As coronavirus ups DTC demand, Dirty Lemon’s Iris Nova pivots its retail strategy

Iris Nova's Drug Store is shuttered in accordance to NYC law

Iris Nova, the startup beverage brand backed by Coca-Cola, is balancing a coronavirus-driven uptick in DTC demand with punctures in its hospitality and retail businesses. Its chief executive explains how being historically unafraid of strategy “pivots” has reduced the pressure of the past few weeks.

Iris Nova is the brainchild of Zak Normandin, who first imagined a beverage company “built with consumption data, technology, and direct connection with consumers” back in 2015.

He now counts nine beverage brands in his stable, including Sanzo, Miracle Seltzer and Olipop. But it was flagship brand Dirty Lemon that first turned the heads of investors by taking DTC off a web browser and on to a text messaging platform.

Now, consumers can order crates of Iris Nova’s full portfolio of drinks directly through SMS.

The service has – predictably – proven popular with US consumers staying inside during the coronavirus outbreak. This has seen the company shift its focus to concentrate sales and operational efforts on direct delivery.

“Thankfully, we've invested heavily in infrastructure that supports that – we now have the technology platform that allows customers to place orders very quickly and provides very fast deliveries,” says chief executive Normandin.

However, the company is working to mitigate potential losses from newer arms of its business.

The majority of its partners in the hospitality business have been forced to close temporarily. That poses a “challenge” to Iris Nova as restaurants, hotels, cafes and bars are “critical customers to the company”. Currently, the drinks maker is figuring out ways it can support their businesses through a pivot to delivery services.

“It's just a very dramatic change in the way that we're doing things,” says Normandin. “It’s definitely not bad necessarily, but it’s still a change.”

Additionally, the company is working out how the virus spread will affect the plans for its burgeoning retail business. Central to this is The Drug Store, its shop in New York’s Tribeca, which has had to close as part of the city’s shutdown of all non-essential businesses.

Scaling back

But it's hard to understand how The Drug Store has remained open for the 18 months it has been in business.

Firstly, it’s located in an area of prime real estate without the high mark-ups or ticket prices that keep its neighbors in business. Secondly, it’s essentially a collection of fridges: the store is cashierless, and consumers are trusted to pay for the drinks they pick out via Iris Nova’s text messaging service.

“On paper, the concept makes no sense,” Normandin admits. “And there would have been no data points that we could have kind of pointed to saying, ‘this is the reason why we want to do this right now’. It was just an intuition.”

The store stays afloat because it also houses a customizable cocktail bar that the company rents this out to private event planners. That line of revenue is no longer viable for the foreseeable future (all social gatherings are currently banned in New York).

Yet Iris Nova had, luckily, u-turned on its plans to expand The Drug Store’s footprint even before the coronavirus outbreak. The original plan was to open cashierless stores in “three or four” US cities, as well as operate another outpost in New York.

“We’ve scaled back on that, just because there's a lot of variables that we couldn't control for in launching The Drug Store at scale,” says Normandin. “The operational overhead required to do that is really significant.”

The company opened its second New York Drug Store in Hudson Yards in March 2019. It realized running a retail environment in a mall was unworkable “really quickly” and closed six months later. An opening in LA is still on the cards but now no longer “in the immediate plans”.

Rapid testing

Yet the Tribeca store – should it weather the coronavirus – will be kept open and double as an innovation center for the company. Normandin has instilled a culture of rapid, small-scale testing, whereby retail ideas are first trialed in The Drug Store. The concepts that work are eventually rolled out across Iris Nova’s retail partners, the largest of which is Walmart.

“In a lot of ways, we’ve optimized our DTC offering, so more recently we've been thinking a lot about retail," says Normandin.

“We're always trying to look at things through a lens of how we can be more efficient or effective with technology, and the tools that we have available to us. The focus is always on optimizing distribution or the operational side of the beverage business.”

An example of Iris Nova’s rapid testing is its partnership with Avery Dennison, which builds RFID labelling. The brand has employed the technology to monitor exactly when a specific bottle is lifted out of the fridge in The Drug Store in real time; now it plans to install these connected fridges in the stores of its retail partners.

“No-one in the food and beverage industry is tracking individual units in a third-party retail environment right now,” Normandin contends. “Having that data available to us in real time is an incredible opportunity, and ultimately results in stronger revenue growth and cost savings that the whole business feels.”

Don't fear the pivot

With the grocery industry in its current state of upheaval, this rollout will likely be delayed for the coming months. But that’s also OK in the culture of Iris Nova, which Normandin has deliberately built to survive fast strategy rewrites.

“I don't think pivots are bad,” he says. “In the past, pivots have always been kind of viewed negatively ... but they’re really important for companies to learn that oftentimes, things are not going to go as planned.

“This virus has shown how fast business can change in the course of a week. It shows that you need to be reactive to the market, rather than let the market control you.”

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