THE FUTURE OF THE BEVERAGE INDUSTRY

Zak Normandin

The non-alcoholic beverage industry is projected to reach $1.6 trillion in sales globally by 2025 — That’s larger than the mattress industry ($42B by 2023), the eyeglass industry ($167B by 2023) and the cosmetics industry ($863B by 2024) combined. Despite its current size and impressive growth trajectory, the industry had very modest beginnings. In fact, the most iconic beverage brand in the world, Coca-Cola, began in 1886 as a fountain drink sold at a small pharmacy in Atlanta, GA.

It wasn’t long before Coca-Cola’s potential for even broader mainstream appeal was realized. And so, by the turn of the 20th century, Coca-Cola agreed to a distribution agreement to bring a bottled version of its distinctive soft drink to customers nationwide. In fact, then CEO Robert Woodruff promised to put Coke’s products “within arm’s reach of desire.” This shift ushered the widespread production and sales model that exists to support the beverage industry today. The Coca-Cola Company (KO:US) revolutionized the industry and created the blueprint that other beverage companies have mirrored to great success: using distributors, brokers and brick and mortar retailers to market and sell beverages to consumers worldwide.

Most industries survive by iterating (and ultimately re-inventing) to maintain relevancy, but the non-alcoholic beverage industry has changed very little in the face of new technology and rapidly shifting preferences. Specifically, the modern consumer desires direct connection with brands and faster access to innovative beverage products — a desire, and ultimately a shift in consumer behavior that has largely been unaddressed in the beverage market thus far.

We believe that if legacy CPGs were coming to market today, their product selection and distribution model would look much different than it has over the last 100 years.

I have spent the last decade creating brands in the CPG space — I saw first-hand the inefficiency of selling new food and beverage products into retailers like Target (TGT:US) and Whole Foods Market (AMZN:US). I sat with buyers during reviews and became frustrated to find that even approved products would take up to a year to reach store shelves. Consumers deserve better from the brands they love and trust.

With that in mind, in 2015, we developed a new way to bring innovative products to market faster and more efficiently, via a direct-to-consumer distribution model built on text-message — a process we call conversational commerce, or cCommerce. Our first brand, DIRTY LEMON, utilized this platform to great success, selling over 2M bottled beverages to 100,000+ customers across the US. More importantly, with each customer interaction, our platform collects over 30 data points that we leverage daily to provide an unparalleled level of service experience.

Through our system, consumers enter their billing, shipping and credit card information just once on a SSL gated website — After the customer is registered they can easily order our beverages or contact customer service anytime (24/7) through a familiar conversational interface, without having to revisit a website or app. We’ve created a natural, frictionless connection with consumers by utilizing the most common communication channel in existence: text messaging. This revolution in commerce literally puts the buying experience back in the hands of the consumer.

The evidence to support direct sales of beverage products is overwhelming. 70% of consumers will be buying groceries online by 2024; and these online customers are 69% more likely to repurchase items they have purchased online (vs. in-store). 65% of Millennials use tech to purchase food items — and 68% plan to purchase all of their food online by 2020, such that by 2020, consumers will be spending $100B/year on food/beverage products online, equivalent of $850 per US household. Simply put, consumers are spurring traditional retail stores for a digital experience that makes shopping easier, faster and highly personal.

Today, we’re announcing a $15M SEED round in our parent company, Iris Nova, led by The Coca-Cola Company’s Venture and Emerging Brands unit with additional support from investors including Greycroft, GGV Capital, Imaginary Ventures, CASSIUS Family, PLUS Capital, Nebari Ventures, Winklevoss Capital, Betaworks Ventures, Lakehouse Ventures, TACK Ventures, Chris Burch, Gary Vaynerchuk, Michael Rapino (Live Nation), Ron Burkle, Kate Hudson, Scooter Braun, Sophia Bush, Alex Rodriguez, and Tobey Maguire.

Iris Nova, Latin for “new lens,” will spearhead radical changes in an industry that has experienced little innovation for decades. Common technology, operational infrastructure, and data will be shared across a variety of branded beverage categories — our first brand; DIRTY LEMON, was proof of concept in our ability to execute within this model. Since inception, the brand has processed 90% of orders entirely by text message — revenue has doubled YoY since inception, with projected growth of 250% in 2019.

In addition to bottled beverages, we are also reinventing the in-store experience. The second brand under the Iris Nova umbrella, The Drug Store, is a conceptual retail experience used to market our beverages and validate new beverage concepts before they are launched in bottled format. The Drug Store utilizes our cCommerce platform for all transactions, creating an experience that’s enhanced by the frictionless direct communication that our customer has come to expect from the company.

DIRTY LEMON and The Drug Store are just the start. Over the next 12 months, we’re aggressively pursuing expansion of our vision across a variety of ongoing initiatives:

  • $1M allocation to Iris Nova Ventures, which will invest in early stage beverage brands and offer exclusive distribution via our cCommerce platform
  • Two new beverage brands launching Q1 2019 and Q3 2019
  • Implementation of next-day delivery for 90% of our customer base by end of 2019 (Faster than Amazon Prime).
  • The Drug Store expansion to four US locations — Tribeca, Hudson Yards and Chicago in 2019. Miami in early 2020.
  • One new beverage product every month in 2019 under the DIRTY LEMON brand.

We are empowered to look at the industry through a new lens, building the beverage conglomerate of the future with data and technology supporting each stage of future growth.

I am sincerely thankful, humbled, and motivated by the tireless efforts of our team and support from an incredible group of investors. The late Robert Woodruff’s insight is more relevant now than ever: we are striving each day to put our beverages within fingertips’ reach of desire, pursuing the continuous improvement of experience and product selection with each customer interaction. What started as an ambitious vision a few short years ago is quickly becoming a reality that we believe will have a monumental impact on the future of CPG.

Thank you for being a part of our journey.

Zak Normandin
Founder/CEO, Iris Nova

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