An Investor’s Insight Into the Functional Drinks Boom - Slurp or Skip Guest Episode - Emile Ward

Is the booming functional drinks category still an exciting place to invest, or has the market become too crowded?

In this episode of Slurp or Skip, Richard is joined by founder, adviser and drinks investor Emile Ward to taste three emerging soft drinks and explore what it takes to build a successful beverage brand.

Having co-founded and sold Gin Foundry, Emile now invests in early-stage drinks businesses. He shares what he looks for in a founder, why flavour must come before function, how brands can prove they have potential beyond early London adoption, and why some investors are too quick to overlook the drinks category.

We taste Chāps Zobo, Forever Farms Spiced Apple Cola and Yugen Super Soda while discussing functional ingredients, health claims, repeat purchase, branding, consumer education and the challenge of competing with established soft-drink giants.

We also explore the next areas of opportunity, including collagen, protein, creatine and enhanced waters, before Emile shares his advice for founders preparing to raise investment.

Which drink would you slurp, and which would you skip? Let us know in the comments.

Transcript:

Introduction

[00:00] Richard: Hi everybody, and welcome back to another episode of Slurp or Skip. This is another guest special, and I’m delighted to be joined today by Emile Ward.

Emile is a founder, adviser and investor in a number of beverage brands. We’re going to pick his brains on what makes a drink hot or not, and ask him to taste three relatively new launches from the soft drinks category.

Emile, thanks for joining us.

[00:24] Emile: Thank you very much for having me.

From drinks founder to investor

[00:28] Richard: How did you get into this space? I know your background is largely in e-commerce, you’ve exited a business and you now invest in a number of different companies. How did you get started in this role?

[00:44] Emile: My brother and I co-founded a company called Gin Foundry Limited. We did several things. E-commerce was a big part of the business, we ran Junipalooza, our big gin festival, and we had the Gin Foundry website, where we explored the world of gin and went behind the scenes.

We essentially made a business out of what we loved and what we liked to drink. We ran it for seven years and, during the height of the pandemic, sold it to Enotria & Coe. I then spent three years there, which gave me a more holistic view of the market and the wider spirits industry, rather than just gin. I also wanted to move into beverages more generally.

During that period, I had watched brands such as Sipsmith, Four Pillars and Gin Mare go from their infancy through a period of growth and, eventually, exit for significant amounts of money. I started thinking about how I could become involved with some of the brands that might do the same thing. That led me to make angel investments using my own funds, while learning more about investing and connecting with other people in the industry.

[02:04] Richard: You hadn’t really been involved in investing before that, then. It grew out of your passion for the industry and the experience you had gained within it.

I’m also delighted to say that two of the brands you mentioned are brands I’ve worked on, so I’d like to think we contributed in some small way!

What Emile looks for in a drinks brand

[02:23] Richard: Before we jump into the three drinks, what do you look for in a beverage business? Is it as simple as seeing where the broader climate and macro trends are heading and finding something that ticks those boxes? Is it about the people behind the brand, or is there something more intangible?

[02:42] Emile: There is an intangible element, but there is also something of a recipe. I’m looking back at the investments I’ve made as well as the businesses that regularly pitch to me.

I invest at a very early stage, sometimes pre-seed or even before launch. That is different from most larger institutions, which tend to invest later when a business is more proven.

At that early stage, and because I have insight into the category, I look closely at the founder mix. If there are multiple founders, I want to understand their backgrounds, their hunger, their reasons for building the business and the edge they can bring to it.

Then there is the branding and design, the liquid itself, which is very important, and the direction of the wider market. Does the brand fit an emerging trend, or is it behind one? It is a combination of all those factors.

[03:52] Richard: If I put you on the spot and made you choose the single most important factor, what would it be?

[03:59] Emile: Mostly the founder. Their energy, excitement and passion matter because they are ultimately the person driving it. In most instances, they are putting everything they have into the business. You want to know whether they will be able to pivot, keep moving and retain the hunger to bash through doors.

Drink one: Chāps Zobo

[04:28] Richard: First up, we have Chāps, a brand I recently discovered through its Ocado listing. Emile, you have seen it before in its canned format.

Chāps is London-based and aims to bring classic African drink flavours to the UK in a ready-to-drink format. This is its Zobo, made with hibiscus, ginger and pineapple.

I’m going to pour some for both of us and get your thoughts on the aroma, packaging and taste, before finding out whether it is a slurp or a skip.

[05:01] Emile: I generally like hibiscus. I wouldn’t necessarily call it a trend because it has been around for a long time, but it is a big crowd-pleaser.

