PSFK Retail Conference Preview: Iris Nova Founder On Beverage Innovation And Next-Generation Customer Loyalty
Before taking the stage at PSFK's upcoming Future of Retail Conference on January 16, Iris Nova (comprising brands Dirty Lemon and The Drug Store) founder and CEO Zak Normandin tells PSFK how he is pioneering a new kind of beverage brand built around strong customer relationships, seamless retail technology, and innovative product
Dirty Lemon is a different kind of beverage company. Without traditional retail partners or e-commerce, the millennial-friendly brand has built a dedicated community of customers—and a valuable collection of data. Originally available only ordered by the case via text, Dirty Lemon is quickly moving into brick-and-mortar retail, with a new space in New York's TriBeCa neighborhood and future locations on the way. Using the honor system, the storefront operates on the existing text-to-order platform, while a VIP space in the back serves experimental cocktails to the company's most loyal clients.
Ahead of his presentation at the Future of Retail 2019 Conference, January 16, PSFK caught up with Zak Normandin, founder and CEO of parent company Iris Nova as well as its brand Dirty Lemon, to better understand how the latter maintains relationships with customers, plans to acquire new ones and what it means to stay ahead of the curve in the worlds of wellness and commercial beverages.
PSFK: Zak, could you tell me a bit about Dirty Lemon and what led you to found the company?
Zak Normandin: We started Dirty Lemon in 2015. And my past experience was in retail, or in food and beverage, but selling products into retail stores. I sold into Target and Whole Foods.
One of my frustrations was always the speed that it takes to get a product from the point of presenting it to a buyer through to getting it onto store shelves. So, Dirty Lemon, for me, was a response to a lot of the challenges I was having in connecting with consumers, and with the barrier of retail in the mix.
We developed Dirty Lemon as a direct-to-consumer beverage offering. We don't sell into grocery stores. We have a direct connection with all of our customers through a platform that we developed, which allows the customers to place orders via text message.
That's what we've been working on for the last three years, building out the platform to enable convenient, frictionless deliveries and access to our products for consumers.
The beverage products that we're selling are all functional in nature. They have lemon juice, ocean minerals, and sea salt as the base. And then we add flavor and function profiles on top of that base to give it a purpose. We're launching one beverage per month for the foreseeable future, so we have about a 30‑day innovation cycle. And we can launch products to consumers faster than they would be able to access them in stores.
Very cool. And how will you be deciding the next flavor of the month?
We’re identifying trends, really just by looking at the market. We just launched a CBD beverage—I'm sure you're familiar with the buzz around CBD.
It's, I think, our best. We partnered with high‑end cannabis brand, Beboe for that. And we are noticing that CBD was very popular and prevalent in a lot of food products, but it wasn't really being used in beverages. Incorporating it into a beverage allows consumers to achieve the benefit of CBD without having to worry about mixing a tincture into a smoothie or whatever it may be.
Yeah. So we're traveling, we're talking to people that are leaders in their respective industries, within the food space. And that's how where we're identifying different beverages. This month, we're launching turmeric, which has been around for a while. But it's an incredible anti‑inflammatory, and it’s in an orange bottle which is very fitting for October, and Halloween.
Some of the ingredients are really progressive, like CBD. And some of them are a little bit more familiar to consumers. But all of our beverages have under 15 calories and less than one gram of sugar. We like to think of the product offering as an easy way for consumers to incorporate some of these ingredients into their lives, in a convenient way.
In what industry would you consider Dirty Lemon?
At our core, we're a technology company. We have technology driving pretty much everything that we do, from acquisition of customers, through the process of delivering the product to you. The ordering process is all technology‑enabled.
But, of course, we're also a beverage company. So the quality and overall presentation of the beverage is very high priority as well.
Then we're also getting into retail so we have a core competency that we're building in and curating like experiences around the physical space.
Can you tell me a little bit more about your approach with retail? I know that you have a development called the Drug Store.
We launched the Drug Store in Tribeca about a month ago. [It is] almost like a testing ground for new products.
It’s a full cocktail bar in the back part of the space. And then in the front part of the space, we have a grab-and-go cooler that holds a thousand bottles of Dirty Lemon, where customers can come and grab a bottle anytime. They just text us whenever they take a bottle. It's all on the honor system.
