How Diageo’s Joint Venture will transform Ciroc & Lobos 1707 - Nick Tran

0:06Ladies and gentlemen, welcome back to the Uncensored CMO. Now, earlier this year, Diageo and Main Street Advisors announced a new joint venture to run Sirot Vodka and Lobos Tequila, and they put Nick Tran in charge of that new operation. And I'm catching up with Nick in this episode to find out what does it take to run two very exciting spirit brands and how do you turn them into cultural icons and what can marketers learn about how to market spirit brands. We cover a lot of great ground in this episode. You're going to love it. Here it is. Nick Tran, welcome to the show. Thank you so much. It's great to be here.

0:36Now, you announced this huge joint venture, or huge joint venture back in April, Diageo and Main Street Advisors. I imagine something as big as that doesn't just happen. So what can you tell us about how the opportunity arise? I sometimes think big things like that do just happen. And it's just getting the right people together and having the right discussions. But in this particular case, I was able to come in after they'd already decided on pulling off this deal. and working with both Diageo as an operator and an amazing group that knows how to really sell and distribute spirits. And then with Main Street Advisors, who really has their pulse on culture, have a bunch of amazing celebrity icons that are part of their portfolio group.

1:21And being able to bridge that gap between audiences and operations and filling that space with the marketing and the culture elements has been a real big opportunity and why I'm excited to be here. Yeah, it's quite a marrying of two kind of pretty impressive organizations, isn't it? But I guess one is pretty famous for huge global successful brands, the other one for scaling and turning brands around. What can we learn from kind of Main Street success as a sort of investor? I mean, there's just a lot to unpack there. I'd say everything from their financial prowess and then how they really help bring brands to life.

2:01I think knowing what's happening in the pulse of culture and it helps that within their family office, they have some of the largest icons in culture, whether it's Arnold Schwarzenegger, Bono, LeBron James, you know, down to, you know, a lot of others. I just feel that they know how to not only build brands, but make sure that the folks that they attach to those brands are providing a mutually beneficial opportunity to have both sides grow. So you're actually building the brands and the personality of the celebrities that they're working with. So the other thing that I'm really excited about is the fact that Main Street doesn't just passively invest in companies.

2:39They lean in and they provide the right contacts and the networks and they really help propel your business to growth. So I'm fortunate to be in this position and lucky to have partners like them. Yeah. And presumably, both organizations take a much longer term view than lots of companies. You're not subject to the usual quarterly earnings results. And how much do we sell last week? I mean, there's a bit of that just to see where you're benchmarking and making sure that there's progress being made against your goals. But they are taking the long view on not only brands, but on individuals. So when we talked about this, this wasn't like you're here for a year.

3:15Let's see what you can do. This is really just a longer-term partnership to see how we can stabilize and rebuild CERAC, while at the same time growing and amplifying Lobo 1707. And they're providing not only the runway, but also the strategic thought leadership and partnership to really help make that come to life. And they've given me almost full autonomy to build the team as I see fit and bring the brands to life in the way that I think is the right approach. So they're, at this stage, the most incredible partners that I could have ever asked for. Well, I was intrigued by that, actually, because I did a joint venture.

3:49Well, not a formal joint venture, but a virtual joint venture with PepsiCo many, many years ago. And one of the things I absolutely loved about it was the freedom, because I basically took a number of brands that were at the time neglected by the Britwick portfolio where I was. And we created our own team and we had ownership from end to end, from the idea. Which brands were there? So I had Lipton iced tea. Okay. Which, well, people will be surprised to hear this, but Lipton iced tea is massive globally. It is massive, yeah. But in the UK, people drink their tea hot. Yep. So if you say to people like, you know, do you want to have a cold tea?

4:24They look at you going, what are you talking about? Yeah, yeah, of course. But the weird thing about Lipton in particular was when people tried it, they absolutely love it. Of course. And so I got given the handover documents from Pepsi Lipton International and massive great documents going, you know, here's everything we know about it. Yeah. And I spotted the issue on page one because what they gave me was this advertising campaign they'd run. And it said, don't knock it till you try it. So I said to them, how much sampling did you do? And they were like, oh, no, we didn't. No, no, no, this was this advertising campaign.

4:54I'm like, you just told everyone, don't knock it till you try it. And you're not even making people try it. I know, I know. So it was funny. So in terms of freedom, basically, I said, all right, the only thing we're going to do now is we're just going to start with all our budget went into central London. Sure. Just going to sample as many people as we can. Yeah. And then we grew like 20, 30 % that year. Then we just expanded it to outer London, then the rest of the country. But the freedom, the freedom of my experience is enormous. Yeah, but the irony of that is that Pepsi built their original Pepsi brand by doing the whole taste test against Coca-Cola.

