Find The Not-So-Obvious Opportunity. TÖST Did, And It's Reaping The Rewards.

0:10Hey folks, I'm Ray Lateef and you're listening to the number one podcast for the food and beverage industry, Taste Radio. This episode features an interview with Brooks Addington, the CEO of Toast, a fast-growing brand of sparkling, alcohol-free beverages. By any measure, consumers are drinking less alcohol. While their reasons for abstaining vary, the occasions for which they had been consuming beer, wine, and spirits have remained consistent. The circumstances have created an ideal opportunity for alcohol-alternative brands to innovate and find relevance among mainstream consumers. Enter Toast.

0:47Launched in 2018, Toast markets sparkling non-alcoholic beverages made with white tea, white cranberry concentrate, ginger extract, and other natural flavors. The products, which are available in two varieties, original and rosé, come in 750ml bottles and 250ml single-serve varieties that are sold in four packs. Distinguished by its sleek and minimalist label, the brand has won over consumers seeking a sophisticated alternative for occasions when they might typically drink alcohol. Distributed in 40 states, Toast is carried by major retailers in a variety of channels, including Whole Foods, BevMo, and CVS.

1:24Earlier this year, the venture capital arm of beverage alcohol conglomerate Constellation Brands acquired a minority stake in Toast, praising, quote, its delicious liquid that feels celebratory and also versatile and approachable for everyday enjoyment. In the following interview, I spoke with Toast CEO Brooks Addington about how the brand has carved out a positioning that has resonated with consumers of all types, and how its thoughtful communication strategy has given it a leg up over competing products.

1:56Hey folks, it's Ray with Taste Radio. Right now, I'm honored to be sitting down with Brooks Addington, who is the CEO of Toast Beverages. Hey Ray, thanks for having me. Thanks so much for being with me here in Philadelphia for the final edition of Expo East. Literally. Right. It's not going to be any more after this one. Really? I wasn't aware of that. Oh, yeah. It came out this morning that New Hope is not going to do Expo East anymore. Instead, they're going to replace it with individual events that happen throughout the year. I guess the next one is going to be in 2024 in Savannah, Georgia.

2:27Savannah's a phenomenal city. Oh, yeah? Yeah. I'd like to hit that one. I've never been. People always say amazing things. I've never been. Great food and the waterfront's just architecturally amazing with a huge amount of history. So it's worth going. We traveled down during COVID down to Florida. We were road tripping everywhere with the family and stopped in Savannah for a couple of nights and just had an absolute blast. Great art scene, from what I understand. Great art scene, great food scene, architecturally really interesting, beautiful parks. It's a neat place. Are you an architect geek?

2:56I'm a bit of an architect geek, yeah. I can sense it. I can sense it. I'm sorry to call you that. I'm from Chicago, and I grew up in a very modern house. And so, yeah, I'm a big Ando Tadao fan, the Japanese architect who has built many buildings around the world. So I could I could spend a whole podcast just talking about that. I can sense that. Yeah. You live in Vermont now, though. I do. Yeah. I spent some formative years, about 17 years in three different countries, Thailand, Canada and Japan. Wow. I think in the 17 year period, I spent about a year and a half in the U.S., primarily in Japan, primarily in financial services.

3:30but just always was sitting around, you know, investing and trying to get my hands dirty on helping out, advising on different projects in various industries and always had a knack for consumer products. You know, love food like a lot of people, was blown away by the beverage scene in Japan. And so, you know, we ended up moving back to the States in 2011. I was working on some projects, a couple of consumer products that were not food and beverage related. And then Toast came along and here we are. This is an amazing story. I feel like we could do an entire podcast just on your 17 years in financial services.

4:05Do you speak Japanese? My children would say not really, but I'd like to think I can handle myself. So yeah, I'm not bad. Day-to-day is great. No issues, but I wouldn't want to pitch toast in Japanese quite yet. I'd be a little nervous about that. I'd like to think I'm proficient, but as I said, my children would laugh and say, You know, he doesn't know what he's talking about. Well, I've never been to Japan, but I feel like the drinking culture and the celebratory culture there lends itself well to a toast. You know, it does, actually. I'll tell you a crazy stat. So we all know that people are drinking less around the world and the rest of that.

