#248: Mike Cessario, Founder and CEO of Liquid Death – Disrupt with discipline

27:33So small challenger brands, if they're smart, they can kind of try to use the big guy's own might against them, which is kind of what we did. It's like if a big company is going to come and try to threaten you with a cease and desist with their big expensive lawyers thinking it's going to scare the small company. Well, if the small company is smart enough to realize, hey, well, if we just publicly post their cease and desist letter, it makes everybody else see them as like, oh, big guy, you're trying to crush the small guy. Screw you. We want to support the small guy. You know, you can use that to your advantage.

28:09And famously, Ben & Jerry's Ice Cream did this in the 80s when Haagen-Dazs tried to squash them out of distribution. Ben and Jerry's launched this whole campaign where they were like basically calling out the big guy who was trying to get rid of the little guy. And it was this hugely successful sort of campaign for them. So there's a history of challenger brands being able to kind of leverage, you know, the big guys who were, who were kind of trying to, to use their might against. So you had a big competitor come after you for the, the armless, uh, armless, uh, Palmer name that you had and you changed it to dead billionaire.

28:48That's amazing. And this strategy that you've had, creating this great entertainment brand that just happens to be this healthy platform, which is amazing. You've had explosive growth the past few years. What's been the biggest challenge for you personally in leading through this kind of movement towards scale? the marketing part for us is kind of the easy part because we do that so well like we can do this marketing stuff in our sleep a lot of other companies struggle struggle with marketing that's a tough place for them for us especially in the beverage industry because of the way it's structured there's a lot that is out of your control that you don't have a lot of effect you can't affect as much.

29:35For instance, distribution. To be in every retailer, for the most part, you have to go through a distributor. But there's a limited amount of distributors. Coke has its own distribution network. Pepsi has its own distribution network. But you can't get into that network unless they own you, basically. So we go through the beer network. Because the way the alcohol laws are structured in the US, Anheuser-Busch corporate can only own 20 % of its distribution network. So we're able to go one by one to 300 unique independently owned beer distributors and convince them to take us on as a brand. And they're the ones who deliver Liquid Death to all the grocery stores and convenience stores.

30:23They're the one who put Liquid Death on the shelf. They're the ones who has to reorder it when it's out of stock. But in that network, they're selling hundreds of other brands and maybe they get their bonuses selling Bud Light or these other billion dollar brands. Liquid Death is so far down the totem pole on what they're focused on. So that's a tough part as a brand growing and scaling. You can't be sitting out of stock on the shelf for three, four days at a time. and we don't have thousands of employees that can go in every single store the way Coke or Pepsi can to keep an eye on that. So you really lean on your distributors to execute in retail well for you.

31:09And that's been a big part of our challenge scaling is we're just trying to get more and more mind share with our distributors where they remember Liquid Death in the store and keep us in stock and that they understand all that. And then from the retailers, the retail buyer, they are the gatekeeper for shelf space. Why should they give Liquid Death this space over somebody else? And is somebody else paying more money for the shelf space than what we're paying because they're a big company and they can afford it? So there's all these things that don't have anything really to do with consumer demand that you have to still kind of figure out to get to that level of scale.

31:49We could have everybody in the country want our brand, which is what it was in the early days. In the early days, we were ripping on Amazon and retailers were saying, no way we're putting this on the shelf. It will never sell. Moms will never buy liquid debt. cut to today, we're driving almost all the growth in the flavored sparkling water in Target to an 80 % female customer. Cause mom is buying this because she's like, finally, my nine-year-old's excited to drink water instead of soda. Cause he has something he feels like he's not supposed to have. Right. But it's hard to convince a buyer of that, or it's hard to convince a distributor of that, who are not marketers, who are not, you know, culture experts, the way marketers tend to be.

32:35So that's really the hard part of scaling is all the in-between between us and the end consumer. It's a very fragmented, fragmented, complicated puzzle that it takes years and years to years to just get more and more efficient. Yeah, I get the challenge of the scaling. But as a leader yourself, You go from what is very, very small to now you've got a billion-dollar brand. How have you had to evolve as a leader as the brand has scaled? Well, one, it's about, for us, I think it's important keeping the culture at Liquid Death intact, right? It's a brand that's all about fun and disruption and creativity.

