Coca-Cola buys stake in company behind New York’s cashierless drinks store

The investment in Dirty Lemon's parent company Iris Nova gives Coca-Cola a window outside of traditional retail channels

Coca-Cola will start selling its Dasani zater brand in aluminium containers in north-east US before rolling them out next year. Reuters

Coca-Cola, facing shifting shopping habits that have roiled the food and beverage industry, is taking a minority stake in Iris Nova, the company behind a cashierless New York City store where customers pay for drinks via text message.

Coca-Cola, now the startup’s largest backer, led a $15 million investment round that values Iris Nova at about $60 million. Iris Nova is the maker of Dirty Lemon, a line of upscale drinks.

For Coca-Cola, the stake gives it a window into a brand that has picked up customers outside of traditional retail channels, using social-media buzz and direct-to-consumer sales to drive growth.

Coca-Cola is one of the most recognisable brands in the world, with a massive retail presence, but for now Iris Nova isn’t looking to expand into outlets such as Walmart, Target and Kroger, according to founder and chief executive Zak Normandin.

“That would dilute everything that we’ve built,” he said. “We believe in a future with consumers having a direct connection to brands and you don’t get that in the traditional retail system.”

Coca-Cola, in its search for growth, made a splash with a $5.1 billion deal to buy the UK coffee chain Costa earlier this year. The beverage giant has also invested in smaller brands, such as the sparkling water company Topo Chico.

Iris Nova spoke to other large beverage companies and private equity firms before deciding to partner with Coca-Cola, Mr Normandin said. The company hopes to be profitable by the end of next year and is targeting $100m in sales by the end of 2021. In addition to Coca-Cola, actress Kate Hudson and veteran tech executive Tim Armstrong were among the investors who took part in the funding round, according to the company.

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Coca-Cola buys Costa Coffee from UK's Whitbread in $5.1bn deal

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Customers can walk into the Dirty Lemon shop - called The Drug Store - in New York’s Tribeca district, grab a drink and depart. They are encouraged to send a text message to the company, which then responds. New customers are asked to open an account, while existing shoppers are charged. The company says it has processed about 90 percent of its orders via text, including those from online subscribers, since it started selling in 2015.

Dirty Lemon relied heavily on Instagram to develop its brand but is pivoting away from social media. In recent weeks, the company has turned off Facebook and Instagram advertising entirely and hasn’t seen a sales dip, according to Mr Normandin. The company will open at least two more retail spots in 2019, with a second Manhattan location planned along with one in Chicago.