Liquid Death CEO Mike Cessario on selling water like a punk band, and why comedy is the one thing Coca-Cola can't buy

0:11Welcome back to Mixed Signals from Semaphore Media. I'm Ben Smith, the Editor-in-Chief of Semaphore. And with me this week is our business editor, Liz Hoffman, because Max Tani is on a well-deserved vacation in Norway. Our guest this week is Mike Cessario, who is one of the real geniuses of modern marketing. Mike is the creator and CEO of Liquid Death, which is nominally a company that sells water in a can and flavored water of various kinds, but fundamentally, and maybe almost more than any other company out there, it's just basically pure marketing. They've managed to build a billion-plus dollar business in a very traditional consumer-packaged goods space competing with Coke and Pepsi and, you know, Spindrift and things like that.

0:55Mike has said what he's running is a media company rather than a water company. and I'm interested in talking to him about whether there's even a difference and about what he's learned out on the edges of the advertising industry. We'll be right back with Mike after the break.

1:15Hey, Mixed Signals listeners. There's a new podcast we thought you'd enjoy. It's called Frontier CMO, hosted by our friend Josh Spanier, Google's VP of Marketing. It's about the forces driving innovation and reshaping the marketing landscape today. Whether it's AI's impact on the industry or creators' role in culture, Josh is getting into the weeds with the people who are actually shaping what's next. These are your notes from the frontier. You'll hear from CMOs, agency legends, brand visionaries, and brilliant thinkers. Search for Frontier CMO from Think with Google wherever you get your podcasts or watch on YouTube.

1:54Mike, thank you so much for joining us. Thanks for having me. And I went to Liquid Death's website this morning, and the first thing I saw was, We Want Your P. Can you tell us about that? Yeah, so we did a collaboration with Garage Beer, and Jason Kelsey is their ambassador and shareholder. And we wanted to do something fun together. And everything that we do at Liquid Death is about trying to create real entertainment instead of marketing. you know? So when we approach a commercial, we think about it more like an SNL skit than we do just a typical sales pitchy commercial. So we try to find something that's legitimately funny.

2:39And ideally it's something that's kind of making fun of something in culture at the moment. Like that's kind of what comedy is, is making fun of what's happening in culture at the moment, which is why I think as a marketing genre, you know, Red Bull monster, like they do the same thing. They blur the lines between an entertainment company and a beverage company, but their genre of entertainment is action sports. And you can maybe argue, will the X game still be around in 30 years? But comedy will always be around because you're always going to be making fun of whatever's happening, right? So, you know, we saw everywhere in culture, people are kind of fretting about these data centers and all of that.

3:19So we thought, hey, it would be funny to just kind of poke fun at this thing. I think people thought it was like some way to be, you know, anti-data centers. And it was really more just about like having fun with this idea and fear that's around it. And how do you do something that is actually funny that leans into, you know, what people are talking about in a very ridiculous kind of way. You've said that you're an entertainment company that monetizes through beverage, which I think in a way is kind of the early history of entertainment. You have P &G making soap operas in the 20th century. Is that really the easiest way to monetize?

3:56Like, why not be an entertainment company that monetizes through entertainment? Because trying to monetize purely through entertainment is really hard, right? Like, you have to create something that's actually a hit show and then sell it to Netflix. And what are they going to pay for it now and doing all this? For us, having a CPG company that is a tangible product that people need, and you're using the entertainment to help drive brand loyalty and win over the other brands. Because, again, for us, we see it as we built our own basically internal marketing agency that we kind of call Death Machine that can create this kind of marketing that I don't believe there's an agency out there that can do.

4:43Like we had to create it ourselves. And we have a very unique model of how we do that. And for us, it gives us our true moat within these beverage places where we play. Because you start thinking about, okay, you want to use an athlete to market your product? Whoever has the biggest check can get any athlete. I can go try to spend most of my budget on some athlete. But if Red Bull or Coca-Cola or somebody else can write a bigger check, that agent says, we got to take this. We love Liquid Death, guys, but sorry, we can't turn down$3 million. Sorry. But Coke or Red Bull or whoever, they cannot make comedy at the level that we make it.

5:23It doesn't matter if they have$100 million because comedy isn't about spending money. It's about building something that you need a unique machine to do it with. And especially in giant companies with all the approvals and bureaucracy, comedy is not designed to survive that, right? athlete deals can or things that are a lot more, you know, safe or no one's really going to care either way about it. No one's going to hate it, but no one's going to really love it so much either. That kind of stuff is what sort of comes out of those systems, not really comedy. And there is some data, I think we saw a point saying that 90 plus percent of companies that they talked to said they don't feel they have the infrastructure or ability to deliver comedy in their marketing.

