The right investors

A start-up brand’s search for the right investors is tricky. A new(er) brand wants autonomy, but also experienced, vocal investors that can help build the business. Add the additional fundraising goal that one or more of the investors is a VIP or celebrity, and the equation becomes even more complicated (something I’ve chronicled on Medium, in the past).

Sure, when raising capital, start-ups are mostly in it for the green and less so the buzz, assuming they’re a well-managed operation and not giving away equity, wantonly.

But VIP and celebrity investors remain in high demand, because their individual reputations and involvement can sometimes attract other investors, or help drive consumer purchase. But, like any other credible investor, they must be vetted properly. Are they well regarded and free of major scandal (think, R. Kelly level) that might tarnish the brand’s image in the short- or long-term? Do they add value to the actual business and its plans for growth, through association, access or reach? What is their willingness to do more than just post about their endorsement or investment on social media, and are they willing to support the brand and their investment even during a challenging socio-economic climate?

I’ve been involved with a number of VIP and celebrity investor deals (include Flow Alkaline Spring Water’s $45mm Series D in May 2020) so I have a good lay of the land when it comes to what a brand can expect in terms of actual support from these investors. But as with everything, Covid has changed the tenets of what we as a culture expect from a VIP or a celebrity in general, including how they handle their business dealings in the public eye. We hope for higher standards, an awareness of the current climate and its impact on people, culture, business and politics. We hope the VIP or celebrity has a desire to take a thoughtful position and say or do something meaningful about the day’s issues, particularly in 2020.

Who’s speaking up, who’s not

If you inventory the VIPs and celebrities that have lent a truly profound voice to the chaos of this year, you will find that list lacking in many normally familiar names that are regularly jockeying for leadership in “the zeitgeist.” (I’d rattle off a list but I have no desire to hear from their attorneys.) And it’s hardy a surprise in our current cancel culture, which described as “extreme” is a total understatement. Many VIPs and celebrities simply don’t want to risk their reputations and more important, their paychecks or legacies, by getting “too involved” or making any public statements that can be trolled on Twitter.

But if you follow the news regularly, and I acknowledge that is a very tough thing to do these days when it’s depressing, you will find shining examples of exactly how strongly a public personality can take a stand on socio-cultural and socio-political issues, and benefit every brand they associate with in the process. Tennis phenom Naomi Osaka, who earned her second US Open title in September 2020, is such an example.

Ms. Osaka and SOTO Sake

In mid-August, before the US Open started on August 31, it was announced that Ms. Osaka was an investor and creative consultant to the Japanese sake brand, SOTO, which amusingly is based in Miami and was founded by two Canadians. The union generated news both in the US and in Ms. Osaka’s birthplace, Japan, where she holds nearly rock god status.

During the Open, Ms. Osaka quietly raised her profile and thought leadership further by sending a message to everyone watching the tournament, every time she walked on the court. The message: think very hard about the scale and impact of racial injustice in the US, right now.

With her series of Covid-compliant masks emblazoned with the names of Breonna Taylor, Elijah McClain, Ahmaud Arbery, Trayvon Martin, George Floyd, Philando Castile and Tamir Rice, Ms. Osaka spoke volumes without saying a word every time she strode, masked, onto the tennis court. And those sentiments, absorbed by her fans and other conscious citizens, take Ms. Osaka and the brands she partners with, to a higher level.

When a brand decides to align itself with a VIP or celebrity for an investment or endorsement, the first item of discussion amongst the marketing team members is “do they represent the brand’s values?” These “values” often include terms like vibrant, strong, authentic (deeply overused, much like the term ‘iconic’) or irreverent. Elongated into easily digestible phrases for consumers, those values take the written or spoken form of “force of nature,” “believing in myself” and “never giving up,” “staying true to myself,” or being “brave” (joining the misused pile very soon) or “honest,” and “inspiring.”

And yet with her simple act of seven unique masks during the Open, Ms. Osaka not only checked off every box above but identified a new and more interesting path, where a thoughtful and risk-taking VIP or celebrity can instead help inspire a brand’s values and position, vs. simply aligning with values determined in the abstract by the brand’s marketing department.

It’s what makes SOTO’s involvement with Ms. Osaka such a breath of fresh air in liquor marketing. Even though it’s a new relationship, it’s already clear it’s not about a world-class athlete’s passion for drinking sake during the off-season. Instead, Ms. Osaka dove into the zeitgeist and lent her youthful, understated style to a global social movement. And even though it’s not immediately apparent, that integrity, humanity and generational leadership will put a halo on SOTO and other brands she supports.

In her signature philosophical communication style, when asked by the media “what message she as trying to send with her seven masks,” Ms. Osaka replied “Well, what was the message that you got is more the question.” Mic drop.

It’s a mindset and an approach that aligns perfectly with the way SOTO markets itself: through understatement. The brand doesn’t scream that it’s one of the finest sakes on the market. Instead, it asks you to decide, with elegance, good taste and profound confidence, if you believe it is, after you try it.

It’s an marketing approach that doesn’t work for every brand, nor for every category of liquor or beverage. But it works for SOTO, as it has for Ms. Osaka.

Your feedback is welcome as always, either via LinkedIn or at www.gallegoandco.com.

The Delicate Equation of Celebrity Investors Unafraid of Controversy was originally published in The Startup on Medium, where people are continuing the conversation by highlighting and responding to this story.

“Once upon a time, fashion retail shops played a role in sociocultural connection and expressing self-worth…”

A generation ago, we celebrated the concept of retail therapy in a specific manner, one driven by spending money on something we were utterly certain we deserved, and by the status accorded us as we spent the money, in public view. From our stroll into the store, receiving fawning or snooty service (something we’d b*tch-slap when we dropped some cash), to the “I deserve it” moment when we dropped a cool $1,500.00 on some new clothes, to the branded shopping bags we carry, or had carried for us, exiting the store, the shopping trip was informed by validation, and knowing other people saw and perhaps envied us spending the money.

What’s happening now

Fashion retail has suffered greatly the past 6 months, partially because we couldn’t shop in stores and then realized we didn’t really need to. But well before Covid, the business model for fashion retail in the US was already crumbling. It was held together by an old-school duct tape formed by the agendas of overpaid executives, the notion that certain stores were “institutions” that shoppers needed (essentially, every argument made about the existence of Bergdorf Goodman — admittedly one of my favorite stores), by corporate indecision about cutting hard losses for a “luxury” retail brand with marquee real estate, and of course, the industry’s spotty embrace of e-commerce.

The hard truth is that people do not shop the way they used to. The fashion retail experience now is driven more by efficiency than theatricality and the social status of being seen, shopping. The biggest clothing retail spenders, never see the inside of a store. And these are just two factors reducing daily foot traffic in retail shops.

The List No Fashion Brand Wants To Be On

This summer saw the creation of a new who’s who list. On it, some of the most familiar names in fashion retail declaring bankruptcy, restructuring, or closing for good. J. Crew (in May, but apparently emerging from Chapter 11 soon), Neiman Marcus (also May, but mired in legal issues), John Varvatos (again… May), Jeffrey, the last of the well-curated boutique shopping experiences (in May too… see a theme?). In late May, Victoria’s Secret announced it would shutter 250 stores this year. Brooks Brothers joined this parade in July, declaring bankruptcy. Also in July, The New York Times exposed, with deserved dignity, the financial hardships of one of fashion’s greatest success stories, Diane Von Furstenberg, a brand you might assume was in decent financial health because of the icon status, thoughtful leadership and benevolence of its founder. Not even close.

Lord & Taylor joined the party on August 3. Also in August, Ralph Lauren announced its quarterly sales dropped 57 percent. And very recently, discount designer clothing retailer Century 21 announced it would close its doors, for good. Tarnished luxury retailer Barneys, for two generations a singular arbiter of style, is not amongst this 2020 list. Thankfully for Barneys, the chain collapsed last fall, pre-Covid.

