in any of those places. By investing in marketing, not only does it help our current footprint of business but that’s what’s going to unlock the growth of our future footprint.
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By GlobalDataDB: Health has been a macro trend shaping consumer demand for many years now. Do you think consumers are becoming more discerning? They’re faced with a plethora of products making varied claims. It must be more difficult to get a health-centric brand to land.
BL: There are three macro trends that I think have really lifted Roar. The first is lower sugar, which is not new but there is a high percentage of consumers, which is in the 70s, looking to reduce their sugar content.
If you look at 0g of sugar in the US, that segment of products is actually declining 14% in the latest 52 weeks. Zero to 5g is growing 27%. What that tells me is consumers want less sugar but, if it’s zero sugar, they either assume there’s something artificial that they don’t want to put in their body, or they assume there’s no flavour and no taste, so they’re not going there. We’re 2-3g of sugar for an 18oz bottle. That is the sweet spot of growth, up 27% in the last 52 weeks.
The second one is hydration. In the US, 75% of adults are chronically dehydrated. We have electrolytes but, with so much of electrolytes, the story has been through sports drinks and then you go back to the sugar trend and Gatorade and Prime. To your point, consumers are discerning and looking at labels.
Then I’d say the last thing is consumers are looking, especially post-pandemic, at true functionality. Immunity is a big piece of that. Vitamins, antioxidants are a big piece of that. I don’t know what the health equivalent of greenwashing is but I think there are a lot of brands that are positioning themselves as healthy and functional yet when you turn around the back of the label, there’s nothing. It’s gimmicky. As consumers become more discerning, that’s where Roar has a really exciting potential for the next couple of years
DB: You’re not concerned yourselves about Roar getting caught up in that?
BL: I’m not. We don’t make a tonne of claims, other than saying what — we don’t make claims of what our functionality can do for you. We just say vitamins, antioxidants, electrolytes, 100% of vitamin C and your B6, B5, B12. We say what’s in it.
What we’re seeing now is big brands who struggled in 2023 are over-investing
DB: There’s a thesis in the US that challenger brands are, once again, having their place in the sun. What’s your take on that?
BL: We felt like probably 2023 was a great opportunity for challenger brands and we saw a lot of that progress. What we’re seeing now is big brands who struggled in 2023 are over-investing. They’re spending at irresponsible levels to try and hold on to what they lost in 2023. I think there’s probably going to be a little bit of a lull in 2024.
The other thing is, as you know, the capital markets aren’t great right now. Challenger brands, while we all had momentum, now we’re seeing big brands push back a little bit harder. I feel like 2024 is a little bit of a settling out but I think by 2025 we’ll continue to see the same momentum we had in ‘23 and the six to 12 months before that.
DB: Are your retail customers expecting Roar to invest more in promotions to try to maintain its shelf space?
BL: No, I don’t know if they necessarily ask us to. They don’t come and say we need you to invest more but, when the brand next to you was on promo at ridiculous prices for long windows of time, you need to take notice. We need to be competitive and acknowledge that. I guess it’s a matter of how long can that sustain? We think there are some brands that are doing it out of desperation but will start to tail off later this year. The key thing in a challenger brand is to communicate the value you bring to the consumer so it’s not just about the price point. It’s about the price for what they’re getting and I think that’s where we feel like we’re in a good position.
DB: Factory’s funding could come in useful here, too.
BL: Oh, absolutely and we’re putting it to good use. The art more than science in an early-stage is when you push on the gas pedal and how hard you push on the gas pedal knowing that the gas pedal is not infinite. We’re already thinking about, with Factory, where we want to go next, what’s our next phase of growth and what resources and team we need to get there.
DB: What opportunities does Roar Organic have to grow its distribution in the US?
BL: If you look at ACV [all commodity volume] in the natural channel, we’re at about 61% ACV. We still have some white space to grow channel. The natural channel in the US is often the early indicator of where conventional will go. Conventional, we’re only at 50%. There’s still a lot of room to grow plus we have club, mass, drug, convenience. There’s a big retail footprint to grow.
I think in the US, for better-for-you brands, we often talk about the smile of the US – so the path from north-west California, Texas and then up the East Coast – where, with better-for-you brands, you’re talking to a slightly better-educated consumer, maybe a more premium household income, [who] care about what they put in their body. That’s where you tend to start and then you fill in the country from there.
We actually have a huge presence on QVC. That’s exciting for us because we do great business there and that is the middle of US. That’s not the ‘smile’. The middle of the country has a different vibe to it, a different income level, the products they choose maybe have a different nutritional profile. We’re crushing it with that audience. We’ll continue to focus on the ‘smile’ of the US [but] we do have the opportunity to grow as we fill in the middle.
DB: Is Roar Organic available in Canada?
BL: We are. It’s a related entity but we do have an independent team up there that works on our Canadian business. We just started going into export. We are in a couple of countries around the world and we’re pushing to expand further.
DB: Where are they?
BL: We do some business in Kuwait. We do some business in Costa Rica. We’re talking to the other countries you would expect, like Australia and Europe, but we’re still early stages on the international side.
DB: What were Roar Organic’s net sales and net income in 2023?
BL: We are call it $25m in net sales and we’re investing heavily. I won’t give you a net income number but we are investing for growth in the future. As you know, in early-stage brands, you’re always trying to structure and invest for your next phase of growth. That’s where partners like Factory really become critical.
DB: What are you forecasting for net sales this calendar year?
BL: Coming out of last year, when you look at retail, our growth was over 90%, our net sales grew 80%. Even though retail is not all of our business, our non-retail business grew at a high clip as well. This year, we’re ratcheting that down a little bit. We’ll probably be more in the 50% growth range. All of these other competitors – it’s been interesting to watch the first quarter – they’re all still down double digits while we’re up 49% in food, we’re up 48% in natural. We’re growing gangbusters, they’re down and they’re spending to try and recover from that. I think that’s going to slow a bit of our growth for this year but that’s okay: we’re not in this for 2024. This is about building a brand over time. We’re trying to take that long approach and make sure we’re making the investments now, even if they aren’t paying off until ‘25.
DB: Is the business profitable?
BL: No but that’s by design. When you’ve got momentum, let’s not go for profitability, let’s go for growth but it’s always that balance between the two. I’m confident that we could get there with our contribution margins. We just have decided we’re going to continue to pour fuel on this thing.
DB: I assume you use a co-packer for your manufacturing. Are there any plans afoot to look at the network because you’ve got these growth plans?
BL: Absolutely. Luckily, the manufacturer we are partnered with they a) have facilities all over the US but b) they have an incredible ability to scale. It’s just all about hitting those volume hurdles and deciding what the right network of manufacturing looks like. Obviously, shipping liquid is expensive but most importantly not good for the environment. We’re in dialogue with them to figure out how we build out our network so that we save costs to invest in the business but also have a different footprint.
DB: When do you think you’ll need the next round of funding?
BL: We’re evaluating that. Our partners are open to — we’ve kind of been getting funding each year but not going beyond the year and so we’re looking at ‘Do we get another few months? Do we get another 12 months?’ Or do we say ‘Okay, now is the time, let’s go big and let’s get what we need to get to profitability and breakeven.’ That’s an ongoing discussion we’re having with our investors literally right now.
