How O2 Helped Keep America’s Gyms Open For Business

Dave Colina: On the company side, we're a company that is values- driven. And we talk about this a lot. We only have three values, but we've taken each really, really seriously. It's honesty, humility, and hustle.

Dave Knox: I'm your host, Dave Knox. And this is Predicting the Turn, a show that helps business leaders meet their industry's inevitable disruption head- on. Welcome to another episode of Predicting the Turn. Today, we sit down with Dave Colina, the co- founder and CEO of O2. O2 is a startup fitness beverage brand that's making a big splash thanks to innovative marketing and a recent win in the BevNET Best of 2020 awards. Dave, welcome to the show.

Dave Colina: Hey, thanks for having me, Dave.

Dave Knox: I want to just start off with the background and the story of O2. What it is exactly when somebody says a fitness beverage and then dive into what's happened over the course of the year.

Dave Colina: Yeah, for sure. I can give you the backstory in a nutshell here. O2 is a recovery drink and as a brand, we make functional hydration and recovery products that taste really, really good, and are clean and all- natural. The original idea started, it feels like forever ago in 2011, actually. I was searching for a better alternative to all the sports and energy drinks that I was drinking. Couldn't find anything that I liked. And so I approached a friend who's a physician about effectively building are building a better mousetrap and combining the things that we liked about sports and energy drinks and excluding the stuff that we didn't like, the high sugar and, and everything else. And so that was the original premise for our product. And then he came across some really compelling medical literature that showed the accelerating effects of ingested oxygen on the liver's metabolism of toxins. And that's when it became a recovery drink. We've had a strong presence in the fitness scene since we launched. And that was in 2014 and that was literally and figuratively out of the back of my car. And our presence in the fitness scene just came as a result of my being a CrossFit coach. That was something I started to do after I left my day job to help make ends meet.

Dave Knox: This year obviously has been tough for a lot of people. And you guys have been making a splash with your business with some really innovative marketing that went to the core of your community and the people that helped you get to where you are today. Can you talk a little bit about that and the big news you had from BevNET recently?

Dave Colina: Yeah, absolutely. Like I mentioned, from day one, we've had a strong presence in the fitness scene and that's been rooted in independent gym owners, so CrossFit gym owners, boot camp gym owners, yoga studios, places like that. They were among our first retailers of O2 when we launched and have since played a really, really big role in building up the brand. When 2020 rolled around, I like many of my peers in the fitness space, we were pretty concerned about what was happening overseas with COVID. So I was paying close attention to that just based on the threat that it represented to my business because we had at least over 50% of our business was coming from our fitness channel, so gyms purchasing O2 from us and selling it to their members. And within a matter of about a week, that channel disappeared entirely. And so a joke, one of the few things that we got right at the outset with the company because so much has changed since we launched, but one of the few things that we got right is we've always been a very values- oriented company. So when COVID hit, we decided that we were going to lean into this and do everything that we could to support our core clientele, which are the independent gym owners, because we believe that the gym owners are among the most important members of our society, especially right now, because they keep us fit and healthy to battle stuff, just like COVID. We announced a program on March 18th called the 50/ 50 initiative where we committed to pledging 50% of our profits from each purchase of O2 that was done online, back with the purchaser's local gym owner. And within three days, we had done more sales online than our best month ever. And over the course of about five weeks, we brought in a few other brands to join us in this initiative and ended up joining generating over$ 230,000 to give back to about 2, 100 participating gyms.

Dave Knox: When you look at that campaign that you guys launched, I mean, you're not, Coca- Cola, you're not a business that's selling billions of dollars. How did you think about the risk situation that was going to be playing up as you leaned in and did that campaign?

Dave Colina: Yeah, that's a great question. This was not a decision that was driven by a spreadsheet or driven in purely financial motives. Otherwise, I think any CFO in America would have said," Don't do this." This was something that was driven by a feeling of moral obligation to do the right thing. When our gym channel shut down like I mentioned, that channel was over 50% of our revenue, we still had two other sales channels that were perfectly fine. One was the grocery channel, and grocery was getting crushed in March. People stocking up on products, especially hydration based products. And then the other channel was our web channel, drinkO2. com. And we couldn't really influence what happened in the grocery channel, but we could influence drinkO2. com and what we do with it because we own that channel. So it felt like the right thing to do in that situation, knowing that gym members were going to continue purchasing O2 except instead of buying it from their gym because their gym was shut down, they were going to buy it from us on drinkO2. com. It only felt like the right thing to do was to share the upside from that transaction, with the gym owner that would have otherwise been making that sale. It wasn't something that we thought was going to take off in the way it did. Frankly, we were all a little surprised and delighted that it took off the way that it did, but definitely surprised. And it also wasn't something that we felt represented a tremendous risk to us because we still, even though we have a somewhat large presence nowadays as a brand, we only have a few people that work on the team. There's not a ton of overhead that we needed to cover, so we could afford to share half of our profits over the course of a few weeks with some really deserving people. So that's what we did. And luckily for us, it paid off in a really big way.

