Lessons Learned, Applied. A CPG Pioneer's 'Second' Act.

0:10Hello, friends. I'm Ray Lateef, and you're tuned into Taste Radio, the leading podcast for entrepreneurs, makers, and innovators in the food and beverage industry. She helped redefine premium soda. Now she's rethinking the martini. In this episode, Sherelle Klaus shares how the lessons, missteps, and successes of building dry soda informed the launch of Second Sip, a lower-proof gin brand designed for today's intentional drinker. Sherelle reflects on how her second act is more focused and collaborative, shaped by patience, humility, and a deeper understanding of distribution strategy, brand clarity, and long-term scale.

1:01Hey, folks, it's Ray with Taste Radio. Right now, I am supremely honored to be sitting down with the great Sherelle Klaus, who is the co-founder of Second Sip. Sherelle, it's great to see you. Hey, Ray. It's so good to see you, as always. Absolutely. We don't see enough of each other lately. The last time we sat down and had a drink was about six months ago. Yes, it was. In a bar called Overstory, if I'm not recall. Yes, Overstory, yep. Yes, in New York City. And part of it was to celebrate the launch of your brand, your newest brand. Second Sip. Exactly. Yes. It was a beautiful party, and we loved having you there.

1:39So thank you for coming. Yes. Yes. Thank you so much for inviting me. As I mentioned, you and I have known each other for some time. You are also the founder of an amazing brand called Dry Soda, which people recall was one of the first premium soda brands on the market. Second sip is a gin. It is a lower proof gin than is typically on the market. This is 20 % alcohol by volume. Most gins on the market are about 40 % call by volume. And it definitely feels like a sophisticated option, albeit a lower ABV, at a lower ABV. And I don't even know why I say albeit, because sophistication isn't necessarily specific to a particular proof, as we've seen with a brand like dry soda.

2:26And I think throughout your journey as a beverage entrepreneur, you've really understood what that term means and what premium means? Well, I think first and foremost, it's what's in the bottle. It's how does it taste, right? And dry became very popular early on because we had really unique and elevated flavors, right? We had a lavender, a lemongrass. Those weren't flavors people saw. And it tasted really good. And it tasted very different from anything else. It was much less sweet. So it had this more sophisticated. And then from a marketing standpoint, we started out in high-end restaurants, right?

3:00We were served in champagne flutes. So I understood the value of a drinking occasion and that ritual. So ritual is really important in my mind in any drinking occasion. I'm a total foodie, but a beverage is just an important part of that. So with Second Sip, what came about is this idea that I wanted to create a gin that I could have in a martini, which to me is the ultimate sophisticated drink, right? And there's no place to hide in a martini. Like your base spirit better be really, really good if it's going into a martini. And to me, martinis is the height of sophistication. And but I didn't know if it could be done because perfectly, honestly, I drink martinis and I can't have as many as I used to and still do my 8 a.m.

3:44yoga class or continue my night as long as I wanted to. But I just didn't know if that could be done. But I knew that I would only create this if it was good enough to be in a martini and And not just that I thought it was good enough to be in a martini, but that it was the top mixologists around the world would think it was good enough to be in a martini. So that's how the idea came about, was that same idea of how people are drinking the ritual behind it. And could we replicate that for someone, but give them, because I always, it's all about more experiences and more options, right? That like our mantra with the dry was social drinking for everyone.

4:19And that's continued. That thread of my sort of goal in life has continued with Second Sip. In the broader sense, is this part of a trend? Is this just something you felt was going to click with a lot of people? Or how do you evaluate that opportunity? So I've learned a ton of lessons with DRI, and I knew that I wanted to apply those. And for me, it was a few things. It's my own personal experience, right, of I know I'm not the only one that feels this. And it's my experience with these consumers with DRI. I wrote the guide to zero-proof cocktails during COVID, and I got to know the consumers even better during that time.

5:00I really, obviously, 21 years of dealing with consumers and their drinking habits and how they're drinking and where they're drinking. But that opportunity also opened me up to all these zero-proof spirits as well. And for me, the zero-proof spirits just didn't hit. It was a less than. It was like an Entenmann's cake, right? It was always going to be less than. It wasn't going to be the full experience. And I'm not really interested in anything that doesn't going to give me, I don't want to give up anything. So that was one piece as I started thinking through this. The other piece is, and I think any beverage entrepreneur out there listening to this can appreciate this.

