Hitting home runs since the NAMA Show, Launch Hydrate offers more than one revenue channel for operators

No time to listen? Prefer to read? Here is an edited podcast transcript:

Bob Tullio: Every once in a while, a product comes along that grabs my attention for a variety of reasons. In the case of Launch Hydrate, it’s the way the drink came to the market that fascinates me.

From the ballpark to the NAMA Show to the workplace, Dillon Houston, with a little help from industry consultant Josh Rosenberg, has this hydration replenisher with some special features built in, prepared to compete with the big players in their category.

Dillon Houstoun: We started Launch Hydrate almost two years ago, when Perfect Game, the largest travel baseball organization in the country, came to us to create a better sports strength for their two and a half million athletes.

Bob Tullio: These athletes are youth sports athletes? What age category, typically?

Dillon Houstoun: It’s between eight and 18.

Bob Tullio: Okay.

Dillon Houstoun: And so, we created an isotonic with youth athletes in mind that was not only better for you but also offered improved performance. We then spent the first year penetrating Perfect Game's facilities and selling through concessions at their over 20,000 tournaments nationwide.

We then began to use vending operators to help service some of these facilities and also place it in their markets and smart coolers. And we saw that the demand for a clean-label, performance-focused isotonic that we saw in the youth sports space translated into the workplace. We have a product that has performed exceptionally well within this channel, as well as are offering the ability to add other points of distribution and increase revenue for vending operators through the youth sports concessions.

Bob Tullio: So, did you sell out of vending machines typically in these locations at the tournaments or was it through the concession stands?

Dillon Houstoun: In the tournaments, it was through the concession stands. We do sell it through smart coolers and vending machines through some of the training facilities and indoor practice facilities.

Bob Tullio: We’re joined now by Josh Rosenberg of Forward Thinkers, who’s been deeply involved in the marketing and branding at Launch Hydrate. And Josh, I know you’ve expressed, you feel that the changing demographic in the workplace is creating a perfect condition for Launch Hydrate.

Josh Rosenberg: In 2024, Gen Z overtook Baby Boomers in the workplace. And Millennials, 50 million in the workplace. Baby Boomers, only 17 million in the workplace. We’re a channel that, for the longest time, we were stuck on price. We were stuck on staple brands.

Now it’s about clean label. People are focused on what they’re putting in, what they’re consuming and this brand hits those markers. They’re focused on functional beverage. They’re focused on hydration. They’re focused on, “What can I get out of what I’m consuming?” And our brand does that in hydration. It does that in focus, and it does that in energy. The ingredients are there, the label's there. And at the same time, we use ingredients like cane sugar. We don’t have any artificial ingredients. Zero dyes.

So, it hits on a lot of markers. And that’s critical, I think, for today’s workplace consumer. It’s why our partner, Perfect Game, came to us and asked us to build this beverage. Why we’ve had great success in the youth marketplace where we’re selling equal to or greater than our competitive brands like Gatorade or Powerade. But when we come into the workplace, we’ve actually found that our velocity of our brand, with less space, can sell equal to a Powerade.

We’re increasing the category by 19% while only contributing to 25% of shelf space. That’s incredible. And we’re a dollar higher on average retail. So, we’re bringing more dollars to the operator. We’re bringing category growth, new sales to the operator — something everybody is looking for, which is share of wallet. That means we’re bringing consumers in or consumers back that they’re not often seeing. And that’s a win-win for everybody.

Bob Tullio: What’s happened is you started out as a functional beverage that was designed to serve youth sports, and it has transformed now into really a premium functional beverage. And you see a great place for it in C-stores, and in the workplace environment? Have you had success in C-stores so far?

Josh Rosenberg: We’re not even looking at C-stores. We’re an at work and at play beverage. And the reason for that is because we had such success at play. Who brings the kid to play? Mom or dad. Now we want to hit them on the other part of the clock. You think about the share of stomach and the overall clock. We’re at work or we’re at play, for the majority of our time and day.

We’re creating a swell, a demand, and that demand is going to bring us to retail. And most brands, the last 15 years and 30 years in the beverage industry, most brands that have gone and they’ve tried to — other than maybe Prime, where they use social media to drive a craze, and we’ve seen how that’s gone — but other brands go and they pay to play. They force themselves under the retail shelf, and they win or they lose. More lose than they win.

