Liquid Death’s Mike Cessario: Trust your taste

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1:18A couple of buddies from high school, they were roadies for this band that was on the Warped Tour.

1:31And they hit me up, hey Mike, we're going to be in Denver, you should come to the show.

1:41This is the summer of 2009. Mike Cesario has backstage passes for the Warped Tour in Denver. The headliners include NoFX and Bad Religion. Pretty much heaven for a guy like Mike, who grew up playing in punk rock bands.

1:59The way they have the backstage of Warped Tour, since it's outside, is all these tour buses are all parked in this one, like, sealed off area, and the bands are all hanging out on each other's tour buses, sitting in lawn chairs outside. And these guys, you know, they were drinking Monster Energy cans. And I remember asking them, are you guys just ripping energy drinks out here in the hot sun? They're like, no, no, it's water. I'm like, what do you mean? And they're like, on the can, it says tour water on the bottom. Basically, what I find out is as the official sponsor, they don't want anybody drinking something that's not their beverage on stage.

2:40Right. They were never going to force bands to drink energy drinks that they didn't want to drink. So they had to manufacture this special product for the bands that was water, but it looked like their product on stage. Right, because these guys, if they're pounding energy drinks out in the sun, their hearts are going to explode. So these guys are on stage drinking what looks like Monster to all these kids in the crowd. But it was really just water. And I remember thinking that was, one, it was interesting. I mean, two, I thought it was a little f***ed up. Because the trickery of it. It's the trickery.

3:19It was trickery, right? And then it just always stuck in my head. It was just like a brand marketing thing. And yeah, basically 10 years later, creating Liquid Death.

3:37Liquid Death is the beverage company Mike founded. It's now valued at$1.4 billion. Mike's irreverent approach to marketing has made his drinks a cultural phenomenon. In today's episode, he reveals lessons about scaling a brand. Lessons he learned the hard way.

4:19But you have to time it right. Oops. Working as a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it.

4:33This is Masters of Scale.

4:41I'm Jeff Berman, your host. liquid death launched in 2019 selling spring water in a tall boy can the skull logo looks like something you might see tattooed on the bicep of a roided out drummer or painted on the deck of a skateboard so it's probably not surprising that mike was into punk rock as a teenager eighth grade i started playing guitar and we were in a punk band that we and some friends had.

5:15Where'd you grow? Maybe like 30 minutes outside Philadelphia in like the cornfields. All we did was we played music after school. We played shows. We listened to music. That was our thing. But I was always sort of on the creative side. So in the band, I was the guy that was designing the t-shirts and silk screening them, going to Kinko's with glue and cutting out stuff to make show flyers. And the guy who was a drummer in our band, his dad was an award-winning Philadelphia graphic designer named Dave Bell. And I would see in his house all this cool design work he was doing for clients. And that was where I was probably 16, 17, when I realized that graphic design was a real job.

5:56So then ultimately, I decided to go to college for graphic design. But then after a couple of semesters, I switched over to the advertising program. And then, yeah, my first ad job at a school was for this agency in Boulder called Crispin. What's interesting about this is you have these both punk roots and entrepreneurial roots, right? I mean, you're silk screening, you're figuring it out, you're making the merch. And so even the most progressive of creative ad agencies are still corporate entities. So So did you like that? Did you hate it? How did that resonate with you? There's all different kinds of agencies, right?

6:37And Crispin Porter was the one that I thought felt the most punk rock in spirit. Like they did really disruptive stuff. But the clients are incredibly corporate, right? Like Volkswagen, Domino's Pizza, Burger King. These were giant clients they had that were very corporate. And I think that was what I realized in my advertising career. I kind of could fit in with the creative weirdos a bit, but it was still wanting to do really great creative work that these corporate clients just did not want to buy. Right, right. They want Don Draper coming in and hitting them with something that's on the nose for them where you're creating stuff that is really transgressive.

7:21I feel like in big corporations, everybody's just trying to keep their jobs. Yeah. So it's like no one wants to take any risk. I remember working on frozen pizzas. And it's like, what they think is the most critical part of their advertising is what they call the cheese pull shot, where it's like the shot of the slice being lifted up with the cheese. And they'll spend half a million dollars just to get that shot. And it's like, really, do you think as a frozen pizza company in a world where there's a pizza shop on every corner that your problem is, oh, if we make it look really good, it'll change people's minds about frozen pizza.

