3 Lessons From OLIPOP, America’s Fastest-Growing Functional Beverage Brand

A few weeks ago, I spoke with Ben Goodwin, co-founder and CEO of OLIPOP, a better-for-you soda brand putting gut health and indulgence side by side and starting to make leading soda brands pay closer attention. The brand launched in 2017, before attention to health and wellness and functional drinks became so popular. Fast forward to 2023, OLIPOP is enjoying tripe-digit growth and set to reach $200+ million in sales this year. To understand the main drivers of this success, here are a few learnings Goodwin shared with us:

1.Approach innovation from an atypical angle

There are brands that see light of day as a response to growing trends and relatively new, high-growth categories, and then there’s OLIPOP. When asked about how he thought about starting a company focused on gut health in such a competitive market back in 2017, Goodwin had a clear answer. “I was never focused on following trends. My view of innovation came from my personal journey around health, with the goal to track the emergent microbiome research, see what clinically supported options there were and build a trojan horse of what is possible.” Relying on scientific research and credibility was key to the brand, leading to a team of human gut microbiome experts translating research and findings into product development, thus able to anchor OLIPOP’s positioning and products on strong evidence and credibility.

What is also atypical is that the founders of OLIPOP decided to enter an extremely saturated and competitive category (one that is declining year-on-year), with Coca-Cola
KO
and PepsiCo
PEP
being the historic leaders and owning some of the most valuable and favorite brands in the U.S. However, OLIPOP would differentiate itself from the start, deciding it would not be part of the considerable sugar crisis in the country, leading to alarming levels of diabetes (11% of the population has diabetes in the U.S. and 38% have prediabetes according to the CDC, costing people serious health issues and the government more than $300 billion a year).

Instead, what Goodwin did from the start was develop drink formulations with much less sugar (between 2 to 5 grams vs. the average 40g), which he worked on himself. The result led to a functional formula named OLISmart containing botanicals plant fibers and prebiotics, all chosen for their proven positive impact on digestive health. And given that soda is the second most price-inelastic product, he could afford charging a slight premium for these innovative, healthier sodas.

2.Tap into emotions to drive customer affinity

OLIPOP’s branding and positioning is quite unique, and probably a key reason behind the brand’s success. Despite being created with the clear intent of being a healthier alternative to mainstream sodas and providing the added benefit of microbiome health, Goodwin admits he doesn’t want his drinks to be labeled as just healthy, functional beverages, which would harm the brand’s penetration. “Consumers don’t want to have the health-related information too broadcasted. There’s enough to know that the brand is healthy, so there is no need to add more: stressing too much the health component interrupts the indulgent part.” Fiber and prebiotic ingredients are mentioned on the cans, as well as a claim that each can “supports digestive health,” but the overall branding is highly joyful, colorful and with a touch of nostalgia.

“OLIPOP is leveraging deep childhood memories and our aim was to tap into nostalgia and shared social moments,” shares Goodwin. Indeed, after conducting consumer research, findings showed that it helps to speak to both joyful nostalgia and comfort. According to him, older generations have always associated soda with joy but also enjoy discovery, which drove the development of a wide range of flavors, from the classic cola and root beer to tropical punch, ginger and lemon or strawberry vanilla, amongst others. Millenials seek soda for comfort, while GenZ are more permissive with occasional consumption of unhealthy products, but they are very conscious of their mental health. Olipop manages to speak to these three generations, regardless of their consumption of traditional sodas.

The brands’ main consumer group is individuals who had to stop traditional soda consumption for health reasons, with 10% of them now fully converted to the brand. Research showed that once consumers try the brand, they clearly love it: repeat purchase rate is 2.5X that of the standard rate for beverages within grocery retail. In fact, OLIPOP’s root beer surpassed A&W root beer this year, making it the most popular root beer in the U.S.

3. Diversify distribution to cater to a mainstream audience

OLIPOP started with select health stores before quickly aiming to go national and beyond the niche health and wellness audience. “We wanted to make our sodas mainstream, and available to customers regardless of which state they’re in,” says Goodwin. The goal was clearly never to be a functional brand catering to the health and wellness enthusiasts only, but to address a mainstream audience that is aware and/or affected by the negative consequences of soda drinking. In a few years, OLIPOP’s distribution grew tremendously: in addition to being present at Wholefoods, Walmart, Publix and Target as well as local healthy stores and food chains like Sweetgreen, it is also gaining momentum from the club channel through Sam’s Club, and is planning to enter the convenience channel soon.

Direct-to-consumer also represents a good amount of sales for the brand, with 15-20% of revenue coming from its website. The role of its e-commerce channel is mostly for loyalty and retention: most sales are driven by subscription, marking the brand’s strong fanbase of customers who, as Goodwin admits, represents OLIPOP’s biggest advocates. The brand has also successfully managed to use SMS marketing to boost sales of new product launches, an atypical yet successful method so far.

The issue with today’s “healthy” and functional brands is that they are quite niche and too focused on health, creating imminent barriers to purchase from consumers who aren’t part of the small niche of highly health-conscious individuals. By approaching innovation from a genuine angle, balancing traditional consumption drivers with better-for-you offerings and having a holistic, robust distribution strategy, OLIPOP has managed to bridge the gap between traditional soft drinks and healthy, gut-friendly beverages with fun, colorful, tasty drinks that are definitely starting to throw shade at the historic players in the category.