Before committing to large, expensive orders from large retail chains, some startup brands are testing hospitality and health venues to reach their ideal early adopters.
Cadence, a hydration brand that launched this summer, is betting that select venues like members-only clubs, boutique hotels, wellness studios and run clubs will be key to establishing more brand recognition. One of the more prominent partner examples is the members-only club Soho House, where Cadence is on bar menus, in gyms, and inside mini bars in The U.K. locations, and will soon expand to the members club stateside.
“It’s working really well in our favor,” said Cadence co-founder Ross McKay. He added that the approach is in contrast to the distribution strategy of his previous CPG startup, the plant-based chicken brand Daring Foods. “I’m used to the volume of being in retail and what that does to your business,” McKay said. “But it’s been incredible to start with these more niche spaces, which are showing higher velocities.”
Often viewed as a lower lift sales channel than physical wholesale, brands are able to fulfill orders by hotel and health club partners much quicker than a national retailer. These channels have what’s considered a captive audience, who are often on-site during a vacation, workout or wellness visit. With more brands trying to approach wholesale retail carefully, hospitality and wellness destinations can act as a bridge between a product’s online and offline presence. These accounts aren’t necessarily big revenue drivers. Brands, however, see them as a clever marketing tool to leverage, with some attributing new customer sales to these properties.
Canned water brand Open Water, for instance, grew its on-premise footprint through partnerships with restaurants, hotels and even zoos. Direct-to-consumer supplement brand Dose, launched amid the pandemic in 2020, tested its product-market fit by targeting wellness enthusiasts where they usually spend time before entering hundreds of stores nationwide.
Dose was founded as a daily drink supplement geared at liver health, made with ingredients like turmeric extract and ginger root. For a few years, the company sold primarily through its website before venturing into brick-and-mortar. Over the past year, Dose has experienced growth in retail and is now available in a total of 1,879 doors, a 79% year-over-year jump. Earlier this year, Dose entered 700 stores with Vitamin Shoppe and is currently rolling out in 100 HEB stores.
But Dose’s hospitality deals took off while the startup was still settling on early retail partners, such as The Vitamin Shoppe and Erewhon.
Throughout 2022, Dose struck deals with luxury hotel and resort chains, starting with 1 Hotel and followed by Equinox health clubs. Today the brand has about 29 locations across these hospitality accounts, including the most recently added The Maybourne Beverly Hills. In the coming months, Dose is adding several more 1 Hotel and Equinox locations. The placements vary depending on the property. Sometimes, Dose products can be found in hotel rooms, in other cases, they are sold in the cafes and spa areas.
Dose’s founder and CEO, Vasu Goyal, said the company views these locations as marketing channels that helped the brand tout its benefits on the ground while physical availability was limited.
“We think it’s a way to showcase the product to an audience that tends to be early adopters of these wellness products,” Goyal said. 1 Hotel, for example, focuses on featuring sustainable products and services, which Goyal said made it a fit for offering Dose products. The goal is to drive trials that lead to in-store sales since Dose’s tonic is meant to be taken daily for noticeable efficacy.
These health and wellness accounts make up a small portion of Dose’s overall sales. However, Goyal said, “It’s definitely had a big enough marketing impact that we’re looking to expand into more hospitality venues.”
Through customer surveys, Goyal said the company can see people coming to order Dose after trying it at one of the brand’s hospitality partners. These prestige hospitality venues are simultaneously supporting Dose’s overall wholesale goals, Goyal said; “We’ve seen traditional retail partners excited about our presence in these spaces and the level of premium luxury it represents.”
Beyond Soho House, Cadence is primarily testing physical sales at health and wellness venues before jumping into retail expansion. The brand’s latest wellness partners include Othership, a New York City-based sauna and ice bath studio, and the Los Angeles-based fitness club Heimat.
Rachel Hirsch, the founder and managing partner of Wellness Growth Ventures, which has backed brands that lean heavily on on-premise growth, said that CPG brands in the wellness space are trying to get more creative as they transition from online to wholesale.
“Rather than jumping straight into big chain stores, many are strategically placing their products in locations where their target audience is already primed for wellness and self-care experiences,” Hirsch said.
One of Wellness Growth Ventures’ portfolio brands is Cure Hydration, which is utilizing hotel rooms to introduce its drink mixes to dehydrated and jetlagged travelers. Cure is stocked at select Auberge properties, Canyon Ranch, Miraval and a handful of Marriott and Hyatt properties.
Hirsch also pointed to another portfolio company, canned wine brand Nomadica, which has grown its national network of hotels and concert venues since launching amid the pandemic in 2020. Nomadica is stocked at InterContinental, Fairmont, W and Ace Hotels, among others. “This channel is definitely not a replacement for wholesale, but more a tool to incite buying at either DTC or retail,” said Hirsch.
As Dose gears up for its next retail chain launch, Goyal said more hotels and spa locations will be added later this year. “We’ve also had inbound inquiries from other hotel and spa groups,” he said, declining to name the deals as they are still being negotiated. “These locations remain an important part of our flywheel as we transition to being omnichannel.”
