Beer Marketer's Insights
Canned hard tea heading into Portland, Me, under brand name Wandering Whistler has drawn smattering of recent media attention for sophistication of its liquid and graphic treatment, but it also brings interesting back story that hasn’t been told yet: it’s another effort quietly backed by Anheuser-Busch InBev’s Zx Ventures venture arm and it was brought to life in a mere 3 months with help of Boulder, Colo-based incubator called Interact that has since broadened its role to include another nascent brand associated with Zx Ventures, Up Mountain Switchel, the colonial-style drinking vinegar.
Wandering Whistler Brewed Alcohol Tea is “a collection of international teas with a twist,” melding tea leaves, botanicals, water and cane sugar in brew that comes in at 4.5% ABV. The line, whose name is intended to connote adventure as well as authenticity of traditional teakettle, is currently launching in Portland, Me, in Earl Grey & Elderflower, Jasmine and Chai flavors, in 12-oz cans decorated with line drawings of London, China and India, respectively. They go out at $11.99 per 6-pk. Line is among many these days that are offering alcoholic take on styles familiar from premium end of NA biz, whether in teas, sparkling waters or juice drinks.
Interact principal Blake Mitchell said that after successfully handling other assignments at Zx, founder Jackie Atlas concept-pitched the venture arm’s board with idea of offering more upscale, subtle hard tea entry than the dominant entries currently. “We wanted to do an authentic tea, and let others own sweet tea,” Mitchell said. At same time, brand sought not to be burdened with traditional notions that tea should be “proper, slow and burdened with rules,” as creative brief describes it. Atlas’ pitch came in 2d, was greenlighted for phase 1 funding “and she ran with it,” Blake told us. Interact worked with her to refine the liquid and packaging and finetune a launch plan which will start in Portland, viewed as a craft-forward market and one whose cold weather fosters strong culture of hot-tea drinkers familiar with varieties like Earl Grey and jasmine. “Our focus is to connect with tea drinkers in crafty places,” as Mitchell put it. Working with local Bud distributors, the brand will target both retailers and craft beer bars whose patrons might be seeking an alternative.
Atlas, described as an inveterate tea drinker, is youthful media exec whose longest gig in her decade out of college was 2 years facilitating cross-platform media deals at CBS Sports, per her LinkedIn profile. She signed on as an “intrapreneur” at Zx in NY in Jul 2017, founding Wandering Whistler last Aug. Now she’s shuttling between NY and Portland to orchestrate launch. Her partner in development, Interact, has worked with entrepreneurial brands for over a decade, helping nurture such brands as Koia (from earliest days when it was called Raw Nature 5) and Vive wellness shots on bev side. Interact also worked on sweeping packaging redesign for brewer Dogfish Head. Among its newer clients are Coco5 coconut-water-based sports drinks and Weller hemp-derived CBD bevs. About 3 years ago, Interact began to also work with CPG giants like Kraft and Mars that were seeking an innovation edge, with ABI entering the fold last year. Mitchell gives Zx credit for enlightened approach that doesn’t encumber Wandering Whistler with bureaucracy or impose unrealistic timetable on rollout.
uperpremium tea stick marketer Cusa has landed $2.5 mil in financing via Series A capital round led by Break Trail Ventures and S Cap. Cusa brand name is short version of name of founder Jim Lamancusa, outdoors enthusiast who was seeking convenient tea vehicle comparable to what’s been available in coffee (BBI, Aug 15 2017). Since launching in 2017, co says it’s entered 1,400+ retail doors at likes of Sprouts, REI, King Soopers, Safeway, HEB and Cost Plus World Market. New round will help Cusa gear up to enter 3K new retailers committed to launch in latter half of year. It also will fund move into new categories that co isn’t ready to identify quite yet. “Our technology can be used for all beverages, not just tea, so we look forward to bringing other healthy and convenient beverages to the market very soon,” Cusa said. Boulder, Colo-based co now has brought in $3.6 mil, including from earlier investors Smart Capital, Service Provider’s Capital and Organic X Labs, which were back for this round.
