[00:00:03] Ray Latif: Thank you for listening to the BevNET podcast. I'm Ray Latif. I'm here with John Craven, Jon Landis, and Mike Schneider. We're here at BevNET Studios in Watertown, Massachusetts. This is episode number 59 of the BevNET podcast. And today, if you're listening, is May 26th, 2017. How are you guys feeling today? Caffeinated. Caffeinated. Living the dream, every day. Sugar high? Every day. Landis is feeling a sugar high. We'll talk about why shortly. I feel like if we had a theme song for this episode, it'd be Raindrops Keep Falling on My Head, because this is a rainy month. It's like 55 degrees outside, 12 Celsius, I think. Did you say 12 Celsius? I did. Chill, dude. Yeah, well done. Well, just to let our listeners know, usually I'm wearing a wonderful black hat with a Manchester United logo on it, and today I'm not wearing it because I forgot it, which is shocking because, man, you happened to win a really big tournament yesterday. Stop it. I'm just needling Mike Schneider, the big Arsenal fan. All right, nobody else knows what I'm talking about, so we'll get right into this. We've got a really interesting episode this time around, as we usually do, but this one is particularly interesting because I sit down for a great interview with Mark Mahoney. Mark Mahoney, for those of you who don't know, is a longtime executive in the beverage industry, having started in the food service business, and now is the co-founder and CEO of Powell & Mahoney, a line of premium cocktail mixtures that is one of the leading brands in the space right now. It's growing like crazy. And I sit down with him and talk to him about his background and getting into this business, what it takes to succeed and sort of the state of the craft mixture category as it relates to merchandising and also how it's sort of piggybacking on a great trend that we're seeing in premium spirits and sort of upscaling your cocktails. Something that sort of leads into our next segment with Mike and Jeff Klineman, who talk about Tracking Recent deals in the food and beverage industry. And one of the things you guys talk about is a recent deal with First Beverage Group, a well-known advisor and investment bank in the beverage space, which recently invested in a Mezcal brand. They're the first investment that they've had in the spirit space. It's a spirited conversation, right? It's a spirited conversation. All puns intended. Yes. Lastly, we have a great Elevator Talk interview with Dan Bresciani. For those who don't know Dan, I don't know where you've been. You must be hiding under a rock. But Dan is one of the coolest guys I know. And I hesitate to say that because everyone I know is pretty cool. But Dan is a really particularly cool guy. He and his brother run a company called Loco Coffee Company. And they sell a blend of cold brew coffee and coconut water. And they've got some really cool stuff. We got him in the elevator. they're in the elevator, they're selling to Jack Welch. Jack Welch is going to give him a $9 million. And yeah, let's see if anyone else wants to buy. Right. Let's do it. Let's do it. All right.
[00:02:47] John Craven: Bye. Bye. Bye.
[00:02:48] Ray Latif: Bye. Bye. Bye. All right. So shall we get to you? Mark's interview. Who's who's amped for this? I'm pumped. I'm pumped. I'm awake.
[00:02:59] John Craven: I like Mark. He's such a great dude and he's got a lot of great perspective. Not only does he have his brands, he has a co-packing facility as well. And so he works in many different areas of the industry and has a really interesting perspective.
[00:03:12] Ray Latif: Yeah. All right. Let's do it. Mark Mahoney. All right. We're here in the conference room at BevNET HQ. I'm with Mark Mahoney, who is the CEO of Thirsty Ventures and the co-founder and CEO of premium drink mixer brand, Powell & Mahoney, thanks so much for being with me.
[00:03:28] Jon Landis: Yeah, good afternoon, Ray. Thanks for having me.
[00:03:30] Ray Latif: So you just came back from a little bit of a vacation. You had some good sun and fun down in Florida, yes?
[00:03:37] Jon Landis: I did. Some was work-related. I got a couple of days of work in southern Florida, Miami, and then spent some time with friends in Key West. Had a great time.
[00:03:46] Ray Latif: So a little, you know, a little respite from work. You're a busy man. You've been a busy man for a very long time. You've been in this business for some time, even though you look like quite a young man.
[00:03:54] Jon Landis: Thank you. Well, 30 years.
[00:03:56] Ray Latif: 30 years is a long time to be in the beverage business. You started out in food service and Mark Mahoney is your latest venture. You started, launched in 2010? Yep. Yeah. So why don't you tell us about, you know, sort of your history, your background in beverages and kind of what brought you into this industry?
[00:04:12] Jon Landis: Yeah, so about 25 years ago, I got into the frozen yogurt business in food service, and that was a real learning curve for me. I had gone from working for a client of my dad who was an attorney, and when I got out of school, I wanted to go into either stock trading or real estate investment, and I worked for this wealthy gentleman that had real estate holdings. He was doing day trades, you know, before day trading became popular. And I was trying to learn that side of the business. And, you know, for a young guy, 24 years old at the time, it was super boring, you know, for me. And about a year later, my wife had always been into food and restaurant business, went to UNH for food and restaurant. She had a cafe and we took a trip up to Montreal and we noticed a concept called Joggenfruis. And it was a yogurt machine that you basically took a puck or a portion of yogurt and you could blend anything into it. candies, cookies, nuts, peanut butter, whatever. And there was a local guy, Dick and June's Ice Cream, that had that in his stores. So we started talking with Dick about it. I ended up partnering with Al Williams, Dick's son. So I was moonlighting, selling machines, making yogurt, nights and weekends, and we built this small business together. And after about a year or 15 months, went from making the product ourselves to buying bigger machines and having a warehouse, and then sharing a big warehouse in Gloucester with a lobster company, which is not a good idea for the ice cream business, by the way.
[00:05:48] Ray Latif: I'm sure there's lobster infused ice cream these days.
