Liquid death has quickly become one of the hottest new brands in the bottled water industry. Founded in 2017, the company has seen explosive growth in just a few short years. With its punk rock ethos, edgy branding, and sustainable packaging, liquid death has tapped into younger demographics that the big water brands have struggled to capture. As liquid death continues its meteoric rise, more and more investors are eager to get a piece of the company. But does investing in liquid death actually make sense from a return perspective? There are several factors to consider when evaluating liquid death as an investment opportunity.
Rapid revenue growth points to future profitability for liquid death
In just three years since launch, liquid death generated over $45 million in revenue in 2020. The company is projecting over $130 million in revenue for 2021. For a new CPG brand to hit this type of growth trajectory so quickly is almost unheard of. And liquid death’s revenues come with best-in-class gross margins for the water category. While the company is still investing heavily in growth and not yet profitable, the revenue ramp indicates that profitability is on the horizon. If liquid death can continue growing while maintaining premium price points, its clear path to profitability makes it a compelling investment from a return standpoint.
Cult-like following among younger consumers gives liquid death brand strength
Unlike older bottled water brands, liquid death has a devoted fan base loyal to the brand itself. Consumers are drawn to the rebellious, non-conformist attitude and proudly display liquid death cans and merch. This gives the brand tremendous pricing power that can be leveraged long-term. While big water will always have the distribution muscle, liquid death’s cool factor and anti-establishment ethos makes its product stickier with the next generation of water drinkers. This brand equity translates to pricing power and growth runway that incumbents will struggle to replicate.
Focus on sustainability provides an edge as consumers care more about environment
Liquid death touts its sustainability credentials across all touchpoints. The recyclable aluminum cans, partnerships with environmental non-profits, and emphasis on carbon neutrality all cater towards environmentally-conscious consumers. As more attention focuses on sustainability, liquid death is well positioned given its credibility in this area. While recycling initiatives can be copied, liquid death has authenticity from its founding that gives it an edge. Consumers are willing to pay more for brands that align with their values, providing insulation against private label alternatives.
Direct-to-consumer approach provides valuable consumer data and feedback
Liquid death sells directly to consumers via its website in addition to traditional retail distribution. The DTC channel provides invaluable data on who is buying, how existing customers repurchase, optimal price points, and more. These consumer insights allow liquid death to fine tune pricing, develop new products, and enhance its positioning in a way that legacy brands struggle to replicate without the same level of consumer intimacy. As liquid death scales DTC as a channel, it further differentiates itself from competitors.
With its anti-establishment brand, sustainability focus, social media savvy, and meticulous approach to consumer data, liquid death is poised for continued market-beating growth. While not without risk, liquid death has disrupted the stale bottled water category in a way that positions the company for standout profits in the future. For investors with adequate risk tolerance, liquid death offers an intriguing investment case study of a breakout CPG brand.