On this episode of the “VinePair Podcast,” hosts Adam Teeter, Joanna Sciarrino, and Zach Geballe discuss the fall of Haus, a direct-to-consumer (DTC) vermouth and low-alcohol spirit brand that took social media by storm when it launched in 2019. The three discuss where the brand went wrong, the difficulty of finding investors, and the complexities of the DTC model. Tune in for more.
Check Out the Conversation Here
Adam Teeter: From VinePair’s New York City headquarters. I’m Adam Teeter.
Joanna Sciarrino: And I’m Joanna Sciarrino.
Zach Geballe: I’m in Seattle, Washington. I’m Zach Geballe.
A: This is the VinePair podcast. What’s going on?
J: Happy Monday, y’all.
J: How’s it going?
A: Monday in August.
J: It is what it is.
Z: I feel every Monday, you got to bring more snark than that, Joanna.
A: It’s the dog days of summer. Why do they call it the dog days?
Z: I actually know the answer to this one.
J: Oh, tell us. Do tell.
Z: Astronomy fact checkers out there come at me, but I believe that the name originates because this time of year — in the late summer in the Northern Hemisphere — is when this star, Sirius, in the constellation Canis Major, i.e., the Big Dog, which is the brightest star visible from Earth, is most prominent.
A: Ah, all right.
Z: Yeah. You were not ready for that level of nerdiness, but I did it.
A: I love it. Since you are the person with the nerdiness and all the knowledge today, what have you been drinking?
Z: That’s only until we get to the topic, which I think we will see your nerdiness and knowledge part of that. But anyhow, what have I been drinking? Couple of interesting things were interesting. My cousin, fellow wine industry pro, brought over a really lovely bottle of 2006 Domaine de la Janasse, Chaupin Chateauneuf-du-Pape which is an interesting wine. I feel like I’ve had some mixed results with Chateauneuf-du-Pape of that age, but this one was still in really nice condition, really still lovely, bright fruit character, lots of earthiness. That was kind of a treat. Then I think the only other thing that I had recently that was also pretty cool is a relatively new vermouth to me. I’m literally trying to remember what it’s called, probably should have been prepared, but it’s made by the Poli family that make some of the more well known grappas from Italy. It’s like a Torino-style white vermouth. It’s really good. That category of vermouth is like a mixed bag, I think sometimes. Because they’re not dry vermouth, they’re still somewhat sweet and sometimes can play a little too, just kind of citrusy for me. This one has a really pronounced herbaceous character, though. I’ve been just mostly drinking that on the rocks as discussed on previous episodes. That’s one of my favorite summertime kind of “I’m making dinner” drinks. Just vermouth on the rocks or maybe with a splash of soda.
Z: Yeah. Been enjoying that bottle. How about you, Joanna?
J: Nice. Yeah, this weekend I had my first sour beer in a while that I’ve liked. It was Hudson Brewing’s Aria I, which is a sour double IPA with coconut, lemon, and lime. I liked it because it was very tart. I feel like they’re very tart generally. But the coconut added some much needed sweetness and roundness to it that I thought was really nice. Also, we were at brunch and I had a Rosé Piscine. You know that kind of drink?
J: Oh, you never had a Piscine before?
Z: I don’t think I have.
J: That means pool in French. It’s like a big wine goblet. I think what it’s…
Z: Did you just have a big glass of rosé and you’re giving it a fancy name, Joanna?
J: No, no, no. In the south of France, I believe this is a drink. It’s a big goblet of rosé, like a big bowl goblet with ice. But the ones that I’ve had in New York have had other things. Sometimes vodka, sometimes lavender or other things, and grapefruit soda or some sort of grapefruit element. The one I had over the weekend, which was at Frenchette, had vodka, rosé, and pamplemousse. Unclear if it was like a soda, soda or sparkling water, but it was very good.
Z: Very cool.
J: Yeah. What about you, Adam? Oh, then obviously all the drinks on Friday.
A: On Friday we had our staff party at the Long Island Bar.
J: It’s so very fun.
