6 min read

Weekly Debrief: MIRROR’s Growth Stalls, Beyond Meat Slows, Kombucha Gets Stoned

Welcome to the Fitt Insider Weekly Debrief. Every weekend, we compile the top stories impacting the business of fitness and wellness from the past week.

Here’s what you need to know for December 12, 2021…

  • lululemon beats earnings, cuts MIRROR’s outlook
  • Plant-based meat sales come down to earth
  • GT’s launches cannabis-infused kombucha

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Reflecting on Connected Fitness

In its latest earnings report, lululemon’s activewear sales exceeded analyst estimates. But, MIRROR, the company’s connected fitness brand, is weighing it down.

By the Numbers

  • lululemon’s net revenue reached $1.5B, a 30% increase YoY.
  • The core women’s business ticked up 25%.
  • Two strategic priorities, menswear and international sales, were up 44% and 40%, respectively.

A strong showing, lululemon boosted its full-year forecast with CEO Calvin McDonald noting that the brand expects to surpass $6B in annual revenue for the first time.

Not so fast… While lululemon’s apparel outperformed, its home workout device suffered a setback.

  • 2020: lulu paid $500M to acquire MIRROR, with the connected fitness brand earning $170M in revenue.
  • 2021: Heading into this year, MIRROR’s revenue target was set at $250–275M.

Cutting MIRROR’s 2021 sales figure in half, lululemon now expects the equipment maker to bring in $125M to $130M — with McDonald adding:

“As you know, 2021 has been a challenging year for digital fitness… We have seen increasing pressures on customer acquisition costs that are impacting the entire industry.”

Home workout hangover. Bolstered by the pandemic, connected fitness boomed. But, as gyms reopen and competition across the category grows, consumers and brands are trying to find their footing. For lululemon, the synergies made the MIRROR acquisition too good to pass up. Now, they’re likely wondering if the deal was too good to be true.

Meat vs. “Meat”

In 2020, the plant-based hype machine was in overdrive. Now, sales of vegan meat alternatives have sputtered.

Beyond the Bubble
Plant-based meat sales are down across the board, and some of the biggest players in the game reported losses.

  • Beyond Meat recorded a wider-than-expected Q3 loss of $54.8M, and with US sales falling 13.9% YoY, the company has adjusted its forecast.
  • Canadian packaged meat giant Maple Leaf Foods will review its plant-based division after sales dropped 6.6% in Q3, down 20.7% YoY. Of note, its animal-based meat sales were up.
  • US retail sales of all plant-based meat have been negative since April, declining 0.6% YoY.

So, why the stumble? Oversaturation could be one explanation. Hoping to capitalize on the boom, countless brands have launched plant-based products in the past two years, expanding past burgers by taking the battle into chicken and seafood.

No longer an exclusive or novel product, the glow of plant-based products has perhaps dimmed enough for consumers to discover a harsh truth: Many of these replacements are ultra-processed, raising more questions than answers.

But not all faux meat is bleeding. Impossible Foods just raised $500M at a $7B valuation, citing “record growth” as it prepares to IPO.

The disproportionate success of plant-based purveyors suggests that faux meat may just be experiencing a market correction. But before buying the dip, investors will need to watch a new cohort of alt-proteins.

The cell-cultured protein sector (aka lab-grown meat) is scaling up, attracting more than $3.1B in funding last year. Similarly, insects like crickets, mealworms, and grasshoppers are gaining traction as an animal-free protein alternative — with the edible insect market set to reach $4.6B by 2027.

In particular, some brands think bugs make a better burger than Beyond can. Malaysian startup Ento, Dutch company Burgs Foods, and Swedish global retailer IKEA are all entering the arena with insect-based beef analogs.

Takeaway: Consumers appear ready to part ways with real meat, but finding a foolproof replacement isn’t a sure thing. As the plant-based industry regroups, companies that achieve sustainability and minimal processing are poised to thrive.

Weed as Wellness

GT’s Living Foods is launching a line of cannabis-infused kombucha called “Cannabliss.”

An industry pioneer, GT’s owns nearly half of the kombucha category’s market share and is worth over $900M. Now, if you live in California, the brewer wants to get you stoned.

Booch Meets Bud
GT’s cannabis line, available at Californian dispensaries, will incorporate adaptogenic mushrooms, prebiotics, and both THC (psychoactive compound that produces a “high”) and CBD (non-psychoactive compound often used to treat anxiety and stress).

The new tonics will come in two blends, “Mild” and “Wild”, packed with differing amounts of THC and CBD.

Of note, the company is positioning the product as a vessel of wellness — not just a fun high. GT Dave, founder and CEO of GT’s Living Foods, expanded on the launch:

“As we continue to innovate with plant-based wellness, we could not overlook the power of the cannabis plant, which goes beyond recreational and aligns with our belief that food and plants are medicine.”

And Cannabliss isn’t GT’s first venture into marijuana. The company discontinued its CBD-infused kombucha earlier this year after encountering regulatory uncertainty and consumer confusion. Now, they’re feeling confident in their second act.

Stirring the Pot
Cannabis-infused kombucha marries two billion-dollar markets with increasing momentum.

A subset of functional beverages, the global kombucha market has exploded over the past few years, projected to reach $10B by 2027. Meanwhile, the “weed as wellness” movement has catalyzed mainstream marijuana adoption, driving the booming legal cannabis business.

Elsewhere, functional wellness drinks that promise a stress-relieving buzz (without the throbbing hangover) are on the rise:

  • Recess, which offers “calm, cool, collected” in a can of CBD seltzer, saw e-commerce sales 4x during the pandemic.
  • Adaptogen-infused Kin Euphorics has raised over $10M since launching and recently brought on Bella Hadid as “co-founder” and partner.
  • Plant-powered wellness drink Sunwink announced an aggressive national retail rollout in September, projecting availability in over 3,500 locations and 500% growth YoY.

Looking ahead: Cannabis kombucha is nothing new, and smaller brands like cannabis seltzer Cann have made considerable headway in the sparkling weed space. But, THC-infused drinks only represent about 1% of the total cannabis market.

With Cannabliss, GT’s entry is a landmark move from one of the most respected in the functional beverage industry, affirming marijuana’s steady march into the wellness orthodox.

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