[00:05:51] Jon Landis: We didn't want it to be, but it ended up being that way. And then one day, a good friend of my wife's, Gary Ogan, from Bacon Joy Foods, he came in, he was talking to me about the business, and he's like, you know, you can't be doing everything yourself. You need to get into distributors. And I said, well, you know, who do you think? And so he recommended Perkins Paper at the time, which is now Gordon Food Service. and Sorelli Foods, which got bought out by another big service operator. So we took it from a small startup to a New England-based company, and then we expanded it basically from Maine to Florida using food service distributors. And along the path, we ran into Dole Foods. And Dole Foods at the time had a product called Dole Whip. And it was like a sherbet. And we were making that product into a portion pack which you could make yourself. And a lot of our customers ended up using that same product to make frozen drinks. The problem with it was that the guys that were making the frozen drinks had to go back to the kitchen, get this frozen pack, bring it out in the blender and everything. So we decided that we were going to get into the frozen drink business because so many customers are asking us for that type of product. We got into that with a brand called Aloha. We built the brand in 18 months to over a million dollars, ended up selling it to a dairy concern out in Chicago. And my partner, Al, and I were involved in the sales process of that product. Took it national after about 18 months of being purchased. And then the guys that we sold the company to wanted to fold it into their business. They didn't need us anymore. Our non-compete set expired, so we get back into the business. with a brand called Maui Beverages. And Maui Beverages was a prepackaged, we had gable top quarts like ice cream. It was all frozen drinks and then we had a smoothie brand that was aseptic or shelf stable, all natural. We were fortunate enough to ratchet that up over 20 years to a 12 country international business. And we sold it three years ago to our partner in California that was vertically integrated. a company called Lion's Magnus, and they grew their own fruit. They had almost 2 million square feet of production warehouse, their own logistics company. super vertical play, you know, for those guys. And, you know, they were making products for Starbucks and Dunkin' Donuts and McDonald's and all the big players. And I noticed that the three biggest guys in that business at the time were Island Oasis, which was a local Walpole company, Tropics was based in Florida, and Maui Beverages. And of the three, The only one that wasn't completely owned by a manufacturing concern was Maui. It was shared with an owner. So I decided that I would sell that business. While we were building that business and making that decision, Brian Powell came to me and said, hey, I know you can make a great product. Brian was formerly with Stirrings at the time. And after three or four meetings, we had just gone through the downturn in the economy. It took Brian like, I think, four to six months before he could convince me that it was a good time to, he said, a lot of great businesses have been built during, you know, the downtime in the economy. And I said, all right, I said, we have to develop the product and the brand so that it looks like it's been, you know, a heritage brand. and it's got to be a value-added proposition, which meant that we couldn't use like a custom glass bottle, which I had been doing before in different products in the retail space. And I said, and we have to balance fruit juice and flavors so that the product has a shelf life, you know, retains its color and flavor profile. And I, so that took us about six months to really figure out how we would get the flavors developed at the right price point because Everything before then, like Stirrings and some of the other brands that were out there that are no longer in existence today.
[00:09:45] Ray Latif: Stirrings is still out there.
[00:09:46] Jon Landis: Stirrings, of the ones that, you know, six, seven years ago, Stirrings is the only one that really weathered the storm during that time. A lot of the brands were. $8.99 to $12.99. And Stearns was the only one that survived.
[00:09:59] Ray Latif: And you're talking specifically about premium cocktail mixing brands. Correct. And Stearns famously, or maybe not so famously, was acquired by Diageo. Was that about 10 years ago or so?
[00:10:10] Jon Landis: Yeah, it was about six.
[00:10:11] Ray Latif: Six?
[00:10:12] Jon Landis: Okay. About six years ago. Yeah, they had a national distribution footprint. They did a good job. So they were known for being a natural brand in the category.
[00:10:20] Ray Latif: It was run by another... notable entrepreneur, Bill Creelman, who's now- That's right, yeah.
[00:10:25] Jon Landis: Yeah, he did a great job. And then Paul Nardone got brought into the mix and helped grow it and sell it to Diageo.
[00:10:32] Ray Latif: Yeah. So, you know, it's interesting to hear you talk about Brian Mahoney saying, you know, some of the great brands are built in a downtime, in a down economy. The economy was just starting to turn, as was sort of the market and interest in home-based cocktail preparation. And that really hasn't slowed since, in fact, it's grown pretty dramatically since 2010. How Powell & Mahoney specifically, how has your brand been able to capture that interest? Because you have great distribution and you have great sales. I mean, every time I look at the IRI numbers, you're surging. in terms of your growth?
[00:11:07] Jon Landis: Yeah, I think, you know, timing has a lot to do with success of a business. There's luck thrown in there. We thought we brought a value proposition to the party and we were fortunate enough that at-home consumption of, you know, the premiumization of cocktails and making products at home became, people were entertaining more because it was that much less expensive to go out and meet friends. And we were able to take advantage of that wave. And a lot of the natural players in the segment like Whole Foods, et cetera, were bringing in and giving more of our retail space to products in our category. And they've been instrumental in really educating the public on you know, good quality products at a fair price. And as a result of that, I mean, over the course of six years, when we looked at the categories six, seven years ago, we called it a dusty category. So, the bottles were collecting dust. They were all on the bottom, you know, row. And very rarely would you see a set that was larger than four feet in a grocery store. And Whole Foods, I credit Whole Foods with changing a lot of consumer opinions and behavior on the set.
[00:12:14] Ray Latif: But you had to have a set that had all-natural ingredients or be formulated with all-natural ingredients, and that has really grown as well since. I was at Whole Foods the other day, and I saw the set you're talking about, you know, a large, you saw everything from mixers to syrups to bitters to everything, but they all have to be premium. They all have to be all-natural. I mean, you can go to any other store and see some of the legacy brands, Mr. and Mrs. T's, Master of Mixes, some of these brands that have been out there for a while. And some of them are, you know, including ingredients that are not so Whole Foods friendly, I guess.
[00:12:45] Jon Landis: That's correct. Yeah. Whole Foods has done a great job for the category and continues to do that. And we see a lot of the legacy brands that have been out there for 20, 30, 40 years, continuing to lose market share because they haven't pivoted and gone to, you know, a natural ingredient panel.
[00:13:02] Ray Latif: One of the amazing things about your brand is that you've been able to attract retailer interest from very, very big retailers. Target, Walmart. You know, what was their interest and how were you able to convince them that this is not only a category that's an important one for them to play in, but that you're the brand to kind of lead that to be the anchor for their set?