A: Which was really fun. I drank a lot of the drinks. But two of my favorites were Miami Vice, which was awesome. This was a swirl of the frozen Cosmo because it’s Toby Cecchini’s bar. For those who are unfamiliar with who Toby is, he is the bartender who is credited with inventing the Cosmopolitan when he was the head bartender at the Odeon. Now he owns the Long Island Bar in Brooklyn. He doesn’t want to have a Cosmo on the menu for obvious reasons, but he has a frozen one because he is like, “Look, I’m going to get asked for it. So it’s there.” Then he always has a different frozen drink. Right now, it’s a frozen Piña Colada because it’s really hot out and a Miami Vice is when you swirl the two together. That was really fun. Apparently a Miami Vice is when you swirl any two frozen drinks together.
J: OK. I was going to ask.
A: That’s what I was told by the man himself. I’m going to take his word for it. Because I’d always thought it was a frozen Daiquiri and a frozen Piña Colada swirled together. But apparently, it’s any two drinks swirled together can be a Miami Vice. This is the Miami Vice. The other thing is he made me, he talks about it on “Cocktail College” when he comes on to talk about the Gimlet, but he made me his father’s Gin and Tonic, which was really awesome.
J: Oh, tell us.
A: He takes a little bit of the lime cordial that he makes for the Gimlet. Then he adds the tonic, the gin. And then it’s like a ton of sliced limes that are floating at the top. So it’s in a really tall, tall, tall, big pint glass. It’s very refreshing and you can drink it over the course of 30 to 45 minutes. It stays cold and was really tasty. Those were the two best things I drank. Then in terms of wine, I had some delicious Greek wine over the weekend as well. I had a bottle of Xinomavro from Alpha Estate, which was pretty dope. Also a really, really delicious bottle of Malagousia — I’m probably saying it completely wrong — from Skouras Winery. Both really great wines.
J: What about the Nebuchadnezzar you brought to the bar?
A: Oh yes. We did bring a Nebuchadnezzar to the bar. It was a bottle of the Morgon that’s brought in by Kermit Lynch that basically everyone knows. The reason we brought that wine was because it was the wine that was for sale at a Nebuchadnezzar at the wine shop down the block.
J: That’s a good wine.
A: Yeah, it was good. We told Toby we were going to bring in a big bottle of wine. When Tim McKirdy and I went into the wine shop down the block from the Long Island Bar, this was the huge bottle. We’re like, “How much is that?” They’re like, “$260.” We’re like, “We’ll take it.” I think they were pretty shocked that they sold it.
J: I think big bottles of wine are so fun.
A: Yeah. Then Keith opened it, which was fun as well. Because everyone thought we needed a special corkscrew. Keith’s like, “No man, just standard.” It was just a standard corkscrew.
Z: I will tell you, Joanna, that they are fun to have. They are not super fun to serve from having done that a few times.
J: No, oh my God. I bet not. Yeah.
Z: You have to be very coordinated and strong.
A: It was interesting because watching people trying to serve from it in the beginning when Toby’s team was pouring from it, it was a little awkward. Then of course, as the wine left the bottle, it became easier and easier and easier. But yeah, at the beginning it’s super big and heavy. It was great though. We are going to talk a little bit about a current breaking news topic here on the podcast today and use this news topic as a way to talk about just the industry as a whole. For those who are aware or for some who are not, you may not even be aware of the brand, to be honest, if you’re a listener of the podcast. But this past week, the brand Haus announced via its founder, Helena, that it was going to be closing within the next month. I think there was definitely a reaction from a certain group of people in the world of the internet on Twitter and some other beverage writers, etc., that were shocked by this. I think others expected that this could have happened. But for those who are unaware, Haus has been around since 2019. It marketed itself as a low-alcohol spirit, although it actually is a vermouth, just for accuracy’s sake. It’s registered with the TTB as a vermouth. It is a vermouth, but marketed as a low-alcohol spirit. I think in order to capitalize on people who are drinking more spirits and be interested in more spirits. It launched a pure DTC brand. Helena, the founder had his 20 years of experience in tech and Silicon Valley and had worked in a lot of direct-to-consumer brands, especially VIA, a really famous design firm that had launched a lot of the direct to consumer brands we know, including Warby Parker, etc.
J: That was a big differentiating factor for it back in 2019, right? DTC?
