Beverage Experiences Need an Update

What do you love about your job?

I love that every day is really challenging and I'm constantly learning new things and thrown into roles that I would never have ever expected.

Hello, I'm Adam Durrell and I'm the host of the Account Experience podcast. This week we're focusing again on consumer packaged goods. And I guess comes the day from a company that maybe you've not heard of before, but I think it's pretty likely you'll be consuming some of the drinks in the future. And if you've been here before on the podcast, you know that in every episode, I like to catch up with inspiring industry leaders and thinkers, you know, to share best practice and tips to help you develop your own B2B accounting experience program, and also, frankly, just to stimulate what's going on in the world of business. As I always like to say, we combine the energy of client management with the fluid refreshment of customer experience. And that intersection we call that Account experience. I'm also father of four, a founder and fanatically interested in humans, and I love anything that furthers the quality of business relationships. Today I'm talking with Daniel Solomons. He's CEO and co founder of Update. It's the world's first and only energy drink that doesn't contain caffeine. You can think of it like Adderall in a can or maybe the Tesla of energy drinks. So it appeals both to existing energy drink consumers looking for a healthier alternative to the usual suspects, Red Bull and Monster. And we'll get into the magical ingredients that make it special later when we get into the thing with Daniel, and we'll find out also how he's distributing the product, how you know what it takes to develop a brand. So I'm really interested in finding out how that's going to work out today. Welcome, Daniel. Welcome to the Account Experience Podcast.

Thanks so much for having me.

Hey, it's great to have you along. Now, I gave a rather brief introduction to Drink to Update when we got into the podcast, but I'd love to hear from you. Tell us about the product and about what's special about it.

Sure. So, firstly, you did a great job explaining it yourself. You didn't leave much room for me. But the idea of Update, it's an energy drink without caffeine. And what we've done is we've spent several years working with some of the leading scientists in the country. I live in New York, so scientists in America who have worked out how to break down the components of the caffeine compound into its various parts. So caffeine, when you consume it, whether it's in coffee, tea, energy drinks, really any format, it metabolizes in your liver into three components. Paraxanthine, theobromine, and theophyline. And paraxanthine is the component that they've identified that drives the energy and the focus that you get from caffeine and that you crave from caffeine. While the side effects that you've known to associate with caffeine, whether it's the jitters, the anxiety, the crash, the disrupting sleep, all of those are driven from the caffeine compound. And the other two metabolites, par, theobromine, sorry, and theophyline. And so what we've done is we've worked with these scientists to isolate paraxanthine, the compound that gives you the energy and focus away from the rest, to use that as our main source of energy and as the key stimulant in Update rather than using caffeine. So users or consumers are really not any more subject to the side effects you would get from caffeine, but you still get the utility that you're expecting or that you're craving.

That's pretty advanced, I would say. I was not expecting so much science to be in an energy drink. So I'm really fascinated about this. And what's the reaction of consumers been like to this?

Yeah, the reaction's been really interesting to, to observe. I think similarly to you, a lot of surprise, a lot of, oh, that's really interesting. Like, how do you have energy without caffeine? And that. That's been a really interesting thing to observe. They take, it's like a double take. When you say energy without caffeine, you know, that opens up the opportunity to explain to the customer exactly what the product is. It's both, both a blessing and a curse having something that is interesting and complicating at this complicated at the same time.

Let's talk about the product and maybe, maybe some of the product extensions you got. Oh, thanks a lot for holding up. For those who cannot see this reporting on video, can you hold up the can? So it's drink update and the slogan is stay focused and it looks like you're drinking peach flavor. Right.

So I am.

Let's talk about some of the product varieties you've got.