5:35It's also not just about the retailer or the bar or restaurant and what they need. It's about your distributor. What does your distributor need? Because route to market is obviously the most challenging part of any beverage experience. I think you could talk to any beverage entrepreneur and they all have their challenges with that. So I was like, what is an issue that the distributors are dealing with right now? And it is alcohol sales are softening, right? And they're not, I think, seeing the repeat by of the non-alc spirits the way they wanted. Those weren't quite performing in our interviews with both salespeople and the upper echelon, the CEOs, not the CEOs, but the executives of the distributors, that the promise wasn't there for the zero-proof spirits, but they do need increased drinking occasions, and they need people drinking increased drinks, more cocktails.

6:29So what better option than to bring back the three martini lunch, so to speak, right? That's a new occasion there. And now, instead of zebra striping, people can have a cocktail, and then they have to go to like a soda water, now they can actually have two or three martinis and have that base spirit and drink more. And so now you're solving the problem for the bars, the restaurants, and you're solving the problem for the distributor. And like, so super interestingly, we just launched with Southern Wine and Spirits in New York and January is usually their slowest month, right? Here we are talking about a dryish January and this opportunity to really create real volume in January for them.

7:12And they're so excited about that and that innovation. So those are the three sort of prongs of how I looked at this. Is the consumer going to want to buy it? Are the bars and restaurants going to want to buy it? And am I solving this problem for the distributors? And are they going to get behind it? Because if a distributor is not going to get behind it, and you're not solving a problem for them, it's tough to get their attention. So I felt like we had all three of those things. It feels like there's a lot of parallels between what you're doing with dry soda and what you're doing with second sip in that there were people who kind of gave up on soda because it was high calorie, high sugar.

7:49It had ingredients that people didn't want, whether there was the, you know, full strength, so to speak, or the diet versions, there were ingredients that people just wanted to stay away from. And then we saw brands like dry soda come to market. We saw, you know, these new better for you functional sodas come to market and people came back to the category or people were more inclined to say, yes, I will have this type of soda or that type of soda. It also introduced soda to a whole new generation of consumers that said, this is for me. This is a brand that represents me and my values and my culture.

8:23So I think there are two things that you could be targeting with Second Sip. One is bringing people back to drinking, bringing people back to gin. and two, bringing new consumers to the category saying, well, you're not going to have a rough day tomorrow because you're only drinking half the alcohol that you'd normally consume in a martini. But which is the bigger audience? Where do you see the most opportunity between those two types of consumers? That's a good question. The consumer on premise in the bars that we're in in New York is we're in most of the top bars in New York. They're there for the cocktail experience.

9:04And so they're probably having more now. However, our D to C business is all of a sudden just kind of gone uphill. We've had a couple of press pieces and I've been communicating with some of those consumers and they are actively seeking out options for themselves to be more intentional with their drinking. And interestingly, I got an email today from a customer who she came to Second Sip because she tried all the zero proof gins. and I was fascinated by that because to be honest, I never assumed that somebody that was going for a zero proof spirit would come to a low proof. I thought if you're going zero proof, that just means you don't want any alcohol at all.

9:43So that sort of opened my eyes. I was like, oh, okay. It's good to know that that's, there's a spectrum for people. And I knew there was a spectrum. I just sort of assumed if you were going zero proof spirits, you were fully out. So I think that's yet to be seen, Ray. Like that's what the whole point of this is in our focus in New York. We're just now launching in Miami is to really focus on this consumer and understand how they want to use this and what's going to make sense for them. I'm seeing how it makes sense for the bars. I'm seeing how it's making sense for our distributors. And now we're learning from our consumers.

