LIVE: Iris Nova CEO Zak Normandin speaks about entrepreneurship at Breakouts with Yahoo Finance

LIVE: Iris Nova CEO Zak Normandin speaks about entrepreneurship at Breakouts with Yahoo Finance


>>>[ MUSIC ] GOOD AFTERNOON EVERYONE, AND WELCOME TO BREAKOUTS. MY NAME IS EMILY McCORMICK AND I WILL BE YOUR HOST THIS AFTERNOON. FOR THOSE OF YOU THAT DON’T KNOW, BREAKOUTS IS A SERIES ON YAHOO FINANCE WHERE WE INTERVIEW ONE-ON-ONE DISRUPTORS AND CEOS IN THE BUSINESS COMMUNITY. TONIGHT I’M HAPPY TO WELCOME ZACH NORMAN, THE FOUNDER AND CEO OF IRIS NOBLE, YOU MAY BETTER KNOW HIM AS THE FOUNDER AND CEO OF THE BEVERAGE BRAND, DIRTY LEMON. I WOULD LIKE TO COME TO THE STAGE, ZACH NORMAND AND. [ MUSIC ] [ APPLAUSE ] >>THANK YOU SO MUCH FOR BEING HERE. >>THANK YOU FOR HAVING ME. >>I WANT TO GO BACK TO THE BEGINNING, BECAUSE YOU ARE A BIT OF A SERIAL ENTREPRENEUR, YOUR FIRST MAJOR WAS LITTLE DUCK ORGANICS, CHILDREN’S FOOD DYNAMIC WHICH MAKES SENSE AND YOU ARE A FATHER. HOW DID YOU GO FROM THAT TO IRIS NOVA AND DIRTY LEMON WHICH IS A MILLENNIAL BRAND GEARED MOSTLY TOWARDS WOMEN? >>WHEN I WAS BUILDING LITTLE DUCK ORGANICS, WE WERE TRYING TO GET THE FASTEST, WE WERE TRYING TO GET NEW PRODUCTS TO MARKET QUICKLY. WE TRY TO BRING THE FASTEST INNOVATION TO CONSUMERS AS FAST AS POSSIBLE OR THE BEST INNOVATION TO CONSUMERS AS FAST AS POSSIBLE. ONE THING THAT WAS ALWAYS FRUSTRATING TO ME WAS THE PROCESS OF HAVING TO PRESENT A PRODUCT TO A BUYER AND HAVING THEM APPROVE THE PRODUCT AND WAIT TO GET TO STORE SHELVES. SO AFTER I SOLD THE COMPANY IN 2013 AND REALLY STARTED THINKING THROUGH NEW AND DIFFERENT WAYS TO GET PRODUCTS TO CONSUMERS, THAT IS HOW WE LANDED ON DIRTY LEMON AND THE WAY WE SELL THE PRODUCTS TO CONSUMERS. >>WHY DID WE NEED ANOTHER BEVERAGE COMPANY? >>BEVERAGE HAS BEEN INTERESTING TO ME BECAUSE THE BEVERAGES THAT CONSUMERS CHOOSE TO DRINK SAY A LOT ABOUT THEM AS INDIVIDUALS. SO THE COFFEE AT THE COFFEE SHOP THAT YOU GO TO EVERY MORNING, THE SPIRIT THAT YOU CHOOSE TO DRINK WHEN YOU ARE AT A BAR, THE BOTTLED WATER THAT YOU CHOOSE TO DRINK, THAT ALL SAYS SOMETHING ABOUT THE INDIVIDUAL. AND I WAS ALWAYS REALLY INTERESTED IN JUST THIS IDEA OF BUILDING AN AESTHETIC AROUND A PRODUCT AND SELLING ON THE BRAND PROMISE RATHER THAN, OR ON A BRAND RATHER THAN THE LIQUID INSIDE THE PRODUCT OR WHATEVER WAS INSIDE. >>WHAT DOES IT SAY THAT A CUSTOMER WHO IS DRINKING DIRTY LEMON? >>WE ARE TARGETING MILLENNIAL FEMALES, WE HAVE A 60% FEMALE CONSUMER BASE, 60% FEMALE, 40% MALE, HIGHER DISCRETIONARY INCOME, IT’S A PREMIUM PRODUCT. THEY CARE ABOUT WELLNESS AND FITNESS AND BEAUTY. SO IT IS VERY MUCH FOCUSED ON THE MODERN CONSUMER. AND SO FROM THE VERY BEGINNING, WE WERE FOCUSED ON BUILDING A LIFESTYLE AROUND THE BREAD BEFORE WE ACTUALLY SOLD THE PRODUCT. A LOT OF THE MARKETING IS SUBTLE AND NOT FOCUSED ON THE PRODUCT BUT MORE AROUND THE ANCILLARY, YOU KNOW, THE DIFFERENT ELEMENTS OF THE LIFESTYLE OF THE MODERN CONSUMER. >>LET’S TALK ABOUT PRICE, THIS IS A PREMIUM PRODUCT. ONE OF THESE BOTTLES IS $10. HOW WILL THAT FAIR, WE TALKED ABOUT POTENTIALLY BEING RECESSION OR DOWNTURN, ARE PEOPLE GOING TO PRIORITIZE THIS TYPE OF PRODUCT? >>IF YOU LOOK HISTORICALLY IN RECESSIONS, CONSUMERS TEND TO CONTINUE TO SPEND ON FOOD AND BEVERAGE PRODUCTS SPECIFICALLY, I THINK THAT THIS IS AN AFFORDABLE LUXURY FOR CONSUMERS THAT ARE LOOKING TO HAVE THE BENEFIT OF THE FUNCTIONAL INGREDIENTS THAT WE ARE USING, BUT INCORPORATE THEM INTO THEIR DAILY ROUTINES. SO I DON’T THINK, WE ARE NOT TOO CONCERNED ABOUT THAT, BUT WE ARE NOT PRIORITIZING OR OVERT PRIORITIZING DIRTY LEMON. AS IRIS NOVA, THE PARENT COMPANY, WE INVEST IN BRANDS AND WE CREATE NEW BRANDS INTERNALLY TO ROLL UNDER THE PLATFORM AND THAT HAS HAPPENED AFTER THE COCA-COLA INVESTMENT IN DECEMBER. >>LET’S TALK ABOUT THE COCA- COLA RELATIONSHIP. HOW DID THAT COME ABOUT? THAT WAS A $15 MILLION ROUTE THAT CLOSED, THAT IS A $60 MILLION CLOSING FOR THE COMPANY . >>THAT WAS A VERY EXCITING PARTNERSHIP. >>HOW DID IT COME ABOUT? >>WE BUILT A RELATIONSHIP WITH COCA-COLA FOR SOME TIME. I’VE A GREAT DEAL OF RESPECT FOR COCA-COLA AND THE INFRASTRUCTURE THEY CREATED OVER THE LAST 100+ YEARS. I THINK THERE ARE VERY FEW PRODUCTS WHERE YOU CAN TAKE A BOTTLE OF OR THE PRODUCT THAT A BRAND SELLS AND PUT IT ON THE TABLE OR PUT IT IN FRONT OF SOMEONE ANYWHERE IN THE WORLD AND THEY WILL KNOW WHAT THE BRAND IS AND I THINK COCA-COLA IS ONE OF THOSE RARE EXAMPLES. I THINK FOR THAT REASON AND GIVEN THEIR REACH AND OPERATIONAL INFRASTRUCTURE, WE WANTED TO PARTNER AND LEARN FROM THEM. OUR VISION IS TO COMPETE WITH THEM ONE DAY. I THINK THAT THERE IS A LOT OF INEFFICIENCIES IN THE COCA-COLA MODEL AND I THINK THERE’S A LOT OF THINGS WE COULD BE DOING THAT WE CAN DO IN OUR ORGANIZATION THAT ACTUALLY, YOU KNOW, PUT US COMPETITIVELY AGAINST THEM. THAT’S WHAT WE ARE LEARNING AND USING THE INFORMATION THAT WE LEARN FROM THEM TO GROW WHAT WE ARE DOING. >>COMPETING WITH COCA-COLA, THAT’S ONE OF THE BIGGEST BEVERAGE GIANTS IN THE WORLD, WHAT WILL IT TAKE TO BE ABLE TO MANIFEST THAT? >>IF YOU LOOK AT THE BEVERAGE INDUSTRY, IT IS EXPECTED TO BE A $2 TRILLION INDUSTRY BY 2023 AND IT IS 60% HELD BY COKE AND PEPSI. IF YOU LOOK AT HOW FRAGMENTED, ALL THE BEVERAGE BRANDS OUT THERE, THE MAJORITY OF PRODUCTS ARE COKE AND PEPSI PRODUCTS AND WE THINK THOSE ARE VERY OUT OF TOUCH WITH THE MODERN CONSUMER, HIGH SUGAR, HIGH CALORIE CARBONATED SOFT DRINKS FOR THE MOST PART AND WE ARE INVESTING IN CREATING PRODUCTS THAT ARE BETTER FOR YOU AND NONE OF THEM HAVE ADDED SUGAR. THEY ARE WELLNESS FOCUSED AND