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There won't be 'billion-dollar beverage brands' in the future: Iris Nova CEO

The face of the beverage industry is about to change – and billion-dollar beverage brands won’t be part of the new look, according to Iris Nova founder and CEO Zak Normandin.

Iris Nova serves as the parent company of the flagship beverage brand Dirty Lemon, which has sold more than 2 million bottles since inception in 2015, largely to millennial women. Celebrities including Cardi BKarli Kloss and Kate Hudson have promoted the low-calorie, functionally focused lemon beverages, which are infused with wellness-intended ingredients like matcha, collagen, ginseng and chromium.

“We don't believe in billion-dollar brands. We're trying to build million dollar LTV (long-term value) customers, not billion dollar brands,” Normandin said during an interview with Emily McCormick for Yahoo Finance’s Breakouts.

“We want to have a billion dollar organization, but I don't think that billion dollar brands will exist in the future,” Normandin added. “I don't think that, you know, that there is the next Coca-Cola as a brand, like the product Coca-Cola being built right now, because there's just too many options.”

Normandin’s claims are at odds with the beliefs of some of the largest existing players in the space. PepsiCo (PEP) CEO Ramon Luis Laguarta said during a recent earnings call that the company’s Bubly sparkling water line “could be one of our next $1 billion brands,” with strong sales and demand for the drink helping propel earnings and organic sales growth during the most recent fiscal quarter.

But Normandin is right on at least one count: optionality within the beverage space – and even within Coca-Cola and peer beverage giant PepsiCo themselves – has proliferated. The biggest nonalcoholic beverage companies in the world own troves of brands, including Fanta and Dasani for Coca-Cola, and Lay’s and Mountain Dew for Pepsi.

Competition in the beverage startup space has risen, too: Iris Nova’s Dirty Lemon has often drawn comparisons to other ventures like adaptogens-infused Moon Juice, with each operating within the narrower vertical of wellness-focused beverages.

To that end, Dirty Lemon is just one piece of Normandin’s larger vision for Iris Nova in building out his goal to “actually compete with Coca-Cola one day.” Iris Nova has previously announced plans to invest $100 million over the next 3-5 years to incubate up-and-coming beverage brands, which will all fall under the parent company’s umbrella.

The eventual goal is to go public via an initial public offering, Normandin said. That will likely take place in the next 3 years, after the company hits expected annual revenue of $100 million profitably.

Dirty Lemon Breakouts

Instagram’s influence

But regardless of whether a million- or billion-dollar value is assigned to a specific brand, having a recognizable image and ethos is still an integral part of building out each venture under the Iris Nova umbrella, Normandin said.

“At the end of the day, you know, when you peel off the labels of any beverage product, the liquid in the bottle is all commodity, and it can be changed and manipulated,” Normandin said. “What people buy into is the brand and the trust factor ... this liquid can change while the integrity of the brand still, you know, remains.”

For Dirty Lemon specifically, that brand was born in 2015 on Facebook-owned (FB) Instagram, a platform that has become the go-to host for “influencer” marketing.

Back then, “the Instagram feed was still chronological,” Normandin said. “When you posted something, it was getting out there real-time to everyone who was following you.”

To date, the Dirty Lemon Instagram following tops 100,000. But that platform – and digital market dollar spend in general – has become less of an investment focus for the company in the years since launching, Normandin said.

“That market has become so oversaturated in such a short period of time,” he said. “And, you know, we don't see, you know, Instagram advertising and influencer marketing specifically to be as effective, you know, nearly effective now as it was before.”

Major public companies have also made massive investments into influencer marketing, paying celebrities and social media moguls to post images with branded products. During its last earnings call, beauty brand Estée Lauder (EL) revealed it was spending 75% of its digital marketing budget on influencer marketing, which CEO Fabizio Freda said was “revealing to be highly productive.”

Iris Nova’s Dirty Lemon, however, has rotated away from the platform. Some of its alternative marketing efforts have included a set of cashier-less brick-and-mortar retail concepts, currently in New York City’s Tribeca and Hudson Yards neighborhoods, where consumers pay via text for bottles of Dirty Lemon.

“Over the last few years, the price has also skyrocketed to work with influencers,” Normandin said. “We used to pay someone $500 and, you know, a long time ago, and we saw a crazy return on that. Now, like $500 won't even get you a response to an email.”

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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