How Top Note Tonics Pivoted Beverage Categories and Understood Their Market
In Edible-Alpha™ Episode #25, Tera talks with Mary Pellettieri of Top Note Tonics, a company that makes complex and layered American craft mixers. Mary originally thought she was going to be a beer brewer and she had a lengthy career in beer operations, including at Goose Island and Miller/Coors. She and her partner discovered her affinity for tonics and saw that the mixer category was increasing in popularity while the beer space was already very crowded.
Mary’s experience in sales, marketing, distribution and new product development/research in addition to quality assurance has allowed her to take calculated risks. She has benefited greatly from fully understanding and mitigating, but ultimately accepting, the risks associated with food and beverage production. Top Note Tonics fully own their intellectual property and create/design their own products. Besides their handmade syrups, they utilize co-packers to produce and package their products so that they could focus on their sales, marketing and new product development.
Top Note Tonics began making syrups and soft drinks. However, many bars and restaurants were not ordering syrups or soft drinks because they were either forgoing them or making their own, indicating a changing consumer demand. They then began to pivot towards the niche ready-to-drink, already mixed sparkling tonic, using their foray into syrups to further understand the mixer category and build their brand.
They have multiple channels of distribution for their products, including bars/restaurants, liquor stores and retail stores. Top Note Tonics is starting to get interest from very large retail accounts and are building out distribution in their ready-to-drink line by giving retailers a product that makes them stand out as innovative. They have chosen to “go deep” in a few target areas with their current distribution and are planning to target northern California and the Pacific Northwest as well as the mid-South next. In 2018, they want to roll out their products in 3 new markets and secure a fairly large national grocery channel.
Mary reflects that she has learned much since starting the business and pivoting within the mixer category to understand what the market needs. After working with Tera, she realized that it will take $1.2 million total to finance their plans and they are currently raising more money to reach that goal. Now that she understands the best use of the money after learning more about her business, she feels she will spend that money more wisely. Mary and her partner were able to collateralize their personal real estate to gain bank financing. They were also able to take out lines of credit, but once they get bigger customers and begin building more inventory, they will have the option of accessing more bank financing if they need. Mary reflected that having a good bank as a partner is important and that learning about money has been the most important and useful that she has picked up as an entrepreneur.