10:16The other thing I wanted to point out that we haven't quite talked about yet, but that I think is super critical is credibility in this spirit space. So like I said, I came up with the concept, But can that even be done? And who am I from this woman from N.A. to come in and try to build something here? So that's why I partnered up with Leo Robitschek, who was a friend of mine that I met actually doing a visit for Seattle commercial like years ago that they put us together. and Leo is royalty in the industry. And, you know, he created the first Michelin-starred cocktail program at 11 Madison Park and has trained, I'd like to say, like 30 % of the top bartenders in London and New York right now.

11:00The number's probably a little high, but it seems like that. Everywhere we go, they're around. And then from him, we brought in Nick Strangeway, who is just a master distiller out of the UK, who has created gins for Beef Eater and Absolute and his own brand, Hepworth. and it was the credibility of those three and the fact that Nick, we all came together and said, we want to do this, but if it doesn't work, we're not going to launch it. Like, is it good enough to be in a martini? And we took it to the 15 top mixologist in New York and the 15 in London, and we had them try it and give us their feedback.

11:34And we got a resounding yes. And these are like martini masters, right? Like these are the real deal. And that's when we knew we had it. And And without that piece, I just, I think the idea is great. And all of those other pieces I had are great, but that's one of the reasons why Southern believed in us too, right? They saw we're in, within a few months of launch, we were in most of the top 50, like in the world's best bars we were in, in New York and on menus and getting this like repeat velocities and this repeat buy. And it's because of that. So that is kind of the final linchpin of how this worked and why it works is because it's really good and it tastes good and we worked really hard to get it there.

12:18Yeah, I mean, industry credibility is really important. At the end of the day, the people that are really going to judge your brand are the people drinking it most often. The bartenders will put you on the menu. The bar managers will help you get there. The distributors will help you get on shelves at liquor stores. But taste is king. It always has been. How much of your experience with understanding how people perceive taste at dry soda informed you about the way to approach flavor and proof for Second Sip? So in this situation, I know what I don't know. I knew what my favorite gins were. They're a London dry style gin.

13:02Those are all my favorites. and Nick and Leo and I all sort of gave our list of our favorite gems of what we like, but I left it to those two. I said, here's what I know is that it has to deliver. And they know that these guys are incredible at what they do and have incredible experience. And so this is an area where I'm like, I don't have to tell them that they knew that. And it was more like, they were concerned I was going to push them in a certain like, oh, it's good enough. Let's just, And I'm like, no, because I know how important that part is. But more importantly, they know it. And it's their names.

13:36Their names are literally on that bottle. So they wanted to make sure it was really good. So we had an idea that it was definitely going to be a gin forward. So London Dry is definitely more gin forward. And how we got there was very complex and complicated and not easy. But we did it just with that. It was all about the martini. And it's interesting because it works amazingly well on a martini. Negronis and gin and tonics are awesome. but it was about that martini. So it only informed in the fact that I knew what, like when we brought Nick in, I said to Leo, I'm like, does he have the chops to really create this?

14:10And he's like, of course he's like, this is the guy. And, and the fact that we all agreed, if it doesn't work, we go our separate ways, which, you know, it's not easy for an entrepreneur like myself, but so I just, I mean, I, I had very little to do with that piece of it. Cause I had to let them go. I will say the interesting thing that we told Nick was, cause he went into this lab in London and worked on it. And then we took it to an upstate distiller in New York and did a small batch and then scaled it up in New York, New York distilling. But I didn't give him any sort of cogs, like there was no parameters and there was no parameters on the ABV.

14:45I said, just go see what you can make. And we got really lucky that it came in at half because that was sort of what I was hoping for, but it was like taste first, taste before ABV, taste before cost. Did you feel like you're much more prepared for the launch of Second Sip than you were when you launched Dry Soda. Did you feel like you had as much information and you did as much research and as much product testing and market testing for Second Sip as you did when you launched Dry Soda? Did it matter? Yes. I cannot tell you how much fun it is to do this brand after everything I've learned. Like it's, it's unbelievable.

15:28Like it's just been a night and day difference. So yeah, I was very intentional about the launch, how we launched, where we launched and everything from that point on, like how we're scaling, which distributor we went with. Like that distributor conversation was fascinating because I had this concept, right? That I'm answering a problem for a distributor, but what I didn't know was, are they going to get that? And after we launched, we were able to self-distribute through Park Street, which is a, so we had time to get a little momentum, but it was interesting. We had five of the top distributors coming to us and vying for us.