THEY ARE MEETING THE NEEDS OF THE MODERN CONSUMER WHICH IS CHANGING QUICKLY. >>AT THE SAME TIME, WE ARE SEEING A COMPANY LIKE COKE OR PEPSI PIVOTING TO TRY TO KEEP UP WITH THE TRENDS AND MOVING TOWARDS COFFEE AND ENERGY DRINKS AND THINGS THAT A YOUNGER CUSTOMER MIGHT BE MORE INTERESTED IN THAT IS HEALTH FOCUSED. WOULD COKE OR PEPSI BE INTERESTED IN TAKING UP SOMETHING LIKE DIRTY LEMON OR IRIS NOVA? >>I THINK WHEN YOU LOOK AT THE PRODUCTS, THEY ARE TRYING TO SHIFT, BUT THE ORGANIZATIONS ARE SO LARGE AND IN MANY WAYS DEPENDENT UPON BOTTLERS TO PRODUCE THE PRODUCTS AND I THINK THAT IS THE BIG DISCONNECT BETWEEN THE INNOVATION THAT CONSUMERS WANT AND THE PRODUCTS THAT ORGANIZATIONS LIKE COCA-COLA WANT TO BE BRINGING TO THEIR CONSUMER BASE. I THINK THERE ARE EXAMPLES OF LARGE STRATEGIC’S THAT HAVE DONE A GOOD JOB OF THIS. YOU LOOK AT PEPSI WITH BUBBLY AND LIFE WATER, SUCCESSFUL CASE STUDIES AND REACTING TO CONSUMER DEMAND. I THINK COKE HAS BEEN LESS SUCCESSFUL IN THAT AND THAT IS NOT TO SAY WE DON’T HAVE RESPECT FOR THEM, BUT HISTORICALLY, I THINK THEY HAVE BEEN LESS REACTIVE TO CHANGES IN THE MARKET. AND MORE KIND OF STRAIGHTFORWARD IN JUST CONTINUING TO DO THE SAME THING OVER AND OVER AGAIN. IF YOU LOOK AT THE LATEST INNOVATION FOR COCA-COLA, ON THE COCA-COLA SIDE, IT IS CINNAMON COCA-COLA WHICH I DON’T THINK IS VERY INNOVATIVE AT ALL AND THEY ARE LAUNCHING THAT OVER THE CHRISTMAS HOLIDAY. WHAT WE HAVE THE BENEFIT OF AS AN ORGANIZATION THAT HAS BUILT A DIRECT CONNECTION WITH OUR CONSUMERS AND THAT IS THROUGH TEXT MESSAGE. THE MOST INTERESTING PART OF THE BUSINESS IS THIS TECHNOLOGY COMPONENT THAT WE BUILT WHICH ALLOWS US TO PLACE ORDERS, IT ALLOWS US TO CONNECT WITH CONSUMERS DIRECTLY AND FOR CUSTOMERS TO PLACE ORDERS OVER TEXT MESSAGE, AND IT REALLY ALLOWS US TO CONTINUE TO BUILD A RELATIONSHIP WITH THEM SO WE CAN SERVE THEM NEW AND DIFFERENT OPTIONS ON DEMAND. WE CAN CREATE A NEW PRODUCT RIGHT NOW AND HAVE IT OUT TO CONSUMERS IN 30 DAYS, THAT IS SOMETHING THAT BIG STRATEGIC’S WILL NOT BE ABLE TO TOUCH BECAUSE OF THE WAY THAT THEY HAVE BEEN BILLED HISTORICALLY. >>LET’S SAY JAMES QUINCY CAME KNOCKING ON THE DOOR AND SAID WE WOULD LOVE TO ACQUIRE DIRTY LEMON OR IRIS NOVA IN ITS ENTIRETY, WOULD YOU SAY YES? >>I MEAN, OBVIOUSLY WE ARE NOT BUILDING FOR THAT RIGHT NOW. I THINK THAT OBVIOUSLY AS A STARTUP, WE ARE LOOKING TO EVENTUALLY, WE HAVE A LOT OF INVESTORS AND WE NEED TO PROVIDE A RETURN FOR THOSE INVESTORS, BUT I THINK THE EVENTUAL PATH TO EXIT FOR US IS THROUGH AN IPO WHERE WE CAN THEN CONTINUE TO DO WHAT WE ARE DOING ON A MUCH LARGER SCALE. >>WE’VE SEEN A LOT OF CONSUMER FACING IPO THIS YEAR COMMENCING UBER AND LYFT AND PALATINE IS FORTHCOMING, WHAT IS YOUR TIMELINE FOR THAT? >>I THINK IN THE NEXT 3 YEARS, WE WANT TO GET TO $100 MILLION IN REVENUE PROFITABLY AND WITH A PORTFOLIO OF BRANDS THAT WE HAVE A STAKE IN EACH OF THE BRANDS THAT ARE IN THE PORTFOLIO, AND I THINK THAT THAT WILL HAPPEN IN THE NEXT 2 TO 3 YEARS. >>ARE YOU PROFITABLE NOW? AND IF NOT, WHEN DO YOU EXPECT PROFITABILITY? >>WE ARE NOT PROFITABLE, BUT A LOT OF THAT IS JUST GIVEN THE STAGE THAT WE ARE AT. WE ARE IN VERY FOCUSED GROWTH MODE RIGHT NOW WITH ALL OF THE PROFITS THAT WE ARE MAKING FROM THE SALES OF PRODUCTS GOING BACK INTO MARKETING AND BRANDING AND EXPOSURE FOR THE BRANDS. >>YOU TALK ABOUT INVESTING $100 MILLION IN THE NEXT 3 TO 5 YEARS TO CULTIVATE THESE BRANDS. FIRST OF ALL, WHERE DO THE BRANDS COME FROM? WILL THEY BE INCUBATED WITHIN IRIS NOVA AND USING THE TALENT THAT YOU HAVE NOW? ARE YOU LOOKING OUTSIDE? >>WE EXPECT A SPLIT TO BE ABOUT 50-50. WE HAVE A FEW REALLY EXCITING JOINT VENTURES THAT WE ARE GOING TO, SO WE ARE UTILIZING THE DIRTY LEMON CREATIVE TEAM OPERATIONAL INFRASTRUCTURE TO ACTUALLY CREATE PRODUCTS THAT WILL HAVE A SIGNIFICANT OWNERSHIP STAKE IN THEM WITH OTHER BEVERAGE BRANDS. SO WE ARE DOING THAT AND WE HAVE OTHER BRANDS THAT WE ARE JUST CREATING FULLY OURSELVES INTERNALLY, AND THEN WHERE WE ARE FINDING OTHER BRANDS IS WE HAVE GREAT VISIBILITY IN THE INDUSTRY, WE ARE ON THE STREET EVERY DAY, WE DO SELL OUR PRODUCTS INTO PLACES LIKE BERRIES BOW AND MARIJUANA IN LA. AND WE HAVE OUR PULSE ON WHAT’S HAPPENING IN THE MARKET IN A WAY THAT’S MUCH DIFFERENT THAN LARGER STRATEGIC. AND ALSO WE ARE ENTREPRENEURS OURSELVES, SO WE HAVE AN OPERATING TEAM THAT HAS INCREDIBLE MOTIVE EXPERIENCE IN BEVERAGE, AND I THINK THAT THAT NATURALLY ATTRACTS THE TYPES OF BRANDS IN THE TYPES OF AUDITS WE CAN ROLL INTO THE PLATFORM. >>YOUR BACKGROUND IS IN CONSUMER PACKAGE GOODS AND BRANDING, THE PACKAGING IS THIS BEAUTIFUL PRESENTATION. WHERE DID YOU FIND THE R&D TALENT TO ACTUALLY CREATE THE DIRTY LEMON BEVERAGE AS IT STANDS TODAY? >>WE CREATED ALL OF THE PRODUCTS INTERNALLY. WE HAVE A FULL BEVERAGE LAB AT OUR OFFICE IN LOS ANGELES. AND AFTER I SOLD MY LAST COMPANY, I STARTED AN AGENCY AND WE WORKED WITH LARGE CBG AND ENTREPRENEURS TO CREATE NEW PRODUCTS. MY FOCUS HAS BEEN ON HOW CAN WE GET NEW PRODUCTS TO MARKET FAST. AND IT WAS THROUGH THAT PROCESS THAT I BUILT A NETWORK OF FORMULATORS AND PACKAGE SUPPLIERS, AND PACKERS, ALL OF THESE DIFFERENT PEOPLE THAT HELPED BRING PRODUCTS TO MARKET QUICKLY. WE FORMULATED THE FIRST DIRTY LEMON BEVERAGE. IT WAS SIMPLE, IT IS THE BLACK AND WHITE BOTTLE WHICH YOU MAY HAVE IN THE AUDIENCE, AND THAT PRODUCT QUICKLY TURNED INTO COLLAGEN WHICH WAS OUR NEXT BEVERAGE, AND SO ON AND SO FORTH, BUT WE’VE LAUNCHED 13 BEVERAGES UNDERNEATH THE DIRTY LEMON LINE SINCE WE STARTED AND WE HAVE MANY MORE TO COME. >>LET’S JUST TALK A LITTLE BIT ABOUT THESE