While the above brands’ offerings are varied, there is a common denominator behind their failings: significant, prime real estate and the inevitably crippling impact of that on their businesses. Consider J. Crew, which has two prime locations on Manhattan’s Fifth Avenue (midtown and downtown, naturally). Or John Varvatos, which had stores in New York’s Soho, Miami’s South Beach, Los Angeles’ WeHo and Boston’s Copley Place. And of course, there’s Barneys’ Madison Avenue location, the rent for which, if the pioneering retailer had managed to survive 2019 and collapse in good company during Covid, would have risen to $30 million annually in 2019 for that single retail location (not including property taxes that would have driven the annual rental tab to $44 million per year).

Insisting on a large amount of prime real estate for a fashion brand is typically dubbed a “strategic, brand-building initiative.” And it’s married to a treadmill mandating ridiculously higher-than-average sales volume per store. Whether you plan to generate that the traditional way (ever-higher dollars generated per square foot of the store), are banking on a free-spending, HNWI private client network to close the sales gap, or worse, believe in on some misguided revenue model that involves renting out the store for special events or as a location/set for film or television, the math rarely works in the brand’s favor when the lease rate is simply too high.

A dissection of just two of American fashion’s blue chip brands, and their inability to meet sales projections to match their leases, says it all.

Bad math, lesson #1: Ralph Lauren Fifth Avenue, Midtown

Three years before Covid in 2017, Ralph Lauren closed its “other flagship” location on Fifth Avenue and 55th Street in New York. Mind you, the brand already have one of the chicest and most beautifully designed flagship locations at the Rhinelander Mansion on Madison Avenue, just one mile away. But hey, more is more, right? The rent for that second flagship location on Fifth Avenue: a staggering $25 million per year, or $2,083,333 per month. It was, for that location, a financial model that could never withstand even three quarters of weaker sales, let alone Covid.

Knowing that midtown Fifth Avenue has been a tourist trap for decades, let’s work backwards on the math for this lease, assuming Ralph Lauren’s global appeal means most visitors will buy some piece of merchandise as a token, or status symbol, of their visit to the store or to Manhattan in general.

To cover just the rent on this space and for perspective, this store would have had to sell 879 units of its iconic polo shirt (at an estimated price of $79.00 per knit shirt)… every day… of every month… for the duration of the lease. Note that the average fashion retail store over 15,000 square feet in size is lucky to conduct 200 sales transactions a day.

Yes, one can argue the holiday months are busier and generate significantly greater sales. You can conjecture that Ralph Lauren’s more expensive merchandise (say $2,500.00 for a men’s suit or a woman’s gown) might offset this. But consider that the former is a dependence on seasonal sales and lower profits for marked-down merchandise, and that the latter is for merchandise that people buy and replace less frequently.

Now and in 2017, the fundamentals of a strong retail business remain the same: The average store must be able to pay for its core expense of rent based on typical foot traffic, twice a year markdowns and private client sales.

In the July 22, 2020 article cited above (truly a great read), Ms. Von Furstenberg realized she’d made a grave mistake on retail expansion — in 2016 — four years before Covid and a year before Ralph Lauren’s Fifth Avenue shuttering. It’s also important to note her brand’s stores, while in prime locations, were never huge.

Bad math, lesson #2: Victoria’s Secret in Herald Square

If you think the prior example is unusual, let’s look at lingerie icon and feminist punching bag Victoria’s Secret. Their 60,000 square foot flagship store in Herald Square had a monthly rental tab of $937,000.00 — a “bargain” compared to Ralph Lauren’s Fifth Avenue location. But that’s still a lot of undies and ancillary beauty and bath products to sell… items women buy with regularity, but not intense frequency.

I’ll break down that math again, tied to the brand’s signature bras, based on an average price of $38.00. To meet that $11 million annual rent, Victoria’s Secret would have to sell 821 of these bras a day. Which of course begs the question: how many bras do Manhattan women or women visiting Manhattan, need? On average, women and men buy new underwear, every 6–12 months. During or because of Covid, and working from home, that figure may be far less.

History will repeat itself

Yet despite the irrefutable logic of these numbers, brands are still interested in opening stores in prime locations. Consider Zappos, born of and profitable through e-commerce, which reportedly leased 16,000 square feet (the same amount of space as the Ralph Lauren Rhinelander Mansion, below) in Manhattan’s Union Square area in August 2020.

As more retail space for hopefully less astronomical rents becomes available for retailers in major cities, more brands will follow Zappos’ path. The lure is simply too strong: prime real estate and plenty of it, likely discounted from ridiculous highs but not necessarily supportive of profitability.

And these brands will likely fall into the same marketing mindset that humbled the brands I’ve already mention: the belief that in order to fully realize a brand’s lifestyle vision, the brand must create a large-scale physical environment, fully under the control of the brand, for the consumers “to experience” and experience elevated self-worth.

If you need proof of this, look no farther than the rise and fall of Delia’s. The “juniors” (to use a classic department store term) clothing brand was quirky, had a clear, connective point of view, and was a pioneer in direct-to-consumer (catalog) sales. Eventually, Delia’s migrated to e-comm and into limited physical retail (90+ locations), and then filed for bankruptcy twice by 2014, before briefly resurrecting itself in 2018, and becoming a non-factor today.

Think about the genesis of that business. Delia’s started a successful brand in the 1990s doing what all the experts are telling brands to do today— migrate to D2C and e-commerce. Then, buoyed by that success, they decided people “needed” a Delia’s store, to “bring the brand to life.” Did they really? No. The issue with immersive brand environments is they will become suffocating, and kill a consumers relationship with the brand if mismanaged or overdone.

More recently, Outdoor Voices, once dubbed “the next Lululemon,” collapsed, prominently. Outdoor Voices leaves us with a legacy of canned upbeat messaging (the phrase “Doing Things” — whatever that means — marked the entrance to the brand’s offices), amorphous cotton clothing, nine retail locations and delayed openings in other locations, $50+ million in funding, and a 2019 valuation of $40 million chopped by $70 million, likely triggered by a 12-month burn rate of $19 million in 2018. More… bad… math.

Do the right math, and pace growth without greed

The bottom line: Fashion brands need to reevaluate their motives and realistically review their profitability models when increasing their physical retail presence. They should consider keeping the growth model smart and focused (like the early Bonobos store locations, which were essentially cost-effective hybrid “showroom-fitting rooms” that directed you to then make the purchase online).

A fish climbing a tree

Even as I finished writing this, I read that Brooks Brothers found fire sale buyers, money men intent on saving “legacy” brands. Past the buyers’ goal of restoring the brand to just enough financial health to unload it to another buyer for a tidy profit, the big question is why we even need to save a brand like Brooks Brothers, or many of the others that collapsed this year. And I understand there are livelihoods at stake, including manufacturing jobs (and the US is an economy built on manufacturing).

But long before Covid, Brooks Brothers was a fish climbing a tree (a favorite saying of a friend of mine). It’s a non sequitur that applies to so many fashion retail brands. Brooks Brothers didn’t know how to capitalize on the rise in workplace casual dress, and suffered greatly because it nurtured too formal and dated a style that not even a heavy injection of cool (via the Thom Browne design partnership that started in 2007 and ended in 2015) was ever going to fix. Simply put, the brand couldn’t connect to younger shoppers or adapt to evolving sentiments about its core product: suiting.

David Wolfe, a retail and trend forecaster renowned for his cutting and profound insights, said it best when he commented on the decline of the Marc Jacobs brand (remember when Marc Jacobs mattered in fashion?) in 2015. Wolfe’s point: that in fashion and clothing, when young people no longer covet your fashion label, “… that’s really what’s wrong, and it cannot be repaired.”

Few consumers “covet” Brooks Brothers. And yes, Brooks Brothers has — you guessed it — plenty of real estate to deal with. But the truth is that, like marketers perception of how shoppers see the retail experience, Brooks Brothers never truly evolved.

If 2020 is truly a year of deep introspection and reevaluation for American — really global— business, let’s learn from the past when it comes to fashion retail stores. We simply don’t need them or care about them the way we used to. And some brands simply are not worth saving despite their legacies, and we’re even worth saving, before Covid.

Fashion Retail’s Bad Problem With Good Math was originally published in The Startup on Medium, where people are continuing the conversation by highlighting and responding to this story.

The concept of what we consider to be a “soda,” is changing. For the past 20 years, soda has largely meant one thing: a sugary carbonated soft drink. An evolution — hopefully, a revolution — is underway.

