21 Seeds: Kat Hantas

27:34And like you've never made a beverage before, let alone an alcoholic beverage. Like, just the chances of this working are just really minuscule. Did anybody push back or give you any kind of feedback like that? Yes, definitely. Because that would have been responsible, by the way. Yeah, 100%. In fact, that's the only thing that most everyone said to us. When we come back in just a moment, a lesson from Kat on how not to make a label for your brand new tequila. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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31:36Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2018 and Kat, her sister Nicole, and a third partner are trying to ignore anyone who's telling them that infused tequila is a bad idea. And instead, they dig in and start doing a lot of research. We had so many conversations with, we basically would talk to anybody who was in the business, touch the industry in any way, shape or form. And what would you ask them? And we would ask them, you know, like, do you drink tequila? You know, how does it sell in your bar and restaurant? Like, where does it land in terms of how it performs? And we would just, as much information just about the industry and how do you price it and who do you buy it from?

32:20And like, do you know those people? Could you set us up with those people? So I would say in almost all those cases, they would say to us, it's a really tough business. It's a very complicated business because selling booze in this country is very complicated. Every state has different laws. Exactly. Exactly. And it's a three-tier system. Unlike wine and beer, you can't sell directly to your consumer as a hard alcohol brand, like as a spirits brand. You have to go through a distributor. You have to go through distributors. So your initial customer is not your ultimate customer, right? Yeah. We were selling tequila to women, but we didn't come from beverage and we certainly didn't come from alcohol.

32:56So they're like, well, you guys are insane for even thinking that you're going to get this done. But, you know, listen, we were three smart girls and we just had – we had this belief that there was a white space that nobody was servicing. So it would be you, your sister, Nicole, and your friend, Sarika Singh, who had worked with some food companies before. Right. And she was a Stanford engineer that was a friend of mine as a mom friend, but she had worked in food innovation. So she knew how to bring a product to market commercially, and she knew how to deal with the commercialization of something you're making at home.

33:43What I'm curious about is if even in 2018, I mean, now it's even more so. But if you went to just even a Whole Foods in 2018 that sold liquor, you would see tons of tequila on their liquor shelves. You'd see tons of bottles. It's like now it's even more, you know, just saturated, you know, like energy bars. But did you guys do that? Did you walk through stores and like look at the bottles? And then at any point, did you think, oh, there's just so many brands here. How are we going to break through? Like, I'm just curious about your thinking process. Yeah. Basically, there were some flavored tequilas on the market.

34:22We tried those flavored tequilas. And it was exactly the problem that we had with kind of flavored spirits in general as a category. The three of us as three women, we all felt the same way. Our problem with flavored spirits is that they tend to be overly sweet, have a weird aftertaste like you're sucking on a nickel, and smell like a Jolly Rancher. The way I would describe it is like trying to spray perfume on someone with really bad body odor. Nothing improves. The body odor is still there, but you're just masking it with the perfume. And now the perfume doesn't smell as good, and the person doesn't smell better.

35:01So you want to make a tequila that does not have those qualities, does not taste like a Jolly Rancher. And for the drinker, the consumer, you're thinking of a specific type of woman, right? Yes. Moms. Moms. Yes. The three of us are moms. Yeah. So Nicole, Sarka, and I are all moms. And that is who I was observing. And moms have a lot of pain points, right? Whether you're working at home or working outside the home and you're managing the household, raising the kids, you need to have energy. You have to have a good night's rest. You know, you have to be able to get up and do it all over again. Yeah.

35:43And the way that we thought about it, right, was, okay, we're trying to get tequila into the house for that wine occasion, to replace the wine, get rid of the wine, and insert the tequila. That happens through retail purchase, right, through buying at the grocery store. Like in California, you can buy alcohol in a grocery store. In a grocery store, yep. Right. So our whole idea was moms control the shopping. They make those decisions. So we're going to put this product where she can find it. Right. We're going to tell her how to use it, give her permission to bring a hard alcohol into the home, because prior to 21 Seeds, really women would bring wine and beer, buy that for the house.

36:28And they weren't in the business of really buying hard alcohol for the house. And we really changed that behavior. All right. So now you've got your start. You're doing some research here and you're talking to people. You're getting feedback. And tell me how you, you know, is it like going to because you can go to like Sonoma County and, you know, find a winemaker to make you your own, you know, bespoke wine brand. Like it's not that hard to do. How do you do that? Presumably getting to go to Mexico because it's like champagne, right? Tequila has to be made in a certain part of Mexico using certain methods.

