Drinks With Caroline
Caroline Levy, a veteran Wall Street analyst, delves deep into the world of beverages with some of her hero's.
Caroline’s quick wit, empathetic approach, and vibrant personality allow leaders to be vulnerable and speak truths not typically heard outside of closed-door conversations.
Drinks With Caroline
The Business of Branding featuring Mike Cessario - Founder of Liquid Death
Marketing maestro, Mike Cessario describes Liquid Death as an entertainment company.
He calls Amazon the great equalizer, and articulates his goal to build a multi-category, healthy beverage platform.
His advice to entrepreneurs is “to de-risk the offer” and “pursue something you know better than anyone else.”
Hello friends, old and new, and welcome to Drinks with Caroline. I'm so happy you've joined me for what I believe will be another stimulating conversation with an industry expert, founder or otherwise fabulous person in the consumer industry. Mike Cessario, welcome to Drinks with Caroline, I am so excited to have you. I have just cracked my liquid death dead billionaire tea, lemonade, agave with vitamins drink and I'm super excited.
Speaker 1:And if I drink the whole thing, I'm not going to last the whole podcast because I'll have to run to the bathroom but, it looks really delicious, so I'm really grateful that you agreed to join us, because you have got one of the best founder stories ever. I'm hoping you'll start with telling us just how you came to be the beverage guy yeah, thanks for uh, having me on thinking of me.
Speaker 2:I mean, my sort of journey was I was in advertising on the creative side for about a decade, working for big agencies and working on all kinds of brands, from Volkswagen to Domino's Pizza to Netflix and things like that and I started getting frustrated that the big companies weren't really marketing for the year that we live in.
Speaker 2:They were still living in the past of what marketing was in the 90s, before social media and where people's attention was not solely on their phones and all that. So kind of wanted to start my own product where I could control the way it was branded and marketed in the way that I think modern brands should brand and market. And yeah, I wanted to do something in the healthy space because what I had seen in my marketing background is all the funniest, most irreverent marketing. That's the most memorable, is all for stuff that's terrible for you, like it's beer, candy, junk food, fast food, like that's all the funny marketing, whereas healthy things were never marketed in a fun way and it made no sense. Why made no sense? Why? So Liquid Death was you know my want to make a healthy product. That's even funnier than the unhealthy stuff that people were used to seeing for a long time.
Speaker 1:You make such a good point because, yes, it's like to sell dare we say it a cigarette or alcohol. They've often had the best creative, and now you come along and you're disrupting the water business. That's pretty remarkable. Right, because so many things that are bad for you, like sugar, candy soda the best creative and now you come along and you're disrupting the water business.
Speaker 2:That's pretty remarkable right, because so many things that are bad for you, like sugar, candy, soda or things like you know, alcohol, beer their whole marketing strategy is we want people to associate our products with fun. It'd be all about fun. So beer's about parties and candy's about fun and soda's about fun, but there's no reason that sugar is any more fun than water or something else. So it's really just we're trying to make water and low calorie flavored sparkling and low calorie iced tea just as fun as beer. And you're seeing that I think we have a lot of people who are like hey, I go to a party and I don't really wanna drink. This is way more fun to walk around with. Or a mom who's like, hey, finally, my nine-year-old will drink water for the first time ever because he feels like he has something he's not supposed to have and I love that. So, yeah, I think it's really all about fun.
Speaker 1:It is, and you've created the desire to have a badge in the water category, which I think might have been there for a single female who was carrying around smart water or something, but it wasn't the norm in this segment at all. So kudos to you, and it took an outsider, I think, to see that. Can you also explain why it's called Liquid Death?
Speaker 2:I knew from my marketing days that I knew how expensive marketing is. So when you're a brand new company with no marketing budget, no media budget or anything, your only chance at survival is the actual product itself has to be super shareable, buzzworthy. Like you need people to create the media for you for free, and that's really hard to do. Like people don't share too many things in their feed. Like people don't tell their friends about a new beverage too often. Like so for us, we needed to bake so much of the marketing into the packaging and product itself because we weren't going to be able to afford to have a okay, who cares thing and then spend millions of dollars to build a campaign around it. The campaign had to be the product.
Speaker 2:We knew that the name had to be very, very provocative and memorable and funny and do the things we wanted the marketing to do, which is be funny, be memorable. We needed the product and brand name itself to do that. So then, when we thought about it that way, all the names started dying off until you got to something hey, what are we willing to bet on? If this was on the shelf, someone has to pick it up. Then they have to be like what is this? And they have to take a photo with their phone. So Liquid Death was just kind of one of the few names that I felt. Yeah, I would bet this is something people have to pick up.
