Recess raises $30M Series B to scale its magnesium-based wellness beverage brand

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We have Benjamin Witty from Recess coming in the studio. How you doing? Good to see you. What's happening? Welcome to the show. Uh we don't have audio from your side. Let's check in with the production team. Let's check in. Could be. tell you about Adio, customer relationship magic.

Adio is the AI native CRM that builds, scales, and grows your company to the next level. You can get started for free atio. Good opportunity to tell Ben about. Yes, we got to tell him. He's got a $30 million series B. He needs a CRM. Let's get him on that. Maybe he needs an eight, too.

Another beverage company uses audio. Wait, really? That's awesome. Okay. [laughter and gasps] 8. com. Yes, we can. How'd you sleep last night? You sleep well. I slept well, but I could sleep better with an eight sleep. So, thank you. There we go. Uh, great to great to finally meet.

Uh, we we uh share uh the day job guys. Fun fact, this is our second podcast together. Your first time on TVPN. Didn't we do a podcast together? Like 10 years ago, I Yes. But I forgot what. But what it was like it was like Lucy like me and David hung out with you. We did like five episodes of this thing.

It was a total flop. That's right. Now what? But I was I was really neoccorporate media strategy. Never stop podcasting. Didn't work. But yes, we should never stop. Great. Great. Uh great to hang on the show.

Uh why don't why don't you give a quick intro on kind of yourself and the company if anybody's been living under living under a rock. Yeah. So you know I'll start myself. So I didn't come from the you know food or beverage industry. Actually started my career in Silicon Valley.

So I was in San Francisco in the early stage tech world from 2010 to 2016.

[clears throat] But I kind of knew I wanted to start a company in the consumer space and so I went out on my own in around that time and kind of was led to the the origin of recess and kind of my observation in that 2016 era was you know we were entering this new period in history driven by technology and was going to leave us all kind of stressed out and anxious.

And so I had this thesis that kind of led to to recess that you know in the future that we were entering kind of people would be prioritizing their mental wellness and looking for healthier ways to reduce stress and relax.

And I kind of saw the, you know, the rise of these new types of functional ingredients such as, you know, magnesium, adaptogenic herbs, CBD at the time, you know, even THC.

And kind of my conclusion was that they were going to kind of, you know, serve as the inputs into this fundamentally new space, you know, of, you know, products that would emerge on the other side of kind of caffeinated beverages and alcohol focused on relaxation.

And um you know I didn't know a sing and so the kind of the light bulb moment was like Red Bull for relaxation but it took a much more expansive view of the space that would emerge and the different kind of subcategories that you know the I could create a brand that could ultimately kind of extend into.

I remember hearing you on a podcast back, it must have been in the kind of 2018 era where you talked about how Red Bull, I believe you talked about how Red Bull like distinctly they didn't necessarily want to make a drink that just tasted the best, but they wanted it to have like this specific sorry specific flavor that just was like extremely identifiable and like made you feel something and how you leveraged that with with recess, which I think you you did well from from the very beginning.

Um, but yeah, I feel like, you know, looking back, uh, it's interesting that there were so many there were so many brands created during that that that initial boom, uh, whatever 2016 to 2020 kind of I look as like the heyday when you had uh, uh, everyone was like reading Lean Lux and uh, 2 p. m.

, you know, and and there was just like this this so much investment in the category. And to me, uh, Recess stands out because it's the only the only brand in that era that like was kind of riding the same wave but didn't look like everything else at the time. Yeah.

Um, and yeah, just uh obviously um yeah, like even even the fact that like whatever popup you did in in New York during that era like still sticks out in my mind when I can't remember a single I can't remember any of the other kind of marketing that was happening during [snorts] that period.

Yeah, the Instagram sticks out to me like crazy. I remember the the the Instagram. Did that ever grow? Like is that like the corner of the cornerstone of like the community? Is is that still a because I remember like the the Instagram just popped up so quickly and grew so fast.

Was was there like did that turn into like a whole flywheel of the business. So what the twist in the business was like our first product line included CBD in it. Um and so we got off to this you know I never thought of the brand as like a CBD brand.

I I thought I always thought of brand as like a relaxation brand and we did a lot of like I'd say kind of groundbreaking kind of marketing you know activities in that first year in 2019 you know from our content strategy you know which we can talk more about the popup in New York you know brand collaborations but what happened was you know I saw the writing on the wall that the regulatory clarity for you know CBD was going to take a lot longer than everyone thought and so I'd never so I basically accelerated the vision of becoming a brand platform and bet on magnesium as this ingredient that we could use that could deliver the same effect, you know, in a fully compliant way, which was this incredible bet.

Um, our recess mood line, which is what, you know, leverages that ingredient, is kind of seeing velocities, you know, on par with Poppy. Um, and so that lines, you know, National, Target, Kroger, etc. , Yeah, you were early.

You were uh CBD was an interesting category because there was so the growth of the category was so insane that even though you guys were early in terms of like a CBD beverage, I'm sure you just like I remember you guys so noisy. It was Yeah, it was so noisy.