FLAVORS. YOU HAVE COLLAGEN, RETINOL, SOME OF THESE PRODUCTS THAT YOU ARE MORE FAMILIAR WITH PUTTING ON YOUR SKIN, FOR EXAMPLE, SO WHAT RESULTS ARE YOU REALLY PROMISING WITH DIRTY LEMON? >>A LOT OF THE INGREDIENTS THAT WE’VE BEEN USING HAVE BEEN VERY COMMON IN THE NATURAL PATHING OR BEAUTY SPACE FOR A LONG TIME, SO THEY HAVE A PROVEN HISTORY OF EFFICACY. IN DIFFERENT FORMATS. SO YOU LOOK AT COLLAGEN, COLLAGEN HAS BEEN A SUPPLEMENT THAT’S BEEN ON THE MARKET AND SOMETIMES ON THE BOTTOM SHELF OF A NATURAL FOOD STORE FOR DECADES NOW. BUT WHAT WE DID WAS WE TOOK THE PRODUCT AND THAT INGREDIENT AND WE BLENDED IT INTO A READY TO DRINK BEVERAGE AND PUT IT IN A BOTTLE. AND WE’VE DONE THE SAME THING WITH EACH OF THE OTHER BEVERAGES. SO ON THE DIRTY LEMON LINE, WE HAVE A BASE OF LEMON JUICE AND OCEAN MINERALS AND SEA SALT AND WE ADD FLAVOR AND UNCTION ON TOP OF THAT. AND THAT HAS BEEN A REALLY GREAT WAY FOR US TO SCALE. WE CAN LAUNCH HUNDREDS OF DIFFERENT BEVERAGES UNDERNEATH THE DIRTY LEMON LINE AND NOT REALLY BE TIED TO ONE SPECIFIC INGREDIENT, AND I THINK THAT THAT IS A CHALLENGE THAT I’VE SEEN WITH A LOT OF OTHER BRANDS, THEY FOCUS ON ONE INGREDIENT. AND CONSUMERS ARE SO TRANSIENT IN PURCHASING DECISIONS NOW THAT IT BECOMES REALLY HARD TO KIND OF REST YOUR LAURELS ON ONE SPECIFIC INGREDIENT AND BUILD A BRAND THAT WAY. BUT THAT SAID, WE DON’T BELIEVE IN BILLION-DOLLAR BRANDS, WE ARE TRYING TO BUILD MILLION- DOLLAR LTB CUSTOMERS, NOT BILLION-DOLLAR BRANDS, WE WANT A BILLION-DOLLAR ORGANIZATION, BUT I DON’T THINK THAT BILLION- DOLLAR BRANDS WILL EXIST IN THE FUTURE. I DON’T THINK THAT THERE IS THE NEXT COCA-COLA AS A BRAND LIKE THE PRODUCT COCA-COLA BEING BUILT RIGHT NOW. BECAUSE THERE ARE JUST TOO MANY OPTIONS, THERE’S A LOT OF STARTUPS OUT THERE THAT ARE CREATING A VARIETY OF DIFFERENT PRODUCTS FOR CONSUMERS, NATURALLY THAT CREATES A LEVEL OF SELECTION THAT CONSUMERS ENJOY, AND THEY WANT TO PARTAKE IN. >>SO YOU WANT TO COMPETE WITH COCA-COLA, BUT YOU DON’T WANT TO BE THE NEXT COCA-COLA AND TAKE THE ROUTE THAT THEY’VE TAKEN, SO WHAT IS THE MAIN DISCREPANCY BETWEEN THE TWO IN THE MAIN STRATEGY THAT IS DIFFERENTIATING YOU? >>SO COCA-COLA AT ITS CORE IS A BTB BUSINESS, THEY SELL SYRUPS TO THE BOTTLERS AND THE BOTTLERS PUT THE BOTTLES OF THE PRODUCT THAT THEY PRODUCE ON THE TRUCKS AND THE TRUCKS BRING THE PRODUCT TO STORAGE. THE STORES SELL THE PRODUCT TO CONSUMERS. SO THE STORES ARE ACTUALLY THE B2C PART OF THE EQUATION. AND THERE’S A LOT OF INEFFICIENCY AND A LOT OF PEOPLE THAT NEED TO TOUCH THAT BOTTLE BEFORE IT GETS TO THE CONSUMER. WE’VE CUT OUT ALL OF THE MIDDLEMEN, AND WE HAVE A RELATIONSHIP DIRECT WITH THE CONSUMER. SO A CUSTOMER PLACES AN ORDER FOR DIRTY LEMON ON THEIR PHONE, SO THEY ARE ON THE LAST BOTTLE AND A TEXTILES AND SAY SEND ME ANOTHER CASE OF RETINOL OR WHATEVER PRODUCT AND THEN WE DELIVER IT TO THEM THE SAME DAY OR NEXT DAY EVERY DAY IN THE U.S. THIS IS VERY FAST IMMEDIATE ACCESS TO THE PRODUCTS THAT CONSUMERS WANT. AND WE ARE UTILIZING THE SAME TECHNOLOGY FOR ALL OF THE BRANDS IN THE PORTFOLIO, AND WE ARE POOLING ALL OF THE CUSTOMERS. SO IF YOU HAVE PURCHASED A DIRTY LEMON PRODUCT BEFORE, YOU CAN TEXT ANYONE OF OUR PORTFOLIO BRANDS AND PLACE AN ORDER FOR THOSE PRODUCTS AS WELL WITHOUT HAVING TO ENTER IN YOUR CREDIT CARD INFORMATION AND BILLING INFORMATION AND SHIPPING INFORMATION. >>SAME DAY OR NEXT DAY, THAT IS ON PAR WITH AMAZON AND A HUGE INFRASTRUCTURE GIANT. HOW HAVE YOU ACHIEVE THAT? WHERE ARE YOUR VISTA FUSION CENTERS? >>SPREAD TO THE U.S. OUR GOAL IS TO BEAT AMAZON PRIME ON SAME DAY SHIPPING OR ON TWO DAY SHIPPING. SO WE THINK THAT THROUGH COURIER NETWORKS, WE CAN DELIVER SAME DAY AND MOST OF THE MAJOR U.S. CITIES. SO IN MARKETS LIKE NEW YORK AND LA, WE TEST SAME-DAY DELIVERIES AND THAT WILL EXPAND BEYOND THOSE MARKETS TO OTHER LARGER CITIES LIKE CHICAGO AND MIAMI AND DALLAS, TEXAS, AND EVERYWHERE ELSE, WE HAVE DISTRIBUTION CENTERS THAT ARE LOCATED WITHIN ONE DAY GROUND SHIPPING FOR THE REST OF THE U.S. >>DIRTY LEMON IS ALSO AVAILABLE ON AMAZON. IS THAT RELATIONSHIP GOING TO DISAPPEAR EVENTUALLY? WHAT IS THE USE OF THAT CHANNEL IF YOU ARE TRYING TO BEAT THEIR DISTRIBUTION? >>THERE IS NO, AT THIS POINT IN TIME, IT IS VERY CHALLENGING TO COMPETE WITH AMAZON. I THINK FOR ANYONE. THE SCALE IS JUST TOO GREAT FOR US TO NOT SELL THE PRODUCTS BECAUSE THERE IS AN OPPORTUNITY TO SELL A LOT OF PRODUCT THROUGH AMAZON. SO THAT IS ONE, SO WITH ALL THE BRANDS IN OUR PORTFOLO, WE HANDLE ALL OF THEIR DISTRIBUTION INFRASTRUCTURE OR THE FILAMENT WITH THE EXCEPTION BEING AMAZON. SO THE BRANDS IN THE PORTFOLIO ARE GOOD TO SELL ON AMAZON, BUT OTHERWISE, THE DISTRIBUTION GOES TWO HOURS. >>YOU ARE BASED NATIONALLY? PLANS FOR INTERNATIONAL EXPANSION? >>WE HAVE AN OFFICE RIGHT NOW IN NEW YORK AND LOS ANGELES, WE ARE OPENING AN OFFICE IN LONDON, AND I THINK THE NEXT NATURAL PATH BEYOND THAT WOULD BE ASIA. SO WE ARE SPECIFICALLY LOOKING AT JAPAN AND SINGAPORE AS THE INTERESTING HUBS WHERE WE COULD LAUNCH SOME PRODUCTS IN THE PORTFOLIO. >>WHAT YOU SEE AS BEING ATTRACTIVE ABOUT THOSE MARKETS FOR THE FORTHCOMING BRANDS IN THE IRIS NOVA PORTFOLIO? >>I THINK A BIG MOTIVATOR OR INSPIRATION RATHER FOR ME WAS ACTUALLY ASIA IN DEVELOPING THE TECHNOLOGY PLATFORM THAT WE USE NOW. SO WHEN WE FIRST STARTED IN 2015, I WAS LOOKING AT DIFFERENT METHODS OF TRANSACTING AROUND THE WORLD, AND IN ASIA, FOR YEARS, WE HAD ALL THE DIFFERENT MESSAGING PLATFORMS WITH PAYMENT INTEGRATION THAT IS VERY, THAT’S SOMETHING PEOPLE USE ALL THE TIME, YOU CAN BUY A PIZZA OR PAY YOUR BABYSITTER