37:10That's right. So the first thing we did was we hired a lawyer. We hired a booze attorney. We thought we got to wrap our heads around, like, first of all, the legalities of how you sell tequila, right? And then we also thought a booze attorney could point us in the direction of, you know, who are some of the distilleries down in Mexico that are making tequila for people? Yeah. I wonder when you went down, it's in Oaxaca, right? No, Oaxaca is for Mezcal. Mezcal. Sorry, sorry. That's okay. It's Jalisco. Jalisco. Forgive me. Jalisco. Yeah. So you're down in Jalisco. And, you know, I'm imagining three American women going down to Mexico saying, hey, we want to make these infused tequilas with fruits.

37:57Like you must have run into some people who were kind of like not cool with that because that, you know, I'm just imagining they're thinking, well, that's not what tequila is. To be honest with you, I would say they were sort of open to it. But the real issue for us was really in order to be able to infuse at scale, we needed to make some modifications at the distillery. And that's where the conversations became a little more complicated. Like you want to do what? And you don't come from beverage. And you've never started a spirits brand. And you're three girls. It is a very macho business still down there.

38:34So there was a bit of that. But really, it was about finding a partner who was willing to sort of innovate with us. And what was so complicated about the ask was that because you're infusing fruits in the tequila, it has to sit there longer, presumably. So you'd have like almost like vats, like how wine is made. So it wasn't just the actual making of it. But also the storage, like we needed to build refrigeration, being able to store the ingredients in refrigeration that didn't exist down there. So it was a real leap of faith that the distillery had to take, you know, to go on to actually make this product.

39:12So we found a distillery that was willing to do that. And it turned out it was owned by a woman. A woman owned tequila distillery, which probably was rare and is still rare. And she was cool. She was like, I'm in. I can do this with you. Yes. And she actually, you know, she, her mother, this was actually really rare. Her mother owned a bottling facility in Veracruz and she saw a lot of herself in us. All right. But then you also have to start having conversations with distributors because this is a business that requires distribution. So even before you had a product, you had to get, you had to try and get meetings with distributors.

39:57So what was your pitch to them? Yeah. So we put together the pitch. We said, here's what we've observed. This is drinks as easy as a glass of wine, half the calories. We're going after the mom consumer and we're going to push easy at home cocktail solutions from for her to her, you know, through online, like through Pinterest and Instagram and Facebook and so on. And they were like, no, thank you. Wait, I'm curious why they would say that because that to me is a very good business argument. I'm thinking, wait a minute, this is interesting. So they're going to market to moms. That's interesting.

40:34No one said that? Well, they just said it's a pass. Really? I'm surprised. Yeah, because at the time tequila was being marketed to men and being sold like scotches and whiskeys. And that is how tequila was being marketed back then. But it's not that long ago. We're talking about 2018 and I'm thinking dollar signs here. But again, you needed these people. You could not enter this space without their support. You can actually, and that's how we did it. Because you can do it through, we launched with Park Street. Okay. Park Street is a distributor that, you know, checks the box on the three-tier system.

41:14They are the ones who are delivering the booze to the customer, writing, you know, doing all of that. They just don't have a sales force. Ah. So, yeah. So, if you can sell it in yourself, you have to sell it in yourself. This is key because the distributor also is the one who's positioning it in the store and having the conversation with the liquor store owner and the manager. And also like they're kind of – right? They're also your sales force. But basically if they don't believe in your product, you're kind of out of luck. Totally. This distributor, essentially, they're willing to just, you know, you can send them a check and they'll deliver your product, but they don't have the resources to actually position it on the shelves or to, you know, to make the pitch for it.

41:59You had to do all that. Exactly. Interesting. Okay. And so that was how we launched. Okay. Just backing up for a sec, because I know that the tequila is now being – you got this distillery in Jalisco, this woman-owned distillery, and they're working on the product. Let's just go back to California for a second and talk about money. Because starting a beverage brand is not cheap. So, like, I'm thinking you go to a bunch of investment companies, VCs, and, you know, you've got a pretty solid team there. Is that what you did to raise money? So initially, the three of us each put in the money to just – and it was, I want to say,$100 ,000.

