Will White Claw 0% Dethrone Liquid Death? We Reflect & Predict.

0:10Hello and thanks for tuning in to Taste Radio, the number one podcast for the food and beverage industry. I'm Ray Lateef, the editor and producer of Taste Radio, and I'm with my co-host for this episode, Mike Schneider and Brad Avery. Brad, welcome back to the show. Hello. Thanks for having me back. Great to see you. John's out of town. John Craven, that is. Jackie was supposed to join us, but she's a little out of pocket, so to speak. Mike, you're here. I just made it. Yeah, I rolled it. I rolled it. I was at it. Yeah, I came in with Starbucks late. Boxing. No, Brad, please. Would I ever do that?

0:45Oh my goodness. Amanda would kill me. I was coming in from a Boxing Day brunch, watching a little Premier League, and then I was like, oh, it's time to record. Boxing Day brunch. What is Boxing Day again? The day after Christmas. The day after Christmas. But it's when you... You're supposed to be taking things back that day. I think that's what... It's a Canadian thing, isn't it? I think so. Yeah. You re-box stuff you don't want. It's UK, it's Canada, you know, it's the Commonwealth. Yes. But it was a Boxing Day brunch focused on Premier League football. Premier League football and other things.

1:14arsenal top of the league right now we uh top of the league we we top of the league i love it yeah i had nothing to do with it except for support okay brad how was your uh holiday oh it was very nice i watched uh i watched basketball is what i did basketball i don't i never pegged you as a basketball fan oh i love it love uh i've been following pretty closely this year i've had some good stories going on we're in the middle of a pistons losing streak oh yeah it's terrible It's wild to see. Are you a Celtics fan? Yeah. Okay. Yeah. Born and raised in Massachusetts. So by default. How is it possible?

1:51You've been with Bev Ness since 2016. Seven years. I did not know you're a basketball fan. I don't know. I guess I've got, I've gotten a little deeper into it over the past like couple years, to be honest. Now I know how John Craven feels when we start talking about football. Yeah, but like John's always known we're soccer fans. Like I just didn't know that about Brad. Yeah. Yeah. Anyway, as we're coming up on the end of the year, the annual tradition. of BevNet and Nash publishing their top 10 most read stories of 2023 is something that always attracts a lot of attention. I was flipping through those stories and it was really cool to look back as far as January of 2023 to see what people were reading and what really piqued their interest and what it might foretell for 2024, given that these stories are generating a lot of attention for one reason or another, whether it be because of a story about funding or a story about some sort of controversy, a new ingredient, a retailer.

2:48And it was interesting for Nosh in particular, the number one news story for 2023 was about Erewhon. Earlier this year, Erewhon announced that they were going to launch a pop-up in New York City, and everyone lost their mind. Lost their minds. Yes. And then they lost their way. What was it? An executive posted it online and then the company immediately was like, wait, wait, no, that's not happening. Correct. It was in May. Executive Vice President Vito Antocchi posted this on LinkedIn. He said that they were going to launch or they were sorting through hundreds of inquiries from brands interested in participating in a New York City pop-up.

3:31And it was going to be like a smoothie focused pop-up, but they were going to have some brands in there as well. Pop-up grosser going, no! Yeah, exactly. So Nosh published that story. And then I think it was a couple of days later, it turned out that Erewhon had nixed those plans or that they just had too much interest and it just didn't seem fair for one reason. I don't know exactly why they nixed them, but. Yeah, I don't know why either. But I think in terms of determining why it was like the most read story, Erewhon has been in the zeitgeist this year. I mean, they have been getting out there more in the mainstream media overall.

4:10You got like fashion products now that just have the Erewhon logo on them. You've got all this buzz. There's been a few profiles and mainstream outlets about how many stores they have again. I want to say six, seven, something like that. All in Southern California. It's not even like there are over a dozen stores. And yet this retailer is such a giant cultural figure now, especially for California. And I think for a lot of startup brands where it's a real make or break store to get into. You nailed one part of that, which is that it's a big cultural phenomenon for one part of California. And that the industry loves them some heroin.

4:54But make or break. Yeah, make or break is not the right way to put it. But it can be a launchpad for a lot of brands just to get trendy. It's not going to break you if you don't get into Erwan. It might break you if you get into Erwan. It could, yeah. It's a little on the expensive side. Yeah, so there's a double-edged sword element there. Any retailer that you get into, once you get in, there are all kinds of additional costs that some founders don't understand exactly what it means to get into retail and what it means to stay on the shelf and what it means to maintain velocity. And, you know, we joke about Erewhon, but it's the same for any retailer that you get into.