Break Trail, based in Columbus, Ohio, and Boulder, Colo, doesn’t seem to have track record in bevs but has numbered among its CPG investments the likes of Frey detergent and Trusst Lingerie. S Cap only entered food/bev space a coupla weeks ago with investments in blenderless smoothie play Bright Greens and allergen-free snack marketer Libre Naturals. As part of latest round, Break Trail’s Jay Hirsch and S Cap’s James Cali are joining Cusa board.
Capping what’s been 5-year development process, cannabiz player Canopy Growth is motoring toward first production of bevs via new plant it’s setting up at its Smith’s Falls, Ontario, hq with investor/partner Constellation Brands. Canopy chmn/ceo Bruce Linton offered sketch of CPG development efforts in wide-ranging conversation with CNBC reporter Aditi Roy at Cannabis World Congress & Business Exposition today at NY’s Javits Center. Expo runs thru tomorrow afternoon.
New facility is 150-170K-sq-ft, with 6 or 7 bottling lines, Linton said. Among areas co is targeting are THC-based bevs to be sold in Canada starting this fall, along with science-backed CBD-based sports recovery bevs that might work in US too. He didn’t offer many details, except to say co has settled on offering clear liquids and moderate dosages of active elements. He credited Constellation with committing staff to set up plant, devoting lab resources to getting flavor profiles right and helping undertake research on consumer preferences. Among various challenges has been building adequate stock of oils, dealing with impact of aluminum trade war on cans and devising labels to conform to regs that haven’t been fully disseminated yet.
Outside bevs, the CPG mix will include CBD-based moisturizing and sleep products using as platform the portfolio of This Works, UK co picked up for $55 mil just this week. Canopy also is doing lotta work harnessing CBD’s anti-anxiety benefits toward pet market, to calm dogs whose masters are away. Of course, it’s got hi-profile partnership with Martha Stewart in that segment (BBI, Feb 28).
As it moves toward consumer segment, Linton adopted pragmatic tone, saying co is aiming to erect solid supply chain that won’t frustrate retailers and to launch entries that, if not necessarily igniting out the gate, at least avoid stigma of being “terrible flops.”
Tho by Linton’s description, Constellation partnership has been productive so far, he offered nuanced, even contradictory, view of CGC’s view of partnerships. In essence, co prefers not to undertake them, aside from necessary alliances with university researchers and the like. “We’re not great at partnering but at getting done what we need to get done,” he said. Canopy prefers to keep capabilities in-house and “not take shortcuts with a bunch of partnerships and joint ventures,” partly because market will frown on co if it’s believed that it “shared your future with everybody.” So preferred model is to vet right acquisitions and buy them with Canopy shares. Where that won’t work, preferred alternative is to take minority position of 10-20% via Canopy Ventures unit, with path to future ownership. But Linton good-humoredly acknowledged contradictions as conversation proceeded and other examples of fruitful partnerships emerged.
On m&a front, with co having notched 30+ acquisitions by now, focus has turned to fewer and bigger deals, many of them in international markets, others focused on science and growth. Acreage deal checked a lot of boxes. Canopy maintains 2-3 staffers who look at everything that’s out there, identifying prospective targets for any white space.
Tho climate in US remains much in flux, Linton offered other reasons for pursuing presence here beyond sheer potential magnitude of market. For one, Canopy is intent on earning listing on NY Stock Exchange and establishing banking relationships with major players as credibility builder as it seeks to expand within Europe and other global markets. It’s better ice breaker to discuss co’s successful corporate run before asking, “Can we sell weed?” he noted, to round of guffaws in audience.
It’s taken several key steps toward building US base. In past year it set up shop in economically depressed Southern Tier region of NY State, where high stock of derelict buildings, high unemployment and need for economic revitalization have won co warm welcome, just as it has in areas like its home base in rural Ontario and central Denmark. More recently, it inked deal with Acreage in which its $300 mil gives it option to foment acquisition once climate is clearer here.