“I believe that when my daughter becomes an adult there won’t be sugary soda.” A beverage brand founder I’ve worked with for years declared this during an interview with The Wall Street Journal in the mid-aughts.

It was a bold statement, and I like working with CEOs and entrepreneurs who have the risk tolerance to make bold statements. But it’s been 10 years since he made the declaration, and with the soda aisle still generating $35.4 billion in sales (according to IRI and other sources), it’s clear soda will be around well into his daughter’s thirties and possibly for his own grandchildren to sip.

Soda is dead! Long live soda!

We’ve been declaring the “death” of carbonated soft drinks like Coca-Cola and PepsiCo for a generation. Let’s track some see-saw declarations from analysts and the media over the past 15 years:

• “Coke, Pepsi Losing the Fizz” (March 8, 2005)
• “Soda Sales Fall for First Time in 20 Years” (March 9, 2006)
• “US Soda Sales Fell at Slower Rate Last Year” (March 25, 2010)
• “Soda Sales Expected To Rebound” (April 7, 2011)
• “Pepsi and Competitors Scramble as Soda Sales Drop” (May 15, 2012)
• “US soda sales fall to lowest since 1995” (March 31, 2014)
• “The epic collapse of American soda consumption” (March 10, 2016)
• “US retail sales of carbonated soft drinks are rebounding” (May 31, 2018)
• “PepsiCo Sales Get Lift from Rebound in Soda” (April 17, 2019)
• “Soda Comeback Drives Sales Gains at Coca-Cola” (October 18, 2019)
• “Coca-Cola Sales Fall 28%, but It Says the Worst Is Over” (July 21, 2020)

It’s an exhausting list, isn’t it? And it’s a fraction of the epitaphs declaring either soda’s end… or marveling at its regular rebounds. And the category is still strong, despite 20 years of declines. Both Coca-Cola and Pepsi remain in our collective consciousness and on store shelves around the globe. It’s one of the longest “farewells” in cpg history, and one that won’t end soon.

Even with the July 21, 2020 news that Coca-Cola plans to discontinue some of its “zombie brands”, a buzzy term apparently used to describe the products no one wants to buy or worse, aren’t profitable, we already know the majority of Coke-branded soda offerings will not be amongst those that are unplugged. And on the same day Coca-Cola talked zombies, it also disclosed that sales of Coke in China, Southeast Asia and Western Europe “continue to improve.”

Despite the grim implications about our society’s relationship with sugary soda, the soda market is moving toward a better place, with steady innovation that leads to category evolution. I’m happy to work with brands and products involved in that movement, and have my own small part it in.

The “new generation” soda trend

Professionally, I’ve been taking about the convergence of sugary soda, no-to-low sugar sparkling waters, lower calorie or ‘natural’ energy drinks, and healthier, fizzy beverages like kombucha, since 2017. Collectively, they represent forces redefining the consumer sentiment of what can be considered a soda. Whether or not this convergence changes the emotional connection generations of consumers still have with soda, is another story and another timeline. And like all major cpg shifts with lasting consumer resonance, the evolution of what we consider a soda is a slow and steady one that requires innovative start-ups and the entrepreneurs behind them to understand they’re building a category of ‘better soda,’ together. No one single brand will change Americans’ perception of what a soda is. But a group of new generation soda brands emphasizing better formulation and ingredients can build the critical mass that consumers (and retailers) need to see and experience, to support this sea change.

It’s a evolution that faces challenges based on (what else?) the impact of Covid. In late May 2020 Wegmans, renowned for its wide selection of products including those from emerging brands and categories, trimmed its product assortment by 40%, according to The Wall Street Journal. And they’re not the only grocer to do so. That diminishment of selection will put pressure on new products, including beverages, to sell faster and in greater quantities than pre-Covid, if they want to hold onto their newly acquired shelf space.

What qualifies as “new generation” soda

There are formulaic tenets to a new generation soda. Lower sugar and a cleaner ingredient panel are obvious prices of entry. And while sparkling water has made a bid to be a soda alternative, most do not qualify as examples of new generation sodas. Take LaCroix. This is only ever a sparkling water brand in my opinion. Yet Spindrift provides a familiar, soda-like experience and while it’s technically categorized as a sparkling water, it qualifies as a new generation soda.

Soda in our collective consciousness

It’s a fine line that will continue to be walked the next few years as new brands carve out their own market within soda. And it’s tied to flavors, mouth feel, the addition of pulp and other dynamic factors including strong branding and evokes, “soda.” Why has this evolution been so slow? Because sugary soda occupies a singular and deeply emotional space in our consciousness tied to childhood, sports, music, vacations and other triggers for rich and nostalgic memories.

Our go-to mental reference for a soda is a chilled, often darker colored, strongly carbonated drink that we assume will feel refreshing and taste sweet. In fact, that “rush of sweetness [also] appears to activate the same reward centers in the brain as drugs,” according to Gary Wenk, a neuroscience authority and author.

For generations, the notion of an iced-cold Coca-Cola in a glass bottle is a staple of summer days at the beach. That psychology has been pounded into our heads for generations, and even if you’ve never enjoyed a Coke on a breezy day at the shore, the very reference is iconic and sets a mood. And that’s part of the secret to the soda experience: it evokes a mood and puts us in a mind-state. Remember Coke’s “Taste the Feeling” campaign from as recently as 2016 — all mood, all sentiment.

The earliest ads that made us love soda, more

Ever since football star ‘Mean’ Joe Green’s commercial for Coca-Cola in 1979, sugary soda has been sold to us as an emotionally charged, generation-spanning source of optimism and refreshment. Beverage marketers elevated that conversation in the 1980s with the endorsements of pop music superstars like Michael Jackson and Whitney Houston in their commercials and created a marketing strategy that has barely changed in four decades (something I’ve written about before on Medium). The goal of that strategy: create an positively energized, emotionally transportive moment with earworm beats and lyrics, and the ritual of slugging down a sugary soda.

“Ever since football star ‘Mean’ Joe Green’s commercial for Coca-Cola in 1979, sugary soda has been sold to us as an emotionally charged, generation-spanning source of optimism and refreshment.”

The demonization of sugar in relationship to soda is a numbing dialogue, specifically when traditional carbonated soft drinks still occupies an entire aisle of the store. Most people know too much sugar isn’t good for them. But it hasn’t stopped them from enjoying sugary drinks or the familiar taste of iconic sodas, even in their “diet” or “zero” forms. Sitting in a shuttle bus from the Dodger Stadium parking lot to the halls of Expo West in 2018, I sat next to three natural foods buyers from leading groceries. What were they drinking? Cans of Diet Coke and regular Coke.

But new generation sodas — that remind us of the taste of iconic soda brands and that first emotional connection drinking them — are steadily emerging. They represent an important category of beverage that retailers and the health-conscious amongst us should nurture, with discipline and repetition. Because I have had the good fortune of working with so many of the top emerging beverage brands, some of these new generation sodas, are clients. I will be transparent about the brands I discuss and if I work with them, and it should not diminish their stature in this important movement.

OLIPOP. I started working with this ‘digestive tonic’ brand at the beginning of 2019. Their co-founder, David Lester, contacted me out of the blue about working together. He described their concept and I asked him to send me samples. He did, and I was unduly impressed. OLIPOP entered the market with an important mission of improving gut health (the microbiome) through a soda experience, and a scant few months into their Southern California launch were selling upwards of 40 cases per week, per store, at natural foods icon Erewhon. If you’re a stranger to beverage sales, that figure might seem small. As far as beverage start-up sales are concerned, it’s epic. But as the brand scales nationally, it’s often the nostalgic soda experience that helps drive OLPOP’s enviable consumer connection. Ben Goodwin, the brand’s co-founder and a self-taught food scientist, has identified a formulation process that starts with our positive, emotionally-charged memories about food and drink. Those memories, fuel his his creation of OLIPOP’s flavors, through the lens of functional ingredients and an emphasis on prebiotic dietary fiber.

Why you should drink it: Because the familiar taste profiles may help wean you off mass market sodas.

What you’ll get from it: An introduction to the power of soluble plant-based fiber (prebiotics) that supports gut health. Americans don’t know enough about either, and OLIPOP and authors like Katherine Harmon Courage have a lot to teach us.

