Advice Line with Jim Koch of Boston Beer Company

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2:30Hello and welcome to the advice line on how I built this lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show who will attempt with me to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Send us a one-minute message that tells us about your business and the issues or questions that you'd like help with. You can also send us a voice memo at hibt at id.wondery.com. And make sure to tell us how to reach you.

3:12And also, don't forget to sign up for my newsletter. It's full of insights and ideas from the world's greatest entrepreneurs. You can sign up for free at gyros.com. And we'll put all this info in the podcast description. All right, let's get to it. My guest today is Jim Cook, founder of Boston Beer Company, the American brewery best known for Samuel Adams' beer. Jim, welcome to the show. Welcome back to the show, I should say. It's always a pleasure having a beer with you. It is always a pleasure. If I enjoy myself here. I think that's perfect. Jim, if I had a drinking buddy, you would be my top choice.

3:54You're probably a lot of people's top choice to be a drinking buddy. So thank you for being here. And yes, please, let's all enjoy a Sam Adams beer. Jim, you were, just to remind our listeners, you were first on the show back in 2017 to tell the story of how you created the Boston Beer Company and Sam Adams beer. And it's just such an inspiring story because at the time when you started this brand in the 80s, you were on the fast track to sort of financial stability. You were working at a consulting firm, but you were feeling suffocated. You were feeling like this wasn't the life you wanted to live.

4:31So you left and you decided to start a beer brand. And you actually are widely credited as sort of the godfather of the craft beer revolution that really kicked off with Sam Adams Beer. You are still with the Boston Beer Company, but no longer running the day-to-day. You're the chairman. And I'm super excited to have you on the show to help us with these entrepreneurs. But before we get to them, let me start by asking you, Jim, about product market fit for a moment, because this is going to come up in our conversation today, right? I mean, you were essentially creating a new kind of beer in the U.S.

5:08This is a flavor profile that most beer drinkers weren't used to. They were used to drinking Coors and Budweiser. How did you get ordinary beer drinkers in the mid-'80s, you know, the guys at the corner bar, to start drinking Sam Adams beer? Well, I have to say I didn't try to do that. And I think that'll come up with a lot of the folks we're going to be speaking to today. When you're at the leading edge of a product that is very unfamiliar to people, even a category that is unfamiliar, you don't want to go where all the volume is in the mainstream. You want to just find a handful of people who will get what you're trying to do.

5:55And so 99 % of the beer drinkers out there, I wasn't trying to reach them. I was really trying to reach the 1 % that was interested in flavor, that drank beer for the taste, that knew a little bit about the ingredients way more than trying to convert, you know, a Bud Light drinker to Sam Adams. That was a shock to their palate, to their system. Yeah. It might have even harmed them to have that much flavor in their mouth at one time. Yeah, I mean, this is a classic example of finding product market fit, right? You engage with early adopters. I wrote a blog post about this a little while ago in my newsletter.

6:45And it's interesting because in most cases, you start with early adopters. You sort of give them the product. You get their feedback. You really kind of cultivate their passion. And soon enough, it's those people who become your biggest evangelists. That's exactly right. Our whole market when I started was a list of 100 bars in the whole world. That was what we cared about was those 100 bars that were in the right pockets in Boston. We only had one truck to deliver the beer, so we couldn't go all over creation. But we focused on them. And eventually we got every one of them to carry Samuel Adams.

7:31It took about a year to do those hundred bars, but that was where we focused and it grew from there. I remember vividly the story you told about going – using payphones in Boston as your office because you didn't have an office. You didn't have a phone line. You were using payphones and you did this because you were taking any money you had and using it to improve the quality and the flavor of the beer. Like you were really scrimping on the other thing. So I'm curious when you – when early stage founders might ask you or talk to you about where they are, how should they think about allocating resources in the early stages of the business?

8:17Well, I'll give them some simple advice. Don't play company. You start out and you think, well, I'm starting a company. I need to have the things that a company has. I need to have an office. I need to have a computer. I need to have an executive assistant. Well, BS, you don't need those things. They suck up money and they distract you. And, you know, when you do have an office, you tend to want to go there and avoid all your real challenges because it's a safe place. Well, I didn't have that. All I had were those hundred bars. Yeah. I could just talk about this forever, but we got to bring in some callers.

