In professional hockey, many teams will lean on veteran experience when selecting a captain. In 2016, the Edmonton Oilers and Connor McDavid made history when the NHL team named the 19-years-and-266-day-old player as its permanent captain, proving that leadership extends beyond veteran legacy. As a start-up founded in 2009, El Segundo, Calif.-based L.A. Libations has shown through its insights and track record that the beverage brand creator and incubator is a captain in its own right.
Fueled by their dedication to health and wellness and social responsibility, three entrepreneurs — Danny Stepper, Dino Sarti and Pat Bolden — saw the demand and desire by consumers for access to beverage that support healthy lifestyles.
“We saw this shift just a little bit earlier than everybody else, in that the world of beverage was changing. Consumers were reaching for healthier options,” says Stepper, co-founder and chief executive officer of the company.
Recognizing this shift in consumer purchase behavior and the gap that existed within mainstream retailers, L.A. Libations saw an opportunity to merge the best of both worlds.
“We had built really interesting relationships with all the big retailers and they seemed to be rooting for us as entrepreneurs,” Stepper says. “Kroger was the first one to name us as their Emerging Beverage Category Captain, a title we hold with most of the big retailers today.”
Yet, Stepper, Sarti and Bolden are no novices to the beverage market. Stepper’s beverage knowledge dates back to when he started as a merchandiser for a bottler for The Coca-Cola Co. in Los Angeles. He worked for the Coca-Cola system, migrating back and forth between bottling operations and the beverage manufacturer, for nine years before leaving in 2003.
Following his tenure within The Coca-Cola Co., Stepper moved to London to pursue a movie- producing career, which includes the Disney “Goal!” trilogy. Yet, Stepper’s real passion remained beverage. He then teamed up with Sarti and Bolden from Coca-Cola and re-entered the beverage market with Icelandic Glacial, which had outside investments from St. Louis-based Anheuser-Busch. However, the trio’s entrepreneurial spirit yearned for more independence, so they left the bottled water brand to begin L.A. Libations.
“We were creative guys but we did not have the resources to create our own brands in the early days, so we partnered with entrepreneurs and we were able to learn a whole lot,” Stepper says. “In many ways, we learned what not to do.”
Beyond their entrepreneurial spirit, L.A. Libations’ founders also believed in developing a company that would disrupt the current beverage market by empowering the missions and goals of emerging brands.
That disruption has been driven by the proliferation of the better-for-you, functional beverage market.
“Our mission is to disrupt the beverage industry by empowering our emerging brands to win,” Stepper says.
He adds that disruption stems from the desire of the consumer to engage in a total beverage experience for all occasions.
“What we were seeing was this movement to function a while back,” Stepper says. “For 100 years it’s been about taste and refreshment and then we saw this big shift to functionality. Consumers wanted beverages that do things for them, and it kind of over-rotated to this assortment of bad-tasting, functional beverages. But today what’s happening is consumers want it all. They want really great-tasting functional beverages, and that is an opportunity and a challenge to make a lot of these things taste good.”
However, Stepper acknowledges that in its early days, L.A. Libations were more beggars than choosers with brand investments. Despite some early challenges, the company was able to take its early experience and help shape L.A. Libations into what it is today.
“Pat, Dino and I learned many lessons in the early days,” Stepper explains. “We learned why many entrepreneurs fail. We learned that you are never finished evolving and making your products and brand better — the liquid, the packaging and the branding. You’re literally never done. There’s no finish line. We learned [that] brand building is key, and going too fast can be detrimental to your brand. We mostly learned by making mistakes, and we’ve made a lot of mistakes. We just are very disciplined at not making the same mistake twice, which actually is very helpful to a lot of the entrepreneurs that we partner with … so they don’t make the same mistakes we made. That saves a lot of time, and time is money in this game.”
Through those lessons, L.A. Libations has bolstered its incubator portfolio while furthering its partnership with The Coca-Cola Co.’s Venturing and Emerging Brands (VEB) unit. “We want to play in all the sweet spots that we have defined with VEB,” Stepper explains.
Although L.A. Libations already had a working relationship with the VEB unit in its early endeavors, The Coca-Cola Co. furthered that partnership with a 2014 investment in the beverage brand incubator company. Stepper highlights how amazing the partnership has been, adding that he is encouraged to “keep pushing” the legacy beverage company.
“The knowledge and insights that they have are incredible, and as they evolve into a total beverage company — ‘Beverages For Life’ — it positions us well,” Stepper says. “We are very close with VEB and our mission and values are completely aligned. They made a huge bet on us, and we will not let them down. The partnership obviously gives us credibility. We don’t take it lightly, it has been huge for us.”
Stepper adds that Scott Uzzell, president and general manager of VEB, has been a valuable teacher that has helped further the relationship.
“He is an awesome executive, coach, colleague and friend,” Stepper says. “I learn something every time I interact with him — and that is a lot. As far as the company, VEB has given us a runway to get brands in the air. But our job is to make the brands finely tuned airplanes, so when they get off the ground, they will have a long flight.”
A portfolio of partnerships
As a brand incubator, L.A. Libations has interacted with hundreds of beverage brand innovators on a yearly basis throughout its nearly decade-long existence. Through those meetings, the company has learned what it values most when pursuing partnerships.
“When we don’t create our own brands then we partner,” Stepper explains. “There are a few factors in who we choose to partner with.”
For example, Stepper highlights the importance of the team behind an investment brand as well as a brand with potential for incredible traction in emerging markets like kombucha or cold-brew coffee.
