One of the hardest hit businesses during Covid were the independently-owned gyms across the country. But thanks to a now award-winning marketing campaign by O2 Recovery, many of those gyms were able to keep their members during the lockdowns. I sat down with Dave Colina, CEO and Founder of O2, to talk about their #StayForMay campaign, which recently won BevNet’s Best Marketing Campaign award thanks to nearly 60,000 consumers paying their dues to 1,918 gyms.
Dave Knox: What is the story behind O2?
Dave Colina: 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 in 2011. I was searching for a better alternative to all the sports and energy drinks that I was drinking and couldn’t find anything that I liked. I approached a friend who’s a physician about effectively 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 such as the high sugar. 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. 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.
Knox: The fitness scene has been one of the hardest hit industries during the pandemic. How has O2 responded to that?
Colina: Our strong presence in the fitness scene has 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, we had at least over 50% of our business coming from our fitness channel where gyms were purchasing O2 from us and selling it to their members. And within a matter of about a week of Covid, that channel disappeared entirely. We have 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. 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.
Knox: As a startup, every dollar counts for your business. What gave you the confidence to learn in and donate that amount of money to the gyms?
Colina: 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, that channel was over 50% of our revenue, but 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, drinkO2com. 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.
Knox: What has separated O2 in the beverage industry?
Colina: There are a few things. One is 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.
But I think even more special is the company and the types of things that we do for the community. We’re a company that is values-driven. 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. Gyms were just struggling to find ways to provide their members value while their gym doors were shut. We 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.” We came up with an idea we called Stay for May. O2 and three other fitness brands 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… as long as they kept their gym membership in the month of May active. 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 brands that they were already buying stuff from, and it 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.
Knox: As a growing brand, how do you balance your three different retail channels of gyms, grocery and direct-to-consumer?
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, they are buying single cans on their way out as they recover from their workout and head home. And that is a different purchase occasion than people who are buying O2 on our website when they are buying full cases of product. And that is a different purchase occasion than people who are buying O2 at Whole Foods or Kroger when they are up and down the aisle and see a special deal, or they are just thirsty as they do their grocery shopping. It is the same type of person, but it is 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 they will buy it there, but they will 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 are not so much conflicting as they are complimentary.
Knox: The beverage industry has always been fierce and competitive. How do you see it evolving in the year to come?
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 are 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 have been able to flex our strongest muscles 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.
One thing that’s going to be constant is that people are 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. We have grown our direct consumer business, literally 10X from where it was last year, which means we have 10X the contacts and 10X the relationships. This really strong D2C business is now serving as something of an incubation channel for us to 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. For example, we recently launched a hydration mix, an on-the-go hydration packet that are similar to O2’s recovery drink, but without the oxygenated water. We know that our customer is on-the-go and the on-the-go hydration mixes out there 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. We launched those on Black Friday and 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.
And the one thing that we are looking forward to seeing change is people getting back to the gym. 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.