Attracting investment: How non-alcoholic brands are taking their business to the next level
Canadian non-alcoholic craft beer brand Partake has raised $4m USD; while Australia’s Lyre’s has snagged $11.45m USD – which it says is the most material investment on record to date for the category.
Raising funds during a pandemic
Partake – which has been self-funded since launching in 2017 – has already started making inroads in the US market (not least with listings with Whole Foods Market in the Pacific North West) and the funding will focus on boosting this expansion by growing its distribution and retail network, building brand awareness (digital marketing and local sampling activations are in the pipeline), and securing key hires.
“For us to compete in the US market we needed to bring on more resources and a funding round was the way to achieve that,” Ted Fleming, Founder and CEO, told BeverageDaily.
“With this funding we can fill several important roles on our team and really be proactive in building brand awareness with consumers and supporting key distributors and retailers.
Fleming founded the brand after being diagnosed with Crohn’s Disease, leading him to give up alcohol. The company now has five non-alcoholic brews, all coming in at 10 calories and 2 grams of carbs per can.
The $4m USD (£3m) round was led by San Francisco's CircleUp; which was joined by Export Development Canada (EDC), Natural Products Canada, McLean & Associates, and Barrel Ventures.
Fleming had the challenge not only of pitching his product successfully: but doing so during a global pandemic.
However, he still managed to raise 50% of funds through virtual communications with people he had never met in person.
“The process certainly took longer because there was a lag time between conversations, samples arriving, and follow-ups,” said Fleming.
“The lack of in-person meetings was new for everyone involved and made it more difficult for us and potential investors to gauge the interest and capabilities of each other - in essence it added more uncertainty into the whole process."
But some solid figures helped Partake convince investors - it's seen an 250% increase in sales and placed its product in over 1,000 new retailer doors nationwide between 2019-2020.
"We were fortunate in the sense that we had some good retail case studies to highlight and were able to demonstrate solid growth through the spring and summer,” said Fleming.
Investor view: ‘A sound comparison can be drawn to the plant-based meat market’
Partake’s funding round was led by CircleUp Growth Partners, who say the motivation to invest in Partake came clearly from the growing movement in the US of consumers making more mindful choices around alcohol (52% of US adults are actively trying to drink less – that’s 131 million people - and 30% of US adults don’t drink at all).
Noting that previous products in the category have not always been able to meet consumer expectations, it sums up the category as one ‘with pent up demand with less than satisfactory supply.’
And a key point of interest for the investor was a brand that did not silo itself with purely with non-drinkers: but is one that could “provide a solutions for regular drinkers to flex in and out of the category without sacrifice.”
As Trevor Rechnitz, partner at CircleUp, notes: “A sound comparison can be drawn to the plant-based meat market: incumbent solutions that have been around for a long time had products that fell short on flavor and nutritionals and were marketed strictly towards the vegetarian community.
“Upstart brands Beyond Meat and Impossible Foods tinkered with the product to make it a viable alternative for all consumers and marketed it towards meat eaters trying to reduce their intake and make more mindful nutrition and life choices. All of a sudden, the $200m plant-based meats category that had been stagnant for a long time took off on the back of product innovation and a shift in brand narrative.”
In the same way, it sees a wave of non-alcoholic beer challenger brands emerging to capitalize on the rising moderate drinking movement in the US: “It is abundantly clear that within the beer and ‘beyond beer’ category, non-alcoholic is one of the highest growth potential segments.”
Global leadership position
Australian non-alcoholic spirit brand Lyre’s has just closed a seed funding round, which will help power its mission over the next year to evolve ‘from a start-up to a true multi-national beverage company’ – with multiple manufacturing sites and an expanded global presence.
Lyre’s has secured a total of $16m AUD ($11.45m USD; £8.85m) in growth capital: which it says is the most material investment on record to date for the category. This will be used for innovating new products, expanding into new markets, as well as providing ongoing support for core drinks.
Entrepreneurs Mark Livings and Carl Hartmann launched the company’s first products in Australia in July 2019: and says the in its first 18 months they have ‘moved into a global leadership position in non-alcoholic spirits’ thanks to their ability to pre-empt growing consumer demand (it 13 alcohol-free spirits are already available in more than 30 markets).
Despite the challenges of 2020, Lyre’s has focused on the on the direct-to-consumer segment and beaten its expectations by delivering over 400% monthly recurring revenue growth since January.
Its seed round was structured to be completed in three tranches over the course of an initial twelve-month trading period, a necessary process to ensure the business was sufficiently capitalised to support what Livings describes as ‘planned, lightning- fast growth with controlled capital consumption’.
Major participants in the seed round include VRD Investment, Doehler Ventures, DLF Venture and Maropost Ventures with a number of European, American and Australasian family offices and HNWI also participating.
“The investors we’ve brought into this business see value well beyond the short to medium-term impacts of the pandemic and will bring significantly more value beyond their participation from a capital perspective,” said Co-founder Carl Hartmann. “Good companies with strong fundamentals and a truly unique market offering can always raise money, even in challenging times.”