Why it’s going to become a player in new generation soda: Because it has the taste, quality, formulation and connective brand optics (how cute does that can of OLIPOP look on Instagram) to help you transition easily, into “better for you.”

OLIPOP’s first digital ad, which debuted in August 2020 on the brand’s social media channels, below.

Olipop Orange Squeeze Commercial (08-24-2020 cut)

Health-Ade Booch Pop. The new soda line’s parent company, Health-Ade, is also a client. The audacious concept of introducing a soda with a foundational element of kombucha, distinguishes Health-Ade Booch Pop immediately. Where consumers need to meet the brand half way, is embracing that innovation without preconceived notion, because kombucha has a specific taste profile. Kombucha became a billion-dollar beverage category in record speed. But as a wave of brands followed pioneers like GT’s Living Foods and Health-Ade into the category, the boundaries of what kombucha is as a beverage experience, are starting to blur. And that sentiment informs the new generation soda movement. Every movement needs a voice. Health-Ade Booch Pop’s voice? Co-founder Daina Trout. With a formal education in nutrition, a proclivity for speaking her mind, and a growing dialogue with working mothers and female leaders across the country, Daina may become a vocal figure in defining healthier soda in the next decade. The sodas just launched in July 2020.

Why you should drink it: The formulations are unique, delicious, and have the bubbly mouth feel of traditional soda. The relationship between our expectation of how something might taste, vs. how it actually tastes, the memories that taste experience triggers, and how it makes us feel emotionally in the present, is a critical part of embracing food and drink. Health-Ade Booch Pop is formulated with this in mind and is the kind of drink that straddles a number of beverage categories and consumer expectations competently.

What you’ll get from it: A rich-tasting soda experience (70% less calories and 80% less sugar on average, than traditional soda) and a new way to appreciate the flavor cues and benefits of kombucha as an ingredient in a drink, vs. being the entire drink.

Why it’s going to become a player in new generation soda: Because the Health-Ade brand has the presence nationally, to innovate at this level, and because this drink may be a bridge between die-hard soda drinkers and kombucha lovers.

Poppi. I don’t have a deep knowledge of this beverage line, especially since its re-brand at the start of 2020 from its previous name “Mother”, when the founders competed on “Shark Tank.” But I am fluent in the conversation of “apple cider vinegar” and its purported benefits. Amusingly, the first time I encountered the formulation of apple cider vinegar was in a shampoo, not a beverage. And unfortunately, I am not personally a fan of apple cider vinegar’s taste profile. None of that, however, should minimize Poppi’s potential status as a new generation soda.

Why you should drink it: Because you’re an apple cider vinegar devotee seeking a healthier, soda-like experience.

What you’ll get from it: Healthier refreshment than a traditional sugary soda, for sure.

Culture Pop. This is a brand new entry into new generation soda, and the fourth brand to use “pop” in its name. I haven’t tried this beverage yet, but include it because it’s further evidence of this new generation soda pop movement.

There are now four ‘new generation’ sodas with ‘POP’ in their name

Why do they all have “pop” in their name? Because most everyone understands what you’re describing, when you say “soda pop.”

Which of these brands takes a major leadership position in new generation soda, is still up in the air. But all have a part in building an important, and still nascent, beverage sub-category that requires ongoing, connective marketing and stronger retailer support to have a profound and lasting impact on the concept of soda.

UPDATE

Beverage industry trade media leader BevNET.com offers an update on this trend (October 15, 2020), here (paywall).

“New Generation Soda” Has More Choices and a Lot of “POP” was originally published in The Startup on Medium, where people are continuing the conversation by highlighting and responding to this story.

Forbes and top food & beverage journalist Chloe Sorvino recently profiled Southern California natural foods temple Erewhon, its multi-million dollar financing round with Stripes Group, expansion plans and the Erewhon owners’ earlier hopes to bring gourmet and natural foods pioneer Dean & DeLuca to the West Coast. It’s a great read if you want to learn more about specialty, natural foods retail and entrepreneurialism.

Yet, one day after that article ran, pioneering gourmet grocery and cafe chain Dean & DeLuca announced the closure of their flagship location in SoHo. All other New York locations of the iconic Dean & DeLuca brand, which set a standard for stylish food retail and coffee-cup-as-status-symbol with their minimalist aesthetic, signature font and logo, and sleek subway tile store interiors, were already closed. As recently as 2014, the chain had 40 locations.

Then, less than two weeks later, another of New York’s food and coffee icons, The City Bakery, immortalized in an episode of “Sex and The City,” shuttered its doors, apparently the result of mounting debt and unprofitable expansion. “City” as my friends and I called it, was a part of my life for 20 years when I lived on the East Coast. Whenever I met my longtime friend, the beauty expert Didi Gluck, for breakfast, we met at “City.” I had lunch there twice a week, every week, for the eight years I worked in the Flatiron District.

As a fan of pretzel croissants and perfectly made coffee, The City Bakery’s closure was nostalgic. As a food & beverage marketing expert who studies trends, it was outright depressing. I’m a firm believer that a curated food experience is where you, as a consumer, benefit the most from a distinct and informed point of view about food, drink and their cultural context (think David Chang and anything he does). The City Bakery and founder Maury Rubin (he warmed up to me on my fifth year eating there), with his male Alice Waters-meets-Graydon Carter (the hair!) vibe, offered you beautiful food choices but not every choice. They were his choices and The City Bakery’s choices, and they were consistently wonderful. But they weren’t for everybody.

The over-personalization of food (you know, the endless stainless steel squares filled with ‘options’ for you to top your $17.00 salad) does not actually celebrate a point of view or the idea of curation or food learning. Rather, too much random choice invites avoidance and discourages exploration and food learning because there’s no “taste funnel.” Why brave trying something unusual looking or oddly named, when you can go full basic b*tch and get the kale with chicken? The most extraordinary curated food experiences, whether retail or dining, challenge you with unexpected options and plenty of them.

That in-your-face retailer challenge (See this? Don’t recognize it? It’s life changing and you will buy and eat it!) is part of the magic of Erewhon. It’s arguably the finest natural foods marketer in the country and a singular brand builder: beverages like functional digestive soda pioneer OLIPOP (a client; the founders at their recent Los Angeles pop-up, a “curated beverage experience”); breakfast and snack brand MUSH (yep, also a client); and über-stylish CBD drink VYBES have built their halos of cool partially because they sell, and sell well, at Erewhon.

Erewhon’s cachet is built on their commitment to the highest quality products, a fearless embrace of new foods and brands, brilliant merchandising and a well-planned physical retail environment that, like IKEA, keeps you wandering through the aisles, exploring products and learning about food, and shrewdly, your own tastes and interests. It’s genius.

But that experience, is 100% curated through the thoughtful lens of Erewhon’s founders and team, and it is not a mass market proposition. There are some populist product choices to be sure, but a majority of the prepared and packaged foods there are sold because they meet Erewhon’s specific and elevated taste, aesthetic and mission. It reminds me of Colette, the vanguard Parisian retailer. I was a devotee of Colette when I lived in Paris on-and-off in the early aughts. The store invented the concept of “experiential luxury retail as entertainment” and influenced many other retailers but is now, like Dean & DeLuca and The City Bakery, shuttered. Maison Kitsuné has tried to take Colette’s mantle, but lacks the harder edge and audacity that Colette, at its prime, owned and defined.

All these musings make me ask: are the closures of Dean & DeLuca and The City Bakery a potentially limitless opportunity in Erewhon’s expansion plans? Or are they a sign that this type of shop (and for the sake of argument, we’ll call them all “shops”) has a firm ceiling. I think it’s the latter. And that, in a more-is-more-is-more culture (see any recent bad news about WeWork), we should appreciate that.

It leads to the big question: Where is the turning point, between a few prime locations, to a dozen or more, for a specialized consumer retail experience? I recognize there are other factors involved in the success and closure of these brands, but I feel strongly that not every brand has to be omnipresent to successful, profitable, influential, trendsetting and referential. And that’s where the cool factor lies.

I want to see Erewhon carry and burn brighter the torch lit by brands like Dean & DeLuca and The City Bakery. But I cringe at the idea of misguided over-expansion, turning them into the Barneys of gourmet grocery.

