Virgo Investment Group announced today that it has invested an undisclosed sum in L.A. Libations-owned brands Arriba and orro. The move comes as the beverage incubator focuses on developing and scaling its own in-house brands, while Virgo’s initial investment could potentially be the first of many, the company said.
Where is the financing going?
Virgo is beginning its relationship with L.A. Libations by funding chelada and Mexican soda brand Arriba and in “mini-meal replacement” drink orro. Both brands were developed by L.A. Libations, but are run as separate entities.
Launched in 2019, Arriba’s expansion outside of California was kickstarted in December 2020 following investment from Molson Coors Beverage Company, which also owns a minority stake in L.A. Libations. Orro., developed in partnership with entrepreneur Shaun Neff and launched in February, is currently only available online but is expected to roll out into retail in the near future.
“A lot of it is for installation,” said L.A. Libations CEO Danny Stepper. “The brands are in a little bit of different places, but they both have tremendous momentum. And so working capital is a huge need.”
Arriba general manager Tim Wright said much of the financing will go into in-store marketing programs to drive velocity growth, including off-shelf displays. As well, the brand is working to grow its distribution footprint and is targeting expansion into Arizona, New Mexico, Nevada and Texas. Most recently, the brand has added 1,300 Walmart stores, Food 4 Less stores in Southern California, and Ralph’s. Arriba is distributed through warehouses and in UNFI in California, but the brand continues to work within Molson Coors’ DSD network in Texas, Wright said, and is currently authorized in 4,000 convenience stores in Texas which are rolling out now.
The brand is seeking to add talent in several key roles, including area sales managers in Texas, positions focused on the food service channel, and a full time marketing team member.
“We really want to bring this full circle, get into on-premise, get into some of these chains, create a bunch of fun programs for the distributors, and that’s where all the capital that we just raised is going to go to,” Wright said.
While orro. is only available through ecommerce, CEO David Orr said the brand has seen an “extreme traction with consumers” driven by a partnership with vegan social media influencer Tabitha Brown. While the product has faced out of stock issues due to high demand, Orr said the brand is currently reformulating the product and is expecting to announce new flavors in the back half of the year. The brand is also planning to launch a 4-pack in retail around the late summer or fall and is currently in discussions with several national retail chains.
The financing from Virgo will primarily go towards increasing production and is hiring DTC specialists and will add to its sales team, Orr said, beginning with senior leads before adding “complimentary team players.”
What does this mean for Virgo?
Founded in 2009, Virgo is a private equity investment firm based in San Francisco and typically invests in companies with revenue in the $50 to $75 million range, while checks are usually between $15 and $25 million. According to managing director Scott Guthrie, Arriba and orro. are atypically early stage investments for the firm, but the ability to partner with L.A. Libations was the driving force in completing the deal.
“We really felt when we were introduced to Danny that this was a really good opportunity for us to partner with real experts in the [beverage] space, and allowed us to bypass, I think, some of the major pitfalls that we would have had if we had just gone out on our own,” Guthrie said.
While Virgo has previously invested in Flow Alkaline Spring Water, it more regularly partners with companies in the healthcare, real estate and media industries.
Though they are not partnered, the investment also creates an indirect connection between Virgo and Molson Coors, which continues to work with L.A. Libations to develop new brands including probiotic seltzer Huzzah! and better-for-you soda Mad Vines. The incubator is also working with the conglomerate to scale plant-based energy drink brand ZOA.
“We don’t view ourselves as a strategic beverage investor, we play across a lot of different categories,” Guthrie said. “So for us, finding the right partnership with L.A. Libations is really critical. We’re just excited to be able to support growing brands like this and we definitely want to be able to invest in other additional brands that meet the same criteria.”