Most people only wake up in the middle of the night to a noise outside or a bad dream — but at 3 a.m., Ben Goodwin thinks about soda.
Goodwin is the CEO and formulator of Olipop, a "healthier" prebiotic soda on track to surpass $200 million in sales by the end of the year.
He and his co-founder, David Lester, 42, launched Olipop in 2018 with the goal of creating a product that would "help push people's diets in a healthier direction … but doesn't require a massive behavior shift from them," Goodwin, 38, tells CNBC Make It.
In its first year of business, Olipop made $852,000 in gross revenue selling to 40 grocery stores in Northern California. Goodwin and Lester packed and delivered the cans of Olipop themselves, a formula Goodwin perfected in a makeshift lab at his house in Santa Cruz.
Since then, Olipop has grown into a nationwide brand and a favorite among Gen Z and millennial consumers, who gravitate to the brand's eye-catching packaging and nostalgia-inducing flavors like root beer and vintage cola — many of which Goodwin comes up with in the early hours of the morning.
For example: Olipop's banana cream flavor happened "as I was laying in bed one night and asked myself, 'What's the weirdest, hardest flavor I could pull off?'" Goodwin says.
Olipop's flavors might mimic the taste of other beloved soda, but where it stands out is its ingredients: Many popular soda brands can pack about 39 grams of sugar in a single can, but Olipop slashes that number down to 2-5 grams, while also providing 9 grams of fiber. Each can cost about $2.49.
It's no coincidence that Olipop's rise has coincided with the public's growing interest in gut health. Between December 2022 and January 2023, as the hashtag #guttok surpassed 700 million views on TikTok, Google searches for "Olipop" spiked. Within the first six months of 2023, Olipop hit $100 million in gross revenue.
Here's how Goodwin and Lester turned a $100,000 investment into a multimillion-dollar business capable of selling $20 million worth of soda a month.
Goodwin and Lester met at a crossroads in their lives, when each felt lost in their careers.
In 2005, Goodwin dropped out of the University of California Santa Cruz, where he studied environmental science, to help one of his friends start a kombucha company.
"I knew that if I did finish my stint in college, I'd be saddled with quite a bit of debt," says Goodwin. "And I actually read the book by the Clif Bar founder [Gary Erickson] on the founding of Clif Bar, and it just dawned on me that I could go be a food or beverage entrepreneur."
Learning how to brew kombucha sparked Goodwin's curiosity about gut health and all of the fruits, herbs and other ingredients that can help improve it.
"I learned that we actually produce a lot of neurotransmitters and hormones in our gut microbiome, and they have an outsized impact on how we think and feel," Goodwin recalls. "The light bulb went off for me."
Several studies have shown that your gut plays a pivotal role in your overall well-being, fighting pathogens, producing vitamin K and other important chemicals, and may influence your immune system and heart health.
He left the kombucha company in 2008 with hopes of creating his own drink, one that would be delicious and gut-healthy — but this time, it would be a soda.
"I grew up drinking soda, it's one of the most ubiquitous American beverages of all time," says Goodwin. "I thought, If you really want to create a healthy product that's accessible and can break through at mass scale, soda is the perfect vehicle."
Goodwin spent the next four years in a makeshift lab he set up in a friend's backyard alongside Jim Ilehder, a microbiologist he hired to help with formulation. At the same time, Goodwin balanced several freelance jobs, including product development, web design and digital marketing for other businesses, putting whatever money he made toward the experiments.
"I think I spent about $300,000 of my savings on that project," says Goodwin. "We made our own equipment from parts at Ace Hardware and an aquarium store downtown to save money."
By 2012, Goodwin had created the fizzy, fermented soda of his dreams. At the same time, 6,000 miles away, Lester quit his corporate job at Diageo, a large alcohol distributor, and decided to move from São Paulo to San Francisco to become a full-time entrepreneur.
It was actually Lester's old boss at Diageo who introduced the pair.
"She knew Ben was looking for a business partner and thought the two of us would work well together," says Lester.
They agreed to meet at a coffee shop in Palo Alto in early 2013 to discuss a potential partnership in Ben's probiotic soda company – Obi.