[00:13:23] Jon Landis: Yeah. So we, I mean, when we started off, we wanted to be a margarita and a Bloody Mary and offer. some innovation like our Peach Bellini and we wanted to add more products so that we didn't want to flood the retailer with too many SKUs because, you know, some are going to sell well, some aren't going to sell so well. So we were able to get into different retailers with like our Sriracha Bloody Mary became like one of our biggest sellers when we introduced that like three plus years ago. So we've been able to offer differentiation in the category, which showed we get a lot of interest from different retailers. We want them to bring in our core set, which would be our Bloody Marys, our Margaritas, Peach Bellini. But we have to cater to what they want. A lot of bigger retailers are asking us for different SKUs. And we have to look at that and we don't want to have SKU proliferation, you know, of 25 SKUs out there. But when the big guys ask for something, you know, it's time for us to look at that and innovate. And interestingly enough, just over the course of the last 18 months, if you look at some of the natural category leaders like Whole Foods and Fresh Market, et cetera, they've been smart enough to bring the carbonated craft mixers into the set. which is great for everybody because the turn on that product can be anywhere from three to seven times what the cocktail mix category sells on a weekly volume basis. So that's been great. They've brought tonic water in there. They brought ginger beer over there. And ginger beer is a super hot product right now. There's about 20 brands out there. So we kept getting asked by the bigger retailers, what about carbonate? How come you're not doing anything carbonated? So we answered that question at Expo West by launching a blood orange ginger beer, a ginger beer, a mojito, and a tonic water. And we're just introducing that now to the marketplace. Products will be available next week.
[00:15:20] Ray Latif: Wow. And you were here just before Expo West. You came to the office and brought some of their really delicious products, and they're really conveniently canned. Different from, I mean, you did launch those products in 750 milliliters prior to the cans, correct?
[00:15:35] Jon Landis: Yeah, about two years ago, we came out with 750 mils. Customers kept asking us to do, you know, a single serve or something. And we felt that that market was somewhat flooded. You've got Fentimans out there, you've got Q, you've got Fevertree, you've got a bunch of players in that segment. We decided after doing our research and taste testing, et cetera, that we wanted to offer something different. We wanted to have more of a mass appeal instead of, I call it a snob appeal. We didn't want to do the same glass bottle, high-end glass bottle. And so Chris Crandall, our COO, said, I like the craft beer look. So we started looking into cans. You know, the recyclability of cans, the fact that no oxygen can get into them like a bottle, no light can get into them. We thought it was a better vessel and a better approach for us to have differentiation in that category. They pack really nice on the shelf. You don't have any issues with your bottle height. We're not a me too in that category. And it's got a great billboard compared to, you know, a 6.7, 6.8 ounce single serve glass bottle. that a lot of our competitors have. And we can do a quality beverage at a better price point than those guys because of the package and the label that they chose to go, you know, they have to go with when you're doing a single serve glass bottle. So we think it's a winner. We've done some tweaking since we first brought the flavors in and had you folks taste them. And we just think they're, you know, gold standard in the category now.
[00:17:04] Ray Latif: Yeah, I wish our listeners could taste some over the podcast.
[00:17:08] Jon Landis: They'll be available in the next couple of weeks.
[00:17:10] Ray Latif: Yeah, there you go. I wanted to get into this idea of saying no. And this is kind of, it sounds like it's off topic, but it's very much on topic. You're growing so fast. I remember I think we saw you, Adam Stern and I, our senior sales executive here who was on the podcast last week. We went and visited you guys in Salem and I think Walmart was being mentioned as a retailer that wanted your product. At the time you were like thinking about it and then you said, you know what, this is not the right time for us. And that's a hard thing to say, you know, especially for a big, I mean, every beverage brand wants to be in Walmart. I would assume, you know, the opportunity is just so amazing to reach so many consumers. But you guys had to say no. Why? And, you know, is it something that's, you know, in the life cycle of your brand just wasn't the right time?
[00:18:01] Jon Landis: Yeah for us that was about two years ago when Walmart first called us and we were really excited about it and the reality was that we couldn't produce that amount of product that would have been required to sell to all our existing customers, to the customers that have been so loyal to us over the years. We didn't want to put those customers in jeopardy of not being able to service their account just because a new huge account, you know, wants to bring in your product. So we looked at it and politely said, you know, we love the opportunity, we're just not ready. And, you know, much to our surprise and thankfully, Walmart said, that's a good answer. They said, don't try to do something that you're not ready to do just because the big guy calls. So from a manufacturing perspective, we really had to amp up the procedure of us manufacturing more product so that it would be readily available for whoever wanted it throughout the country. you know, that took us about 18 months, you know, to invest in the facility and be at a place where we were confident that there'd be no degradation in quality of our products to be able to offer it, you know, to a wider audience. And a lot of the demos and demographics and data that we got showed who the top sellers of craft cocktails were in the country. Walmart was right up there. They sell a lot of cocktail mix. It's somewhere in the low 30s, 30 percentile for on a national basis. That's a lot of product. A lot of people are buying cocktail mix there. And we just didn't want to say no to that, you know, for an extended amount of time. You know, we just launched recently, and we're having great success with them. Our year-over-year sales with all of our retailers are very robust, and we're really looking forward to getting our new crafted canned cocktails, you know, in their hands, the carbonated products.
[00:19:54] Ray Latif: Nice. Overall, you know, Walmart sells 30% of all cocktail mixtures in the country. Still a small category though. Very small. Yep. Fast growing, but still very small. How do you grow it beyond where it is right now? I mean, is it a collaborative effort among all the brands? Is it just greater awareness that those products are out there? How do you get more people to drink, to blend cocktail mixtures into their drinks?
