New Billion Dollar Companies Forming in the Beverage Industry

March 08, 2017 - By: Baystreet Staff


We continue our examination of the healthy, functional beverages market in this update to our February 14th, 2016 research report. In our last piece, we discussed how the largest producers of consumer beverages, companies like the Coca-Cola Company (KO), and PepsiCo (PEP) have been diversifying their product offerings through the acquisition of smaller companies offering low-sugar, healthier beverages.

When looking at the Coca-Cola Company’s recent acquisitions, it becomes clear that Coca-Cola looks to acquire companies that are category makers. A category maker refers to a company pioneering the development of a new functional product category. Examples include VitaminWater with its enhanced water line of drinks, ZICO with its coconut water, and Suja Life a cold-pressed juice manufacturer; Coca-Cola acquired all three of these companies for substantial premiums. To be sure, PepsiCo has also been acquiring these new market leaders, most notably Naked Brand Juice for a staggering figure of $450 million, and probiotic drink-maker KeVita for $200 million in 2016.

In this report, we examine some smaller, publicly traded beverage players that are demonstrating the same category maker potential seen in the companies acquired by Coca-Cola and Pepsi.

We currently note three major trends in the beverage industry that are setting up to be major new drink categories.

Calorie Burning

With consumers growing increasingly health conscious, consumer interest has started to develop around beverages designed to aid weight loss. Celsius Holdings, Inc. (CELH) has pioneered the first calorie-burning beverage by combining certain natural ingredients (green tea leaf extract, caffeine, taurine, and guarana) to raise body temperature and metabolism. The vegan drinks containing no sugar, no high-fructose corn syrup, no aspartame, no preservatives, no artificial flavors or colors, and no gluten have propelled the company to be the leader in this growing category.

Smart money has started to position itself around this potential blockbuster. In April 2015, an investor group led by Russell and Kimora Simmons invested $16M into the Company. Mr. Li Ka-Shing, the richest man in Asia, also participated in the investment round through his Hong-Kong based private investment arm, Horizon Ventures.

Another billionaire investor, Carl DeSantis has been an investor since 2007. Mr. DeSantis founded Rexall Sundown and grew it into the world’s leading Vitamin Company. Mr. DeSantis sold Rexall Sundown for $1.8 billion in 2000.

Celsius’ sales are beginning to see the explosive growth of calorie burning drinks. Since 2013, CELH’s sales have grown 120%, and as of Q3-2016, the company reported annual sales of $23.2M, citing its first profitable quarter.

Probiotic Drinks with Kombucha

New Age Beverages Corp. (NBEV) has developed a well-rounded portfolio of probiotic drinks showcasing the properties of Kombucha. Kombucha, widely known for years for its benefits in digestive and intestinal health, has recently broken out to become one of the fastest growing product categories for consumer beverages.

Although New Age Beverages Corp began as a micro-craft brewery project, the company saw the opportunity in kombucha and quickly acquired a national kombucha distributor called Bucha Live in 2015. The Bucha Live brand is notably differentiated from other kombucha beverages due to its lack of the traditional taste of vinegar. As a result, Bucha Live beverages have found popularity with new kombucha initiates, being sold primarily on the West Coast of the U.S. in national chains such as Krogers and Whole Foods.

With its differentiated products and the continuing growth of the Kombucha craze, NBEV has seen considerable success. The company recently uplisted to the NASDAQ with a $15 million offering, with share price climbing 165% in just the last quarter of 2016.

Vegan Or Dairy-Free Protein

Over the last decade, there has been a surge in awareness in formerly unnoticed or ignored health concerns. These concerns include celiac disease related gluten intolerance, use of antibiotics in food, inclusion of high-fructose corn syrup in drinks, among many others. Fortunately, the increased awareness has allowed to the creation of many new companies offering alternatives conforming to the specific needs of each consumer. Recently, the marketplace has begun to look for new alternatives to whey protein. Despite comprising the majority of the protein supplement market, whey protein is unsuitable to lactose-tolerant individuals. In addition, vegans are unable to consume whey protein. As a result, a substantial market opportunity is starting to develop around high quality vegan protein.

With a new vegan protein drink supplement ready to deploy, Zivo Bioscience, Inc. (ZIVO) is starting to excited many investors. This Michigan-based company develops and commercializes nutritional compounds, created through its proprietary algae strains. Zivo’s algae technology has demonstrated broad potential across multiple fields, with numerous signed JV agreements in the nutraceutical and pharmaceutical sectors in both humans and animals.

In December 2016, Zivo announced their new protein additive, boasting a first-in-class profile that is non-dairy, non-GMO, vegan, and high in dietary fiber. These features offer meaningful differentiation in today’s protein supplement market, and pose a major competitive risk to the incumbent whey protein companies. With over $4.7 billion in global sales in 2015, the protein powder market has never been larger, hinting towards the substantial opportunity in vegan protein.

ZIVO is already up 35% since November since the company announced the creation of their new additive, and could go higher as they announce new beverage partnerships.

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One Equity Stocks is a leading provider of research on publicly traded emerging growth companies. Our team is comprised of sophisticated financial professionals that strive to find the companies and management teams that will outperform the market and deliver investment returns to our subscribers. We are not a licensed broker dealer and do not publish investment advice and remind readers that investing involves considerable risk. One Equity Stocks encourages all readers to carefully review the SEC filings of any issuers we cover and consult with an investment professional before making any investment decisions. One Equity Stocks is a for profit business and usually has a financial relationship with issuers we cover. In the case of ZIVO, we have been compensated $2,500 for research services. One Equity Stocks nor any of its principals or affiliates has a position in ZIVO.

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