16:06And with Dry, I practically had to sell my oldest child to get that going. Like it was unbelievably hard to get a distributor with Dry. And here we had, you know, we had them all coming to us and And that was a fully new and really cool experience. I mean, I can't tell you how cool that part was. But yes, so I feel like it's not just the launch, but like everything that's gone into this and timing and patience. So we have, you and I talked about this just before this started, about what I got called by my earlier distributors at Fry. And it wasn't a pleasant name, but it was around Relentless and something else along those lines.

16:45And it's because I pushed so hard. I was pushing, pushing, pushing. I had expectations. But this time I come into distributors understanding their pain points and how do we help solve those so that together we can build this. So I'm quite confident I'm not getting called to Albert anymore. And they were very lovely at our GSM. What Sherelle is referring to is the last time we sat down for an episode of Taste Radio, which was almost, well, the episode was published almost eight years ago to the day. And the first line in the copy is distributors called her a, quote, relentless B. Everyone knows what the B word here is.

17:23But Sherelle Klaus paid little mind to their insecurities. She was too busy building a business. And one of the things you've noted a number of times in this current conversation of ours is that Leo and Nick have been integral to the development, the creation and development of this brand. If I'm not mistaken, Dry Soda, you were running things solo. You were a solo entrepreneur, solo founder. If you had to go back and do it all over again, would you have launched with a co-founder? How much does the co-founder matter in what you're doing now and all the time you're running the two plus decades you're running Dry Soda?

18:02That's funny you ask that. No one's asked me that question before. I don't think so. I enjoyed being there on my own and figuring this out. But that being said, I also had a lot of really brilliant people around me that I that was one thing I brought in. I had great board members. I had great team members, advisors. So I just love that experience with dry and it just brought so much. It is interesting. However, I think this is super funny. I launched Second Sip and two weeks later I got married. And so I had been single most of my time with Dry and didn't have a partner. And then all of a sudden now I have a business partner.

18:45So I fully embrace that concept in this last year. But I really enjoy having a business partner now. Leo is quite a bit more involved than Nick is as well. But Leo and I, we talk a lot because he's very, very involved, like day to day type stuff. Yeah. And especially in this business, I have so much respect for this industry and I have so much respect for what I don't know. And I will say from this perspective, the learning curve is much, much quicker now. Like with dry, there was I had to find out all of this stuff on my own. There wasn't someone to tell me. I was also in my early 30s when I started dry and I thought I knew everything, Whereas I am a much wiser, older woman now and understand the value of being able to have people help you with those answers a little easier.

19:37I mean, I've asked the question about solo founders to a lot of entrepreneurs who have launched their businesses by themselves. And it's about 50-50. The response is sometimes they'll say, no, I wanted to run the show on my own. And then the other half of the time, the folks are saying, oh, it would have been so much easier and so much more helpful to have someone by my side. There's a loneliness that a lot of people mention when they talk about entrepreneurship. and I think if it were me, I would love to have someone advise me, but I think I'd want to run the show on my own. At the same time, if I didn't really know how to run a business, it would be nice to have someone who could just run the day-to-day.

20:18And that comes up a lot. There's some entrepreneurs that I just spoke with a couple of days ago. They were like, hey, Ray, do you know anyone that could just run our business for us? Oh, that's funny. Well, I will say that to be fair, I would love to give a shout out to David Clark, who runs our operations for us and who was with me at Drive for years and is now running operations at Second Sip, that he's been a really integral part to this whole thing. And so I do feel like in some aspects he was a partner, even though obviously he's not necessarily like a co-founder. Having him by my side through all of this has also been really helpful.

20:57And he's just as excited as I am by the whole thing. So it's kind of, yeah, how you surround yourself with people. But yeah, I mean, I do like being the boss with things. Being able to focus on sales and marketing and promotion of the brand and partnerships and so on and so forth feels like your wheelhouse. And doing that in an industry where you're not as well known as you had been in NA could be a little scary. But what's been your approach? What's been most effective for your pitch? how do you get people interested almost from the get-go? Is it from the liquid? Is it the branding? Is it the opportunity?