[00:20:19] Jon Landis: Yeah, that's a great question. And, you know, we rely on data, looking at what our customers are doing month over month, year over year. And we see, you know, a new audience and a new demographic, a much younger demographic coming into the space. Again, to mention someone like Whole Foods, some of these premium, even the package stores are putting great sets together. And it's opening up a whole new opportunity for folks that say, well, I'm a beer drinker and or I drink wine. You know, a lot of people are looking at brown spirits that never were looking at that category. You know, that typically was a 40 plus. year old crowd that was drinking Brown Spirits in the last, say, six to eight years, that's dropped down to, you know, 23 year olds. And a lot of people are drinking, you know, older cocktails and it's just a great movement, you know, in that direction. So there's a lot more high quality cocktail mixers out there. The sets improved dramatically in, you know, the six years that We've been in it and continues to grow. There are a lot of regionally specific strong companies that are making a lot of headway in the category. And I think the only detriment to growing a brand is the price, the quality. People want to keep improving the quality and keep improving the quality. But at some point, there's a tap out point that says, I'm not going to spend $15 for a mixer that's getting to the point approaching the price point of the liquor that I'm pouring into that.
[00:21:49] Ray Latif: And it's interesting you mentioned that the liquor itself is the huge component in all of this. You don't drink a cocktail mixer straight. I don't think many people do. Although your carbonated line is some of that stuff you could certainly drink straight. But for, say, your Sriracha Bloody Mary, I think I was in a store, I was in a package store maybe a month or so ago, and I saw a value-add with Absolute Vodka, and I think it was Mark Mahoney. And it was, you get, it was basically a side-by-side, you get Absolute and a Bloody Mary mixer, correct? Is that correct?
[00:22:19] Jon Landis: Yeah, we do a lot of Vaps or value-added packaging. With Spirits Brands, Pernod has been great, Absolute has done a great job with our Bloody Marys. We do hundreds of thousands of vaps with those guys a year. It's great for us to seed the market because that usually goes to a club store and select liquor stores that aren't carrying our product. And we get a lot of turns. We get the opportunity to do demos, you know, with those two products together. And some of the data with their tequila brands that we've done, we see that they'll sell two to three times the amount of product when we do a demo side by side with Avion Tequila and the Paula Mahoney Margarita Mix. Same goes for Absolute and our Bloody Mary. So it's a great opportunity for us, gives us national exposure. and exposure to some customers that we haven't been able to reach in the liquor or a club store.
[00:23:13] Ray Latif: And so Pernod buys the product and adds it to their, or they package it with their liquor store? That's correct, yeah. That's a pretty good deal for sure. And the big liquor brands are, you know, always going to have product on shelf and they have, you know, the marketing dollars to really be out there in full force, so it certainly helps you. At the same time, you know, the craft spirits category is really growing quickly. Local brands are always looking, you know, to reach more mouths. And, you know, how do you work with craft spirit brands? And is that an important part of the growth of the mixer segment and your brand in particular?
[00:23:46] Jon Landis: Oh, absolutely. I mean, with the proliferation of small distilleries in the country, it looks like it's going the same on the same approach as craft beer. It just multiplies every year, year over year. We love the local aspect of it too. We work with a couple of different distilleries. Deacon Giles is less than a mile from our office in Salem, Mass. Privateer up at Ipswich. There are a ton of them. I mean, Jack in our office just deals with local craft distillers and does demos with them, offers our product up, you know, to couple up with their products. the spirit goes hand in hand with our product. And in most instances, unless the bartender doesn't know what he's doing, there's more of our product in a cocktail than there is the spirit. So it's a direct reflection on the quality of the product you're being served, what's in there together with the spirit.
[00:24:40] Ray Latif: And I just wanted, this is one of my last points to know, time flies. We've been talking for about 23 minutes. How is that possible? It feels like- It's the cold brew we're drinking. I guess so, yeah. We're drinking some delicious Arise Nitro Cold Brew, great stuff. You know, your roots are in food service and food service is just as hot as it gets, you know, when it comes to the beverage industry, RTD products in particular, but sort of behind the, you know, in the kitchen as well and behind the bar for sure. And I just wanted to get a sense of, you know, where you're at in terms of, food service varieties of your cocktail mixtures and whether or not that's going to be an important area of focus and growth for the category.
[00:25:15] Jon Landis: Yeah, about a year ago, one of our investors is based in Chicago. It's the Leahy family, Leahy IFP. And they run two sophisticated aseptic facilities where they run products for national chains. We worked out a licensing deal with Leahy to do five aseptic food service packs of Powell & Mahoney our formulations so that we could deliver that same quality in a much less expensive packaging format on a national basis. So we can deliver basically anywhere in the country through like Dot Foods. Cisco is picking up the product. We've got Reinhart Foods picking up the product. We just had a call last week. We're in front of like a dozen of the largest food service chains in the country, you know, with different products that they're looking at right now. We're presenting the canned products and a septic to airlines right now. So there's an awful lot of opportunity Powell & Mahoney in the food service space right now. We're really excited, you know, about that side of the business.
[00:26:20] Ray Latif: Yeah, and I, you know, you see simple mixers behind the bar all the time. I mean, you know, Q, Fever Tree, a bunch of other small ones. What does it take to get those margarita mixes that a lot of times in the Bloody Mary mixes, a lot of times you see them make in-house, you know, what's the upside for them beyond just convenience? How do you say, okay, you know what, we're going to take this out of your hands and
[00:26:42] Jon Landis: Yeah, usually we see, you know, we call them A plus accounts and that would be, you know, someone like locally, like Eastern Standard or someone like that, that they're really, they've raised the level of quality, execution, everything's hand done there. Now, as a chain like that evolves, if they go on a growth spurt and they've got more than say half a dozen accounts, consistency becomes a huge issue for them. If one bartender in one location is making it like this, not everyone is going to follow, you know, that rule. And that's where we come into play. So the larger regional accounts for us and national to keep consistency, price, et cetera, in line, that's where our food service product really comes into play. And there are a lot more of those class accounts out there than there are everybody, you know, doesn't have the time to hand muddle and execute that. It's time consuming. There can be a lot of waste involved. You have to have a lot of volume and a lot of patience to go through that.
[00:27:39] Ray Latif: This has been great. I really love talking to you. We've talked at length for, I don't know, I think we've known each other about four plus years or so. And in those four years, I feel like every time I talk to you, I learn something new about this business and the industry. And I really appreciate that. The one thing that's also really interesting about you personally is that I've never seen you angry. I've never seen you stressed. Every time I talk to you, you seem really laid back, like everything's cool, everything's good. And I think I asked a couple of your guys, Chris and Casey, I was like, I've never seen Mark angry. Like, does he get stressed out? And they were like, yeah, we've seen him like get a little steamed once or twice, you know, here or there. But you know, how do you, is that really important to maintain that kind of level headedness in this business? tough business to be a part of. And you see people stressed out all the time.