Sure. So when we were creating update and we came across this new ingredient, we typically believed that the best way to introduce a new ingredient to consumers is through the form of a sparkling water type product, such as an Energy drink. The reason being a sparkling water in a can requires really no explanation to the user as to what to do, how much to consume, when to consume it. Unlike things such as tinctures or gummies that can get finicky, we thought a sparkling water was the best vessel. And so we created an energy drink called Update. We have four flavors, peach, berry, lime, and mandarin. And we'll continue to expand the flavor profile of SKUs over time, but now we're really focused on the one core product rather than getting into different product verticals, such that when people, you know, hear or think or speak about Update, there's a very clear product that they're referring to. And so it's Update the energy drink as opposed to, oh, it might be this one or that one.

And what would be the typical profile of a consumer of Update?

So that's a great question and one that has been really interesting to see. We initially thought we would be stealing share away from your typical energy drinks, like you mentioned earlier, your Red Bulls and your monsters, providing people with a much healthier alternative. And what we've found is that we are very much stealing share away from those players in the retailers. But what has been far more interesting is observing a whole cohort of individuals who, roughly 40% of people who metabolize caffeine slowly, who get those side effects to, you know, at a very like, to the nth degree, those people have typically steered clear of caffeine. And what we've found is that a lot of them are now trying Update. So we're introducing new people into the energy drink category, people such as myself also, who would never drink energy drinks prior to starting Update. And for me, it wasn't about the caffeine content. For me, it was the way that energy drinks were positioned as unhealthy, copious amounts of caffeine and sugar branded in a way that you felt shameful drinking. And so, you know, we've flipped the narrative on its head and really trying to level up sophistication in a category that is typically, from a marketing perspective, you know, topless guys at CrossFit gym and girls in bikinis. And we're really trying to elevate that. And so, you know, we're in a bunch of offices here in New York City, law firms, private equity firms, tech startups, places where you would never have energy drinks prior in their refrigerators. You know, you're not walking into Goldman Sachs and finding Red Bull in the fridge, walking into a meeting with that. But what we're seeing is a lot of adoption from these types of companies around Update.

So that's an interesting position. So you're not having it as a sort of a gym drink. It's more. Maybe an alertness during the day.

Exactly.

Business meetings. But somebody's happy to have it on the table.

Exactly. And positioned in such a way that if we're on a podcast right now and I'm drinking a monster, you would probably be judging me and more inclined not to publish the video. But if, you know, I walk into a boardroom and someone's drinking an Update, my gut reaction would be, oh, damn. Like, I feel, you know, less competent because I'm not on an update right now, and they are.

It does appeal to me. I'm not traditionally a huge fan of energy drinks, but I have been drinking less caffeine, consciously. So I think this could be something that was. That would work now. I mean, I'm in the Netherlands in Amsterdam. I was not able to get a can of Update to bring to the. Cool. I'm sorry about this, but I'm looking forward to getting my first taste of it when I come over to New York later in the month. So.

Yeah, we'll have to send you some.

Okay. But. But let's get back to this, because what I want to try and get into is you're a relatively new company with. With Update, so I'd like to dig in a little bit about if. If you can share your founder's journey and what it's like, start building a brand. It's rare that we get to speak to people at this level, so, yeah, sure.

