Raises: Dirty Lemon
Dirty Lemon is looking to add some juice.
A filing with the U.S. Securities and Exchange Commission (SEC) reveals that the New York City-based company, which markets a line of all-natural functional wellness drinks made with fruit juices and botanicals, is attempting to raise $4.5 million.
Dirty Lemon turned heads upon its launch in 2015 for its innovative text message-based ordering platform. The brand sells its four SKUs –Detox, Energy, Skin + Hair and Sleep –exclusively through SMS: customers simply register their phone number, billing, shipping and credit card information online, then text the Dirty Lemon number to place an order. A 6-pack of bottles costs $65, which includes two-day shipping on all orders.
In an interview with BevNET, CEO Zak Normandin, who founded baby and toddler organic food brand Little Duck Organics, said the company was in the middle of closing the fundraising round and declined to go into specifics. He said that the new resources would be directed towards the company’s current focus on marketing initiatives and developing new products.
“Over the last year we’ve built something in beverage that is clearly non-traditional,” he said in an e-mail. “Looking forward we need to elaborate on what we have done well and expand our current product offering.”
According to Normandin, part of that expansion includes exploring new innovations that may have a larger consumer base and different use occasion than Dirty Lemon has tapped into thus far.
“We are focused from an R&D standpoint on broadening the appeal of the brand,” he wrote, noting the company is developing more products for everyday drinking. “For example, having an entry level offering will allow customers who are excited about the brand to have an easier opportunity to become a customer.”
Social media has been a key part of Dirty Lemon’s strategy to build a lifestyle brand from the beginning. The company announced its official launch on Instagram in 2015, but it has used that app to communicate a broader personality rather than simply promote the line. One is as likely to find a random meme or risque bedroom shot as an image of the product itself. For example, in a nod to its Sleep variety, one post features in image of semi-nude woman sleeping in bed, captioned with “snoring is absolutely an aphrodisiac.”
“We’ve never really explored traditional marketing in the way that most brands do,” Normandin said. “Because it has been a part of the brand since Day One, it has naturally been a core focus as we continue to grow.”
5-hour’s $4 million Settlement
Living Essentials, maker of 5-hour Energy, and its venture capital arm, Innovation Ventures, was ordered to pay nearly $4.3 million in penalties and legal costs following a trial in Washington in which a judge found the company in violation of the state’s Consumer Protection Act.
Washington Attorney General Bob Ferguson filed a lawsuit in King County Superior Court in 2014, alleging Living Essentials made “deceptive and/or unfair representations” in its marketing that 5-hour Energy claimed to provide energy and alertness, was superior to coffee, was recommended by doctors, and does not cause a crash in consumers. A trial was held in August 2016.
“The makers of 5-hour ENERGY broke the law in pursuit of profit, and now they are paying for it,” Ferguson said in a press release.
Judge Beth Andrus ruled that Living Essentials and Innovation Ventures had “scant evidence” behind the science the company cites in its marketing of 5-hour Energy.
“Defendants spent more time trying to justify the science behind their ads after-the-fact than they did before marketing the products in Washington,” Andrus wrote in the ruling. “The Court was struck by the fact that Defendants presented no testimony from a single scientist actually involved in developing the contents of this product.”
The companies were ordered to pay roughly $2.2 million in civil penalties, $2.1 million legal costs and fees to the Attorney General’s office, and were instructed not to make claims about the physiological effects of 5-hour Energy and other products without proper scientific evidence to back up the claims.
The Washington lawsuit was filed alongside similar deceptive marketing complaints by attorneys general in Oregon and Vermont. Living Essentials won its case in those two states.
In an email sent to BevNET, Living Essentials spokesperson Melissa Skabich denounced the ruling.
“Unlike the two other courts that found in our favor, this court did not follow the law,” Skabich said. “We intend to vigorously pursue our right to appeal, and correct the trial court’s incorrect application of the law.”
Super Battle over Super Tea
There’s a battle brewing over tea trademarks.
Last month, pomegranate beverage maker POM Wonderful filed a complaint in U.S. District Court in the Central District of California alleging that Bai Brands had infringed on its “Super Tea” trademark.
The product in question is Bai’s Antioxidant Supertea line, one of a range of low-calorie, antioxidant-infused beverages marketed by the New Jersey-based company. Bai, now owned by Dr Pepper Snapple Group, introduced the product in 2015. Attorneys representing POM and its parent The Wonderful Company are arguing that Bai infringes on POM’s trademark by causing a likelihood of confusion with the “Super Tea” mark.
