Liquid Death – Will It Keep Growing and How Far?

Those in the beverage category have been watching bottled water brand Liquid Death (LD) very closely, long before last week’s Series C announcement. LD came out of the gates quickly for a team with no prior (publicly known) beverage operating experience. If the average early-stage food/beverage brand sells only $150,000 in Y1, Liquid Death sold $3,000,000. 

That’s an impressive start when considering that it did NOT accomplish this through mass distribution. It did it entirely online. Selling only case packs of their now famous tallboy aluminum cans. This makes enormous sense when launching a new brand in an over-supplied category where sales are 50% or more private label at rotgut pricing that would make your ‘cash-flow-obsessed’ accountant wince. 

LD is most famous for its in-your-face, hypermasculine, and extreme punk-metal brand identity. It’s using what I call a Big Mallet right off the bat without fear. It has taken energy drink branding (and container design) where it has never gone. Simple. Highly memorable.

It’s not surprising to find out that the founder has a deep agency marketing background and understands modern media. 

The brand started with around $2,000,000 in seed funding, a sum most founders don’t have. This allowed them to go negative on profit in the early months to drive initial case sales online. This allowed them to closely monitor repeat purchases and fan affinity in real-time, rather than waiting months for inclined case sales at one retail account to infer the same.

So, why did it work so well? 

Liquid Death is an example of serving an extreme niche in a staid category full of bland branding and boring brands. The target audience is punk-metal enthusiasts who don’t drink alcohol. Talk about a niche. And the sheer craziness of the trademark in the bottled water aisle jumps out for sure. While shopping, I’ve noticed it, and I have zero interest in the offering. Shelf context helped clarify the one linguistic problem with the word “death” – it has the misleading connotation of the energy drink space. 

By selling only case-packs online, LD also ensured that it had powerful purchase intent right away. It didn’t waste time spraying inventory to low-velocity points of distribution and serving dabblers and curiosity buyers. 

LD then used Series B funding to get into thousands of retail stores in years two and three. At $45,000,000 in retail sales in 2021, much of this appears to be sold online because the chains (Whole Foods, Publix, 7-eleven, Sheetz) listed on its site simply don’t add to enough stores to move this kind of dollar volume. The brand is barely premium, priced at $1.69 per tallboy can, a huge advantage in a price-sensitive category. 

The brand’s most significant long-term risk is that, once the ‘fun factor’ fades on the trademark, there is no real product attribute differentiation to sustain market share. Liquid Death is a brand using audience positioning and sustainable packaging to an extreme degree to capture available market share. The aluminum can will help with long-term fan retention because it’s memorable and masquerades as a ‘cool’ energy drink even when not serving that outcome in real life. 

Yet, without a formulation or technical basis for insulation, Liquid Death will require expensive advertising and event marketing to sustain growth. This is no doubt why they just raised $75M. 

The online launch, hyper-focused UPCs, and clear brand identity make this an interesting Skate Ramp case study, with one exception: growth may stall after $100M without expensive investments in marketing. The margins of the business hopefully can sustain this. 

Dr. James Richardson

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