[00:28:22] Jon Landis: Yeah.
[00:28:23] Ray Latif: You know, what's what's your secret to staying?
[00:28:25] Jon Landis: I think it's, I mean, I've been in the business now over 30 years. And, you know, there was a time and I try to coach a lot of people getting into the startup side of the business. I try to coach them on You know, it's perseverance, it's attitude. I can remember years and years ago, I had a lot of stuff going on with one of my businesses and my partner was like, how can you go out and when someone asks you how you are, you say fantastic. And I look at that, and if you keep it in perspective and say, you know what? I enjoy what I do every day. You can tell I'm excited about it, right? I love the business. I love the beverage business. I love meeting new people that are doing it. It's exciting. It's an exciting space to be in. And I'm fortunate enough to have a good team built around me that can take a lot of responsibility. And we try to, we call ourselves problem solvers. I say there are two, types of people in the world, problem identifiers and problem solvers. We have to be problem solvers because every single day there are going to be problems in this business, right? It's a challenge all the time. And it's the attitude, if you have a defeatist attitude, you're not going to make things happen that you need to make happen for your company, for your friends, for your investors, et cetera. So I'm thrilled to be involved in this. I've been doing it for, like I said, 30 years. And I'd rather do nothing else than to stay in this business. And it's a very enjoyable, rewarding business to be in.
[00:29:56] Ray Latif: Anyone who's listening right now, I think they're pumped up. I'm pumped up. I'm excited to see what the next generation First Beverage brands are and how they can learn from you. your success and clearly the success of Paul Mahoney and where you guys go from here. Mark, thanks so much for taking the time.
[00:30:14] Jon Landis: Oh, thanks for having me. I know you're a busy guy.
[00:30:16] Ray Latif: I always enjoy speaking with you. Yeah, it's a lot of fun. It really is. All right. We'll see you soon.
[00:30:20] Jon Landis: Have a great afternoon. You too.
[00:30:21] Ray Latif: Thanks. Thanks. Two things I got from that interview, you know, Mark, as Landis talked about earlier, is a really cool laid back kind of guy. And it's difficult to be that guy in this industry because it's such a rough and tumble business. But Mark, you know, has a pretty laid back approach to it. He's a really focused and determined businessman. But he comes with a great attitude on how to succeed and wanting to succeed and just being good, decent guy. And that's something that's certainly not lost on me and I think not lost on his business partners as well. The other thing that was interesting is his partner Powell & Mahoney, Brian Powell, when Mark was talking about this, talked about launching a brand in a down economy. When they launched Powell & Mahoney 2010, It wasn't a good time to get into the beverage business. It wasn't a good time to get in almost any business. I mean, it was just a rough time to get money, to get your product on the shelf. But at the same time, there are opportunities, and they saw an opportunity to get into a space that had some potential, had some traction, and you know what? It's really turned out to be a great move for them because Palmahoney's, you know, kicking butt, and they're national, and they seem to be the opposite of slowing down. They're growing faster than ever.
[00:31:29] Mike Schneider: Well, I think one thing I'd just throw in there is that we're talking about a period of time that was, you know, geez, it's almost like a decade ago at this point, right?
[00:31:37] Ray Latif: Seven years.
[00:31:38] Mike Schneider: A little more than that. Eight, nine, something like that.
[00:31:40] Ray Latif: Oh, OK.
[00:31:40] Mike Schneider: If you're going to go back, yeah, OK. And I guess the point I was going to make, well, two actually. One is that when you have sort of a different approach than what everyone else is taking, which at the time they started, everyone was sort of chasing vitamin water 2.0 or whatever you want to call it. And then the second thing is just pointing to how long it has taken them, which I think is another thing. You know, you have a good product and a category they're focused on. It's not something that's going to be an overnight success. And now we're seeing the results of that hard work paying off.
[00:32:14] Ray Latif: Yeah, certainly. I mean, we talk about the growth of at-home cocktail mixing and you know, sort of the premonitization of that space and the spirit space as a whole. And it's really had an impact on their business and other businesses too, in particular, Mezcal. You know, the Mezcal category is one that has attracted a lot of interest from a lot of new brands, some investment as well, from big conglomerates to private equity firms. It doesn't seem to be one that's slowing down anytime soon. In fact, there's more money being pumped into it for sure. I mean, that's something that Mike and Jeff talk about, as they alluded to earlier, with First Beverage's investment in that space, with its investment in Gem and Bolt. And I don't want to steal their thunder. But Mike, you want to talk a little bit about some of the other things that you guys discussed?
[00:33:01] Mike Schneider: Yeah, we get into Peeled Snacks, and then we get into an interesting and peculiar investment for a local Boston venture capital group. So let's listen. Yeah, let's do it. Here today to talk about our most favorite subject, the economy of food, beer, and beverage, with BevNET editor-in-chief, Jeff Klineman. Jeffrey, welcome. Well, thank you, Mike. It's an honor to be here. It's awesome to have you here. So what's going on in the world?
[00:33:27] Mark Mahoney: Well, one of the things that I think is pretty interesting is there's this kind of investment creep from some of the private equity firms. I don't pretend to know the space, the motivations of investors well enough to imagine every reason for why these things are occurring. But one of the things that I think is super interesting is that people are moving out of their investment comfort zones a little bit. It's happening. in ways that I think they're either searching for adjacencies in categories or else the universe is starting to converge a little bit in terms of who people know.
[00:34:12] Mike Schneider: What do you mean by that? Do you mean tech investors are investing in beverages?
[00:34:16] Mark Mahoney: Well, they certainly are, but that seems to have a lot more to do with them wanting to boost up the places where they get their coffee. What I think is super interesting, actually, is that the firms that have normally been devoted to food are edging toward beverage, the ones that have been devoted toward beverage. are edging towards spirits, the ones that have done non-alcs are edging into beer, and just this past week we've seen a pretty interesting cycle of that.