9:01So, Jim, what do you say? Should we bring in our first caller? You sound like really great people, so I'm anxious to talk to them. All right. I think we got our first caller online. Please introduce yourself. Tell us your name, where you're calling from. Hi, I'm Kim Jones, the CEO and co-founder of Tropical Vibes. We're based in Ponte Vedra Beach, Florida. And we are a lifestyle brand that focuses on tropically inspired products. So we started about three years ago with branded apparel and home goods and are very excited to be expanding into the spirits market with a new rum that is set to launch in a few weeks.

9:39So thanks for having me. Amazing. Okay. And what's your question today, Kim? So my question is, as I'm sure you've heard, everybody is talking about brand story. And that seems to really be the buzzword. And so as we're growing our brand, how do you suggest we create a compelling brand story that spans across all of our product lines and is not based on our founder's story? Got it. Okay. Well, let's break this down a little bit first, Kim. Tell me about how you started this brand. How you started Tropical Vibes? Yeah, so my husband and I decided to start a travel agency a few years back as a side hustle.

10:26And we named it Tropical Vibes Travel. And one of the things we did was to create hats and shirts and things for the legions of customers that we anticipated coming to our travel agency. And we were awful travel agents, but everybody wanted the hats and the shirts. And so we pivoted and started selling the branded apparel. Actually, throughout the country, we ended up in about 120 stores across the U.S. and Canada with our branded apparel. And it says Tropical Vibes on it. Tropical Vibes. Like a palm tree, yeah. And so, okay, so the idea was originally, it was, I love this, it was a travel agency, presumably to help get people to tropical areas, right?

11:08Yeah. Like Caribbean and that didn't work out. But the swag and maybe the swag that you were going to give away turned into the company, turned into the business. Yes. And so that and today you've got what? What do you do? Hats and shirts. Yep. Hats and shirts and some items for the home. But we always wanted to do a rum. And so we are really excited to be expanding the product line by launching this rum line. All right. Right. And so right now you're trying to figure out what is the story we tell, right? Jim, I want to start with this idea. And you might have some questions for Kim even before you answer it.

11:49But I mean, obviously, the Sam Adams brand is in the story, just even in the label, even in the name, even in looking at Sam Adams on that. Everybody listening can picture what that label looks like, and it tells them a story that even if it's not the exact story you thought of, it's enough of a story that we can all gather around it, right? And so how do you think about storytelling with a product or with a brand? To me, it has to start with a founder. And I know you're a little skittish about that, Kim, but to me, a brand has to come from somewhere. And generally, that somewhere is the heart and the passion of a human being.

12:40I mean, with my beer, you know, Samuel Adams, the historical figure, the patriot, had a passion for American independence. and I wanted with my beer to create beer independence for the United States. I didn't want to be dependent on imported beer from other countries. So you've got to start with your own passion. And what do the tropics mean to you? Because essentially you started with a business where you were going to take people to the tropics. Well, that didn't work. But now you're continuing that mission because you're bringing the tropics to people. Yes. Because, you know, to you, the tropics are this unique place where you put your feet in the water and your ass in the sand and you breathe out, you're relaxed.

13:37What is it about the tropics that you want to bring to people? Tell that story. I think that's a great point. and trying to separate the two, the founder from the brand, because we have done well with the apparel. And I always joke that our biggest retail customer is in a very small town in Idaho, right? So clearly the Tropical Vibes brand really resonates with people that aren't in South Florida or aren't living the dream in the tropics. And I want to capitalize on that, but I would love to make our customers sort of the hero of the story. I don't want to be the hero of the story. And I'm trying to figure out how do you tell a brand story that puts the customer front and center?

14:28I'm not sure you have to sort of separate the two, right? Like, in other words, I don't necessarily think that the story you have to tell is exactly your story, like Kim Jones, why did I want to do this? But I think that the question, why did I want to do this, should inform how you think about the brand story in general, right? And so it sounds like there was, from what I understand, you did not grow up in Florida, right? You grew up somewhere cold? Seattle. Okay, so rainy and cold. And so did you, presumably you would dream about, I mean, now you live in Florida, would you dream about, like what do the tropics mean to you?

