On Dec. 20, Dirty Lemon parent company Iris Nova announced $15 million in seed funding that includes a minority investment by Coca-Cola. Coke’s Venturing & Emerging Brands unit has paid close attention to Dirty Lemon. The brand gained attention for its unique go-to-market strategy, which founder and CEO Zak Normandin has named c-commerce, or “conversational commerce.” Once consumers sign up at Dirty Lemon’s website and provide a credit card, future orders can be requested and paid exclusively by text message, using what Normandin calls “common language.” When the Coke investment was announced, Normandin told Bloomberg that he hopes to be profitable by the end of next year and reach $100 million in sales by the end of 2021. Coke is clearly as interested in the technology behind the brand as the functional liquid in the bottle, which makes use of ingredients including charcoal, turmeric and rose water. Commenting about the investment,outgoing VEB President and GM Scott Uzzell had this to say in a statement: “As our company’s futurist group, we are investing in thought-pioneers like Zak and companies like Iris Nova that can help us tap into consumer trends to bring even more products to market faster through new technology and innovation like c-commerce. As we continue to evolve as a total beverage company, VEB will always seek to invest in and learn from people, products, technologies and companies that have a vision of what the future could be.” On Dec. 7, Normandin spoke at BD’s Future Smarts conference about the company’s “data-driven” approach. Although the appearance came before the deal was announced, Normandin’s presentation and an audience Q&A sheds light on why Coke may be interested. The following are highlights:
Liquid. Dirty Lemon sells seven core products, all of which start with a base of organic lemon juice, ocean minerals and sea salt, Normandin said. From there, each product is enhanced with a functional ingredient defining its name: +Turmeric, +Collagen, +Ginseng, +Matcha, +Charcoal, +Rose, +Sleep (magnesium). There also is a limited-edition collaboration with Vogue magazine. More collaborations are planned this year. Normandin said there are no current plans for a sparkling beverage even though it’s a category he’s looked at. Other than +Collagen, each 16-ounce PET bottle of Dirty Lemon contains 10-15 calories, is sweetened with less than one gram of sugar, and is labeled non-GMO and vegan.
Genesis. Normandin founded Dirty Lemon in 2015 after growing frustrated with “what it takes to get a beverage or a food product onto store shelves,” he said. “It took a long time after an approval from a buyer to actually get the product to consumers.” His goal became to “create a lifestyle and aesthetic around a brand and then sell products direct to consumer,” he said. “By selling direct to consumer, we’re able to access consumers very quickly.” Drilling deeper, the model was intended to “validate new beverage concepts, direct to consumer first, before they reach store shelves,” said Normandin. “We’re collecting data on consumption behavior in the beverage space to be able to make more effective and efficient decisions around the products that we are selling to consumers and basically to provide them with an elevated experience.”
Technology. Dirty Lemon developed its own technology platform to take orders by SMS text messaging. The platform is enhanced by 24/7 live customer support, also by way of text message. Products are priority-shipped free anywhere in the country. “We’re not constrained by the same timeline or innovation cycle that I’ve been used to dealing with buyers and having to wait for that approval process to get products on the store shelves,” Normandin said. “To that end, we have a 30 day innovation cycle now. We can think up a new beverage and actually have it to market and in consumers’ hands in 30 days.” During 2019, Dirty Lemon plans to launch one new drink every month. “The system that we’ve developed allows us to take advantage of trends that aren’t dependent upon on a mass market consumer,” he said. “We can be very niche in what we’re targeting. We have some products, like our +Sleep beverage, which don’t sell very many units when you look at them compared to our other products. But they have very, very loyal followings, so much so that we would never think to take that product out of stock.”
cCommerce. Normandin said he believes “conversational commerce” is the future of e-commerce. “Consumers want to have an intimate connection with the brands that they enjoy and purchase most,” he said. “By establishing a direct connection with a consumer over a conversational medium, we actually have the best possible chance of retaining that customer long-term.”
Retail. Normandin said Dirty Lemon has surpassed 100,000 U.S. customers. About 60% percent of customers re-order product within 90 days, he said. This month, Dirty Lemon will launch in London to open the European market. For now, Dirty Lemon has an extremely limited retail presence. In fact, the company confirmed in a text message that the drink can’t be found in any retail store in Atlanta, where Coca-Cola is headquartered. However, the goal eventually is to sell proven beverages at retail, Normandin said. In 2017, Dirty Lemon opened a pop-up store in Manhattan called the Drug Store, where bartenders mixed “homemade” versions of Dirty Lemon drinks, Normandin said. Testing at the store led to the ready-to-drink launches of +Rose and +Matcha. Last year, Dirty Lemon re-opened the Drug Store in Manhattan’s Tribeca neighborhood, this time with cold vaults that hold 1,000 bottles of Dirty Lemon. The store employs no cashiers, operating instead on a “tech-enabled honor system,” as Normandin described it. Consumers take a drink from the cold vault and send a text to the company, which charges their credit card. The store moves more than 100 bottles a day with about a 5% theft rate, Normandin said.Three more such stores will be opened this year in Manhattan, Miami and Chicago, he said. “The Drug Store really reinforces our vision to build a data set around consumption behavior and to use that data to make more informed decisions around new products for consumers,” Normandin added. “We’re really inspired by this idea of building a total beverage company that’s powered by technology.”He said “other brands and other beverage products” could be added to the platform as the company builds out its infrastructure.
Pricing. The products sells by the six-pack for $65, including shipping. Subscription “VIP” orders of a six-pack per month reduce the price to $45. BD located a coupon code for a free six-pack with our initial order. At the Drug Store, single bottles sell for about $10. Singles are not sold online, in order to control shipping costs, the company said. “We intentionally priced the product high, because we wanted to validate this concept,” Normandin said. “It’s very easy to sell a cheap product, especially online, because the friction points are very low.” Normandin added that the product quality and functional ingredients support the price-point. “It’s worked in a big way. From here we would obviously go downstream with lower price point products. We won’t always be selling $10 beverages. The premium price point has allowed us to really validate the model with a proof of concept which is Dirty Lemon.”
Production/Distribution. Currently, the drinks are co-packed in 100% recyclable PET bottles on both coasts, Normandin said. “I don’t see any reason to actually own manufacturing,” he said. “We’re able to utilize resources that are available to the broader beverage market. There’s a lot of established good partners out there.” Dirty Lemon employs seven warehouses serving all U.S. regions. “Our goal is to be faster than Amazon Prime in 2019,” Normandin said. “We’re testing out same day deliveries in markets like Los Angeles.” The products are shipped and stored refrigerated with a 140-day cold shelf life.
CBD. Dirty Lemon also has been notable for launching the first nationally-available CBD-infused beverage, which the company dropped late last year. “We were very surprised by just the logistical and operational challenges of actually selling a food and beverage product in market that has CBD,” Normandin said. “We’ve had credit card processors get shut down. We had insurance carriers that said that they wouldn’t sell policies to us. We actually had — and this was really the thing that made us just stop the thing entirely — a trucking company that told us that they wouldn’t move a shipment because it had CBD on it. It was a full truck load.” Normandin said beverages are a “great format for CBD” and he sees “clearly a lot of demand.” The lack of legal clarity, however, created “operational challenges” and “just too much of a legal risk for us.”
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