42:46Yeah. We put in the$100 ,000 for the year of 2018 to just see if we could actually bring this, you know, make this product, do the development of the actual product. I got you. So you have – you've secured a distributor. You've secured a distiller. Let's talk about the branding and the label and the name now because that's also important. Absolutely. And so what we did was we took a walk to that tequila aisle and kind of looked at the aisle. And the first thing we noticed was that, first of all, there was no color. Like color was missing from the aisle. So we knew we wanted it to be bright and stand out, but not be like we wanted it to feel premium.

43:29We were thinking like we want it to almost be like a beautiful bottle of perfume that you would feel proud to give as a gift. So a lot of, we needed the label in the bottle to do a lot of heavy lifting for us because that was where a lot of the marketing was going to happen. And then what was interesting there was, you know, we actually hired a design agency that was very, very prominent in the space. And it actually took up a big piece. That was one of our big mistakes that we made. Because you hired this very expensive firm to put together ideas for a label. Yes. And this does not work out. You fired them?

44:10Yes. Now, it's important to note that every brand that they have brought to market, like so many of their brands are for men. I mean, but those were the big spirits brands. Like they had worked on many, many spirits brands. All of them, I would say the majority of them, you know, are being marketed to men. And so they kept pushing our label and the design into a sort of very masculine, like mustache handlebar kind of vibe. and we were like, that's not what we want. And so we'd give them notes and they would just ignore our notes. And it was actually very, a little bit scary, right? Because here we were totally unknown.

44:46We were going with our gut and we thought we can't keep doing this. We can't keep giving them these notes and them ignoring them. So we fired them. How much did they cost a month? I'm curious. What was the retainer? Like 50 grand? I mean, I think we had only put in at this point, a hundred thousand dollars. So it was like almost, I would say almost half our budget was going to this. Yeah, I'm sure. And it ate up a lot of time for us, which was quite valuable because we had sort of, I can tell you about these sort of early meetings that we had in terms of the final piece, which is who are the retailers, right?

45:21We wanted to be where mom shop. So we had pitched a big retailer in California that had many locations, like 147 locations throughout California selling alcohol. This was BevMo, I think, right? That's right. And BevMo is going to be critical for you in California because if you were going to go to every mom and pop liquor store, that would just take forever. But BevMo is probably 150 or more stores in California alone, right? Yes, exactly. And more importantly, going back to our consumer, she's not going to make a separate trip to that mom and pop store. She's buying her stuff where she buys her stuff.

46:01Right, because that demographic is not going to like the corner liquor store. Exactly. Yeah, so we had through like a friend of a friend of a friend, we had, you know, we were able to get to who at the time was the liquor buyer at BevMo and just pick their brain on this idea, right? And actually, to your earlier question, Guy, he was the one who was like, actually, I think this is a good idea. I'm not surprised because it's an innovative brand, BevMo, but yeah. Exactly. And he thought, you know, the Kettle Botanicals had come out and he was like, it's sort of like a similar proposition in that it's, you know, a little lower ABV and it's, you know, that's like lighter vodka with flavor.

46:46And this is tequila with flavor. I get it. Like he thought I could see that tequila is on fire as a category. And this could be kind of like the Kettle Botanicals in the tequila aisle. And the Kettle Botanicals is like Hendrix, gin, and all those spinoffs that came out of that world, right? Like all those kind of apothecary kind of brands of gin. Exactly. And so he actually was one person that was very encouraging to us. And so he said, listen, once you get further along and you have a finished bottle, you know, they had these things called line reviews, which we hadn't heard of until, you know, we had this conversation.

47:23And what a line review is, is all the major retailers, which is where we wanted to be, right? Our strategy was like, we're going to go where mom shop, mom shop in grocery store chains. They shop at Target, they shop at Walmart. So we needed to get into those accounts. And those line reviews happen once a year in the spring. And you have to be ready with your product, everything done in like January. And if you are lucky enough to be invited to present at a line review, you have an opportunity to pitch your product. And then if they decide to take you, then you go into their resets. So they completely reset the stores, all the shelves in the spring.

47:59And then based on how those products perform, then they do plug and play in the fall, which is like a reshuffling. So basically you have like kind of like one chance to get in there. Right. And the line review, this is BevMo's line review. Yes. Where they basically, it's like a dog and pony show. Everybody comes there. Exactly. So then at that point, we had been working with like a consultant, this guy that had been in the spirits industry, and he had worked with another design firm. And so he said, listen, these three girls, they've already spent a fortune, you know, a big chunk of their budget.