In the suit, POM’s lawyers state that POM’s “SUPER TEA Mark was custom designed to be distinctive, innovative and recognizable to consumers so that the SUPER TEA Mark would act as a source-identifier.” They argue that “there is a substantial goodwill associated with the SUPER TEA Mark” due to the years of time, money and resources the company has dedicated towards developing and marketing the line.
A cursory search of U.S. trademark registration records indicates that both companies may indeed have reasonable arguments to present with regard to their ownership of the term. POM has used “Super Tea” on its tea products since 2009, one year after records show the company acquired the rights to the mark under the classification of Goods and Services defined as “sports drinks containing caffeine.”
Records show that Bai registered the marks “Bai5 Antioxidant Supertea” and “Bai Antioxidant Supertea” on May 4 and Oct. 26, 2015, respectively, for for tea-based beverages, with fruit flavoring and antioxidants.
According to the suit, to “further protect its established common law rights,” POM filed an new trademark application on May 4, 2016 with the U.S. Patent and Trademark Office to secure the rights to the “Super Tea” mark for “non-alcoholic beverages with tea flavor; fruit juice concentrate; fruit flavored beverages,” and “non-alcoholic beverages containing fruit juices.”
POM sent Bai a cease-and-desist letter regarding the use of the term later that month, on May 16, but Bai didn’t stop its trademark infringement, according to the suit.
POM is seeking to enjoin Bai from further infringing on its trademark, and for all infringing products, packaging, advertising and promotional materials to be recalled, seized, impounded and destroyed, according to the lawsuit. The brand is also asking for compensated for its legal fees and any other relief the court deems just to provide.
Dr Pepper Snapple Group Inc., which completed its acquisition of Bai for $1.7 billion earlier this month, was not named in the suit.
A representative of POM declined to comment on this story. Bai did not respond to requests for comment.
A bipartisan group in the U.S. Congress introduced legislation in February aimed at eliminating federal alcohol taxes and updating regulations for kombucha.
The Keeping Our Manufacturers from Being Taxed Unfairly while Championing Health Act, or KOMBUCHA, would increase the applicable alcohol-by-volume limit for kombucha from 0.5 percent to 1.25 percent. The bill is co-sponsored in the Senate by Sens. Cory Gardner (R-Colo.) and Ron Wyden (D-Ore.), while Reps. Jared Polis (D-Colo.) and Scott Tipton (R-Colo) have introduced a companion version in the House.
The bill addresses one of the chief concerns of kombucha manufacturers: the presence of trace alcohols, at amounts of up to 1 percent, that can occur during the production process and trigger federal excise taxes typically reserved for alcoholic beverages.
“Kombucha is the fastest growing beverage category in the United States,” said Polis in a press release. “This bipartisan bill will eliminate unfair taxes for kombucha brewers, many of whom are small businesses. By taking kombucha out from under alcohol in the tax and regulatory code, we can help a new industry grow throughout Colorado and across the country.”
Uproar Grows Over Plant Milks
In the wake of the introduction of a Senate measure designed to prevent makers of plant-based dairy substitutes from using terms like “milk” or “yogurt” on their packages, a new theatre of combat has opened, this time in the courts.
Two leading alternative milk producers have been hit with class action lawsuits alleging their products falsely claim to be equally or more nutritious than dairy milk. Lawyer Lee Cirsch at Capstone Law APC filed two suits in the Superior Court in Los Angeles County, one against WhiteWave Foods, producer of Silk, and another against Blue Diamond Growers, producer of Almond Breeze.
Although Almond Breeze Original does contain several vitamins and nutrients, including calcium, it lacks in nutritional value when compared to 2 percent milk, the suit claims.
The court filing goes on to state that Blue Diamond’s “entire marketing strategy portrays its almond beverages as nutritionally superior to dairy milk.”
The class actions come almost immediately after Blue Diamond agreed to pay $9 million in a class action settlement arguing that Almond Breeze falsely claimed to be “All Natural.” The settlement did not include an admission of wrongdoing.
Although the amount of nutrients in alt-milks can vary widely depending on ingredients and brand, pro-dairy advocates have often pointed to a lack of protein and vitamins in many nut and plant-based milks as evidence of dairy’s superiority.
But many alt-milk producers and supporters disagree that there is any consumer confusion about the nutritional benefits of nut and plant-based milks. Molly Spence, director of North America for the Almond Board of California, told BevNET that the attempt at litigation against almond milk companies “comes a little late” as the drink has existed for centuries and brands make no false claims about their own nutrition stats.