We’re going back to something that’s been proven over generations. But if you build it with the youth, the future consumer, and if it’s the right brand, which we know we have, and if you build it with the home shopper, you can sustain a healthy growth pattern. You can pull yourself through retail and you can have success. And that’s what we’re trying to bring to market.

So, we’ve got the at work, the at play, and we’ve had success in both. That’s the ride we’re taking. We’ll get to retail when retail matters. But right now it’s about this, this on-premise consumption. And that’s our focus.

Bob Tullio: So, Perfect Game is a private entity that puts on a tremendous amount of youth baseball tournaments. What is it about the product that excited the people at Perfect Game? I guess let’s talk about the attributes and ingredients that make a difference.

Dillon Houstoun: Yeah, I think kind of the consumer feedback that we have gotten from why this product is resonating with the consumer is that it’s low in sugar. So, it’s got about half the sugar as traditional Gatorade. It uses real cane sugar, so no artificial sweeteners or corn syrup. It has no artificial dyes or colors.

It uses real fruit juice and vegetable juice for flavoring. And it has performance elements such as more electrolytes than your traditional isotonic, all five essential electrolytes. So not just sodium, like a lot of the isotonic products out there, but it has potassium and calcium and magnesium as well. Probably the most novel thing about it is that it utilizes a natural nootropic called Cognizin, which has been clinically shown to improve focus, reaction time, and general cognitive health.

Josh Rosenberg: One thing I want to add about Perfect Game. We didn’t bring it to Perfect Game. Perfect Game came to us and one of our founding partners, who’s a serial beverage entrepreneur. He sold tea brand to Nestle. He just recently, actually, his second major brand, and he’s got a laundry list of successful non-alcoholic and alcoholic beverage brands that he’s put to market that you see on your shelves every day. One of our partners, David Smith. I’ve got 30 years of experience between Coca-Cola and launching brands, building brands, being an operator… he has as well.

They [Perfect Game] came to us and said, “We don’t like what we see in the market. Our parents, our consumers, don’t like what they bring and what we sell in our concessions. We need a better product. We want you to build it for us.” They’re actually in ownership with us in this brand. They’re invested. In return, they gave us concession rights, and they said, “Build us a brand that matters, a better-for-you product.” And we built it for Perfect Game. We didn’t have a clue what we were going to do with it beyond that. And here we are two years later, selling it across the country with every Perfect Game venue. Just last year, we had an Arizona Diamondbacks Stadium controlling the entire venue on every digital board. Think about that for a startup.

And now this year, we’re rolling it out across the workplace, the convenience services channel, where we’re being introduced through Vistar. We just captured one of the big three, where we’re going to launch with 1600 micro markets. And we have up to 10 USG partners. And we’re launching a USG program. We expect to go win big. And now this brand’s got momentum. And we’ll be a seven-figure brand in under three years with momentum behind us. This is something that clean-label, better-for-you product. It’s the trend of today’s consumer.

We know we’ve got a great brand. Consumers at the taste test, they walk up, they say, “Where’s your fruit punch?” It’s right there. But it’s clear. That’s because it doesn’t have additives. You’ve grown up used to seeing that red dye, but it looks like it’s a clear beverage or a slightly tinted beverage because of the fruit juices. And then they try it, and they buy it. And once we have them, we have them hooked. The trial turns into consumption. The consumption turns into velocity. And our operators, once they have it, they stick with us, and they expand it.

Thirty years of doing this, Bob, the number of brands that I saw come and go at Coca-Cola, I can’t be more excited about a brand because I’ve seen them succeed. I put brands out at Coca-Cola. It was my job to build brands in this channel for 18, well, 10 of my 18 years. I led it nationally. I had a lot of failures. I had a lot of successes, some successes. I put this one right up there with it.

Bob Tullio: In your words, Dillon, why do you think this is going to resonate in the workplace?