There is a nice kick of ginger. Ginger can sometimes be added as a throwaway ingredient because of its perceived health benefits, but it comes through well here. It is a little sugary at the end, but it has a good flavour.

[05:31] Richard: It feels very grown-up. Jess and I have tried a lot of soft drinks and functional drinks. Chāps isn’t claiming to be functional, but I think there is an opportunity to make the soft drinks category feel more grown-up and create a middle ground between alcohol-free drinks, functional products and simply great-tasting soft drinks.

I can imagine this being served out of home with ice and perhaps some lemon.

[06:03] Emile: That may be why they have moved into this format. It can be served at the table and it differentiates the product from the can. Everyone moves into cans for convenience, but this could be a play for the on-trade.

It is very nice. I would like a little more education about what Zobo is and whether the name has a particular meaning. I think there is something about that on the back label.

[06:36] Richard: The ginger has certainly given me a tickle! It is nice because you don’t often experience that. We’re so accustomed to synthetic-tasting colas from Pepsi and Coca-Cola that, when you try something closer to what cola was originally intended to taste like, it can take you by surprise.

This is the first hibiscus drink I’ve tried and I’m really impressed by it. It feels grown-up, has real depth of flavour and there is a lot going on. With ice, it would be really refreshing in summer.

For me, it is a massive slurp.

[07:17] Emile: Definitely. It is very nice. I would be interested in trying the other flavours and learning more about the name. There may be an opportunity to explain on the label what Zobo means or translates as.

[07:35] Richard: Education is something we talk about a lot. There will clearly be an existing UK audience familiar with these African flavours, but this is the first product I have tried containing hibiscus, so it is a really nice entry point for me.

If the name Chāps relates to the people behind the brand, could they feature on the label? You see that with many founder-led businesses. The human story can help when you are trying to build a smaller brand.

[08:12] Emile: Definitely. For a relatively new brand that isn’t yet widely known, I would probably want something like that on the back. At the same time, I understand the desire to keep the aesthetic simple and straightforward. You don’t need to know everything immediately. The ingredients themselves are clear.

Overall, I would recommend it. It is very good.

How a soft drinks brand proves it can scale

[08:45] Richard: What would make you believe that a soft drinks brand can grow beyond a London base and some initial early adoption? What signs tell you that something is a genuine trend with the potential to scale?

[09:02] Emile: First and foremost, it needs a niche. The founders must understand their consumers and target them effectively, which I think Chāps is doing.

If you establish a good base, build a solid audience and generate repeat sales, you can build a business from there. You can then expand into other flavours that may introduce the brand to new audiences.

Growing beyond that initial base comes down to branding, marketing, communications and potentially different flavours. I also want to see sales velocity across different accounts. If a brand is predominantly performing well in particular markets or regions, what happens when it tests the product in areas without the same demographic? Does it continue to sell, or does the messaging, branding or flavour range need to change?

Winning the same accounts repeatedly is positive, but at some point the brand also needs to look more widely.

Flavour must come before function

[10:22] Richard: Coming back to the factors you look for, founder energy and an understanding of the product are clearly important. Taste is also crucial. From our work with functional drinks brands, we know the function may be important, but people won’t repurchase a drink if it doesn’t taste good. Is taste the most important thing after the founder?

[10:46] Emile: Taste is hugely important. One of the problems in functional drinks is that many people lead with the function. If the taste isn’t there, however, consumers won’t come back.

We don’t have enough time in the day to drink things we don’t enjoy. A flavour-first approach is important, and the brand can then sing and dance about the functional element.

Drink two: Forever Farms Spiced Apple Cola

[11:18] Richard: Next, we have a brand I have seen at trade shows for a few years: Forever Farms. It describes its products as natural sodas that are low in sugar, high in fibre and low in calories.

The brand has a large range, but we’re trying its Spiced Apple Cola. I chose this selfishly because I am always intrigued by different colas. It is a challenging market to enter, with brands such as Karma already operating in it.

When you taste a good cola, you remember that there were many different colas when we were growing up, including RC Cola and Panda Cola. It almost felt like a different drink from what Pepsi and Coca-Cola have become today.

Forever Farms is run by third-generation farmers. The drinks are made with spring water from their land, while the carbonation uses CO₂ captured from their renewable energy. The pack includes a diagram explaining those circular environmental practices.

[12:24] Emile: They have several different flavours and products, don’t they?

