Lawsuit Reveals Drizly’s Plans to Enter Cannabis Market

Dear Client:

Alcohol delivery service Drizly plans to expand and enter the cannabis market later this year. The company didn’t exactly officially announce these upcoming plans, rather, the news came to light after Drizly filed suit against former ceo and co-founder Nick Rellas for violating a non-compete agreement by starting his own cannabis delivery business.

HOW WE GOT HERE. Nick Rellas co-founded Drizly in 2012 with Justin Robinson, now the company’s svp of new business. In August, Drizly “dismissed” Nick from his role as ceo but kept him on as a board member. Cory Rellas, Nick’s cousin, took over as ceo. Cory said the transition was amicable and that Nick would “be as much a part of the business but in a different role,” per Boston Business Journal. But according to the complaint, Nick left the board just two short months later.

Then it came to Drizly’s attention that Nick is setting up his own cannabis delivery operation. Apparently, Nick even asked Drizly to invest in his startup, an offer Drizly refused. Instead they promptly filed suit against their former ceo last Friday in Boston’s Suffolk Superior Court.

Drizly wanted to keep the suit sealed because it reveals its plans for the cannabis space. A judge rejected their request, but Drizly was allowed to redact portions of the complaint. As a result, details on the new venture are scant.

Here’s what we do know: “Beginning in late 2017 and continuing through [Nick’s] tenure as ceo, Drizly decided to enter an adjacent market for another highly controlled product: legalized medical and recreational cannabis,” per the complaint, reports Law360. “Drizly has approached potential commercial retail partners, explored the best path to market, consulted with state regulatory officials, and crafted a market entry plan.”

Drizly claims that Nick “would not have been able to create a competing company without the knowledge and experience he gained at Drizly,” adding that’s why they had Nick sign the nondisclosure and non-compete agreements. Nick’s “flagrant and repeated breaches of his contracts are the basis of Drizly’s instant lawsuit,” per the complaint.

The two sides are already in settlement talks, but are also due to appear in court on Monday, according to the case docket.

Drizly declined to comment further on the case and its pending marijuana plans.

We’ll have more as this story develops.

IRI: SPIRITS WIN THE SUPER BOWL

Turns out consumers turned more towards spirits during the Super Bowl. Spirits volumes were up 6.2% and sales were up nearly 9% during the two weeks surrounding the big game, according to recent IRI data.

Note: IRI measured the week of the Super Bowl and week after the Super Bowl, “which contains lift for features that carry over into the days following the game,” notes IRI director client insights Patrick Livingston.  

Breaking spirits sales down by category for the two-week period:

  • Brandy/Cognac volumes were up 5.5%, sales up 9.6%
  • Cordials volumes up 7%, sales up 9.3%
  • Gin volumes down 0.3%, sales up nearly 3%
  • Premixed cocktails sales and volumes up about 27%
  • Rum volumes up 1%, sales up 3%
  • Tequila volumes up about 13%, sales up 15.8%
  • Vodka volumes up 3.4%, sales up 5.6%
  • Whiskey volumes up 8.6%, sales up 11.4%

Meanwhile, wine volumes were up 1% and sales were up just over 3% for the period and total beer volumes were down 0.3% and sales were up 2%.

IRI notes that hard seltzer was a standout within the beer category, up a whopping 263.7% for the two-week period.

You may recall, this year’s Super Bowl featured several spirits brand ads for the first time, including Jim Beam, Jack Daniel’s and Hennessy [see WSD 02-04-2019].

CONTROL STATE TRENDS KICK OFF 2019 STRONG

Dry January Shmy January. Control state spirits trends are moving full steam ahead in 2019. Spirits volumes were up nearly 11% in January with a rolling 12-month growth of 3.4% and sales were up 13.4% and trending at 6.4% during the past 12 months, according to recent NABCA data. That’s the highest spirits growth rate reported in a January since 1999.

Irish whiskey was knocked down to the third fastest-growing spirits category at 17.6% growth, toppled by cocktails (up 22.4%) and tequila (up 20.2%).

Every spirits category reported strong growth for the month with vodka up 11.4%, brandy/Cognac up 8.3%, gin up nearly 7%, rum up 9% and Scotch up nearly 6%. Canadian whiskey, cordials and domestic whiskey each reported 10% growth for the period.

Though NABCA notes that some of the results were artificially inflated because December 31 sales were included in some states’ January results, which is one of the strongest selling days of the year. Moreover, there were also 14 more selling days January 2019 versus January 2018.

After equivalizing, spirits growth was still strong, with volumes up 6% and sales up 8% for the month.

Meanwhile, wine was pulled out of a slump in January, with volumes up 6.3% for the month. The rolling 12-month trend was still in the red (-0.9%) but improving (compared to December’s -2%).  

WSD BRIEFS:

JAMESON PARTNERS WITH ANDERSON .PAAK. Pernod Ricard’s Jameson has partnered with Grammy winning musician, Anderson .Paak, for the new campaign #LoveThyBar. This campaign aims to help support neighborhood bars by offering Jameson drink specials across the nation. They even go so far as to offer a rebate on a Jameson drink in select states across the country on St. Patrick’s Day.

LEXINGTON BREWING & DISTILLING CO. GETS A NEW LOOK. In celebration of their 20th anniversary, Lexington Brewing & Distilling Co. will receive new packaging for all of their beers and spirits. The new look will unify all of their brands under one style to better help the customers recognize their products on the shelf, per a release. In addition to the new look, the brewery and distillery have new releases, Kentucky Coffee Barrel Cream Ale and Town Branch Malt. The Kentucky Coffee Barrel Cream Ale is available in six packs and on draft. The Town Branch Malt is a 7-year-old single malt whiskey bottled at 87 proof.

90+ CELLARS ADDS THREE NEW WINES TO PORTFOLIO. 90+ Cellars has expanded their Reserve portfolio with the addition of three new wines, Lot 163 Merlot, Lot 164 Pinot Noir, and Lot 165 Zinfandel. Lot 163 Merlot comes from the same winery that is responsible for Lot 148 Cabernet Sauvignon. Lot 164 Pinot Noir is their first ever Collector’s Series Pinot. Lastly, the Lot 165 Zinfandel hails from the same winery as Lots 163 and 148 and is from Rockpile.

INVIVO PARTNERS WITH SARAH JESSICA PARKER. New Zealand wine company Invivo, has partnered with actress Sarah Jessica Parker to develop sauvignon blanc and rose wines. The collaboration will involve Sarah Jessica Parker choosing the grape variety and final blend, label and name the wines on an ongoing, annual basis. They make it clear in the NZ herald that this is not an endorsement but a collaboration with SJP. She will also attend the sauvignon blanc and rose launch event in New Zealand later in the year when the wine will be unveiled.

Until Monday,
Sarah

“Time passes irrevocably.” – Virgil    

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