4:40About a year ago, there was a poll in Japan and they asked 20-somethings, how many of you consider yourself regular drinkers? Now, in 2000, the number was like 28%. It was 9 % last year. 9 %? 9%. But people still like to celebrate. They like to go out. You know, people have smaller apartments, smaller houses. There's a lot of going out, entertaining, going to parks, getting together with people there. So yeah, there's a big opportunity. We're not in Japan yet, but we are in Korea in size in a lot of locations there. And Japan's very much on our list. Well, hopefully toast will one day be big in Japan.

5:16Yes. I hope so. A lot of people are drinking less. Younger consumers are drinking less. It feels like the timing for Toast is perfect, but Toast as a brand, as a company has a longer history than just the last few years. Talk about the origins of Toast and where the idea came from. Sure. Yeah. So, you know, really it goes back about almost 10 years and it was a brainchild of a guy who had had some exposure to beverage before, had been involved in a beverage called 12 many years ago. And he had the idea of creating something that could stand, you know, on par with an alcoholic beverage. And so the concept was born really from that, where if you went to a party, there weren't a lot of options.

5:54Now, again, you have to think back to 2012, 13, 2014, where there really weren't that many options for non-alc. It was a ginger ale or a soda water and a lime. So, you know, people, when they go out for dinner or they go to a party, shouldn't they have the same elevated experience as anyone who's drinking an alcoholic beverage? So the idea came from that. Let's create something of that magnitude. We use the word elevated a lot, or meaningful, sophisticated. So when the beverage went to be created, he brought in a team of individuals, beverage professionals, and what have you. One of them was Alfred Pertale of the Gotham Bar and Grill, who became sort of the taste conductor, we like to say.

6:32So the idea was, let's create a beverage that has the attributes of an alcoholic beverage, but doesn't have any alcohol in it. So it wasn't so much that we wanted to be tea-based, or we wanted to have white cranberry, but those flavors added experience. We wanted a nose, a mouthfeel, a finish, that level of sophistication that you would get, you know, in an alcoholic beverage, that experience. So if you went to a party or you went to a restaurant, you would feel like you were being treated with the same level of, you know, respect and focus than anybody else. So there was a lot of back and forth on that.

7:02Products soft launched on be noticed to a lot of people back in very early 2016. And then I got involved. It was a soft launch and then off the shelves trying to figure out, you know, what's the plan to move forward with this? Who are the right people to help move it forward? I got involved in 2016 and we relaunched the product formally in April of 2017. So, you know, I'm not the original idea founder, but I did launch the product and have been CEO, you know, throughout that period of time. So it's been a journey. I think one of the most brilliant aspects of toast is that it doesn't call itself an analog of something.

7:39It doesn't describe itself as a non-alcoholic sparkling wine or something along those lines. It is very much a non-alcoholic sparkling beverage. And it feels so intuitive as to what it is. Why is that? That's a great question. And I think you really nailed it in terms of what we tried to achieve was we believe that people want to have an experience when they're drinking a beverage like toast. They're not necessarily looking for the product to taste just like something else. Now, I think there are some categories that doesn't necessarily apply, beer being one of them. If you walk off the golf course or on the beach or whatever it is, or you're having some beers with friends and you want to peel back and go have a beer, fantastic.

8:21I understand that one. But in our case, with our product, we believe there's a big market for people that just want the elevated experience. So again, when we created the product, It was about having those attributes. What are the attributes of an alcoholic beverage that people would think of? Again, nose, mouthfeel, finish, a level of sophistication, a sense of mystery as to what the flavor is at some point. So all of that was what we thought about in the very beginning in terms of creating a line of beverages. And we believe moving forward in the future that consumers will be looking for those.

8:51They don't necessarily have to have the beverage taste like something. And there's obviously room for that. And there are many, many great products out there that are doing that. But I think we're going to see more growth in that space of it just happens to be elevated. It doesn't necessarily happen to be, you know, as you said, an analog. An analog, yeah. I have to do a mea culpa at this point in the episode because in 2018, when I first encountered Toast, I and some of my colleagues saw it as a really niche opportunity. Didn't see a lot of runway for it. You clearly did. You saw the breadcrumbs.

