From Aloe to Arriba: L.A. Libations Launches New Product, Forms Alliances
Beverage incubator L.A. Libations has played a critical role in the growth of several entrepreneurial beverage brands including ZICO, Neuro and illy issimo, lending its expertise to gain key retail placements for the brands at chains like Target, Wal-Mart and Kroger.
Now, the company is utilizing the experience, connections and relationships that it has cultivated in recent years to introduce its second company-owned brand — one with some big names behind it.
Set for a national launch in 8,300 7-Eleven stores, Arriba is a new horchata energy drink that L.A. Libations has been developing over the past two years. Unlike Aloe Gloe, the aloe water brand that the company launched in 2011, Arriba, a dairy/energy blend that is all-natural and gluten-free, is targeted to reach a specific demographic in Latino consumers. L.A. Libations co-founder Danny Stepper hailed the new brand as one that brings “freshness and innovation” as well as “new and unique consumers” to the energy category.
“Every major retailer is jumping at the bit to get it,” Stepper said. “Clearly we’re onto something. We haven’t sold any to customers yet, and so we’re not doing any victory laps, but I’ve never seen retailers so engaged.”
Stepper noted that while L.A. Libations had Arriba in the pipeline for two years, the company felt that it needed a strategic partnership with a major retailer in order to have a real shot at success in the now-mature energy category, which is dominated by megabrands in Monster and Red Bull. Stepper said that L.A. Libations has commitments with several major retailers for a planned wider release this summer, but he praised “7-Eleven’s unwavering commitment to innovation” with the launch. The chain holds a three-month exclusive deal to carry Arriba, which will be positioned directly next to Red Bull on store shelves, Stepper said.
Although 7-Eleven is as big as it gets in convenience stores, a critical channel for energy products, Stepper noted that the biggest hurdles in the development for an entrepreneurial beverage brand lay with financing and marketing. To say that L.A. Libations found a big-time partner to help build and promote Arriba would be an understatement.
The company entered into a joint venture with film studio and entertainment powerhouse Relativity Media, which is an investor in Arriba and will play a major role in the marketing of the brand with product placement in Relativity-produced TV shows and movies, including the upcoming film “Earth to Echo.” Relativity is also the second largest sports agency in the U.S., with 200 professional athletes on its roster, according to Stepper, who said that Relativity athletes, which have a combined 60 million Twitter followers, will engage consumers via social media to promote Arriba.
“We all know that growth is coming from emerging brands and categories, but we also know how many fail,” Stepper said. “Combining L.A. Libations’ entrepreneurial disruptive spirit, 7-Eleven’s commitment to innovation, alongside the powerhouse media platform of our dear friends at Relativity Media, we have a real chance to create brand love with Arriba.”
Coke Distributes More Distribution Rights
Reyes Holdings has signed a letter of intent with the Coca-Cola Company to acquire the distribution rights in the Chicagoland area.
“We are proud to be new members of the Coca-Cola family,” J. Christopher Reyes, founder and co-chairman of Reyes Holdings said in a statement. “We intend to use our distribution experience to ensure that the refreshing taste of Coca-Cola is within ‘an arm’s reach of desire’ for thirsty people throughout the Greater Chicago area.”
In the same release, Coca-Cola also announced a new bottling partnership with Troy Taylor, who the company described as a longtime advisor.
But unlike Taylor’s agreement, Reyes Holdings — which distributes products from MillerCoors and a number of craft breweries — will not become a bottling partner and will not be responsible for the manufacturing of any Coca-Cola products.
In addition to the Chicago, Reyes’ distribution-only agreement will include areas of Northwest Indiana and Southeast Wisconsin.
Reyes Holdings is comprised of three divisions: The Martin-Brower Company, Reyes Beverage Group and Reinhart Foodservice. A fourth, yet-to-be-named division is expected to be created specifically for the distribution of Coca-Cola products.
The deal, which is not expected to close until 2015, will mark Reyes’ first major foray into beverage distribution outside of the beer category. However, the company already distributes Coca-Cola products through its Martin-Bower business, which serves over 14,000 McDonald’s restaurants around the world.
Similar to its previous acquisitions of Allied Beverages, Windy City Distributing and Chesbay Distributing, Reyes is expected to make a significant investment into the new division.
Brain Power: Nawgan Evolves, Turns ON New Product Line
With a new round of funding in hand, the company behind brain-boosting beverage Nawgan has launched a new brand of functional drinks intended broaden its reach to a wider range of consumers.
ON Powered Refreshment is a line of energy/refreshment beverages that are formulated with a blend of tea leaf-sourced caffeine and ornithine, an amino acid said to have several health benefits including improving athletic performance and reducing ammonia in the body. Widely consumed and sold in Japan, often as a supplement, ornithine works “synergistically with caffeine to reduce fatigue and significantly increases stamina and concentration over caffeine alone,” according the company, which is now known as ON Beverages.
Amid the development of ON Powered Refreshment, Japanese conglomerate Kirin Holdings, which invested $3 million in the company in August 2011, recently added to its investment. Although ON Beverages CEO Dan Holland declined to give an exact figure for the new round of funding, he told BevNET that “it’s a substantial amount.”
Kirin’s initial investment was intended to build a sales and marketing staff and expand Nawgan’s distribution footprint beyond its home market of St. Louis, Mo., according to company founder Rob Paul. Yet while the brand has since gained some traction in U.S. colleges and universities and achieved some penetration on the West Coast, Blick said that the primary market for Nawgan remains St. Louis.
Nevertheless, Kirin, which, via its subsidiary Kirin Kyowa Hakko, is major supplier of ornithine as well as Cognizin, the key functional ingredient in Nawgan, believes in the continued development of Nawgan and potential for ON as a global brand, Holland said.
