Beer Marketer's Insights
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Clean Cause, Austin-based yerba mate drink that steers some proceeds to reforming substance abusers, has undertaken what seems to have been significant staff cutback as pandemic curtails some activities, even as founder Wes Hurt tells us as he's coming off two record sales months, with funding in place to weather storms into next year. "We're well-funded, have the right team in place" and are benefiting from self-distribution in Austin, Wes told us in call today. "The company has never been healthier. It's just that there's a dirty rat called Covid." He declined to specify magnitude of furloughs, signaled by resumes landing in in-boxes of other bevcos we talk to. By now, entrepreneur said, core line has completed rollout thru Whole Foods, even as zero-sugar extension that launched just as pandemic was getting started (BBI, Mar 25) is continuing its own rollout thru natural retailer. As with other bevcos, he said online biz has more than doubled, both thru CleanCause.com website and Amazon. Nor has DSD expansion stopped: he and sales chief and former Red Buller Sam Wilson have recruited 30 new houses over past 2 months. He declined to identify them until launches are under way, but characterized them as located "Colorado and east," tho not yet extending to East Coast. So Clean Cause is another co finding doors open, particularly at houses looking to fill void of departing Bang Energy brand. Co had earlier built out sizable presence for canned natural energizer on West Coast and in Southwest via such DSD partners as Classic, Markstein, Lenore, Hensley and Silver Eagle. As reported, Hurt is recovering addict who founded Clean Cause in part as way to help others wrestling with substance abuse, to date awarding 1,282 "sober living scholarships" worth $641K, per website. His biggest frustration, aside from pandemic? Divergence of approaches being taken by various yerba mate players, from Guayaki to Yerbae, Yachak and Marley, which he believes is hindering consumer education on ingredient.
Ex-Facebooker and coffee-geek partner who're exploring functional-coffee space in RTDs have taken novel approach to beta testing cycle, devoting most of can's front panel to large-lettered phone # so users won't hesitate to tell the co what they think. Brand called Taika (Finnish for "magic") blends "perfectly calibrated" caffeine level via proprietary process with functional ingredients L-theanine, ashwaganda and lion's mane, reishi and cordyceps mushrooms. "Coffee that conjures clarity," assures front-panel text. Item is packed in 9.5-oz slim cans in Black, Oat Milk Latte and Macadamia Nut Latte (tho website allows macadamia word is "dangerously close to macarena"). Allulose-sweetened liquid comes in at 60 calories for the 2 creamed sku's. Brand was created by Michael Sharon, Facebooker who was on hiatus (for two and a half years, which would seem to stretch meaning of word), with Kalle Freese, a competition-winning barista who'd earlier cofounded Sudden Coffee, freeze-dried entry among new breed of artisanal instant coffees which was incubated in BeyondBrands, as we profiled in 2016 (BBI, May 10 2016). Taika has raised $2.7 mil in seed funding so far, including from Kindred Ventures, an early Blue Bottle investor, per TechCrunch profile. By now it's made its way to usual retail suspects, per TechCrunch: early-adopter outlets in Bay Area like Bi Rite, Epicurean Trader and Rainbow Grocery, more recently Erewhon chain in SoCal. It's not immediately clear what is route to retail. As for core concept, got an opinion? Check out image of can at Taika.co and you'll know exactly where to call.
EXTENSIONS: Talking Rain Intensifies Functional Reach via Essentials Entry with Immunity Spin
At time immunity-boosting items are high on consumers' shopping lists, Talking Rain is extending its eponymous bottled water brand further into functional segment with canned Talking Rain Essentials, immunity booster that augments caffeinated sparklers and Talking Rain Elevate (TRE) "performance water" entries spawned by regional bottled water brand. New entry is getting test run in Chicago first, just as Sparkling Ice + Caffeine extension of sibling brand Sparkling Ice tested in Chicago, got needed tweaks, then rolled out nationally. "Immunity is essential. Be well," is tagline.
Not long ago closely associated with almondmilk, Califia Farms continues to double down on oatmilk segment, launching protein-rich Protein Oat subline not long after adding suite of oat creamers in Jan and pivoting Black & White Cold Brew into oatmilk creamer base. Protein Oat debuts in 48-oz carafe-style multiserve bottles in Original and Vanilla, via mix of plant milks from peas, oats and sunflower proteins to deliver as much protein as dairy milk along with omega-3, -6 and -9 fatty acids and key vitamins and minerals, co said. The new line broke at Whole Foods and Sprouts at SRP of $5.99.