[00:34:48] Mike Schneider: So First Beverage Group has made this investment in Gem and Bolt Mezcal. Okay, so it's this Mezcal that comes in a flask, it's hip. It also contains Damiana, which is a shrub that grows in Mexico and Central America, and it's an aphrodisiac. And it also is used to treat headaches and bedwetting and depression, of course. I mean, what aphrodisiac isn't? But that's not the most important part of the deal. It's not even the most interesting part of the deal. Jeff, what do you have for us?
[00:35:15] Mark Mahoney: So, First Beverage Group, as we know, is headed by William Anderson. And it's long had this kind of split practice where they do a lot of investment banking, primarily on the beer side. And they operate a fund, sort of venture capital fund, that's largely invested in non-alcoholic beverage and in a little bit of tech that deals First Beverage and CPG companies. Now, what's interesting about that venture fund is this is the first step outside of beer and non-alcs. The logic for going after Mezcal as an investment target is pretty obvious. It's a really fast-growing category. There aren't a ton of well-run independent brands in the US. The leadership of Gem and Bolt is an established quantity in that it's Jody Levy, who has also been one of the founders of Watermelon Water and moved that over to professional leadership under Christine Parich, who's the former CEO of New Belgium. And that's a company that, by the way, First Beverage has really strong knowledge of. So there's some connection there in terms of social circles, but there's also a willingness to back a brand on the rise in a category on the rise.
[00:36:47] Mike Schneider: A category on the rise per you, which has doubled in a four-year period ending in 2016 and has continued to pick up steam, growing primarily for what reason?
[00:36:57] Mark Mahoney: It's sort of a carve-out of the tequila category. High-end tequila has been growing for years. I don't think there's a ton of cannibalization there. I just think that it's surfing the tequila wave, if you will. It's sort of a discovery spirit and it's working into a lot of bar menus.
[00:37:18] Mike Schneider: It's got a lot of good smoke, mezcal. It's kind of a smoky tequila, if you will. If you think of it maybe as the illegitimate child of scotch and tequila, is the entire category on the rise or is it pulling from other categories and do you see this as sustainable growth or is this kind of an aberration?
[00:37:35] Mark Mahoney: I think Mezcal is a category on the come, as they say, and probably the investment in something like Gem and Bolt, which is a clear Mezcal, by the way, so there's a certain amount of mixing that'll go into it. I think the investment in Gem and Bolt is probably one of the first that we'll see in a series in the category. Now, is it eating other product shares? No, I think that spirits as a whole have been on the rise as compared to other alcoholic beverage types, beer and wine. And that sort of undiscovered country type spirits are starting to be more in play. So your mezcals, your Canadian whiskeys, all these sort of flankers to the larger categories are kind of coming up on their shoulders. And so we're seeing a lot of interesting stuff out there.
[00:38:35] Mike Schneider: Spirits category, extraordinarily interesting. We could talk about it all day and also while consuming spirits, I think, and get progressively more interesting as we do it. But we've got to move on to the beer world.
[00:38:47] Mark Mahoney: What's interesting here is you've got an investment in the beer world from a fund that hasn't been involved there, and it actually involves the firm Castanea Partners, where a former Boston firm and one where A food and beverage practice is being built out by the former head of First Beverage Venture Fund and a longtime friend of this organization by the name of Tom First. of Nantucket Nectar's fame. So Tom joined Castaneda in the spring, and I don't know if this deal originated with him or not, but Castaneda is now in the beer business. They picked up a majority stake in The Bruery, which I think is probably a craft brewery that you're more familiar with than I am.
[00:39:46] Mike Schneider: The Bruery, very interesting. Big bottle beer, Belgian style, amazing stuff. $30 a bottle, okay, on average for the bottle. So this is a curious investment for me. It's a high-end West Coast, obviously that's, you know, West Coast beer is very hot, but- It's a cork bottle beer company, basically. Exactly, exactly.
[00:40:06] Mark Mahoney: So talk to me about how this fits into their portfolio. The reason that it's interesting is, again, you have a consumer products focused fund that hasn't crossed that line into any kind of proofed product until now. They're investors in Essentia, which is a fast-growing alkaline water brand. They're investors in Jenny's, which is a high-end ice cream brand. You know, they were- Dry Bar, Aster and Black, Integrity, they've got- Yep, they're in the sort of consumer services, high-end product delivery. And they also were an early investor in Fuse, which made them quite a bit of money. But I just find it interesting that you've got a food and beverage investor buying a beer brand and a beer and non-alcoholic investor going into spirits for the first time with their fund. And you've also got a lot of people investing in peas and chickpeas and more. And I think we should probably go into that a little bit because, again, it's reflective of some of the heat that's in the consumer product space, if not sort of a continuation of this odd duck merry-go-round in the investment week. So the reason I'm talking about P's, and this is sort of an interesting side note to some of the weirdness in the investment that we've seen in the past couple of weeks, is that a couple of investments went into pea-based snacks in the past week. Now Peeled Snacks has been around for almost a decade and they were best known as sort of dehydrated fruit play. But about two years ago and we recently had the... the founder Noah Wabesnader on stage at Project Nosh Live to talk about it was that a couple of years ago they figured out that they could start a salty snack line called Peas Please. It's a dehydrated snap pea kind of snack and all of a sudden things started to click for the brand. So they they'd really been strongly innovative and had fought it out in an area that was much slower growth and then wham salty snacks allowed them to expand the brand platform. And all of a sudden, they're players. And actually, there's a little bit of a competition in the dehydrated sweet pea snack space. So you've got to get some ammo. And they went out and did it. They announced an investment from a group out of Connecticut called Surratt Capital to help fuel their growth. Now, no sooner did the Snap Pea investment snap, Then we caught another one out of California where hippies, which is a chickpea-based dehydrated salty snack. brands in food right now. Yeah, it's owned by Livio Besterzo, who was on this show very recently.
[00:43:37] Mike Schneider: And if you haven't seen the brand, just go to hippies.com and take a look at what they're doing.