8:00No. But if you think about the context of clinical focus groups and things like that, of course, what makes you hungrier? This or this? That? Oh, see, that's what we should do. But it's like, that might not actually be the business problem that you need to solve. And were you pushing the envelope with them? Or was it like, these guys aren't even going to listen to what I'm saying. They're not going to listen to the small agency creative director too much. And how I would try to sell this to folks is, look, I want to turn your, whatever it is, million-dollar marketing investment into$20 million in awareness.

8:39I want to give you the most insane ROI and make you look like a genius to your bosses. That's what I want to do, to truly kind of entertain people and make something they've never seen before to be like, oh my God, did you see this? It's so great. You have to see it. And then you have people generating free media for you. Mike enjoyed the work at Crispin, but after a couple of years slogging through the intense hours expected there, he moved on to another ad agency and then another. His paychecks were getting bigger, but he was bored. Big corporate clients were too timid to try his most innovative ideas.

9:13So then I started thinking rationally, okay, well, Now, if clients are my barrier, I know that I have the ability to make great work, but the clients that I have in these particular work scenarios are controlling what gets made or not made. I said, I need to make my own product. Then I can control the marketing for it. If we can sell the product, okay, if I'm going to create my own product, what's like a stale category where there's just nothing exciting happening in it? So then I found the only alcohol category I could find where there was not a single cool brand was brandy. There was literally dust on the bottles, on the shelves.

9:52Then I tasted it and I'm like, wow, this is actually a lot like bourbon. Bourbon was the fastest growing thing at the time. So clearly this is a brand problem, not a taste problem. I can solve a brand problem. So I said, okay, let's brand this in a way that the masses can connect with what it actually tastes like better. Because most people perceive brandy to be like sweet liqueur, but it's not that. So all these people that love bourbon and wanted to find, I'm like, let's just make it look like a bourbon. And then came up with a name that coming from my background, which was growing up punk rock, there's a band called Hot Water Music from Florida.

10:27And one of their songs was called Western Grace. So I said, yeah, let's just name it Western Grace. So there was like a nuanced tie to the world of punk rock, but still this very Americana feeling. That was my first real entrepreneurial kind of get thrown into the fire. So, I mean, raise money, like what'd you do? So the two people I started with, they were based in Philadelphia. So they said, hey, if we're going to do this, you need to move back to Philadelphia. You can't be in San Francisco. So in a way, I begrudgingly left the West Coast to go back to Philly, took a whatever day job for an agency that was not doing cool stuff by my standards, just to pay the bills.

11:07We were able to start so small with that. We didn't have to raise much money. I convinced my parents to loan me five grand so that I could just put something in. So why are we not here talking about Western Grace? Why are we here having liquid death conversation instead? What happens with Western Grace? I mean, again, early on, no idea how to start a company. I mean, alcohol just being so regulated. Where did that hold you back? So from a brand perspective, right? I mean, my contribution is, hey, or at least what I was thinking was, hey, we can make really cool marketing brand, push this out there.

11:44But the reality was, hey, we're not going to have any money to do that for a long time. And there's all these restrictions against what you can run on social media for alcohol because it's age restricted and how you can do that. And the The other, probably the bigger part was I sort of got business married to the wrong two people. Because they both came from the same place, same thinking, it was always two versus one. Anything I wanted to do that would just get shot down. The other tricky part was they're like, hey, if you want to maintain equal share in the company as us, you have to work on it 40 hours a week with no pay.

12:21And I'm like, well, I can't do that. Right. Right. Right. So by the time we kind of got to that, I'm just like, you know what? I'll take my little vested piece that I have. You guys go grow it from here. I'm going to go back to my ad world and I'm going to figure out what my next thing is. And how did you react to that? Yeah, I mean, it was the lowest point for me. My passion has just kind of turned to shit. And then literally the crappy agency I worked at fired me. Because I think they just saw that I wasn't in it and didn't care. So it was like, I'm sitting here, no job. And then I was trying to figure out what I wanted to do next.

