The fastest-growing premium water brand in North America is ready to make a bigger splash. Flow Water today announced plans to go public.
The Toronto-based company, founded just six years ago, is planning a reverse merger, with the stock expected to start to trade this spring. Aside from saving a lot of money in legal fees, founder and CEO Nicholas Reichenbach agreed to the deal because hot public markets, hungry for sustainable investments, have doubled Flow’s private valuation.
“We’ve got a long way to go to really capture the market share, especially in the U.S. market,” Reichenbach says. “The primary reason we’re going public is because this is fundraising at the best valuation that we can get.”
While Flow has seen sales surge 44% in the past year, hitting $25 million [CAD$30 million] in 2020 , it had already made big gains with consumers pre-pandemic. Flow sales were growing 8 times faster than the premium water category overall as of February 2020, when top brands including Fiji and Evian saw sales declines.
“All of our competitors, they’re all declining and we’re increasing double-digits across all formats,” Reichenbach says.
Its ecofriendly packaging has been a big selling point, with customers willing to pay $2.29 for a liter (its bestseller).
Flow is currently sold at 30,000 chains in the U.S. and Canada like Whole Foods CVS, Safeway, Walmart and Duane Reade. It also has strong e-commerce sales, which make up about 20% of overall revenue thanks to 65% coming from subscriptions.
The brand has raised more than $100 million, most recently securing a $45 million series D in May 2020. It has a roster of more than 35 celebrity investors, including Post Malone and Shawn Mendes.
A former video game entrepreneur who has published some 300 games, Reichenbach decided to commercialize his family’s spring in 2015 after test results proved the water is one of the highest-quality still mineral waters in the world, with greater levels of minerals like potassium, magnesium and calcium than than popular brands Fiji or Evian.
The water, which has naturally occurring alkaline pH, now comes from two springs. The original and main spring is from the Reichenbach homestead in Ontario. Flow purchased a second artisanal spring in Virginia in April 2019.
Flow has two bottling plants close to each site, which could give it an edge as it tries to compete with far bigger beverage conglomerates. The beverage industry typically has few IPOs because independent brands have historically struggled without the help of a major logistics player like Coca-Cola or Pepsi.
“I don’t think it’s necessary for us to partner with a national brand, and I don’t think it’s impossible,” Reichenbach says. “But it’s not for the faint of heart. It is in the tens of millions of dollars worth of investments to roll these things out. For small beverage companies, sometimes it is easier to sell. But because we have such a rapid consumer base, and they’re really very avid fans of Flow, we can take that passion and convert it into long-term value for our shareholders and them.”
Flow is looking to raise around $50 million on the public markets, of which half will go towards sales and distribution. Existing shareholders will put in roughly half, while the rest will come from a syndicate from investment bank Stifel.
“It’s a very fast route to market, which saves the company a lot of money in legal fees,” Reichenbach says. “It allows us to get on the market really fast and get our fundraising done so we can actually deploy our capital and see the continued growth that we have.”
Reichenbach is hoping to take advantage of investors’ outsized demand for sustainable investments. Flow has opted out of plastic and used recyclable packaging called Tetra Pak since it was founded. It’s also now one of the few water companies to be a B-Corp, a certification it earned from running its plants fully on renewable energy and is working to source 100% renewable packaging.
“The mega trends are here to stay for a long time as we make the world a better place,” Reichenbach says. “For me, this now has turned into more of a lifelong journey.”