Canadian market this fall will provide crucial test of how significant bevs can be as part of cannabis picture, Linton suggested. That’s when doors should open to range of consumer items, from vapes to bevs, and provinces like Nova Scotia are shaping up as good labs for how product onslaught will play out. That’s because, in Maritime province, authorities have decided that rather than opening parallel retail network to accommodate cannabis, it would be more effective to simply sell category from areas established in back of gov’t liquor stores, where consumers will be able to pay for their rum and their cannabis at same register. As sign of provincial gov’t’s expectations, it’s putting 4 cash registers in cannabis area and only 1 up front in liquor area. That should add element of convenience that stokes demand, while also offering clear view of substitution effect vs spirits. “More stores means more sales, people can go and ask questions,” Bruce offered. “I think the beverage sector is going to be way larger and more pronounced than any market on the planet because all our vendors are in charge of selling liquors, they know shelf-stable beverages and are comfortable with that.” He said he wouldn’t be surprised if bevs grab 25% share of total. On flip side, intense anti-smoking sentiment in Canada is likely to crimp that form of cannabis consumption.
Asked whether it’s all going to come together, Linton offered analogy of motoring down highway at 100 mph, then hitting brake at last minute and sliding into space between 2 parked cars. In other words, it’s hair-raising time. But he thinks he, co-ceo Mark Zekulin and Canopy team can pull it off.
Hain Celestial has brought in Seth Weis to serve as svp biz development, reporting to prexy/ceo Mark Schiller, who’s been working to simplify product portfolio and reinvigorate growth. Weis replaces Denise Faltischek, who’s departing on Aug 31 after 14 years at Hain to seek new opportunities. She most recently served as evp, chief strategy officer and corporate secretary. Weis comes from finance background, including jobs at Duff & Phelps and Glencoe Capital Management before seguing to operating co at Treehouse Foods.
Created by Bay Area techie, hydration entry called Play Mode has been quietly building retail and on-premise base out west for plastic-bottle line that offers scientifically designed hydration blend that works just as well as mixer for those who wish to party healthy. “Hydrate while you celebrate” is mantra devised by founder Mike Baeta, former techie who detected void at retail while plying data analytics job at Sara Lee. He’s about to move beyond bevs this summer with launch of Play Mode Pops, popsicle format using identical recipe but in larger version of classic Otter Pops format, 11 inches long and 1.5 inches wide, for 3 oz of fluid. And after 4 years of finetuning proposition he’s finally ready to head into chains like Whole Foods and eastern US region.
Liquid devised over 2-year period with help of indie chemist includes sea salt, milk thistle, zinc gluconate, range of juice-sourced antioxidants and carefully balanced potassium levels, but is all natural and contains no caffeine. With help of erythritol as sweetener, it contains just 16 g of sugar per 20-oz bottle. Flavors are Berry Blitzer and Black Cherry. Baeta says it seems to be viewed by some millennial consumers as “Pedialyte for adults,” helping counteract the alcohol they consume while in “celebration” mode. Baeta, who’s self-funding effort as as Play Mode Beverage LLC, has taken grass roots approach, getting his first bottles out into Calif and Las Vegas back in 2015, landing spot at Encore and Wynn resorts for brand’s ability to mix well with vodka, rum and even champagne. Bottles command $8 there. Building on that, Play Mode is about to enter all 50 Caesars Palace properties this summer, starting with Vegas units. Brand has also been sold in Total Wines chain in Calif and Nev for past 6 months. And it’s about to ride distribution partner Southern Glazer into such new markets as Chicago, Austin and NY, tho Mike said he’s also seeking beer wholesalers and other potential DSD partners in markets where that’s the right fit. He just reskinned bottles with more sophisticated look that maintains approachability but doesn’t look out of place aside bottle of Grey Goose Vodka or Moet Champagne. By now he’s built staff of 10 and counts former Naked Juice cfo John Kelleher as key mentor. Website is at HydrateRecovery.com, tho it doesn’t yet show more upscale new pack look.
