04 Jun 2021 | 10.23 am
From Brewing Beer To Naked Ambition
Niall Phelan's Naked Collective wants to detox the world
04 Jun 2021 | 10.23 am
Niall Phelan is drawing on his Rye River Brewery experience with a new healthy beverage venture that’s piquing investor interest, writes Gerry Byrne
Niall Phelan is a man on a mission to detox the world, one carbon-neutral vegan energy drink at a time. The Rye River Brewing co-founder has the moral conviction and drinks industry smarts to get him started, but can’t crack the lucrative healthy beverages sector on ethical principles alone.
That’s why the entrepreneur has been busy on the fundraising front, securing €16m so far from investors for his drinks startup, the faddishly named The Naked Collective.
Phelan (44) founded The Naked Collective with business partner Catherina Butler in 2019, two years after he quit Rye River. It produces Mude (spelled like nude, pronounced like mood), a low-calorie, non-alcoholic and additive-free canned drink. Naked’s mission statement would chime with Greta Thunberg’s cri de coeur: it is a “carbon neutral startup beverage company that loves creating healthy, natural and functional drinks, designed to help and improve the health and well-being of the world’s consumers”.
In 2020, Phelan and Butler began seeking investors to fund Naked Collective’s global expansion. They raised €10m in New York in February 2020 but Covid led to their would-be backers cancelling before the deal could be signed. CRO filings show that Naked Collective raised €6m later in 2020, primarily from Luke Vice and James VanderLinden, founders of digital marketing company Aware Ads in Toronto.
A second funding round that concluded in September raised a further €10m and, according to Phelan, generated €13m worth of offers. The founders are currently in the process of raising another €5m on Crowdcube, with plans for a further €10m later in the year. That should be their “lifetime requirement”, Phelan predicts.
Let My People Go Surfing
Although much of his career has been in the alcoholic drinks industry, Phelan has now completely abandoned alcohol, leaned towards Buddhism, become a vegan, taken a postgraduate course in environmental sustainability, and reads books about ethical businesses. One favourite is Let My People Go Surfing, by Yvon Chouinard, the founder of the adventure sports gear business Patagonia. The book’s subtitle is, ‘The education of a reluctant businessman’.
Phelan doesn’t just want to slake thirsts with his Naked Collective products – he wants to rewrite the corporate rulebook.
“I want to create something that our kids will be proud of,” he declares. “We are here to give back more than we take from an environmental, community and planetary perspective.”
Notwithstanding Phelan’s already multifaceted career, this latest venture is audacious. Phelan originally started to train as an aeronautical engineer. “I quickly realised that I was probably going to be responsible for killing an awful lot of people if I stayed,” he says, explaining why he dropped out.
Aviation’s loss was Red Bull’s gain. Richmond Marketing was preparing to distribute the high-energy drink in Ireland and Phelan snagged a slot on the launch team. “I was head down and learning,” he recalls.
Phelan then spent four years with Nestlé in Ireland and the UK, where he developed most of his product development and marketing skills. Phelan’s entry into the beer market followed his recruitment, again by Richmond Marketing, to manage the launch of Coors in Ireland. “After a while I got closer to the boardroom and spent time on the executive leadership team but I just didn’t enjoy that part of it,” he adds.
Phelan’s next stop was Rye River Brewing, set up in with partners Alan Wolfe and Tom Cronin. The Celbridge brewer’s McGargles brand proved popular but Rye River struggled financially. Losses and debts mounted as a result of taking on distribution contracts for third-party beers that didn’t go according to plan.
In retrospect, Phelan believes investing in brewing equipment instead of sub-contracting production of McGargles out to an established brewery was a mistake. Refinancing became an almost constant treadmill, and in 2017 a weary Phelan told his partners that he wanted out.
“Raising capital to build the brewery and growing too quickly from creating a distribution business was definitely challenging and ultimately led to me not enjoying the business anymore,” Phelan recalls.
Another reason triggered the move: Phelan’s love affair with alcoholic beverages was over. Ditto for anything else he thought might ultimately prove fatal to consumers. Disillusionment with drink was sparked by Phelan’s experience with an alcoholic relative, coupled with his increasing interest in healthy living – he now spends a lot of time in the outdoors, hiking and climbing.
Even so-called soft drinks are, Phelan says, very unhealthy, given the amount of sugar and additives they contain. “I’ve been in this this business for 25 years and during the majority of that time I sold things that slowly kill people,” Phelan admits. “I can’t be responsible for any more of that damage.”
His anxieties were sharpened, he adds, by a post-graduate course in sustainability he took after leaving Rye River. Another motivating factor for Phelan was his growing interest in Buddhism (although he does not practice it as a religion). “I got to the stage where I realised that I was running a business that didn’t fit with any of my values,” he said. “I wanted to do something that did.”
Ironically enough, it was brewing that steered Phelan around the latest curve in his career. During a 2011 visit to a Denver brewery, a Coors executive showed Phelan an early stage in the brewing process, prior to the production of alcohol. He explained how the beer was then at its healthiest, before further fermentation destroyed all the vitamins and minerals that were naturally present in the ingredients.
At Naked Collective, Phelan was reluctant to simply add the ‘good stuff’ in the form of powdered vitamins (“for creating expensive pee”) and artificial flavourings, as most soft drink manufacturers do. Gentle, limited brewing, he decided, was the way to extract the flavours and vitamins from the plant-based ingredients without destroying them or resorting to dried alternatives. “We never actually add vitamins,” he explains. “The vitamins come from that process of brewing.”
Elsewhere in the business formation process, Phelan remembered the hard lessons learned at Rye River. “We don’t invest in stainless steel, which is another way of saying we will never have our own production facilities,” he remarks. “Instead, production in Ireland and everywhere else has been subcontracted to independent breweries. We are producing in all our markets, not shipping product from Ireland. We are very carbon-neutral principled, so we try to produce locally rather than export product all over the world.”
Big money has been paid for companies selling alternative health products. Coca-Cola’s purchase of vitamin drink company Vitaminwater in 2007 for $4 billion is a case in point. However, the enterprises Phelan benchmarks himself against are Beyond Meat and Impossible Foods, producers of plant-based meat alternatives. “They came in and just turned that world upside down. They forced innovation and forced changes across even the most stubborn meat companies.”
So far, things appear to be going to plan for The Naked Collective. Mude drinks in five flavours, plus two flavours of a non-alcoholic beer, are in hundreds of Irish, British, US and Canadian stores.
Phelan says this year’s sales target is €20m “at the low end” and €30m at the high end. “We just finished our first production run in Mississippi and we signed up Acosta, the biggest Food & Drink broker in the USA,” says Phelan.
Finally, what’s the thinking behind The Naked Collective company name? “It’s partly a reflection of our sense of humour. It signifies transparency – we have nothing to hide. We wanted to portray the fact that our ingredients are the purest possible that you can put into a product.”
So nobody was undressed in the making of this product? “Not so far but I wouldn’t hold your breath!”