Speaker 1:Do you think people understand that you mean death to plastic or that doesn't really matter?
Speaker 2:It doesn't really matter, because it's about you just have to generate curiosity in people, which is really hard. When someone sees something on the shelf in the water aisle that says liquid death, it's enough to shake them out of their routine and be like wait a second, what is this? And if you can just get a customer to a what is this, you are light years ahead of 98% of other brands. That's really hard to do. So if I can get them to a what is this? And they pick it up and they're like water murder, your thirst death to plastic. Oh, this is cool. I'm going to try this right. So that's what you're really trying to get to. It's like get someone to actually pick it up and then read more about what it actually is. But just getting someone to pick something up is almost impossible.
Speaker 1:It's really absolutely genius. I thought it was particularly cheeky given that we were in the middle of COVID and I was thinking what a scary thing to do. I mean, I come from a background of Wall Street where you're so careful about anything you ever say or do, and there you are boldly taking a huge risk.
Speaker 2:People always talk about risk but I honestly think for a startup with very limited capital, trying to do something like the big guys is way riskier. You will run out of capital we have. And I think I've always known about people because, being in marketing so long, you're just so in deep with like culture and psychology and how do people actually respond to things and you realize people are pretty smart. I think a lot of companies just write off consumers as stupid and they kind of just create for the lowest common denominator where you realize people have a sense of humor.
Speaker 2:The vast majority of people instantly got that liquid death was funny and I always bring up the example. Kroger has their own brand of ice cream and the flavor is death by chocolate and no one is like scared to eat that ice cream, right, because people aren't dumb, they know it's a joke and it makes it fun and I think during COVID one of the reasons and we were kind of like a perfect brand for that- Very bold and quite brilliant, and it's actually a great segue, though, to how did you raise capital?
Speaker 2:The very first round of capital that we raised was really just a friends and family round. And even when I came up with the idea for Liquid Death and I was telling people about it, what I kind of realized was people I knew who were smart marketers were like this is brilliant, you have to do this. But anybody else outside of marketing and you don't typically raise all your money for marketing people they were like I don't know if this is going to work. You know retailers won't put it on the shelf. So I realized I kind of had to prove out some kind of test and because to put something in a can, you can't just do that in your garage like making a breakfast bar. You have to produce a minimum run of like a quarter million cans minimum to do any kind of can product really. So that was going to be a couple hundred grand just to even start. I said okay, let's make a photoshop render of a can that looks real. Let's let me just shoot this really cheap little commercial that we literally shot for 1500 bucks. And since we didn't have real cans, I literally used a Miller light can that had a white can and a gold lid but a girl was pouring it out like this, so you couldn't actually see the can, but water was coming out.
Speaker 2:And we made this video. We put it on Facebook, made a couple of little funny social posts of like what looks like a real can, and I put up a few thousand dollars in paid media behind the video, because Facebook won't show the video to anybody unless you put paid behind it. And then after about five months of that, the video had about 3 million views. Our page on Facebook had 80,000 followers, which was more than Aquafina had on Facebook at the time, because, like, who really wants to follow a bottled water company? And then we had hundreds of messages from people saying this is the coolest thing ever. Or is this real? Where can you get this?
Speaker 2:I had a distributor from New York say, we're the biggest non-alcoholic distributor in New York. Can we talk to a salesperson? So then I use all that traction to then have something tangible to show to investors, to de-risk them investing. Hey guys, look what I did with $6,000 and myself and no help with the right investment team, I think this can really be something big.
Speaker 2:So then, yeah, I was able to kind of cobble together a five grand check here, a 10 grand check here to kind of cobble together about 150K to do the first minimum run of liquid death. And then, once we had kind of physical cans, I was introduced to a venture capital firm called Science which was behind Dollar Shave Club. Their whole thing was kind of finding disruptive brand-driven products that were about direct-to-consumer, and our plan at first was just to be direct-to-consumer because retail was just too afraid of liquid death and it was too big of an undertaking to try to get into retail out of the gate. So we said, hey, let's just start selling through our website and through Amazon and just do kind of digital social marketing to kind of drive awareness around. So then science came in as our first sort of institutional investor and then we started selling the first product in late January 2019.
Speaker 1:2019. And I don't know if you disclose how big your sales are at retail now.