AND THE SICKLY DO ANYTHING THROUGH YOUR MESSAGING APP. AND THIS IDEA OF CONVERSATIONAL COMMERCE HAS BEEN AROUND FOR SOME TIME IN ASIA. I THINK JUST IN GENERAL, THE MARKET IS MUCH MORE DEVELOPED. ESPECIALLY FOR CONSUMER PRODUCT. COCA-COLA, FOR EXAMPLE LAUNCHES HUNDREDS OF NEW BRANDS EVERY YEAR IN ASIA, SPECIFICALLY. AND THAT IS NOT HAPPENING HERE IN THE STATES. SO I THINK THAT I’M INTERESTED IN THE MARKET, I DON’T KNOW WHAT THE PRODUCTS WILL DO WELL, BUT THAT’S SOMETHING THAT WE ARE LOOKING FOR A STRATEGIC ALIGNMENT IN MARKET TO BE ABLE TO TEST OUT THE BRAND IN OUR PLATFORM. >>JUST TALKING A LITTLE BIT ABOUT THE TEXT PLATFORM, BECAUSE THAT IS HOW 90% OF CUSTOMERS ARE MAKING PURCHASES. THEY ARE TEXTING IRIS NOVA AND DIRTY LEMON AND SAYING SEND ME A BOTTLE OF ROSE OR I’M AT THE TRIBECA DRUGSTORE AND I’D LIKE TO BOTTLES OF THE MACHO DRINK. IS THAT SUSTAINABLE IN THE LONG TERM, HAVING THIS TEXTBASED MESSAGE, METHOD OF CONSUMER TRANSACTIONS? DO WE NEED TO BROADEN THAT? >>WE THINK BRANDS WILL HAVE A PHONE NUMBER AND WEBSITE. THE PHONE NUMBER WILL NOT BE FOR PICKING UP THE PHONE AND CALLING A BRAND, IT WILL BE TO LET YOUR PHONE AND TEXT THE BRAND AND SAY I WANT MORE PRODUCT, I’M CHECKING ON MY ORDER, ASK A QUESTION TO CUSTOMER SERVICE, AND IT WILL ALL HAPPEN OVER MESSAGING. I DON’T THINK IT IS GOING AWAY ANYTIME SOON. THE IDEA OF CONVERSATIONAL COMMERCE IS FAR MORE FRICTIONLESS THAN ANY OTHER OPTION, IT’S MORE FRICTIONLESS THAN SUBSCRIPTION WHICH IS BASICALLY GOING AWAY AT THIS POINT OR JUST LOGGING INTO A WEBSITE WHERE YOU HAVE TO ENTER YOUR USERNAME AND PASSWORD AND DOWNLOADING AN APP HAS A LOT OF FRICTION AROUND THAT AND GOING TO THE STORE, I WOULD ARGUE THE GROCERY STORE ESPECIALLY HAS THE MOST FRICTION BECAUSE YOU HAVE TO GO TO YOUR CAR AND WALK DOWN THE STREET AND CARRY BAGS HOME. I’VE THREE CHILDREN, AND WHEN THEY WANT FOOD, THEY PICK UP PHONE AND THEY GO TO UBEREATS OR POST MATES AND AMAZON PRIME AND WE HAVE FOOD DELIVERED IN TWO HOURS AND THAT IS THE FUTURE. SO IF YOU LOOK AT MILLENNIALS SPECIFICALLY, 60% OF MILLENNIALS BY 2021 WILL BE ORDERING ALL FOOD ONLINE WHICH IS A STAGGERING STATISTIC. IT REALLY TELLS YOU, THAT’S JUST MILLENNIALS, THEN YOU GO TO JEN Z, I THINK THE NUMBER WILL BE HIGHER. SO THESE ARE ALL OF THE DIFFERENT DATA POINTS THAT WE ARE LOOKING AT AS WE CONTINUE TO INVEST IN INFRASTRUCTURE THAT SUPPORTS CONVERSATIONAL COMMERCE AT SCALE. >>I ORDER MOST OF MY GROCERIES ONLINE OR FROM POST MATES ALL THE TIME. BUT JUST LOOKING AT THAT, THAT IS A HUGE PART OF YOUR COMPANY. SO ARE YOU A TECH COMPANY OR A BEVERAGE COMPANY? >>THE MOST INTERESTING PARALLEL TO THIS IS NETFLIX. NETFLIX LAUNCHED IN 1997, AND AT THE TIME, THEY WERE JUST BASICALLY A DVD BY MAIL TYPE OF DELIVERY SYSTEM. AND I THINK THAT NETFLIX, WHAT HAVE YOU ONE QUESTION BACK THEN IS WHY ARE YOU INVESTING IN STREAMING? IT IS LIKE, THE PATH TO DISTRIBUTION IS THROUGH DVDS AT THE TIME THEY INVESTED IN STREAMING, AND IT WASN’T UNTIL 7 YEARS LATER THAT THEY RELEASED THE FIRST ORIGINAL SERIES WHICH WAS HOUSE OF CARDS. AND NOW IF YOU LOOK AT NETFLIX AS A COMPANY, THEY ARE MUCH MORE OF A CONTENT COMPANY NOW AND LESS OF A TECH COMPANY BECAUSE THE TECHNOLOGY HAS BEEN COMMODITIZED. BUT THEY WERE THERE AND FIRST TO MARKET WITH BASICALLY BRINGING STREAMING TO THE MASSES, AND REALLY MAKING IT A MORE COMMON THING TO SIT AT HOME AND TURN ON YOUR TV AND GO TO YOUR NETFLIX APP AND LOOK AT ALL OF THE SHOWS THAT YOU HAD AVAILABLE TO WATCH. THEY SPENT $16 BILLION THIS YEAR ON CONTENT WHICH IS MORE THAN ALMOST EVERY STUDIO, NEARLY COMBINED. SO THEY ARE SPENDING THE MOST OF ANY OF THE CONTENT STUDIOS, AND ANYWAY, I THINK THAT THE BEVERAGE INDUSTRY IS IN A VERY SIMILAR PLACE NOW TO WHERE NETFLIX WAS WITH THE MOVIE INDUSTRY OR THE MEDIA INDUSTRY BACK IN 1997. IT IS A VERY ANTIQUATED DISTRIBUTION SYSTEM THAT IS IN PLACE RIGHT NOW AND WE ARE BUILDING TECHNOLOGY TO SUPPORT THE NEXT ITERATION OF DISTRIBUTION OF CONSUMER PRODUCTS. NOT JUST BEVERAGE, AND I THINK THAT IS AN IMPORTANT NOTE. WE TEST THIS WITH AVERAGE RIGHT NOW, BUT THE TECHNOLOGY WE ARE DEVELOPING COULD APPLY TO BEAUTY AND PERSONAL CARE AND HOME GOODS, ANYTHING THAT HAS A HIGH VELOCITY THAT YOU ARE REORDERING ON A REGULAR BASIS. >>ARE ALL OF THOSE AREAS THAT YOU ARE LOOKING TO TEST INTO UNDER THE IRIS NOVA PORTFOLIO? >>I THINK IT’S POSSIBLE. OUR FOCUS IS ON BEVERAGE RIGHT NOW, BUT BEYOND THAT, OUR ASPIRATION IS TO BUILD THE CBG CONGLOMERATE OF THE FUTURE. SO A CONGLOMERATE THAT TAKES AWAY A LOT OF THE FRICTION POINTS AND THE DIFFERENT LAYERS THAT HAVE HISTORICALLY JUST TAKEN AWAY FROM THE CUSTOMER EXPERIENCE. >>WITH THAT ANALOGY TO NETFLIX, YOU TALK ABOUT THE HUGE SPEND ON CONTENT. EXPANDING THAT ANALOGY, IS SPENDING ON THE R&D THE DEVELOPMENT OF THE NEW BEVERAGES, THAT WERE MOST OF THE MONIES GOING RIGHT NOW? >>THAT’S WHY WE ARE FOCUSED ON ACCELERATING THE ON BOARDING OF NEW BRANDS TO THE PLATFORM. SO WE ARE BRINGING ON A LOT OF BRANDS THIS YEAR. AND YES, SO THE MAJORITY OF THE DOLLARS THAT ARE COMING INTO THE COMPANY ARE EITHER IN STAFFING UP THE CURRENT TEAM AND BUILDING A MORE ROBUST TECHNICAL INFRASTRUCTURE, BETTER PICKUP FACILITIES AND THINGS THAT ALLOW THE CUSTOMER TO RECEIVE PRODUCT FASTER, AND THAT THE ON BOARDING OF NEW BRANDS TO BUILD OUT THE PORTFOLIO. >>LET’S TALK A LITTLE BIT ABOUT THE OTHER COMPANY’S IN THE PORTFOLIO OR THE OTHER BRANDS, I SHOULD SAY, YOU HAVE THE DRUGSTORE, THAT’S THE BRICK- AND-MORTAR RETAIL LOCATION AND I HAD AN OPPORTUNITY TO CHECK OUT THE DRUGSTORE. >>WHAT DID YOU THINK? >>I THOUGHT IT WAS INTERESTING. IT