Epidemiology, membranes, MIT, Sales, Technology
by Trond Arne Undheim, Ph.D.

The Future of Beverages: SHOW NOTES FROM FUTURIZED PODCAST #2

These are the show notes from The Future of Beverages, initially published on June 30, 2020, where futurist Trond Arne Undheim’s interview with Ronan McGovern, MIT alum with a PhD in mechanical engineering, serial entrepreneur and founder of Point5 Brewing, who talks about his newly launched non-alcoholic beer and muses about emerging trends in the beverage industry.

BACKGROUND

Ronan, you are a MIT alum with a PhD in mechanical engineering and currently the CEO at Sandymount Technologies, an MIT spinout that serves brewers. Serial entrepreneur, as we’ll get into. But is that a Dublin accent?

Let’s jump straight into the beverage space, an area I know you are passionate about. What’s going on? (00:02:20)

“People are drinking less sugar. People are drinking less alcohol. Twenty years ago, it would have been soda. That has really changed now. Juice consumption has gone down as well. A lot of is is being replaced with cold brew and seltzer.”

Health and wellness trends

Not sure if you read Beverage Daily, but Beverage company Imbibe claims health and wellness concerns are becoming more important, perhaps not a surprise? Also, wider range of options (what the industry’s incremental innovators call line extensions)

Why is the industry putting out new flavors and is it working?

“Hard from a business standpoint. Need to change advertising often. Cannot reduce the cost. Has been a challenge for the industry. People would say it’s the era of choice. I don’t necessarily agree with that myself.”

“A lot of craft brewers will sell most of their value on a single SKU type. Harpoon IPA is a big part of their sale.”

“The line extensions is marketing, keeping the relationship with consumers.”

Is the function of a drink liquids? So function plus would be flavor?

“Interesting question. What is a beverage? With Coca Cola, it provides hydration, energy, caffeine, so it wakes you up, and is addictive. Then, it has a brand, so it makes you feel like people who are in the Coca Cola advertisements.”

Food tech is immensely popular. Why are people so intrigued by innovation in the food space?

“Is it that people can try it? The product is close to consumers’ daily life.”

When did the non-alcoholic market start?

“The non-alcoholic market goes back to 1989. Could be five percent of the German beer market.”

Consumer shifts are hard to predict, right? But when they happen, they can cause profound changes. How did the whole idea of a non-alcoholic beverage space emerge? What’s the market size now? How will it evolve and why?

“You’ve got to laugh at Irish people drinking non-alcoholic beer. But it’s happening now.”

Let’s talk about non-alcoholic beer. When did this truly begin? (Prohibition Era, but commercially took off with Anheuser-Busch in 1990s– O’Doul’s nationwide with the slogan “The Taste Will Win You O’ver.”)

What’s the market? Used to be retired cops, suburban dads, and reformed alcoholics. Now is different? What were the first products? How has it evolved? 0.5% of category dollars through the first three weeks of January, according to Nielsen (the entire non-alcoholic beverage category is worth about $7 billion). Is that enough to be excited about?

“All it takes for me to get excited is single digit growth. certainly, in coastal cities, this will be significant, is on a trajectory.”

Booklyn’s first alcohol-free bar, Getaway, opened in April, offering a wide variety of bourgie mocktails, and Listen Bar, a booze-free pop-up venue, recently appeared in Manhattan with the goal of “rewriting nightlife beyond alcohol.” But those mocktails only really appeal to sober New Yorkers who have $12 to squander on an alcohol-free drink. It wasn’t until last month, when I started seeing ads for Heineken 0.0 at my subway stop, that I knew sober culture was ascending to a new level of mainstream. The Heineken poster read: “Meet someone for a drink at the gym,” and, “Make barre class feel like a bar.” It boasted that the NA Heineken had “great taste” and only contained a mere 69 calories. (Nice.)

  • Listen (booze-free) bar in NYC (website)
  • Getaway (booze-free bar in Brooklyn (website)

What is your innovation in this space? You take the water out of beer? Why did you start Point5 Brewing and how did you get it off the ground?

Point5 is about creating a non-alcoholic beer that tastes exactly like beer. The way that is done is through a membrane that removes very precisely remove the alcohol from traditionally fermented beer. We are making it the traditional route, brewed as a pilsner. The difference is in the step after fermentation. Pretty special technology. Very close match to traditional beer. The alternate way is to vaporate the water or to completely change the fermentation process, stop it early. But in those cases it’s hard to match the original taste.

Point5 came off the platform of Sandymount Tech, which is the membrane technology. I was working on desalination at MIT. I was working on membranes. I found an application where I could use my technology to make beer concentrates and thereby save transportation for brewers. Along the way, we discovered a way to remove alcohol, which led to Point5.