Speaker 2:Yeah, we're well past 300 big. Your sales are at retail now.
Speaker 1:Yeah, we're well past 300 million in scan sales at retail. That is incredible, and you started with still water, just flat water, but you've had a lot of innovation going on recently. Can you talk a little bit about how that progressed?
Speaker 2:Yeah, we launched with still water. That did really well. And then in 2020, our second year we launched the sparkling version of our sort of premium mountain source Stillwater. We had mountain source sparkling water, so something that was kind of like a Perrier or Pellegrino that world.
Speaker 1:And what did you call it? How did you come up with the names?
Speaker 2:Our first product, which is the Stillwater. Here it's called Mountain Water and then it just comes in a still version and a sparkling version. So it's just Liquid Death Mountain Water, still and sparkling. And the sparkling did really well out of the gate. And the great thing that we saw was out of the gate it was almost purely incremental. It had no cannibalization on the still, because I think you realize that people are kind of either still or sparkling people there's not that many who are equal still or sparkling. There's kind of one or the other. So it was kind of total new audience for us that that served.
Speaker 1:And that in itself is so unusual that newish brand very new really by the standards of the industry has now found a way to layer on a whole incremental consumer. I mean brands die for that to happen.
Speaker 2:What we knew very early on was Liquid Death was going to be. More was going to be a true brand. And what I mean by that is I define brand as how do people feel about your company beyond the functional benefits of the liquid, whatever that might be? Because at the end of the day, no one can own a function or an ingredient Exactly. Hey, yeah, I've got this many electrolytes. Well, someone else can have that many and they can probably have it cheaper and they've got better distribution. So you can't own that.
Speaker 2:So if you start spending all your marketing telling people about something you can't own, you're effectively marketing for the category and competitors. So we always looked at it as what we can own that no one else can own is our fun brand. Nobody can be as funny as us. Nobody can kind of market the way we market, so we always led with that. And when you're creating a true lifestyle brand which I think is a word thrown around too lightly like just because you use an athlete to market doesn't make you a lifestyle brand, exactly you use an athlete to market doesn't make you a lifestyle brand. Exactly your point.
Speaker 2:I think lifestyle means true badge value, which most people can more easily understand that in the fashion space, where you know that, hey, this thousand dollar pair of shoes is just as functional as the $50 pair of shoes.
Speaker 2:But there's an emotional reason and badge value and all that of why people pay more and everyone understands that in fashion. But no one really understands that in CPG, I think, or especially food and beverage. But it's a real thing, like if you look at data and psychology, the reason people walk around with certain beverages or packages. It is emotional and not so much functional. So we kind of knew that, hey, if people were gonna love Liquid Death for the brand and the lifestyle, they would probably be open to a variety of different kinds of liquids that the brand was wrapped around, right. So when it was Stillwater, you had all these people that thought the brand was awesome but they might be like, yeah, but I'm not really a plain Stillwater drinker, so I'm not gonna. Yeah, but I'm not really a plain still water drinker, so I'm not going to buy it, but it's a cool brand.
Speaker 1:Oh, now they make sparkling.
Speaker 2:Now I can participate in the brand and this is cool. And then we have more people saying, hey, when are you guys going to come out with flavors? I don't really drink unflavored water too often. So then in 2022, we launched flavored sparkling. It had just a little bit of sugar and more flavor than kind of the typical category leader like LaCroix had, and then, sure thing, almost all incremental and you had people saying finally, now I can participate in Liquid Death because I like flavored water and I don't like unflavored water. We kind of knew from the beginning that the brand had more legs as a true lifestyle brand and it wasn't just about one functional beverage category.
Speaker 1:So since that you've also launched into teas and most recently into some soda flavors. So will you talk a little bit about those?
Speaker 2:So we launched iced tea in 2023, and that was even more successful out of the gate for us than flavored sparkling. And you know, within a couple of months I think we were like the number two or number one bestseller iced tea on Amazon, with very limited marketing. We didn't do a ton. We made one video when we launched it and that was kind of it. And then, literally like a month ago, we launched new flavors of our flavored sparkling, but inspired by more traditional soda flavors like Cola, dr Death and like Root Beer Wrath.
Speaker 2:And what we found is that there's tons of data that people are trying to drink less sugary soda. People are not drinking that much diet soda because people feel like some of the stuff in diet soda most diet soda is not good either. But and people are going to the flavored sparkling category as a soda replacement. But the category is so bland that most people are like I, I try, but it's so bland it's not really a legitimate replacement for me.