21:35What's really getting people excited and out of their seats? Well, yeah. So we're in the midst of actually raising a round right now. So it's been, I'm one of those weird people that really likes to raise money because it causes you to get so focused on the value of your company and what you're doing and be able to articulate that. And you also then see, oh, where maybe are we? we don't need to be focused on that or whatever. So I find those, I find conversations with potential investors to be some of the most valuable conversations I have. And I think really what is resonating right now is both, well, I have to, I'm sorry, I'm gonna say three things.

22:13One is the taste, right? Is that it works. Like this product actually tastes good. I think it's the momentum. It's really hard to deny how quickly we've grown and scaled in New York. And like I said, in these top influential, impossible bars to get into that really then help that halo then really helps grow it the rest of the way. And then I think it's the timing, right? The timing is right. The customers are buying it. The repeat is there. It's, I guess it's the momentum, right? Like it's just the momentum is here and I'm seeing it. So when we talked about the importance of operations, it's why David is critical to this company right now because of, I mean, we're talking, this thing is scaling faster than I expected.

23:00And so like, you know, we're already having like distributor, you've got to be ordering more, you've got to be ordering more. So I'm not going to be a relentless bitch and asking them to order more, but like just getting them on the right cadence of getting that done. But it's making sure that we are set up to be able to grow this thing as quickly as it's beginning to happen. So I think that's it. And I think it's because also every everybody gets it as soon as they think, oh, I do want two martinis, but then I can't have wine with dinner or whatever it is. Right. Like, it's just such a universal tension that we all feel.

23:34And when people get that. Yeah, it just kind of opens the doors. Do you see Second Sip as a lifestyle brand as much as it is, you know, an alcohol brand or a low ABV alcohol brand? Is this the gin, I think, that people will say, this is the gin I have in my house? Or is this for, you know, a specific occasion type of gin? To me, lifestyle would mean that this is my gin. This is the one I always go to versus, you know, occasion-based gin. Thank you for asking. I was actually going to ask you. So tell me what you mean by lifestyle. So yes, I think that's the perfect question because yes, this becomes my gin.

24:11Second sip is my gin. And that was why I said we are a gin company first. So there are a couple of other brands out there that are low proof, but they're like doing, they're doing all of it. They're doing tequila. They're doing, you know, the brown spirits and all of that stuff. And that is not something we're interested in doing. We're not trying to be the poster children necessarily for low ABV. We're like, we are a gin company. and that is something I have said from the beginning to every single person on our team and repeatedly over and over again to our social media, to our press people. We are a gin company and we're just a gin company that you can drink twice as much of.

24:46So yes, the lifestyle, this becomes second step, becomes your gin. To me, that's how you create a new category is that you be that thing for them and you're not the special occasion. You're not the just when I don't want to drink as much. This is, it's good enough to be your gin, your everyday gin. And that was not easy to get to and not, you know, I don't think we're seeing that in any other brands out there in the market right now. So. How long was this in development? Second step that is? Yeah, it took us like a year. Okay. To get it all done. And that's because I'm very pushy. Sure. Throughout this conversation, I feel like there's one word that has sort of been the through line for everything that you've mentioned, which is focus.

25:29You're focused on being a gin company, first and foremost. You're focused on the New York market. You're focused on being great tasting. You're focused on that on-premise opportunity and making the bar, the front lines for your brand. And I would think a lot of that learning, a lot of that emphasis on focus came from your experience building dry soda. Where frankly, I think there were times when I saw dry soda maybe lose focus and it was easy to because there were just so many, so many places you could go. There were so many trends that might affect how people would perceive the brand or drink the beverages.

26:10Is that the case? Absolutely, for sure. Like with dry, again, that's sort of your first time entrepreneur, right? That some of the different pieces And, and just what's crazy is that I started that brand to be an elevated experience for people when they weren't drinking alcohol. Right. And we very, because we had like a third of the sugar of a regular, a quarter of the sugar of a regular soda and all that stuff, we became a better for you soda. And that's when our sales really took off. We experienced such, such high growth, but that wasn't why I started the brand. And we wanted to kind of get back to that.