Bend-based beverage maker Altitude Beverages is growing by narrowing its focus.
The company dropped what had been its flagship product: a canned latte that featured CBD and super foods including lion’s mane, chaga and reishi mushrooms. It is now focused solely on its other product, a line of nonalcoholic CBD mocktails with amino acid supplements.
It stopped selling its Everything Latte product in September.
While the company had been focused on getting the Everything Latte onto grocery store shelves, its mocktails were quietly getting picked up by bars, restaurants and other places. And, unlike grocery stores, which cost money to get products on shelves, these on-premise customers just generate revenue.
Now Altitude is all in on selling the mocktails. The company’s goal is to be the largest alcohol alternative in the Pacific Northwest, said co-founder Thomas Angel.
“Lattes was trying to boil the ocean,” he said of the company’s nationwide grocery strategy. “Now we see the traction and the pull of consumers so we are going to double and triple down in the Pacific Northwest. Then from there, the door is open to scale to other regions.”
Pulling the plug
The Everything Latte was sold in all Sprouts Farmer’s Markets and had nationwide grocery retail strategy. However, what looked like a wild success on paper was a money sink.
“The traditional model of grocery is you have to give your product (away). There’s slotting fees and required promotional spend in buy-one-get-one or temporary price reductions or end cap fees,” Angel said. “It becomes really expensive to have your product in the store.”
And that doesn’t even guarantee that your product will sell or sell quickly enough.
Angel and co-founder Laura Melgarejo Silva were trying to raise money to grow the business, and as they were making the rounds in this challenging venture capital environment their production numbers and unit costs were coming into stark view.
They realized that reaching a $20 million run rate would cost them $20 million. Part of the issue was production had to be out of state. As a shelf-stable coffee product, a special kind of pasteurization is required and there are a handful of manufacturers in the country — all in the Midwest — that can do it, said Angel.
It was a hard decision — to cut the product that launched the company — and one that Melgarejo Silva had to convince Angel to do, she said.
“I didn’t think we had the option, to be honest,” said Angel on why he was reluctant to drop the lattes. “I knew intuitively we should do it, but we gained so much traction. You don’t want to disappoint people.”
But Angel said the company was lucky even as it faced this tough decision. It had an alternative.
The future is mocktails
Now, the company’s main product is produced in Portland. Altitude works with Swift Cider, which operates a co-packing service out of its production facility in North Portland.
Local production has been a huge benefit for the company, said Angel and Melgarejo Silva. The company is on a path to profitably grow in the Pacific Northwest. Now that they are no longer dependent on grocery as a sales channel, they forecast a 20% net margin.
By 2025 Angel and Melgarejo Silva want the company to be at $20 million annual run rate.
They are riding the growing popularity of nonalcoholic beer, wine and spirits. IWSR, which researches the global alcoholic beverage category, found the NA category surpassed $11 billion in 2022, up from $8 billion in 2018.
The company sells about 5,000 cases of 24 drinks a month of product. Angel expects volume to jump soon as the company gears up to announce a major sales partnership. Product is distributed through Columbia Distribution.
Altitude’s mocktails come in three varieties: Blue Hawaiian, a curacao and pineapple flavor; Mountain Mule, a spicy ginger lime flavor; and Paloma, a grapefruit and basil flavor. Mocktails contain CBD, but the company is working on a non-CBD variety as well.
Once a non-CBD version is available, it opens even more venues as potential customers, said Angel.
Altitude’s mocktails are still sold through some wholesale channels in other states, but the majority of retail locations are in Oregon and Washington. Product can still be found in some grocery locations such as Market of Choice and World Foods, but the biggest channel is bars, restaurants and venues, said Angel. It’s also available online direct to consumer.
Angel said that when the company jumped into mocktails last year “it was a stretch,” for the company. “Looking back, it was the smartest thing we did," he said.
Closer Look
Company: Altitude Beverages
Location: Bend
Products: Canned mocktails that include CBD and supplements like mushrooms and supplemental amino acids.
Employees: 4
Web: altitudebev.com