Speaker 2:So we said, hey, I think there's an opportunity to use a little bit of sugar, little bit of like a natural sweetener, and create our sort of place within the flavored sparkling category as a true soda replacement. Now, it's not as sweet as soda. It's probably about half as sweet as soda, but it's got the 10 calories, two grams of sugar, and tastes significantly closer to soda than anything else in the category. And we even found that some of our most successful flavors within flavored sparkling were ones that kind of had a clear soda analog, where it's like orange lime, cherry, like things that were classic soda. Those were the flavors within our flavored sparkling that were selling best and I think so. You know, we kind of said, hey, let's just sort of reposition in a way our flavored sparkling category where we can kind of have our own space within it, and that's how we've sort of launched it this year.
Speaker 1:When I first came to this country from South Africa, I was appalled and amazed at the size of the portions, the sweetness of the candy, the sweetness of the drinks, and how much everybody had of everything and how cheap it was, and I then unfortunately learned to eat everything on my plate.
Speaker 1:But I have noticed a tipping point where there are enough people now trying to get off sugar, trying to lose weight. Obviously, the ozempic type drugs are really accelerating that trend. We now have someone in charge of our health and human services who is very conscious about how he wants children to be fed in schools and so on, and so it really feels to me like a serious tipping point in the world of soda, and you're seeing Walmart building alternative soda category displays. So I really do feel like you've hit something, and I'm just wondering how the big guys are going to respond. Coke and Pepsi are launching into the prebiotic soda business, which has been dominated by Olipop and Poppy, but do you feel anyone else is doing what you're trying to do without claiming to have other health benefits?
Speaker 2:Not too many, not too many that I've seen and again I'm sure they will come. Just like when we launched one of the first brand driven still waters in a can, we were the only one. Now, if you go look at the shelf, there's 10 brands that now put water in aluminum. And when we originally were marketing for the first still water in a can, which was this, you know, I had everybody telling me hey, you need to tell people that cans are infinitely recyclable and make all your marketing about cans. And I said, yeah, but if I do that, the minute there's another can water, I'm marketing for them too. So we always led with the brand first. So make people want to badge this. And then the secondary message is death to plastic, infinitely recyclable, which allows people to justify the vanity purchase. Right, if someone buys liquid. Death if you really did a true psychology experiment on them.
Speaker 2:It's because they either want to look cool, they want someone to talk to them, because when you carry around a liquid death, someone will talk to you. A stranger will say what is that? Or, oh my God, liquid death, Like I love that, Like it creates conversations. But if you ask someone, why did you buy this?
Speaker 2:Nobody will say because I want to look cool, they say, oh no, look, because it's not a plastic bottle, right. Same thing Tesla. People don't drive Teslas because they care about the environment so much. It's a cool, badge value car. But then they justify the purchase with but it's better for the environment. Like. That element is what gets the repeat. It gives people a reason to support the brand in their own sort of psyche of why they feel that this is something good. So same thing with like. If we have success with our sort of flavored sparkling play, yes, others will come, but we're winning with the brand first. Not simply because of the taste, because you can replicate taste anywhere easily.
Speaker 1:You've said something so critical that winning on ingredients is just not sustainable because other people can come in and do that. And the power of brands is magnificent when they're working. One example is Coke, which has a lot of things going against it perhaps, and it's tens of billions in scale, and they are growing in carbonated soft drinks, they're growing volume and they're growing pricing. It really is a lesson in how powerful marketing is and the power of brands, and you really get that. That's what differentiates Liquid Death.
Speaker 2:Yeah, and if I remember reading recently, most of the growth is coming from Coke Zero and the better for you side of carbonated soft drinks.
Speaker 1:Right, but the fact that this brand is so old, the name. Coke, and there are many brands like yours that have been born in the last decade, but Coke has managed to stay cool and relevant.
Speaker 2:If you look at the actual marketing and shelf data, there's a direct correlation between market share, velocity and physical space. The more physical space a brand has, it is completely mapped to what its market share is and to what its velocity is. Because I think you look at some of the data and for any given category, customers are not loyal to one brand or product or price point within a category. People who buy the cheapest brand in the category 30 plus percent of those people also buy the most expensive thing in that category sometimes, and vice versa of those people also buy the most expensive thing in that category sometimes. And vice versa. The people who buy the most expensive thing 50% of them sometimes buy the least expensive thing. So I think brands have to get out of their head that, oh, I'm going to have this loyal customer that only drinks this and they're this specific kind of person.