33:20And that DNA has to always be a part of the DNA of the company. It doesn't matter if you're 10 people or 300 people. If you lose that spark, you lose the ability to innovate and continually execute against that. Because, again, the bigger you get, the more you have other people that you depend on to lead and run things. where I can't be a micromanager in the weeds of every aspect of the company like I had to be when it was small. You have to trust people to run their teams and to make the right decisions. And it's my job to really make sure that the vision is there, that we're all aligned on what we're marching towards and how we're going to get there, and that we've got the right framework and culture to deliver on that kind of level of execution.

34:15And also remembering at the end of the day, it's I work for my employees as much as they work for me. I think any great leader, the people that work for you have to feel like you truly have their best interest in mind, that you want them to succeed and that you're there to help them figure out what do they need to be successful. I think that's at least how I've approached it. You know, so many leaders give that comment that you just made lip service. They say, I'm here for my people. I need to serve them. How do you make that become a reality? What do you do that really says, you know, people, a lot of times we judge ourselves by intentions, but people judge us by our actions.

34:56What actions do you drive to really make sure people know that? We don't have a lot of corporate politics the way big companies have. Like we're trying to be very authentic. Now, authentic is also a word that's thrown around a lot. What does that mean? It's more people that work for me. I don't talk to them or treat them any differently than I talk to my brother or my good friends. You know, like I try to be very real upfront and say, hey, this is what we're trying to do. And hey, what's happening? Like, I'm free to say, I don't have all the answers all the time. Like, hey, I don't know what to do here.

35:31Tell me, what do you think? versus I think sometimes people try to put on this facade where they think I have to play this character and I can't let anybody see weakness. It's like, I don't feel that way. And I think people respond to being genuine when they feel like you're not putting on a show. You're not faking who you are. You don't have an ulterior motive. You're just being very upfront about what you want to get out of this, what you're trying to do. And then people then trust you. And if people trust you, then they believe what you say and they'll work hard for you. I think people, when they don't trust someone, that's where you have people who, you know, they don't want to bust their ass or they're just always looking for a way out when they can.

36:17And then when they find one, then they're gone. You know, even now, as you've got this billion dollar brand, you still operate under this mantra of what you say are small bets. Explain. Yeah, when you've got a small marketing budget that you need to punch way above its weight class, because, I mean, we're a nationally distributed brand. I mean, we're in every single major retailer pretty much across the country in some level. But our marketing budget does not look like a full national marketing budget of typical giant national brand. So when you need our marketing to really have a lot of earned media value, which is really what our focus is, when we make a piece of content, we'll put some media dollars behind it, but we need people to talk about it, share it, spread the message for us without us paying for every eyeball.

37:14So that kind of means you need to have what we call a hit. Just like there's a hit show that Netflix might have or a hit show that someone else has, we need hits. And hits are really hard to find. If you just say, hey, I think this is going to be a hit and I'm going to put all our money on this one idea and we hope it's going to be a hit. But if it's not, then you're screwed because you're not diversified. And I think you see it a lot more when you look at like stock traders and people who have venture capital firms that they have a bunch of bets knowing that one or two big successes will pay for everything else.

37:55But you can't find those big successes if you're not diversifying and trying a bunch of different things. So that's kind of what we do when we create our content. We don't spend a million dollars on any one piece of content. We might spend 100K on average on a piece of content, but that allows us to do a bunch of different things that we might see, oh, wow, this 100K thing has 20 million views. Let's go move some media dollars behind the thing that we know is a hit and that we know is resonating with people and really scale that up. So that's how we think about it. Do a bunch of small things to try to find winners and move money to the things that are really working hardest or most successful.