9:26The trail was there. the path, the vision, knowing that there was going to be an opportunity, knowing that there was going to be a significantly sized market, maybe not a billion dollar market, but a significantly sized market for these types of beverages. How did you forecast? How did you evaluate the trends? How did you evaluate the opportunity for a brand like this? Yeah, I mean, I, you know, honestly, I tried the product, you know, in beta effectively in December of 2015, November, December 2015. and I had one sip and looked at the branding and was blown away. I was really excited about what was happening because I'd never really tasted anything like that.

10:04And to me, the concept made total sense. What do you drink when you're not drinking? We all have friends that don't drink, and sometimes you don't want to drink. What are you drinking in those moments? You know, uniquely for toast in this space, we obviously play into that celebratory space. We don't view ourselves as a celebratory only beverage. We're an everyday beverage, but there was a natural play for us to move into those traditional sparkling juices of which, you know, it was a hundred million plus segment in itself. So we knew just from that space that there was space for us to play in.

10:37Secondly, you know, we had done the soft launch. We'd seen success with that. We were talking to those retailers and those restauranteurs who were excited about what we were offering. They were looking for things like this. And then when we launched in 2017 at just the old school, you know, going from store to store and sampling the product out. And there was this, you know, people would walk by and say, well, you know, why would I waste my time? I drink scotch. If I'm not drinking scotch, I drink water, you know, kind of that madman period. But there were also people, once you got them to try it, they'd say, you know, this is actually, this is actually pretty good.

11:09And they would go and buy it. And we would sell cases at a time at demos. We're really fortunate for that. So I had a lot of experience seeing firsthand that the consumer was excited about the product. And as we grew and we continued to move on, we weren't being thrown out of stores. The product was moving. And it doesn't mean that, you know, the mom and pop in Bangor, Maine was crushing it with hundreds of cases a month because they obviously weren't, but they were always coming back for more. And so we really grew on that. And then on the non-alc side, the press sort of started coming out of Europe, 2017, 2018, Seedlip showed up.

11:44You know, 2019 for me was, I think, a big year for the U.S. where there was a WAPO article, Washington Post article, I think in July, off the back of the Fancy Food Show in New York, where they had, you know, top 10 trends to follow. And we happened to be in that article, and that wasn't really the point, but more so that non-alc was on that list. And from that point on, 2019, we really saw a change in the excitement and the interest in the space. I saw a graph the other day of the growth of the non-alc space. And it spikes in January, and then it doesn't drop back down to last year's level. This goes on for five years.

12:22There's trial, and then it keeps raising. And then trial, and it keeps raising. And it's just going up and up and up. Last year, 31 % growth. For the category or for toast? For the category. Yep. And, you know, we're seeing across all generations, you know, people in their 50s and boomers are drinking less for their reasons. You know, the Gen Zs are sort of becoming grabbing that space in terms of being the generation that's drinking that much less. I think I saw something the other day that said that 60 % don't drink. I don't know if that number is entirely accurate. There's a lot of data out there that's hard to follow sometimes.

12:53But there's no doubt they're drinking less. 25 % of them are saying we're looking to drink less. Whereas, you know, you look at the Gen Z and the Boomers, it's like six and one percent, right? In terms of purely drinking non-alc beverages that are designed for that occasion. You had mentioned the taste and how many people love the taste of the product. That's one aspect of Toast's success. The occasion, you talked about the celebratory occasion as being really important. I want to get to that in a sec. But the branding, there's no question that you have stunning branding, that the bottle looks amazing.

13:27And I think that was when I first saw the brand in 2018. I said, this is beautiful. How many people are going to buy it? Again, being wrong about that. How did you go about creating that label design and creating it for the consumer that you're going after? Yeah, well, I mean, the name is unique, Toast. And it's a play on a toast, you know, which is an international sign of hospitality, raising a glass and having a toast. We wanted to keep the bottle clean. We wanted to keep it simple. We wanted to keep it elegant. And we didn't want to splash it with, you know, real organic agave or, you know, it's lower calorie or all these sort of sales points.