Speaker 2:The reality is people are drinking all kinds of things and whatever is physically in front of them in a store. When they're making a two-second decision and they're trying to get in and out, they're going to grab what that is Like. The few people will take time searching for something when they're making a purchase decision. Very few of the like hardcore fans do that, but that's very small. That's why I think it's the tricky thing as a new brand when you've got the Coke or Pepsis of the world that own the physical space. But what I think is the great equalizer is something like Amazon, because Amazon takes the physical space barrier out of the equation. It's purely about consumer demand for the most part there. So yeah, that's definitely one of the tough parts about being in brick and mortar, because if you don't have the physical space, it's just not possible for you to gain a certain amount of market share, a certain amount of velocity.
Speaker 1:So how did you first get into retail and who were your most supportive retailers and what was it that you used to sell to them? About the opportunity and teach them about what was possible. It must have been really, really difficult.
Speaker 2:Yeah, it was tough. It's almost like when you raise money from investors. Essentially what you're trying to do is de-risk the offer. I mean, that's what you're trying to do. So at a certain point once Liquid Death was doing a few million in sales on Amazon alone. That's finally when someone like Whole Foods was our first major retailer. That took us on surprisingly.
Speaker 2:Now at least you could come to the table with something hey, we're doing a couple million on Amazon and we have to charge.
Speaker 2:At that time we had to charge 20 bucks a 12 pack in order to make money.
Speaker 2:So then if you're going to Whole Foods because you're not shipping it anymore you're not shipping a 12 pound case of water to somebody it's like, oh wow, now we can sell it to Whole Foods for a good margin, and now Whole Foods can sell it for $14.99. So we can say, hey, whole Foods, we have millions in sales paying 20 bucks. What do you think is going to happen when we tell all those people, hey, now you can get it at Whole Foods for $14.99. So you were able to make a really compelling case that there was not a lot of risk for them in doing this. And that's kind of what we've had to do every step of the way with every retailer is show them how well the brand was doing in other channels where we exist, and that they may be missing out by not having this brand here and that they're just going to go, whether it's to your competitor or to Amazon, if you don't have it. And that's kind of how we've had to build out retail and that's on the distribution side.
Speaker 1:I'm also interested in your household penetration.
Speaker 2:When it comes to distribution, we're primarily DSD through the beer network.
Speaker 1:So that's direct store delivery through a bottling network. Who do you use for that?
Speaker 2:Primarily Anheuser-Busch, which really I don't know how many other options new brands have for DSD, because you can't go into Coke or Pepsi unless they own you. But because of the alcohol laws in the US, these beer distributors are independently owned and they can make their own decisions of which brands they distribute. Now you have to go one by one to all these guys and there's literally hundreds of them and it's hard to get them to want to take on new brands. But over time, as you do more volume and you get more retail awards, you can sign those distributors.
Speaker 2:But then we also use some of the UNFI direct stuff for folks like Whole Foods where they require you to do that, but we try to remain DSD for as many accounts as possible.
Speaker 1:I just want to go back to branding and the way you come up with your names. Do you ever worry you're going to run out of brilliant ideas, because every single name makes me laugh? That's hard. It's like being a stand-up comedian and having to have new material all the time. What's the process and how do you make sure you stay funny?
Speaker 2:We're not doing a completely different playbook from what Red Bull was very successful at, which was, hey, you blur the lines between an entertainment company and a beverage company. And Red Bull's entertainment was action sports, which was, hey, you blur the lines between an entertainment company and a beverage company, and Red Bull's entertainment was action sports. So dirt bikes and snowboards and stunts, those don't feel like Red Bull commercials, even though they are, but it's legitimate entertainment that people would seek out on their own to watch and it's not terribly expensive to create. We're doing the same thing, but rather than action sports, our thing is comedy.
Speaker 2:We've built our marketing team more like a Saturday Night Live writer's room. Like we don't really have traditional marketing copywriters, like we do have standup comedians and people that wrote for TV shows and things like that. Because, to your point, you need that level of comedic talent that you're not gonna get from like traditional marketing people, right. Because to your point, you need that level of comedic talent that you're not going to get from like traditional marketing people, right. And then we sort of sign comedians the way Red Bull signs athletes. Like we've got folks like Burt Kreischer, tom Segura, bill Burr, whitney Cummings who have all sort of invested in the brand because they believe in a brand. That's all about comedy, and then you know they help support the brand. We can bounce ideas off them sometimes. So yeah, it's just like sort of building a comedy driven ecosystem is how we're able to kind of continually have even more firepower for the output that we have.