5:26So the fact that they didn't have that in their back pocket as a tactic to utilize for Lipton is mind-boggling, especially if their line was, don't knock until you try it. So that's a super fun story. Yeah, it's brilliant. But what I kind of discovered in that joint venture as well is you bring the benefit of both organizations together, right? That's literally what this is. Exactly. So like Lips and the brand, Unilever, Pepsi, the bottling system and go to market. Of course. Yeah. We're sort of leveraging the same concept and it's leveraging the strengths of Diageo and the strengths of Main Street and MySquad and really bringing that to life.

5:59So, you know, we are just a couple months into this journey, but we are beyond excited and we think there's a lot of opportunity for both Lobo 1707 and Ciroc. So more to come. Yeah. Now talking about that, of course. So the brands are in different situations, aren't they? Ciroc is more of a turnaround rebuilding exercise. I'd love to know what your plans are specifically on Ciroc. Yeah. Part of it is to try to find efficiency in how we use our dollars and really maximize all that to rebuild the brand. And the way that we're doing that is to take the context of where Ciroc used to play and moving into a new area where I think there's going to be a lot of growth.

6:37So the way that we're thinking about it right now is how do we move it from the nightclub, which it was basically born out of, and into an athletic club, which is sort of like what we have here. The reason why I think the athletic club works is because it's still an aspirational premium environment, but it's not necessarily rooted in this party hard until 2 a.m. it's really this idea of luxury but still this casual participatory environment where it's socializing community and you know some leisure sports all around this like 2 p.m to 5 p.m time frame and it allows you to just casually shift your night into a great dinner before you go to bed which is sort of like more of the life stage that I'm at as opposed to the go out to the club at 10 and hit it hard until 2.

7:21Yeah. And how do you make kind of investment decisions around that? Because is that down to Diageo to do that or do you do that? How do you decide where to invest and how much to invest? Yeah, fortunately we are responsible for all of that. So when it comes to investment decisions, we really just try to look at the landscape of who we're trying to reach. So, you know, we're hitting two broad consumer profiles. One that's this type of person that's call it 2535 and they're really looking to optimize their lifestyles. So whether it's that person that might be pairing, you know, a pair of Uniqlo khakis with like a really high end, you know, designer top or someone that is, you know, looking to, you know, put Ciroc into their, you know, transfusion versus your, you know, everyday vodka.

8:08We're looking for those types of folks that like to aspire for something a little more premium, but they're still conscious and they're trying to just optimize the things that matter most and not worry about everything in general. The reason why we think it's such a fun place for Ciroc is the fact that Ciroc is actually the only high-end vodka that's actually made from French grapes. So it's one of those differentiators that I wasn't even aware of when I came into the business, but realizing that it's not made from potatoes, it's not made from grain, it's not made from corn and it's made from the same ingredient that some of the best French wines are made from really let me know that the product story has been lost over the years.

8:48And if we can dial it back into focusing on that, we have a really good opportunity to convince people that this is not only a fun brand, but it's a brand that's rooted in an amazing product. Yeah. So how much of it is changing what you've done in the past, but how much of it is reinvention versus continuing what happened before? Have you had to start from scratch with the brand and almost think it again? Pretty much. We're treating it almost as if it's a startup brand within the overall portfolio. Where they landed on this idea of Let's Leisure, which was the campaign that was most recently done for Ciroc, I think is an interesting territory.

9:23So we're just evolving that to make it a little more actionable and let people know that we want them to leisure well. and for us that's being a guide and explaining a little bit more explicitly on what it looks like and what it's what it means to leisure well so you know you see all these membership clubs popping up in London and New York and in Miami and in LA and it's almost getting to the point where those environments are now out of touch with a lot of people and they are exclusive so what we're trying to build with the Ciroc Athletic Club is that sort of premium aesthetic, but making it inclusive and open to everybody and making it so it's a place where people can come in, hang out when we do these pop-up events, but also just buy into the mindset of the brand.

10:08And in the same way that, you know, Corona back in the day really had that idea of like, find your beach, and they own that beach aesthetic. We think we can own that athletic club sort of like, you know, environment that we think was something that we see a lot of folks in this generation aspiring to, but not yet really getting to live out. It reminded me a little bit, actually, going back to my joint venture, one of the brands I had was Gatorade, which is another funny one, because, of course, Gatorade in the US is massive. Massive. Absolutely massive. But I think it's a$4 billion brand or something.

