Mental wellness and alcohol moderation will drive next phase of functional beverage growth, Recess CEO predicts
However, founder and CEO Ben Witte has made it clear from the start that he is “build a brand, not market an ingredient,”and say it Recess Mood line without CBD – launched in 2020 – now accounts for 40% of business and is on track to generate”well over 50% of sales“by the end of 2022.
‘We see this as a broader relaxation category with several sub-categories that we can play in‘
Speaking to FoodNavigator-USA after launching three new Recess Mood flavors and resuming distribution to 1,000 Albertsons stores under multiple banners including Safeway, Albertsons, Pavillions, Shaw’s and Kings, Witte said he also secured listings in CVS and entered into agreements with Fresh Thyme and the Airport Channel via OTG, with additional clearances expected.
The new Mood flavors — which come with a reduced retail price of $3.49 (down from $3.99) — will hit shelves in October, said Witte, who said the brand is tapping into key trends in “mental wellness and alcohol moderation…we see this as a broader relaxation category with several sub-categories that we can play in.
“Instead of positioning ourselves as a brand of CBD beverages, we focused on establishing the “take a break” use opportunity and developing a leading lifestyle brand focused on marketing CBD. a feeling: calm, cool, collected.
As for the price reduction, he said: “We’ve worked hard on optimizing COGS (cost of goods sold) while maintaining quality, so we’ve moved to larger co-packers and achieved economies of scale. Transport costs and toll charges have also stabilized somewhat.
“We are building a leading lifestyle brand focused on marketing a feeling: calm, cool, collected”
He added: “When we talk to retailers, they see alcohol moderation as this mega trend and see the trend of consumers prioritizing their mental wellbeing, which is going to impact many parts of the store in many categories.
“We are seeing speeds for Recess Mood comparable to, or even better than, our CBD lineup, and this fills a consumer need for retailers who cannot bring CBD. There are also several ingredients here that we can use around mood and relaxation, whether it’s CBD magnesium, adaptogens, nootropics, etc., and these functional ingredients are going to be combined in different manners.
Recreational products are typically found in functional drink sets along with kombucha and other gut health drinks, energy drinks and other drinks that are better for your drinks, Witte said: “Kombucha is spaced out too much, so we’re seeing drinks like Recess that offer a proposition around mental well-being taking space from kombucha, although every retailer is different.
Wording: ‘Not tired, not wired…’
Depending on the flavour, the Recess Mood range contains combinations of magnesium-l-threonate* and botanicals such as l-theanine, lemon balm and American ginseng, all of which are associated in consumers’ minds with calm and relaxation, said Witte, who says the brand’s fans cite multiple occasions of use from a morning drink to start the day on a high note, a quiet afternoon after work to decompress or as an alternative to alcohol.
Recess – who is careful not to make harsh claims about the pack and uses fairly vague phrases such as “to get you where you want to be” and “adaptogens to help maintain balance” – doesn’t list amounts of magnesium or botanicals in its Recess Mood line, but Witte insists it uses meaningful amounts that produce a noticeable effect for most consumers.
“We don’t just sprinkle it on because we think it’s very important that people can feel something when they drink our products and we have thousands of testimonials to back it up, although people react differently to functional ingredients.”
CBD: “You operate in a constrained addressable market with a patchwork of state regulations”
The original Recess products – infused with a combination of botanicals and 10mg of CBD from a broad-spectrum hemp extract – continue to perform well, although regulatory uncertainty at the federal level has prevented many large retailers to enter the market, Witte said.
“We see the two product lines coexisting, and we see a lot of momentum on the CBD side of the business. We now have 24 states that have enacted state regulations of one kind or another. [permitting the sale of CBD-infused foods or supplements] and this is pushing some traditional retailers like Sprouts and Wegmans to grow the category.
“Major liquor distributors like Southern Glazer’s, Breakthru Beverage Group and RNDC have entered the space over the past year, but it’s certainly an unusual business situation to navigate because you’re operating in a limited addressable market. with a patchwork of state regulations, and I think you’ll see a lot of brands not being able to make it to the other side, and I think we’re still a long way from Target, Whole Foods, or Walmart offering CBD drinks.
Asked about the CBD beverage landscape, he said: “It was pretty wild. Since our launch, there have probably been 100 CBD drink brands that have launched, but few of them have built a very geographically distributed footprint. If you look only at metered channels, we’re 50% larger than the number two brand, and that’s not taking into account independent accounts like bodegas and liquor stores in New York where we have a very large business, as well as our e-commerce business.
“We are not in competition with LaCroix”
Asked about the challenges of selling premium beverages to consumers on limited budgets in times of runaway inflation, beverages such as Recess “are not in competition with LaCroix“, pointed out Witte.
“When people drink a can of Recess, they drink it instead of alcohol or cold brew coffee or kombucha, and the interest in the proposition that CBD offers – helping people feel calm , balanced and relaxed – only speeds up, if anything.”
“There was this kind of gold rush mentality and everyone became a hemp grower and a CBD extractor”
So what is happening on the supply side?
When the The 2018 Farm Bill passed, which removed industrial hemp from Schedule I of the Controlled Substances Act, but did not suddenly legalize CBD and other cannabinoids in foods, beverages and supplements, “there was this kind of gold rush mentality and everyone became a hemp farmer and a CBD extractor,” Witte said.
“And basically supply has outstripped the addressable retail market and prices have come down.”
Looking ahead, he added: “We continue to see a lot of activity in Congress, which is fed up with the FDA’s inaction in creating a national regulatory framework, as you can see in a recent letterwritten to the FDA by the sponsors of the CBD Product Safety and Standardization Act. We still believe it’s a matter of when, not if, the FDA acts.
*Some animal studies show that magnesium-l-threonate is more effective at increasing magnesium ions in the brain and improving cognitive function than magnesium sulfate.