5:32It's like that's not necessarily going to lead to success getting into retail. So be ready. Especially a store like Erewhon where there's so many products on the shelf. So many different brands you've got to compete with and stand out against. So there's the element of, okay, you're in, great, but, you know, so are, you know, 100 other brands that you are now on shelf with. And you've got to get as much as those those shoppers there are like prime for discovery and want to try new things. You got to get them to pick up yours over any of the dozens of other new things that they have in front of them.

6:05It's weird when there's like a it's like walking into a treasure room. Which cup do you pick up first? You know, which which gem do you pick up first? They're all over the place in Erwan. Well, that's the whole point. So when I did a taste radio interview with Kabir Jain, who was the chief operating officer of Erwan, did this a couple of years ago. he had talked about how much they focus on new products and introducing new products on a very consistent and frequent basis. So like every two weeks, they're bringing in new products, particularly when it comes to beverages, because that's what their consumers expect.

6:39And that may be a good thing for brands in that, you know, let's say you launch a new brand and you're like, I'm looking for a retailer. Everyone's willing to take a shot on you. If you meet the criteria for getting in there, you have to be natural, organic, you know, clean ingredient label, et cetera. But most of all, you have to be innovative and have some sort of differentiated approach to a particular beverage category or food category. I guess the hard part is how to stay on shelf. Let's say you get in there. And then there's the other hard part too, which is that when one comes in, one has to leave.

7:07I mean, so there's that piece too. And we don't talk about that as much. I was having some conversations with the retailers at BevNet Live and at Nosh Live in our one-to-ones and they were talking about, yeah, you know, that's just the way it goes. Yeah, totally. So it's super competitive. I hear that from retailers all the time. It's like, okay, if we bring you in, someone else is coming off. And our expectations are that you're going to generate more incremental value to our stores by having your brand, your products in there. And if that's not the case, why bring you into their stores? But I think the thing with Erewhon and the whole pop-up in New York City was, you know, does this foretell a potential more permanent location on the East Coast?

7:45And I think based on what Erewhon had said is that they're really focusing on their stores in Southern California, in the Los Angeles area more specifically. And I misspoke. It's not six or seven stores. They have 10 stores. Okay. Wow. 10 stores. They've been introducing, they've been launching new stores. They have, I thought they were opening up one in Malibu. Pasadena, I thought. They have one in Pasadena. They have one in Pasadena. That's a new one. They have one in Culver City, Calabasas, Beverly Hills, Santa Monica, Silver Lake, Studio City, Balisades Grove, and the flagship in Venice in Santa Monica.

8:18Well, the original in Venice. But I think what's the thing about the pop-up too is that, like I said, you've got them now kind of part of the national discussion in some regards. And so you're going to have people in New York who have heard of this store out in California and there's going to be hype for like a pop-up, I think, you know, coming to the East Coast. It generates excitement. And when you've got, again, like, you know, profile pieces in, I think, like the Atlantic, I want to say, or you've got, you know, fashion models wearing clothing bearing the brand name. You've got people who are like, well, what's this mythical store that's 3 ,000 miles on the other end of the country?

9:00It's true. It's true. And I think the last thing I'll say about it is that we always hear from investors about velocity and proving yourself out in one particular market, even in one particular store or chain, and showing that you can actually sell your product and support your brand in that one particular store chain or area. And it doesn't necessarily need to be Air One. Air One is probably the most high profile one and the one that's going to generate the most interest. but let's say even locally here in the Boston area, like a Cambridge Naturals, very small store, very small chain. But let's say you're doing really well in there and you can prove that your brand is resonating with our consumers and maybe you can transfer or that interest can translate to another store, another retail chain.

9:44It also depends on your brand. Don't sleep on Whole Foods Local either. There's all kinds of great entries into retail and it just depends on, it depends on you, it depends on your audience. I think taking on your local market first is a pretty good strategy. For sure. On the BevNet side of things, the number one story was actually about Kratom. I think I'm pronouncing that correctly. I think it's just Kratom. Kratom. I want to say. Kratom. Kratom. What is Kratom, Brad? Kratom is officially classified as a drug. It is a plant-based substance that is said to have opioid-like properties. And it's been highly popular in recent years.

