Hint CEO Kara Goldin on managing ‘crazy growth,’ CPG suitors, and SPACs: ‘I think it's kind of buyer beware…’
The year started on a promising note, added Goldin, who had her Eureka moment in the early 2000s after cutting up fruit and throwing it into pitchers of water to wean herself off diet soda and realizing there was nothing like it on the market (Hint has no sweeteners, preservatives, or colors; just water and natural flavors).
Buoyed by a successful Super Bowl commercial (airing February 2, 2020), San Francisco-based Hint was gearing up to launch in three major customers chainwide – Walmart, Sam’s Club, and ALDI – an “incredibly aggressive” move to pull off in the space of a few months, Goldin told FoodNavigator-USA, “And then COVID hit, and we shut down the offices in New York and San Francisco.”
As other corporations rapidly followed suit, sending an army of workers home armed with laptops and video conferencing software, it quickly became clear that Hint’s burgeoning corporate foodservice business – which accounted for 15% of its business at the time – was going to fall off a cliff.
‘Our direct to consumer business almost tripled’
While this didn’t inspire the kind of raw panic Goldin experienced in 2012 when Starbucks (which at the time accounted for 40% of Hint’s business) called her up to say it was dropping the brand, it was a sobering prospect, even if the expectation was that a good portion of that business would likely return at some point, she said.
“The question became, what can we do to move those sales into direct to consumer? We had over a million consumers in our database as of March of last year, so we sent out an email and said we have plenty of inventory, so if you're interested in ordering your favorite Hint flavor, go online and order a case directly from us, and we saw an incredible lift from that email.
“Our direct to consumer business almost tripled,” said Goldin, noting that flavored water – now a staple for many Millennials – lends itself far better to an online subscription model than meal kits or gourmet snacks.
‘They were like, wait, what, a beverage company is launching a sunscreen?’
She added: “Some of the employees at Google were drinking six or eight bottles of Hint a day, which is crazy, right? Were they eating six to eight bags of the same brand of chips every day? Probably not.
“We’re also on Amazon, but drinkhint.com is a little over 40% of our business now,” added Goldin, who says any serious CPG business today has to meet consumers wherever they are, whether that’s on Amazon, your own website, or physical locations.
“Of about 200 people that we have working at Hint, about 40 work on direct to consumer now, so it's significant.”
While shipping beverages directly to people's homes isn’t cheap, building direct relationships with consumers has been invaluable for Hint, which was inspired to take its brand in an unexpected direction in 2017 with the launch of sunscreen and deodorants following some consumer-driven conversations online, said Goldin.
“I think this threw some people into a little bit of a tizzy, they were like, wait, what, a beverage company is launching a sunscreen?” But for younger consumers in particular, she said, it was a perfectly logical adjacency for a brand they associated with wellness (the sunscreen promotes its oxybenzone- and paraben-free credentials), which for many shoppers is as much about what you’re putting onto your body as what you’re putting into it.
‘I remember going to the team and saying, Can we do this? This is crazy, right?’
Goldin won’t share revenue figures for Hint, but says they were “up almost 50%” in 2020 and doesn’t query reports estimating them at over $160m: “We are hands down the leader in the still flavored water market, which is the majority of our business.”
Amid the turmoil caused by the pandemic, some unexpected opportunities to increase bricks & mortar distribution also arose in April 2020, a time when conversations about new listings had pretty much dried up for many brands as retailers prioritized supply chain issues, she said.
“Costco – who we’ve done small bits of business with over the years - reached out and said they were running into issues with [some beverage] suppliers that couldn’t meet demand [owing to a tightening of supply for aluminum cans], and they said, would you be interested in going nationwide with us? They remembered us always talking about doing everything in the United States.
“We had just flipped the switch for Sam's Club, Walmart and ALDI, and we’d picked up more space in Target and it was kind of a daunting, scary opportunity that was presenting itself," said Goldin, who sources all of her packaging domestically, and manufactures Hint from a network of eight filling plants operated by contract manufacturers across the country.
"I remember going to the team and saying, Can we do this? This is crazy, right, on so many levels? But we all agreed we could do it, and we did it successfully.”
‘CPG companies reached out to us, but it was about taking a chess piece off the table… our missions didn’t align’
So is Goldin entertaining offers from big CPG suitors, or is Hint - which is backed by investors including SpringBoard Growth Capital and GingerBread Capital - exploring ways to raise money in the public markets?
“We don't have a relationship with Coke, Pepsi, or [Keurig] Dr Pepper [which distribute several 3rd party beverage brands that they have also invested in, or in some cases acquired] and we’re the largest, privately owned independent beverage that doesn't have that relationship, which makes us pretty unique,” said Goldin, who has raised “just over $70m” to date, which she argues “is actually pretty lean…
“There are some beverage companies out there that have either sold to the large soda companies or felt like they were forced to take money from them or build some kind of relationship with them because they couldn't figure out how to do what we did.”
As for offers, she added: “Early on, we had a lot of CPG companies and soda companies reaching out to us and more than anything it was about taking a chess piece off the table; our missions didn't align.”
SPACS: ‘I think it's kind of buyer beware’
Asked about special purpose acquisition companies (SPACs), companies with no commercial operations formed just to raise capital through an IPO for the purpose of acquiring an existing company, she said:
“There are lots of SPACs, and we've had many approaches, but you know, you could call me and say, ‘Hey, I'm going to do a SPAC, and we're going to value the company at $10bn!’ Let's say you're the SPAC, you've still got to go out and get the cash to build your pipe, so there's no guarantees [when a SPAC raises money, the people buying into the IPO do not know what the eventual acquisition target company will be].
“And I think more and more, what we're seeing is that the regulations around the SPAC market are limited and, you know, I think it's kind of buyer beware.”
She added: “We've had a crazy growth year, and we have plans to continue growing. That doesn't mean that we wouldn't go public or that we wouldn’t entertain offers, but we’re ready to continue to build a standalone company that has purpose and mission.”
“We've been doing this for 16 years, we've got incredibly patient investors.”
Sustainability and the beverage industry
Asked about sustainability and packaging, it’s a complex issue where consumers are bombarded with confusing messages and competing claims, said Goldin.
Cartons made from composite materials (plastic, paperboard, aluminum) for example, are often touted as greener than PET bottles, she observed, but if the vast majority end up in landfills or incinerators, because most recycling facilities don’t handle them, are they really more environmentally friendly?
Similarly, aluminum cans might have better recycling rates than PET or TetraPak, but much of the aluminum used in the US is sourced from China, and the production process is energy intensive and creates high greenhouse gas emissions, she claimed. Glass in turn, has good recycling rates, but it’s fragile, and heavy to transport… and so on. Which makes it extremely hard for consumers to know what is the best choice, she said.
Hint, which packages its beverages in recyclable PET plastic bottles that are manufactured on site at its co-packers' bottling facilities, is exploring alternative packaging and product formats, but for the time being, says PET is the "most balanced choice."
On the Hint website, the company makes the following admission: “We just started making a boxed drink for kids in order to compete in the format that kids drinks tend to use, but we need to be honest and tell you that we do not view this packaging as better than bottles.”