48:37They don't have a ton of money. And they're really, they have some interest from BevMo, right, to show something. can you work on this very tight timeline and deliver at this amount of money? And they said yes. And they did an incredible job with our bottles. So they came up with the label that I now know, which has the prominent fruit and the vegetables, almost like a photorealistic image on the bottle, 21 seeds with that sort of sunburst design. Yeah, it's actually from the top view, the top of an agave plant, but yes. Okay, I got you right. So you get the first bottles out, I think, or samples of this when, by the end of 2018?

49:22Yeah. So by the end of 2018, and we call up our friend at BevMo, and we say, okay, we have our bottles. Now, we were Frankensteining it, right? Like pouring the liquid in. And we made our appointment with this guy, and we go down to BevMo. And on a Friday, we confirm the meeting, and we get there on Monday, and we pick up the phone. There's no receptionist at BevMo. And we were 15 minutes early because we were very excited. And we're talking, talking. And 15 minutes go by, and nobody comes to get us. And so we're thinking, oh, maybe we should email, send an email because maybe there's no receptionist, so they probably don't have assistance.

49:59So we send an email. And then five minutes later, this lady comes out, and she says, hey, you're here to see so-and-so. Yes. Well, so-and-so doesn't work here anymore. And we're like, well, we said we just talked to him on Friday. What do you mean? Well, he didn't know he wasn't working here on Friday. The guy, your contact, who was like, come see me. I like this. He's no longer working there. Correct. And back to my movie days, I'm thinking when the studio head leaves, you're done. You don't want to be known as that person's tequila. It could have been like the click five, right? Like. Totally.

50:33Like you do everything right. And then you get to that moment. And they fire the lead singer and don't want to be a boy band anymore. Yeah. When we come back in just a moment, how Kat manages to avoid a humiliating encore to the boy band debacle. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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53:13Hey, welcome back to How I Built This. I'm Guy Raz. So it's late 2018 and Kat and her partners are sitting in the headquarters of BevMo having a very awkward moment. A woman there has just told them that the buyer who liked their product and wanted to give them a chance doesn't work there anymore. So we were sitting there. We're like, do we run? Should we just get out of here? Like, she doesn't know who we are. Like, this is our chance to go. We should go. And as we're debating whether we should just get up and leave, this guy comes out and he says, hi, I'm Gary. I'm the new so-and-so. My meeting just canceled.

53:50I'll take the meeting. and we were just like, oh, wow. So we go in to the meeting and we tell him our story. He tastes the product and you could see his face lit up. He's like, wow, he was blown away. This is really good. And he said, okay, you know, if you get your product done and ready, then let's do the line review. So cut to, we set the meeting with Gary and I email him just to find out how many people are going to be in a line review, just so I bring enough product for sampling and all of that. And I don't hear back from him, but we'd already made the appointment. And I thought, you know, he's really busy because he's in line reviews.

54:34So this is fine. Let's just bring more product than we need. And so we say, okay, we're going to go into our meeting on Friday. And our thinking for the labels was like, okay, everyone's telling us at most we might get two SKUs approved. There's no way. If you get one, you're lucky as a new brand, right? Because we're competing for shelf space against Diageo and Bacardi and Constellation and all their brands, right? So that shelf space is very, very coveted. And by the way, in spirits, you don't have to pay slotting fees like you do in non-alcohol. So it's a little more fair in that if you really do have that shining product, you can get through.

55:16And it's not a matter of how much you can pay, right? With the slotting fees you have to pay. So we get there, same thing. We're waiting, we're waiting, we're waiting. And nobody comes. And we're like, where's Gary? So then we send another email. And again, this person comes out and it's not him. And they're like, well, he's gone. He's leaving BevMo. He's no longer the person that's in charge of spirits. And they're like, this woman, Kim, the new buyer, she's doing the line reviews. We go in, we pitch her the product line, and she tastes them all. And she says to us, she's like, you know what?

55:52These are really good products. And I think we'll end up probably bringing in one or two of these. And we said, great. Do the margarita two ways, spicy margarita with the cucumber jalapeno and a regular margarita with the Valencia orange. But you knew then and there that they were going to make an initial order, which is encouraging. Yes. We felt really good about that. But we still had to actually make it at scale. And that was a real problem. Because? Because we'd never tried it before. So when we took our, we go down to Mexico to do our first production run using, you know, the instructions that we have come up with.