What were you drinking before?

Water is the smallest molecule, the next biggest one is alcohol, then aromas, then proteins and sugars. If the filter is just bigger than water, you can just let the water through, and a slightly bigger one, you can let the alcohol out. We can now do that very selectively.

The precision level in membrane technology is amazing. Other use cases?

Very small molecules that have no charge, is where we do well, unlike salt, as is charged particles in sea water. That’s harder. Beverage sector, alcoholic beverages that have small, subtle flavors. Cold brew coffee. Distilling alcohol without using heat for the purpose of making biofuels. Waste water treatment.

How did you get into this?

I’ve been fermenting mead. Had been doing that before Sandymount. I wanted to make something that would be unique at a house party. I did one with maple syrup, too. I did other engineering projects with my dad when I was a kid. So that was a subliminal motivator.

You are a serial entrepreneur, serial tinkerer, aren’t you? You were inspired from your dad to do these kinds of experiments? (00:21:00)

I wasn’t a crazy scientist. But building kites and flying little airplanes, I did. I have a lot of curiosity. I don’t have deep technical talent, like the people I’ve met at MIT who are insanely good at coding. But I have the curiosity, I guess.

Foodtech is a very sexy field. I recall the industry events we did at MIT were extremely well attended. Everyone loves food trends. But what fundamental shifts do you see happening there? Robotic kitchens? Completely new business models?

Tell me about your experience at MIT—what did you learn there which is relevant for your entrepreneurial life?

I’m interested, and I’m sure my listeners are as well, in the mindset of the entrepreneur. Can you bring us there? What goes through your mind as you are starting a venture? Bring us into the mindset of a serial entrepreneur, specifically…

Can we talk about www.ShopRespond.com for a moment– a hand sanitizer business you started and ran for three months during COVID selling 1.5M+ bottles of hand sani. Who does that? Why? (00:30:00)

“Having people bored on your team is undesirable”.

“Anton found a distiller. Gina found a bottler. Barry, my cousin found sources of ethanol. It was a crazy market. Every day, deals would crash. People were only doing business based on cash. Everything had to be paid up front.”

“We were filling the gap between the largest companies and bigger than what a local distiller could do.”

How do you even make hand sanitizer? From what you tell me, you mix water, ethanol, glycerin, hydrogen peroxide, and then to make the business work you need boxes, labels, bottles, a manufacturing site, a bottling site, and some big buyers, is that right. What else? How do you even do that in a few weeks. Well, by now I think even WebMD has a recipe online right now which they put up in late March. What’s the secret formula?

How did you discover it was a pop-up business?

We ended up pre-selling all the bottles. Right now we only have a few random items. I knew it would shut down pretty quickly. We were thinking, “we might get lucky and get two weeks out of this”.

You started a company in a month and wound it up. Was it worth it? Did you achieve what you set out to do?

I wanted to manage payroll and keep them busy.

It was interesting to do a nonprofit and something in between. It’s an LLC, but we made a decision to donate the remaining profits we had at the end of the period. Setting up a nonprofit is expensive and takes time and would have been complicated.

When you are trying to recruit a team like that, it’s interesting how the slight nonprofit angle motivates people.

Have you learned something fundamental from this?

Hard to pintpoint. I would consider it successful, we made money we could donate to charity. That was very valuable for our team, gives us credibility which is worth more than any money we could have made.

Having a small success with hand sanitizer was big for all of us.

Thoughts about COVID and business? Impact on the beverage business?

Driving demand towards the home and towards ecommerce. for nonalcoholic beer, which is non-regulated, is a big driver of sales. Short term, tough for restaurants. In the beer industry, the vast majority is going to homes. Brewers have made up some of the volume.

A decade from now, what’s happening with beverages? A steady march towards non-alcoholic drinks?

Some of the things that won’t happen is: I don’t think beer is going away. Core brands of lager and ale have been around for centuries, and have stood the test of time, and will continue, as well as wine and spirits.

I’d be surprised if the major categories will go away.

Distributed production…could home brewing become a real business?

Ecommerce is a big part of the cost. Concentrates do provide one avenue. But how do you get consumers to experiment with concentrates? We have a solution that launches soon which is a solution for bars to serve from kegs. People at home need to have a good experience.

What about Bevi, the flavored drinks dispenser?

Is that model possible in the home. Many industry professionals were critical, and said this will never work. Yet, they just landed $35 million from Bessemer in early 2019.

Good thinking, but the appliance at home, the price point is important. Sean Grundy, founder of Bevi, is well positioned.