6:12And you obviously, you've spent a lot of your career in the ad business, in the marketing business. And it feels sometimes like liquid death, just watching you. I heard Benoit on Josh Spanier's podcast the other day. It seems like there's some sense in which liquid death is basically a meta critique of the marketing industry. And Benoit said there's Nobody less creative than marketers. You know, you think these sort of company structures can't get anything done. And you don't work with agencies or anything like that? You're doing this all in-house? Yeah, we do it all in-house. I mean, do you think the marketing industry sucks?

6:45Is that kind of the basic point of this thing? I mean, it's why I started Liquid Death. I worked in the marketing industry and worked for agencies. And I kind of, as a creative person, I kind of hated my life. like working on clients I didn't care about doing work that I just thought was so not good. Because I think creativity is a big word. And if you think about, get out of the marketing office and think about what does creativity mean in the world? I mean, it's like the biggest stand-up comedians, the biggest movies, the biggest TV shows, the biggest influencers. Like, that's the pinnacle of creativity, not the Subway sandwich ad or the, you know, the car ad.

7:27Like, that's not the pinnacle of creativity. But when you're in that little box of marketing creativity, these things all of a sudden seem pretty creative. But as soon as you get out of there, it's like, it's nothing. It's noise. It's stuff that people will pay money monthly to not even have to have come into their field of view. So for me, like I hold creativity to the bar of where all the other awesome creativity is in the world. And I think there's a way to use it to, you know, as you were saying, not just to monetize it from an entertainment standpoint. I think if you can really entertain people, you can monetize it from a packaged goods standpoint as well.

8:05So you're at all these agencies. We've got all this marketing energy. So I want to make an entertainment company. What was on the discard pile? How did you land on Let's Sell Water? Well, the very first product that I created was actually an alcohol company. I was only a few years into my advertising career and you know kind of again just feeling a bit stagnant like i wanted to present ideas to clients and my bosses wouldn't even present the idea they're like no no mike we're not even gonna show you were you were that guy yeah i was that guy um so i said okay well i guess i have to i can't just wait around for clients and bosses to just hopefully land on something that i that i think is great or exciting so i was like i need to create my own product that I can control the marketing for.

8:54And I think if I can do it well, there might be an outsized financial reward than just a creative salary at an agency. So the first thing I created was an alcohol company called Western Grace, where I wanted to make brandy cool. Because I had actually tasted it and I was like, wow, this is really good. It tastes a lot like whiskey. Whiskey was the biggest spirit fastest growing at the time brandy literally had dust on the bottles in the liquor store um and i thought this was an interesting opportunity to go disrupt something and um yeah we created this brand called western grace that was actually named after the song of a punk band called hot water music um and the idea was kind of similar to sailor jerry rum was this was 2012 was super successful and i kind of knew the guy that started that and i saw that so i kind of wanted to copy that sort of route of hey i know enough people in the band and music world like hey maybe we can push brandy in this interesting world and kind of almost position it more like whiskey um so i had like a couple years experience of that where we actually found a distillery and a producer and we ended up having like a warehouse full of some product in philadelphia i brought a couple other like former Sailor Jerry sort of executives into the mix to help me do it.

10:16And, you know, that was like my first like entrepreneurial experience where I learned all the things kind of not to do, you know, like getting business married to the wrong people and saying, hey, let's just all have equal share, even though it's my idea. And then I can be outvoted two to one on literally everything. And just learning how hard alcohol was as a new product category with all the red tape of laws and then you can't market on social and how like the first couple of years are probably going to be less about marketing and more about like tactical bartender acquisition and tastings at bars and not any of the, you know, cool marketing stuff that I was sort of banking on.

10:56Um, so, you know, ended up kind of parting ways with the people I joined together with on that and said, Hey, you guys take it from here. I'm good I'm gonna go back to my kind of focusing on the agency world and I'll go find my next thing and then a couple years later I sort of started having the early ideas of liquid death which again almost as a way to start thinking about what's next it was like okay well I just got out of alcohol and I saw all the nightmares that go along with alcohol what's something that would be a lot easier than alcohol and it's like water was probably one of the first things um and now i knew i wanted to do something healthy because i think that was my that was my big sort of umbrella white space was like hey i want to make a health a healthy beverage brand that markets more like a junk food company or like an alcohol company um and then just going through the world of different healthy things that um that we could make and kind of starting with water and just the more you start kind of peeling back the onion you see oh my god bottled water just past carbonated soft drinks as the number one volume beverage in the United States.