“The variety of milks on the market today simply comes down to consumers having more choice,” Spence said. “Almond milk has been appealing because it has no saturated fat or cholesterol; it’s fortified with vitamins and minerals; unsweetened products can have 0 grams of sugar and as few as 30 calories a serving; it’s dairy-free/plant-based/vegan; and the nutty taste and creamy texture is appealing.”
It’s that appeal – and the erosion of sales of dairy milk as well – that may have led U.S. Sen. Tammy Baldwin, D-WI, to submit “The Dairy Pride Act,” a bill that would require the U.S. Food and Drug Administration (FDA) to enforce regulations defining the terms “milk,” “yogurt,” and “cheese” as strictly related to animal dairy products, effectively banning nut and plant-based alternatives from using the terms in their names or packaging. The proposed bill came several weeks after a bipartisan group of U.S. Congressmen submitted a letter to the FDA requesting they crack down on dairy alternatives.
This increased federal scrutiny left many dairy alternative beverage producers questioning the legitimacy of common dairy industry arguments that nut and soy alternative drinks infringe on dairy milk’s standards of identity. It also leaves legal ambiguity as to whether nu-spellings such as “Mylk” or the single-word “Almondmilk” are in violation of the rules. On Feb. 2, the Plant Based Food Association sent its own letter to the FDA arguing current plant-based milks are already accurate in their labeling, using their “common or usual name.”
But standard of identity is no longer the only issue for dairy alternatives, and the lawsuits are likely to bring nutritional differences further into the public eye.
For their part, the plant-based side is sometimes willing to acknowledge what their products lack.
“We’ve seen that dairy spokespeople have noted almond milk doesn’t have naturally occurring protein, and that’s true,” Spence said. “So if you’re looking for protein, you’re better off with dairy milk or a handful of almonds.”
According to Lindsay Moyer, senior nutritionist at the Center for Science in the Public Interest, protein is one of the key differences between dairy and alt-dairy milks. An average cup of 1 percent milk contains about 8g of protein, while almond milks only contain 1g on average. (Soy milk can often contain more protein, as do pea protein-based milks.) Often to match the nutrition of dairy milk, alt-milks must be fortified with added calcium and vitamins.
Cow’s milk also naturally contains sugar, while the sugar of almond and soy milk is added, usually along with vanilla and chocolate flavoring, which Moyer said can sometimes be equivalent to a day’s worth of added sugar as recommended by the American Heart Association.
But the big question for consumers is “does it matter?” The difference in nutrients between products may not actually be that important to consumers who prefer almond or soy milk, whether due to lactose intolerance, a vegan diet, or simple preference for taste.
“It depends on if you’re relying for the milk for protein,” Moyer said. “If all you’re having for breakfast is cereal with non-dairy milk then that might matter. But if you’re looking for a low calorie beverage, an unsweetened almond milk might only have about 30 calories per cup, so that’s a plus.”
But for some consumers it does matter. Plant-based milk company Ripple chose its name to represent the shake-up it hoped to have throughout the dairy alternative category. Using pea protein, the company produces a non-dairy milk that has directly marketed itself as a highly nutritious drink. On the brand’s website, Ripple boasts 50 percent more calcium than cow’s milk, more vitamin D, half the sugar, a fraction of the saturated fat, and it matches the 8g of protein.
“Milk is a wholesome kind of ‘mom and apple pie’ kind of beverage and we think alternatives to milk should be just as healthy,” Ripple co-founder Adam Lowry told BevNET.
“On one hand I can agree with the gripe of the dairy industry that these alternative milks that don’t have nutrition are harvesting unfairly the health halo of milk,” Lowry said. “I can understand the frustration there, but on the other hand they’re trying to define it as a ‘lacteal secretion from a cow.’ And that’s ridiculous. I’d love to have some threshold of using that term ‘milk’ being defined by meeting a nutritional standard, I think that’s fine, but given how many people want a dairy-free alternative it shouldn’t be limited to ‘lacteal secretions.’”
But Ripple’s strategy takes share from both alt-milks and dairy milks alike, and he didn’t hold back on the almond-based substitutes. Although many almond milk producers have varieties containing extra protein, Lowry said he doesn’t believe many almond milk drinkers are aware of the lack of protein. In some regard, the category, he said, let nutrition get away. And as more consumers begin drinking alt-milks, producers may need to live up to a standard.