[00:43:43] Mark Mahoney: Yeah, and so they pulled in money from a sort of behind-the-scenes private equity fund that's been highly successful. And of course, none other than Leonardo DiCaprio as a co-investor. Livio has been pretty upfront about the role that marketing and celebrity marketing can have in brand growth, but it's the private equity fund that's actually pretty interesting. It's Castanea Partners, and they've quietly invested in the past and buy Vitacoco, Popchips, Happy Baby, and a number of other highly successful brands. They do a good job of picking these companies, but they're pretty quiet about it.
[00:44:35] Mike Schneider: Yeah, sometimes the investors, the megaphone, you know, you got a Leonardo DiCaprio or an Ashton Kutcher who's investing in you and they're out there helping you get to the next level. And sometimes they're just quietly letting you do your thing and letting the product speak for itself.
[00:44:48] Mark Mahoney: It's interesting here when you've got a private equity firm that's known for a pretty high batting average actually kind of ducking into the fifth spot in the lineup behind Leonardo, who's going to get most of the interest. Jeffrey, why are we seeing such a crazy week in investing? Well, I think all the investors have been enjoying their mezcal. And chasing it with barrel-aged beers. No, I think that people just can't seem to quit this stuff, no matter when we hear talk of a bubble, when things get more competitive and you have what the private equity guys would call sort of amateur investors flooding into the space. People have predicted that a lot of the craft beer companies have kind of been taken off the table, but that hasn't happened. I mean, in the past month or so, we've seen AB make more investments. Lagunitas was taken off the table when Heineken closed that deal last week. I think there are probably a couple more to come. You know, we hear comments and complaints about the valuations of food and beverage companies, and the competition for deals is making people crazy, but sales keep getting announced. I wish I knew enough about the macroeconomic environment to explain it all, and I have been kind of pushing the boss to send me to get an MBA kind of off hours. I think one clue is always if you look up the food chain at the publicly traded companies, you know, what we call the strategics, they still face a lot of questions about where their innovation is coming from. And they've made it practice to outsource that innovation, that M&A, to smaller private companies. And as long as private equity investors see those big exit opportunities, a sale to a larger strategic, an IPO as part of an exit plan, they'll keep betting on these smaller players. That's why we saw this sort of investor go round in the past week.
[00:47:15] Mike Schneider: Fascinating things in the world of Food Beverage and beer. Jeff, how do we take the pulse on a day-to-day basis?
[00:47:21] Mark Mahoney: Well, we're taking the pulse for you on a day-to-day basis across all our verticals, across Project Nosh, across Brewbound, across BevNET. We've got a great team of editors and reporters out there. pounding the phones, pounding the pavement, day in, day out. And they're incredible, and they really are passionate about covering all of these disciplines. So just go to the sites.
[00:47:51] Mike Schneider: Awesome. BevNET.com, ProjectNosh.com, Brewbound.com. Great to have you, Jeffrey. Well, thank you very much, Mike. So, John, I'm curious about The Bruery investment and what your take is on that. Why would you get into a big bottle brewery on the West Coast as an East Coast private equity company?
[00:48:08] Ray Latif: Well, can I jump in for a second? If John had the money, he would have invested in The Bruery.
[00:48:13] John Craven: John invests in The Bruery every time we go to Expo West. He puts down, you know, at least a few hundred dollars for the team to drink there.
[00:48:20] Mike Schneider: Once a year. I was talking to Chris Farnari, our editor of Brewbound, about it a little bit. I think it is a brewery that, you know, it's sort of not your standard, like, making IPAs and this and that. Right. So, I think that's something that, between that and their kind of unique direct-to-consumer model that they have, I think that's what makes it interesting. But, geez, yeah, going to that taproom out there, it's dangerous. They make some high-alcohol beers. I think I still have at least the first five days of Christmas in my cellar, you know, aging. Is that a beer release? Yeah, they make the 12 days of Christmas.
[00:49:01] Ray Latif: Okay.
[00:49:02] Mike Schneider: So, they've got one for each of the days. We don't have to sing the song, I hope. Do we? No.
[00:49:06] John Craven: Landis, go for it.
[00:49:08] Mike Schneider: Five golden rings. I was sort of hoping you were going to ask me about Jim and Balto, because that makes a fabulous Negroni. A fake Negroni, now using Gem and Bolt instead of gin. Let me ask you this. Did you feel sexually charged after you drank the Gem and Bolt Negroni? Because it does have... You know what?
[00:49:28] Ray Latif: I'm going to stop us here right now because not only do I not want that question answered, our listeners don't want that question answered. America as a whole doesn't want that answer. We're going to pretend that never happened. Yeah. We're not going to edit that out.
[00:49:41] John Craven: Thanks for saving us, Ray. I mean, correct me if I'm wrong, Bolt Mezcal's the one that has the worms? Not all Mezcal. Okay. Not all Mezcal, but have you chewed it before? I've had the worm, yeah. Yeah, what did it do? I don't know. It gave me sexual prowess.
[00:49:57] Mike Schneider: Is that what you're looking for?
[00:49:59] SPEAKER_??: No!
[00:50:00] Ray Latif: That's what it says on the internet, I think. This is another segment I didn't mention at the beginning. This is the off-the-rails segment when the Show Notes off the rails. Let's move on to Elevator Talk. Landis is eating the worm.
[00:50:13] Mike Schneider: It explains a lot.
[00:50:14] Ray Latif: Yeah, yeah. Dan Bresciani, as I mentioned, is a young entrepreneur based in the Boston area. He and his brother, again, founders of Loco Coffee Company. They recently did a really cool rebrand and revamped their sort of business strategy. And we're going to talk about this here in the Elevator Talk.
[00:50:35] Mike Schneider: Welcome to Elevator Talk, where we put an entrepreneur in the elevator with their dream investor for 45 seconds. We ask three questions. Who are you and what does your company do?
[00:50:44] Jeff Klineman: So I'm Dan Bresciani. I'm the co-founder of Loco Coffee Co. And we're a cold brew coffee with coconut water in it. And we wanted to create a more refreshing, clean, beneficial cold brew coffee.
[00:50:55] Mike Schneider: What's coming up next?
[00:50:57] Jeff Klineman: So we've been in business about a year now. Over that year, we've learned a lot. We were kind of playing both sides of the fence with the coffee and coconut water, but now we want to really show that we're a coffee and it's just a more clean, beneficial coffee. And I think we kind of display that with our new label here.