Full photo credits: Erewhon (Blau Journal), Dean and DeLuca (Perishable News), Colette (Saudi Gazette), City Bakery (TimeOut).

Vanessa Dew is one-third of the ambitious trio that co-founded Health-Ade, one of the top-selling kombucha brands in the US. She’s also an emerging thought leader on being an Asian-American entrepreneur in the US food & beverage industry, with plenty of hard-earned life and career advice for male and female entrepreneurs in any industry.

The Q&A by G&Co.

I try to avoid interviewing clients, because of the obvious bias. But sometimes a client has a narrative and insights that needs to be shared, particularly in a climate where diversity is so topical. For the latest in a series of entrepreneur interviews, I sat with Vanessa Dew, the driven, compassionate and deeply self-aware co-founder and chief sales officer of Health-Ade. In the US, Health-Ade is the #3 best-selling kombucha brand (and climbing) and is available in over 26,000 stores.

G&Co.: You recently wrote on LinkedIn about your struggles with your self-image as an Asian-American, and how steadily resolving those issues lead you to become an entrepreneur. What has been the greatest lesson you’ve learned from that experience?

Dew: I’d say it’s the importance of self-worth grounded in self-acceptance, and how having a real sense of it makes success as an entrepreneur more emotionally satisfying. Driven people, male or female, often have self-worth issues from my experience. That career drive is an effort to fill a void. Sometimes these entrepreneurs will evolve and be better leaders and humans. Others will implode because they never achieved a deeper level of self-respect past being successful and making money. I don’t think success is worth its price without that sense of self-worth.

G&Co.: You’re a rarity in the beverage industry: a c-suite Asian female entrepreneur. Considering our current climate of inclusivity, how do you feel about that?

Dew: I didn’t co-found Health-Ade to be that person, you know? I did it because I was sick of working a job that brought me zero joy, and that I had no deep emotional connection to. I only realized the lack of Asian entrepreneurs in the beverage industry well after co-founding the brand. Diversity is interesting as it relates to different cultures, particularly Asian cultures in America. Many Asians are raised simply to excel at a reputable school and get steady, lifelong jobs and just work and work — it’s a stereotype for sure. Industries can strive for greater diversity in their top ranks but the other ethnicities and cultures also have to truly want those types of careers and opportunities. And big c-suite jobs require a certain leadership mindset that not everyone shares, or aspires to, or can even achieve.

G&Co.: Getting specific about your role as chief sales officer of one of the top-selling kombucha brands in the country, what advice do you have for younger beverage companies building their sales divisions?

Dew: Well… my role is a bit unique, since I didn’t start my career “selling beverage.”

G&Co.: Of course. You started your career in pharmaceutical sales, which is different from beverage sales on many levels. How has that informed the way you built the sales team at Health-Ade?

Dew: Sales is a high pressure role, no matter what you’re selling. And winning business, landing an account, is always a high. But yes, there are differences. Coming from pharma, I had to teach myself about leading the sales for a beverage company. Some of that came from observation and direct experience selling Health-Ade, some from asking a lot of questions from experienced sales reps, buyers I met along the way, and founders of companies I admire. I analyzed that information in a way that aligned with what I learned from pharma sales. It helped me create a differentiated sales team, both in terms of approach and culture.

G&Co.: How so?

Dew: I interviewed a sales guy once, who said to me “I’m male, pale and stale. You wanna hire more people like me.” I was horrified.

“I’m male, pale and stale. You wanna hire more people like me.”

It was the exact opposite of what we wanted to create at Health-Ade and a big reason we approached our sales team culture so differently. Our sales team members start from a position of integrity — in regard to the quality of our product as a major differentiator, and the premium nature of our brew signaled by our price. They never bash competitors. Instead, they emphasize the integrity and quality of Health-Ade’s drinks and the mission of the company: to provide people with real food and food-based wellness solutions. We also train our sales teams to walk into a retailer door like them own and live the brand the way Daina, Justin and I used to when we started.

G&Co.: On topics that involve ‘pale males’… You’ve successfully raised money twice to grow Health-Ade. [laughs] What have you learned from that process that might benefit entrepreneurs raising their first capital?

Dew: On your first proper round, if you’re raising money from smaller or mid-size private equity groups, I think it’s vital that someone in that group has actual experience as an entrepreneur and helped build a successful brand from the inside. That’s not always the case. But that type of investor will understand what it’s like to scale a business — the emotional weight on the entrepreneurs, the financial, operational and logistical issues of building a small CPG brand. You count on your investors for advice and strategic input, but that has to be grounded in actually having done ‘this.’

G&Co.: I like that you address the emotional side of working with investors.

Dew: Yes, the impact of that is under-appreciated. When you’re raising money as a tiny start-up, you might be less selective about who you take money from, simply because you want to get the company off the ground. There are a lot of emotional highs and lows in the process, but the human stakes aren’t as great. But when you’re raising money and employ a few dozen people or more, the human stakes are higher. As a company founder and leader you have a responsibility to these people — who have chosen to work for you and share your vision as an entrepreneur. It’s an emotional process across the board, even if transacting dollars is something we try to treat without emotion, as businesspeople.

“The impact of the emotional side of working with investors is under-appreciated.”

G&Co.: Speaking of emotional connections, your co-founders are your best friend and her husband. I realize you run different facets of Health-Ade but what is that dynamic like? And how do you balance work and friendship?

Dew: It’s cliché but respect and trust lie at the heart of it. There have been many days when I’ve been so grateful to know Daina and Justin have my back, and that we still share a collective vision for this company. I don’t think I would be a healthy part of this partnership if I had not confronted my own self-image and self-respect issues earlier in life.

G&Co.: Back to self-worth…

Dew: Absolutely. Having addressed that before we started Health-Ade made me more respectful of myself and others, and also taught me some hard lessons about integrity. I try to bring that to work every day. If I have advice for others debating working with those they are closest with, I will say it is only for a handful of people and that it’s lucky and rare if it works out and continues to work years later. As an Asian-American, the concept of family is deeply important to me. We created a family at Health-Ade, but as with all relationships, we work to keep it happy and productive.

“Working with those you’re closest with is only for a handful of people, and it’s lucky if it works out years later.”

G&Co.: You helped build a billion-dollar industry: kombucha. What advice do you have for a beverage entrepreneur trying to find or create their own billion dollar category?

Dew: It’s not about tapping into the next big thing, it’s tapping into your thing. There are so many entrepreneurs with great ideas. But the billion dollar category is a rare one to be a leader in and you can’t choose to become an entrepreneur solely focused on that. It’s not about finding that billion dollar category to simply get rich. It’s more about being your own boss, creating something you, yourself own, and can share with others, and about the quality of life that working for yourself might bring you. That said, I work like a dog but tell people it’s ‘Asian discipline,’ but I truly love what I do for a living. Also, with success comes a responsibility to pay it forward. I do so by advising other Asian-American entrepreneurs, like the founders of Fly By Jing and One Culture Foods.

“It’s not about tapping into the next big thing, it’s tapping into YOUR thing.”

G&Co.: Which leads us to your mission as an entrepreneur. Being a ‘mission driven’ business or brand has become typical entrepreneur jargon.

Dew: It has! But you identify your mission by offering a product or an idea that people want and need. Great products and brands offer solutions and sometimes that solution is the mission. For Health-Ade, our kombucha became a solution for those searching for an answer to gut health, in a drink that was high quality and tasted amazing. As we grow the business, we are constantly reminded how many people out there are yearning for something to make them feel good from the inside. Health-Ade will continue to be a leader in gut health and making people feel good. That’s been a huge joy for me as an entrepreneur — knowing that our customers find functionality in our brew and that we continue to be a go-to gut health brand for them.

G&Co.: Thanks for the insights and time, Vanessa.

In 2018, UGLY Drinks brought their pop art inspired drinks to the US. Co-founder Hugh Thomas updates us on the brand’s progress and his professional and personal journey after moving to New York to lead UGLY’s first market outside the UK.

The Q&A by G&Co.

For the second in a series of entrepreneur interviews, I sat with Hugh Thomas (aka “UGLYHugh”), the affable, socially-conscious and intensely driven co-founder of UGLY Drinks. In the US, UGLY is successfully expanding on the East Coast and other key markets and also focused on its D2C business. The brand is already a player in the UK, sold in over 5,000 stores.

