Drink Maker Strikes Plum Deal With Prune Farmers

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Drink Maker Strikes Plum Deal With Prune Farmers
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Six years after launching the trendy L.A. beverage line Functional Drinks, the co-founders of MD Drinks Inc. last week got their big payday – courtesy of a Northern California farmers’ co-op known for rebranding prunes into a cool snack.

Sunsweet Growers Inc. of Yuba City, a leading marketer of dried plums, specialty dried fruits and juices, announced Aug. 10 that it was buying the Culver City company, which began in a kitchen laboratory and grew to a nationally distributed line in the multibillion-dollar nutraceutical food and beverage market.

Function Drinks are fruit-flavored beverages spiked with nutritional supplements such as ginko biloba, yerba mate and gymnema to relieve hangovers, boost energy or enhance weight control. The three beverages – Urban Detox, Alternative Energy and Light Weight – typically retail for around $2 and boast celebrity fans ranging from Madonna to Shaquille O’Neal.

Terms of the deal were not disclosed, but Sunsweet said MD Drinks co-founders Dayton Miller, Josh Simon and Dr. Alex Hughes would continue to have leadership roles in the company, which will remain in the L.A. area. Hughes, now a surgeon in New York, still works in product development for the company but doesn’t have a daily operational role.

Established in 1917, Sunsweet Growers is considered the world’s largest handler of dried tree fruits, including prunes, apricots and mangos. It processes more than 50,000 tons of prunes a year – about one-third of the global market – but in recent years has branched out into specialty teas and waters.

Tony Gerst, head of new venture initiatives at Sunsweet, said in a statement that the company intends Function Drinks to become the first of several innovative brands that it will nurture via a new wholly owned subsidiary, Disruptive Beverages.

“We believe Function gives us a great foundation on which to begin building a great portfolio of beverages,” Gerst said.

Night on the town

Inspiration for MD Drinks’ flagship product, Urban Detox, came after the three hard-working and hard-partying friends decided they could do better than the typical high-caffeine and B-vitamin energy drinks that they often used to get themselves to work after a night out on the town.

“Ironically, once we started work on the idea we pretty much stopped partying and spent all our spare time working on the company,” said Miller, chief executive, who at the time worked in corporate strategy and business development at Walt Disney Co.

Miller had introduced Disney co-worker Simon to Hughes, a college friend then in a surgical residency at Ronald Reagan UCLA Medical Center.

Hughes began consider the potential use of some of the supplements he used at the hospital, including n-acetyl cysteine, an amino acid that boosts immune response, and detoxifies many toxins and poisons. NAC became the label ingredient that set Urban Detox apart from competitors.

For Alternative Energy, he combined a variety of natural caffeines and energy boosters that would activate at different times after consumption in order to prevent the typical cola crash.

Based on Hughes’ ideas, the partners eventually hired consultants to help them turn the formulas into tasty, shelf-stable products. The company’s first bright-orange delivery van featured a huge “Hungover?” banner set above the company’s website address and phone number.

Launching Functional Drinks in Los Angeles worked toward its eventual success in two crucial ways, Simon said. Not only were the beverages more likely to get free publicity from celebrities photographed drinking the products, but the area’s small groceries, delis, liquor and convenience stores were more open to stocking a new product than major distributors.

“We really had a lot of local L.A. stores willing to give us a chance that I don’t think we’d have gotten elsewhere,” he said.

Initially tapping friends and family for funding to launch the company, MD Drinks eventually attracted angel and private-equity investment. The company hired a boutique investment bank about a year ago to field a growing number of inquiries from potential suitors.

“Sunsweet rose to the top of the list pretty quickly, though we couldn’t figure out at first why a company like that would be interested in us,” said Simon, the company’s president. “But we learned they were a brand-building company, and had some really interesting ideas about how they could take us to the next level.”

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