[00:51:12] Mike Schneider: What's coming up that you're excited about?
[00:51:13] Jeff Klineman: I'm just excited to see what's next. The innovation in beverages has been crazy. You know, 10 years ago, you would never see the wide range of beverages that are in a cooler now in a grocery store. So I'm just interested to see what people come up with next.
[00:51:31] Ray Latif: Always good to see Dan. Yeah, definitely. You know, Dan participated in the New Beverage Showdown last year, he and his brother, and they had a really good showing. and they went through that revamp that I discussed.
[00:51:40] Mike Schneider: They made a few changes to the brand, right?
[00:51:42] John Craven: Yeah. They used to be Loco Coco, but you know, I think through selling the product in the marketplace, really understood that they're more of a coffee product than a coconut water and rebranded to Loco Coffee Company, which I think is the best move.
[00:51:55] Ray Latif: Yeah, for sure. You know what else is a really good move? Going to BevNET Live, going to Nosh Live, going to Brewbound Session. Can you go to all three? Yes, you can.
[00:52:02] John Craven: Sure. Why not? We'd love to have you come to all three. there is a buzz that you can kind of feel in the air in this office as we get closer and closer to these events that what that is. Okay. I'm telling you, I think it's all the cold brew. It's definitely the cold brew helping it out, but you know, we're really excited. We have some fantastic lineups on stage. And tickets are selling at a faster pace than they've ever had. So we're going to have some stacked rooms with lots of great people. You should be there. That's it.
[00:52:30] Ray Latif: The events will sell out as they always have. So it's now or never in some cases. I mean, you just don't want to miss your opportunity to come to these shows. As I mentioned before, it's really the cream of the crop in terms of the food and beverage industry events. And, you know, in terms of trends and innovation, you know, we write about these things all the time, but we learn a lot of stuff just being at WebNet Live as well. I mean, it's not just like, you know, we're there and know exactly what's going to happen at these events. We get a lot out of it as well, and we break news and we cover news from the event. You know, it's just a really tremendous event for Food Beverage, and beer. Like I said, you don't want to miss them.
[00:53:06] John Craven: I don't want to say, like, come to BevNET Live and we'll write about you. But a lot of people do talk to me, and I was at Sweets and Snacks earlier this week, and they're like, you know, we want to get some coverage. And a really good way to develop that relationship with our editorial teams is at these events. You know, we write about things that we know about, and we only know about things that people tell us. get in contact with us, be engaged with us and being at our event and meeting us, shaking our hands and telling us your story face to face is a really great way to make that happen.
[00:53:36] Mike Schneider: Well said Landis, very good. We'll of course be podcasting from the event as well. It's a good opportunity for us to get you to interview you or to get you into our Elevator Talk segment. So let us know if you're going to be at the event and we will get you scheduled.
[00:53:48] John Craven: Yeah, we're working on designing a little podcast studio so we can be recording interviews
[00:53:54] Ray Latif: The BepNet Live Podcast Studio.
[00:53:57] John Craven: And the Nosh Live Podcast Studio.
[00:53:59] Ray Latif: Yes. And also the Livestream Lounge, for those of you who are familiar with our Livestream Lounge, it's sort of an informal talk show that we run during breaks and lunch hours of all the events. And we sit down with founders of companies, we sit down with distributors, financiers, retailers, and we talk to them for about five to 10 minutes about what's going on in their businesses and what's going on in the industry. It's a really great way of meeting folks and learning about folks that you may not have heard from before. So big, big milestone next week, episode 60 of the podcast, action-packed lineup. We've got Bob Burke, an interview with Bob Burke, who is a mover and shaker, if there ever was one, in the natural food space, a veteran of Stonyfield Farm and a consultant for a long time. is on the board of a lot of fast-growing companies, and he just knows a ton about this space and this business, and you don't want to miss that. Also got, as Landis mentioned, you are at Sweets and Snacks. What the heck is Sweets and Snacks again?
[00:54:53] John Craven: It's like a wholesome Knacks. It's just the candy, and they give out a lot of it.
[00:54:59] Ray Latif: Being the National Association of Canadian Store Show.
[00:55:01] John Craven: Yeah, because Knacks has lots of junk food and candy, but it also has you know, the e-cigarettes and like fried chicken and, and, but I'm wait, that's your lunch.
[00:55:12] Mike Schneider: Yeah. I mean, I just had two boxes of nerds candy that you gave me. Yeah. So what the hell is wholesome about that?
[00:55:18] John Craven: Well, I mean, it just the air in the room, it's, it's a much more wholesome event. It's just, you know, you keep using this word.
[00:55:27] Mike Schneider: I do not think it means what you think it means.
[00:55:30] John Craven: It is. I think it is. I think that, you know, people, they're generally very inviting and it's easy to talk to people.
[00:55:35] Mike Schneider: You're talking about the people are wholesome.
[00:55:37] John Craven: It's just in general, just the sense that the atmosphere at the show, you know, it's much smaller, it's a small show, but everyone's very engaged and there's really cool stuff on display. It's all about, you know, snack, food and candy.
[00:55:51] Ray Latif: Yeah, I mean, at the center of the Tootsie Pop is oatmeal, actually, at these shows.
[00:55:56] John Craven: Yum.
[00:55:56] Ray Latif: Yeah, yeah, really good.
[00:55:58] Mike Schneider: Free range oatmeal.
[00:55:58] Ray Latif: Yeah. Landis and our editorial team from Nosh is going to recap the event in next week's podcast, so don't miss that as well. All right, final thoughts? None. Crickets.
[00:56:13] John Craven: Okay. I don't want to die. Tumbleweeds. Tumbleweeds again.
[00:56:16] Ray Latif: Hempseed pops. Did you have any? Yeah. Thanks so much again for listening, folks. I really appreciate it. Keep those comments, questions, ideas for future podcasts coming. Send us an email at podcast at BevNET.com. We'll read it. We'll respond ASAP. And we love getting those. So please send them to us. On a final note, glory, glory. Anyone got a bucket? See you next week. Huh?
