Drake’s Organic Spirits Expects New B2B Program to Drive Future Growth
Minnesota-based Drake’s Organic Spirits made it onto this year’s Inc.5000 list of fastest-growing private companies, with a three-year growth rate of 1,774% and case sales reaching 90,000 9L cases in 2021.
The company launched in 2017 by husband and wife team Mark and Kristen Anderson. The portfolio includes spirits (spiced rum, white rum and vodka), mixers, Spiked Ice popsicles, and Boxtails ready-to-drink cocktails. And most recently, Drake’s began supplying bulk cane alcohol B2B.
HOW IT STARTED. Mark and Kristen didn’t start their careers in the bev alc business. They both have agricultural backgrounds. In 2008 they started a company called Captain Drake, “which focused exclusively on organic and non-GMO ingredients for the food and beverage industry,” and they became the biggest importers of non-GMO citric acid, Mark tells WSD.
They entered the organic spirits industry in 2014, and in 2017, they decided to launch their own spirit brand, Drake’s Organic Spirits, after noticing the expansion of the health and wellness trend in the food and bev space as well as other CPG categories.
Sustainability is at their core. For the Drake’s Organic Spirits portfolio, they control the process from top to bottom, with the alcohol distilled from organic cane sugar at their facility in Colombia, which is then shipped to the US to one of its bottling plants in either New York or California.
The company also has five certifications: USDA organic, Non-GMO Project verified, gluten-free certified, vegan certified, and kosher.
“Our goal is to create a product that’s better for you and better for the planet,” says Mark.
ON INNOVATION. In late 2020, the company launched Drake’s Organic Boxtails, a line of ready-to-drink boxed cocktails. The 1.75L bag-in-box cocktails contain about 5g of sugar per serving and contain 12% abv. The lineup includes: Black Cherry Limeade, Mango Punch, Minted Mojito, Watermelon Tini, and Perfect Margarita.
Why the boxed format? It fits their sustainability ethos. Indeed, each container is made from eco-friendly recycled paper, and can be composted or recycled.
“In the beginning I would say that there was a slow pull through [for Boxtails] because consumers would see this boxed product and think it was boxed wine,” says Mark. But they got past that hurdle after some consumer education and once they were allowed to do in-store tastings again.
On the innovation front, they’re also planning to add a tequila to their full-strength spirits lineup. They made tequila for the Boxtails, “and due to the reception of that, we have an organic tequila that we are producing and about to launch,” he says, teasing that “there are some other neat, innovative products that we’re adding to our lineup.”
12 MILLION PROOF GALLONS OF BULK ORGANIC SPIRITS TO SELL. Their branded products are growing well—with sales up 50% over last year— but Mark says the biggest growth will come from the new B2B program.
Last month, Drake’s began supplying bulk cane alcohol B2B, “offering a portion of its annual 12 million proof gallons of organic cane alcohol to distillers, co-packers, blenders, flavor houses/ extract manufacturers, and other companies seeking high-quality sustainable organic alcohol,” per release.
“We produce about three to four million gallons of 96% organic cane alcohol, beverage grade, meaning we can ship it from our distillation facility in South America to our bottling facility in New York and the only thing that’s required at the bottling facility is proofing it down from 96% alcohol to 40% abv, or 80 proof,” according to Mark. So that 3-4 million gallons equals about 12 million proof gallons of organic cane sugar-based alcohol.
“So growing a spirit brand via the three tier system, it’s a long endeavor. Even though we [sold 90,000 cases] last year, in terms of what we used of our own organic cane alcohol production, it was just a small fraction of our overall production,” Mark explains. “Thus, we have a lot of availability to provide the market if other brands, other co-packers, other distillers, want to look at using premium beverage grade, sustainable organic alcohol.”
It’s early days, but so far “there’s a lot of interest out there,” he says.
BDSA PART II: EMERGING M&A IN CANNABIS AND MEDICAL MARKET DECLINES
Yesterday we covered the first part of BDSA’s recent global cannabis market report, giving the rundown on the staggered growth rates between more established and newer cannabis markets in the US [see WSD 09-22-2022].
Today, we’ll continue our coverage of that report, catching up on the state of mergers and acquisitions in the cannabis industry and how consumer habits have shifted with more recreational markets opening up.
M&A TO COME, BUT “NOT A MAJOR FACTOR YET.” BDSA co-founder and ceo Roy Bingham anticipated a fair amount of consolidation down the road for the still relatively-new US cannabis market.