VPX Sports seems to have begun dispensing buyout checks to wholesalers who're losing Bang Energy to Pepsi system. Word is that group of nearly 20 houses on West Coast, mainly in Calif, are expecting buyout payments in next day or two, to tune of $15 mil or more overall, we'd guesstimate. As we'd reported, those beer houses had approached VPX as a group while warning Pepsi that it would be placing itself in legal jeopardy if it began distributing brand in their territories before they were made whole (BBI, May 5). Apparently all parties have come to table, with none of wholesalers accepting option of enhanced buyout in exchange for credits rather than cash, and wholesalers were to see wire transfers start to flow in as early as today, clearing way for Pepsi to start distributing brand in those territories. So episode seems to be reaching amicable end, tho partners still have to work out details of inventory, billbacks, etc, in coming 2 weeks. Recall that VPX efforts to steer wholesalers toward credits on its other VPX brands had prompted fears that Florida co was unable or unwilling to pay cash, notion co strongly disputed to us last weekend, saying 50 buyouts already were teed up for payment (BBI, May 11). We're hearing reports from wholesalers elsewhere in country of progress toward closing out relationships and easing transition to blue system. Some will be continuing to distribute other VPX brands like Redline, perhaps not on exclusive basis this time, while getting in hunt for replacement brands to Bang.
In recent years, convertible debt - debt that later converts into equity - has been regarded by early-stage investors as a relatively quick, easy way to bring in growth capital, as we've explained in the past (BBI, Jun 9 2015). But a series of market changes capped by the disruption created by the global pandemic has suddenly reduced the appeal of these vehicles in the form of lower caps, shorter maturities, higher interest rates and other changes. These changes might be scary enough on their own, were it not for another change that's much harder to see - because it's not actually in the term sheet. This change involves the behavior of subsequent equity investors. Nutter McClennen & Fish LLP has been sounding the alarm on this issue, so we asked its attorneys Jeremy Halpern and Meghan Kelly to offer a primer for early-stage bevcos. Based in Nutter's Boston office, Jeremy and Meghan are members of the firm's Food & Beverage Group (Nutter.com). Here's their take on the issue:
Recovery of Uncle Matt's Organic OJ company by founders Matt and Susan McLean in wake of Dean Foods liquidation (BBI, Apr 1) has drawn some recent coverage that's filled in a few blanks on investment partners that helped the McLeans get over finish line. According to update in FoodNavigator, those investors include Stonyfield Farm founder Gary Hirshberg; John Foraker, former Annie's ceo; Andrew Abraham, founder/ceo of Orgain; Nicole and Peter Dawes, founders of Late Jul snacks who're now running with Nixie sparkling water brand; and Matt Rogers, founder of Nest and Incite.org. Also participating from institutional side was mission-driven VC firm Renewal Funds, whose websites list other investments as Sustainable Produce Urban Delivery (or SPUD, service launched in Vancouver, BC, by Jones Soda creator Peter Van Stolk), Farmhouse Culture and Mama Earth Organics. Hirshberg had seemed to flag pending deal, without identifying brand, on Tales from the Trenches webcast series he hosts as Dean's Food bankruptcy was coming to a head (BBI, Apr 7). We haven't been able to get on Matt's radar since deal went thru. As reported, Dean had acquired Uncle Matt's just 3 years earlier for $22 mil before running into rough sledding, allowing founders to buy it back at bankruptcy auction for $7.5 mil.
For years, incubator LA Libations was associated with Coca-Cola, minority investor into whose system LA-based co funneled early-stage brands as part of stepped-up innovation push. But that relationship wound down a year or so ago (BBI, Aug 13), forcing LAL to forge a new direction. Most visibly that was to link up last fall with new strategic partner, Molson Coors Beverage Co, the "beverage" newly heading into corporate moniker as sign of co's intent on diversification beyond beer (BBI, Nov 18). But co founded by former Coke execs Danny Stepper, Dino Sarti and Pat Bolden quietly has undertaken flock of other initiatives: accelerator arm dubbed SIP (for SoCal Innovation Partners) which won vindication when early client Limitless was acquired by KDP, and merchandising arm called Relentless. Meanwhile, tho things have been quiet on MC front, Danny promises slew of pending announcements of innovative brands that will be aligning with megabrewer. He's finally ready to talk about some of initiatives, via conference call this morning hosted by Goldman Sachs bev/tobacco analyst Bonnie Herzog, and in extensive discussions with BBI. (Bonnie recently started at Goldman after long run at Wells Fargo where she demonstrated uncommon interest for Wall Streeter in street-level dynamics of bev/beer biz.) Stepper's views on broader environment also are of interest, given LA Libations' role as broker of innovative bevs to major retail chains, especially out West; at any given time, it serves as category captain for several. He's also wired into deal flow, offering window into M&A. So we're ranging thru all those areas below.
Shooting free throws was never his forte. But retired NBA legend Shaquille O'Neal is throwing a lot of free shots - to tune of 1 mil units - in direction of frontline healthcare workers and first responders as part of Covid-related initiative at Forto Coffee, which offers organic coffee lift in same 2-oz format as 5-Hour Energy. Partners are well on way to giving away 1 mil shots by time reopening occurs, hopefully with greater accuracy than O'Neal was able to muster from the line during storied career. Effort moved into high gear last Thurs evening when O'Neal flogged effort on Fox program Extra. Up next: Jimmy Kimmel show in 2 weeks.