“From [company founder] Rob Paul’s perspective as well as our investor and board, we wanted to have a more broadly appealing brand, although we continue to work Nawgan in certain channels and with certain consumers,” said Corey Blick, Vice President of Marketing, ON Beverages. “Secondly, I think the nutritional technology that we had access to, and some of the research there sort of prompted that ‘Hey, we gotta go do this.’”
ON Beverages gained self-affirmed GRAS (Generally Recognized as Safe) certification for ornithine in October, allowing the company to use the ingredient in the new products.
Blue Point Bought By Bud
Anheuser-Busch InBev has agreed to purchase New York-based Blue Point Brewing Company, a move that reflects the beer giant’s growing interest in the craft segment — and its consumers’ thirst for variety.
Exact terms of the Blue Point deal were not disclosed, but sources familiar with the transaction said it could be valued between $18 and $24 million.
Mark Burford, Blue Point’s co-founder and brewmaster, said that negotiations with A-B InBev began last year and have been going on for “many months.”
Peter Cotter, the co-founder and president of Blue Point, said he’s excited for the opportunity to become a part of A-B InBev’s craft portfolio, which also includes Goose Island Brewery, a Chicago-based craft brewer that was purchased for$38.8 million in 2011.
“All of the employees will be able to maintain their jobs and the credibility and quality of the brand will remain,” Cotter said. “It’s great for the community. With the kinds of resources from A-B coming into Patchogue (Long Island), it will create job growth and the sky is the limit for where the brand could go.”
According to IRI, a Chicago-based market research firm, Blue Point’s dollar sales grew just over 20 percent in 2013, to more than $4.2 million, in multi-outlet and convenience stores (which includes supermarkets, drugstores, mass market retailer, military, dollar and club). Dollar sales for the company’s flagship Toasted Lager, which accounts for about 50 percent of production, were up 11.5 percent.
However, it wasn’t necessarily Blue Point’s impressive growth numbers that attracted A-B InBev to the deal. Instead, the opportunity to add greater depth to its current set of craft offerings was a primary consideration, said Andrew Goeler, A-B InBev’s vice president of imports, craft and specialties.
“This fulfills the consumer demand for variety and is a nice complimentary portfolio to what Goose Island offers,” Goeler said. “Blue Point has some excellent brands and having access to the A-B system is something that is really important.”
That system includes access to multiple brewing facilities across the country and an intricate network of wholesalers that will be granted the first rights to distribute Blue Point beers. For A-B InBev, the deal hinges on efficiencies that come alongside the expansion of a higher-margin portfolio.
“Similar to what we do with Goose Island, where we make some of the beers at an A-B brewery, we have the same opportunity to expand with Blue Point,” said Goeler. “We will be able to get the brands out to A-B wholesalers and will allow consumers to have access to these great beers.”
Brew Detroit’s ‘Big Boy’ Bet on Contract Brewing
Here’s a beer pairing for you: What do you get when you combine two executives from a famous burger chain, a used car salesman, and a craft brewery owner?
How about Brew Detroit LLC, a new and a state-of-the-art 100-barrel contract brewery started with $8 million in private investment.
Other partners in the contract brew startup include David Crawford, Big Boy’s senior vice president of marketing, and Don Foss, a famous used car salesman and the founder of Credit Acceptance Corporation, which provides auto loans to individuals with substandard credit. Mark Rieth, the owner of Atwater Brewery (and a former automotive professional himself) is also a minority partner in the new venture.
Sirois told Brewbound that, “a few years ago,” on behalf of Big Boy chairman Robert Liggett Jr., he reviewed the financials for a craft brewery looking to raise capital.
“The result was that we thought the brewery was over-leveraged,” he said. “It wouldn’t be worth it. We kept looking at the white space in brewing and, especially in Michigan, we saw a need for a space to produce beer in quantity for all these wonderful brands that the state of Michigan has.”
Sirois, Crawford, Foss and Rieth (which actually sounds more like a high-powered law firm) invested a combined $8 million to start Brew Detroit and hired former Mendocino Brewing supervisor Jason Schrider to oversee the brewing operations.
Situated in about 75,000 sq. ft. of space, the company has already received a brand new 100-barrel BrauKon brewing system, four 400-barrel fermentation tanks, two 200-barrel fermentation tanks and a packaging system capable of canning 400 containers per minute. The brewery will be capable of bottling 12 oz. and 22 oz. packages, filling 12 oz., 16 oz., and 19.3 oz., cans and packaging draft beer, Sirois said.
Brew Detroit will launch with about 48,000 barrels of capacity and has already signed contract agreements with Atwater Brewing and two other “fairly large” Michigan-based breweries, whose names Sirois said he could not disclose.
Sirois said knows the transition from managing a chain of burger joints to a large-scale production brewery won’t be easy, especially as the contract brewing environment becomes more competitive. Right now, new ventures like Brew Hub in Florida, Ruckus Brewing in Pennsylvania and Paragraph XI in Massachusetts are preparing outposts of their own.
“I am not a brewer,” said Sirois. “I don’t have the background that a lot of folks have. It was not easy to put the money and this project together, but I think the upside is great. I think there is a hole and there is a great opportunity to create a nice business out of it. Will it become competitive? Sure, and that is what tells me that this is the right thing to do.”
Brew Detroit will initially look to take on Michigan-based clients, but Sirois said he’s not ruling out the possibility of brewing for larger regional companies looking to expand their footprints in the Midwest and on the East Coast.
“This was built to service a variety of needs,” he said. “We will talk to anybody.”