So, myself, I grew up in Sydney, Australia, hence the accent. But I guess given you're in the Netherlands, everyone on this podcast probably has accents. I grew up there. I, you know, did that traditional route of, you know, you finish high school, go into, you know, a business degree at one of the universities in Sydney left that went into the world of finance, and did that for about four years. After about four years, the learning curve started to plateau, was no longer exponential, and I decided I wanted to make a change, to do something where I can continue learning. And at the same time, it's less common in Sydney as it is here in the US to really travel for college. So you tend to live at home. You go to college that way. And therefore, I had never lived overseas. So I thought, what if I can actually change career paths and move at the same time and kill two birds with one stone? So I resigned from work, and six months later, hop on a plane to New York with the mentality that I've saved up enough money to live in New York for a year and if I like it, you know, I've got to find a job and work it out. That brings me to New York where I'm hanging out with some friends who I had already in the city and some of my closest friends here. And we would always hang out and talk about work and business and ideas. Thought it would be really great to build something together. They had already started a number of consumer businesses in the city, from fast casual sushi restaurants to an amakase restaurant to a technology app. And so we thought the best way to work together was to start a new business because then we can each run one. And in the technology app, one of the backend engineers was a hobby nootropic and adaptogen individual. That was something he loved and he would come to work and create these nootropics for the team. And so we all started to try these supplements and for us it was the first time of feeling kind of like Bradley Cooper in Limitless, without any caffeine or without any Adderall. It was all natural. And we thought, this is amazing. You know, the world always needs energy and right now everyone reverts to caffeine because it's the most readily available stimulant. But it's really perfect stimulant for the majority of people because they get all these side effects. So what if we can take this guy's, you know, supplements, mix them in sparkling water and there you go. And so that led to me ordering a bunch of supplements, you know, off Amazon, mixing in my kitchen counter, and obviously coming up short and not coming up with a product that worked. And it was very important to us that the product had an experiential factor to it so you could feel something. Otherwise, what's the point? The world doesn't need another functional product. And so we then went down a rabbit hole, got in touch with these scientists, who are world class scientists, and spent a number of months building up a relationship with them such that they then turned around to us when they felt comfortable and said, hey guys, we've spent five years prior to you meeting us analyzing the caffeine compounds and breaking it down into its various components and working out how to actually construct, you know, the paraxanthine ingredient. And we tried it first. I get sent a bag of white capsules and he says, you know, just try the product. And this is, this is, this is.

Turning into a very interesting story here.

And this is even before he told me what the ingredient was. He just sends it to me and says, try it. And I try it and I have this really interesting experience where, you know, I start working and four hours later I look up and time has just flown by and I've just crushed everything I needed to do. So I thought, oh, that's interesting, but maybe it's placebo. Let's try it again tomorrow. And I continue this for a week and have the same experience. I then feel comfortable to give it out to everyone else to try. And again, the experience is shared amongst others. So that's when we got back in touch with the scientists. We worked out what the ingredient is. They told us all about it. They showed us all the clinical studies and data that they had done. And also paraxanthine. Whilst it's a new ingredient in a product, it's not actually a new compound. It's always existed in caffeine. And so there's literature that dates back, you know, decades on the ingredient or on the compound. So we then did all our, you know, kind of like due diligence and then began working with these scientists and spent three years working out how to formulate the actual update drink that we have today.

That's amazing. Let me just play that back to you to make sure I got it. You said you were experimenting. I think you said it called it nootropics. Is that right?

Yeah, nootropic and Adaptogen. Adaptogen ingredients. They're kind of like natural ingredients that help enhance cognition, focus, energy, etc.

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So you're experimenting all this stuff yourself. You're figuring out that you, you want to make a drink, but it's not working out. You want to do something world class. You get in touch with a bunch of people who are doing some research on this. It sounds like a really, you know, some really amazing steps that you went to to get there. So, so you've got the ingredients and then what, you, then you're able to create the drink together with them? Is that, was that the final step?

Yeah, exactly. Then we're able to create the drink together with them with the help of a number of other formulators, flavor scientists, biochemists, and that's how we got here.

That's fantastic. And so let's talk a little bit about the history of drink, of update, about how it's been in the market. So how have you been? I guess big question is, how do you distribute a new product like this? Where do you start?

Yeah, great, great question. So we started online just because it was the easiest, fastest way to get the product out there. We spun up a website, launched the product. We actually spent very little dollars in marketing or building a brand. We just wanted to get the product out there enough to get people to buy it, to get feedback from people that weren't ourselves, to make sure that we weren't believing our own bullshit, as they say. And it was an amazing experience because what we learned was we had a number of issues or got a lot of constructive criticism, I should say, with the product. And that led us to reformulate some FL to change manufacturing processes. And so once we did that and felt really comfortable with the product, we then launched in retail in New York City.