56:30And when we went to do that at scale, it just, it didn't work. And it was taking way, way too much time. and it was the equipment was breaking. We were clogging it up with like the pulp, you know, from the fruit. And it was a disaster. And so that night we went home. It was like day one. And that night we went back to our hotels and we got the email from BevMo. That was the PO. And that said? And it said they wanted all three SKUs in all 147 stores. All three flavors in all stores, which is how many cases? I think it was like 300 cases. Wow. That's great. No, it was insane. So now we had to get it to work.

57:13And you got to get the money to finance this, right? Because a few hundred thousand dollars, you're going to need more than that. Yes. You got to pay the distributor. You got to make the tequila. I mean, this is now you got the bottles. And by the way, what was the, just as I curiously, what was the retail price going to be per bottle? Based on their margins and stuff, the retail price was going to be anywhere from like$32 to$34. Okay. Yeah. Now you needed to raise some money. So did you think about going to professional investors and institutional investors or VCs or? Initially, we did not. Initially for the seed round, we were just going to focus on friends and family.

57:52Okay. We focused a lot on women because we wanted to be predominantly female owned. So we went after a lot of female investors, which typically in the Bay Area, they get left out of stuff, right? So you could go to these people and say, hey, we have this purchase order. We're raising money. And I think the first round you raised a few million dollars. Two million. Yep. We raised$2.15 million. But now you really have to build awareness. Now, how did you guys begin the process of building hype? Because you're not going to go to bartenders. You're not going to be – and you have a very specific customer in mind.

58:30Let's be honest. Many of whom are not huge barflies. Yeah. Like you don't see a lot of moms sitting at the bar pounding drinks. Quite the opposite. You don't see them doing that really at all. And, you know, a lot of the playbook, again, was like throwing these parties, getting these really like really attractive young people at a bar and get everybody hyped up. And and it's like, you know, Red Bull and, you know, whatever night, you know, you weren't going to do that. And also that costs a lot of money. So what was the first step you're going to take to build awareness? Because now this is going to go into BevMo by the end of 2019.

59:09It actually launched in BevMo April of 2019. Oh, April of 2019. Okay. Wow. Yeah. Now, the plan was, right, we're going to go where she is. So basically, we're going to go on Pinterest, we're going to go on Facebook, we're going to go on Instagram. And then we did get a little lucky, right, in that we ended up on television right away, because BevMo did a thing for Cinco de Mayo. So basically like any touch point of press that we got. And obviously, you know, we did know a lot of people in publishing. So we were able to get some articles written about us. Like we pitched PopSugar, for example, which is a very similar site to Refiners29.

59:53And we pitched the article to them about an easy three-step spicy margarita that you can make at home. And even if you don't know anything about how to make cocktails. And we would take those pieces of content and amplify the heck out of them. And one of our investors was an esthetician for Jessica Alba. And Jessica Alba fell in love with it straight away. And she just posted, you know, my favorite new adult beverage on her Instagram. And then we were going out and doing giveaways, like tons of giveaways on social media. How would you do giveaways? So basically, you can't give away alcohol. No.

1:00:32And you can't give away like a gift card to a retailer. Yeah. All we would give you is the value of three bottles of tequila. So what you would ultimately win was just$100 basically. Ah, okay. Got it. Okay. And also, I'm curious to say at this point when you're doing all this stuff, are your co-founders still doing their full-time jobs? No. Wow. Okay. Yeah. Okay. Okay, so you've got this going. And by the end of this year, 2019, you guys sold, and they ordered 300 cases. By the end of that year, you had sold 1 ,800 cases. But I have to imagine that was in other retailers, not just BevMo. Yes. So where else were you selling these in mom and pop?

1:01:17We got into Molly Stones. Oh, Molly Stones. Okay, yeah. We're still following the same playbook. You want places where moms shop. Places where moms shop. If she doesn't shop there, we don't want to be there. So we were very, very focused, which was what allowed us to really stretch our dollars, right? We were also wanting to get a distributor, right, that actually had a sales force. So we wouldn't have to go out and do all this ourselves. Yeah. So we were kind of, we were also marketing to those folks. And the thing about those folks is they pay attention to certain accounts. So we went out and got into those accounts.