A: Yes. It was going to be all direct-to-consumer, pure DTC. I think what I was pretty surprised about from learning this past week is that the brand raised $19 million, which is a lot of money, lots of startups never raised $19 million. It’s a lot of money to have raised. It was, I think, a $5 million round initially and then another $14 million, and was attempting to raise an additional $10 million to continue to grow, and ultimately, I think, try to sell. The round fell through, the investors pulled out and they have announced they’re running out of money. Basically, by the time you’re hearing this, they’ll have basically three more weeks until they close. People were upset about this because I think it was definitely a brand that was ubiquitous online, especially if you were on Instagram, you saw it everywhere. But I think there’s a lot of things that we can learn from it closing, which is what I want to talk about.
J: It was still independent, right?
A: Yes, independent. But this is what I want to talk about today. I think it’s a fun conversation to have, because as you guys both know, this is my background, entrepreneurship, business and fundraising and things like that. I want to use this as a conversation for that. But before we go into that, I’m just curious from both of you, what were your reactions when you heard about it closing? Were you really aware of the brand and in the past? Have you had it? Joanna, first, I guess from you as a food and beverage writer, when was the first time that you became aware of the brand?
J: I feel like definitely through social media is how I became aware of it. Because it has a very distinctive design. I think that’s what it stood out for, its aesthetic. I know we don’t want to have the aesthetic conversation right now about it, but I think back in 2019, there were maybe a few non-alcoholic spirits on the market that I was aware of, like a Seedlip situation. Haus I think came out. I’m not sure a lot of people actually knew or understood what it was. To your point earlier, it’s a vermouth but…
A: To be fair, some writers are even still calling it non-alcoholic on Twitter. They’re wrong.
J: Yep. I think it’s part of this movement, maybe kicked off of this lower-ABV movement. For me, actually, I didn’t realize it only launched in 2019. I thought it had been around for a lot longer. That was the extent of my awareness and then coming from the food space, because I feel like it had gotten a good amount of coverage in that space and then moving into the drink space, understanding where it sits amongst the drink industry has been an interesting thing to me too. I didn’t know if it had been bought yet, so I don’t have a lot of response to this news.
A: Yeah. What about you, Zach? Obviously, you knew Haus because we had an interview on the podcast earlier, in the height of Covid.
Z: I was going to say, that was how I learned about it, was you sent me a file of your interview with the founders. I was like, “Oh, OK, cool. Here’s a brand I don’t know.” I got to say it’s funny. Haus has existed in this space that I don’t think I enter very often. Some of it is like an Instagram algorithm thing where I’m not really its target audience, I don’t think. But also…
J: It’s very lifestyle-y.
A: It’s very lifestyle-y.
J: Versus drinks-y. Yeah.
Z: Exactly. I think it is something where to me, it’s existed in something of a similar place, not so much to some of the other non-alc or low-alc brands that have either preceded or followed it. Because those have, as I think we’ve discussed, a stronger retail presence. It felt more to me. I think a point I want to get both of your opinions on later on in the conversation, it felt more to me like some of the DTC wine clubs that have popped up and/or existed. I think an interesting point of comparison at some point for us in this conversation will be Winc, which we talked about last year when it tried and failed to have an IPO initially. I think it comes to this question that I know you’re particularly interested in getting into, Adam, which is like, can you create a drinks brand purely through DTC? And what we’ve seen from Haus recently is, maybe not.
J: Maybe not.
A: I think one of the things you bring up, which is really interesting because they talk about this in our interview with them, is that they purposefully, when they launched, did not try to get press from the traditional beverage and food publications. They went after lifestyle. Vogue, etc. Now, one could argue that was smart because they were building more of a lifestyle brand. One could also argue that was smart because beverage and food publications would immediately call out that it wasn’t a low-alcohol spirit, that it was vermouth. Maybe those were questions they didn’t really want to have to answer early on. They just didn’t pitch publications like ours, Eater, etc. Additionally, there’s a lot of small brands out there. 2019, what does VinePair have to gain, Eater or whatever, going after the brand that early on? And saying, “This isn’t low-alcohol spirit. This is vermouth.” You wait around to see if it’s successful, if it starts to grow. Then as journalists, you decide whether or not you’re going to cover it after that. The thing I think is interesting is even this week, the majority of people who reported Haus going under, have been business publications.