In the background of the space, like I said, is a cocktail bar where we have bartenders making homemade versions of all of the Dirty Lemon beverages. Then you have the option to add alcohol into the drink. We have a mindset that most beverage trends start in either coffee shops or cocktail bars.
So a lot of the, a lot of the beverages that we create are inspired by some of that craft, and we want to showcase that for our customers outside of the digital space. But really, you know, retail for us is a way to market the products. We're using retail as a marketing channel. We're seeing a lot of volatility in the digital customization market.
So Facebook, Instagram, Google, are the channels that brands have relied on to acquire customers, but the marketplace is being flooded with advertisers now. So, we're actually shifting all of our marketing spend to retail as our way of connecting with consumers.
We think that we can do that profitably with really great immersive content that we're creating, with new products that we're showcasing in those spaces and ultimately using that as a place to be able to test new products before they get into bottle format.
We’re launching four Drug Stores in 2019. Two are here in New York City and then we're opening one in Chicago and Miami.
Who would you say is the Dirty Lemon customer and how are you reaching them, to get them into the store?
Our customer is predominantly female. It’s 80 percent female, 20 percent male. Our customers are, on average, 25 years of age to 45 years of age.
It’s very much a millennial consumer, who cares about wellness. Our consumer cares about the effect that food products have on their bodies, and the way that they look and they feel. I think that this sentiment is with most consumers now regardless of age. I think that people are generally just more aware of the things that they're putting in their body.
We like to continue offering innovation in ingredients because we know that all of the ingredients that we're using in our beverages have functional benefits that can contribute to a better healthier lifestyle.
I know how important transparency is and it sounds like you have an amazing list of ingredients. Are you sharing that information with your consumers?
We have, obviously, ingredient panels on the back of all the bottles. We also have a naturopath on staff to answer any questions that customers have about the products.
SMS is our primary channel of communication. Customers can text us any time and say, “What's acerola?” and we'll have a solid answer to provide them with medical backing because a lot of these ingredients have been used in the naturopathic space for a long time. But they've just been sitting on the bottom shelf of your natural food store. We’re bringing them to be kind of the main focal point of each of these beverages.
For the texting experience, is it a chatbot, or is there somebody behind the text?
We do have a bot that's on the front end of the system. We acquired a company earlier this year that is actually the world's best chatbot. That was a Webby that they won last year. We purchased a product, a company called Poncho, which is a conversational weather bot. We use the NLP [neuro-linguistic programming] that they developed for that product to strengthen the front end of our bot.
So if you ask a question to the system or if you try to place an order for, let's say, two cases of our rose beverage, and you write that in as a text message, you'll get a response back from the bot confirming, “You’d like two cases of rose?”
“Yes,” you say, and confirm it. And then the order is placed without the assistance of a human. If you ask any questions that are outside of the logic that we created on the front end, it gets pushed to live customer service.
We have 24/7 live customer service everywhere in the US, and quickly expanding. We'll have a warehouse open later this year in the UK, and we’ll be offering that same level of quality and service to customers outside of the US as well.
That's amazing. Do you have any plans of incorporating new technologies in the brick-and-mortar stores?
Yes. At our retail locations, the only way to purchase products is with our text platform. So there is no cash, no credit cards. In the front part of the space, you grab a bottle. You text us and tell us what you took, and we charge your card on file, or we send you a link to enter your credit card information. But the cashier is on your phone.
Everything is processed at your convenience. A lot of people grab a bottle when they're on their way to work in the morning, and then text us when they're at their desk. That’s the level of convenience that we know our customers are looking for in a brand, and not only from us but just from brands in general.
They want convenient, easy access to brands and to new products, or the products that they're buying frequently.
In the back part of the space it's specifically for our VIP customers. VIP is like our subscription program. [They] buy at least one case of Dirty Lemon every month, so they also get a discount. They get $20 off if they commit to buying one case a month. When you go into the back part of the space, we ask for your last name. And then we confirm your account with the last four digits of your phone number.
Then when you're done checking out for the night, it'll say, “Thank you for coming to the drugstore. Today your total is $20. Would you like to leave a tip?”
And you’ll write it in via text message. Let's say your tip is $5, it'll say, “Your total today is $25. Would you like to charge your card on file?” And you say yes, and that's it. Then you walk out of the drugstore.