10:40I can't say something crazy scale. And in the UK, it's$4 million. I mean, it was like a tiny. and I remember it was the London Olympics and the entire team came over to kind of like the entire Gatorade head office team came over to see what I was up to but in the UK we were a challenger brand so we had to like you know we had to target it upmarket we had to go to the absolute elite sports clubs and you know educate them on nutrition and position the brand as being part of your kind of you know athletic lifestyle really we were really kind of targeting top end whereas in the US of course it was you know one dollar on the end of the aisle I mean it's synonymous with sports in the US like the idea of having that Gatorade bucket splashed on the coach at the end of a big game is sort of like part of sports culture but in the UK you know having lived there for a few years it's just a brand that is completely yeah irrelevant and non-existent so it's an interesting opportunity to bring some of these big US brands and try to scale them in places like the UK completely I mean the funny thing was the competitor Lucas Aid would basically had the Gatorade playbooks yeah did all the things that Gatorade just you have to sort of rethink completely rethink how you do it yeah so back in the day really early in my career uh i worked on some spirit brands and had loads of fun i have to say it's really really kind of cool uh kind of environment to work in all the heritage and the kind of in bar experience that kind of thing i mean i seem to remember from then what we were trying to do broadly three things we were trying to kind of target culture you know get into culture using a lot of pr brand experience that kind of thing um innovation like flavors i mean flavors are a great way of getting kind of you know, getting people to try new things.

12:11And then we were obsessed about serve. I mean, everyone had like the perfect serve, didn't they? And like, you know, the ideal way of serving it kind of thing. I mean, that was kind of the playbook I was using, you know, back in the day. I just wonder from your point of view, is that what you're going to be doing? Yeah. I mean, part of those things are still relevant today. I do believe that the appeal of being in the spirits category for me was how amazing the marketing was when I was growing up. I remember looking at spirits brands and thinking that they were having the most fun and doing some of the most provocative work.

12:41To be honest though, over the last 10 years, I think they've really started to become a little bit watered down, and they've taken a little bit of a step back in how they market their spirits, brands, and even the categories at large. So I'm excited to bring a little bit more energy back into the space. On the innovation side, I mean, Ciroc is rooted in a lot of product innovation. So I actually think we might need to simplify and scale back on how many different SKUs we have and how many different flavors there are. there's probably half dozen to a dozen that really matter and then the other ones are just sort of like new news that pop up but then they immediately fade so we're gonna really take a look at which ones we want to emphasize over the new year but I do think having a regional approach to how we bring the flavors to life will actually be really fun so as an example you know peach does really well and everyone has this idea of like Georgia and peach is just really going well together so how do we bring that flavor to life for that specific region while we might do something with apples, you know, up in like New York.

13:37I'm obviously playing off of some cliches being called the Big Apple. But, you know, we'll find ways to bring the regional stories to life with each of the flavors. And then finally, when it comes to the serve, we're definitely going to lock in on a handful of cocktails that we think we can really win and own for both Ciroc and Lobos 1707. And given the fact that Lobos is, you know, the one tequila that's finished in sherry casks, I think we have an actual advantage from a product perspective to really own a few cocktails. while on the Ciroc side, we not only have the core proposition of the fact that it's made from fine French grapes, but the fact that we have a few flavors to really push the cocktail and the serve strategy to new levels, I think will be really fun.

14:15Now, there's a lot of talk about how drinking habits are changing and that kind of thing. I love this one. You know, every week there's a story about how, you know, people aren't drinking, they are drinking, their habits are changing. What's actually going on in the category and what are the real trends that you're seeing? I would say that a lot of the data in general these days, forget about what you just mentioned, but in general, it's all driven by headlines where people don't necessarily read into the articles. They just see the headline, they click on it, get the little subtitle or subhead info, and they kind of move on.

14:49So unfortunately, the way that people consume information in news these days is just not as rigorous as it used to be. So when you see this headline that says Gen Z isn't drinking as much as previous generations, on one hand, half of Gen Z isn't even of age to drink. So if you pull Gen Z and you're asking them, like, do you drink? The ones that are not legal are going to say, no, I don't drink. So then that's a little bit tough. If you take that group out and you say, like, ignore them, the same group that's above 21 is roughly drinking in the same realm as their previous generations. The only nuance that I've seen is the fact that because of things like COVID, they're entering the workforce a little bit later than they otherwise would have.

