Andrew Merinoff wants to invest in products that seem impossible to pull off.
Case-in-point: This month, the founder of venture capital firm Dispact Ventures, announced he is taking over as CEO of passion fruit liqueur Chinola, one of the firm’s earliest investments. Eight years ago Chinola’s bottle caps didn’t open properly, the labels fell off, and the liquid wasn’t shelf-stable, he said. Now, after experience on both sides of the M&A table, he’s decided that the time is right to take his first run at the chief executive job with the aim of deepening the brand’s foothold throughout the U.S. and in 12 international markets. The move is emblematic of Merinoff’s strategy to take a hands-on approach with brands that offer a “disruptive” spin on a category.
“Identifying trends before they actually happen is a really key piece of my portfolio,” he said.
That portfolio includes spirit companies like coconut water-cut rum Coconut Cartel and Empirical Spirits, a distillery in Copenhagen run by two ex-Noma alumni. His hands are also in a number of ready-to-drink brands: Celebrity-backed The Finnish Long Drink, sparkling margarita sipMargs, cocktail-inspired SESH, and agave spirit-based and citrus cocktail Zuzu. The portfolio goes beyond spirits too, with Calidad, a Mexican-style lager and non-alcoholic brands Artizn, Kimino and Fizzy Fox.
A veteran of restaurant and bar work, Merinoff returned to the food and beverage industry after he founded a technology investment firm in college that advised and launched close to thirty companies. While working in brand development for Jose Cuervo importer Proximo Spirits, he helped build Manhattan’s first legal distillery since prohibition, Great Jones Distilling Co.
“I use my learnings from Proximo all those years to really help us fine tune what Dispact is today,” he said.
Against the backdrop of growth in fourth category beverages and the emergence of no/low trends, Merinoff has filled his portfolio with sweet spots between categories or products that have potential to make a mark in underlooked segments. The Finnish Long Drink, a ready-to-drink version of a traditional Finnish gin-and-citrus soda, secured a $25 million round in 2021, and is backed by celebrities Miles Teller and Kygo. Meanwhile, its Boston Beer competitor was discontinued last year. XED beverages, the maker of hybrid cocktail and seltzer SESH, was acquired by Next Century Spirits last year.
One of the attractions to a passion fruit liqueur is its potential as an emerging cocktail flavor and ingredient. The national average on-trade pour of a liqueur is .25 to .50 oz, but Chinola’s national average pour is .50 to 1.5 oz, Merinoff said.
“It’s not always just about the cool brand, but it’s the velocity that brand could make as a very standout type of ingredient in a space that is a little difficult,” he said.
The firm’s strategy has also come down to two simple but critical components: if Merinoff enjoys drinking the product and likes the people behind it.
“I think hard kombucha is a great category but I’m not a big fan of kombucha — no offense, but if I can’t drink it, I couldn’t invest in it,” he said.
Merinoff gravitates towards founders of early-stage companies who are excited to learn and willing to work outside of their job description. It’s a practice he tries to implement as well post-investment. He’ll typically come on as an advisor or board member, but will engage on anything from marketing calls to training brand ambassadors.
Dispact’s portfolio additions are typically early stage with a solid growth plan, proof of concept, and a minimum revenue of $750,000 for the last 12 months. The firm plans to make three to five investments this year, targeting companies with valuations in the $6 million to $25 million range.
“I do believe when I raise capital, it’s always from a strategic investor,” he said. “So a lot of these companies that bring me on it’s actually not to have me sit quietly.”
The advisor is also betting that the successful brands of the future will prioritize transparency and sustainability. As the better-for-you movement grows, he’s looking towards companies that go beyond organic and are built on biodynamic ingredients or support their local community of origin. Part of Chinola’s draw was its story as an additive-free, fresh fruit liqueur that’s produced with sustainable practices on the Dominican Republic’s remote northern coast.
“I want brands with transparency,” he said. “So that when I go out and tell their story I’m not lying but telling a genuine story.”
While social media is key to sharing that story, brands that invest in trade education are setting themselves up to scale, he said.
“The average consumer goes home and they make five seven drinks a week,” he said. “The average bartender is making 300 to 500 drinks in a single night. So my recommendation for a lot of these new brands is as much as you should win the consumer, win the trade.”
However, entrepreneurs that are aiming to win an acquisition do not align with his philosophy. Large spirit deals over the past few years have created unrealistic valuations, he said, which he predicts will move companies towards down rounds.
“If you’re trying to work backwards into an acquisition, you’re never going to be acquired,” he said. “You might be but I’m telling you, there’s 1,000 brands trying to do the same thing and just out-spending each other.”