Speaker 1:I just love it. It's really genius. I can't think of another brand that's doing that, even in a different category, can you?
Speaker 2:not really. I think to your point, especially big companies. Like humor is really hard and big companies are typically really bad at it, because comedy doesn't really work through a old system and I think what ends up happening is everybody is so risk averse and no one really knows what to do, so it just gets watered down into this thing that's not really funny and then that's the thing that gets signed off on. So for us, the great thing about comedy I think there was a stat. It was like 90% of these large companies that were interviewed felt they don't have the resources to deliver humor in their advertising. So it's something that a lot of companies struggle with and are afraid of, and it's our biggest strength. Again, why we feel our moat is what it is is that what we're doing is really hard for a lot of companies to do effectively, but we built our company from day one with that in mind.
Speaker 1:Yeah, so it's really authentic to you. You're not like hiring a comedian to sell your product. It's totally your DNA. I also want to ask about your partnerships. It's not intuitive that a water brand is going to be partnering with a makeup brand or a soap brand, an ice cream brand. Can you just talk about how you start thinking about these ideas? How does this bubble up?
Speaker 2:Again, like when you think about our goal to be funny and entertaining. But one of the best ways to make people laugh is to do something unexpected. They actually. There's an old adage about comedy Comedy is entering through the door and leaving through the wall being unexpected. So that's why I think these unexpected partnerships like Liquid Death and Elf Cosmetics Just saying it is funny, it is, it's very funny, really funny video and all that.
Speaker 2:So I think one it's like we find these partnerships where, because we have such a track record of delivering super shareable, funny, viral content, we have brands that come to us now, like Elf, like Amazon, who say hey, we want you to help come up with a cool marketing idea that we can be a part of, because we want some of that, and for us we get exposure to their audience, which may be a new customer for us, and oftentimes they're paying us for that. So it can be very, very low cost for us to release something like that and we find the right way to get our brand in there and their brand in there. And it's kind of a win-win because for them, even though they're paying, it's the cheapest thing they've probably done all year with the highest return and for us it costs us nothing sometimes and we still get a bunch of awareness and all of that. So it's been a nice system that we have right now. And now it's almost like the inbound that we're getting from brands is so heavy now that now we have to kind of like, okay, hold on, let's be selective with who we work with and why we work with them and can we get the best creative product out of them, because not every brand is the right brand to partner with Liquid Death.
Speaker 2:We've seen things where it's like, hey, here's the thing we wanna do, and they're like, oh no, we can't do that. Ok, no problem, you're just not the right brand. Like, we don't need to do these things. So it's more like hey, if you want to be on the Liquid Death Show and you like the Liquid Death Show, yeah, let's talk, but it's not for everybody.
Speaker 1:Which leads me to your hilarious Super Bowl commercial. Can you talk to me about how that came about and then what the response has been?
Speaker 2:Super Bowl is obviously a big marketing spend for a small brand. But I've always said I think Super Bowl is one of the most efficient marketing spends you can do because it reaches over 100 million unique people and it is the one time a year where people actually want to watch the commercials. No other big TV event, even the NFC championship game, has nearly as many people as the Super Bowl. But people don't go into that saying, oh, I can't wait for the commercial, but they do for the Super Bowl. So to reach that many people when they're actually paying attention, I mean you'd have to spend multiple times that to have the same effect outside of the Super Bowl. So I do think it's an efficient spend.
Speaker 2:But when you're a small brand it becomes a much larger bet within your marketing budget for the year. So for a brand like us we need that Super Bowl spot to work really hard for us. So we have to thread a lot of needles. One Fox or whatever big network is running the Super Bowl and the NFL they have to approve all the commercials and they are very, very strict with what you can say and not say and how sort of provocative anything can be. So that's a-.
Speaker 1:Mike, that makes me want to see what was on the cutting floor before you got it past there.
Speaker 2:So, yeah, so we have to thread that needle. Then we also have to thread the needle of okay, well, it's got to be, it's got to feel like liquid death, it's got to have some of our spirit and humor in it, but then also it's got to do a lot of work to help strategically of what we're trying to do, which is, you know, there's a lot of people who have heard of Liquid Death. We're somewhere like north of 40% aided brand awareness just for the name Liquid Death. But you look within that, of those 40% who have heard the name Liquid Death, way less know that it's water or flavored sparkling or iced tea. They're like, oh, I've heard of liquid death, I thought it was a beer or I thought it was an energy drink, because the way the product looks what makes it fun? It looks like stuff that it's not. So so much of our focus is getting more and more people to know what it actually is that we sell, so that when they see it in the store it's not oh, there's Liquid Death. I don't need any beer today, so I'm going to keep walking that it's, hey, liquid Death. That's that water I heard about. Or that's that iced tea I heard about, which will get a lot more conversion and new customers when they know what it is.
