The funding round was led by Monogram Capital Partners with celebrity investors Camila Cabello, Priyanka Chopra Jonas, Nick Jonas, Joe Jonas, Kevin Jonas, Mindy Kaling, Logic, and Gwyneth Paltrow. Also contributing to the funding round were Raj and Indra Nooyi (Former CEO, PepsiCo), Anjula Acharia (Founder, A-Series Management & Investments), Payal Kadakia (Founder, ClassPass), Moj Mahdara (Serial Investor & Co-Founder, Beautycon), Paul Klein (lead singer of pop band LANY) and returning early investor Rocana Venture Partners.
The recent funding round brings Olipop's total funding to $55.9m and total valuation to $200m within three years of being on the market where it is meeting a clear consumer need: improving digestive health, a common issue for many consumers.
Approximately 60% of Americans experience a digestive issue on a weekly basis and 95% of Americans don’t reach the daily recommended intake for fiber, according to Olipop. This shortcoming is where founders and beverage entrepreneurs Ben Goodwin and Lester first spotted a market opportunity for a low-sugar, low-calorie, and high-fiber soda made with functional ingredients, including chicory root fiber.
"Prebiotics are the trend. Instead of putting more foreign bacteria into your digestive system, you’re actually much better off feeding the bacteria that’s already there," said Lester, adding researchers from Baylor College of Medicine and Purdue University concluded that the prebiotics found in Olipop increased the diversity of bacteria in the human gut microbiome, specifically bifidobacterium and short chain fatty acids.
The results were validating, said Lester, who has always prioritized scientific research into its product formulations, and will continue to adapt its formula based on the most recent gut health science.
"The goal for us really is to put together the best formula to support digestive health," he said.
Asked about the flurry of new entrants into the functional soda category also promising digestive health benefits, Lester commented that while competition is good for the business and pushes Olipop to move more quickly, he is concerned that many new brands in the space aren't pursuing the "same level of scientific rigor applied to other brands that we apply to ourselves."
Soda category positioning
When Olipop was first approaching retailers with its functional prebiotic soda, its pitch was that stores need to be investing in their digestive beverage set, which was comprised mainly of kombuchas, drinking vinegars, and wellness shots, noted Lester.
"We’ve built out our business in the digestive health set where the common thread isn't kombucha but products that offer digestive health benefits," said Lester.
After getting on store shelves, such as Target and Kroger, it came down to reaching the end consumer by positioning itself as a soda brand.
"I think what our growth comes down to is the category we’re playing in, which is the $40bn soda category as opposed to a $1bn kombucha category or $4bn sparkling water category. There’s just simply more occasions for a consumer for a soda product," said Lester.
Olipop leans heavily into traditional and nostalgic soda flavors including root beer, cola, grape, and cherry vanilla, to draw consumers into the brand.
"If you are hitting on those mainstream flavors the opportunity is much greater in terms of occasion," said Lester.
Lester said that the company will be using the funding to ramp up several areas of the business and support its forecast of reaching a $100m runrate in 2022.
Olipop said it will use the funding to develop new products, grow its team, and tap into new marketing channels including television and out-of-home advertising.
"Last year was us really preparing for scale. We’ve been really focused on going toe to toe with some of the biggest CPG brands in the world and see if we can compete with that consumer," said Lester.
"Now we feel is really the time to mainstream this category of functional soda that we’re leading that we hold a 66% share of right now, and see how far we can really take it. We’re just going to be an awesome soda, first and foremost."