Aiming to fill a route-to-market gap for emerging drink brands, beverage accelerator L.A. Libations has taken a significant minority stake in California-based distributor HiTouch Distribution, which will now be called HiTouch Libations.
Speaking with BevNET earlier today, HiTouch co-founder and CEO Chuck Casano and L.A. Libations co-founder Dino Sarti said their two companies provide each access to something it was previously missing: key accounts and distribution capacity, respectively. The Los Angeles-based beverage incubator and accelerator has offered its broad suite of services to a long slate of fast-growing better-for-you drink brands — ranging from small startups to major projects from Molson Coors’ non-alcoholic division — but now has a committed partner with the power to actually get products on store shelves.
“This is the way we finally take our business to where we can now go from ideation all the way through to the shelf and make sure it’s well merchandised,” said Sarti. “We can now do that completely within our own little universe.”
This isn’t the first time L.A. Libations has dipped its feet into distribution. In December 2020, the company began its SoCal Incubation Program (SIP), piloting products from its partner brands at designated “innovation centers” placed within 50 Sprouts locations in California. The program was expanded in 2021, during which L.A. Libations aligned with Classic Distributing and Molson Coors DSD affiliate Beauchamp Distributing Company to help supply stores like Gelson’s, Erehwon and Bristol Farms. But both those partnerships “weren’t right for a few reasons,” Sarti said.
Meanwhile, Casano had been steadily building HiTouch into a regional player in refrigerated DSD since launching the company alongside co-founder Czar Daniolco in 2015. The distributor services chains like Bristol Farms and Whole Foods throughout SoCal, but had been seeking a path to enter other chains like Ralph’s, Vons and Pavilions. After over a year of holding informal discussions with other local beverage operators about potentially working together, conversations earlier this year with Sarti and L.A. Libations co-founder and CEO Danny Stepper quickly turned serious.
“The more we started talking, the more you know, it made a lot of sense, and so we moved as quick as we could to close this deal,” Casano said.
Now with a committed partner, L.A. Libations will be able to more effectively pitch emerging brands to retail buyers by offering robust DSD coverage, complemented by the services of its merchandising arm, Relentless. Meanwhile, L.A. Libations’ connections with chains like Sprouts, Albertsons and others can open doors for HiTouch, which has deep roots with natural channel partners including Whole Foods. Sarti suggested that L.A. Libations may also help represent HiTouch’s interests outside of beverage — it also distributes yogurt, dips, sauces and a variety of other perishable food items — at the customer level.
“What we found was we had this gap where retailers at places like Ralph’s and Vons and Albertsons would say I really want to place a bet on this emerging category, I’d really like to be first to market, but how are you going to get it to me?” Sarti said. “And now because of this relationship with Chuck and Czar we’re really grateful to be partners with them because it creates a way for us to finally close that play.”
For HiTouch, the investment will be supplemented by improvements in its infrastructure. The distributor is set to move into a new 20,000 square foot warehouse in Santa Ana, California in January. While Casano and Daniolco will continue to operate the distribution business independently, the final decisions on what products it carries will be made alongside Sarti and Stepper. Meanwhile, expect HiTouch to grow its current count of 17 routes in Southern California; “We want to be able to do 1,000 new grocery stores in L.A.,” Sarti said.
As the two companies build their consolidated operations over the next year with more trucks and routes, the idea is to present customers with a one-stop solution.
“If you’re an entrepreneur wanting to come to Southern California, you do a deal with HiTouch and you get an amazing push in the natural channel, and then you’d have to bring somebody else in to do the other stuff, and distributors don’t like being parted out,” Sarti said. “But I think over the course of the next 12 months, we will emerge into a single solution for brands in Southern California. You won’t need to add extra distributors on top of HiTouch, the way you do today.”