13:06And how old are you at this point? I'm like, probably 29. How did you deal with the depth of that? Because I think it's a moment a lot of people experience. And it's really hard. And people can go in holes that it's hard to get out of. So how did you manage that? Yeah, I mean, it didn't help probably at the time. My roommate was a bartender in the service industry, and our apartment was just a constant party. I was partying, and I was trying to forget as much as I could. You were numbing. Numbing, yeah. So then it happened to be that I saw a guy I worked with in Boulder was starting his own startup agency in Chattanooga, Tennessee.

13:50once I got this job in Chattanooga then it kind of it kind of woke me out of it okay now I have another opportunity swept the clouds out of the way sun shining again yeah and I just went full focus again on that and then that was when we started doing like some of the best creative work that I had done in my career that then led to a big company called organic valley they created the first organic protein shake now they had an agency i think which was just like pretty sunsets and family farms that they were selling to like whole foods moms right they knew that this was a different crowd if we're going to win with a protein shake we're kind of talking to like the gym crowd probably a bit more male.

14:39So they gave us a shot as a small nine-person agency as like a one-off project. Hey, can you come up with something to launch this thing? So we pitched this idea to them called Save the Bros, which was like, hey, if bros keep drinking these chemical protein shakes, they're not going to be around much longer. And who's going to bring the beer pong table? And it's like this funny PSA that it's like, to keep bros around, you got to get them on an organic protein shake. at organic valley we have a plan to save the bros it's called organic fuel it's a recovery shake with 26 grams of the protein that bros love but none of the synthetic junk bros don't need to know that it's organic or made with real milk from pasture-raised cows just tell a bro it has a ton of protein and he'll pound the out of it originally organic valley was super nervous like they liked the idea at first but then when they saw the final thing they made the mistake of showing it to some of their family farmers they're like oh we don't get this uh so they were like guys i don't think we can run this our farmers don't get it but sure enough we're able to convince them to run it we run it goes completely viral millions of views every press outlet media outlets talking about it then they were excited then they're like hey how do we get more bros we can't get bros at trade shows and everything else Like they loved it after that.

16:04And then that was about the moment when I started having my next sort of aha moment for what my next brand was going to be. Because I was always thinking about, hey, I'm an entrepreneur. There is a big gap in the health food world of doing funny, interesting brands. After the break, how Mike made water in a can cool, like a billion dollars cool.

16:41Real leaders don't back down when the stakes are high. They innovate, they push forward, and then they take the stage at the Masters of Scale Summit. Join us in San Francisco, October 7th to 9th, to hear from the CEO of the New York Times, scientists using cutting-edge technology to find cures, the leader of crypto powerhouse Coinbase, a retired four-star general, and many, many more. Apply now at mastersofscale.com slash apply25. That's mastersofscale.com slash apply25. If you're ready to take your startup from idea to impact, then AWS is your launchpad. From data storage to machine learning to secure app hosting, AWS gives you the tech, trusted by the world's fastest scaling startups.

17:30And here's the best part. Join AWS Activate today and you could score up to$100 ,000 in AWS credits tailored to your stage and network. Go to aws.amazon.com slash activate and start building. Expanding your business in the US can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the Professional Employer Organization, or PEO, that gives you a dedicated HR expert plus Fortune 500-level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one.

18:14So if you're scaling, make it simple with Deal. Go to deel.com slash mos and get up to three months free. Welcome back to Masters of Scale. You can find our full interview with Mike and more on the Masters of Scale YouTube channel.

18:35So when did the penny drop on water? Was there a moment where you were like, this is the thing? Well, when I started with the thought process of, okay, I want to make a healthy beverage. Also coming from the baggage of alcohol is the most regulated thing ever. I'm like, what has no regulation? Right. No ingredients. It felt very simple. So it was like, that was like the way I got to water first. Okay. Water is literally the simplest thing and the most healthy thing. Right, right. It can't get simpler than this. Yeah. You can market water to a four-year-old or a 64-year-old. It may be expensive to ship.