WAS DIFFERENT. O IT LOOKS A LITTLE BIT LIK THIS. FOR THOSE WHO AREN’T FAMILIAR. HOW WOULD YOU DESCRIBE IT? IT IS ALMOST A VENDING MACHINE BEHIND A WALL? >>WE BUILT THIS OUT AS A WAY FOR CONSUMERS TO BE ABLE TO HAVE FASTER, EVEN FASTER ACCESS TO OUR PRODUCT. TYPICALLY PEOPLE ARE TESTING US AND HAVE TO WAIT FOR THE PRODUCT TO COME IN. FOR CUSTOMERS THAT ARE LOCATED WITHIN THE NEIGHBORHOOD OF EACH OF THE DRUGSTORES, THIS IS A GREAT WAY FOR YOU TO GRAB A BOTTLE ON THE WAY TO WORK OR COMING HOME FROM THE OFFICE OR WHEN YOU ARE OUT AND ABOUT, AND EVENTUALLY, SO RIGHT NOW THIS IS ALL DIRTY LEMON PRODUCTS, BUT AS WE BUILD OUT THE PORTFOLIO, THE PRODUCT THAT ARE IN THE FRIDGE WILL BE ALL THE BRANDS IN OUR PORTFOLIO. THIS WILL START TO LOOK MORE LIKE A BODEGA FRIDGE OR A PLACE WHERE YOU BUY YOUR BEVERAGES WITH A VARIETY OF PRODUCTS OUTSIDE OF JUST DIRTY LEMON. >>ONE THING I NOTICED IS THERE ARE NO ATTENDEES OR CASHIERS, THERE’S NO ONE BASICALLY MONITORING THE STORE. >>IT IS ALL ON THE HONOR SYSTEM. YOU GRAB A BOTTLE AND WHEN YOU ARE ON YOUR WAY OUT OR AT YOUR LEISURE, YOU TEXT US AND TELL US WHAT YOU TOOK AND WE CHARGE YOUR ACCOUNT OR IF YOU ARE A NOT OCCURRING CUSTOMER, WE SEND YOU A LINK TO PAY ON YOUR PHONE. IT SOUNDS LIKE A CRAZY IDEA, BUT WE TESTED IT, AND OUR THEFT IS ACTUALLY UNDER 5% WHICH IS CRAZY. WE MOVE A LOT OF BOTTLES TO THE FRIDGE EVERY DAY. AND THE MORE I THOUGHT ABOUT IT, AFTER WE HAD LUNCH THIS, YOU COULD WALK INTO ANY STORE IN NEW YORK CITY AND GRAB A BOTTLE OF SOMETHING AND WALK OUT, PROBABLY NO ONE WILL STOP YOU, BUT YOU DON’T, BECAUSE THE RIGHT THING TO DO IS PAY FOR THE PRODUCT. AND THAT IS WHAT WE ARE SEEING WITH OUR CUSTOMERS IN THE DRUGSTORE. >>WHAT PERCENTAGE OF SALES TAKE PLACE AT THE BRICK-AND- MORTAR LOCATIONS AS OPPOSED TO ONLINE OR VIA TEXT FOR CONSUMERS WHO AREN’T IN ONE OF THESE AREAS? >>THIS IS A VERY SMALL, THE DRUGSTORE IS FUNDAMENTALLY A MARKETING INITIATIVE AND WE AREN’T LOOKING TO SCALE THE DRUGSTORE TO BE ON EVERY STREET CORNER. WE THINK THIS IS A GREAT WAY TO CONNECT WITH CUSTOMERS IN REAL LIFE AND ALLOW THEM TO SEE THE PRODUCT BEFORE THEY PURCHASE THEM. BUT THIS ISN’T, THE DRUGSTORE IS IN A SCALED WAY FOR US TO GROW REVENUE. THE CORE OF OUR BUSINESS IS DIRECT CONSUMER. THAT SAID, WE ARE EXPLORING A LOT OF NONTRADITIONAL WHOLESALE ACCOUNTS. AIRPORTS, HOTELS, COFFEE SHOPS, ETC., BECAUSE WE THINK THAT THOSE ARE GREAT PLACES FOR EXPLORATION. AND FOR PEOPLE TO LEARN ABOUT NEW PRODUCTS FOR THE FIRST TIME. SO THE IDEAL SITUATION IS THAT SOMEONE GOES INTO A STORE, THEY PURCHASE ONE OF THE PRODUCTS AND ON THE BACK OF EVERY BOTTLE IS OUR PHONE NUMBER AND THEY TEXT US IF THEY LIKE THE PRODUCT AND THEY GET MORE OF IT. I THINK THAT IS THE WAY BEVERAGE CONSUMERS, THAT’S THE WAY THAT THEY TYPICALLY SHOP. ONCE YOU FIND A BEVERAGE YOU LIKE, YOU WANT MORE DELIVERED TO YOU. I THINK, YOU KNOW THE WAY THAT LaCROIX WAS BUILT AND ACHIEVED SUCH TREMENDOUS SCALE IN A SHORT PERIOD OF TIME, YOU LOOK AT ANY OF THE OTHER BRANDS IN THE BEVERAGE SPACE THAT’S GROWN VERY QUICKLY, THAT’S BECAUSE THEY HAD FANATICAL FANS THAT JUST WANTED TO CONTINUE TO RECEIVE THE PRODUCT. A LOT OF THOSE BUSINESSES WERE BUILT ON AMAZON, BUT AMAZON WASN’T REALLY BUILT FOR THE BEVERAGE INDUSTRY SPECIFICALY, AND WE ARE BUILDING THE INFRASTRUCTURE THAT SUPPORTS THE DIRECT CONSUMER PORTION OF BEVERAGE SALES. >>HOW DID YOU ACHIEVE THAT FANATICAL CULTLIKE STATUS? YOU ARE ALL OVER INSTAGRAM, INFLUENCERS ARE TOUTING DIRTY LEMON, CELEBRITIES TALK ABOUT DRINKING IT, HOW DID YOU ACTUALLY GET TO THAT LEVEL SO QUICKLY? >>WE LAUNCHED ON INSTAGRAM AT A TIME WHEN IT WAS VERY DIFFERENT THAN NOW. IT WAS 2015. THE INSTAGRAM FEED WAS STILL CHRONOLOGICAL. WHEN YOU POSTED SOMETHING, IT WAS GETTING OUT THERE IN REAL- TIME TO EVERYONE WHO WAS FOLLOWING YOU. SO WE LEARNED FROM SOME PEOPLE THAT BUILT LARGE FOLLOWINGS AND WE WERE POSTING SOMETIMES UP TO 12 TIMES PER DAY SO WE POSTED EVERY TWO HOURS BECAUSE WE KNEW THAT THAT WAS THE WAY TO GET THE BRAND IN FRONT OF MORE PEOPLE. >>WAS IT WORKING? >>YES. WE GREW A LARGE FOLLOWING QUICKLY. AND WE WERE THERE FIRST WHEN, WE WERE ONE OF THE FIRST BRANDS TO ADVERTISE ON AMAZON OR FACEBOOK, RATHER AND INSTAGRAM. AND THAT MARKET HAS BECOME SO OVERSATURATED IN SUCH A SHORT PERIOD OF TIME, AND WE DON’T SEE INSTAGRAM ADVERTISING AND INFLUENCER MARKETING SPECIFICALLY TO BE AS EFFECTIVE OR NEARLY EFFECTIVE NOW AS IT WAS BEFORE. BUT IT WAS REALLY LIKE THE FOUNDATION OF HOW THE BRAND GOT OUT THERE EARLY ON. AND IT IS EXTREMELY HARD TO BUILD A FOLLOWING FROM SCRATCH. BECAUSE THERE ARE A LOT OF BRANDS THAT ARE PULLING FOR YOUR ATTENTION. AND I THINK CONSUMERS ARE JUST GENERALLY DESENSITIZED TO MARKETING. I THINK THAT THE PATH TO CUSTOMER ACQUISITION FOR MOST CONSUMER BRANDS NOW IS MUCH MORE LONGTAIL THAN IT WAS EVEN JUST A YEAR OR TWO AGO. YOU HAVE TO REALLY SPEND TIME WITH THE CUSTOMER AND ALLOW THEM TO TASTE THE PRODUCT OR TOUCH IT OR ALLOW THEM TO FALL IN LOVE WITH THE PRODUCT BEFORE THEY BECOME A CUSTOMER RESTED A FEW YEARS BACK, IT WAS MUCH MORE BASED ON AN IMPULSE PURCHASE. >>ABSOLUTELY. I JUST WANT TO REMIND EVERYONE THAT IN A COUPLE MINUTES, WE WILL OPEN THE MIC UP FOR QUESTIONS FOR ZACH. PLEASE GET THOSE READY AND FEEL FREE TO LINE UP NOW. >>YOU THINK YOU WOULD DO IT THE SAME WAY IF YOU WATCH ON INSTAGRAM TODAY? >>I DON’T. IF WE LAUNCHED TODAY, I WOULD DO SOMETHING, AND WE THINK ABOUT THIS WITH THE NEW BRANDS. I THINK THAT CONSUMERS WANT TO BE STIMULATED AND NOT IN A PHYSICAL WAY NECESSARILY, BUT THEY WANT TO REALLY ENGAGE WITH SOMETHING THAT TAKES