You guys did such a good job marketing that a bunch like something about CBG is fascinating because people just think like you make a drink and sell it and it's just going to work and you just put it on a shelf and people buy it and obviously like the actual logistics of scaling a beverage brand are so much harder than that that like so so few of the companies ever ever really you know even crack like a couple million of of um revenue.

But um but yeah, the timing on magnesium as well.

I thought I was supplementing magnesium like in that sort of 2016 beyond era and then it was only like a few years ago that people started talking and saying like hey did you know that the average like you know 70% of Americans are deficient in magnesium and to me that had been just like I I knew that because of our food system and there's way less magnesium content in in even vegetables and stuff today than there were you know decades ago.

Um, but you feels like nice and early to that and that's an ingredient like a hero ingredient that was quite a bit more durable in my opinion than this like initial CBD boom and I don't you know I could call it a bust maybe because there's I know a lot of people that have built brands saw great revenue growth and then didn't figure out a way to kind of like center themselves on a more durable kind of hero ingredient.

Yeah. I mean I just just to double click on that a bit like I think beyond the mark the the smart marketing that we did in the early days that were about to you know reacelerate in a big way.

I think I had the right kind of category view of the how the space was going to emerge and you know just a simple insight I'd always say like I've never heard anyone call Red Bull a caffeine company. It was an energy company just like we weren't a CBD company or not a magnesium company or or not even a mocktail company.

I mean the other amazing bet we made was uh on the RTD mocktail opportunity and so we launched no mocktail line in 2023. Kind of what I saw there was you know when the when kind of athletic brewing was reatalyzing the non-al beer space you know my observation was like beer was flat to declining right in alcohol.

So was kind of fighting for share of a shrinking pie. What was growing it was RTD cocktails and hard seltzer. So my thesis was there's going to be like an RT mocktail category, you know, on the other side of RT cocktails, just like, you know, non-aler existed on the other side of alcoholic beer.

And you want to bet on a feeling that humans are going to want for a long period of time versus a single ingredient, right? Yes.

And so I had this on one framework I had is stimulation, intoxication, relaxation that this really represented the emergence of this fundamentally new kind of value proposition kind of in feeling that people would be seeking.

And you know when I had the light bulb moment for you know what became recess you know Red Bull was started in 1987 right like you know Red Bull, Monster, Starbucks all wrote this kind of secular tailwind of kind of consumers seeking stimulation.

And again, my thesis was in the future that we were entering, you know, people would be basically figuring how to relax in the crazy world that we were living in.

And that, you know, all these trends, whether it's, you know, focus on alcohol moderation, stress relief, enhancing sleep, you know, focus are all kind of connected and a part of kind of consumers prioritizing their overall kind of mental well-being.

And that's kind of why the recess platform strategy has been kind of successful. And I think there's a lot more kind of we can do, you know, beyond this in the in the in the next phase of the business. What do you uh how do you think about marketing and brand building going forward?

It feel I I don't know if I have this correct but it feels like over the over the last few years the focus has been like distribution getting the right assortment of products like laying the foundation so that you are in have the ability to scale because one of the challenges as a beverage brand if you're doing people like to buy beverages in stores.

So, if you're doing like viral internet marketing, that doesn't necessarily translate to the sales growth that you want, unless you have the distribution. And, you know, my the the grocery store closest to my house uh has like recess.

So, I'll I'll I'll I'll grab uh some from there, but uh I'm I'm assuming it took a while to get the kind of saturation from a distribution standpoint so that you guys can have the confidence to like do a big celebrity partnership or do a TV campaign and start doing these things that uh just are kind of a waste of money uh unless you have that distribution.

That's right. like and I think that's one actually the best parts of the recess story as I've been kind of transitioning the business beyond the original CBD line with the addition of mood and mocktails.

I've been focused on, you know, basically performance marketing to drive the Amazon business and we're still 50% ecom and then we just get so much organic kind of word of mouth, you know, via, you know, basically testimonials.

So, we probably get, you know, 100 to 150 organic tag posts a day across, you know, Instagram and Tik Tok of primarily women, which is our kind of core kind of consumer spreading um, you know, the the the word on recess. And that is super powerful.

And so I look at this round, this next phase is fundamentally about, you know, scaling the team, scaling distribution and, you know, really re catalyzing brand marketing because, you know, John, what you guys were alluding to earlier, you know, the kind of groundbreaking content, the pop-up, stuff like that, I really have turned off.

And again, if you compare, you know, what we've where we are comp, you know, compared to where Poppy, Liquid Death, brands like that, we've done really no levers on brand marketing yet. And so you're going to start to see, you know, a lot more of that in this next phase.

And you know, just to talk about Red Bull a little bit, like I always kind of thought of Red Bull as like a media company that monetizes through selling cans. Y um and I do think beverage is this very kind of underappreciated category.

Um you know, especially it has some similarities to even, you know, tech companies like when I, you know, when I had the idea for recess, I discovered this amazing fact which was, you know, Monster Energy was the best performing stock of the past 20 years, right? It was Celsius did incredibly well too.