Dave Knox: I want to dive into the product itself a little bit. As you mentioned, you're a hydration and recovery product. Now, what makes that brand so special? And what's really driven people to be so attracted to O2 and what you guys have brought to the beverage industry?

Dave Colina: Yeah. I think there are a few things. One is the product. But I think even more special is the company and the types of things that we do for the community. So I'll touch on the product. The product, it just tastes really, really good. And I know that sounds overly simplistic, but you'd be surprised how many functional products don't taste that great. O2 is a functional hydration product, which means it's got a lot of electrolytes. It's got 50% more electrolytes than Gatorade, for example, but it only has one gram of sugar and it doesn't have any artificial ingredients, but it tastes really, really, really good. So not only does it work well in terms of helping you hydrate faster and recover faster, but it also just tastes incredible. That's on the product side. On the company side, we're a company that is values- driven. And we talk about this a lot. We only have three values, but we've taken each really, really seriously. It's honesty, humility, and hustle. And so we put those values forward in everything that we do. And I'll give you an example. In April, we were out in the market with this 50/ 50 profit- sharing campaign that we were doing. And we were talking to all the gym owners that we work with and just gauging how they were feeling about COVID and their business in general and how things were going to unfold in the month of May. And the overwhelming consensus was it's been a really, really positive experience seeing what my community is doing, seeing my members rally, and seeing brands like O2 rally to support me. But gosh, I'm terrified of what's to come if I'm still forced to keep my gym shut down. A lot of gyms were doing online Zoom classes that sometimes it worked well, sometimes it didn't. And a lot of gyms were just struggling to find ways to provide their members value while their gym doors were shut. So we kind of went back to the drawing board and we got creative, which we do pretty well at O2. And we said," What can we do to help gyms retain more members as the month of May unfolds and as gyms are still forced into these mandatory shutdowns." So we came up with a pretty creative idea and we called it Stay for May. And O2 and three brands that we work within this space, an apparel company and a supplements company, and another gear company, we pooled our resources and collectively said," We're going to donate a$ 25 gift card to our websites." So across four brands, that aggregated to$ 100 gift card to every gym member in America who belonged to one of those 2, 100 participating gyms. And the catch was as long as they kept their gym membership in the month of May active. And like I said, we branded that Stay for May. We announced that at the end of April. And when we announced that, we had both gym owners and members telling us it was the most remarkable thing that they'd ever seen. It was keeping people in business. It was keeping members engaged with their gym. And it ultimately ended up being a huge win for all parties involved because it helped gyms retain and reward their members for their loyalty and it helped members get a nice gift card to brand their brands that they were already buying stuff from, and then helped us acquire a bunch of new customers completely organically. The things that make O2 special are sure the product, but it's also the type of things that we do for the community and the types of things that we rally behind as a small team of 10, 11 people and get done.

Dave Knox: Talent is a big part of Predicting the Turn. And as we talk about talent, I wanted to mention one of our sponsors Hunt Club. Imagine the power of the best marketers in the world, helping you to find your next marketing leader. That's the power of Hunt Club. Hunt Club is a new category of talent company that powers the network of experts, connectors, and business leaders to help you find the best talent. Let's face it, recruiting hasn't changed with the times. Hunt Club is changing the recruiting game by leveraging technology and crowdsource referrals, to find you the best people possible for your company. Stop paying job boards that don't work or recruiting firms that recycle the same active candidates. Partner with Hunt Club. Let's talk about those 10, 11 people, as you mentioned. It's a small team, but you're managing a direct to consumer sales channel with your website. You've got a wholesale channel for the gyms and you've got a grocery channel. How does a team of that size manage that complexity of Omnichannel?

Dave Colina: It's not easy, man. I think that our per capita output at O2 is pretty remarkable. I don't know this, but I'm guessing we do about as much work as a 20 person team as a 10 person team. So it's a lot of long hours, a lot of hustle, but everybody who works at O2, there's not anyone on the team who's not an A player. And everybody has a lot of passion for the brand and a lot of passion for the community that we serve. And so that makes the late nights and the weekend work, when it happens, which it has been happening quite frequently this year, it makes it a lot easier because you don't really feel like you're, you're grinding away for something that you don't care about. We run our business very effectively and very efficiently. And it comes down to having effective and efficient people on the team who are fully bought into the brand and the community that we're serving and building.

Dave Knox: As a growing brand. How do you balance as you think about your direct to consumer channel, your partnership with grocery retailers, but then also your partnership with gyms? How do you balance between those different channels?