14:04We didn't want to pander to the consumer. And, you know, being in a clear glass bottle has its challenges, but we wanted to stand behind that, believe in that. And just having an elegant bottle with a very elegant name and very simple messaging, we believed was going to be attractive to the consumer. And it's proving to be that way. You know, we have received a lot of great accolades from people that have really enjoyed seeing that. It speaks out across the retail floor. You know, when it's on display, it's really nice looking. And it's an easy message for the consumer. It's not a complicated message.

14:38They see Toast. They see it at certain times a year. It's on display. That makes sense to me. And then importantly, the price point is approachable, which is critical. Price point. That was the thing that was also really stunning to me. So when I first saw toast in my local Whole Foods in the New England region, I was like, whoa, you know, this with the, I think it was with the cheeses and just adjacent to the other alcoholic beverages or the alcoholic beverage category. It was like around$7.99 or$9.99, something like that. But I was like, wow, this is a great price point. And looking back, it's even better than I realized because a lot of the other non-alcoholic or alternative brands out there are selling for$30,$40 a bottle.

15:20And I know, you know, these are complicated recipes and there's a lot that goes into these products, but not many people, I just don't see a huge market for people buying a$40 bottle of non-alcoholic spirits. I'm going to get in a lot of trouble for saying that, but I think it's true. How did you go about pricing this product? So it was really important for us to be approachable. You know, one of our brand pillars is inclusiveness, which plays into not only the fact that it's inclusive in terms of some people aren't drinking, but also that we wanted it to be accessible and that people could enjoy the product every day if they wanted to.

15:54You know, some do and some don't, and that's okay. The data is now showing in hindsight that people don't want to spend the same amount of money for their non-ALC as they do their ALC. We know that now from studies and polls and the rest of it, and there's retailers that can talk to that very messaging. How many people buy a$19 bottle of wine? You'd be surprised at how few people do. And so if you're talking about now a non-alc bottle, when is the occasion where you're going to pull out that kind of money and spend that? So there is a market for that. And understanding that that's your market is great.

16:25Our view is we want to be available to everybody. And we want to be something that's enjoyed again and again and again. We want people to be able to buy three or four bottles and pop one open on a Tuesday night and not be concerned about it. But we also want to be premium and delicious enough that they feel good about bringing it as a gift to a party or serving it at their wedding. All of these things happen every day. Having the right price point allows for that. We want to be this, and I don't want to use the word workhorse in the marketplace, but we want to be a product that people can really recognize and know as a go-to.

16:57They like it. It's delicious. They don't have to overthink it. They walk into a party. You know what? I'm not going to drink quite yet because we all know it's a moderation play. you know, do you have any toast? And fantastic. Perfect. That's what I'm looking for. To be able to achieve all that and really to scale your business and have people have those repeat purchases, you need to be priced right. I've been in businesses, involved in businesses in the past that just priced themselves out of the game. They were just in the wrong place outside of food and beverage. And so I'd learned from that and knew coming in what attracted me was, well, we can make this and make a nice margin on this business and grow something here and not charge too much the consumer and get people to buy it again and again and again.

17:37I don't want to be the one-time purchase. I want to be the multi-purchase. And in order to be that, you have to be priced right. Again, going back to the occasion, that also plays into the scalability of your brand. How many people are going to buy it and how regularly are they going to buy it? What is the biggest occasion? What is the most compelling occasion for people to buy and drink toast? You know, that's a question that's very hard to answer. We obviously do very well at what we call sort of, you know, holidays around the year. Sure. I mean, obviously dry January, there's Valentine's, there's Easter, there's Mother's Day, there's barbecue season.

18:12There's obviously Q4 and the holidays where everyone makes, you know, makes money, hopefully. And that's a huge beverage time for everyone. That for us is trial. Now it's the day-to-day. It's the every week. It's I'm not drinking this month or I have a meeting tomorrow or I don't drink during the week anymore. All these different reasons. So what we like about our product and what we think we have an advantage is you do have this celebration piece to it, but you also have this approachable aspect because of the price and because of the quality. You can drink it every day if you would like. So we have a lot of customers that drink it during the week.