38:36We'll be back with the rest of my conversation with Mike Cesario in just a moment. One thing I love about Mike is how he really embraces the underdog status of liquid death and uses it to his advantage. That's a quality I see in a lot of great marketing minds, including Wendy Clark, the global CEO of the marketing agency Dentsu International. She says you've got to have that challenger mindset no matter what size of company you work for. Well, I think there's a great book written by Adam Morgan, who is a longtime planner in the advertising business. And it's called, I think he's going to not forgive me now.

39:11I think it's called Eating the Big Fish. I was going to say Eating the Giant Fish, but I think it's called Eating the Big Fish. And it's all around challenger branding. And even when I was at AT &T, when we were the big fish, we always have to take the challenger mindset. Because if you take the challenger mindset, you care. You always think of yourself as David going up against Goliath, right? And you try harder. You don't sit back on your laurels. You don't think, I've got this done and then Pepsi comes along and eats your lunch. So I think the challenge of mindset just keeps you hungry. It keeps you focused.

39:44It never lets you rest. It drives innovation. It drives ingenuity. It drives excitement. And frankly, those are the sort of the attributes of people you want on your team that you want working for. It doesn't matter that your company is 120 years old, 130 years old. You are the steward of that brand in that moment. You have a responsibility to leave it better than you found it. And you can't rest on past success. You know, the great axiom that I'll say is like today's headlines tomorrow are just yesterday's news. No one cares. So go back and listen to my entire conversation with Wendy. Episode 43 here on How Leaders Lead.

40:23Yeah, I'm going to come back to how you're leading at Liquid Death. But, you know, you mentioned earlier that your dad, you know, kind of gave you a sense of humor and you guys didn't take each other too seriously and you kind of picked up that trait. And that's a cool story. But when you think back about your upbringing, do you have a story, you know, about what it was like when you were growing up as a kid that really impacted the way how you lead today? I mean, I think it was the fact that my dad, My dad always raised us to be very independent and just kind of realized that, you know, everything you do is going to have consequences.

41:03And you can't just be expecting that there's going to be somebody there to just fix everything for you. And I remember there was, you know, I didn't go to college right away after high school. I thought I wanted to be in a band and be in a touring band and do that. I was in a band and we were pretty good. And it was like, hey, let's at least give this a shot. I'm like, college will always be there. So, you know, we were playing in a band and, you know, trying to do that whole thing. And I was, you know, living in my own little cheap apartment that I was paying for myself, had a full-time job at a ski and snowboard shop selling snowboards.

41:43So I'm doing that during the day, trying to play band stuff in the off time and try to like, you know, just support myself. And then I remember my roommate at the time was this like, you know, pothead kind of kid that just randomly one day was gone. He just left, took his stuff. I came home. There was no one in the apartment and I couldn't afford to pay the rent. And my dad could have easily just said, hey, I'll just kind of make up the difference for you. And he said, no. He said, Mike, if I help you now, it's going to hurt you. And I have to let you sort of deal with this situation and mess that you've got yourself into.

42:20So sure enough, I couldn't pay the rent, got evicted from the apartment, had that go on my credit. It forced me to kind of make other decisions of what I was doing and all of that. And I think that was like a moment I always remembered that was like that big sort of wake up call, splash in the face where I mean, I was working in like a factory at that time just to make money. and realize how hard this really is out there when you don't have the right sort of plan. So ever since then, it really just changed my motivation for how hard I would work and push at something and knowing how much energy, effort, and drive is really needed to kind of get to that level where you want to be at.

43:07So that was probably one of the scenarios I remember most. You know, at the top of the show, you know, I shared that we have a little bit in common. You're a hell of a lot better marketer than I am. But yeah, that was my vocation as well. We both started out our careers in the advertising business. And, you know, corporate marketing can be really safe. And you're you don't really think in a safe way. I mean, how did you navigate, you know, that dealing with what a lot of people would be thinking about let's take the safe route and being a guy who wanted to go the other way? Well, I think the safe route is only safe when you have a lot of capital.

43:47Because when you can afford to pay for all the eyeballs that are exposed to your message, the message can be safe and you can still get the message out there. But if you need the message to reach a lot of people and you can't pay to reach all those people, safe will not get you there. Like you'll run out of money if you're trying to be safe. So for us, we knew that earned media and getting something that's really shareable, where people will spread the message for you, requires a different approach that would not fit under the normal safe sort of guidelines of what people expect from big companies.