J: Yep, TechCrunch.
A: TechCrunch, other things. Only one food publication actually chose to cover it and now we are talking about it. But I thought that was also really interesting to a lot of this larger food world. This wasn’t that big of a piece of news because there’s lots of brands. I think what’s also so interesting is if you pay attention to one bubble in the world of food and drink and lifestyle media, this seems like a huge thing that happened. But if you look at other places in the world of food and drink media, no one’s talking about it because it really did exist in this outsized space, in this small bubble.
J: Its presence was…
A: Its presence was really big, but it actually wasn’t that well known in the actual drinks community. That’s kind of how I want to segue the conversation to why I think I’m not that surprised about the news that we heard this week. I think the biggest thing that is really a lesson in all of DTC consumership and entrepreneurship, etc., is how much we are now learning lessons of the last 10 years of the impact venture capitalists have had in driving growth above all else. I think one can look at a lot of different examples, Haus being just one of them, in terms of what happens when massive amounts of money get involved in building a brand. I think one of the key takeaways from this I have is that growth for growth’s sake is not a good thing. Even when I was in business school, everyone in the entrepreneurship classes talked about the hockey stick. The hockey stick was what everyone wants to see when they look at growth for a new venture. If you can explode out of the gate, if you’re a rocket ship that makes that hockey stick shape, you automatically become a business that acquirers will be interested in. The problem is that’s not really realistic.
J: Or sustainable.
A: Yeah. We’ve seen this happen in media. Media companies go under because of this, they bought readership. We’ve seen this happen in other direct-to-consumer businesses in software, etc. It’s fueling growth based on money. Initially, when I saw that Haus had raised $19 million, I was like, “Holy crap. I don’t know a lot of entrepreneurs in my circle that have ever raised $19 million.”
J: Yeah. It’s a lot.
A: It’s a lot of money, but then I realized, but that’s also necessary when it’s a pure DTC business because of the way that DTC works when you don’t have anything else in order to back your brand up besides DTC. What I mean by that is like, you don’t have a winery, you don’t have a physical space. You don’t have stores. You don’t have your goods in someone’s store, even.
Z: You don’t have those relationships with wholesale channels that are going to provide a buffer if your DTC sales are variable.
A: Exactly. You have to grow online. The way that you have to grow online is through massive spending. There’s a lot of things that have happened in the world of online growth in the past few years. iOS 14, a lot of DTC companies have said, has really crippled their ability to grow. The removal of accurate third-party cookies, etc., is hurting people’s ability to grow. It’s why third-party cookies are so important now for sites like VinePair. But these things have really impacted growth. What happens is you start doing a calculation. When you grow as a DTC brand, you basically start saying, “What is our cost per acquisition for a customer?” How much are we having to spend to get one sale? I would assume the cost per acquisition for Haus was very high, $60, $70, $80 per customer. Haus costs $35 a bottle. You have to assume that you’re losing money on the acquisition of every customer. But you hope you’re either losing money or breaking even. Then you get a reorder in which then the model goes, it’s all gravy, baby. Then the people start reordering.
J: The repeat. Yeah.
A: Right. My question is, how much reordering was actually happening? That’s one thing that’s really interesting because if you just look at raw numbers, if you have a hockey stick, you can keep driving growth of consumers. But this, I think, gets back into the issue with Winc that we’ll talk about in a little bit, Zach, is that’s where I think Winc is getting f*cked right now.
J: That’s because for a brand like this and for a brand like Winc, these subscriptions and these types of products are often big in gift guides. For gifting, but not for individual, personal purchasing, which is where you’re going to get your reorders.
A: Exactly. When you initially make a purchase via a price that is discounted, then you’re less willing to make that purchase in the future at full price. This is just how consumers work. This is why I do not think that Haus will be the last DTC business that we see go under in the next year or so. I think we’re going to see a lot of them. I think they will be in the kitchen and fashion and in lots of things.
J: But didn’t it end up evolving to be on-premise, too?