It's happened like four times in beverage and and energy specifically like great outcomes. Yeah. Exactly.

And so it does have this like you know if you bet on especially if you're creating a category and riding like a very large secular tailwind like has this compounding you know effect to it and you know obviously brand marketing plays a critical role in that and I think there's some you know a lot of new you know opportunities to do stuff in in news new ways in this era with you know the role of you know Amazon and digital experiences even I think there's a lot of cool stuff we can do in the next phase of recess so I'm excited to you know turn that back on.

Yeah. Yeah. You got a I don't know I don't know how much you you still work with day job but if uh if you sat down for an hour uh brainstorm with uh with Ryan and Spencer you could probably come up with like at least a hundred ideas that would uh that would unlock that that next stage of growth.

Yeah, they'll be back in the mix for sure. Uh we got to talk about the fund raise. We got a gong here that we would love to to hit on your behalf. Uh how' the round come together? Who who participated? Yeah, so the round was led by Kavu. It's a $30 million series B. Kau's voice drowned out by the gong.

Uh you said you you were getting into Kavu. Yeah. So Kau was the main investor in Poppy which they just sold to Pepsi for about $2 billion earlier this year and kind of where their next It's Rohan Oza, right? Yeah. Yeah. He's a legend. He he was like top guy at Vitamin Water. Sold that to Coke for 4 billion.

like truly the crowning achievement of the CPG beverage industry uh at at the time and still today. One of the greatest bev deals ever. And then uh he's been on Shark Tank. He's just like a legendary consumer package goods investor. Uh yeah, quick lightning round of questions.

Uh I'm assuming that Kau is not uh underwriting this uh underwriting the business from with any type of AI lens, but are you getting are you getting any leverage out of AI? Uh I would say like we we at this show uh unfortunately get very little.

I would say it helps with with some research and we build software internally that's that's helpful. Um but I'm curious if uh the the chat was wondering if if it's been uh help help move the needle at all.

Not not yet, but I'm starting to have conversations with different groups kind of building kind of AI driven kind of content production and I'm very excited to figure out how we can leverage that. I mean, you have to pump out a lot of a lot of content, you know, running a beverage business or any consumer brand today.

And I think there's an interesting way for us to use it in a kind of a tongue-in-cheek way. I mean, the whole recess story and antidote to modern times is kind of, you know, was in response to the implications that AI would have, right? And I think so to like incorporate it into the content strategy.

Um, you know, I feel like you could do something really fun with AI customer service where Yeah. the AI like you need some customer service. People are going to have questions about the product generally.

There's going to be a lot of back and forth, but you could probably do some crazy stuff with like fine-tuning the LLM, bringing a unique brand voice in and kind of like go that just feels like recess day job.

It's also I I can imagine like I I I would imagine a lot of the your distributor relationships today are still like somebody has to call somebody on another line and a grocery store has to call the distributor when they're you know and it's still like kind of analog so I can imagine some opportunities there.

Another question from the chat uh uh they're asking about the potent like are you excited about drone deliveries?

I can imagine like beverage is something that people like when people want a drink they you've built a big ecom business but when people want a drink they don't typically think let me go on my computer and order a drink and we saw there was uh I don't know if this company is still around but there was a company that was started in the same era as recess that tried to go really all in on on ecom and I I I don't uh I think they they partner with Coke at some point and I don't I don't know that they're still around names escaping.

Is it lemon something? Lemon. Lemon per. No, not lemon perfect. Lemon perfect was like lemon. Dirty lemon. Dirty lemon. Yeah. They text messaging. They were like insanely good at e-commerce.

But yeah, theor theoretically if you can just, you know, say like I want a six-pack of recess mood and hit a button on your phone and a drone just drops it into your backyard. That should increase velocity. But I'm curious. Yeah, I mean I'm a big believer in just omni channel. I mean Instacart's a huge channel for us.

Do Puff, Door Dash, increasingly kind of anywhere where kind of consumer products are sold, you know, we want to be. Um, and so, you know, when that becomes a real a real channel, I think we'll we'll explore it for sure, but it's not it's not something I spent a huge amount of time thinking about. Got to stay focused.

Awesome. Walmart and Costco next before Yeah. I mean, you get those and it's just like, okay, you've kind of won and then the like you you'll just be in the place to take advantage of whatever thing comes next. So yeah. Yeah, lots of opportunity. Thank you so much for stopping by the show. Great to find.

Thank you for coming on. We'll talk to you soon. Congrats to the team as well. Cheers. Have a great rest of your day. Let me tell you about public. com investing for those that take it seriously. Multiasset investing industry yields trusted by millions. Uh let's go. Palanteer.

Speaking of stocks, Palunteer earnings Palanteer according to CNBC tops estimates boost fourth quarter guidance on AI adoption. uh they issued a strong guidance attributing growth to adoption of its AI uh government sales which have been central to Palunteer's ascent grew 52% from a year ago.

Uh and again stock is not up a ton after hours. Um but uh we can uh dig into this more uh probably tomorrow. Uh, did we want to try to Yeah, we got to go through a little bit of this. We got to do a little bit of a a