Dave Colina: Well, we've found over the years that they're very complimentary. So thankfully, there's really no channel conflict. What we see is that people who buy O2 in their gym, so in a normal year, that would be quite a lot of people there, they're buying single cans on their way out as they recover from their workout and head home. And that's a different purchase occasion than people who are buying O2 on our website when they're buying full cases of product. And that's a different purchase occasion than people who are buying O2 at Whole Foods or Kroger when they're up and down the aisle and see a special deal, or they're just thirsty as they do their grocery shopping. It's the same type of person, but it's a very different use occasion. And we know that when our gym sales are strong, close to a grocery retailer, that that grocery retailer is going to benefit from it because people discover O2 in gyms and more recently online, and they'll buy it there, but they'll also buy at the grocery store. And then the same can be said for online. Geographies where our online sales are strong, those are the places where we win at retail and win in the gyms. So the channels aren't so much conflicting as they are complimentary.

Dave Knox: When you guys launched, oxygenated recovery drink was kind of a new- to- market innovation.

Dave Colina: For sure.

Dave Knox: The beverage space itself is pretty fierce and competitive. What are you expecting to see over the next year as you guys really continue to make such a mark on the beverage space?

Dave Colina: Well, we've been fortunate in that we've gotten a lot of reps in when it came to managing difficult situations leading up to 2020. Like you said, beverage industry is a really competitive space and we have never been a brand that's been super well- funded or venture- backed, or a brand that's got all these crazy partnerships in place with celebrities. We're a good old fashioned Midwestern brand. And we work hard and we earn everything that we get. Thankfully, this year has been something where we've been able to flex the muscles that are strongest in a really big way and get creative and scrappy and resourceful when we had to. And I don't think that that's really going to change much in 2021 either. I think that COVID has kind of leveled the playing field in a lot of ways for different brands. And I think one thing that's going to be constant is that people are more and more shopping for food and drink online. And I don't think that's going to change anytime soon. And that's something that we embrace because we know how to grow and retain our customers that way. And the one thing that we are looking forward to changing or to seeing change is people getting back to the gym. And we cannot wait for that to happen because even though that hasn't been a huge part of our business this year, that's going to be a huge part of our business next year. In the meantime, we're going to continue to do everything that we possibly can to help gym owners who have been negatively impacted by COVID because one, we feel it's the right thing to do. And two, once their doors are back open, we're going to be ready to rock it out with them as their preferred drink of choice.

Dave Knox: And speaking of that drink of choice, how are you thinking about product innovation over the next year?

Dave Colina: Yeah. we have fortunately been in a position where we've grown our direct consumer business, literally 10X from where it was last year, which means we have 10X the contacts and 10X the relationships. And so we have a really strong D to C business that is now serving as something of an incubation channel for us too because we can test new products in that channel. Whereas, last year, we were kind of limited to where we could test new products. As we think about what the innovation pipeline looks like, it's going to come down to what we're good at and what we believe in as a brand. Fundamentally, we make a damn good drink and we make products that are within the functional hydration category, and that are clean and life- giving products that taste really, really good. And we do so in a way that our business operates with integrity. As we look at places where the categories have kind of been slow to adapt to consumer preferences, or For example, we recently launched a hydration mix, an on- the- go hydration packets that are similar to O2's recovery drink, but without the oxygen data water, of course, because we know that our customer is sometimes on- the- go and we know that a lot of times those on- the- go hydration mixes just don't taste really good. That's something that we thought was a good opportunity for us, because like I said, we can make a damn good drink. And we launched those on Black Friday. And so far, the overwhelming consensus has been," Wow, this stuff tastes incredible." There are a few other categories that we're excited about in 2021, but at the end of the day, we're really listening to where our customers want us to go and letting them sort of chart that course for us.

Dave Knox: That's perfect. Well, if somebody wants to learn more about O2, where's the best place for them to go?

Dave Colina: It is a drinkO2. com, which is where we spend most of our time and energy these days. That's our website and we do all kinds of cool stuff online. As much as people say," Join our newsletter," I will definitely say," Join our newsletter," because we do cool stuff for sure, on a very regular basis, especially for our direct consumer channels. So it's drinkO2. com. That's the letter O, the number two.

Dave Knox: Wonderful. Well, Dave, congrats to you and the entire O2 team for everything you guys have built. And for the big BevNET win with the best marketing campaign of 2020.

Dave Colina: Awesome, man, thank you very much. It's been a heck of a year, but I'm very proud of it and look forward to the next year.

Dave Knox: Thanks so much for listening. If you like the show, hit that rating and make sure to subscribe so you don't miss a single episode. And for more resources, head over to PredictingtheTurn. com.