A: This is why I think part of my theory of why it went under is correct. You see this massive pivot happening in the last year, where Helena admits in interviews recently that they were pivoting hard to on-premise sales, because I think an alcohol brand cannot be built on DTC alone. That’s going to be my hot take of the entire episode, but I really think you cannot build a pure DTC alcohol brand. I think alcohol brands must be built on and off premise in addition to DTC. I think DTC is an important part of the equation for a lot of brands, but it’s amazing to me how many very-high-up executives at the different alcohol companies have said to me, “Look, we know that the three-tier system has its issues, but it honestly works for us in a lot of ways.” I don’t think that’s a model that you can come in with only $19 million and fix. The problem is, when you’re building a brand that’s pure DTC, but then you ultimately are going to need to sell to a company that’s used to building brands via the three-tier system, that also doesn’t match up. Helena says in her interviews that the company that walked away was Constellation. I have to imagine they’re not the only people that looked at this brand. I think that it is a hard thing to reconcile for most traditional alcohol companies when they look at the numbers of a DTC brand and the margins can be almost nonexistent because of how much you’re spending. They’re probably using very high-quality juice because they were making high-end vermouth. Also, the vermouth is very expensive. For a traditional company, $35 for what is actually vermouth is very, very, very strange. You’ll never find vermouth that expensive.
Z: You come across the other problem which Haus has faced in trying to enter the traditional markets and any purchaser would face too, which is you get to a point where suddenly you’re not selling to a lifestyle consumer. You’re trying to sell to a bar manager or whoever. They’re going to say, “Why the f*ck am I paying $35?” Or more than 35 probably, or whatever. You’re paying $35 or slightly less for what is essentially just pretty good vermouth, when I can get the same quality vermouth for half the price from basically anyone else who’s not calling it a low-alcohol spirit substitute. They’re just calling it what it is. I’m very curious. I think, Adam…
A: Hold on, Zach. I want to hammer home that point. Because I think you made an excellent point that we need to hit home on, which is, if you’re building a DTC business, you have a price you have to hit online, $35. Zach, as a buyer, he’s going to ask for discounts. If all of a sudden you can get the product for cheaper in brick and mortar than you can online, then the online channel essentially falls apart.
J: Useless. Right.
A: You have this huge internal conflict the entire time about how do you keep this price consistent? It’s very, very difficult. The way wineries are able to pull it off is because a lot of the stuff they sell DTC is winery-only releases. Remember, they have all the other channels to get you to come in the first place. They have the tasting room, they have placements on wine lists. They have wines that are specific to bottle shops, etc. It’s a very different model. I think that’s where this got really confusing really quickly.
J: Yeah. I was also going to say, nobody can try this unless they commit to ordering a bottle.
A: Yeah. You have to take the risk.
Z: To reverse the thing you just said, Adam, and further expand on it, if you’re a brick-and- mortar retailer, you have to charge $40 for a bottle of Haus or whatever, because they’re charging X amount and you have to take your margin. Why are you going to take on a product that’s so readily available online for less? Now you’re Barnes & Noble or whatever. You can get it on Amazon. It’s the same problem on the other heads. It really does make it difficult, I think, for those kinds of things to enter into a more traditional beverage alcohol retail or on-premise channels. Maybe on-premise is slightly easier because you’re just looking at a different pricing structure and model. But again, where is the call for the very, very expensive vermouth? It’s hard enough to get people excited about paying for vermouth, even if it’s just a cocktail ingredient or something in bars and restaurants, let alone paying twice what they normally would.
A: Yep. Zach, you were going on before I cut you off. What was your next point?
Z: Oh, no problem. No. I think I was just going to ask that I wonder, too, we’ve been focused on Haus and talking a little bit about some other beverage alcohol brands, but Adam, I think you in particular, but maybe you and Joanna also would know better than I would. Are you seeing some of the same issues in just all these… You hinted at all these DTC categories. I think about just my incredibly anecdotal, non-scientific noticing that every couple of months, the ads for DTC businesses on the podcasts I listen to, outside of the VinePair podcast network, change. They’re always like, now there’s a new mattress company. Now there’s a new vitamin supplement company. Now there’s a new erectile dysfunction company or whatever, a new telehealth, mental health, whatever. I’m like, are these businesses all coming up against the same problem? Which is, they’re just as a limited audience for this specific way of acquiring products, not the products themselves, but you just can’t grow your DTC mattress company beyond a certain point. Especially there, I guess everyone buys a mattress and they don’t really need a new one. But even with something like wine or spirits or whatever, where people will be reordering, you’ll just get a tap out the size of the market because in the end it’s still small compared to people who go into a liquor store or a grocery store and pick something up.