12:06It's like, wow, people are drinking a lot of bottled water. And then you look at the category, oh, it's kind of stagnant. It all looks the same. It's all in plastic bottles. It's all one kind of brand voice. And you just kind of start seeing where the opportunity really is within that space. But I think like, as we've grown, you learn too that, you know, liquid death was bigger than just, you know water in a can it's like that started there but then we kind of said okay let's try sparkling and then that worked really well hey let's do flavored sparkling that worked really well hey let's do iced tea with some function and a little bit of natural caffeine oh wow that really worked well now we've launched a sort of you know better for you energy drink and now that's a top 20 energy drink brand in year one in a highly crowded um you know space so i think in a way that's one of the biggest feats liquid death has accomplished is being a true multi-category brand under the same brand name where it's almost like we're kind of like a store brand that's not a store you know and and but it's premium and it's funny and people are like hey when liquid death makes something i i know it's low calorie low sugar i know it's probably you know not too bad for me and it's funny.

13:22And if we can stick to those, it seems like people will be interested to be a consumer. You said that just back on the kind of pure marketing front, you've said that your goal is to win the internet for the day. And I guess when you were making Brandy, I was the editor-in-chief of BuzzFeed. And that was like very much our goal as well. And I think like it's when that's your goal, like it's so wide open. You're just like, I don't know, what are people talking about? Let's jump on that. Like there's a way in which I was thinking about LiquidSk brand and BuzzFeed's brand, because BuzzFeed's brand was also just, let's go viral, whatever that is, which on one hand is wide open, on the other means you risk having no brand at all.

13:56But I'm curious, just because you've been doing this, you're a child of the internet, and you've been doing this for the whole rise and fall of social media. Is it still possible to win the internet the way it used to be? I'm curious how the new TikTok era has changed the idea of we're going to win the internet today. I think for us, I know that our head of creative, of Andy has said our goal is to win the internet for a day. I'm not sure that's entirely accurate. I think it's a very blanket statement, which is we just want to make things that are legitimately interesting on the internet, not just interesting compared to other crappy ads, but interesting compared to everything else that shows up in someone's feed from their families to influencers to that kind of stuff.

14:42Like, we just want to be interesting and be noticed. And we kind of have to because this is a startup with limited marketing budgets. And, you know, the game is sort of stacked against beverage companies. It's why for the longest time, it's like the beverage company model was build a beverage company. It's almost impossible to be profitable because Coke and Pepsi set the pricing for every category and they have all the scale. So just because you're a new water brand doesn't mean you can go in and charge$8 a bottle because that's what you need at small scale to be profitable. No, you got a price where at scale Coca-Cola prices, and then you can't really get profitable until$200,$300 million in revenue where you have enough scale to actually make a profit at scale pricing.

15:27So the game for a lot of brands was you build brand and demand and you burn cash and then you get sold to Coke or Pepsi or somebody else. Like that's typically the model. So for us, like it's really about how do we maximize our limited amount of dollars so that we can go capture as much awareness and audience as we can. Because if you try to play it safe and play the same game as the big guys, oh, we're going to give a huge chunk of our budget to this athlete or this influencer. it's like you give them all this money they post one time maybe a couple times and it's like it doesn't actually move the needle for you big companies don't need that to move the needle the same way that a small company does like i've seen it uh i forget who it was i wouldn't say it if i did know but a new cpg brands gave i don't know 200 grand to one of the kardashians to post one time because they had 100 million followers and you thought that was going to be some big thing.

16:29They didn't even increase their follower count by a thousand followers after the post. Right. And it's like, you just completely, you might've tanked your company trying to play like a big company. Um, so for us, it was always about, Hey, how do we make a dollar of marketing actually turn into 10, 20,$50 worth of awareness? And it doesn't mean it has to be the biggest thing on the internet. It just means, Hey, if we spent a hundred grand on this video, how do we get it to generate a million to five million in awareness if you actually went and paid for that, those impressions. And when you're measuring just awareness, like, is there such a thing as being off-brand?