Dillon Houstoun: Yeah, I think it’s the same reason we’re seeing it resonate within the youth-sports community. It’s clean label, no artificial dyes or colors, lower sugar, but still real sugar, and then the performance element. Got a time sensitivity within the workplace. You can drink one of them and get the same hydration component as drinking five Gatorades, as well as the cognitive enhancement.

Bob Tullio: Wow, that’s fantastic. And it tastes good?

Dillon Houstoun: And it tastes delicious, yes.

Bob Tullio: OK, good. That’s good too.

Dillon Houstoun: On the taste point, I would say is that it tastes good with a younger audience, which is more critical of taste than an older audience. If you can succeed with 9- and 10-year-olds from a taste perspective, it overperforms on taste from some of the other performance-minded products that are out there.

Bob Tullio: Because they tend to be pickier by taste, huh?

Dillon Houstoun: Exactly.

Bob Tullio: That’s great. What are the top flavors?

Dillon Houstoun: Strawberry Lemon, probably the most unique of our flavor profiles. It’s got like a good amount of sweet balance up front with a lemon sort of kick sour on the on the back end. Super refreshing outperforms the other three SKUs, followed by fruit punch, which is behind strawberry lemon, then tropical. And then lastly, orange.

Bob Tullio: Dillon, tell us about the NAMA Show itself. How did that work out for Launch Hydrate?

Dillon Houstoun: Yeah, the NAMA Show went really well. We did the sponsored sampling, where we handed out product one of the days. Got really good exposure from that as well as some wonderful feedback. Really helped drive, I think, traffic to our booth as well as when people got there, they were already familiar with the product.

Bob Tullio: So, there’s a lot of operator interest after the show?

Dillon Houstoun: Yeah, a lot of operator interest after the show. You know, we’ve got probably a lead list in the hundreds. After the show, we are finalizing our onboarding process with Vistar, which will be done this month, and sending product to all of -- opening up all of their DCs, which will really enable us to follow up on that lead list. We plan on doing that quite aggressively.

Bob Tullio: That’s great. So, distribution is now covered. That was obviously very important. Talk to us about the new product coming out in September.

Dillon Houstoun: Yeah, we’ve taken our ready-to-drink product, which has been in the market now for about 18 months, and have been working on developing a made-to-drink stick-pack version of it.

Bob Tullio: You started out, obviously, serving youth baseball. Are you still looking in that direction in terms of future growth?

Dillon Houstoun: Yeah, absolutely. We are looking to utilize the vend operators, not just as an avenue to sell our hydration product within their micro markets and vending machines, but also look for partners that are interested in being last-mile distribution partners, bringing them additional revenue distribution points through youth sports concessions. Five of those throughout the country with great early success and are looking to continue to grow those.

Bob Tullio: Oh, that’s interesting. So, you’re not only interested in, obviously, selling the product in workplaces and office environments, you’re also interested in developing distributor relationships with operators who can help you take them to concession-type operations in youth sports and other athletic venues.

Dillon Houstoun: Yep, absolutely. Adding additional revenue for our operator partners.

Bob Tullio: And you’ve added some. That’s great. When you look at the future following growth that you’ve experienced since the first of the year, the NAMA Show, the success there, the new distribution relationship with Vistar, and the fact that operators have been very receptive to your product. How do you feel toward the future as you look ahead?

Dillon Houstoun: Yeah, I feel very positive about the future. I think our initial data that we’ve captured suggests that we’ve got a great product/market fit. Our hydration product hits a lot of attributes that the modern consumer is looking for. I think we can take our existing playbook and expand on it, continue to add vend operator partners to service both the workplace and office, as well as continue to expand our youth concession market.

We also have some really exciting concession and sports opportunities at a higher level, looking into the minor league baseball arena, to continue to take the playbook we were successful with in youth baseball and kind of elevate it at a larger scale.

And then, like we talked about previously, I think our made-to-drink stick pack version is a real game-changer. It’s got better margins than are ready to drink. think it tastes just as good if not better, has even lower sugar than are ready to drink.

Bob Tullio: Fantastic. Still no C-stores though.

Dillon Houstoun: Still no C-stores yet. We’re trying to really focus in on these two channels being workplace and youth sports concessions, building out density and velocity within those two channels and then layering in more traditional route to markets like C-store and retail.