X2 CEO on its ‘clean’ & ‘healthy’ energy drinks

X2 CEO Mark French and Eric Foss, X2 Board Chairman and Former Chairman, CEO of Pepsi Bottling Group and Aramark, joins Yahoo Finance to discuss X2’s partnership with Anheuser-Busch’s AB ONE, growth in the energy drinks market, and outlook on the beverage space.

Video transcript

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ALEXIS CHRISTOFOROUS: Welcome back. Basketball star Kawhi Leonard's energy drink brand, X2 Performance, has officially announced that they have partnered with Anheuser-Busch's AB ONE. Here to talk about it is Mark French, X2's CEO, and he is also accompanied by the newly appointed chairman of the board and former CEO of Aramark, Eric Foss.

Gentlemen, thanks so much for being with us. Mark, I'm going to start with you. Just lay out for us, what does this partnership exactly mean for the X2 brand?

MARK FRENCH: Great. Thank you for having us. What this really means for us is, we're truly in a unique lane of our own. We're clean, healthy energy that's been tested and trusted by some of the lead athletes you referred to before, but also over 30 professional teams. And it's our goal now to commercialize that.

And as the energy drink sector continues to grow, more people are looking for clean, healthy offerings, and we're ecstatic that Anheuser-Busch has selected to partner with us to bring this offering to the masses. And we're piloting in Los Angeles really to double down in a marketplace where we launched and had great success with CVS and Subway. And now with Anheuser-Busch, we'll be bringing our product to the masses, whether it's through the 7-Elevens, the ampms, the independent convenience stores. And this is the first step in what we hope will be a great partnership.

- Eric, let me ask you, what is the attraction of the X2 brand for Anheuser-Busch? Why this partnership?

ERIC FOSS: Well, I think a couple of things. I think, first and foremost, as you look at the beverage space, one of the things is, you look at the category development. What you've got in the energy category right now is a large, growing, and very profitable segment of the business. As a matter of fact, it's been, if not the fastest, one of the fastest growing for many, many years.

And so I think it starts with the category dynamic, but I think, importantly, as you talk to consumers and listen to what they want, clean, natural, healthy, better-for-you beverages is right squarely in the sweet spot. And then I think, third, the fact that, you know, with ABI it really completes a very powerful team here for us that includes, you know, a couple of great sponsors, the management team, and our endorser partners in Kawhi, Saquon, Kendall, and Lavonte.

ALEXIS CHRISTOFOROUS: Yeah, you just mentioned some of those high-profile athletes that are involved with the company. And Mark, I know that X2 recently closed a $16 million Series D funding round. What do you hope to do with some of the money that you're raising?

MARK FRENCH: Yeah, and I think what's really interesting about that is, you know, we don't pay endorsers. The athlete partners that we talk about are shareholders in the business-- Saquon's an investor, and Kendall joining us-- you know, when having a variety of different beverage opportunities because this is a product line that's really dear to them. They drink it. They use it before games and workouts.

So really, where we're investing is to grow the brand. So that means inventory, product, building the team, the sales organization, the marketing. Product-development innovation is something that we've been working on behind the scenes to add more offerings to what we're bringing out with the ABI network. But that's where we're focused right now.

- I'm curious-- how crowded is this space? Is there room for another energy drink? And what is so special about the one that you offer?

MARK FRENCH: I can start, Eric. Again, we're truly in a unique space where we are isolated-- that we are clean, healthy ingredients. The reason why you see the adoption from customers-- but equally important, these pro athletes-- is there are no crash or jitters with our product. And that's for a variety of reasons that really stem from the ingredients themselves.

So as Eric alluded to before, more and more people are coming into the category-- that, being customers. But we offer something for a demographic that has been labeled as the label readers. So as more and more people are going into convenient supermarket channels, they're looking for healthy offerings. And if you look at the back of the can of X2 versus some of the competitors, you can pronounce all of our ingredients. You know exactly what you're getting. And you don't see those negative side effects.

So we're confident. I think with ABI getting behind us, we're even more confident that there is room for a brand like X2. And I think the critical piece, you know, for any startup in this category is distribution. And the folks at ABI will tell you that, you know, 99 of the brands that try to get distribution don't get it. So we're just ecstatic that they looked, tasted, tested our product, see how we're building the brand, and wanted to get behind us as we grow it.

ALEXIS CHRISTOFOROUS: You know, as you try to grow it, Mark and Eric, it-- you're at this critical juncture now, and at the same time, you've got these supply chain issues happening. And I'm wondering, Eric, I know you've just come on as chairman of the board, but you used to head up the Pepsi Bottling Group. You were CEO of Aramark, so no stranger, certainly, to food and beverage. How are you going to help the company navigate through these challenges, these supply-chain challenges, and also the cost pressures, the pricing pressures?

ERIC FOSS: Sure, it's a great question, and maybe just let me build on Mark's point. I think one of the things you're seeing us do here as a company is pivot this brand that has resided inside locker rooms and in the hands of elite athletes, and we're now taking it and beginning to activate that at retail and putting it in the hands of everyday athletes like you or I.

So I think, relative to the question on what's happened, there's certainly no doubt, across businesses, industries, and geographies, inflationary pressures have been a reality this year. And it's certainly the case across the beverage sector. I think, as you look at raw materials, you look at packaging costs, costs across the supply chain, labor-- all of those are experiencing inflationary pressures. And I think the good news is, broadly across beverages, the industry has been able to price that through at retail, which has, I think, ensured margins are maintained.

ALEXIS CHRISTOFOROUS: So just to be clear, so you are passing some of those costs along to the consumer, or you guys are not, Eric?

ERIC FOSS: Yes. As we look at the inflationary pressures that I mentioned, you know, we will look to-- you know, in partnership with, in addition to ABI, our retail partners-- pass some of those costs along through the pipeline.

ALEXIS CHRISTOFOROUS: All right. Mark French, X2 CEO, Eric Foss, chairman of the board-- thanks so much, guys, and best of luck with the energy drinks.