1:01:51Which are? Which are like High Times in Newport Beach. That's a liquor store? Yeah, it's a liquor store that's independent because most spirits brands at launch are not at BevMo in 147 stores, right? So they're in a mom and pop shop. So there's certain mom and pop liquor stores that they pay attention to. So we wanted to make sure we were in those stores so we could go on the radar of those folks. The distributors who could then bring you out beyond California to make you a national brand. But also to just be our distributor within the state of California. At this point, we're still doing everything ourselves.

1:02:28Yeah. Another lucky thing happened to us at the end of the summer of 2019. Another one of our investors knew Katie Couric. And so Katie Couric had tried 21 Seeds at her house. And that summer, New York Magazine interviewed her and said, what was your favorite finding from the Hamptons that summer? And she said, it was 21 seats. And I think it's going to be the next Casamigos. So then, of course, we took that and marketed to our distributors and marketed to the buyer at Molly Stones and marketed to BevMo and pushed that out. And people don't – they think that it just happens and that's the end of it.

1:03:02You have to push all of that out to all of the people. You would eventually get a distributor, but I don't think that happened until COVID. So COVID turned out to be kind of a bonanza for booze because everyone started drinking more. I mean, some of these companies couldn't make enough of it. Yeah. My sister, she was an amazing forecaster. And during the pandemic, she knew stuff was going to really start to shut down. So she had the foresight to bring a lot of product in stateside. So we overbought so that we wouldn't run out of supply. And part of that is because when you're in the chains, you can't run out of stock.

1:03:47Otherwise, they'll move someone else into your slot. They don't just run empty shelves, which then turned out to be great for us because we had product to sell. But by that point, we were now in Total Wine and More. We were regionally in Whole Foods. So we had expanded to more stores in California. By the way, were you profitable? For 2020, we actually were profitable because it was, you know, you didn't have to spend as much money on things like flying to distributors and opening a market. So like those kind of expenses, you know, can really add up. And we didn't have any of that stuff. We were able to open all of those markets over Zoom, which it saved us a lot of money.

1:04:34All right. So 2020 is turning out to be a good year or very good year. And you guys get a – I think by the middle of that year, you do secure the biggest distributor called Southern Glazers to agree to distribute your product. And by the middle of 2020, are you still only in California or at this point are you outside of California? At that point, we're outside of California as well. We're in New Jersey and we're in New York. And by the way, when Southern Glazers became a distributor, I mean, what did that mean? Because you're focusing on big retailers. So BevMo, Molly Stones, what other big retailers did you start to get into?

1:05:17Target, Walmart. We got in to Whole Foods nationally. So what made that possible was having this national distribution deal with Southern because these big guys, when you're multiple states with Walmart, they don't want to deal with a bunch of different distributors. You know, they want to deal with one distributor in multiple states. And by, I guess, by early 2021, you start to get inquiries by people who want to potentially acquire you. You start getting like incoming from brands that are interested in you, unsolicited. Unsolicited, yes. Because, you know, we're now on Nielsen. Nielsen rates.

1:06:02I didn't know Nielsen does ratings for spirits too. I guess they rate everything. Yeah. They rate everything. So there's Nielsen and IRI data. And we were now on the leaderboard. Like suddenly this little brand, 21 Seeds, is now suddenly the leader in flavored tequila. and it's actually growing serious share. So we started to get inquiries. And I mean, I imagine when you started this, you had this idea of, you know, eventually hopefully we can get acquired. But these conversations are happening fast. And so one of the suitors that approaches you in 2021 happens to be Diageo, one of the biggest beverage companies in the world, alcoholic beverage companies.

1:06:47They also own, I think, Casamigos and Don Julio and probably other tequila brands. And they wind up making you an offer. Tell me a little bit about it. I mean, I know that some people get uncomfortable talking about money and that stuff. And I think it's amazing. Just three years in, you get this offer. It's a$160 million offer. Yeah. So by every measure, we had accomplished everything we'd set out to do. And now it was like, how is this brand going to live on forever, right, and get even bigger? We also knew that there would be quick copies, copycats, right? Oh, yeah. I mean, already there were already two brands that had totally copied us, you know, and that were being sold.

1:07:37And we knew there were more coming. So we knew there was like, we needed some air cover, right, if we were going to take this brand globally. Yep. And when we looked at Diageo, we thought, hey, listen, they actually are the biggest in tequila, which we thought was a huge positive, right? Because they have Don Julio and Casamigos. So the on-premise already knows their brands really well. So you can piggyback on that, you know, knowledge. Yeah. And they had nothing in flavors. So we were totally unique in their portfolio. Like once Diageo is on your side, you know, you can go everywhere. Yeah. And, you know, and then we thought, is this a good deal for our investors?