44:25You know, as a marketing person, and much beyond that now, as a leader, you seem to be a guy who really does believe in following your instincts and using a lot of common sense around how things will really work. Do you do traditional things like focus groups or what's your view of that kind of feedback from customers? Yeah, we've done focus groups before, and I think they can be very helpful for certain things, but they also will not help on certain other things. Like if you're trying to figure out, hey, will consumers like this video and you put a bunch of people in a room and play a video and ask them for their input, you're going to get things that normal people under normal circumstances are not going to have the reaction to.

45:18And I've seen that when I worked for ad agencies for big brands and they would go and test stuff in these focus groups and it would test well. Then you put it in market and it doesn't do well because it's just it's a clinical environment is very different than someone just flipping through a television and coming across a TV ad or whatever it might be. But I think for things like when we were testing, you know, flavors or pricing, like, hey, would you buy something at this price versus that price? I think you can get a little bit more accurate info from people there. But I think when you start trying to use focus groups to answer all your questions because you don't have the right intuition or systems to make a hard decision yourself, that's where I think it can start being a slippery slope.

46:06But yeah, getting customer feedback is always important. You just have to be mindful of what's the reality of the situation that they're giving it in. What are you really trying to get at? And you start up a company, which is always the hardest thing in the world to do. And I've heard you describe startups in a way of saying you need to explore the absurd and try to make new things happen. How did that mindset come into play when liquid death was just an idea? The quote I was taking was from this guy, Reed Hoffman, who was the founder of LinkedIn, who had his own Masters of Scale podcast. I remember him saying that almost all truly innovative ideas are almost laughable at first.

46:55Because anything that's truly new and never been done before almost seems ridiculous. If a new idea seems like, oh, this makes perfect sense to most people, it means there's probably already 10 companies who have been working on this for five years already, because if it makes so much sense. But you look at these hugely successful industry changing ideas like Uber, for example. When the idea for Uber first came out, people thought it was ridiculous. Oh, people are going to, normal people are going to drive drunk people around in the back of their cars like taxis. Like people thought that was ridiculous.

47:36Or Airbnb. Who is ever going to rent their house out to perfect strangers to go stay in it like a hotel? It sounds laughable and ridiculous at first, but then they end up becoming some of the biggest businesses in the world because they truly are innovative. So, yeah, something like Liquid Death, you want to put something healthy in a can that looks like beer. It sounds ridiculous, but then it ends up actually being this. Absolutely. And you mentioned culture earlier. As you've scaled, you really want to protect your culture. When I was running Young Brands, the thing that I focused on, number one, in terms of just the value or behavior I wanted to see in the company was recognition.

48:26How would you describe your culture and what would be the single biggest trait you want to make sure everybody in the company really understands that this is what makes liquid death work and this is the behavior we got to exhibit day in and day out? That's a good question. At this stage of the company, it is about we need to move fast because that's really our only competitive advantage we really have over the big guys is we can move a lot faster when we're small. and especially when you have people that join the company from bigger companies where they have a lot of great experience but big companies have the luxury of taking their time and moving slow and just sort of waiting for things to happen whereas a startup which we are i mean at our level of scale we're still tiny compared to you know a lot of the other competitors we have to be like we have to make quick decisions.

49:30We have to get things to happen quickly. It's like from an operation standpoint, it's like, hey, how do we get the capacity and thing we need quickly? Because things can change so fast as a startup. You know, all of a sudden the demand can be way up. And what are we going to do to service that? We can't just say, well, we'll take our time and we'll just be out of stock for months and just, it'll eventually catch up. It's like, no, we got to move fast. So everything we do from how decisions are made to even how things are incentivized, it's all about how do we move quickly and how do we react quickly too?