10:24Because it's plant-based. Yeah, it's plant-based. It is a plant-based solution. And so there's been a number of states passing legalization bills to sort of protect the sale and possession of Kratom. But the FDA has been very, very clear. They do not like it. It is not approved for food or beverage. And they are enforcing it. And that's what our number one story of the year was actually about, was a raid by U.S. Marshals at the behest of the FDA against a company called Botanic Tonics, which makes a brand called Feel Free. A big part of your story, Brad, was about a class action lawsuit that was filed by Romelo Torres, who is a alcoholic in recovery, who alleged that Botanic Tonics and 7-Eleven had falsely advertised their feel-free shots as a safe, sober, and healthy alternative to alcohol.

11:15Mr. Torres was not doing so well. He said that he had an addiction to the shots and worsened to the point where he was drinking 10 of them a day and spending$3 ,000 a month on the products, experiencing, quote, severe withdrawal symptoms when he attempted to quit. This sounds like a movie. Danny Stepper, you out there? Oh, geez. This is not a good thing. It's notable that feel-free shots contained both kratom and kava. And kava, yeah. So it's a combination of the two. And I don't know that there's even much research that's been done on how those two ingredients interact with one another. When there's not a lot of research on cannabis yet, you got to believe that there's not a lot on kratom.

11:59Yeah. And so the issue that kind of came up is feel free. Botanic Tonics is a pretty young company. They're only about two years old and they very quickly attracted a lot of controversy. And there's allegations that the products are addictive. There's even a subreddit with I think I last checked is over a thousand members about people who are claiming that they have become addicted to the shots and are trying to get sober from them. goodness. And again, these are just allegations of users online, but that's what the class action lawsuit you were talking about. As soon as you said opioid, I was like, not for me.

12:31Yeah, I don't know that it's, I think it's opioid like properties is what the FDA has said. That's the addiction probably that they're talking about. And so feel free, actually, this year released a version of the shots without kratom in them anymore. And so they do have, I believe, the classic that is still the has kratom, but they released a version that just has kava. Yeah, they just call it feel free of kratom. And some other functional ingredients. And to be clear, the story that you wrote about the feds kicking down the doors of Botanic Tonics, that was a story that came after your story about the class action lawsuit.

13:05So the class action lawsuit, that news came in April 6th. And the story about the feds seizing the$3 million worth of kratom products was on May 3rd. So very interconnected. stories i haven't heard much since yeah i haven't heard too much since i need to dig back in the rock kicking down the door and waving the floor yeah yeah but they took over three million dollars worth of kratom everybody like they took they took shots they took they took the the raw powder that they had they they took a lot of uh inventory from from their offices all right before we go any further i'd like to thank our presenting sponsor for this episode that's tetra pack the pioneering packaging solutions company that provides safe, innovative, and environmentally sound products that each day meet the needs of hundreds of millions of people around the world.

13:57You can learn more at tetrapack.com. One of the other news stories that really stood out for me, and I should note that typically, or at least for the last five years, the top news story on BevNet has been about like Monster or Bang. And there's plenty about Monster and Bang in these top 10 stories. But it was the one about White Claw going dry and introducing a zero alcohol sparkling water product. Okay, who saw this coming? Not me. Mike, did you see a White Claw zero alcohol coming in? I mean, anything's possible with White Claw, I suppose, at this point. Well, my initial thought was, isn't that just a seltzer?

14:36Yes. White Claw zero. But I think there's some other ingredients in there to kind of give it some extra flavor. I'm empowered bipolar. Well, according to the article, it's being billed as a premium seltzer for adults, okay, with an added boost of electrolytes and just a touch of sugar. Why sugar? Two grams per 12-ounce can. I don't get that. I mean, most seltzer, zero sugar, natural flavors. I mean, bread in your hand, you have a can of Ouroboros, holiday variety, which is their chai cranberry, which is amazing. And I look at the Ourobora and I look at the White Claw Zero, I much would rather have the Ourobora, but maybe having the White Claw in your hand at a party says a little bit more about you.

15:22You feel like you're more as part of the group holding a White Claw. And I feel like a little bit of a broken record repeating this, but I've been saying, you know, part of what Liquid Death's success is, is that it's largely an NA play. They created a canned water that looks like a beer can. And so you no longer feel when you're at a party and you don't want to drink like you're the dork that's holding a bottle of water. You feel cool holding it. And maybe that's part of what this is as well, is that it's the White Claw brand. And so you really want to say no law. You don't want to say dork, I don't think in three.