THEM OUT OF THEIR REALITY. SO WHAT WE ARE THINK ABOUT WITH THE NEW BRANDS IS HOW DO WE TAKE CONSUMERS ON EITHER A JOURNEY OR HOW IS THERE A STORY THAT WE CAN ALLOW THE CUSTOMER TO BE A PART OF? SO I THINK MARKETING NOW, THE MARKET IS CHANGING SO DRAMATICALLY FAST, AND WE ARE THINKING EVERYDAY ABOUT NEW WAYS TO ENGAGE WITH CONSUMERS. ON INSTAGRAM, WE BUILT OUT A STUDIO IN SOHO DOWN THE STREET AND WE WILL BE MOVING TO ALL VIDEO CONTENT ONLY. WE AREN’T POSTING ANYMORE STILL PHOTOS AND WE ARE JUST FOCUSED ON HOW DO WE CONTINUE TO ENGAGE WITH CONSUMERS? BUT THE INTERESTING THING ABOUT THE VIDEO AS WE ARE TALK ABOUT THE PRODUCT, PEOPLE WILL BE DRINKING DIRTY LEMON BUT IT’S NOT ABOUT DIRTY LEMON. IT WILL BE ABOUT THE LIFESTYLE AROUND THE BRAND. THAT’S SOMETHING THAT IS A SHIFT IN THOUGHT PROCESS THE KIND OF START TO BE PRODUCING NEW KINDS OF CONTENT. AS AN ORGANIZATION, WANT TO BE MARKET-DRIVEN AND REACTIVE TO WHAT’S HAPPENING IN THE MARKET AND I THINK IN YEARS PAST WITH STARTUPS, THAT’S BEEN SOMETHING THAT’S BEEN NEGATIVELY LOOKED AT, PIVOTING, BUT I THINK THE STRONGEST COMPANIES KNOW WHEN TO PIVOT AND KNOW WHEN TO EVOLVE THEIR STRATEGY TO CHANGING MARKET DEMAND. >>JUST FOR YOU, IF YOU WEREN’T CEO AND FOUNDER OF IRIS NOVA, WHAT WOULD YOU BE DOING? >>I WOULD BE SPENDING AS MUCH TIME WITH MY KIDS AS POSSIBLE AND I WOULD KEEP JUST BUILDING. I LOVE THE WRITTEN WORD AND I LOVE REALLY WELL-CRAFTED COPY. I ALWAYS WANTED TO BE AN ARCHITECT AS A KID, I JUST LOVED ALWAYS DRAWING AND SEEING, THE IDEA OF SEEING SOMETHING ON PAPER COME TO LIFE. I WOULD PROBABLY BUILD A HOUSE OR SOMETHING LIKE THAT. >>>I THINK WE HAVE THE FIRST QUESTION, I DEFINITELY WANT TO LET OUR FIRST AUDIENCE MEMBER TAKE THE MIC. >>DID AFTERNOON. A GREAT DISCUSSION. I HAVE A TWO PART QUESTION. THE FIRST BEING ONE WITH REGARDS TO BRANDING AND STRATEGY. IT SEEMS LIKE AS WE ALL MIGRATED TO USING PHONES A LOT, A LOT OF COMPANIES AND BRANDS RELIED HEAVILY ON INFLUENCER MARKETING AND I THINK TOWARDS THE END OF THE CONVERSATION, YOU WEREN’T NECESSARILY BACKING ON THAT. SO WE SAW A RUSH TO THAT AND I THINK THE PEOPLE ARE REALIZING THAT FOR WHATEVER REASON THEY ARE NOT GETTING THE RETURN ON ANY OF THE INVESTMENT ON THAT. SO I WOULD WONDER IF YOU WOULD ELABORATE A LITTLE BIT ON THAT. AND THEN THE SECOND QUESTION IS MORE ABOUT SPECIFICALLY ONE OF THE PRODUCTS. THINK DIRTY LEMON HAS A CHARCOAL FLAVOR AND I’VE SEEN A LOT OF CHARCOAL STUFF ON THE MARKET IN TERMS OF HEALTH AND WELLNESS AND I’M JUST CURIOUS ABOUT AT WHAT POINT DO WE ALL DECIDE TO POINT TO THE PHONE IN OUR BODY WAS LIKE A HEALTH THING. ANYWAY. >>I WILL ANSWER THE FIRST QUESTION FIRST. IT WAS A RECENT STUDY THAT CAME OUT JUST A COUPLE MONTHS BACK WHERE THEY INTERVIEWED A LARGE, PRETTY LARGE GROUP OF PEOPLE AND ASKED THEM IF THEY TRUSTED THE PRODUCTS THAT INFLUENCERS WHO WERE, WHERE DID YOU JUST GO? WHO WAS THE GUY THAT JUST ASKED THE QUESTION? >>I DOES WANTED TO MAKE SURE I WAS LOOKING AT YOU. >>SO THEY ASKED, IF THE PEOPLE THAT WERE SURVEYED TRUSTED THE PRODUCTS THAT WERE BEING PROMOTED BY INFLUENCERS AND ONLY TWO OUT OF EVERY 10 PEOPLE SAID THEY TRUSTED THE PRODUCTS. SO THIS IS SOMETHING THAT I THINK IS, PEOPLE ARE GENERALLY SKEPTICAL NOW, YOU LOOK AT THE DOLLARS THAT ARE BEING SPENT ON INFLUENCER MARKETING, IT’S ONLY, IF ONLY TWO OUT OF 10 PEOPLE WILL TAKE THE TIME TO OBSERVE IF THAT IS SOMETHING THAT, TO OBSERVE THAT AND POTENTIALLY MAKE A PURCHASE, IT’S JUST NOT A GOOD SPEND OF MONEY. BUT COINCIDENTLY, OVER THE PAST 2 YEARS, THE PRICE SKYROCKETED TO WORK WITH INFLUENCERS. WE USED TO PAY SOMEONE $500 5 YEARS AGO WE SAW A CRAZY RETURN, NOW IT’S LIKE GETTING $500 WON’T EVEN GET YOU A RESPONSE TO AN EMAIL. ANYWAYS, THE SECOND QUESTION, CHARCOAL, WHAT WE SAW WITH CHARCOAL WAS WE SAW YEARS BEFORE CHARCOAL WAS THAT PEOPLE WERE REALLY INTERESTED IN THIS IDEA OF CLEANSING. JUICE CLEANSES WERE BIG FOR YEARS AND THIS IDEA OF JUICE CLEANSING WAS THAT IF YOU ONLY DRANK JUICE FOR A WEEK AT A TIME OR WHATEVER THE PERIOD WAS THAT YOU WOULD FEEL HEALTHIER AND LOSE WEIGHT, ETC. ETC. THAT IDEA QUICKLY WENT AWAY ONE ALL OF THE HEALTH AND NUTRITION EXPERTS SAID THAT YOU CAN’T JUST DRINK JUICE, YOU HAVE TO EAT FOOD AND LIVE A HEALTHY LIFESTYLE AND EXERCISE, ETC. BUT WHAT DIDN’T GO AWAY WAS THE IDEA THAT CONSUMING SOMETHING THAT HAD AN IMPACT ON YOUR BODY IT WAS GOOD FOR YOU, AND WE WERE LOOKING AT, SPECIFICALLY ALL OF THESE DIFFERENT THINGS, THESE INGREDIENTS AND TRENDS THAT WERE HAPPENING IN JUICE SHOPS AND CHARCOAL SOMETHING THAT PEOPLE WERE ADDING AND CHARCOAL IS BEEN USED AND ITS AND USED IN HOSPITALS EVERY DAY FOR DETOXIFICATION AND IT’S BEEN USED TO REDUCE BLOATING AND LIKE BLOATING IN YOUR STOMACH, ANY DIGESTION ELEMENTS, IT’S BEEN A NATURAL INGREDIENT USED FOR A LONG TIME. FOR THOSE PURPOSES. WE DECIDED TO PUT THAT INTO OUR FIRST BEVERAGE ONLY BECAUSE WE KNOW THAT WE WANT TO FOCUS ON SOMETHING FUNCTIONAL AND IT HAPPENED TO BE A TRENDY INGREDIENT AT THE TIME. AND IT CONTINUES TO BE ONE OF OUR BEST SELLING PRODUCTS. CLEARLY THERE IS STILL APPEAL. THAT IS WHAT LED US TO CHARCOAL. A LONG-WINDED RESPONSE, BUT THANK YOU FOR ASKING. >>IT BE VAGUE ABOUT THE WHITE CLOTH OBSESSED MILLENNIAL PHASE RIGHT NOW, I KNOW YOU ARE A WELLNESS BRAND OR AT LEAST DIRTY LEMON IS, WOULD IRIS NOVA CONTINUE GOING, CONSIDER GOING INTO THE ALCOHOL SPACE? >>I WOULD LOVE TO DO ALCOHOL, BECAUSE I THINK THERE’S SO MUCH OPPORTUNITY IN ALCOHOL, BUT IT’S SO CHALLENGING WITH THE THREE-TIER SYSTEM IN THE STATES TO BE ABLE TO DO ANYTHING DIRECT TO CONSUMER. IF WE DID CREATE AN ALCOHOL- BASED