The kombucha biz sure can use a kumbaya moment, at a time dissension is up as the industry’s trade group tries to get buy-in for standard of identity that many view as overly restrictive even as industry pioneer GT Dave has frayed nerves via recent Forbes article in which he seemed to lash out at rivals that have encroached on his once unquestioned segment hegemony. The stresses are coming at time once-torrid segment has shown subsidence of retail velocities (BBI, Apr 22), even as pricing has gotten more aggressive and brand clutter has mounted. In some ways it parallels easing within craft beer segment – except that in kombucha’s case, it seems to be occurring before category has been fully established yet.
As reported, GT’s founder Dave seemed to impugn integrity of some rivals products in Forbes piece as “basic,” “mainstream” and “carbonated flavored water” (BBI, May 14). After broad outcry, he insisted to BevNet that some of the quotes had been inaccurately stitched together from separate statements he’d made to reporter, and some kombucha rivals we contacted were inclined to take him at his word. Still, there’s little question Dave has an axe to grind. Lurking in background is internal industry tussling over the standard of identity under development by trade org Kombucha Brewers Int’l that seeks to raise alcohol threshold to 1.25% from 0.5% ABV that’s standard for non-alc bevs while promoting the use of production methods that closely mimic artisanal approach of GT’s Kombucha. Dave drew ovation from attendees at KBI’s KombuchaKon 2019 conference in Long Beach, Calif, last month when he donated $1 mil to fund standards effort and related lobbying over alc issue (BBI, Apr 26), but view among many KBI members has changed as standard of identity (SOI) has taken shape promulgating recipe and process for kombucha that validates GT’s and excludes many others. KBI is seeking to uphold view of “authentic” version of kombucha that “requires fermenting sweetened tea with a SCOBY and that the end product is not pasteurized or adulterated,” at time some entries in market have been blurring the lines with sodas and iced teas. (SCOBY, stands for symbiotic colony of bacteria & yeast.) Of course, getting everyone on same page is no easy task under best of circumstances, considering that, as KBI has pointed out, its diverse membership brews booch in everything from 2-gal glass jars to 6K-gal stainless steel fermenters.
Still, in its current form the SOI has aroused so much concern among KBI members that we hear several have banded together to work on alternative. That concern is centered around SOI’s restrictive form that encompasses not much more than a handful of more artisanal entrants – essentially “homebrewers and GT’s, without regard to food safety issues,” as one told us – to exclusion of many entries that diverge from style’s vinegary, small-batch roots. On food safety front, SOI as currently written doesn’t address limits on pathogenic microorganisms and discourages use of processes like pasteurization, filtration and dealcoholization. So “by limiting the types of processing that can be used, processors who ignore regulations and food safety principles will be rewarded, at the cost of those who are following the rules,” per draft memo being circulated by one dissenter that we’ve viewed. Further, some members view as arbitrary the 20% limit that the SOI places on added bacteria, yeast, water, juice or non-fermentable sweeteners that can be added. Further, kombucha makers who’ve figured out how to produce raw items that stay in compliance with 0.5% ABV limit on non-alc bevs question need for industry to try to establish 1.25% ABV as threshold. The memo argues that “many agree that KBI lacks impartiality and credibility as a trade association, now by effectively mandating GT’s method of manufacture, with the unusual designation as the only ‘authentic’ kombucha.” Given sensitivity of issue, BBI contacts declined to be identified, tho Rowdy Mermaid founder Jamba Dunn was outspoken on issue when FoodNavigatorUSA addressed issue a few weeks earlier here. (We emailed Jamba but bounce back said he’s traveling outside country this week.) Approach to KBI earlier today hasn’t yet drawn response.
EXTENSIONS: Q Tonic Joins Elderflower Game
In response to customer requests, Brooklyn-based Q Brands is ready to ride the elderflower wave with a more carbonated version than current alternatives, offering Elderflower Tonic to on-premise accounts in 6.7-oz, 500-ml and 750-ml glass bottles and 7.5-oz cans. “Like our other mixers, Q Elderflower Tonic is full of flavor with higher carbonation,” said founder/ceo Jordan Silbert. “But it is also less sweet, so the subtleties of great spirits are free to shine.” In recent years, elderflower has emerged as trendy cocktail ingredient, even as soft drinks like Belvoir have ridden that flavor to success in specialty and gourmet channels.