15:32So let's pretend, and I don't know the exact data, but let's pretend people enter the workforce around 22. This new generation might be entering the workforce at 23 or 24. And we see typical consumption happen around that time when you enter the workforce, you have disposable income, you're doing happy hour or after work drinks with your colleagues. So it's in those moments where we're missing a little bit, but I don't think it's going to be like a long-term issue Once you cut the data and you look at the ones that are in the workforce It's actually a little bit higher than previous generations in terms of how much they consume and then in terms of like Once they start families and get married and do all those other things in life that typically happen you also see the stability in their habits and the consumption patterns being similar to what it was in previous generations a A couple of nuances that I think the younger generation are doing that is interesting.

16:22They have this term called zebra striping, where they'll do an alcoholic cocktail, and then they'll alternate, where they'll do a non-alcoholic cocktail or beverage, and then they'll switch back. So they're a little bit more conscious with how they go about doing it. And then the other nuance is back when I was growing up and I'd go to a restaurant or a bar, I'd leave my credit card and open up a tab. They're not doing that anymore. So they're closing out their tab every single purchase they make. So there's a little bit more of a barrier for them to order additional drinks. So those are the only main trends that I see that are nuanced from the previous generation to this generation.

17:00But other than that, you know, people are still wanting to have fun. They still want to find a place to socialize. They still want to be able to, you know, have that special treat, whether it's after work or on the weekends. And we talked about the fact they are drinking and drinking in similar ways to before. It is what they're drinking. Has that changed? I mean, I know if I go back to my, I mean, it's quite a while now since I was in the category, but, you know, premium package spirits were a thing for a while. So you had kind of Bacardi Breezer and Smirnoff Ice, and then you had the rise of cider and then you had gin became a thing and then that got replaced by vodka, then tequila.

17:32Sure. And these things seem to go in waves. Are you seeing kind of, you know, many of those trends? There's certainly waves, but at the same time, when you look at the category more broadly speaking. I think it's just about finding opportunities to bring your brand, regardless of which category it's in, just into cultural relevance. So on the tequila side, there is definitely a wave right now where people tend to prefer tequila. I think it was earlier this year, I tried a tequila espresso martini for the first time when normally that's traditionally used with vodka. It was delicious. And so I see a lot of these trends where people are replacing signature cocktails and trying it with different spirits.

18:12You know, that age where whiskey was starting to do really well, where people were taking a little bit more of a refined approach to what was in the liquid and how to really just sip it and enjoy it and pick out the actual flavor notes. It's sort of like cascaded into other spirit categories where people are taking a little bit more of a, you know, finer approach to the spirit and the liquid itself. And at the same time, you still see a lot of innovation with the classics. So right now, the probably the hottest cocktail that I've been hearing everyone talk about on the golf course is the transfusion.

18:41That is made from vodka. And that to me is like a great opportunity to push innovation and showcase that like even the most, you know, standard spirit is still having a moment when it comes to, you know, cocktail innovation. The one at US Open, the Honeydeus, another example of like a vodka based cocktail that's just gaining a lot of traction. So I still think there's a lot of opportunity across all the categories. You mentioned cultural relevance and that's, that's partly what you're known for, isn't it? Yeah. And the reason you're here. What, how do you become culturally relevant? I mean, it's a million dollar question, I suppose.

19:11But how does that happen? It obviously doesn't happen by accident. It doesn't happen by accident, but it's not like a set formula that I would say, step one, do this. Step two, find cultural relevance. I think it's a little bit more complex than that. That would be great. But, you know, I've been fortunate to work with an amazing team throughout my career. And some of the folks that have joined our company now have worked with me at Samsung, at Hulu and Disney and at TikTok. And we have a feel of what's happening in culture and just recognizing the patterns and what we might be able to leverage from an insight perspective to find our way in and bring the brands to life.

19:49So I'll give like a very high level example. You know, we all saw the wave of short form content just becoming the main way that people were just consuming content over the last few years, whether it's through TikTok or Instagram or YouTube. And in that, brands were adjusting how they were marketing to consumers by just delivering punchy, short and almost like meme like content to try to just grab that attention and be in front of as many people as possible. As great as that is, most people now, when they reflect on the content that they've seen, they remember the trends, but they don't remember which brands were involved with those trends.

20:27And what I find is that the next evolution or wave isn't going to be just jumping on viral moments and trying to get a bunch of views, but how do you create these worlds that allow your brand to actually create an episodic or serialized version of what you're trying to put to life and make it just truly entertaining. So whether it's what Liquid Death is doing, whether it's what you're seeing some other brands testing out with what Gucci just did recently with Tiger, there's a lot of appetite for this innovation in a mix of entertainment and marketing and how those could drive cultural relevance.