50:08It's not just about moving quickly. Hey, when there's a problem, how do we quickly react to fix it? So I think that's probably the big thing is everyone knows like, hey, we're all trying to move fast here. I've had a lot of questions that I've asked, but I've never asked that question and got a response that led me into my lightning round of questions like this one. So that's great. So we're going to do lightning round here. The three words that best describe you? Nice, honest, and kind of funny. If you could be one person for a day beside yourself, who would it be? One of the big professional, big wave surfers, because I can't surf.

50:44And the feeling of being on one of those giant waves, it has to be the most incredible feeling that nobody except those guys will ever get to experience. It doesn't matter how much money you have. You can't be a billionaire and stand on a surfboard on one of those giant waves. You'll never know what that feels like. Your biggest pet peeve. It's not one of my biggest, but one that comes to mind is when people misuse the word literally. Where it's like, hey, I literally shit my pants. No, you didn't. What's your go-to liquid death beverage? It always changes. My go-to right now is our, root beer flavored sparkling water.

51:27What's something you loved the most about growing up outside of Philly? I loved growing up as a kid living in the woods and just being a kid and you could literally just run around in the woods by yourself all day building stuff and finding stuff. That was pretty incredible. Where do you go for inspiration? Everywhere. What's the one thing you do just for you? Play drums. Besides your family, what's your most prized possession? My dad gave me his 1967 Mustang Fastback. If I turned on the radio in your car, what would I hear? Right now, you would hear probably my daughter's playlist that is a combination of like punk and metal and even like little kid songs.

52:11She kind of likes everything. what's something about you few people would know that one of my favorite music artists is adele who would play you in a movie adam levine i get that all the time so i imagine maybe they would get him to play what's one of your daily rituals something that you never miss making my own uh coffee in the morning all right we're out of the lightning round great job appreciate that now is there anything that you've learned at work from a leadership perspective that that you try to you try to bring home so that you can can lead it home in an effective manner as well. You know, we had a saying at Liquid Death that I thought was really valuable, which was always assume best intentions.

52:55It's like everybody's always, you know, working hard and under their own pressure to achieve X, Y, and Z. And what can come off as someone trying to intentionally screw you or make your life difficult, it's probably not that. Like they're just trying to do the right thing and it's coming off that way. And I think it just helps the way you interact with people where you don't take things so personally that have any friction. And I think that helps at home too, is realizing the same thing. You know, in terms of how you interact with people, you know, you're obviously a creative person. You deal with all these comedians who are creative people.

53:35What's the advice you can give to other leaders on how do you get the most out of creative people? Yeah, you got to let them feel like they've got the freedom to create. And then you have some process for how you ultimately determine what's the right final product. So it's like going wide and feeling like you're really exploring everything to get to something versus giving them a really, really narrow lane to say, it has to be this specific thing. And don't ever even think of anything outside of that. I think when you start to really constrain creative people too much, it doesn't work that well.

54:16And Mike, you know, you've had a lot of success, but what's the worst idea you ever had? And what did you learn from it? It's probably less about what, like, we haven't had any ideas that really like blew up in our face or anything like that. I think it's, it's more about making the wrong business decisions. You know, like the ideas for that, where it's like, Hey, let's just have one package size that every single retailer has. Right. And it's like, Oh yeah, that seems like a great idea. But then you realize like, Oh wait, well, when it's the same price as this retailer and they price match them, then you're losing margin there.

54:58Then it's like, well, why are they going to buy it at Whole Foods for$2 more than the same exact thing is on Amazon? And it was something that we did for a while. And it wasn't until very recently that we actually took the time to develop a proper price pack architecture that I think is really critical, which is a much better idea than just, you just have one thing that everybody has and it created a lot of problems. So, you know, so when you, you know, you hire people now and you're building this company, when, when you look at someone, you say, this person's going to be a star, they're going to crush it.

55:35There's no, no question about it. What's that person? What does that person have that other people don't? I think for me, it's when they are, at least in our company when they autonomously make sure that things are getting done and anticipating problems and having backup plans where it's like, I know when this person is on this thing, they've thought of everything. They know if something goes wrong, they've got the plan B. I don't have to stay on top of them asking them, hey, have you done this? It's like, no, they come to me and say, Hey, here's where we're at. This is what's happening. This is the progress.