15:04Why were you drawn to that world and that culture and lifestyle? It's just, it's our happy place. It's just everything Jim said, right? Our toes in the water, our butt in the sand. And really just that, we always joke, it's that first day of vacation feeling, right? It's just relaxed. It's calming. It's soothing. It's fun. You know, we did our research when we started the business and, you know, about 26 million travelers go to the Caribbean every year. I think it's almost human nature to be drawn to that type of environment. You're selling that feeling that you described. So you have to have some layers to your brand.

15:51I mean, with the rum, there's going to be layers around the product, how it's made, who makes it, that ladder up to why is this better? Why is Tropic Vibes the rum that I should buy instead of, you know, Malibu or Captain Morgan or Sailor Jerry? Because you're going to be on a crowded shelf. Right. so what is unique special different about that rum and some of it has to be the story the consumers they're looking at the bottle they can't taste the rum you know so you've got to create the taste experience it's it's aged in this kind of barrel we sample it and we don't bottle it till it's ready our rum maker has been making rum in the tropics and the the cool nights in the warm days, bring the rum in and out of the wood that, you know, extracts vanillins from the wood that you wouldn't otherwise get.

16:55I mean, it just has to be many layers to your story. Kim, I'm curious how much, what percentage of your business is direct-to-consumer online through your website and what is through the boutiques? We are about 80-20. So 80 % to the boutiques and about 20 % online. So that 20%, right, those direct-to-consumer sales, I mean, that's really where you can start to develop a community. And I know if I'm looking at your website, you've got a blog and you've got some recipes for cocktails, and that's a great start. And I would really lean into that and really try and cultivate that 20%. You know, Jim earlier talked about taking Sam Adams initially to those early adopters and really leaning into that group to validate this proposition, this idea that this beer and flavor profile he was producing was going to work, right?

17:45And those people would become the evangelists. Those were the ones who would turn Sam Adams' beer into what it is. To me, I feel like you have an opportunity with that 20%, right? The people that you can gather data from, the people who you can ask for feedback, who you can offer incentives if they answer a survey. I mean I think one of the things you can also do with your existing inventory is put a tag on the inventory with a QR code. Let people scan that QR code that takes them to a Spotify playlist that you guys have curated of great music, of tropical vibes. I mean, there are little things I think you can do to start building out that community because eventually you want to see if you can shift that 80-20 around, right, where it's 80 people going directly to you and 20 percent of that business coming to the boutiques.

18:40Jim, what do you think? Yeah, I love that idea. I actually wrote it down, a Spotify playlist, because we have a hard tea that's vodka-based called Sun Cruiser. And I wrote that down for our product, Guy. Great, let's do it. So I'm getting some value out of this. I have to compete against Jim? Oh, boy. No, I think Guy is absolutely right. You're only one person. If you can create acolytes and promoters out there who also get your vision, I'll build on Guy's comment. You know, what if you create like a scrapbook where people can post pictures of themselves in the tropics or enjoying Tropic Vibes rum?

19:29You need things that people can put themselves, situations people can put themselves in. That's what you're trying to do with your product. So allow your drinkers to post their pictures. Yeah. And doing that, right, that having those like user-generated photos, you can incentivize people with, you know, free pair of sunglasses. Maybe you just make cheap sunglasses, you know, that are just swag, you know, that says Tropical Vibes on it that people will get if they post or if they, you know, post a photo of themselves with a, you know, a glass of rum or holding the bottle, something like that. I just think there's so many opportunities that you – little things you can do now to really start to build a community, which will – these will be your force multipliers.

20:17I use that term a lot. It's a military term, but it's the people who will go out there and evangelize for your product. Absolutely. Excellent. Well, thank you both. I appreciate it and super helpful. Thanks for having me. Kim, thank you so much. Good luck with Tropical Vibes. We'll be following your progress. Fantastic. Thank you. You know, I wonder when you think about, Jim, just building a brand today. It's just – I mean, is it – do you think that it's harder because just there's more things out there? Or do you think that it's not necessarily harder today than it was in 1985 or 86? I think it's the latter.

20:57It's never been easy. I mean, it's – building a brand is just – it's hard work and it's a miracle when it happens. I mean, you're creating something out of nothing. It's, you know, the 21st century version of alchemy. And that was always tough. But you need to be a storyteller to create a brand. Yeah. All right, Jim, we're going to take a quick break. But when we come back, what if you could get soup broth from a teabag? That's coming up in just a moment. Stay with us. I'm Guy Raz, and you're listening to The Advice Line right here on How I Built This Lab.