Speaker 2:So we wanted to lean in with the Super Bowl spot. The number one thing that people mistake us for, which is almost intentional on our part, is beer. People love that. It looks like beer. They can walk around a party Kids drink it because it looks like something they're not supposed to have. But we need to do some education. So we said, hey, let's basically make a parody of an old, like early 90s, beer commercial, but have all these people drinking what looks like beer in jobs where you should never, ever be drinking beer and then at the end you pay it off with don't be scared, it's just water and iced tea. That concept was able to thread all those needles we kind of had to thread, for, you know, super Bowl.
Speaker 1:And what sort of response have you had?
Speaker 2:Awesome response. I mean, you know there's obviously after Super Bowl you have all these different marketing reporters saying what they think their favorite, best and worst ads were for the Super Bowl. But there's one organization called EDO that actually uses engagement data to measure which ads in the Super Bowl were the most effective. So right after these ads ran, they're measuring how many Google searches were there, how many website visits were there all the things that you can track digitally after an ad airs to see how effective was it at getting someone to take an action. Liquid Death was the number three most effective ad in the Super Bowl by their data and it made us the number one most effective beverage by a long shot in the Super Bowl. So we think it did exactly what we wanted it to do.
Speaker 1:And advertising generally takes a year or more to pay back. But do you expect to actually see a lift to your sales sooner? I mean, are there things you can do with that ad on social that can amplify? I mean, I know there are, so I'm just wondering what you expect.
Speaker 2:Oh yeah, we have a very sophisticated media strategy. Expect oh yeah, we have a very sophisticated media strategy and we actually we brought on last fall our first chief media officer because I think media is so critical and being sophisticated and efficient with how you deploy it with all the new technologies that are available. So, everything from when we run that Super Bowl spot, all the people that go to the website who agree to sort of cookies, we can now target other ads to them to try to convert them into purchases through Amazon or to drive them to retail. Or, you know, on connected TV, you can actually get, you know, kroger data and target people who are sparkling water customers on connected TV to show them a sparkling water ad. And maybe you can even know, hey, someone who visited our website after the Super Bowl, who saw the spot, they're watching this.
Speaker 2:So the Super Bowl it's not purely about oh, right, after this, how much do sales go up. Part of it also is when you go into those retailers in the fall and you're trying to get shelf space. They want to see that you're making a real investment for them to give you the space. So when you can tell them, hey, look, we're running a Super Bowl commercial. We're doing all of this media to try to drive customers directly to your stores off the heels of that. That makes them feel like you're de-risking them, giving you the space, and without some of those investments you might not even get that space to begin with. So there's a lot that goes into why you know, you make these sort of media investments and how you deploy them.
Speaker 1:And do you do billboards? Do you do print Like? What other forms do you like best for media?
Speaker 2:Media is really just about finding the most efficient way to get your message in front of the eyeballs that you need, and earned media is always at the top of our strategy, which is why pay for eyeballs when you can create things where people are spreading it to other people for you for free. Now you have to be legitimately entertaining to do that, but that's in our DNA how we do that. So when we do things like a viral video that we maybe spend $60,000 to produce and shoot, it gets 15 million views and generates $6 million in earned media off of a $60,000 investment. So that's always at the top of how we think about media getting people to spread it, getting press to write about it, generating its own media. But then we just look at yeah, look, billboards are great, but if you look at what is the cost per eyeball, you're paying for that billboard.
Speaker 1:It's really high and then if you're in the freeway in traffic.
Speaker 2:Look at the car on either side of you. People are. They're not supposed to be on their phones, but they're on their phones in their cars. They're not looking up at the billboards like they used to. Sure you could run a billboard. It might be effective, but you're paying a big premium for that and you have to analyze is it worth the premium? I can spend one 50th of that cost to target that same eyeball on their phone and then you have to make the case. Is them reading you won't believe it's not soda on their phone? Does that have a hugely different impact than when they read you won't believe it's not soda on a billboard? Maybe there's some right, but is it worth 50x more? Maybe not right. So it's all about this analysis, where I steal this from my old boss.
