Dirty Lemon’s Marketing & Growth Strategy, How it Became a Success
Have you ever had a lemony chromium infused beverage? If you have you likely bought it from Dirty Lemon. Dirty Lemon started out in 2015 as a direct to consumer (dtc) beverage brand. It is known for its water and lemon based beverages made with trendy ingredients like chromium, turmeric and aloe.
Since launching its business on Instagram Dirty Lemon has sold more than 3 million beverages and the company is hoping to have sales of $100 million by the end of 2021. It even caught the eye of Coke which is now a minority investor in the brand.
In a market with a constant onslaught of new direct to consumer brands Dirty Lemon provides an interesting case study for how to carve out a market space through innovation, the right product market fit and savvy marketing.
An innovative business model
Dirty Lemon pioneered a new way of selling products. When the brand launched with its signature charcoal flavoured detox beverage in 2015 the only way to get your hands on one was to text your order directly to Dirty Lemon. First, go onto Dirty Lemon’s website to set up an account with your credit card information. Then text your order. Once the text is received Dirty Lemon ships your order the next day.
Speaking about the text to order model, Dirty Lemon Founder and CEO of Dirty Lemon’s parent company Iris Nova, Zak Normandin said: “the only way to buy our products [was] over text message, so we have a very heavy tech component to our business. I would argue that we’re actually more of a technology company than a beverage company. We’ve established this one-on-one, direct connection with all of our customers, which is something very unique in the beverage industry, where brands are typically constrained by retailers and distributors.”
Not only is texting convenient for customers it gave the brand cachet. Since the brand was not widely available when it first launched consumers wanted to try the brand even more. The “scarcity effect” is one of the keys to success of popular brands like Supreme and Yeezy. As Author Robert Cialdini wrote in his book The Psychology of Persuasion “people want more of those things they can have less of”. Although Dirty Lemon now sells some of its beverages via wholesale and brick and mortar retail 90% of its orders are still made by text.
The right product market fit
Not only has Dirty Lemon executed its marketing strategy extremely well but it was also in the right place at the right time. The health and wellness movement has been in full force for a number of years with brands like goop and the The Honest Company riding a wave of changing consumer habits.
Dirty Lemon sells what is known as “functional” products, beverages that contain trendy ingredients like matcha, charcoal and ginseng that purport to have health benefits. Its Charcoal Daily Detox is designed to: “improve digestion, stimulate liver function & gently cleanse your system of impurities.” In a standard 16 oz bottle, this charcoal drink has 15 calories and less than one gram of sugar and to top it off it is vegan. Getting in on the health and wellness trend earlier than some other brands has helped Dirty Lemon gain market share faster.
The premium price of a bottle of Dirty Lemon, at $10.83, also conveys exclusivity and the image that it might be more expensive than other brands due to the cost to create a drink with so many high quality ingredients including ones with added health benefits.
Facebook and Instagram marketing to drive initial growth
In the beginning Dirty Lemon like many direct to consumer brands used Facebook and Instagram to market its products. It even designed product packaging specifically to fit on a 2 x 3-inch screen and focused on a minimal aesthetic that is now very popular on social media. “It was not a very overly branded product. There are only a few words on the front, namely the brand name and the product name,” Normandin said. “I think lack of branding actually spoke to what consumers are looking for.” “We weren’t relying on the merit of the product alone–we were focused on building this lifestyle,” said Normandin. “The power of the brand is actually more important than a product.”
But over time the success many brands found using Facebook and Instagram marketing attracted many competitors. Traditional brands jumped in as well looking to emulate the success of fast growing direct to consumer brands, leading to higher customer acquisition costs. Normandin said cost per action on Facebook increased by a factor of three between 2017 and 2018. The company used to incur between $20,000 and $30,000 per day on advertising for Dirty Lemon on Facebook and Instagram alone.
“Having advertised with Facebook and Instagram since very early on, we saw the cost to acquire customers rise significantly, and it's at a place now where it's just unsustainable. I think that's happening because brands that have historically relied on traditional advertising methods are now shifting their ad dollars to online and to Facebook and Instagram. When that marketplace gets flooded with demand, it raises the price to connect with and acquire customers. As the prices rise and more advertisers enter the marketplace, there was a point for us that it no longer made sense to spend millions and millions of dollars on Facebook and Instagram” said Normandin.
“So as the pendulum swings from traditional brands going to digital and away from retail, we're doing the opposite, shifting to retail and away from digital. As a young brand, there's only so many levers we can pull to reach the broader mass market. Shifting to retail is a great way to connect with a local audience but also have an impact on the national scale.”
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Moving past digital marketing
In 2018 Dirty Lemon opened its first offline presence in Tribeca in New York City called The Drug Store. The Drug Store is an innovative concept where Dirty Lemon places refrigerators with its product in a cashierless space with no employees. If you want to buy a Dirty Lemon beverage from The Drug Store all you have to do is take a bottle of your favourite flavour, perhaps Collagen, and then text Dirty Lemon with what you are buying. Once Dirty Lemon receives your text it texts you back with a link to your credit card information so you can make the purchase. The Drug Store is based on the honour system. The refrigerators do not have locks and since there is no staff inside Dirty Lemon depends on its customers to be honest about what they have taken out of the store.
“On paper, the concept makes no sense,” Normandin said. “And there would have been no data points that we could have kind of pointed to saying, ‘this is the reason why we want to do this right now’. It was just an intuition.” A private space with a cocktail bar at the back of the store that can be rented out for events helps subsidize the cost of the location. Even before COVID-19 halted the event planning industry, Dirty Lemon already decided against plans to expand the concept in a meaningful way. “We’ve scaled back on that, just because there's a lot of variables that we couldn't control for in launching The Drug Store at scale” said Normandin. “The operational overhead required to do that is really significant.”
Pivoting to reach the masses
As with most direct to consumer brands an online only business can only take you so far even if you have a handful of stores. To reach a larger customer base brands have to broaden their distribution points. It is easier to discover new products in a physical environment when a consumer is already on a shopping trip and happens to notice an interesting new product while they are standing in the beverage aisle at Walmart.
Seeing the writing on the wall, Dirty Lemon recently closed a deal that will see its beverages sold at over 500 Walmart stores in the Unites States. While some argue that this may hurt the cachet of the brand, to reach high levels of growth you can’t stay niche forever. Even Apple recently came out with a budget iPhone, the iPhone SE retailing for $399.00, significantly cheaper than the iPhone 11 which costs $979.00.
A niche is typically the best way to start a new businesses. By focusing on a specific segment of customers, in Dirty Lemon’s case, health conscious customers that are willing to pay a premium to ensure they are healthy can create a halo effect. Fans of the Dirty Lemon which include celebrities like Cardi B, Karli Kloss and Kate Hudson helped the company to acquire over 200,000 customers in five years but if you want to be the next Coca Cola and have millions of customers you have to have an effective way to get to the masses.
Normandin has called selling its product at Walmart as “the only way forward.” “If you look at the majority of beverage sales, they are either coming from Walmart, Target or Kroger, so we see this as an opportunity to acquire customers profitably” said Normandin. “When you look at what’s happened with Casper and a lot of direct-to-consumer companies that are getting hammered in the public market, it is because they’ve focused so much on spending whatever it takes to acquire customers and drive-top line growth. They’re losing a lot of money.”