17:09Or is it just like whatever works? Oh, no, of course. Like, everything has to be on brand. And we're very strict about our brand. Like, it's almost like we're, in a way, it is like we're kind of creating our own show. It's like the Liquid Death show. Like there's certain things that writers write on the Liquid Death show and what the character does or wouldn't do. And there's a lot of nuances and things like that. So it's not as, it's probably a wider breadth of what fits on the Liquid Death show than just like a very kind of core brand thing. But yeah, absolutely things can be off brand. And that's why for us, you know, it's really hard to get to that perfect idea that threads all these needles that we needed to thread.

17:55And there's a lot of ideas that die. And, you know, you mentioned like not working with celebrities in the most transactional ways, but you do stuff with celebrities. I think there was an Ozzy Osbourne stunt involving his DNA at one point. I think I'd heard or read that you guys like to use equity to bring in celebrities. How do you think about giving people ownership versus just kind of cash compensation in those deals? Yeah, I mean, it's kind of a multi-pronged approach. I mean, one, because we've kind of proven that what we make is closer to legit entertainment than just a typical ad, there's a different value exchange for the celebrity to be a part of it.

18:39It's not just like if they're doing some big soda ad where they take a sip where the only benefit to the celebrity doing this is the money that they get for it. They know by being a part of a liquid death thing, it's going to be funny and interesting to their audience as well. Like their audience will really like seeing them in this thing and they get that. Or it does have a chance to get shared and be a big talked about thing. And that's good for the talent as well. so it becomes a little bit of a different value equation when you're talking with the agents of these people like we got martha stewart for a fraction of the cost that she would charge any other brand because she knew it was a cool brand and we were going to do something cool and it was going to be interesting for her brand to do this liquid deck thing right and what did you do with her um so this was a few years ago we made a um a limited edition candle that looked like a life size severed hand holding a liquid death can but it was all waxed and uh we made this funny video where it was like we made it seem like the way we made these candles was martha stewart was chopping off guys hands in her kitchen and using those to to make them into candle and they were just all you know unsuspecting guys that were being blindfolded like i'm gonna be on the martha Stewart show.

20:00Yeah. And yeah, like that, that was great for us. And it was unexpected. Like who would think that Martha Stewart was going to be in the liquid death ad and it was good for her for that same reason. And all these folks too, it's like, yeah, we know that again, we don't have the budgets that these other companies have. And there are certain celebrities where they're just like, whether it's them or their agents are just like, hey, money is all that matters to us. Like if it's not at this level, like we just can't do it. Okay. That's fine. But there's a lot of options out there where folks who just, we know, like we think that they legitimately like liquid death as a brand and they want to be a part of it.

20:38We go and find those folks. Or sometimes those folks come into our ecosystem. Hey, I represent so-and-so. He drinks liquid death all the time. He loves it. Would love to do something with you guys. And we're like, Hey, look, like we don't have Coke and Pepsi budgets, just so you know, like we're a, no, no, it's not just about that. We well, hey, maybe we let you invest and you can make some return on an investment because we're a private company. You can only invest if we let you or if we decide to do a funding round. So it's like, oh, okay, great. They're always looking for investments. And if it's not a big one, it's like, oh yeah, that's easy for us.

21:10And we can make a return there. Then, hey, maybe you guys give us a few extra shares on top of that, make it even a better return. And we always, when we shoot something, we try to make it really low lift for them where it's like, hey, you get all this benefit, but we literally only need you for four hours one day. And we can come to you or we'll make it really easy. So it becomes a really easy yes for them where it's like, okay, low lift. We feel like there's some cool upside there. We like the brand. Like, yeah, let's do it. So again, still a lot of sort of needles to thread, but those are typically the kinds of celebrities that we found along the way that we've been able to do cool stuff with.

21:50We'll be right back with Mike after the break.

22:19So the biggest mistake I see as we go into Q4 is marketers over-obsessed about short-term sales. They shift all their marketing tactics, all their goals towards just doing hardcore direct response performance marketing. And every study, every bit of research, every experience in my career has been that when you actually get rid of all your brand activities, your direct response, your DR campaigns, they fall off a cliff as well. It's a mix of brand performance, which actually outperforms in the short, medium, and long term. And so how do you justify keeping that brand spending active right in the middle of the holidays?

22:55We have some help for you, Ben. BCG, partnering with Google, have just published a new study looking at the loss of brand equity by putting back brand dollars. They calculated that for every dollar you pull back, it costs you$1.92 to get it back. That's a pretty big loss. But ultimately, this whole brand versus performance thing is somewhat artificial and a legacy of marketing functions just operating in silly ways. What you really need to do is have brand and performance, which is where modern platforms like YouTube do so well. The integration of the measurement of the AI of this ad products of the creator marketing and product marketing you can do actually drives short term sales right then and there in your journey and experience on YouTube, married to and with long term brand building.

