Just Drinks

The US-based canned water brand Liquid Death was founded by Mike Cessario. The company has been running sales since 2019 and has expanded past its initial canned water with canned iced teas produced and sold in the US since March last year.

In May, Liquid Death raised a further in $67m investment as the US canned-water business looked to become “a multi-category beverage platform”.

Liquid Death claims to have made $263m through retail sales in 2023. The company is present in 133,000 stores across the US and the UK.

Liquid Death's CFO Karim Sadik-Khan, who entered the role in June, sat down with Just Drinks to chat growing the brand in a softer US market, and international expansion.

Conor Reynolds (CR): The brand has been running for a few years now, has it acquired any production assets or is that not necessarily needed?

Karim Sadik-Khan (KSK): You know, one of the beauties of this business, especially in the US, there is a tremendous amount of co-pack capacity available, and you can really start a brand almost virtually, it’s a really efficient way to go do it.

I mean, it is very hard and capital intensive to start production facilities, and you're often going to be really subscale. It's very hard to get to the scale and compete with a coke or a Pepsi or Dr Pepper Keurig, you know, any of those major multinational players. But there are really great co-packers out there that you can leverage.

So for us, it allows us a couple things. One, get to a geographic footprint that's very favorable, very, very quickly, right? So we can have production capacity in different coasts. We have an east coast producer, west coast producer, [a] set of producers in the pack northwest and the south. We can reduce our costs and also the freight time and the cost of getting product closer to our consumers. That's great on many levels.

If I have to go build a plant, that's going to take potentially years, right? There's enough co-pack capacity, especially with some slowdown in beer and the ready-to-drink alcohol like the fermented malt beverages, that there's good capacity out there that I can go leverage those folks looking for volume. So it's actually a win right there.

CR: What sales channels are a target now and does that differ from when the brand first launched?

SKS: The brand started virtually. Mike Cessario created the brand before he had a product, right? And so he kind of built the brand and they started launching on Amazon and direct to consumer through e-commerce. Now it's really expanded well in the brick-and-mortar.

One of our biggest customers is Amazon, and then our other biggest customer is Walmart, and then we're also in all the major groceries, Kroger, Safeway and Target. So we are really well distributed in large format channels. There is still opportunity to drive more distribution there but we are doing incredibly well in those channels.

And then convenience and gas channel in the US are important immediate consumption channels. So, you know, places like 7-Eleven, Speedway, those are doing very well.

Our focus right now is, you know, continue to drive the execution of those accounts where we're doing well as we launch new products, making sure we're driving them into distribution.

CR: What international markets are of interest?

SKS: We're right now in the UK, Ireland, Australia and a little bit in Germany. I think they will be the focus markets in the short term, obviously where it's very early days.

You don’t want to expand too quickly, where you sort of diffuse your efforts. We're not that big. It resource intensive to grow right? We have this great partnership [with] Live Nation, we've gotten some good distribution in UK grocery stores, so let's solidify that business and then grow from there.

I've always been a fan of work[ing] from a position of strength, really develop one or two accounts really well and go from there and become important to those accounts. Because if you go too wide, too fast, and you don't sustain your velocities and you don't show consistent performance, it's very easy to lose that distribution.

CR: You have recently join the Liquid Death team, what’s the focus for you moving forward?

SKS: Part of what I've done historically is revenue management, things like that. At Beam [Suntory I] just ran a transformational revenue management project over the last couple of years. So, how do we get better with that revenue management? How to make our promotions more effective, to again, continue to grow the business and accelerate the business but do it in a more efficient in a more efficient way, from a resource perspective? Similarly regarding our costs side, how do we drive out costs? If I can drive down freight costs and operations costs, that's invisible to the consumer.

The [Liquid Death] brand grew so rapidly that, you know, it's the challenge, right? They grew faster than they could ever have expected. It's been one of the fastest growing brands over the last three years. And so now, bringing in the team, I'm part of that to help more [with] tuning the engine, so to speak, and [to] build that infrastructure underneath it to fully capture that.

This brand has shown it can launch an iced tea, they can launch a sparkling water, they can launch a water, they can launch hydration sticks.

We sell a lot of merchandise. They don't just give away t-shirts. People actually buy them. We sell millions of dollars worth of our merchandise. It's fantastic. So, the brand really resonates with the consumer and so and they've shown that they're willing to follow us into new areas.

That's one of the things that's been so fascinating about watching this from the outside over the last couple of years. And that drew me in was that this, this brand, really has that ability to grow more than just in one category.

SKS: I won't comment on future ones but I would say last year we crossed $250m in measured syndicated data retail sales in the US.

So feeling really good about that and continue to have very, very strong growth. That's the focus, is just grow and do it in a more efficient way.

I think what's been really great, as you've seen some softness in earnings across companies, the economy is a little soft, some large international players [have] had a few tough earnings calls, but we've continued to grow.

CR: How do you view current consumer confidence in the US?

SKS: The US economy is driven by the consumer, right? Full stop. Consumer spending is the driver of the US economy. The US consumer's disposable income has been negative over the last few years. So between inflation and wage growth not keeping up the consumer is compressed. They're spending more on, you know, fuel, food... Obviously, rents have gone up tremendously. So, the consumer is not as healthy as they were coming out of Covid.

So, you see a little bit of that compression with the consumer. And then obviously that that's played through in multiple categories, like companies were for a long time able to drive a lot through just frontline pricing. And, you know, taking four or five percent price here and now, I think that game is over and you're going to have to drive real core demand. You're gonna have to drive that demand and justify your price with the consumer.