1:08:16You know, are our investors making money? And so, like, by all accounts, our investors were like, are you kidding? It was one of our best investments that we made of the year, you know? And we didn't even keep their money for very long. Because the$4 million we raised, we only had that money for like a year and a half, you know? So it was like, everybody was happy. We were happy. And we felt like this brand now has a home and is going to go and save everyone from drinking. crappy margaritas. So they acquire the company, 100 % of the company, I think, right? Yes. And you and your partners become...

1:08:50Ambassadors. Brand ambassadors. And that's what you are still now, right? Yes. No, totally. Like if a truck gets stuck in customs, I'm not the call. Not your problem. Not my problem in the middle of the night, you know? You're just sipping tequila, maybe on the middle of the night, but... Drinking it in the Spritz. Yeah. And now they obviously they have a massive marketing budget and just the ability to just move product. Yeah. I think they sold in their first year of owning it, they sold like, I don't know, 70 ,000 cases, maybe more than that. I think you guys sold, in your last full year, independently, you sold 66 ,000 cases.

1:09:32Yeah, exactly. So yeah, we still meet with customers, like our big customers, and get to pitch ideas that they either do or don't do. It's up to them. They get to do what they want. And that frees us up to go and be creative and do other things. So I know that the journey, we've just talked about it, you know, for a long time, was grueling and challenging. But when you look at it from 35 ,000 feet, it's like, whoa, that was like a total of four years from like a less from like launch to exit. Yeah, like three years from the day we ended up on shelves almost to the day, three years. Like we got on shelf in April of 2019 and we closed the deal with Diageo March of 2022.

1:10:15It's unbelievable. Yeah. I mean, when you think about this, right, the fact that you, you know, you took 10 years away and then you come back into this business and obviously you built a network and you had some advantages because of your place in life and, you know, the people you met and you were in San Francisco and there's a lot of, you know, tech people there and influential people there. But still, like you still have to make a product that works, right? How much of this story and what happened do you attribute to the work you put in? And how much do you think had to do with luck and timing and good fortune and, you know, being at the right place at the right time?

1:10:56I like to say timing versus luck because luck sort of feels like it's happening to you. But timing, you know, with the movie, the timing was awful because they decided they didn't want to be a boy band anymore. And I couldn't have planned it. And with this one, the timing was perfect. We hit every trend going on in spirits at the time. And the market was ready for this product. For sure, there were moments of luck, you know, that went our way. And then the rest of it is just hustle. making yourself, you know, in every step of the way, kind of seem bigger than you are so that you can make the money go further, you know.

1:11:33And that is so hugely important and I think played a huge role in why things happen so quickly for us. We connected those dots and did a really good job at it. That's Kat Hontis, co-founder of 21 Seeds. What do you, what's your like go-to food with tequila? Because I think a lot of people would say chips and salsa, right? Right. Like what is that your go to? So I love to make Greek food. So this drink's so light. You know, I don't think it like complements the way that you look to wine to like bring out certain flavors. But I think of it more like it's refreshing and it accompanies nicely. You got to get Diageo to do like an ouzo inspired tequila, like an anise seed infused tequila.

1:12:20You're combining your two things. Yeah. I'll bring it up in the next innovation meeting. You can then start exporting tequila to Greece. And maybe like, you know, like you did to wine with moms in America, you could do to ouzo. Actually, ouzo, like a licorice-infused tequila would be delicious, actually. Delicious. You know what? I'm going to make it this weekend. I'm going to do it this weekend, guy. I'm doing it. All right. Send me the bottle. Okay. Done. Hey, thanks so much for listening to the show this week. please make sure to click the follow button on your podcast app so you never miss a new episode of the show.

1:12:55And as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at GuyRoz.com. This episode was produced by Carla Estevez with music composed by Ramtin Ereblui. It was edited by Neva Grant with research help from Olivia Rockman. Our audio engineers were Robert Rodriguez and Gilly Moon. Our production staff also includes Carrie Thompson, Alex Chung, John Isabella, Chris Massini, Devin Schwartz, Catherine Seifer, Sam Paulson, JC Howard, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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