Toronto-based incubation firm GreenSpace Brands said it sold its $8.3 mil (sales) Nothing But Nature biz, including its Kiju-branded organic juice and iced tea brand, to co going by Zurban Beverages for $8 mil. The transaction price includes a cash payment of $7.5 mil and potential earnout of $500K. Tho the multiple of 1X sales is modest by current standards, GreenSpace said it vindicates brand resuscitation effort of co it acquired in 2016 while helping pay down co’s estimated $13-15 mil in debt and providing working capital. GreenSpace’s remaining brands are Life Choices grassfed meat products, Love Child organic kids’ foods, Central Roast nuts and seed mixes, Cedar cold-pressed juices and recently acquired Go Veggie plant-based altdairy items.
Hemp-based CBD just moved closer to clear legal status in Calif with unanimous passage of assembly bill AB-228 late last week, advancing legislative effort to supplant health officials’ enforcement jag that’s thrown nascent biz into turmoil in Golden State. Bill passed unanimously by vote of 76-0, per several sources that have been tracking legalization efforts. Bill now heads to Senate, tho position of Gov Gavin Newsom remains unclear, with spokesman saying it “would be evaluated on its own merits” if it reaches his desk, per CBD Hemp Experts. The bill expressly allows the use of hemp-based CBD in foods, bevs and topicals, in response to statement issued by health dept last year precluding CBD use in any animal or human food, even as dietary supplement, outside of licensed dispensaries . . . In coverage of bill’s advance, news sources flagged report by NBC Bay Area titled “Dazed & Confused” last month that detailed woes suffered by some CBD suppliers and retailers, including teahouse in SF’s Chinatown nabe called Steap Tea Bar that sold CBD-infused bubble tea, and marketer of RTD Vybes CBD-oil-infused line profiled in BBI last fall (BBI, Nov 29). BBI had previously chronicled raid of Calif copackers who’d produced discontinued Dirty Lemon CBD entry (BBI, Jan 21). In case of Vybes, founder Jonathan Eppers told station that Calif health inspectors raided his LA warehouse in Jan and impounded $100K worth of product. Subsequently, about 50 Calif retailers dropped Vybes and he's relocated production to Texas. Eppers estimated that lost sales, legal costs and relocation costs have run to at least $500K. “What is going on is unbelievable and asinine,” he said. “They put us in this state of limbo that’s costing us” . . . Meanwhile, Sheetz c-store chain is launching CBD-based items at 140 of its 279 locations in Penn, including what seem to be some human-edible items. Altoona-based chain will offer both isolate and full-spectrum items, including topical rubs & patches, tinctures, vape pens, oral pouches, capsules, pet products and other items,” per Convenience Store News and other media outlets. The items will be stored behind the counter and sold only to those 18 or older with proper ID. “We are excited to be the first convenience store to offer a broad selection of premium CBD products at this magnitude,” said Ryan Sheetz, associate vp of brands. Sheetz also operates stores in W Va, Va, Md, Ohio and NC that apparently won’t be entering CBD category yet . . . As it seeks to learn more about cannabis, FDA is convening its first public hearing this Fri at its White Oak Campus in Silver Spring, Md, and has established public docket open thru Jul 2 under # FDA-2019-N-1482. Info on hearing can be accessed here.
“Best if used by.” That’s the phrase that FDA, after 2-year study, has settled on as preferred phrase for shelf-stable foods/bevs, to replace array of alternatives like “use before” and “expires on.” Non-binding decision, which parallels USDA stance on perishable items, is intended to provide greater clarity to consumers trying to decide whether quality is OK as they try to get most out of their shopping bucks while also minimizing food waste. In cases where actual safety issue is involved, suppliers have greater freedom to get point across. “We worked with consumers about which label conveys the information best, and consumers overwhelmingly chose ‘best if used by,’” Frank Yiannas, agency’s deputy commissioner for food policy & response, told Washington Post. “If there’s a date label that’s about a food-safety issue, at this point they have the latitude to put whatever terminology they need to convey that risk.”