BevNET Live Winter 2023 began today in Marina del Rey, California with wide ranging discussions led by beverage business entrepreneurs, investors, experts, distributors, retailers and more. Today’s panelists worked to summarize the state of the market, share valuable learnings for early stage brands and give a look into how to build, scale, finance and grow within the current industry climate.
State of the Beverage Business
The first panel of the day set the tone for the remainder of the conference while giving audience members insights, from numerous points of view, into the environment they are currently operating within.
Speakers included Buster Houston of VP of national merchandising at Albertsons, Vons and Pavilions; Mike Burgmaier, managing director at Whipstitch Capital; Shannon Deary-Bell, president and CEO of Nor-Cal Beverage Company; and Jessica Pratt, chief sales officer at Pop & Bottle.
While raising capital has always been a difficult task for emerging brands, panelists echoed that the current “semi-recessionary,” and still highly inflationary environment has made financing options even more scarce. However, they also reminded the audience that some of the beverage industry’s recent unicorns – like Essentia and Celsius – emerged after playing the long game and building businesses that endured economic downturns.
“[Essentia] had proved itself and Ken Uptain, the founder, said it’s time to go,” Burgmaier explained. “But you have to wait. You have to understand when the time is right that you have actually built something that consumers are ready for and I think that’s what companies today need to understand a little bit more.”
As brands grapple with shifting headwinds, and some inflationary cooling, their pricing strategies will become increasingly important. For Albertsons, driving cost savings relative to each category, rather than macroeconomic factors, is key to winning in their arena. Houston emphasized that successful operators understand that price decisions should be made both by looking at individual SKUs and also from a distribution standpoint, region-by-region.
While panelists agree the term deflation has begun to crop up in conversation, most retailers and brands aren’t quite feeling the effects yet but should prepare themselves as headwinds shift in the year ahead.
“We are in an environment where we are seeing some inflationary cooling and that is helping especially smaller brands that aren’t purchasing or manufacturing in high capacities,” said Pratt.
“But that said, there’s a lot of high-low pricing strategies and it’s expensive. If you don’t have the momentum like Pop and Bottle does it can be an extremely tough environment.”
Humble Growth Brings Strategic Insight To Investor Relations
The idea of merging strategy and investment is something many firms claim to offer, but the team at Humble Growth believes they have the winning recipe, and have brought together a trio of seasoned industry executives and experts – backed by a $312 million fund – to help finance and grow the next generation of early to mid-stage brands.
Humble Growth’s managing partners, Nick Giannuzzi, founder and managing partner of CPG focused law firm Giannuzzi Lewendon, and Dr. Andrew Abraham, founder and CEO of Orgain, shared their thoughts on the current environment for investment. The firm also counts Peter Rahal, founder of RxBar, as a managing partner and its fund is backed by CPG veterans including Mike Repole, Gary Hirshberg and Jared Smith.
Abraham highlighted that gross margin, and projections for improvements as the brand scales, remain a foundational and fundamental aspect to securing investment. Despite Giannuzzi encouraging against it, the duo said Abraham can’t help but give entrepreneurs free advice on cost savings to recoup some margin points – typically during the first call with the founder.
“Unfortunately, I think we need to get to a place where that path [to profitability] becomes tangible earlier,” said Giannuzzi. “We see that a little bit, especially now that investors are hesitant – they’re careful, they’re being very strategic with their money.”
As the team works to build its investment portfolio, Giannuzzi and Abraham emphasized that they are seeking to develop strong relationships with the leaders of those businesses so that they can trust one another’s advice, understand both side’s decision making process, and avoid invoking things like blocking rights down the line.
Inside The Minds of Albertsons’ Team: “We Are On The Hunt”
Bringing new consumers to the beverage aisle has created a space in the store that spans more than just one section. As the beverage industry captures new consumers grocery chain Albertsons is rethinking and expanding space allocations and said it is “on the hunt” for the next up and coming category.
Kevin Curry, president of Albertsons, Vons and Pavilions; Buster Houston, VP national merchandising and Sean Heryet, national category director broke down both how brands have effectively captured their attention (hint: omnichannel data can be key) and how to create a successful partnership as a new brand partnering with the grocery retailer.
“The incremental real estate we’re putting in stores [for beverage] is creating destinations,” said Houston. “It’s just not sales per square foot. It’s more of ‘I want [the customer] to see something in a section.’ So [we] put a lot of things there that may not justify three faces each, but it’s gonna get the eyeballs on it. We’re definitely in it together with the CPGs.”
Additional Day One Highlights Include:
- Amy Taylor, the recently-minted CEO of Zevia, took to the stage to share how her nearly two decades at RedBull informed the approach with Zevia, and the “authentic, differentiated and distinct” direction she aims to embrace as the company continues to grow in the low-sugar beverage category.
- KeHE’s SVP of Merchandising, Katie Paul, and the distributor’s director of category management Tim Dornfeld explained what they look for in new brand partners and how going through KeHE’s network can open up access from everything from chain stores to regional players, independents and alternative channels like CVS.
- Harmless Harvest CEO Ben Mand has broadened the coconut water brand into a platform of regenerative organic coconut products. During today’s talk he walked the audience through his own decision-making process when it comes to innovation, and key learnings he gathered as he worked to grow the brand beyond beverage.
- As Delta-9 THC beverages continue to work their way into mainstream markets (and were sampled at BevNET Live for the first time!) a patchwork of regulation at the state-level has created an extremely difficult operating environment. Panelists Cassia Furman, partner at Vicente LLP; Michael Ramirez, president of Distribution at ILLA Canna; Diana Eberlein, chair of the Cannabis Beverage Association; and Jake Bullock, co-founder and CEO of CANN gave an overview of current category operations and shared insight around movement at the federal level this year that is sending positive signs for future growth.
- Pronghorn CEO and Managing Director Jomaree Pinkard brings insight from both beverage entrepreneurship and now on the investor side of the table. To wrap up the day, Pinkard shared his thoughts on the state of the market, and why he believes the alcohol industry failed to follow through on its support for BIPOC-led businesses.