[12:29] Richard: Yes. There is a cloudy lemonade and an apple product among others. My initial concern is that a relatively small new brand may have too many products and could benefit from simplifying the range. I haven’t tried this one before, though, so I’m keen to see what it is like.

It tastes like cola and has a strong apple flavour. It isn’t especially spicy.

[12:57] Emile: It is less sugary than the first drink. I’m tasting sweetness, but potentially not only from sugar.

[13:07] Richard: It reminds me more of a cola bottle sweet than a traditional cola. There is less caramel, probably because of the apple, which brings a lot of the sweetness. Again, it feels more grown-up than a conventional cola.

There may be an education job to explain why somebody should choose this over a favourite such as Diet Coke or Coke Zero. Those drinks have cult followings. Consumers are almost tribal about Diet Coke, Coke Zero and Pepsi Max. The big companies have effectively created competition within their own portfolios.

If I am also receiving functional benefits and supporting a smaller independent farming family and brand, that interests me. It is enjoyable.

[14:04] Emile: It is enjoyable. Looking at the label, however, other than the high-fibre claim, I’m not completely clear about the benefits or exactly what “high fibre” means here. I’m also not sure how it provides immunity or supports brain function.

Cola is potentially a very good direction for functional drinks because it is so widely consumed and people love it. At the same time, a brand is competing against the biggest companies in the market, and they will not give it an inch.

If cola is a brand’s only product, it is a difficult route and would require a great deal of money. As part of a wider range, however, it could appeal to many people. It is also a good use of the farm’s apples.

Functional claims and consumer understanding

[15:13] Richard: The drink uses a fibre blend of chicory inulin, acacia fibre and soluble tapioca fibre. It contains 2.6 grams of fibre per 100 millilitres, which is reasonably high.

We work with It’s Giving, which operates at the value end of the new functional soda category. It was created by Simon Gray, who founded Boost around 20 years ago and later sold it to AG Barr. Poppi has also recently entered the UK category with around three grams of fibre per can, which is quite low by comparison. It’s Giving contains around six grams, and Forever Farms is closer to six grams in a 250-millilitre can too.

Do brands need to be especially careful about what they say on the packaging? I don’t think consumers are fully up to speed on this. We have discussed collagen in another episode, for example. Five thousand milligrams is simply five grams, but brands use milligrams because it sounds like a larger number. There can be some smoke and mirrors. Do consumers understand what these numbers mean, or can brands currently win by making relatively loose claims on the back of a pack?

[16:34] Emile: Brands need to be very careful about what they say and how they say it. In the US, we are seeing some businesses being sued for their claims, or at least for failing to display information correctly and claiming more than a product can deliver. I think that will happen here too, so brands must be careful about what they communicate.

The average consumer probably doesn’t understand all of it. The biggest insight is that people want to enjoy a drink. They want it to taste good. If the function is also there, that is great, and it may make the drink a better choice than a sugary alternative.

I don’t think many consumers buy these drinks believing the product alone will fix a problem. They may pick one up and see it as a positive addition to their daily routine, rather than a cure.

When will consumers sacrifice taste for function?

[17:36] Richard: I have consumed protein shakes on and off for most of my life, and I think we simply became accustomed to them tasting awful. We accepted it because we wanted the sheer amount of protein they delivered.

They are slowly improving, and larger companies such as Protein Works and For Goodness Shakes have made them more accessible from an FMCG perspective.

Are there some health and fitness categories in which consumers will accept poor flavour in exchange for a higher level of function? Do these functional sodas need to take the opposite approach because they are soft drinks first, with added function on top?

[18:22] Emile: It is a strategy. Sometimes people confuse wellness with a belief that a product has to taste a certain way, as though a less enjoyable taste makes the function more credible.

In this instance, I think Forever Farms is leading with flavour and taste, with the supplements and benefits sitting behind that. Protein has always been a difficult ingredient to incorporate into drinks. I haven’t really tried a protein drink that tastes amazing.

Protein drinks serve a different purpose, though. The consumer is trying to hit a protein target. With something such as gut bacteria or fibre, the motivation and the level of consumer understanding are different.

[19:17] Richard: Fibre has often been described as the new protein, but awareness is not at the same level. More people now understand the relationship between protein and building or maintaining muscle, particularly those who go to the gym.

People are advised to consume around 30 grams of fibre a day, and many fall well short, but does the average consumer know that? Without a major national education campaign, they probably don’t know or care enough yet.

The price of many of these drinks also puts them out of reach as an everyday purchase for a lot of people. They remain a bonus or a nice-to-have rather than an essential.