PRODUCT, WE WOULD HAVE TO DO IT IN EUROPE, SO THERE’S NO THREE-TIER SYSTEM IN EUROPE, WE WOULD DO THAT IN LONDON. >>IT SOMETHING YOU THOUGHT ABOUT? >>WE BUILT THE SYSTEM ALREADY FOR THE EUROPEAN MARKET. SO THAT’S THE THOUGHT PROCESS. I WILL DO ANYTHING — THE YVONNE WAS ZERO TO IN A VERY SHORT PERIOD OF TIME. AND THAT CLEARLY IS A SIGN OF, DESPITE THE FACT THAT IT HAS ALCOHOL IN IT, CONSUMERS WANT LOWER CALORIES, LOWER SUGAR PRODUCTS, AND HISTORICALLY, THAT IS SOMETHING THAT THE LARGER STRATEGIC’S JUST HAVEN’T BEEN ABLE TO PROVIDE TO CONSUMERS. THAT IS WHY WHITE CLOTH IS SO APPEALING, AND THERE IS A LOT OF OPPORTUNITY IN THE SPIRITS AN ALCOHOLIC BEVERAGE SPACE. >>I THINK WE HAVE ANOTHER QUESTION. >>WHICH IS YOUR FAVORITE FLAVOR? >>GOOD QUESTION. IT CHANGES DAY TODAY. ON THIS TABLE HERE, I DRINK A COUPLE A DAY, AT LEAST TWO A DAY. I ACTUALLY LOVE THE ROSE, THAT IS TO BE ONE OF MY FAVORITE, THAT’S THE PINK BOTTLE. THE RETINOL IS DELICIOUS ALSO. THAT’S MY FAVORITE ON THE TABLE, AND HONESTLY IT CHANGES AND I THINK WE’VE SEEN THIS. WE’VE LAUNCHED A LOT OF PRODUCTS, AND EVERY TIME WE HAVE A NEW ONE COME OUT, EVERYONE IN THE OFFICE STARTS DRINKING THAT ONE SPECIFICALLY. AND THEN YOU END UP GOING BACK TO ONE OF YOUR OLD FAVORITES, AND WE HAVE A COUPLE BEVERAGES THAT WE HAVE FOR JUST A LIMITED TIME. WE HAVE PEOPLE SAYING BRING BACK WHITE ROSE WHICH WAS THE FEBRUARY LAUNCH THIS YEAR, SO WE ARE ALWAYS THINKING, AND I THINK THAT’S THE THING TO MAKE IT SPECIAL, THE VARIETY OF PRODUCT. >>WHAT IS YOUR BURN RATE AND HOW MUCH LIQUID ASSETS DO YOU HAVE TO SUPPORT IT? AND I HAVE ANOTHER QUESTION AFTER THAT. >>ARE YOU AN INVESTOR? >>YES. I AM AN INVESTOR. >>WE ARE NOT DISCLOSING OUR FINANCIALS RIGHT NOW, BUT WE HAVE A GREAT SYNDICATE OF INVESTORS THAT HAVE SUPPORTED OUR VISION, AND WE ARE ALWAYS RAISING CAPITAL. THAT IS SOMETHING THAT IS VERY, THIS IS JUST SOMETHING THAT IS EARLY STAGE COMPANY GROWTH. WE ARE NOT ABLE TO GROW THE COMPANY WITH PROFITS ALONE. WE’VE RAISED EXTERNAL CAPITAL AND HAVE A LOT OF INVESTORS. I THINK WE ARE DOING REALLY WELL, THEY WERE ASKING BEHIND STAGE, WE HAVE ABOUT 30 CORE TEAM MEMBERS AND ABOUT 50 WITH ALL OF THE EXTERNAL SUPPORT. SO PRODUCTION AND CUSTOMER SERVICE, DELIVERY DRIVERS ETC. SO GIVEN OUR SIZE RIGHT NOW, JUST WITH 50 PEOPLE, WE’VE DONE A LOT. SO WE TRY TO BE AS SCRAPPY AS POSSIBLE AND REALLY MAKE SURE THAT EVERY DOLLAR THAT SUSPEND GOES A LONG WAY. I WOULD SAY THAT WE ARE A STANDARD STARTUP, WE ARE NOT OVERSPENDING ON THINGS, WE ARE VERY FRUGAL WHEN IT COMES TO THE DOLLARS BEING SPENT WHICH RESULTED IN I WOULD SAY A LOWER THAN USUAL BURN FOR A COMPANY OUR SIZE. >>THE SECOND QUESTION, WHAT KIND OF COMPETITION DO YOU HAVE IN THE MARKETPLACE? >>IN THE BEVERAGE SPACE SPECIFICALLY WITH DIRTY LEMON, FUNCTIONAL BEVERAGE HASN’T REALLY BEEN EXPLORED IN A VERY, THERE AREN’T 1 MILLION FUNCTIONAL BEVERAGE COMPANIES. HISTORICALLY, BEVERAGE COMPANIES HAVE ALWAYS FOCUSED ON ONE THING AND THEY DOUBLE DOWN ON THAT. WHETHER IT IS MACHO OR CHIA, PICK INGREDIENT. WE DON’T HAVE MUCH COMPETITION WITH DIRTY LEMON WHICH IS WHY IT’S BEEN APPEALING. ON THE INFRASTRUCTURE SIDE WITH IRIS NOVA, WE REALLY DON’T HAVE MUCH COMPETITION EITHER, BUT COMPETITION FOR US IS NOT OTHER BEVERAGES, IT’S OTHER PRODUCTS THAT CONSUMERS ARE GOING TO SPEND. SO IF YOU HAVE $1000 OF DISCRETIONARY INCOME EVERY MONTH, WE HAVE TO COMPETE WITH BEAUTY BRANDS AND RESTAURANTS AND WE HAVE TO COMPETE FOR THEM SHARE OF THE CONSUMER FOR A PORTION OF THE DOLLARS. SO WE LOOK AT ANY PRODUCTS THAT ARE BEING TARGETED TO MILLENNIALS OR EVEN THE OLDER AGE RANGE AS THE PRODUCT SELECTION CONTINUES TO GROW BECAUSE THOSE ARE THE PRODUCTS THAT COULD BE COMPETING FOR THEIR ATTENTION AS WELL. BUT I THINK WHAT REVOLVE IS DOING IS REALLY EXCITING AND REALLY INTERESTING. SO REVOLVE FOR ANYONE THAT THE SNOW IS A CLOTHING COMPANY, BUT THEY BUILT THIS INCREDIBLE MARKETPLACE OF BRANDS THAT ARE THIRD-PARTY AND PRIVATE LABEL USING DATA TO SUPPORT ALL OF THEIR DECISION-MAKING THE PRODUCT LAUNCHES AND IT’S A REALLY EXCITING COMPANY AND ALSO AN IPO THAT HAPPENED THIS YEAR. AND I THINK THAT THERE WILL BE A LOT MORE CONGLOMERATES BUILT OVER THE NEXT DECADE. AND I WOULD LIKE TO, FOR US TO BE ONE OF THOSE IN THE CONSUMER SPACE SPECIFICALLY. >>THANK YOU VERY MUCH. >>COULD YOU THINK IS THE BIGGEST COMPETITION IN THAT DISCRETIONARY BUCKET? >>I THINK THAT, IT’S PROBABLY BEAUTY BRANDS, I THINK WE COMPLEMENT, BEVERAGES COMPLEMENT WORKOUT CLASSES AND THE LIFESTYLE OF THE CONSUMER MOST FREQUENTLY IS WORKOUT CLASS, SOME TYPE OF WORKOUT CLOTHING OR APPAREL, AND I THINK FOOD AND BEVERAGE FITS ALONG WITH THAT. SO I DON’T NECESSARILY THINK THAT THOSE ARE COMPETITIVE, BUT THERE ARE OTHER PRODUCTS, I DON’T REALLY HAVE A GOOD ANSWER ON THAT, BUT THE BOTTOM LINE IS THERE ARE A LOT OF THINGS PULLING FOR CONSUMER ATTENTION AND WE NATURALLY NEED TO COMPETE WITH THOSE, NOT BE THE LOUDEST BUT THE MOST RELATIVE IN BEING ATTRACTIVE TO CONSUMERS. >>MY QUESTIONS ABOUT, WITHIN THE BEVERAGE INDUSTRY, WHO IS YOUR BIGGEST COMPETITOR WITH BEVERAGE TO DIRECT TO CONSUMER BRANDS? >>SO I CAN TELL YOU THE BRANDS THAT HAVE DONE IT BEST, AND THEY ARE NOT NECESSARILY COMPETITORS TO US DIRECTLY, BECAUSE THE PRODUCTS ARE TARGETED TO DIFFERENT CONSUMERS, BUT SOIL IT WAS REALLY THE FIRST SOIL AND, BEFORE US BUILT A VERY LARGE DIRECT CONSUMER BUSINESS. I DON’T KNOW HOW THEY ARE DOING STILL ON THE DIRECT CONSUMER SIDE, BUT I KNOW THAT THEY PAVE THE WAY AND REALLY SHOWED THAT THIS MODEL WAS SOMETHING THAT WAS INTERESTING TO CONSUMERS. AND IT WAS TARGETED