I'm just going to pause you there because this is my geeky side. I really want to dig into experience. And I love this story because you've thrown it out there. You've already got some early product validation and some feedback. So, you know, again, how did, how did you do that? And can you think of any concrete things that you went back to reformulate? I love this.

We launched the product and we launched in summer, and shortly after, we started getting these emails from people that said, you know, they open the product and it, you know, foams all over them and sprays in their face, akin to when, you know, shake up a can of Coke and open it up and you know, first one email comes in and you're like, oh, it's probably just, you know, someone's shaken it or it got dropped with FedEx, whatever it is, and these became more consistent. And I then, you know, go to our warehouse, I'm opening up cans and I'm not seeing anything yet. But this is becoming more apparent from other people. And what we realized was the cans were overly carbonated. And when the temperature in summer in the warehouse or in wherever the, you know, customers were storing the cans got so high, the pressure inside the can would get pent up such that there was no turning back. And when you would open it, it would explode everywhere. Yeah. And so there were a number of occasions and thereafter where I was going into a meeting, handed someone a can, they opened it and bang, it went all over themselves. So it was firsthand experience. And then that's how we went back to our manufacturer. We actually changed manufacturers to someone that had, I guess, higher quality standards and more stop guards in place to make sure something like this doesn't happen. And, you know, we scrapped all the existing product and redid our production.

That's brave to do. I mean, you know, and also must have been a quite an expense. But congratulations on taking that feedback in an early stage. And I think that your journey so far really shows how agile you were to keep iterating the product. It come, you know, you almost come from a tech background where you're doing it every couple of weeks. So this is not something I'm normally aware of in the.

We're still doing that now. Yeah, yeah.

So then you sort of validated it online. You said your next step was to get it into retail. So let's move to that part of the story.

So to get it into retail, you typically would have a distributor who's the middleman and they become your initial customer and then they would get it out into the retail stores. New York's a bit of a different environment where unlike many other regions where you have chain driven stores, in New York you have a lot of independent stores and you know, you're selling to the distributor, they walk into the retailer and sell the product. But when we first got started, in order to get a distributor interested in your brand, you know, they want to know that you have a number of accounts, a number of stores that you can hand over to them. So there's, you know, an initial customer base. So that meant myself and our VP of sales were driving around in a van that we rented slinging cases, going into stores, trying to sell ourselves into the stores. And we did that for about three months. We got ourselves into about 50 kind of retailers that we thought were influential enough to then get a distributor excited. And that's when we went to a distributor to bring them on board. And then they were able to help us expand into many more stores. But what's really interesting from a customer experience given this podcast and what you want to talk about is we have a number of different customers. We have you as the end consumer of the product that we obviously care about very deeply. But then we have the distributor and outside of New York and a lot of these chain driven stores, you have a buyer and the buyer is the person who in our case is in charge of beverage or energy drinks or functional products. They try the product and they consume it and decide if you go into the store. And so a lot of the time we're actually focusing on the customer experience of the buyer prior to the customer experience of you. Because if the buyer doesn't get the product into the store, you're never going to get it in the, you know, in the first place. So it's interesting how I observe those dynamics play out.

Absolutely. This is, and this is of course a really hard thing for many organizations to get right or they just ignore. They just think about consumer pull and then the B2B experience will take care of itself. And then you're also trying to experiment in other online channels. I think you said you tried Amazon. Is that something that's still current for you?

After about being in retail for about three months, we decided to turn on Amazon again. Amazon was an interesting one because the way, the part of the way you get ranked on Amazon, which, you know, then gets you more visibility, is based on reviews. And with Amazon, unlike a lot of DTC websites where they have reviews, you can really control what review gets posted and what doesn't, whereas with Amazon you can't. And so it was critically important to make sure that we were confident enough in the product launching on Amazon, because had we launched and the products blowing up in people's faces, then we would almost be better shutting off Amazon and starting a new one under a different entity name or something. And so that was interesting. We wanted to make sure all our ducks were lined up in a row. We then launched on Amazon and what we saw was our online sales pretty much double overnight. And we've continued to see this. So Amazon was a huge opener for us. And I think especially here in America, certainly The customer dynamics are very different to what they were in Sydney, Australia. But Amazon is the primary place where you're looking up products, your shopping, and you get the goods delivered within one or two days. And so from a beverage point of view, where you want to encourage trial and velocity, Amazon's been great for that.