23:40It's the best of both worlds on YouTube. Where can people find more about this? You can read that report from BCG on thinkwithgoogle.com. It's all about brand equity. Just go to thinkwithgoogle.com and search for BCG and brand equity.

24:05Getting into the business and the cap table of it all, You were valued, I think,$1.4 billion when you last raised in 2024. We've seen, like, lots of very buzzy consumer brands get there and then fizzle. I mean, I should choose a different word for your business. But, I mean, what have you learned from the likes of, you know, Coke, Botzico, and then ran that down? And, you know, there were the mattress brands for a while that all kind of came to nothing. I mean, what did you learn from that generation of super buzzy consumer brands? You know, it's a good question. I think the product category matters.

24:38right? Like mattresses is different than carbonated soft drinks. You know, there's... Well, easier to ship and deliver. Yeah, and the demand too. It's like, how many times do you buy a mattress, right? Versus how many times do you buy a carbonated soft drink or something with caffeine? I think, you know, beverage, also beverage categories matter too. I think there tends to be buzzy things that maybe they're trying to create a new category of something so you know i think a great example is like you know the oat milk category um there was this idea that this is growing fast and the dairy industry is you know 100 billion or whatever it is and hey we're gonna go convert all these dairy drinkers into oat milk drinkers and the size of prize is so big here but then they're making this bet on this tiny category that's somehow going to get really big and it doesn't ever get there and it fizzles out.

25:41Whereas what we've done as a brand is we find large established categories that have kind of been tried and true. And then we're going to go in and win with brand. We're not going to go try to create an entirely new category of product or beverage that is a really small category that we're hoping is going to grow into this big category and that consumer habits are going to like drastically change in order to get there. So I think in a way, we've taken a less risky path where everything that we sell doesn't require a lot of explanation to people. Like people know what low calorie soda tastes like.

26:20People know what water tastes like. People know what energy drinks taste like. Maybe not everybody knows what kombucha tastes like. Maybe not everybody knows what protein soda is going to taste like. So, I think that's maybe one of the bigger differences. But Oli is a good example, right? When they went public, they're probably worth$10 billion at the peak. They're worth$300 or$400 million today. And I always assumed that some big CPG company would come along and buy them and that would be their plant-based arm. And it never happened for them. And when you look back at the stock price, obviously it should have at some point.

26:53So, I'm sort of curious how you think about that arc. And is there a point at which you say we should just sell one of the big guys and make this their problem? or do you worry they'd kill the brand? Like, what's the exit here? Well, I mean, even when you looked at that Oatly IPO, and I think it was 2021, if you looked at that valuation, they were getting a multiple on revenue like four years out. Like, it wasn't, you know, I mean, it was like because of the growth and because of the belief that this category was going to be so big. And I think, you know, a big issue that, you know, I saw that they had was there was only, I think, like one manufacturing facility that could produce oat milk at that time, and they were maxed out with oat is growth.

27:37So then they went and spent hundreds of millions of dollars building new facilities. But then when the demand slowed, they had all these fixed costs. And that's why it took them forever to get to profit. And as a result, the stock price got absolutely tanked because I think even at$800 million in revenue, they still weren't profitable yet, you know. So, and then going through all the tough markets and all that, where profitability mattered more than anything, it was just kind of a perfect storm for, you know, what happened to them. But I mean, for Liquid Death, I think, you know, we've always said, like, we are open to any variety of outcomes.

28:15Like, it was never, hey, this is gung-ho, we want to be a public company, or hey, this is gung-ho, we want to sell. We're just looking at building a big, profitable company that has a lot of growth ahead. And if we do that, we will have options for what LiquidEth does, whether we partner with a strategic or whether we, you know, go public or whether it's some combination of the two. There's companies like Celsius, they're partnered with Pepsi, but they're a public company. Or Monster, they're partnered with Coke, but they're a public company. So I think there's so many different ways you could go.

28:47It's just a matter of what makes sense for us at the right time. Is there a world where you become a marketing company for others? Like where if the thing that you guys are best at and most hyper-competitive at is marketing, that you're ultimately, you kind of circle back and wind up being an agency business? Or do you have no interest in that? No, it's funny you say that. We actually have just started to kind of test the waters on, you know, with just a few select brands to actually use our agency, Death Machine, to do outside client work. So Liquid Death, you know, we've got a beverage business.