56:17If this isn't working, I'm doing this. I think it's rare to find those kinds of people that really just, they're very entrepreneurial, meaning they autonomously treat their businesses as if they're their own businesses and that they're not just wait. They're just, just waiting for someone to tell them what to do or, you know, or that. I think that's. Two more questions. I'm gonna let you go. First one, how do you sharpen your own X and what are you working on right now to get better? I mean, one, I, I read a lot, right. I'm trying to always kind of just absorb knowledge, everything from, you know, nonfiction business stuff to actual fiction stuff.

56:55Cause I think there's valuable, valuable things you learn from all of that. I've got a lot of great mentors, whether those are very successful, you know, public company CEOs that are invested in Liquid Death. And I go to them. And I think it's something that, you know, I've been told, you know, by some of our early investors that, you know, who have invested in lots of different startups, they were like, Mike, you're one of the few founders that actually listens to our advice. because I think there's a lot of young startup founders that can be really thick-headed and ego-driven where it's like, no, I know everything and I'm going to do this my way where I've always been very open, especially in the areas where I don't have as much experience.

57:40Marketing, I have a really strong background. I know that pretty well. But when it comes to raising capital, supply chain, retail sales, finance, all of that that I have less of a background on, you know, I definitely listen to advice from smart people who have been there and done that. So I can just get better and better at those things that I have less previous experience. All right. Last question. I'll let you go here. What's one piece of advice you'd give to anyone who wants to be a better leader? I would say be, you know, again, it's, it's, it sounds cliche, but be yourself and whether, whatever that means, be your true self as much as you can, because then people will believe you.

58:21And there's people who are successful leaders who are quiet types and they lean into the fact that they're quiet and they lead quietly. You've got big alpha extrovert leaders who they can be very successful at that when they lean into that. But if you're an introvert trying to pretend you're an extrovert, that's not gonna work. Well, I have to tell you, Mike, I was looking forward to this because I admire what you've done so much. I mean, you know, to build a brand from scratch, to build a brand that truly does break through the clutter, to have the courage that you've had to take those bold steps.

58:58You know, there are not many people like you around that really do that. And you said one of the things that I think the three words that best describes you is nice. You're a hell of a nice guy. And I can see why people follow you. So thank you so much for taking the time to be on this show. I've learned a lot just listening to how you think, and I'm sure everybody else will too. I appreciate it. Thanks, David.

59:27You know, it's easy to look at Liquid Death and just see the crazy stunts and the chaotic ideas and all the creativity that they throw into that business. And listen, you absolutely should look at how their marketing breaks through the clutter and gets people's attention because it does. And it is truly remarkable. But talking to Mike, you can also see there's a grounded strategy that drives it. Behind every crazy piece of content or irreverent line extension, there's a methodical way of testing and vetting. Plus, I'm sure you noticed this. Mike is a careful student of culture, and he's always taking notes about what people respond to.

1:00:10And he has his own personal board of directors, and he truly listens to them to really understand whether he's heading down the right track. To me, that's the real magic of Liquid Death. Not just the disruptive ideas, but the disciplined and grounded way that Mike thinks about him and then puts him into action. That ability to combine bold ideas with operational rigor is a hallmark of great leadership. Because it creates more than just attention, it creates real momentum. So this week, I want you to spend some time looking at liquid desk marketing. Study what they're doing. Look for the strategy behind the madness.

1:00:52And just see if it doesn't spark some ideas for how you can thoughtfully disrupt things in your world. So do you want to know how leaders lead? What we learned today is that great leaders disrupt with discipline. Coming up next on How Leaders Lead is Zach Brown, CEO of McLaren Racing. So be sure you subscribe on YouTube or wherever you get your podcasts so that you don't miss it. Thanks again for tuning in to another episode of How Leaders Lead, where every Thursday you get to listen in while I interview some of the very best leaders in the world. I make it a point to give you something simple on each episode that you can apply to your business so that you will become the best leader that you can be.

1:01:36Thank you.