I think it's a good thing about online, it seems to me, is that there's something that you plan ahead. What I love about your story and the disruptive angle about it is that, as you said early on, you sort of identified that target customer, which was the person sitting in a meeting room that wants a drink that's a bit classier than an energy drink and is there to fulfill the need. So you've been going about, I think, seeding that demand by putting drinks into offices. And that was really striking for me. Can you tell us a little bit about how that came about?

So, for us, one of the things we recognized early on is the retail game is a very slow game. The cycle that the retail buyers have takes a long time, and so the path to sales is quite long. So when you're looking at, like, what are some alternate sales channels that can generate sales in a shorter period of time. And that makes sense. So, you know, Amazon being one of them, direct consumer through our website being another. And that's when we had the idea that what if we actually go into these offices? Because you have a group of people who are stuck in an office, no one wants to really be there in the first place, especially now after Covid or now in summer, and they tend to have a refrigerator and it's got snacks there. And so why wouldn't we want them to drink our stuff instead of something else? And so we got in touch with the first office, which was a friend of one of our investors. And I went there with a backpack of ice and drinks on my back and went in there and gave everyone a product and told them all about it. And we were fortunate to get really great feedback such that we then went and put a refrigerator in the office and we stock it every few weeks. And then what we realized was that's actually quite a profitable sales channel because it only required, you know, an hour of my time or a colleague's time. Yeah, a few drinks. So, okay, you have the price of that, but thereafter you have this audience that are just going to continue to buy and consume your product. And so we thought, let's try and scale that. Now it's proving harder to scale as quickly as we want, primarily because you have, call it like three groups of offices. You have really small offices where you know they're not going through enough product, where it makes sense for us to take our time to sell to them. Or you have really large offices where they have, they outsource a lot of their hospitality to these larger companies which at that point it's not necessarily a profitable channel for us. Sweet spot is these offices where you know there's one to 200 people, there's one office manager who tends to buy, you know, snacks off Amazon. That tends to be our sweet spot.

That's great and, but also this really gives you a good path for scaling I'm guessing because you really beginning to know your customers. I'm really impressed by that. And you know, the way you've built your business on experience really appeal, really appeals to the one me the way you've done it. Daniel, what's next for the business? What do you, what are your next big milestones you need to get to?

I think for us next it's really continuing to be laser focused on the northeast region in America. Really double down on our distribution. You know, we're at a point now where we need to kind of level up our distributor to the next step so we can really scale and get into, you know, more of those higher tiered stores. At the same time we'll be expanding into la, specifically into a couple of retailers such as Erewhon and Mother's Market. From a customer perspective in food and beverage, those are two very influential retailers where they really help launch new brands to the right demographic that appeal to those brands. So we'll be launching with them and then really ramping up our brand awareness and marketing. Like I said earlier, it's not something we've spent too much money on yet. We're at a point now where I think we're noticing that we really need to ramp that up in order to increase awareness in order to drive sell through both at the retailer and online. And so we'll be doing that over the next coming months.

I think that's really fantastic way to start landing the where we're going on the story on this. It's a wonderful story that you've got and I love the fact that you just turned up in New York with a one way ticket and here you are building a brand that I'm sure is going to go on to some huge and successful things. I cannot wait to get my hands on some of this drink and I'm definitely going to make sure I get some when I'm over in New York in the summer. Daniel, thank you so much for joining us today. And thanks for sharing your experiences as a founder and a future CPG beverage guru. I'm sure you're going to be great.

Thank you. I really appreciate it.