With a wellness-themed lineup of matcha, rose, turmeric and charcoal-flavored beverages, Instagram star and millennial cult favorite Dirty Lemon has sold more than 2 million bottles in three years and snagged upwards of 100,000 customers, with 90 percent of its orders processed via text message.
It’s little wonder that the startup refers to itself as a tech company, especially with its latest endeavor: The Drug Store, a cashierless retail concept that functions like a walk-in vending machine. For VIPs, there’s a SoHo House-style experience attached, with special events, custom cocktails, product sampling and film screenings. The permanent brick-and-mobile venue in New York’s Tribeca neighborhood, opened last fall, is just the beginning, said Zak Normandin, Dirty Lemon’s founder and Iris Nova CEO. Next: A second store in Manhattan, at Hudson Yards, along with Los Angeles and Miami locations.
Normandin, who’s planning to launch a new Dirty Lemon drink every 30 days this year, will take the stage as a speaker at Challenger Brands: A Brandweek Event, Feb. 6-7, in New York.
Ahead of that gathering, which will feature C-suite executives from Levi’s, Bird Rides, Orangetheory Fitness, HotelTonight, Dosist and other companies, Normandin spoke with Adweek about ditching digital advertising, steering clear of traditional retailers and reshaping the future of the beverage industry.
Adweek: What do you see as your biggest marketing challenge of 2019?
Zak Normandin: Acquiring new customers in a cost-effective way that is not dependent on a digital strategy.
What will the $15 million investment from Coca-Cola mean for Dirty Lemon, and how do you expect the two companies to work together?
It was an investment in Iris Nova, Dirty Lemon’s parent company, to expand into a portfolio of brands. The first two brands under the Iris Nova umbrella are Dirty Lemon and The Drug Store, a conceptual retail experience used to test new beverage concepts before they’re produced in bottled format on a national scale. We have two additional brands launching in 2019.
Our vision is to reshape the future of the beverage industry utilizing a tech-enabled, SMS-based sales and communication platform to drive rapid innovation and create products based on consumption behavior and reacting to ever changing customer demands.
For the Dirty Lemon brand specifically, we are launching a new product every month this year. Our platform enables a 30-day innovation cycle that gives us the ability to take an idea to market in about a month, creating products based on current trends in the industry and direct customer feedback which we’re receiving by text message and on our social media channels.
You’ve said you see Dirty Lemon as more of a technology than a beverage company—please elaborate.
At the core of the Iris Nova business model is technology. Over the last three years, Iris Nova has built infrastructure to support direct sales of beverages at scale using a proprietary conversational commerce (cCommerce) platform that allows customers to place orders and interact with the company via text message. We believe the future of the beverage industry will be built through direct communication with customers and the cCommerce model prioritizes customer convenience and delivers a heightened, consistent experience by enabling seamless communication and easy access to Iris Nova’s portfolio of beverages.
We used this platform to launch and scale Dirty Lemon and will employ the same SMS-based cCommerce platform to launch and scale subsequent brands. We’re leveraging technology to drive innovation in an industry that has had little to no technological advances in 100-plus years.
Talk about the response so far to The Drug Store in Manhattan. Do you have any stats on theft? Where else do you plan to open this brick-and-mobile concept?
We opened the first component of The Drug Store Tribeca in September to huge success. We only experience between 5-10 percent theft each month, and the store is already profitable—monthly sales cover the cost of rent.
We’re building a full cocktail experience beyond the cashierless shop in Tribeca that will open next month. Each Drug Store will feature both the cashierless component paired with a full bar experience. We’re expanding this concept to Hudson Yards in NYC and looking at spaces in Miami and Los Angeles. We’ll have four locations by 2020.
How are you substituting your retail pop-ups/locations for digital advertising?
After spending over $3 million on Instagram and Facebook ads the past year, we’re completely shutting off social advertising and transitioning this budget into expanding The Drug Store. One month of rent at The Drug Store Tribeca is the equivalent of one day of Facebook ads, and the early profitability of the space supported our intuition that we should invest in offline experiences.
The Drug Store retail strategy is focused on long-term community building and the natural social sharing that occurs from these experiences, which is why the stores are permanent. We’ll also utilize the pop-up model for one-off brand experiences to launch products. For example, Dirty Lemon will host a pop-up in New York City on Valentine’s Day surrounding a new product launch.
Do you see yourself headed to traditional brick-and-mortar distribution like many other DTC brands?
We’ll never sell through traditional retailers such as Target, Whole Foods, etc. This would go against everything we’ve built and eliminate the direct customer interaction that we find to be the value in a cCommerce model. We do, however, sell in select hospitality/boutique businesses in key cities, which we see as marketing and point of discovery rather than a necessary sales channel.
What’s the toughest aspect of being a challenger brand, especially in the competitive beverage category?
The current market is moving extremely quickly, and to react to changing market dynamics as a company requires a level of speed and flexibility that is challenging to manage. The most challenging part of any CPG company is how to stay relevant and build a brand with longevity.