Ultimately, what we're doing is we're building a data set around consumption behavior in the beverage space, which allows us to better serve our customers. All of the data that we're collecting and everything that we're doing with technology is really with the intention of providing a better, more streamlined experience for consumers to enjoy the brand that we've built.
That's really impressive. Are you concerned at all about, the front aspect of the store—security‑wise? Customers not abiding by the texting?
We’ve had the drugstore open for a couple of months now, and the amount of theft is extremely small. Under five% of all bottles leaving are not paid for.
And I think the bottles that are leaving the space that aren't paid for, it's actually probably more about its confusion on the part of the consumer, and less about them actually wanting to steal the product. So we're not concerned about that.
We specifically chose the location, Tribeca, because we have a lot of customers there. We built a really incredible community of customers. The people that are going everyday to pick up a bottle of Dirty Lemon, they're hyperconnected to the brand, and we just have a lot of trust in that relationship. It’s never really been a concern for us.
But we really didn't know for sure until we opened and now having some data to back up that thought process where we're not concerned at all about theft being an issue.
And, to that, how are you strategizing to build community with and around your brand?
Now retail is our channel to build community. We launched the brand on Instagram. We’ve engaged with consumers predominantly in the digital space for the last two and a half years.
We’re finally at a place now where digital really is a commodity. I mean, every brand is on Instagram. And there's a lot of content. Being a brand on Instagram just isn't what it used to be. So we're shifting.
I think it's interesting because there's really a pendulum that's swinging, where there's a lot of brands that have historically relied on retail that are now trying to acquire customers by investing brands in digital. Then, as that's happening, we're actually starting to shift to retail where we think the biggest opportunity is. Consumers want to be immersed in the brands that they like most. They don't want to just engage with them over a digital format.
I think people are generally spending less time online and more time just like in actual human dialogue and connection with other people, face‑to‑face and not with a screen in front of you. I know that that's probably counter to what a lot of data is showing, which is that everyone's online and hyperconnected. But I think we're just so desensitized to content. I think people just want to get back to this real, authentic connection. And, thankfully, we have that with SMS.
Even though it's over digital format, we do have that deep connection with customers. Retail for us is a way for us to do that in an even more immersive way.
Could you tell me, where do you see Dirty Lemon scaling over the next three to five years? How does the future look to you?
We’re going to continue innovating in beverage. We’re expanding in retail, of course. But the big vision for the company is to really use all these data points and all these places that we're collecting data to potentially launch other beverage concepts underneath one platform.
We're using technology to drive the business, and we're expanding our reach too. I think Europe is a really exciting opportunity, and our path to Europe is through London. We’re opening up a warehouse and a production facility there shortly.
And just continuing to stay ahead of the curve, whether it be innovative marketing, or new beverage concepts. We’ve done a really good job of executing and always being one step ahead with all of our products.
We’re the first charcoal beverage to be sold nationally. A lot of juice shops were doing it back in 2015, but we sold it to a national audience. We were the first collagen beverage on the market. Now, people are buying tubs of collagen to mix into things. It wasn't like that then. Same thing with CBD. These are the things that we just need to stay on top of and make sure that we're never just doing what everyone else is doing. I always want to be pushing the boundaries and looking at things through a different lens.
Do you think that you would be willing to wholesale partner with third party retailers in the future, given your past experience?
We’ll never sell our products into grocery stores. But we’re selling into high‑end hospitality channels, so mostly hotels, coffee shops. We look at those opportunities as profitable customer acquisition channels.
For a lot of people that have seen the brand, maybe on Instagram or their friends have purchased it or whatever, it's a place for them to be able to buy one single bottle without having to commit to a case. So it's a great trial scenario.
It seems like there's so much opportunity as all these different industries are shifting towards the wellness market.
I think these are the products that consumers are looking for.
We built this brand around balance and not having to sacrifice and those are the core principles that really define the Dirty Lemon brand. I think that naturally fits really well into wholesale, especially in the more of a food‑service type environment.
The way that we look at it is: if you're going to overindulge on calories or sugar, it should be with a dessert or an extra glass of wine or something that you're going to really enjoy. But to have an extra 200 calories and 25 or 30 grams of sugar with your lunch, it just doesn't makes sense.