A: I think Covid was a real motherf*cker. What Covid did, and this was already happening pre-Covid, but what Covid did was it caused us to forget the lessons we were starting to learn pre-Covid. Pre-Covid, if you listen to the smartest people out there in the world of marketing and brand building, what they were all saying is the successful DTC products understand that they must also have brick and mortar: Warby Parker, Bonobos, Away. They were all opening brick-and-mortar stores. Because they realized that consumers want to touch and feel the products. They want to walk in. They want to have experience. Casper, their sleep zones or whatever they’re called. Everyone was opening brick and mortar. Covid happens and people are like, “My landlords aren’t giving me a break on rent. I’m getting screwed. We’re all going to work from home, blah, blah, blah, blah.” Everyone’s like, “The future is definitely online.” I think everyone got drunk on that. Everyone’s like, “We’re going to rush tons of money into online, etc. We’re going to forget that brick and mortar matters.” But what has happened since we’ve been slowly coming out of this pandemic? Everyone’s run back to brick and mortar. You read The Times articles about how there’s only a few cities now in the country that are still more remote than in-person. All the mid-major and smaller cities in the country, everyone’s back at the office. New York, San Francisco, L.A. are holdouts. I think they’re going to slowly come back. You see all these older-school DTC brands like Warby Parker, Casper, etc. that are reopening their brick and mortar stores. I just think in the case of Haus, again, I think that Helena’s a really brilliant entrepreneur. She’s going to do something amazing after this. But I do think in this case, this is the thing when you’re in an early stage company, you’re drinking from the firehose every single day. The opportunity at the time was to go all in on online because that’s what everyone was doing in Covid. She was perfectly positioned for that. But the problem is when the switch happened really quickly, it’s really hard to pivot. Picking up distributors, gaining relationships in person and at bars, things like that, is really, really difficult. Cash flow is a thing and runway’s a thing. It just petered out, I think.
J: Do you think that, maybe for lack of a better word, a lack of experience in this space also contributed to this? Obviously, it was incredible that she raised $19 million, but I feel like what we were talking about earlier, with the three-tier system, somebody who maybe had some experience in the drink space would’ve seen or foreseen some obvious pitfalls with a straight direct-to-consumer business model?
A: Yes. I don’t mean to pick on her.
J: Me neither. I’m just wondering, yeah.
A: But there’ve been a lot of businesses that we’ve seen in the past six or seven years of VinePair that I think are really brilliant ideas, but they’re by someone who has a background in finance but loves wine or has a background in advertising and loves beer or things like that. They seem really revolutionary, and they get a lot of it right. But the thing they don’t get right is actually the really hard intricacies of alcohol.
J: Yeah. I have done a number of interviews where entrepreneurs have said totally unforeseen issues in this space. Because it’s extremely complicated and challenging.
A: I think that’s why you see the people who have win after win in the space, people that really understand the space, and I will also say, who really like to drink. I don’t mean that as they’re alcoholics, but who really enjoy going out, being at the bars, understanding that hand- selling is important. That basically every piece of the puzzle of building an alcohol brand is really important. Your marketing is important. The media that you do is really important. What you’re doing with partners, that your own social presence, but then also where you are on-premise where you are off-premise. We turn down advertisers all the time at VinePair when they tell us how small they are. Because we’re like, “Look, you can spend with us. But if our reader can’t go out and easily find you, what’s the point? You need to work on being everywhere first, then you should come to us. Because we’re definitely part of the puzzle. But we’re a part of the puzzle when you’re bigger.” We don’t work with some of these indie brands that are awesome but tell us they’re in three or four states. Even if they’re big in three or four states, because it just doesn’t make sense for them or us; we’re a national publication. I actually will recommend to them or our sales team will, “Hey, we really respect this local publication.” For Atlanta, for example. Maybe advertise in Creative Loafing or one of the cool zines. Talk to that community because that’s where you are. I think that’s a really great way to build a brand in the beginning, is starting in one market and growing out from there. I also think there’s a lot of issues with trying to go national in the beginning. A lot of issues. It’s really hard.
