Vertical Integration: The Secret Weapon Behind High-Growth Brands

What do you do when your co-packer adds production caps? Koia turned to vertical integration

High-growth companies are increasingly turning to vertical integration to navigate challenges and seize new opportunities. By bringing production and supply chain operations in-house, these brands are not only overcoming obstacles but also unlocking significant competitive advantages.

Koia: Crafting Plant-Based Innovation with Vertical Integration

Koia, an LA-based company known for its delicious and nutritious plant-based beverages, opened a 48,000-square-foot production facility in Anaheim, California. The strategic decision to become vertically integrated was driven by lessons learned during the pandemic when supply chain disruptions revealed vulnerabilities in their reliance on co-manufacturers.

One turning point came in 2021 when Koia's co-manufacturers imposed monthly production caps, limiting the brand's ability to meet growing demand. Faced with these constraints, Koia recognized the need to “control their own destiny.” By bringing production in-house, Koia gained more control over its supply chain, ensuring it could scale production without external limitations.

The benefits of vertical integration for Koia extend beyond stability. With their own facility, they can accelerate innovation and respond to consumer trends in real time. Unlike co-manufacturers, which typically require months of lead time for new product formulations, Koia can now experiment freely and introduce seasonal offerings like their limited-edition Peppermint Mocha Protein Shake for the holidays. Their ability to move quickly keeps them ahead in a competitive market regardless of the channel.

CELSIUS: Gaining an Edge in the Energy Drink Market

Another high-growth brand embracing vertical integration is CELSIUS, a leader in the energy drink category. In November 2024, CELSIUS acquired Big Beverages, a Charlotte-based manufacturing and warehousing facility, for $75 million. This strategic move gives the brand 170,000 square feet of production capacity, boosting supply chain control, production flexibility, and innovation speed.

For CELSIUS, vertical integration isn’t just about keeping shelves stocked. The new facility provides an in-house research and development hub, enabling quicker formulation cycles and the ability to test limited-time offers (LTOs) with ease. These advantages strengthen CELSIUS’s ability to stay ahead of consumer demands while delivering unique products in a saturated space.

Why Vertical Integration Matters for Growth

Vertical integration is emerging as a powerful strategy for high-growth brands for several reasons:

1. Supply Chain Control: By owning production facilities, brands reduce reliance on external partners, minimizing disruptions and bottlenecks.
2. Faster Innovation Cycles: In-house production enables brands to respond to market trends faster than co-manufacturers, who often require long lead times for new products.
3. Cost Efficiency: While the upfront investment is significant, controlling production can lead to long-term savings by reducing outsourcing costs and improving margins.
4. Flexibility for Limited-Time Offers (LTOs): Facilities dedicated to a single brand allow for experimentation with seasonal or innovative products, driving consumer excitement and loyalty.

Looking Ahead

As brands like Koia and CELSIUS demonstrate, vertical integration is more than a supply chain solution—it’s a growth strategy. By investing in their own facilities, these companies are better equipped to navigate challenges, meet consumer demands, and remain nimble in fast-changing markets. For ambitious brands looking to scale sustainably, vertical integration is quickly becoming a blueprint for success.

Whether you're a founder evaluating growth strategies or a curious consumer, one thing is clear: the brands controlling their production destiny are the ones shaping the future.