[20:08] Richard: Is Forever Farms a slurp or a skip for you?

[20:12] Emile: I liked it. I would like to try the other flavours and learn more about how the drinks are made, who makes them, the size of the operation and the strategy behind it. Is it a founder-led drinks brand, or is it primarily an extension of the farm?

It is definitely a slurp for me.

[20:38] Richard: It is a slurp for me too. I enjoy supporting smaller producers, particularly given the well-documented challenges facing British farming.

There are good examples of farms innovating with their core produce. William Chase moved beyond selling potatoes by creating Tyrrells crisps and later Chase gin and vodka. Forever Farms is another interesting example of using what the business already has to create something new. Most importantly, it is a really nice-tasting drink.

Drink three: Yugen Super Soda

[21:24] Richard: Last but not least, we have Yugen Super Soda. Yugen is a Belgian brand known for unpasteurised kombucha, and this is its ready-to-drink canned product.

I met the team at the London Coffee Festival, where they had a strong, environmentally conscious stand. This drink is high in fibre and fermented, and contains ingredients including lion’s mane. We’re trying the ginger and lime flavour.

I think the can looks very cool. It has an almost traditional tattoo style, featuring a tiger and a skull.

[22:03] Emile: The can looks great and will grab attention. It is also clearly differentiated and explains what the product is and what it provides.

I would still like the front to quantify some of the benefits more clearly, perhaps by stating that it contains a particular amount of fibre or another ingredient. Those values should be immediately visible.

Branding is crucial when you think about where a product will sit on the shelf, how it will stand out and what surrounds it.

[22:42] Richard: My initial thought was that it would look very different alongside other functional sodas. It also gives me craft beer vibes. That could help it stand out, but it could also create confusion. Consumers may only look at a product for half a second. Even though “soda” appears prominently on the front, it still resembles a craft beer can.

[23:12] Emile: That approach didn’t do Liquid Death any harm in America, although the brand hasn’t performed as strongly here.

On the nose, I’m getting ginger, spice, a little lemon and some apple cider vinegar. The aroma isn’t too strong or off-putting, which fermented drinks sometimes can be, especially for consumers who aren’t used to them.

[23:39] Richard: It is very light, almost like an iced tea. It makes me think we could have served it even colder, perhaps over ice, although it has been in the fridge for a long time.

It feels refreshing. It isn’t too sweet, there is no excessive sugar coating the mouth and the lime isn’t too astringent or overpowering. It is thirst-quenching and would be very pleasant on a hot summer’s day.

[24:23] Emile: You could have a couple of these. With the other two drinks, you would probably be satisfied with one. You could potentially drink three or four of these across a day without feeling as though you had overdone it, because it is so light.

[24:44] Richard: Many functional drinks, such as Poppi, are trying to sit squarely within the mainstream soda category, with the function presented as an additional benefit. This one clearly looks and tastes healthy, or at least healthier.

I’m really impressed. It is light and refreshing, looks different and has some interesting benefits, although some may only be present in trace amounts.

[25:23] Emile: I like it and can see where it fits within the market. Brands also need to consider how they will drive volume, repeat purchase and adoption.

I can see this being adopted quickly. The branding should help it fly off the shelf, while the taste is accessible and unlikely to offend anyone. The other two drinks may divide opinion more. As you said, the Forever Farms drink may not completely satisfy somebody’s craving for cola.

Yugen doesn’t force the consumer into one camp. If that is the strategy, it works well.

[26:11] Richard: So, a slurp for you?

[26:14] Emile: Yes, it is a slurp for me.

[26:17] Richard: A clean sweep!

Is the functional drinks market overcrowded?

[26:23] Richard: Emile, you invest in a number of drinks brands. Soft drinks and functional drinks feel like a real success story within the wider beverage category at the moment.

That success has brought a great deal of competition, with new brands and innovations appearing constantly. As an investor, do you think the market has become too cluttered, or is there still a genuine growth opportunity?

[26:55] Emile: There is still a lot of opportunity in the space. It is overcrowded, but that has never stopped the spirits industry, where there has always been an enormous amount of competition.

New players can still enter a market and make a dent if they have the right execution, team, budget and target audience.

It is overcrowded, though. Many products compete directly with one another and some will not win against the larger incumbents. For those brands, progress will be a slow burn and competing will be very difficult.

There is also a general reluctance among investors to back drinks businesses, whether alcoholic or non-alcoholic. The margins are low, the competition is high and the category is extremely difficult.