J: It’s hard. Yeah.
A: That’s also what they were doing because they were a DTC brand. That’s the appeal to investors. “We can be national tomorrow.” Yeah, you can. But then when it comes to actually building a distributor network, they don’t want to take you national immediately. They want to know that they can tell their sales reps so they can easily walk into every single bar and wine shop in Denver and everyone’s going to buy it because Denver’s a community that loves the brand. A lot of brands don’t think about that initially. One of the entrepreneurs that I continue to be incredibly impressed with is Mary Taylor. I know I’ve talked about her before, but she just Tweeted today that she’s about to do a million bottles this year. She’s on a trip pace to do a million bottles. She has raised almost no money. She’s completely bootstrapped this business. She went into small markets first. She’s grown her wine brand from there. I think she has done an incredible job and is incredibly impressive and we don’t talk enough about her. We talk a lot about other entrepreneurs because raising money is what we’ve decided in our society is what’s the most impressive. We sit here and we say, “This person raised X amount. So they must be really, really incredible. They must be the best ever.” That’s a different skill. Raising money is truly a skill. I hated it. I really hated raising money. I like to think that I was somewhat good at it, but it’s definitely a different skill. Then there’s these entrepreneurs that they just f*cking go out and they do the work. Mary is one of them. She did it without having to say, “You know what? I’m going to put my ego aside. I’m not going to say that I have to be in every New York restaurant first. This is actually a wine brand for smaller markets because they don’t get to have wines like this in these markets, and I’m going to be beloved there.” And she is.
Z: Yeah. I think she also illustrates one other piece that I think is important here too, which is not just a level of work ethic and maybe laying groundwork before you try to grow. But also I think a real respect for everyone in the industry at different levels. I think this is something that Haus to some extent, I think others in the DTC space, there’s been a certain, let’s say, aloofness towards the various traditional methods that beverage alcohol is sold in this country. Look, listeners know, I loathe a lot of things about the three-tier system and I wish it didn’t exist, but it does. It’s powerful. In some ways it is effective at what it is set out to do, which is get beverage alcohol to people. If you are the person who is out here talking about how you don’t need it, are better than it, or are reinventing the wheel here in a spectacular fashion, then all of a sudden you come kind of like, “Oh wait, I actually need big distribution. I need a traditional beverage alcohol company to help me out of my jam.” I’m not saying that people aren’t making these decisions based purely on math, but it’s a business of personalities. Even frankly, as I think, Adam, you can attest, at the highest levels, like, people liking you even when you’re talking about multimillion, maybe multi-billion dollar deals is still a thing that matters. I think a part of what has made Mary successful is she is a likable person who doesn’t talk sh*t about anyone, competitors, whatnot. I think the extent of her sh*t-talking is when she came on and talked about Trump’s tariffs, but that was more of a general survey.
A: She’ll be online sh*t-talking shipping companies, which I understand. It’s annoying when you’ve got pallets of wine. You’re trying to sell them, and they’re stuck in the ocean. I get that.
Z: I think that, again, not to pick on anyone in particular here, but I think that there is just an important reminder here that you don’t know who you’re going to need. It’s a good idea not to bad-mouth anybody, especially people who you might be asking to cut you a check down the road.
A: I think that’s important too. I realized this very quickly when we started VinePair, that we definitely came in with chips on our shoulders. We’re coming in here to bring wine, beer and spirits to the people. We’re going to do it differently and whatever. That was part of our ethos and we still live that. But I do also understand that the alcohol beverage industry is very, very complicated. It’s better to ask than say, “Oh, I know. Or this is stupid. I think it needs to go away.” There’s a lot in the industry that is very, very complicated. Ultimately, these are the people that will buy these kinds of brands. There’s so many of these brands out there. I do think at this point in time, what seems to matter more to a lot of the companies that will acquire isn’t just how fast you grow. But it’s actually like, “What do your margins look like? How loyal is your audience? How do we take your brand? Do people know you? Have they heard of you?” It’s a lot more than just like, “Is there a small group of influencers we can point to that love it but maybe all got sent for free?”
J: It’s the viability of your business.
