Vol. 127 - NO. 39

Blog Startup CPG

SINCE 2019

Functionality
is the Future

Chris Picerni is the Co-Founder & CEO of Overland Health.

Food and beverage trends are moving towards functionality. I firmly believe that. You can see it in consumer preferences and you can see it in the new brands being launched. As people focus more and more on their health and wellness, they demand the food and drinks they put in their body follow suit.

If you are thinking about launching a product with functional benefits, there are some important things you want to have in place. Hopefully, the story of our brand, COAST, can help you avoid some mistakes.

COAST is a cutting-edge wellness drink that flushes toxins out of your body, replaces lost nutrients, and repairs cells. It is considered a supplement which comes with the associated opportunities and cautions.

The Initial Idea

It actually started with a few drinks. A few of my high school friends and I were imbibing and shooting the breeze, talking generally about fitness and health. The contradiction of talking about health while doing something (drinking alcohol) that is incredibly unhealthy was lost on no one. My friend, who happened to be a PhD-candidate at an Ivy League school doing cancer research, pointed out the negative impacts of alcohol on your cellular health, performance, and recovery. It was eye opening.

The initial idea for COAST was born from there. We thought it would be great to create a product that helped limit the actual health detriments from alcohol, not just the short-term hangover. We knew healthy people also drank and just accepted it as a cheat and a setback. What if we could bridge the gap between being healthy and also enjoying your weekend?

Honestly, it was a cool idea but I didn’t think it would be an actual business. I was pursuing my MBA at Columbia at the time and I was able to take classes where the project would be doing the initial research, running the numbers, etc. The plan was to go back into the corporate world when I graduated, but eventually I decided to give it a real shot.

Where to Begin?

Ok, so it is summer 2019 and I just graduated. I now only have a degree and an idea. Luckily, the impetus for the product, my friend the cancer researcher, was now my business partner. He was able to create an active formulation that had true efficacy. We had the knowledge in-house, but lots of entrepreneurs use food or beverage scientists to take their idea to reality.

We started testing a minimum viable product (MVP) with our friends. The good news was that the product worked. The bad news was it tasted terrible and had no shelf life. This is where we enlisted the help of a beverage scientist to improve the flavor and help increase the shelf-life. They were both vital to having an actual commercial product.

Always Follow FDA Guidelines

This is where I did a deep dive into FDA regulations and familiarized myself with terms like GRAS and GMP. The vitamin and supplement space is a bit of a gray zone between food/beverage and pharmaceutical drugs. The distinction between FDA approved and FDA compliant is critical. FDA approved is a designation mainly for pharmaceuticals that have gone through full FDA phased trials and have been explicitly cleared. Chances are, this will be none of your products. Most supplements and functional products are FDA compliant. This means the ingredients are on the GRAS list or otherwise safe. You do not need explicit FDA sign-off to sell this type of product. However, and this is critical, this also means that you CANNOT make any functional claims. You cannot say your product cures this or improves that. It certainly makes marketing tricky!

Once you have your formulation, a good idea is to get a scheduled process. A scheduled process is a detailed recipe and procedure for your product that is reviewed by a recognized process authority. Being based In New York, we used the Cornell Food Venture Center which signed off on our product being safe for consumption – a vital step!

We also found a small contract manufacturer that was GMP certified to produce our drink for us. This is also a necessity. I would highly advise against manufacturing on your own as your kitchen probably does not meet FDA guidelines. We had an added complexity of finding a manufacturer that was willing to produce tiny production runs.

Soft Launch

Beginning in the fall of 2019, we started testing an early version of COAST with actual customers by renting table space at local events in our home base of NYC. Of course, we didn’t tell these early customers that it was just a test. But this was crucial in establishing three things: 1) would anyone actually pay for COAST? 2) What are we doing right? 3) Crucially, what do we need to improve?

A COVID Pause and Chance to Rebrand

This is where we were in March of 2020 when COVID hit. We decided to pause the business and address multiple issues we found through our live testing. First, we decided that we did not just want to be a health drink based around alcohol. At heart, our product was great at flushing toxins and increasing cellular health, so we double-down on this. We reformulated to be a more general detox and recovery drink where alcohol was one use case, but not the only use case. This is one of the best decisions we ever made.

Second, a major problem was the taste. Even though customers told us the product worked exceptionally well, they were turned off by the taste. We turned to Givaudan, masters of flavor. They took a scientific approach to masking the strong flavor of the vitamins and nutrients in our drink and it was invaluable.

Third, to go along with our new focus and flavor, we hired a marketing agency for the first time to do a brand and packaging refresh.

Launch!

Almost a whole year after we paused the business, we released the new version of COAST in March 2021. We ran digital ads for the first time and focused on our DTC business. It started out well and we found some early traction.

Yikes, I Didn’t See That Coming

That’s when we were blindsided by two different issues. First, Facebook shut our ad account down without telling us why. Functional brands need to realize that platforms like Facebook, Instagram, and TikTok have their own internal rules around running ads for vitamins, supplements, and nutraceuticals. We must have tripped up somewhere and it was a pain to get our ad account live again. Be aware!

Second, one morning in the summer, I awoke to separate emails from both of our online payments processors (Shopify for one-time purchases and Stripe for our subscription software) saying that they would no longer process payments for COAST. Well, a business that cannot accept payment is not much of a business! Apparently, something triggered with their banking partners around one of our ingredients and they stopped processing payments for any product on the market including this particular ingredient.

It was a mad dash to find a new payment processor that was willing to work with us. We eventually found a “high-risk” processor (that classification seems ridiculous for COAST) that would work with us. Of course, their fees were about double what we previously paid. This was a brutal few weeks for us. Eventually, we found a replacement for the troublesome ingredient and were able to reconnect with our original processors.

Growth and New Products

Once those issues were sorted, we focused on growth and acquiring new customers. We have been extremely happy with the response and loyalty of our customers.

Recently, we launched our first line extension which are powder stick versions of COAST. Instead of a RTD wellness shot, we now offer powder sticks that you can mix in water. This offers our customers more flexibility.

Lessons Learned

Through the highs and lows of getting Coast off the ground, I learned some valuable lessons. Feel free to take these with a grain of salt, but here is my advice if you are launching a functional brand or supplement:

  • Focus on the benefits. You might be tempted to focus on how cool that ingredient is or all the research behind it. Customers don’t care about your product; they care about how your product helps them. Use your story or ingredients to make a connection with your product and their health, but focus on them.
  • Follow FDA guidelines closely. They say it’s easier to ask forgiveness than permission, but in this case, be careful. We are dealing with customers’ health and we need to take that seriously. Also, fighting the FDA is a battle you will probably lose.
  • Taste still matters. As much as functionality matters in getting customers to try your product, taste matters in getting them to use it regularly. Look, I’m not saying your supplement has to be the best tasting product in the world, but customers do expect some baseline of quality. There may be some people that would use your product regardless of how awful it tastes (tip: target them as your earlier adopters), but you will not get mass adoption without at least decent taste.
  • Be diligent with your suppliers. The supplement world is filled with dodgy suppliers and dodgy ingredients, so do your homework when finding suppliers. Make sure they have good reviews, demand COAs, ask for 3rd party verification, and where possible, do your own 3rd party testing.
  • Have backups. Things can change in a hurry, so I recommend always having backups – backup suppliers, backup manufacturers, and backup payment processors.

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