18:47I get texts from people all the time. Oh, yeah, I just cracked open a bottle of toast. And then we'll get an email from someone saying we just served this at our wedding in Greece. So it's really all these different occasions where, you know, it's really up to the consumer. They determine what the occasion is. We just want to be a part of that moment. We talk about elevating the moment. It's our consumer's moment. It's not our moment. We're just there to be along for the ride and hopefully help out in the celebration, big or small. Where do you meet that consumer at retail? In terms of in the store?

19:18In terms of channel, in terms of where they're expecting to find this type of product? Yeah, I mean, I think the NA space is pretty scattered right now. So what we like to say is premium sparkling. which is really where we were born out of in those early days before there were non-alc sections. Mixer has become a hybrid non-alc test trial for a lot of retailers, major retailers, where they'll throw some products in the mixer category because they know they want to get their feet wet. And then actually having a dedicated non-alc set. We're going into Walmart, for example, in a couple of weeks, and they have a dedicated non-alc set.

19:53We're in CVS's non-alc set. So, you know, major retailers dedicating space. I believe everyone's going to catch up to that. And then we'll want to move over to that direction where we do not want to be as next to the sparkling juice, you know, bottom shelf, aisle 87, collecting dust, you know, for 48 weeks a year. Right. So premium sparkling is where you're going to see us in a bunch of places, if not in this sort of hybrid mixer, if not in a dedicated non-alch. You know, beer is really simple. And I am jealous of beer because everyone knows where the beer is. The beer goes, it's like the plant-based meats go in the protein.

20:31Plant-based dairy goes in the dairy section. Should non-alc drinks go in the alc section? Well, it works for beer. Does it work for everything else? Not really figured out yet. So I think what we're going to see is dedicated non-alc sets, and that's probably where we'll land. But today we're in a lot of premium sparkling around the country. I'm sort of surprised, but not really surprised, that Walmart is building out an alc alternative set. And I've asked other operators and entrepreneurs in this space how they stay differentiated, but also competitive and welcoming to other brands that are coming into the space.

21:12You know, the competition doesn't necessarily seem as obvious as it is, say, for beer or spirits. So rising tide lifts all boats. But again, when you don't see too many products like this out there, is that a good thing for you guys? Or does that make it more difficult for the consumer? That's a great question. You know, all these things are double-edged swords. From one perspective, to your point, beer's beer. People get it. Messaging is very clear. We like the fact that people can intuitively look at our bottle and they get it. That's a huge advantage for us. It's not a complicated concept to understand.

21:49There are a lot of brands entering the quagmire. I saw something the other day. There were 200 UPC codes for non-alc beverages, dedicated non-alc beverages in 2018. There's 600 now, right? So it's getting very busy very quickly. Beer took off. Now it's a big wine movement. Everyone's coming out with a wine. Who's going to survive? To your point, yes, I believe that we have a unique story where no one's really coming at us directly in what we're doing. There are obviously things around us. We have customers that drink all sorts of things. You could say that people drink toast in place of sparkling water or in place of a wine or in place of other things.

22:28It's a double-edged sword because what are you exactly? Do I understand? You're not a beer. You're not a wine. What exactly are you? How do we explain that to not only the consumer, I think, understands it better than sometimes the retailer because they want to fit into this nice, nice section. Where do you belong? or the data agencies, you know, where we were all sort of scattered around different places right now. But the upside is that to your point, okay, I'm building a non-alc set. I have a beer. I have multiple beers. I have multiple spirits. I've got a few wines. I've got a few mocktails.

23:00You know, I've got some aptogens. What am I doing in this sort of sparkling space? What's available? And where do I want to go with that? And hit that right price point. The advantage is we are unique. the disadvantages, what exactly are you? And we've been able to skirt that so far. Not entirely easy, but we've been able to skirt it. How do you read a data report about the category? I mean, you've given us a few stats, but how do you read it so that you can understand where the consumer is going and meeting them with the innovation that they want? Yeah, there's a lot of data coming out. And I was looking at some stuff today on the ride down.