Next year looks to be red hot for Drake’s Organic Spiked Ice — a new frozen cocktail pop from Drake’s Organic Spirits in Minnetonka.
Costco is planning a national rollout as orders come in from retailers including Albertsons, Hy-Vee, Target and Total Wine.
It adds up to a “huge wave” of demand, according CEO Mark Anderson, a serial entrepreneur who founded Drake’s Organic Spirits in 2016.
“When you go from $1 million in sales to $100 million in sales in 12 months that’s a pretty steep ramp-up,” said Anderson, a North Dakota native who moved to Minneapolis in 1996 after the movie “Trading Places” inspired him to get a seat on the Minneapolis Grain Exchange.
Drake’s Organic Spirits is the world’s first and only spirit line that is USDA-certified organic, non-GMO Project verified, gluten free, vegan and kosher, Anderson said.
Spiked Ice blends Drake’s organic rum or vodka with other organic ingredients in flavors such as Classic Mojito and Mango Rum Punch. Each pop, which freezes in a couple of hours, has 80 calories and 15% alcohol by volume.
As Spiked Ice generates revenue and profits, it also serves as a “Trojan horse,” pulling the company’s vodka and rum into stores. Drake’s, moreover, is creating a new “health and wellness” category in the beverage alcohol industry, Anderson said.
“The consumer is going to choose what they perceive as healthier and better for them whether it’s alcohol or not,” Anderson said.
Drake’s can offer its “ultra-premium” products affordably, Anderson said, because he locked up an organic alcohol supply and access to a bottling plant permitted to handle organic alcohol without building either.
“I was initially told that to get into selling spirits you need at least $20 million and 10 years to build a brand,” Anderson said. “Three years into this I can see exactly how that’s at a minimum about what it takes. Instead of spending $150 million to build a distillery and another $100 million to build the bottling plant I was able to put all the pieces together and do it for a fraction of that.”
Anderson, who had gone from futures trading to controlling 38% of the U.S. dairy market, retired in 2004.
He went back to work in 2008, establishing an international supply chain offering organic and non-GMO sugar and citric acid, ingredients in 85% of food and beverage products, to companies that make them.
Involvement with companies that deal with products ranging from pet food to chemical and cosmetics helps Anderson spot consumer and market trends.
A portion of Drake’s sales goes to support Long Lake Animal Rescue, a nonprofit operated by Anderson’s wife.
Drake’s has raised close to $10 million in two private placements, Anderson said.
The machines that produce the Spiked Ice pops cost $500,000 apiece. Drake’s, which has 15 employees, has bought six of the made-in-Wisconsin machines so far.
Anderson now is seeking bank partners for a line of credit to meet soaring demand for Spiked Ice, credit for which goes in part to Beyoncé.
The pop superstar posted a video of people enjoying an earlier version of a sorbet-based Drake’s frozen cocktail product at a pool party during last year’s Coachella music festival in California.
Anderson, who had gotten two cases of the pops to Beyoncé’s entourage, said the resulting social media buzz attracted Costco’s attention.
That was Anderson’s goal. But he knew the sorbet-based product that Costco liked wasn’t practical for widespread distribution because it must stay frozen from manufacture through sale.
Anderson was ready to say yes, then, when the retailer instead asked for a shelf-stable freeze-and-eat cocktail pop it could sell at room temperature. He presented Spiked Ice for evaluation in January.
“Costco said all six regions approved it,” Anderson said. “I asked how many do you need and they said 100 million. I said OK, no problem.”
Costco tested Spiked Ice several markets beginning in July. Anderson said the buyer told him, “It’s the first time anybody has gone from concept to being sold on our shelf in six months, especially in the alcohol space.”
Lyle Berman, a co-founder of Grand Casinos Inc. and championship poker player, joined Drake’s board in August after investing in the company based on the strong interest in Spiked Ice.
Berman, a Minnesota native who now lives in Las Vegas, said in an interview that Anderson has “done almost everything right” in building the company but needs to formalize financial reporting.
“Next year, 2020, should be a year of reaping the rewards,” Berman said. “The growth is going to be explosive; we call it the hockey stick.”
Todd Nelson is a freelance writer in Lake Elmo. His e-mail is firstname.lastname@example.org.