G&Co.: When you launched UGLY in the US in 2018, you knew sparkling water was growing (+15.4%) at a healthy clip. But versus the UK, sparkling is a very crowded category here. How’s it going?

UGLYHugh: Launching a British beverage brand in the US is relatively unchartered territory. In the UK, sparkling is still a newer beverage category, it’s not as competitive as it is here. But Joe [Benn, UGLY’s co-founder] and I believe we have the potential to build UGLY into a global beverage company that educates consumers about avoiding sugar and sweeteners, and based on recent studies in the news, that education is needed.

G&Co.: I know you’ve been in fundraising mode this year. How has that differed from your time raising capital in the UK? What are the similarities or differences between the US and UK investor.

UGLYHugh: On fundraising, the biggest immediate difference between raising start-up capital in the US versus the UK is the huge sense of optimism and hunger for new opportunities that American investors have.

“…The biggest immediate difference between raising start-up capital in the US versus the UK is the huge sense of optimism and hunger for new opportunities that American investors have.”

G&Co.: Really?

UGLYHugh: Yes! I am not saying that UK investors don’t see this in new brands or new concepts. But the influence of major UK retailers like Tesco and Sainsbury’s means that new concepts needs to be able to go mainstream so much faster than in the US.

In the US, selling your beverage at Whole Foods is a major retail achievement. But in the UK, there are just nine Whole Foods locations! In order to expand from this base, you need products that can be picked up by mainstream consumers, faster.

G&Co.: Speaking of competition, what brands are on your radar — both as potential competition and as a source of inspiration?

UGLYHugh: Spindrift. I’m impressed by their growth and their innovation. They have managed to combine a strong foodservice footprint in influential lunch locations with more conventional retail expansion. They test formats, new flavors and flavor blends well and there is lots other brands can learn from their execution.

San Pellegrino’s Essenza line is also interesting. Consumers are looking for flavored varieties and I think San Pellegrino has responded with a classy and well-executed range.

“Psychologically, it shouldn’t feel like a compromise when you pick up a can of seltzer instead of a can of soda.”

Topline, we want to give people healthy choices that feel exciting. UGLY sits at the intersection of the health and sugar free qualities of a flavored sparkling water, but as a brand aspires to deliver the sense of fun found in carbonated soft drinks. Psychologically, it shouldn’t feel like a compromise when you pick up a can of seltzer instead of a can of soda.

In the US we knew we needed to stand out from the crowd with design and color that would visually disrupt some of the “safer” looking brands in the sparkling water set. We matched this with eye-catching point of sale that flows throughout the store to the shelves where we sit.

G&Co.: I have told you since you launched how strong the UGLY branding is, and how people connect to it immediately. Without copying you stylistically, what lessons can other beverage entrepreneurs take away from the creation of UGLY?

UGLYHugh: So much of the brand and design comes from Joe’s and my own soul and DNA.

“Entrepreneurs need to stay committed to their vision and bring more passion, soul and attitude to their brands.”

G&Co.: Ah… you and Joe are UGLY on the inside?

UGLYHugh: Sooo ugly! [laughs] When we started the brand we were in our early 20s and quite tired of the way big soda marketed itself to people. We wanted to remind people of most soda brands’ sugar and artificial ingredients, a brand mission we call sharing “The UGLY Truth.” We wanted to do it in a way that stood out without ever wanting to fit in. Entrepreneurs need to stay committed to their vision and bring more passion, soul and attitude to their brands. Design-wise, street and pop art was a big inspiration. The colors, the shapes, the boldness. That authenticity is something no one can ever copy.

G&Co.: You’ve followed news of the consumer trust and legal issues that LaCroix is having. How do their issues affect the category and UGLY’s growth in the US, if at all?

UGLYHugh: A huge part of the UGLY mission is improving people’s diets. UGLY continues to raise the quality of its products on a week-by-week basis and this is a process that we will never stop. We are moving towards 100% BPA-free cans across our whole range and obtaining Certified Non-GMO status which will be on pack. All of the flavors we use meet the highest standards with our suppliers and all flavors come directly from the named fruits on pack. We will continue to push forward to meet and exceed the highest standards.

G&Co.: When I saw you at Expo West this year, you spoke about your entrepreneurial journey, that is wasn’t just about business, and that you really missed England, your friends and family. Yet as someone who helped launch your brand here in 2018, I personally believe you’re the best one now to lead the charge. How do you consolidate that sacrifice as person and as an entrepreneur?

UGLYHugh: First, thank you for working with us! And what a great question. Leaving home for anyone is very hard thing to do. Since I was 11 years old, it’s been my dream to be an entrepreneur and launch a brand in the US, and the move was never in doubt. Losing my close support network in the UK of Joe, co-workers, longtime friends and family was particularly tough. But I’ve stuck to my entrepreneur’s dream and focused on the business and taking care of myself. I work out and give myself the chance to build deeper connections with colleagues and friends in the US. As with any challenge, taking things day by day, and keeping your head down and working hard, will deliver results.

G&Co.: I’m a big believer in physical and mental discipline.

UGLYHugh: Agreed. I also started meditating. I’ve experimented with a number of apps, but I’ve seen the most success following the Headspace plan and building a streak over a couple of months. I read a great book “Why Buddhism Is True” and this helped give me real understanding around the benefits.

New York is an amazing city, but some of the true home comforts for me can never be replicated, like my local pub Exmouth Arms, watching Premier League football and of course (she’ll kill me if I don’t say this!) my mum’s home cooking.

G&Co.: So what do you see for 2020?

UGLYHugh: From the get go, UGLY set out to take on the giant soda companies and improve the diet of consumers everywhere, starting in the UK and now the US. Our mission has not and will not change. Sugary drinks are still a major issue and the situation isn’t improving fast enough. We’re focused on getting the best tasting drinks to consumers without any of the sugar, sweetener or artificial ingredients found in traditional sodas.

In late July, Norwegian water brand Voss announced — or rather, Dwayne
“The Rock” Johnson announced (since, let’s admit it, the media does not hang on news from Voss) — that Johnson was taking an ownership stake in, and advising, the iconic premium water brand.

For the uninitiated, Voss’ stylish, signature cylindrical glass bottle did as much for premium water as Fiji’s impossible-to-fit-in-a-cup-holder water bottles. But Voss spoke more strongly to water as a fashion statement, and they elevated spring-sourced still water to new heights of social status: “I pull a Voss from my Birkin, therefore I am fabulous.” “I walk into a business meeting carrying a Voss, therefore I am fabulous.” Both brands also spoke to good taste, disposable income, and interestingly, unconventionality, since neither water brand’s packaging was very convenient.

Much of the glowing but surface coverage to date has been about the connective star status of Johnson with his fans, his dedication to positivity and fitness, his creative agency (who were behind his first Voss campaign, naturally), and of course, his unquestionable appeal as a movie and social media star.

But what little, if any, of the coverage has addressed is Johnson’s deeper value to Voss as a brand. The answer likely lies in China.

In 2016, Voss sold a majority of their company to Reignwood Group, the Chinese juggernaut that owns and distributes Red Bull energy drinks in China. For most beverage brands looking to grow their global sales footprint, China is the promised land because of the continued increase in consumer spending there. Per Euromonitor International, China’s household disposable income per capita will grow by nearly a third by 2023.

And Johnson — already the box office champion in the US — is indisputably the most bankable American film star in China. Through advertising, his films, and his social media, he has the potential to sell billions of bottles of Voss in China alone.

Johnson’s seamless and authentic promotion of the brands he’s a part of, like Under Armour, are gold standards in film product integration. For example, in every Fast & Furious film franchise he’s been in, he’s been kicking ass in Under Armour.

Hobbs & Shaw, the latest F&F spinoff, opens August 2. Imagine how powerful a sales tool the integration of Voss into Johnson’s future films will be. And if we see Voss in “Hobbs & Shaw,” we’ll know this deal was a long time coming.

Having worked with talent and being involved currently in celebrity/beverage brand investor deals, I believe the Voss-Johnson deal is potentially a new benchmark. This is because its global reach is so huge and because Johnson, via his creative agency, is in total control of his image promoting Voss.

