Coca-Cola is in talks to invest in Dirty Lemon, a direct-to-consumer company known for its trendy drinks, and the CEO says it has dropped its CBD-infused beverage


Dirty Lemon

Dirty Lemon’s collagen
beverage.

Hollis Johnson/Business
Insider


  • Coca-Cola is in talks to
    invest in direct-to-consumer beverage startup Dirty Lemon.
  • The company, which offers a line of wellness drinks that have
    been touted by celebrities and influencers, is currently raising
    a round of funding which reportedly includes investors like
    Betaworks and Winklevoss Capital.
  • Dirty Lemon CEO Zak Normandi tells Business Insider that the
    company is dropping one of its best-selling items, a CBD-infused
    beverage, from its offerings.
  • James Quincey, Coca-Cola’s CEO,
    said on Tuesday
    that the company does not have any plans
    “at this stage” to enter the CBD space.

Coca-Cola is in talks to invest in direct-to-consumer beverage
startup Dirty Lemon, Business Insider has learned. Multiple
people with knowledge of the talks said that Dirty Lemon’s
discussions with Coca-Cola are ongoing and cautioned that the
deal may fall through. A representative for Coca-Cola declined to
comment on the talks.

Coca-Cola’s potential investment in Dirty Lemon would be a part
of its Series A funding round which
reportedly includes funding from celebrity backers
like Jake
Paul’s investment fund and the Winkelvoss twins’ eponymous
venture firm. (Dirty Lemon is no stranger to celebrity interest:
its previous $5 million funding round included contributions
from Karlie Kloss, Kate Hudson, and Sophia
Bush.)

According to an email sent by a company spokesperson earlier this
year, the current round was originally scheduled to be announced
in late August. As for a delayed close of the round, the
spokesperson said, “We wanted to make sure we had the best group
possible for the round before closing.”

Dirty Lemon’s beverages, most of which are named for their
signature ingredients like “matcha,” “charcoal,” or “ginseng,”
have garnered an avid following among influencers and celebrities
online. In September,
the company opened a cashier-free retail location in
Manhattan
where shoppers pay for the $10 bottled beverages
using an honor-based system that takes place over text message.

With the closing of its new round of funding, Dirty Lemon will
undergo a significant rebranding, the people said. While most of
the company’s rebranding efforts aren’t apparent just yet, Dirty
Lemon’s CEO Zak Normandi tells Business Insider the company
is 
discontinuing one of its most popular products:
its CBD-infused beverage.


dirty lemon

Dirty
Lemon


CBD, the faddish cannabis compound that’s lately been used in
everything from beauty products to dog treats, is technically
considered a Schedule I drug by the DEA — meaning that people
distributing CBD-infused products across state lines could find
themselves in danger of federal prosecution.

Still, even big brands like Coca-Cola have flirted with the
notion of capitalizing on the popular cannabis derivative;
in September, the company created a stir
when Bloomberg
News reported
 that Coca-Cola was in discussions
with Aurora Cannabis to develop beverages infused with
CBD.

James Quincey, Coca-Cola’s CEO,
said on Tuesday
that the company does not have any plans “at
this stage” to enter the CBD space. However, if the 2018 Farm
Bill is passed, which would legalize hemp-based CBD, that could
change. 

One person with direct knowledge of the talks said that
Dirty Lemon’s plans to pull its CBD product was a direct result
of its negotiations with Coca-Cola. But, in an interview with
Business Insider, Normandi said that this isn’t the case.

“We’re going through the process with our legal team,” said
Normandi. “We’re discontinuing sales of the CBD beverage right
now because it’s illegal. To secure our success, we want to make
sure everything is buttoned up.”

Normandi also pointed out that the company’s CBD-infused
beverage is just one of the nine flavors they offer: “We’re not a
CBD company,” he said.

While Normandi declined to comment on the talks with Coca-Cola,
he said that the company has received significant interest from a
variety of institutional and strategic investors.

Coca-Cola’s investment hot streak

In the last quarter alone, Coca-Cola has invested in sports brand
BODYARMOR, purchased Australian kombucha maker Organic & Raw
Trading Company, bought juice company Tropico, and invested in
healthy beverage company Made Group. Coca-Cola
also spent $5.1 billion to buy Costa,
a coffee chain with
almost 4,000 locations. 

“We, of course, use M&A for many purposes: to fill gaps in
our portfolio, yes; enter emerging categories; or even obtain
capabilities or platforms that complement our existing
strengths,” Quincey said in a call with analysts on
Tuesday. 

On Tuesday, the company announced the creation of a new group,
called Global Ventures, with the purpose of handling acquisitions
and partnerships, as well as driving growth for these brands
across different markets. 

In a post on Coca-Cola’s website, Quincey further discussed the
company’s strategy for investing in certain brands as a means of
creating a path toward ownership. 

“Historically, some acquisitions haven’t worked out, in part
because we moved too far and too fast in integrating a company or
brand into our system,”
the post reads.
“We’ve learned that incubation – as opposed
to immediate absorption – has proven to be a better approach,
even if it’s not the only approach.”