“The defining factor is that we use VEB’s insights to define the category and then we create a brand or partner with the brand that we think can be number one or two in that space,” he says.
By partnering with emerging brands, L.A. Libations is able to expedite many of the processes in beverage development, distribution and much more.
“Time is money in the game of beverage, and we speed things up,” Stepper says. “Whether it is commercialization, route to market, or getting brands on the shelf, we are generally faster than anyone. For example with Arya Sparkling Turmeric Water, we branded it in four months and had it on shelves at CVS. As far as Gloe Sparkling, it went from ideation to being in Costco in five months. Not many organizations can do that.”
Stepper adds that the company has worked very hard to achieve that capability to offer to its entrepreneur partners.
This track record has allowed L.A. Libations to build a portfolio that features the following beverage brands: Gloe Brands, a plant-infused line of waters; Arya, a sparkling water with a blend of turmeric; FORTO Coffee, a coffee shot that is cold brewed and made with organic and Fair Trade Arabica coffee beans; Roar Beverages, which features its Roar Kids and Roar Organic lines; Bru, a bone broth drink that is enhanced with vitamins from vegetables and root juices; Trimino, a protein-infused water line; Aloe Rey, an aloe vera juice; Perricone Hydrogen Water in a partnership with Dr. Perricone; TheBu, an emerging mainstream kombucha; Amaz, a plant-based elixir; and most recently, KonaRed Corp., which features a line of cold-brewed ready-to-drink (RTD) coffees.
The addition of KonaRed to L.A. Libations portfolio followed a strategic multi-year deal from Los Angeles-based Venice Brands, an investment firm that provides strategic capital and deep operating expertise to emerging consumer brands, with a focus on better-for-you food and beverage companies. This investment caught the attention of Stepper and L.A. Libations.
“[I] have known Greg Willsey of Venice Brands for a long time,” he says. “For me, his due diligence is among the best. When he invested in KonaRed, it made us take a harder look. What we found was a well-capitalized company with a great CEO — Kyle Redfield — and a brand with true innovation and differentiation in a sea of lookalike cold brew coffee entrants. Kona, [Hawaii], is the only place in the United States that grows coffee, and the coffee from Kona is amazing. This ‘buy local’ story and the authentic aloha story was really compelling for us. Incredible quality, incredible taste, healthy energy.”
For all of the brands within L.A. Libations portfolio, the company does its own due diligence to identity companies that align with its mission and serve an emerging need state in the beverage market.
“When we identify a space we want to play in, it always starts with the team,” Stepper explains. “There can be good brands with bad teams, and they never will go anywhere. Once the team box is checked, we confirm that they are coachable and capitalized.”
Powered by its portfolio and beverage market knowledge, L.A. Libations is taking its expertise directly to retailers that looking to understand today’s consumer.
“Our retailer relationships are really the DNA of our company,” Stepper says.
As the Emerging Beverage Category Captain for numerous grocery, mass and convenience retailers, L.A. Libations has built that trust within these shopping channels because of how it approaches beverage trends and brands.
“Nothing in our portfolio competes with each other,” Stepper says. “When we partner or invest in a brand, we are 100 percent with that brand — win, lose or tie. However, with our retail partners in which we serve as Emerging Beverage Category Captain, we take a true category approach. We often recommend brands that we have no affiliation or economic interest in, and may even compete.”
Authenticity and transparency with the retailers are qualities that L.A. Libations views in high regards. “Recommending brands to retailers is sacred for us,” he says. “If we get it wrong, or just do things that are self-serving, they will stop bestowing their trust in us. We take that very seriously.”
L.A. Libations ability to recommend brands to retailers from within and out of its portfolio and still be trusted by its retail partners stems from its expansive knowledge of the U.S. beverage market.
“Forty percent of the growth in beverages comes from brands and categories that did not exist five years ago,” Stepper says. “If you’re sitting in Cincinnati, Ohio, and you’re thinking, ‘I’ve got to be in all the new stuff.’ The problem 98 percent of new beverage brands fail. Of all these new ideas that are flooding into the market, most of them are not going to work for a lot of reasons and we like to think we’re living in the space. We live where a lot of trends get started in Los Angeles, and for us we basically have became the subject matter expert for lots of retailers, so we do a lot of the work for them.”
This work includes meeting with hundreds of brand owners each year. “We meet with over 250 beverage entrepreneurs a year, doing our due diligence, narrowing it down to brands we think have an exceptional product, unique proposition that will translate into market demand and ultimately brand love,” he continues. “Talking to that many brands, you start to get a pretty good idea of what the trends are. Being able to share these learnings with the retailer, we think, really sets us apart from anyone else in the business.”
Stepper’s background producing movies also will come into play in the coming year. Teaming up with his childhood friend Andrew Panay, the producer of “Wedding Crashers,” the group is developing a movie comedy that will feature a beverage as one of the leading roles. When the movie is released, the new beverage will rollout exclusively with a key convenience retail partner, Stepper says.
Although L.A. Libations has many exciting opportunities within its portfolio and beyond, the future also extends out of the beverage market and into a deeper social mission.
“The future is exciting,” Stepper says. “We feel like we are right where we need to be at the epicenter of emerging beverages. The company collectively decided to start a social mission called “life giving refreshment”. That mission is to improve the lives of the children of Haiti. We have set some ambitious goals for financing and building an orphanage and empowering a local team to run it. I am so excited about this, as our employees will all be spending time there and make a real impact. We would eventually like to co-create some kind of self-sustaining business down there that could improve lives. Who knows, maybe a beverage.” BI