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24:42Welcome back to the advice line on how I built this lab. My guest today is Jim Cook, founder of the Boston Beer Company. All right, Jim, let's bring in our next caller. Tell us your name, where you're calling from, and just a quick line about your business. Hi, my name is Lance Kesner, and I'm from Bellevue, Washington, near Seattle. My wife, Lori, and I created Millie's Sipping Broth. And Millie's is actually the first ever soup broth in a teabag. It's gluten-free, keto, vegan, and kosher. Wow. Okay. And so this is a broth, like vegetable broth or chicken broth, but it's in a teabag? It's all vegetable.

25:27You make it in the teabag, you steep it like tea, and it makes a fresh cup of broth. I love it. This is a super innovative idea. And what's your question for us today? My question is, this coming fall, we're rolling out our product nationally at Walmart. And we're really excited about this and are financially prepared. However, what keeps me up at night is thinking about how we'll be able to fund our continued growth beyond that. So, What are some of your ideas about raising capital to support a new brand that is getting national traction in retail? Okay, we'll get to your question in a moment.

26:09Just a couple quick questions about Millie. So tell me a little bit about how this started. So my wife, Lori, she used to be a teacher. She was a lifelong Weight Watchers member. and the break room was always filled with all kinds of cakes and cookies that were left over from the weekend and she wanted something healthier. So she used to take a bouillon cube with her to school because she wanted a savory, something savory and hot. There was nothing out there. And I said to her, let me make something that is healthier for you. And so I formulated something that didn't have all the preservatives and everything like that.

26:50And she said, put it in a teabag so I can make it really quick because I only have a couple of minutes. So I, you know, ripped open Lipton teabags in our kitchen, put the ingredients in. I made 10 of them. She took them to school and had one. And by the time she came back, they were all gone because all the other teachers had taken them. Wow. Okay. So right now you are in how many stores? We're roughly about 700 stores. And how many people do you have working? So the founding team is just my wife and myself. And then we have a partner company that does the operations and sales. So we work together with them.

27:37And so tell me a little bit about how you're doing so far. I mean, have you broken half a million dollars in sales yet or not quite yet? We're under$2 million. Oh, wow. Okay. So you guys are well on your way. So with just such a small team. And so now that you're going into Walmart, your question is, do you – should you approach – potentially approach investors? Jim, let me pass this over to you. Maybe you've got some questions for Lance before you kind of launch into his question or answering his question. Yeah. What are you going to use the capital for? What do you need money for? Well, basically, I think the most important thing is having inventory and having the capacity for inventory.

28:26Now, we would never make inventory ahead of having commitments or purchase orders from a customer. But to be able to tap into it when it's needed is critical. Yeah. And when do you get paid? Well, usually with Walmart, it's, you know, 45, 60 days, something like that. So that's typical retailer payment schedules. And you sell directly to Walmart? Yeah, it's a direct sale. Okay. I mean, one question to ask Walmart, and Walmart wants you to succeed. Sometimes they have this reputation of being really cutthroat and predatory and so forth, but they're nice to little guys. So a question I would ask is, can you guys pay me in 15 days?

29:15Good question. And if they can, you know, that solves a lot of your problem because you probably don't have to pay your, you know, your producer suppliers in 15 days. So now you've got a positive float. And the issue that you face, you know, trying to raise capital at what is still a fairly early stage is people want a lot. Yeah. You know, if they give you a half a million dollars, they may want half of your company. I mean, really think through your cash flow and, you know, hoard cash to the extent that you can delay your payables and accelerate your receivables. That's as good as investments.

30:00I mean, I think back on when I started my company and I don't have a lot of regrets, but I realized I started my company with$240 ,000. $100 ,000 of it was mine. And then I raised another$140 ,000. and that represented like 35 % of the company. I never needed it because I, like you, was producing through a contract producer and I was selling to a distributor and I thought I needed to give them 30-day terms. And I didn't. They liked me. They wanted to see me succeed. If I'd gone to them and said, you want me to succeed, I'm struggling, can you pay me cash two days after delivery? I mean, I'm not asking you to finance, me.