One day before The Rock/Voss news, powdered nutrition brand Liquid I.V. announced their own celebrity and influencer investor lineup. There are nineteen names, some of which are familiar (Justin Bieber, Demi Lovato, Kevin Hart). The other names require a little research, but even in total, they’re not as powerful a lineup of pitchmen as a single Dwayne Johnson.

Oddly, it harks back to the 90s and early aughts when leading American celebrities (like Harrison Ford and Brad Pitt) made a small fortune appearing in advertisements in Asia. These ads never ran in the US, and they never compromised those celebrities’ images with American filmgoers. My recent favorite in this vein was Hugh Jackman’s dance-driven ads for Lipton, which only ran in Asia. But what Johnson brings, with his own creative agency and social media influence, is so much more today.

The formula of celebrity investors in a beverage brand has been stagnant for a while, and it’s exciting to watch that paradigm get revitalized with Johnson’s latest deal. American beverage brands signing celebrity investors, take note.

The Rock’s Deal With Voss Shows Us the Future of Beverage Marketing was originally published in Better Marketing on Medium, where people are continuing the conversation by highlighting and responding to this story.

Stylish entrepreneur Jonathan Eppers explains how he built one of the coolest CBD beverage brands in the country.

The Q&A by G&Co.

For the first in a series of interviews with entrepreneurs I admire and am confident others can learn from, I spoke with Jonathan Eppers, the founder of Southern California-based VYBES, a CBD (cannabidiol) beverage brand.

In the the food and beverage industry, there are few innovations that are more buzzed-about than CBD, and VYBES is a brand to watch. I discovered it at Erewhon in Los Angeles, but before you say it’s an “LA thing,” know that VYBES is already sold in 3,000 stores in 23 states. Read on, future CBD entrepreneurs.

G&Co.: The rush of new CBD products leaves my head spinning!

Eppers: When I started making VYBES there was really no one selling CBD beverages. But today, you’re right. There seems to be another CBD beverage entering the market every week. It’s getting very crowded, very fast.

“The window of time for a new CBD brand to make an impression with consumers is getting smaller and smaller,” says Eppers.

I learned about CBD in the fall of 2016. That’s not long ago, but few people (including myself) knew what CBD was then. I’ve been caught off guard by the explosion in CBD, but frankly, given where we are today as a society in terms of stress and anxiety levels, CBD seems to have broken through at just the right time.

G&Co.: The glut of CBD drinks we’re seeing… What does it mean for consumer choice and where do you see market segmentation in the future?

Eppers: I think there will eventually be a full range of beverage formats, flavors, dosages and price points. I came from the tech world, where it’s a winner take all approach. It’s not like that in beverage, and the wealth of choices will ultimately benefit the consumer. In that mix, VYBES is one of the higher-dosed CBD beverages. It’s made from organic ingredients and comes in glass bottles, so it’s premium quality and premium priced (at $8/bottle).

I do think, like kombucha and caffeine, there will be two to three CBD beverage brands that ultimately capture a majority of the market share. Several of us are working towards being number one.

G&Co: Well, VYBES is already #1 in my ‘fridge, Mr. Eppers.

G&Co.: I’m sure you’ve heard that liquor sales are in decline. Do you feel easier access and the proliferation of CBD drinks has any role in that?

Eppers: Liquor sales are declining not because of the rise in CBD or THC, but because consumers are much more health and wellness focused than ever before. Younger people in particular aren’t drinking as much beer and hard alcohol as their parents did. A big reason is that they’re gravitating toward beverages that make them feel good, not hungover. I personally took a few months off from drinking earlier this year and I found that VYBES filled the void of drinking alcohol in those situations where friends were drinking, and I wasn’t.

G&Co: It’s funny you say that because I found drinking even half a VYBES before I enjoy a glass of wine, makes me want to drink less wine and I feel great.

Eppers: For CBD beverages, it’s even more “right place at the right time” because CBD can enhance how a person feels when they’re consuming but without any of the side effects of alcohol.

G&Co.: I personally find the VYBES brand to be modern, relevant and easy to connect to. It’s in the spirit of the ease, mellow and community qualities I personally associate with CBD. What branding advice do you have for a budding CBD drinks or edibles entrepreneur?

“CBD as a consumer proposition isn’t loud or anxious, like caffeine. CBD is calming and subtle”, says Eppers.

Eppers: Our branding, aesthetic and identity was designed around how to communicate this to the consumer. When I was creating the brand with Steve Reinmuth of [the design firm] Some Days, we tried to be true to CBD and its effects on the mind and body. We were inspired and heavily influenced by fashion, art, music and of course Los Angeles. There’s a real, genuine and authentic story about the origins of VYBES and I think consumers ‘feel’ that in our brand.

G&Co.: So you’re saying VYBES gives people a vibe!

Eppers: It’s important for entrepreneurs to think about how people are perceived or want to be perceived when they hold or drink your product. Thinking about what it means to drink or associate with VYBES, helps guide us on who we want to become and what values we want to stand for.

G&Co.: How important is it for CBD brands to proactively engage in legislative issues impacting the industry, like the legalization of marijuana?

Eppers: One of my favorite quotes from political circles is “You either have a seat at the table, or you’re on the menu.” I think that eloquently describes how I think about this.

“Trying to sell VYBES, I never thought I’d be engaging politicians, hiring lobbyists or joining industry trade groups, but that’s exactly what I’ve had to do,” says Eppers.

I realized last year that I couldn’t rely on others to push for the needed legislative changes required to move the industry forward, because the industry was so nascent. I wanted my brand to succeed, so I had no choice but to get involved.

I joined the US Hemp Roundtable. Its members are actively involved in legislative efforts in a number of key states across the country. VYBES is based in Los Angeles, so we’ve been active in California, retaining lobbyists in Sacramento to help us pass a bill, AB 228, that we expect will become law this summer and legalize CBD in foods and beverages in California.

G&Co.: The biggest retailers are exploring carrying more CBD products, but I feel CBD is still a long way from mass market. What hurdles do you think newer brands have as they try to enter the market. What advice can those that have made it, share for start-ups?

Eppers: I can tell you that without a doubt, national retailers are eager to sell CBD products. We’re talking to many of them. My belief is that some of them may start selling CBD even before the FDA provides clarity to the marketplace. When one national retailer puts CBD beverages on their shelves, the rest will follow. At this point, it’s just a matter of which retailer chooses to be first.

Unlike many startup beverage companies, VYBES has not had the opportunity to get into national retailers, but that’s actually been a benefit for us. We have built our brand in smaller, regional, independents. Store by store. Shelf by shelf.

We partnered with distributors across the country that service smaller but incredibly valuable accounts. This gives us a lot of flexibility to test new flavors quickly before rolling them out. It also ensures no single retailer is responsible for all of our sales. In the fluid environment we’re currently in, this represents a significant advantage to weathering some of these obstacles.

Distributors in most major cities have picked up CBD beverages but there’s only so much shelf space available, which is going to make it harder for other entrepreneurs to enter the category unless they’re completely differentiated from what’s already here.

G&Co.: Every food and beverage brand gets complaints, what we lovingly call “consumer inquiries” in the world of CPG. Del Monte recently received a complaint about a “dead baby bird” in a can of spinach. What’s the craziest, funniest or most overly dramatized consumer inquiry you’ve ever received at VYBES?

Eppers: First off, that’s just gross. Can you imagine opening a can of spinach and finding that?

G&Co.: I only eat my spinach fresh and tripled washed.

Eppers: Luckily for me I don’t eat canned anything. We really don’t get many complaints, thankfully. But we did get one that left me a bit dumbfounded. A customer earlier this year tweeted at us saying our beverages gave her cotton mouth. You typically get cotton mouth from smoking, not from drinking a beverage — even a CBD beverage.

G&Co.: Thanks for the time, Jonathan!

“Do celebrity endorsements sell beverages? Is it an even bigger win if that celebrity is also an investor in the beverage brand?”

I get asked this, almost weekly (for context, I run a consultancy that specializes in food and beverage marketing). And if I had a nickel for every time I was randomly asked about the merits of a celebrity investor, I estimate I’d have… an extra $20.00. That’s the price of a single lunch at Tender Greens, but it does represent the roughly 400 times over the past eight years that the founder of a start-up has asked me about the worth of securing a celebrity investor for their food or beverage brand.