15:54No, that's fine. That's fine. I'm saying you're the dork at the party. The bottle of water. that's how you feel i'm not i'm not accusing anyone who doesn't want to drink of that i'm saying that's how you feel oh maybe okay yeah that could be true i've had people like marketing professionals in this industry say to me he's like i feel like a badass when i'm holding a liquid death don't you though yeah really yeah people yeah i've like that was a direct quote from someone who i don't remember i took my son to see uncle acid in the deadbeats metal band and And there's Liquid Death everywhere. I mean, it was pretty, it's pretty cool.

16:30Well, they did really embrace that band too. Remember, that was the thesis. Uncle Ass is a great band. They're sick, right? I have no idea what you guys are talking about. So it's like if Black Sabbath just continued. They just have one song and they play it over and over and over again. That's one of their songs, by the way, over and over again. Wow. Great band. So remember, Mike Cesario, Bad Net Live. You know, metalheads are going to want to hold this at shows and stuff. Mike Cesario will be the founder and CEO of Liquid Death. Right, Mike, sure. You're going to have enough money to get there.

16:57And, you know, I'm... That was in every Live Nation venue. Yeah, my biggest mistake ever as a judge at the New Beverage Showdown was like that they're not going to be able to do this. Obviously, they did. And it's just been fun to see. It's like a little stab every time I see where... You know, like I went back and watched the video, though. You were the one judge on that stage that was kind of like, I think this could have some legs. You said that. I said it could have some legs, but I just had no idea how creative Mike Cesario and his team were going to be. I didn't know they were going to be, like, full albums on Spotify.

17:31Just the execution's been phenomenal. But, like, going back to the point about, like, them as an N.A. play and, like, fitting into this non-alcoholic trend that we're seeing overall. Or alcohol alternative, I think. But alcohol alternative, yeah. I think you've got to think of Liquid Death in part of that conversation. 100%. 100%. Yeah. Because he saw the future. he made the can look a little bit just a little like uh it looks like a beer can it looks like a beer can people talk about getting pulled over and they have the cop has to take it and like they have to prove that it's got like the edge of a beer can it's got like it's got that that metal vibe to it and it's just i don't know it's just amazing product yeah and i was just saying back to white claw so i think there's some of that there and why white claw wants to do as your percent is that you get the white claw brand there's still no laws when you're drinking it But it's, you know, you have that attitude.

18:21This is the thing we tell founders. First of all, good liquid in the can. Second of all, you have to have a good brand. Liquid in the can, have a good brand, you know. And then you're onto something there. And then you have to have people that just understand the brand and vibe with the brand. And there you go. So if one of those two things doesn't work. Funny enough, Liquid Death's flavors also have a little bit of sugar in them. I believe they have, use agave nectar for it. They do. They're teas and... They're sparkling. Right. Yeah, I think the thing with White Claw that's going to be interesting to see is, and they're launching this new Forescue line on New Year's Day, is whether or not you start to see them making inroads in places where Liquid Death has already made those inroads.

19:01So are you going to see people? Different audiences though, right? I don't know. I'm not sure. I wouldn't be surprised if we start to see the same people who are drinking Liquid Death drink, have a White Claw and they end their hand. I wouldn't be surprised. Depending on the occasion. And, you know, depending if you're already the White Claw consumer, like personally, me as a consumer, I'm not the White Claw consumer. And so like for me, I'll try this. Like, I'm curious, but I'm not the type of person who normally drinks a White Claw. But if you're the type of person who normally drinks a White Claw and you want a night off from drinking, maybe this is what you go for.

19:34I think it also— Do they take nights off from the White Claw drinkers? I think there's also a question about whether or not 2024 will be that sort of inflection year for any position brands or alcohol alternative position brands. I'm holding in my hands two products that fit within that category. Luna Bay, which is a brand of kombucha, hard kombucha and hard teas. They recently introduced a new tea mocktail line, 0 % alcohol. Interesting. And then there's another brand that I'm holding my hand called Per Se. and they're positioned as an alcohol-free craft cocktail. The variety I'm holding is a mojito.

20:13There is a lot of good stuff in that category. You've got Ghia, you've got Malati, you've got Bombas, you've got the Soix. I mean, there's a lot of quality. But those are tiny, tiny, tiny brands in comparison to White Claw. Yeah, absolutely. The quality's there. You know, Liquid Death and White Claw, I feel like, are another sort of plane than these smaller brands. So the quality is there, the brand is there, but the marketing dollars. Yeah. But does White Claw open up the door to these brands that give them more of a path to people to drink these products? I know. Yeah, it's hard to say because White Claw, again, it's a sort of premium seltzer.