That view can miss the bigger picture. Consumer behaviour is changing and people are moving away from some established brands. The ultimate prize of building and selling a brand remains very real. Large drinks companies continue to acquire smaller brands because that is how they feed future growth.

When investors overlook the category completely, I think it is short-sighted. Often, they simply don’t know where to look or how to assess drinks businesses properly.

The functional categories attracting investor interest

[28:38] Richard: Without putting you on the spot or asking you to mention any brands you are involved with, are there particular businesses or areas that you think are performing well or that excite you?

[28:53] Emile: I recently met somebody building a very exciting product in the ready-to-drink collagen space. I think collagen, protein and creatine are all interesting areas.

I also look regularly at the US as an instigator of trends that may later reach the UK. That doesn’t apply in every case, because we know some American brands fail when they arrive here, but there is still a great deal we can learn and apply to the UK market.

Hydrogen is another interesting area, particularly enhanced hydrogen waters. Health and wellness continue to pull the broader trend forward.

I also wouldn’t overlook what is happening in spirits-based RTDs. One development we haven’t seen as much of here, but which is happening in the US, is the use of varying dosages. That could mean high- and low-alcohol products, different levels of THC where it is legal, or high and low doses of caffeine.

That is an interesting opportunity. Many brands use a broad benefit such as “focus” as their USP, but what does that actually mean? What are the levels of the active ingredients, and where does the caffeine come from?

There is still room to develop products that address more specific needs. A consumer may want sustained focus over a long period rather than one short burst. Ideas like that are piquing my interest.

Emile’s advice for founders raising investment

[30:59] Richard: My final question is about fundraising. We speak with many founders building these kinds of brands. If you could give them one piece of advice before they try to raise money or make a major financial leap, what would it be? What do they need to have in place?

[31:23] Emile: Every founder is different and people raise money for different reasons. Some people always planned to raise investment when setting up their business, while others intended to bootstrap it.

If you have a clear strategy from the beginning, that is great. In other cases, the plan develops over time. A business may experience more success than expected, need to change direction or simply run out of cash.

The first question I would ask is why you are raising from private individuals. There are other possible solutions, including loans and different forms of credit.

If you raise money from angel investors, followed later by institutions, private equity or venture capital, you need to have mapped that journey out fully. You cannot expect one fundraising round to solve everything.

I recently spoke to a founder who had laid out the entire fundraising cycle she believed the company would need. That was refreshing. People may see a business raising £400,000 without realising that it could need to raise again the following year, and perhaps raise even more after that.

Fundraising is incredibly difficult and takes a great deal of time. Some founders are excellent at it because they are well connected, know the right people and have strong business figures behind them. Before starting, founders need to understand that fundraising will distract them from operating and growing the business. It may not lead where they hoped and, once they begin fundraising, they will probably have to do it repeatedly.

They should consider how much that will dilute their ownership and what they ultimately want from the business. Is the goal to exit, or to own a business they are proud of that provides them with an income?

Always try to fundraise from a position of power rather than desperation. Investors will sense desperation. They may either lose interest or dictate terms that the founder does not want to accept.

Choosing investors and advisers strategically

[34:39] Richard: If a founder does take investment, how important is it to choose investors who can contribute more than capital?

You have been an adviser and have built and exited a business yourself. Is access to that expertise equally important?

[34:58] Emile: It is important to have advisers, but it depends on the founder’s character too. Do they listen to people, or do they prefer to go against the grain?

As somebody who has also made passive investments, I’m happy to believe in the founder and trust them to make the decisions they think are right. They will make mistakes and grow, but hopefully they will get the important decisions right.

Advice can be strange. An adviser may offer a particular view, but the founder might see the situation differently, and sometimes too much advice can muddy the water.

When choosing advisers or building a board, the important question is what each person contributes to the overall plan.

If a brand hopes to exit to a large beverage manufacturer in eight or ten years, for example, why not target an adviser who has worked for that business or currently works there? Founders should be more strategic about it.

Those appointments also send signals to investors. The business will need help to cross that bridge when it reaches sufficient volume and starts looking for larger partners. Having somebody on the inside could be key.

Closing

[36:41] Richard: That’s brilliant. Thank you.

Thanks to everybody for joining us for this special guest episode of Slurp or Skip. Emile, thank you so much for your time.

[36:52] Emile: Thank you.

[36:54] Richard: We hope you found the episode useful. If you have any thoughts, if we got anything wrong or if we offended you, leave us a note in the comments and we’ll be sure to get back to you.

Otherwise, we’ll catch you on the next one. Thank you.