A: Yeah. Look, one of the best examples of a brand that’s tumbling now due to DTC is Glossier. It’s another one.
J: Isn’t that what Helena wanted to be?
A: Yeah. Again, it’s all of a sudden, the audience isn’t there. The question is, because it only ever had one in-person store in New York. Did it ever just grow in a way that wasn’t actually sustainable? Brand building is really hard and takes years — decades, even, some brands would argue. There’s a lot that goes into brand building. Again, this is why I go back to this being, I don’t think it is always the fault of the founder. I think a lot of this should be laid at the feet of investors.
J: Yeah. Hockey stick isn’t the best way, actually.
A: No. The timeline for certain brands should not be applied to all brands. Fine, you want to say that was in social media, we’ve seen that you should be growing by 10x every year to be a viable social media property, whatever. Fine. Give them a 10-year window. But that’s also what’s really important for everyone to realize. Most investors who invest institutionally have a 10-year window in which they expect to make a return. That means you have 10 years to exit. That window needs to be extended for actual brands that are trying to become real brands. For apparel, for kitchen, for food, for even media. It takes a really long time. We’ve been lucky to have very patient investors. But a lot of brands aren’t. That’s when the pressure sets in. That’s when it’s like, “You need to grow. If you’re not growing, you’re dying.” We don’t mean growth where it’s 5 percent growth, 10 percent growth year over year. We’re asking for 100x.
A: Tremendous growth year over year. That’s when you can find yourself with a problem where you are just spending, spending, spending, spending, spending — especially when you find something starts clicking. Where that then can be a problem for DTC brands is maybe you find an audience that’s responding really well to the brand. That maybe wasn’t the intended audience, but they’re buying, buying, buying online that the ads are working right on Instagram or whatever. What traditional models do is you just throw more cash at it. But maybe that’s not the audience that actually will be loyal to the brand long-term, but you don’t know that because you’re not testing, really. You’re testing to see what adds to the cheapest to acquire the customers. But you’re not looking at it like, “OK, what’s the reorder rate? How many reorders are happening? Is it one demographic compared to others?” You’re just trying to grow. That can be a really problematic thing, and investors do that to founders all the time.
J: Yeah. I think it puts a lot of pressure on businesses, and then it leads to hasty business decisions.
A: Yeah. Look, we’ve worked for other startups. We know. It’s just what happens. I think people should start drinks businesses. I think there’s lots of innovation that can happen in the drink space that still hasn’t happened. But you have to ask yourself when you start the business, are you willing to be all in? Are you willing to be out at night, sitting at the bar, once it’s sold in, drinking that drink? Are you willing to be talking about it nonstop? Not just about how brilliant you are as a founder, but actually that brand. Are you willing for the brand to be more than you are and for the brand to really represent you and for you to really pound the pavement? If you are, then 100 percent go for it. If you are not or you think that there’s a quicker, easier way to build an alcohol brand, you shouldn’t start an alcohol brand.
Z: Can’t say it better than that.
A: All right. We didn’t even talk about Winc. But it’s pretty amazing that their stock price now — their entire value of the company now based on their stock price — is $21 million. Again, another example. We will chat next week. If you guys have a thought, hit us up at firstname.lastname@example.org, Always love to hear what you think. I’ll talk to you both on Friday.
J: Talk to you Friday.
Z: Sounds great.
Thanks so much for listening to the VinePair Podcast, the flagship podcast of the VinePair Podcast Network. If you love listening to this show, or even if you don’t, but I really hope that you do, as much as we really do love making it, then please drop us a review or a rating wherever it is that you get your podcast, whether that be iTunes, Spotify, Stitcher, anywhere. If you are listening to this on a device right now, through an app, however you got this audio, please drop a review. It really helps everyone else discover the show.
And now for some totally awesome credits. So the VinePair Podcast is recorded in our New York City headquarters, and in Seattle, Wash., in Zach Geballe’s basement. It is recorded by Zach, mastered and produced by Zach. He loves all the credit. Keep giving it to him. Drop his name in the reviews. He’s going to love hearing how much you love him. It is also recorded in New York City by our tastings director, Keith Beavers, who is the managing director of the entire VinePair Podcast Network.
Ed. note: This episode has been edited for length and clarity.