MOSTLY TO MALES, AND NOW THEY HAVE SINCE GONE INTO OTHER DISTRIBUTION CHANNELS, THEY SELL IN 7-ELEVEN AND TARGET AND ALL THAT, I THINK KATE WATER HAS DONE A GOOD JOB WITH BUILDING A VERY BIG COMPANY WITH A VERY LARGE DIRECT CONSUMER BUSINESS. BEYOND THOSE TWO, I’M TRYING TO THINK OF OTHERS, THERE ARE BRANDS LIKE BI AND ALL OF THE WATER COMPANIES THAT HAVE A DIRECT CONSUMER ELEMENT OF THE BUSINESS, BUT THEY ARE NOT NECESSARILY THE CORE FOCUS OF THOSE BRANDS. THE REASON WHY WE ARE DIRECT CONSUMER IS BECAUSE WE WANT TO SEE, WE WANT TO UNDERSTAND BETTER WHAT THE CONSUMER WANTS SO THAT WE CAN CREATE NEW PRODUCTS THAT ARE IN LINE WITH THEIR WANT AND DEMAND AND CHANGING TASTES AND ALL OF THAT STUFF, AND THAT SOMETHING THAT STORE SHELVES JUST DON’T ALLOW FOR. I WANT CONSUMERS TO BE ABLE TO IDEALLY COME TO US AND SAY I REALLY WOULD LOVE IF YOU MADE A RASPBERRY DRINK OR WHATEVER, AND WE SAY SURE, WE WILL DO IT. AND THEN WE DO IT. THAT’S WHAT HAPPENED WITH CBD. WE LAUNCHED THE FIRST CBD BEVERAGE IN THE UNITED STATES NATIONALLY LAST YEAR. WE DON’T SELL THE PRODUCT ANYMORE BECAUSE THERE IS A LOT OF CHALLENGE LEGALLY WITH SELLING CBD AT SCALE, BUT WE WON BEVERAGE OF THE YEAR AND IT WAS EXTREMELY SUCCESSFUL. BEFORE WE LAUNCH THE PRODUCT, WE WENT OUT TO CUSTOMERS AND SAID WHAT DO YOU THINK WE SHOULD LAUNCH NEXT AND OVERWHELMINGLY, EVERYONE SAID CBD, SO WE LAUNCH THE PRODUCT AND THAT WAS THAT. THE REST IS HISTORY. I WOULD LIKE TO DO THAT MORE OFTEN AND GET TO A PLACE WITH OUR OPERATIONAL INFRASTRUCTURE WERE NOT ONLY WITH DIRTY LEMON, BUT WITH OTHER BRANDS, WE CAN LEVERAGE THE POWER OF OPINION AND ACTUAL, WHAT PEOPLE WANT TO BE ABLE TO PROVIDE THEM THOSE THINGS. AT THE END OF THE DAY, WHEN YOU PEEL OFF THE LABELS OF ANY úBEV THE BOTTLE IS ALL COMMODITY AND IT COULD BE CHANGED IN MANIPULATED AND ALL THAT STUFF. BUT PEOPLE BUY INTO IS THE BRAND AND THE TRUST FACTOR THAT COMES WITH PURCHASING A BRAND AS WELL. IT’S A UNIQUE CATEGORY IN THAT WAY, BECAUSE THIS LIQUID CAN CHANGE WHILE THE INTEGRITY OF THE BRAND STILL REMAINS. >>WOULD YOU GO BACK TO CBD NOW THAT THE FARM BILL HAS PASSED? IT IS STILL A BOOMING BUSINESS? >>THE INTERESTING THING ABOUT THAT AND THIS IS THE FIRST TIME THIS IS PROBABLY EVER HAPPENED IN HISTORY WHERE YOU HAVE AN INGREDIENT OR SOMETHING THAT IS GROWN THAT HAS BOTH PSYCHEDELIC PROPERTIES AND ALSO THERAPEUTIC PROPERTIES. SO THERE IS NATURALLY A CHALLENGE IN THAT, BECAUSE THERE’S A LOT OF DOLLARS TO BE EARNED OR HAD IN SELLING CANNABIS IN THE VARIETY OF DIFFERENT FORMS. THE FIGHT THE FACT, DESPITE THE FACT THAT IT’S LEGAL TO GROW INDUSTRIAL HEMP, THE CBD HAS BEEN CLEARED FOR FOOD AND BEVERAGE PRODUCTS WHICH IS THE CHALLENGE THAT THEY’RE FACING. THEY WILL START FINDING ON A PER OCCASION BASIS ALL OF THE DIFFERENT RETAILERS THAT ARE SELLING CBD PRODUCT. I THINK IT’S 600 OR $900 PER OCCURRENCE IF THEY ARE CAUGHT SELLING THE PRODUCT, WHICH TO A SMALL VOCAL GROCER IS A LOT OF MONEY. THAT TYPE OF REGULATION WILL DRIVE OUT A LOT OF THE INNOVATION HAPPENED IN THE SPACE AND I THINK HONESTLY IF I HAD TO PREDICT, I THINK IT WILL FALL TO THE STATES TO DECIDE IF IT’S LEGAL OR NOT, BUT THE FDA NEEDS TO MAKE THE DECISION ON A NATIONAL LEVEL, AND WE ARE NOT IN THE POSITION FROM A LIABILITY STANDPOINT TO TAKE ON THE RISK ASSOCIATED WITH FIGHTING WITH THE FDA. UNTIL IT IS LEGAL NATIONALLY, THAT’S NOT SOMETHING WE WILL PURSUE. >>I THINK WE HAVE TIME FOR ONE MORE QUESTION. >>MY NAME IS VICTOR HUGO GUTIERREZ, THE PRESIDENT OF THE LOCAL ENTERTAINMENT MEDIA GROUP, YOU ARE A MAN ON THE PULSE OF NEW TECHNOLOGY AND ALSO THANK YOU FOR BEING A SPIRITUAL LEADER BY BRINGING DIFFERENT SPIRITS TO THE NEW YORK CITY BARS, AND OF COURSE YOU WILL ADD A LITTLE MORE SUBSTANCE TO IT WHICH IS BEAUTIFUL. THE QUESTION FOR YOU IS WHAT ARE YOU PLANNING NOW AND IN THE FUTURE WITH ARTIFICIAL INTELLIGENCE, AI, WHAT IS IT, WHAT ARE YOUR COMPANY GOALS? >>LAST YEAR, WE PURCHASED A COMPANY CALLED PONCHO WHICH IS A CONVERSATIONAL WEATHER BOUGHT, AND PONCHO IN 2017, IT WAS NAMED THE WORLD’S BEST CHAT BOT. AND WE PURCHASED THAT COMPANY BECAUSE THE ARTIFICIAL INTELLIGENCE AND THE NATURAL LANGUAGE PROCESSING THAT THEY BUILT AROUND HANDLING CONVERSATIONS AT SCALE WAS INCREDIBLY EXCITING. SO WE BUILT, WE BOUGHT THAT COMPANY AND WE TOOK ALL OF THE CORE TECHNOLOGY AND WE ROLLED IT INTO THE NATURAL LANGUAGE PROCESSING THAT WE USE FOR ALL OF THE IRIS NOVA BRANDS. AND THAT, SO WE WANT TO CONTINUE TO INVEST IN THAT AND I’M LOOKING, WE ARE TALKING TO AND LOOKING AT A LOT OF OTHER TECH COMPANIES THAT ARE FOCUSED ON THE SPECIFIC AREAS OF CONVERSATION AT SCALE, WHICH IS SOMETHING THAT A LOT OF BUSINESSES DON’T THINK ABOUT, UNLESS YOU ARE A BANK OR YOU HAVE A VERY HEAVY CUSTOMER SERVICE COMPONENT, THAT SOMETHING THAT MOST BRANDS JUST DON’T THINK OF, HOW DO YOU CONVERSE WITH A LOT OF PEOPLE AT ONE TIME? AN AIRLINE IS ANOTHER GOOD EXAMPLE OF THAT. THAT IS SOMETHING THAT WE ARE THINKING ABOUT ALL THE TIME AND THINK ABOUT WAYS WE CAN STRENGTHEN THAT FOR CUSTOMERS TO ELEVATE THE EXPERIENCE. >>I ONE LAST QUESTION FOR YOU. THE LAST REPORTED FUNDING ROUND FOR IRIS NOVA WAS THE INFUSION FROM COCA-COLA. WHAT IS YOUR FUNDING TO DATE? HAVE THERE BEEN FURTHER ROUNDS SINCE THEN? >>WE HAVE NOT CLOSED ANY ROUNDS BEYOND THE COCA-COLA ROUND. BUT YES, LIKE I SAID BEFORE, WE WILL NEED TO CONTINUE FUNDRAISING FOR SOME TIME, AND WE WILL BE SURE TO LET YOU KNOW AS SOON AS WE CLOSE MORE FUNDING. >>>ALL RIGHT EVERYONE, THANK YOU SO MUCH. THANK YOU, GUYS. [ APPLAUSE ] [ MUSIC ] [ MUSIC ]

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