Coca-Cola buys stake in text-to-pay beverage brand

Bloomberg

Coca-Cola Co., facing shifting shopping habits that have roiled the food and beverage industry, is taking a minority stake in Iris Nova, the company behind a cashierless New York City store where customers pay for drinks via text message.
Coke, now the startup’s largest investor, led a $15 million investment round that values Iris Nova at about $60 million. Iris Nova is the maker of Dirty Lemon, including a recently discontinued one made with sparkling beverages, that found traction with customers on Instagram before the company launched its first retail location in Manhattan this year.
For Coke, the stake gives it a window into a brand that has picked up customers outside of traditional retail channels, using social-media buzz and direct-to-consumer sales to drive growth. Coca-Cola is one of the most recognisable brands in the world, with a massive retail presence, but for now Iris Nova isn’t looking to expand into outlets like Walmart Inc., Target Corp. and Kroger Co., according to founder and Chief Executive Officer Zak Normandin.
“That would dilute everything that we’ve built,” he said. “We believe in a future with consumers having a direct connection to brands and you don’t get that in the traditional retail system.”
Coke, in its search for growth, made a splash with a $5.1 billion deal to buy the UK coffee chain Costa earlier this year. The beverage giant has also invested in smaller brands, like sparkling water company Topo Chico and Moxie, a soda with a cult-following in Maine.
Iris Nova spoke to other large beverage companies and private equity firms before deciding to partner with Coke, Normandin said. The company hopes to be profitable by the end of next year and is targeting $100 million in sales by the end of 2021. In addition to Coca-Cola, retired New York Yankee Alex Rodriguez, actress Kate Hudson and veteran tech executive Tim Armstrong were among the investors who took part in the funding round, according to the company.
Customers can walk into the Dirty Lemon shop in New York’s Tribeca neighbourhood, grab a beverage and depart. They’re encouraged to send a text message to the company, which then responds. New customers are asked to open an account, while existing shoppers are charged. The company says it has processed about 90 percent of its orders via text, including those from online subscribers, since it started selling in 2015.
Dirty Lemon relied heavily on Instagram to develop its brand but is pivoting away from social media. In recent weeks, the company has turned off Facebook and Instagram advertising entirely and hasn’t seen a sales dip, according to Normandin. The company will open at least two more retail spots in 2019, with a second Manhattan location planned along with one in Chicago.