"I remember Ben turned up with this bag of sodas that he decanted into these beautiful glass champagne bottles," says Lester. "And he just blew my mind with his knowledge of the gut microbiome, probiotics, and his passion for what he was doing ... it was a very different type of conversation than I'd be having in my corporate career."
Adds Goodwin: "It was clear to me once we met that David was this very intelligent, earnest, well-intentioned person, and we developed a lot of trust for each other really quickly."
Two weeks after their initial meeting, they became partners. However, Obi didn't see the success and traction they'd hoped for, and in 2016, Goodwin and Lester sold Obi. Goodwin and Lester declined to share how much Obi sold for, and to whom.
Neither could point to a specific reason as to why Obi failed — but both Lester and Goodwin agreed that they weren't ready to quit working together.
"We got to the other side of Obi and realized that we hadn't worked that well together, but equally important, we hadn't killed each other. We still felt very motivated to try and figure it out," says Lester. "To me, it would've been a wasted experience if we didn't then go on and put into practice what we learned."
Goodwin went back to work in the lab — one he set up in his Santa Cruz home — this time focusing on prebiotics versus probiotics, a decision that was buoyed by new research on the benefits of prebiotics for the gut and the brain. Prebiotics are non-digestible fibers that stimulate the growth of good bacteria in the gut, whereas probiotics are live bacteria found in some foods and supplements.
In 2018, Goodwin finished the new formula for Olipop, a blend of botanicals, plant fibers and prebiotics including marshmallow root, nopal cactus and Jerusalem artichoke.
Olipop's name was inspired by a group of prebiotic fibers, oligosaccharides, that Goodwin discovered during this experimental phase — Lester suggested they combine its shortened name, "oli" with "pop," a common nickname for soda in the U.S. Midwest.
The pair pooled $100,000 they received from selling Obi to get Olipop's first cans on shelves.
At the start of 2019, Olipop launched in three flavors — ginger lemon, strawberry vanilla and cinnamon cola — across 40 different health food stores in Northern California. That same year, they surpassed $850,000 in revenue and expanded to national retailers like Target and Walmart.
Lester and Goodwin raised $2.5 million in a seed funding round in 2019 as well, which went to building inventory, scaling up their retail presence, testing new marketing perspectives and hiring new employees.
Olipop's workforce is all remote, and they now have over 100 employees. Goodwin begins the formulation process at his house in Washington, then the soda is shipped and finished at a lab in Palo Alto.
The more popular Olipop became, the more time Goodwin wanted to spend in his lab, creating new flavors to launch. Between 2022 and 2023, he concocted flavors like tropical punch, inspired by the tangy taste of Hawaiian Punch, and watermelon lime, which he describes as "a watermelon Jolly Rancher candy smushed into a watermelon agua fresca drink."
2022 was a big year for Olipop: It kicked off with a series B funding round that raised $39.7 million dollars, with big names like Gwyneth Paltrow, Mindy Kaling, and the Jonas Brothers (Joe, Nick and Kevin) on the list of investors. It ended the year with $73.4 million in gross revenue.
Lester and Goodwin won't publicly disclose their pay but say they've paid themselves "low to moderate" salaries since the company has grown, and mostly lived off their savings in its early years.
Olipop has gone from selling in only 40 stores to over 23,000 stories in the U.S., and it is on track to sell in 30,000 stores by the end of the year, a company spokesperson tells CNBC Make It. At this time, the company does not ship internationally. Most impressively, in 2023, Olipop has seen at least $20 million in sales each month.
For Goodwin, the most surreal career moment came earlier this year when Olipop dethroned A&W as the best-selling root beer in the U.S.
"To get to that point of trust with your customer where they're willing to swap out a brand that's been with them since childhood for your product ... that's huge to me," he says.
Lester and Goodwin say they already have ideas for dozens of more iterations of healthy soda, if the demand is there.
"It's extremely tempting to spend all of my time holed up in my lab experimenting with new flavors, but for better or worse, we do have a company to run," Goodwin jokes.
Adds Lester: "I have no crystal ball that can tell us what happens next, but what we do know is that we're filling a strong consumer need, and we're in a huge category. We want to take this product well beyond $1 billion [in revenue]. I think the potential is there, but we also have the humility to know that's really difficult to achieve."
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