19:08It might be, there might be quality control issues, but like, it's water. It's water. Right. And then I go in my like deep dive focus mode where I'm like Googling and doing research. And all of a sudden I see, holy crap, bottled water just surpassed carbonated soft drinks as the number one packaged beverage category in the US. It was like 20 billion at the time. So it's like, wow, huge category. And then it was, oh my God, every single brand looks exactly the same. It's all in plastic bottles. Nothing's interesting. But everybody drinks water. And I think that was something that I pulled from my days of being in punk rock and metal bands was long before the Whole Foods world.

19:48all the vegans were in the punk and metal world. That was a huge movement in punk. Now it's become such a mainstream thing. So I knew that there was a sentiment of health and positivity in this rebellious world that I came from, and there was nobody making brands for those people. So how do I take a healthy thing and almost make it just as fun as all the other stuff that's not healthy. And then that's where we started kind of building the business. So take us through the kind of two directions from there. One is the brand, right? I mean, okay, the insight that all this kind of looks the same, but like, how do we get to what that brand is, what that brand identity, what the name is, but then also like, how do we actually source it?

20:36How do we package it? How do we like, how do we get to market? So let's start with brand, but then I'd love to hear the logistics of how you figured this out. Well, what's funny is I started with the logistics before the brand. Okay, great. Let's start there. Yeah, because I was kind of like, before I spent too much time on getting attached to a brand and fun thing, like, let's make sure the business side of this is doable. Can't even pull this off. Yeah, because I just went through the craziness of trying to produce a barrel-aged spirit. Right. And I knew that that was so much of the hurdle, not the brand.

21:05So I really went deep in looking for, you know, how to can water, you know, because I knew I wanted it to be in a can that I did know because - For sustainability reasons or for brand reasons? It started originally as, hey, all cool, fun things come in cans. Okay. Few healthy things come in a tall boy can. Yeah. So I was like, hey, I want this to feel like something fun that you're not supposed to have, but what's inside it is water. Yep. So I knew I wanted to be in a can. And then the more I started researching cans, that's when I started reading the infinite recyclability thing. This is like 2014, call it.

21:45There's people talking about how bad plastic is, companies getting rid of plastic. Oh, cans are infinitely recyclable. Now it's like, okay, cans make sense for a lot of reasons. And it turns out there are no co-packers in North America who can put spring water in cans. Zero. Zero. How's it possible? Well, the thing is, if you're doing bottled water or canned water, you basically have to bottle at the source. Okay. Because it's way too expensive to tanker truck water from a source halfway across the country to a bottle. It was just too cost prohibitive. So all bottled water, they have a source.

22:22It gets pumped into the facility from whatever spring it is. And then because canned water was not a category, all the sources that had bottling capabilities only had plastic bottles. Really? So canning lines are like, you know, 20, 30,$50 million to install at scale. And then eventually I said, you know what? What if I just start looking outside the US? And sure enough, I found a co-packer in Austria who had big canning lines and they owned their own mineral water springs. But they also made energy drinks so that that's why they had the cans. Okay. So they said, hey, yeah, we can do canned spring water for you here.

23:04And the shipping costs aren't insane on that? No. I mean, because the water's heavy. No, because if you think about it, when you're shipping a container across the ocean, it's about the same cost to ship a container from Austria to New York as it is to 18 Wheeler, the same thing from across the country. Great. Okay. So you figured out your sourcing, your packaging, your shipping brand. Yeah. So it was right around that time, started, had the name for Liquid Death. Mm-hmm. Was there a moment of inspiration there? Was this a whiteboard with 100 names and this stood out? How did you get to it? It was more like I had a notebook where I was just writing tons of things down and trying to make connections.

23:47But what I did know was from my marketing experience, especially with the Western Grace experience, no money for marketing. All the shareability and marketing firepower has to be in the product itself. So then it's like, okay, if the name and product itself has to be something that if someone sees it on the shelf, I'm betting they have to pick it up. And if they do pick it up, the first thing they're doing is taking out their phone, taking a picture, putting it on social. Is this real? Oh my God. Or they want to post a photo of themselves drinking it because look how funny it is. I'm drinking something called liquid death.