“I think it’s worth reflecting that we are at a very early stage in the evolution of the industry,” said Roy, who then compared it to his 20-odd years in the natural foods industry. “Now what we’re seeing is the emergence, perhaps, of the Whole Foods– who knows who it will be– of the cannabis industry.”
“That can lead to all kinds of consolidation in terms of consumer product offerings as well,” he continued, but it’s “not a major factor yet.” Right now, most markets offer thousands of products from a wide range of brands and suppliers, he noted, especially in more mature markets. However, some newer markets launched with a different model, limiting the number of cultivator or retail licenses from the outset. So there’s already a “more consolidated market that is going to consolidate yet further,” in those states.
As more successful companies rise to the top and create funding for R&D, branding, and marketing, they’ll connect with new consumers and create more appealing products to a broader consumer base. “There are still people that are sitting on the fences at the moment” because they’re not seeing the type of consumer packaged goods they expect, Roy noted. “It will be fascinating to see what happens in terms of mergers and acquisitions and the emergence of major players with ultimately more limited product ranges,” he added.
MEDICAL SALES DISPLACED BY RECREATIONAL OPENINGS. BDSA notes that while the greatest declines in US cannabis are coming from mature adult-use markets, another big contributor is losses in medical cannabis sales.
Some of this decline can be attributed to medical sales falling in markets that open up to adult-use sales or have adjacent states with adult-use sales as patients seek more variety or lower prices in nearby states. For example, Arizona saw a sharp decline in medical sales after launching recreational use in 2021, with sales in its medical channel projected to be 30% lower in 2022 than the year prior and half of 2020’s sales.
Colorado, on the other hand, as one of the first legal recreational markets in the US, saw “modest growth” in annual sales for another two years after it launched adult-use in 2014, BDSA noted in a release.
OKLAHOMA RECREATIONAL CANNABIS QUESTION NIXED FROM NOVEMBER BALLOT
While BDSA reported a slew of new markets opening for recreational cannabis in the near future, it looks like Oklahoma won’t be one of those. The Oklahoma Supreme Court rejected a petition this week to print a ballot question about legalizing recreational adult-use of cannabis in the state for the November general election, reports the Associated Press.
Oklahomans for Sensible Marijuana Laws gathered enough signatures to put the ballot question, State Question 820, before voters this November. However, because it took “longer than usual” to count the signatures and for the courts to address several legal challenges to SQ820, officials ran out of time to print the question on ballots ahead of the election, per report.
While SQ820 is nixed from ballots for the upcoming general election, the can has just been kicked down the road. Justice Douglas Combs wrote in the majority opinion that the bill “will be voted upon by the people of Oklahoma,” whether it’s at the next general election following this November’s or in a special election set by the Governor or state Legislature.
If the question is approved, it would legalize recreational use of marijuana for adults over 21 and older. Recreational cannabis sales would be subject to a 15% excise tax on top of standard sales tax, with the revenue geared toward funding “local municipalities, the court system, public schools, substance abuse treatment and the state’s general revenue fund.” The question also outlines a judicial process for people seeking expungement or dismissal of marijuana-related convictions on their records.
AVIATION GIN OPENS PORTLAND DISTILLERY. Diageo-owned Aviation Gin announced the grand opening of its Aviation American Gin Distillery and Visitor Center in Portland, Oregon. The facility is nearly 33,000 square feet and includes an intimate tasting room, draft cocktail bar and gift shop. “About three years ago, we set out to create a one-of-a-kind distillery and tasting experience to give people the opportunity to get a look at how we make the world’s greatest spirit – Aviation American Gin, that is,” says actor and Aviation co-owner Ryan Reynolds, describing the distillery as: “if a grown-up theme park and a bartender fell in love and produced offspring, it would be this gin factory.”
C. MONDAVI & FAMILY PROMOTES PAM NOVAK TO VP OF MARKETING. C. Mondavi & Family announced yesterday it has promoted Pam Novak to vp of marketing, responsible for overseeing the entire portfolio. Pam has more than two decades of industry experience under her belt, the last seven of which she spent at C. Mondavi. Most recently, she was senior marketing director. “Pam has demonstrated throughout her career the ability to speak to all consumer segments while driving brand awareness with the trade and distributors alike,” says C. Mondavi ceo David Brown. “Her appointment to this important role as the marketing steward of our historic wines, as well as new brands integrating into our portfolio, is exciting.”
Sarah Barrett, Executive Editor
Hana Kruger, Assistant Editor
“There is not enough time to do all the nothing we want to do.” – Bill Watterson
——- Sell Day Calendar ———
Today’s Sell Day: 16
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Fri.
This month last year ended on a: Thurs.
YTD sell days Over/Under: 0