21:00So those are areas that we're definitely going to be playing in. At the same time, I'm not going to abandon what's working today with short-form content. And so we're going to be exploring what's working well across all the platforms and seeing how we can bring both Ciroc and Lobo 1707 to the forefront of culture in our way. I mean, talking about liquid death as well, one of my favorite Mike Cesario quotes is, you know, your advert is not competing with other adverts, it's competing with other forms of entertainment. And they're such a good role model of that exact principle, aren't they? Of making content that people want to consume, not forcing it onto them.

21:32Without a doubt. And I'd say there's many Mike Cesario-isms. Also, if you want to have a spicy debate on LinkedIn, you can catch him in comments just like calling out big brands or other folks and what they're doing and why it's easy for them, but why a small brand like Liquid Death and as a challenger brand have such a harder time doing it, but they just continue to do it well. They're consistent and they have this level of irreverence that really speaks to what the brand stands for. And at the same time, it's a great product with a great message with the death to plastic. So it's a brand that we are excited to keep a watch on and hopefully do something with down the road.

22:08I mean, I'm a massive fan of Liquid Death, but one of the reasons I love them is that because what they've achieved on a very small budget up against some very big competitors. But it's kind of in a way, I guess, similar to what you're doing because what they've done is taken on Coke and Pepsi, that machine that they own most of the stores, don't they, in terms of route to market. And yet Liquid Death have found a way to compete with them and beat them by being more entertaining, more innovative, more single-minded. Even if you have the distribution channels kind of on lock, I think having consumers come in and ask for your product time and time again is a way in.

22:45And it's something that we're thinking about on our end. Like, how do I get people to come in, whether it's to a bar or a restaurant or into a retail chain, and ask for our specific products? That's a huge challenge. And at the same time, you know, if you take the liquid death approach, it is definitely an opportunity for other brands to look at that case study and see how you can focus on what drives true value for the audience and treat them as equals and not as people that you just need to sell to. and the more that we can create entertainment at scale that is relevant in culture and brings our, you know, products along for the ride, I think we'll be in a great place to really capitalize on that, you know, that approach because at the end of the day, the brands that see themselves as entertainment companies that happen to have a product that fuels the growth of that entertainment channel tend to do a lot better than the brands that still think the world is won by 30-second spots that are rammed down people's throats in commercial breaks and are trying to push a product that people actually don't necessarily want.

23:50So fortunately, we are all, as in the mics of the world, and me and other folks that are contemporaries, we know how the audience is now looking at content, and we've generally had a great amount of success in marketing to them in a way that doesn't feel like we're marketing to them. Yeah. And what's the role of celebrities and influencers? because this is quite an American thing. In the UK, I can't name a single celebrity kind of backed drinks brand. I mean, the only one that comes to mind, which is quite amusing, is Ricky Gervais with his Dutch barn, which I just think is hilarious. But even that seems to be almost a parody on the meme.

24:28But are you saying like celebrity-owned brands? Well, the role of celebrities and influencers, even as ambassadors or as involved in brands, seems to be something that is well-developed over here. oh but like what about david beckham and stella artois yeah and then you have although that's here that's interestingly that's that's not in the uk they don't show that no no no no that's here um tom holland and his uh non-alc beer brand is that in the uk uh i'm trying to think i can't think of that oh really yeah it's just something i noticed here is that like the is that just this category or is it as a whole uh i think probably particularly this category okay particularly drinks and you've got ryan reynolds obviously aviation gin right that's that's a that's a very classic one that you know a lot of people have heard of but i can't think of that outside the u.s that existing as much i mean yeah that could be a u.s thing generally speaking and not just uh in the spirit space obviously there's been a lot of celebrity tequilas it's a lot of celebrity spirits that have just been popping up but at the same time i think celebrity culture in the u.s is just so much bigger than in places like the UK.

25:32I think the amount of exposure they have to their audiences, whether it's through television, film, and now in advertising. Because there was a period of time where it was almost looked down upon for some of the biggest celebrities to be pushing any product. They would only be pushing their TV shows and their films. But we've sort of evolved as a society to this place where the new modern-day celebrity is also this entrepreneur who's had this massive exit. So I think a lot of celebrities have now entered that space a little bit more willingly, where they're not only like the face or the spokesperson, but they're actually launching their own brands.

26:09I think as we see that happen more, the U.S. is sort of just primed to capitalize on that because of the celebrity culture and how big these audiences are and how rabid the fan base is of so many of them. So that could be less of a spirits thing and more of just like a general society. Now think about it, you've got Beats by Dre. That's a huge example. Selena Gomez has done Rare Beauty. So yeah, you're right. It's not just spirits at all. Yeah, I mean, that's just been a thing for quite some time. And luckily, we're working on the Main Street side with a group that basically incubated and brought to life Beats by Dre.