The association of celebrity and beverage dates back to the late 1970s, when Coca-Cola pioneered the concept of pro-athletes and eventually mainstream celebrities like Whitney Houston and Michael Jackson (for Pepsi), taking a big gulp of soda on national television and making everyone want to as well. It’s a sure hand the largest beverage brands continue to play, most recently with the troika of Cardi B, Steve Carell and Lil Jon in a Pepsi ad.

But to understand the beverage industry’s fondness for famous investors, you only need to go back to 2004 and the pioneering deal between Glaceau Vitaminwater and the rapper 50 Cent. Vitaminwater was back then the hottest beverage brand in the country, and 50 Cent was at the height of his music career. That relationship, wherein the rap star invests in, endorses and creates a co-branded drink with a top-selling enhanced water, set the standard for what a celebrity investor deal in the beverage industry should look like. Both brand and celeb were all in and shilling hard. Buzz came in the form of exponential media coverage. And a colorful drink (“natural coloring”) with roughly 20–30 grams of sugar flew off the shelves. The $4.1 billion sale of Vitaminwater’s parent company Glaceau, to Coca-Cola, only cemented that deal’s legacy as the gold standard.

Whether or not newbie beverage entrepreneurs realize it, that seminal deal and the optics of its success are the reasons they consider a celebrity investor an immediate brand builder. The truth, particularly today (with a wealth of better-for-you brands, with social media, with digital influencers jockeying with Hollywood celebrities) is something entirely different.

In 2010 I oversaw the public relations campaign for Madonna, Demi Moore and Matthew McConaughey’s investment in the coconut water drink, Vita Coco (disclosure: Vita Coco is and has been a client since 2004). The plan was simple: leverage celebrity buzz to open new retail doors for the brand, make consumers want to drink Vita Coco, and distinguish Vita Coco from its competitors. The tactics were more subtle. On the PR side, we leveraged Madonna’s unquestioned reputation as a shrewd businessperson and one of the wealthiest entertainers to position Vita Coco as a smart investment because it was the best and fastest growing coconut water brand. Why would Madonna (recently profiled in The New York Times) have put her money into a brand that was anything less than the coconut water. It worked: the investment and Vita Coco’s success associated with it, were mentioned in countless newspapers, magazines (remember in was 2010 — print media still mattered then), TV news programs and online news sites. It worked so well that for years, when Forbes issued its annual list of the richest celebrities, Madonna investment in Vita Coco was cited as contributing to her vast wealth, only increasing the awareness of and mystique around the brand. Nine years later, Vita Coco is the US sales leader in coconut water and its parent company, All Market Inc., is evolving into a portfolio of better-for-you food and beverage brands.

What entrepreneurs don’t often see though, are the celebrity investor deals that did not set the media, social media or retail shelfs ablaze… and for every Vitaminwater and Vita Coco, there are many deals where the celebrities’ lasting impact on the brand’s consumer awareness and sales remains unclear. Some investor deals you may or may not know about, below:

MATCHABAR: Drake, Diplo, Ansel Elgort and Billie Eilish. This is an eclectic collection of talent promoting a beverage brand competing in the ‘new age’ energy drinks category. Do they make you want to buy it?

BAI: Justin Timberlake. If your face was buried in a plate of chicken wings during the 2017 Superbowl, you might have missed BAI investor Timberlake’s television spot for this antioxidant beverage, which sold in 2016 to Dr Pepper Snapple for $1.7bn.

WTRMLN WTR: Beyoncé. Let’s just agree Queen Bey can sell ANY-thing, from Lemonade to WTRMLN.

AQUAHYDRATE: Mark Wahlberg and Sean Combs. It’s still unclear to me what either celebrity has to do with superior hydration or pH (“elevated alkalinity”) balance — and the research for the latter is iffy. But they’re all in, I’ll give them that.

SUJA cold-pressed juice: Leonardo DiCaprio, Sofia Vergara and Jared Leto. “The Departed” and “Inception” are two of my favorite films. I think Vergara is one of the funniest women on television. Leto is an acclaimed actor and musician. But not one of them makes me want to buy a $99 “cleanse.” Emily Sommariva, the CMO of LIFEAID Beverage Co., states the case: “The biggest pitfall of celebrity investment is a false sense of what the name alone brings. To get dividends on the deal, the execution of how you amplify the partnership is as important as the celebrity names.”

CORE Premium Bottled Water: Katy Perry. Katy’s bubbly, positive personality, self-deprecation and willingness to be outrageous (you saw her recent Met Ball hamburger get up, didn’t you?) make her a credible investor in the eyes of the average consumer. I can actually see shoppers asking for “that Katy brand of water” and the Perry halo makes you feel good about drinking CORE. But did you know British pop star Ellie Goulding was also a CORE investor? Probably not.

RUNA: Channing Tatum. Even Tatum’s “Magic Mike” mojo, financial investment and enthusiastic support didn’t turn Runa, an outstanding natural energy drink and tea line launched eleven years ago, into a billion-dollar brand.

JUST Water: Will Smith and his son, Jaden. Will Smith described the water brand as “…born out of a child’s love for the ocean” (that child being Jaden) and that he and Jaden “did not want this to be a celebrity brand.” ‘Nuff said.

Ultimately, what any beverage entrepreneur who is considering a celebrity investor needs to remember is this:

• Make sure your celebrity investor is an actual fit for your brand. One of the reasons the Vita Coco investor deal felt so authentic was because all three investors drank coconut water, and physically embodied a healthy lifestyle. That legitimacy becomes brand narrative and deepens consumer connection. Authenticity is a big reason the Vitaminwater deal worked, particularly when the brand launched “Formula 50,” named for 50 Cent, who was then widely recognized for his commitment to fitness. A celebrity investor ideally embodies a brand’s consumer proposition, even if that proposition is as simple as “joy” (like Perry for CORE). The fit matters because the primary reasons you’re bringing in a celebrity investor are for public relations and brand/product validation.
• Try to find a celebrity that isn’t “over-invested.” What can make a deal fresh and interesting is if the celebrity’s connection to the brand is a surprise — authentic, but a surprise. Some celebrities are active investors with a ‘spray and pray’ strategy and who don’t necessarily embody the brands they invest in. That diminishes their PR value.
• Avoid giving free equity. Many celebrities and their teams will bleed a brand for 100% free equity. We all know how much we value something that is given to us for free: not much. As one CEO told me, it’s critical for celebrity investors to have ‘skin in the game’ to get their highest level of support.
• It’s not just about social media. Just because a celebrity has millions of followers on their Instagram feed doesn’t mean their social post about being an investor will goose sales. The endless parade of high-profile celebrity investors today means there’s just too much noise out there — especially on social media. Promoting a celebrity investor requires a strategic balance of public relations, social media, retail promotions and advertising, to truly resonate. Jeff Rubenstein, a top beverage marketing executive who has worked at Vita Coco, WTRMLN and now Health-Ade Kombucha, says: “Celebrities alone can be ineffective, so it’s critical to carefully and deliberately integrate talent into a larger campaign or communications narrative that illustrates, extends, and enhances the values that underpin a brand.”
• Securing even the ideal celebrity doesn’t guarantee success. One reason the Vitaminwater-50 Cent deal was such a win was the newness of it. It just hadn’t been done before. Today, there are dozens of talent managers and even private equity groups that are forging similar celebrity investor deals — some of which make sense, many of which don’t. If you as an entrepreneur feel you can’t find the perfect celebrity for your brand — accept that there may not be one and a celebrity investor strategy may not be the right path. And some beverages are so well branded that a celebrity investor may be unnecessary. Case in point, British sparkling water brand UGLY Drinks, which last year put a stake in the ground in the US as the new “it” water. The brand’s colorful, iconic packaging elicits an immediate emotional connection that few celebrity investors could enhance, and that’s a major building block for becoming a household brand.

Comments or questions? Please find me on LinkedIn.

Disclosure: Gallego & Co. has worked with Vita Coco, Runa, LIFEAID Beverage Co., Health-Ade and UGLY Drinks.