20:53And these are cocktail alternatives, however we want to refer to them. I think it's, you know, I was saying it's kind of there's been this refinement of the alcohol occasion of like when you want to drink. We know that people are drinking less overall alcohol, but when they are choosing to drink alcohol, they're going more for premium products. They want to make the calories or the experience of drinking worth their while. So they're willing to spend more on an expensive spirit, or they'll try a new kind of fancy canned cocktail, and they're drinking less beer and a lot less of cheaper spirits overall.

21:31and then they are embracing all of the alcohol alternative products and the non-alcoholic products and giving those a try. And I think we're still waiting to see which brands are going to be able to stand out or stick. I also saw a path to victory for cannabis there in BevNet Live where the strategics in past BevNet Lives have been like, yeah, we're not touching that cannabis. And now they're kind of like, huh, yeah, we'll talk about it. We're interested in it. yeah, we'll even taste it. So not that that's necessarily an indicator of what's going to happen in the industry because we're all, you know, first movers looking ahead, the best, brightest, newest products hitting us first.

22:09But yeah, that just seemed to be an attitude that we haven't heard before from the strategic. And maybe that's part of that is just growing cultural acceptance of cannabis as it's like becoming more normalized as part of just sort of everyday life rather than a illicit drug. And now it's, you know, we're at 10 years now, I believe, of legal cannabis in Colorado. And so we are looking at, you know, cannabis just becoming a more acceptable part of society. And therefore, strategics are now not as afraid to touch it because everything's trending in the direction of it being accessible legally in our lifetime in the near future.

22:45In beverage, it feels a little more controllable. I mean, I had Calexo, Drippy, and magic cactus and did not melt once. Yeah. You know, one story that generated some interest or quite a bit of interest actually on Nosh was the news that the Family Fund, a new fund launched by experienced entrepreneurs and CPG venture specialist, Josh Wan from Forest Brands, Sean Kelly from Carew and Kurt Seidensticker from Vital Proteins launched this$25 million fund and talked about how they're taking a founder first perspective into this fund. They expect to make 30 core deals, or at least at the time of the announcement, it was 30 core deals with check sizes of about a million dollars a piece.

23:32And I mean, you know, we get this question all the time. Where can I find money? Can you introduce me to an investor? So on and so forth. And I think with the family fund in the announcement that Springdale Ventures had closed their$40 million fund, And I like this, and I think it says something about maybe investors being willing to make smaller bets, or at least relatively smaller bets, for a seed in Series A rounds. And that maybe there's less of a worry than there had been at the beginning of the year about, you know, these funding opportunities for brands. I mean, I think something was going to give eventually.

24:09But it is what we've seen, and this was like a very constant theme on stage at our events at Nosh and BevNet Live, is that money is still hard to come by for a lot of brands, especially early stage brands. And it's not going to be like that forever. But what is changing is the investor philosophy. and the number one thing I feel like we've heard, at least in my mind, the number one takeaway is that now your company needs to be set up for profitability, path to profitability, rather than the growth at all cost mindset and running at a loss. And so that seems to be one of the big changes. It's still hard out there to raise money and even these investment firms raising funds has been difficult.

24:57I talked to Genevieve Gilbreth at Springdale And I was talking to her exactly about this. And she said, yeah, I mean, it was hard for them to raise a fund right now. But, you know, they did it. And now they want to continue investing in early stage CPG brands. Or at least emerging stage. You know, they've got to be a year or two. Emerging stage. Yeah, I believe that's their philosophy. And they also are looking to average at about a million dollars a check. Yeah. And these million dollars a check, again, these are seed and stage investments. They're not talking about angel investments at this point.

25:26They're not angel investments. They do seed and stage, early stage brands. And I asked her as well, you know, are you more, you know, tougher on the brands that you're investing in? She said that the environment has sort of led them to be, you know, apply a little more scrutiny and focus a little more. Although she said they, from the get go, when they started the firm in 2019, they always were more looking for the path to profitability ahead of the curve there. but she said that yeah they've been a little more strict strict yeah exactly but that doesn't mean that they're not investing in these brands and she said it's been really hard for the early and middle stage brands the ones that don't yet have you know that proof point but are trying to get there and trying to show that yes we will have that proof point we're gearing things up to have that proof point but we need the money first in order to get there so that that's the really the challenge for brands right now because it's not as though no one's raising money.