Speaker 2:Gary Vaynerchuk, where he's like yeah, you're in the business of day trading attention, You're in the business of day trading attention. Where is the cheapest way to get the most ROI on your spend from an attention standpoint?
Speaker 1:So what are your goals for Liquid Death going forward? You're over 300 million in retail sales already. What?
Speaker 2:does the future look like? Our goal is to be a multi-category, healthy beverage platform. We've already proven we're a true multi-category brand. Beyond. You know, we're winning in Stillwater, I believe, as of last week on Amazon. Our Mountain Water passed Fiji in market share on Amazon for the first time last week. But this is before Super Bowl. We don't even have the post Super Bowl data yet, this is before Super Bowl. So we're proving we're winning in Stillwater. We're winning in Flavored Sparkling. We're now the number one iced tea on Amazon in dollars. We passed Pure Leaf in January.
Speaker 2:I think Liquid Death can go into other categories in the future. We're not in any rush to jump into new categories. We've got three pretty massive categories with pretty massive TAM that we can still keep growing. But, yeah, we want to be a true multi-category brand. Exist in multiple places in the store water section, in the flavored sparkling section, in the tea section. What other sections can we end up in the store?
Speaker 2:And then, yeah, I mean I think there's a possibility for us to be a multi-billion dollar beverage company and to do it in a way where we don't have to be the number one brand in every category, right, like we can be a top 10, top five brand across four categories and be a massive business, whereas a lot of other brands where, if they're only in one category and they're not good at extending into other categories, they're fighting for limited shelf only in one category and they're not good at extending into other categories they're fighting for limited shelf space in one category and it's a lot harder to get meaningful shelf space like that in one category unless you're like the category leader or the number two or number one. So that's kind of how we think about it.
Speaker 1:In order to go from being little to even 300 million and then taking a next step to get even bigger from there, you need an incredible team around you. I think we often see what gets you from A to B is not necessarily what's going to get you from A to F. Wrong letter, not F, but A to triple.
Speaker 2:A.
Speaker 1:The process of growing up as a company is really painful. It's like being a toddler and then a teenager, and you really have to work hard to put the team in place. That's going to be the team that can win long term, so I'd love to know who some of your lieutenants are and how that works.
Speaker 2:Yeah, no, you're absolutely right. I think as you grow a company from zero, the bigger you get, the more options you have. In the early days you don't have many options. How many people want to come take a risk to run sales for a company that's got a couple hundred thousand in sales right Like you're going to be limited on who's willing to do that. So you kind of got to go with who is excited, which may be a very limited pool. Work with those people. Then hopefully some of those people they're able to grow with the role and stay. Other times the company is a different company Every nine months or 12 months as you grow and scale and the scopes of certain roles dramatically change every year and not everybody like.
Speaker 2:Sometimes the roles outgrow people.
Speaker 2:But as you get bigger and more proven you've got more interest for strong talent that is willing to maybe leave other big companies to come work at somewhere like Liquid Death, and I think we now have a really strong executive team in place with our chief retail officer, mike Fine, who came to us last year from. He was there at Body Armor and Coke like big companies with big revenue that know the game that we need to play to get to that next tier of whether that's a billion in sales or whatever you want to frame it. We brought in our new CFO last year who was the CFO of Beam Suntory North America, kareem Sadika. You know, again, kareem is incredible but we probably couldn't have gotten Kareem two years ago right, you kind of got to be at the right level where he's excited to join and seize the potential.
Speaker 2:And then we've got folks like Marissa Bertha, who is our chief strategy officer, been with us for a few years now. She worked on the executive side at 7-Eleven and was there in the early days of Liquid Death when 7-Eleven made a venture investment into Liquid Death in our early days and she helped lead that and got familiar with our brand and eventually wanted to come over to our side. We have a really strong team in place with diverse backgrounds that are really they've managed businesses that are a billion, two billion, and they kind of know what excellence looks like at those levels and, you know, helping us sort of start getting into that next level of growth and process and the growing up of a business.
Speaker 1:I'm lucky enough to have got to know Marissa she's fantastic and also Kareem a little more recently, and they're real pros and very analytical, very data-driven, very impressive. It's just great to see that and the opportunities that presents, like, for example, I noticed you're drinking a smaller can than I've seen.
Speaker 2:Yeah, this is big for us this year. So all of our grocery product that's in cases, multi-packs is going to 12-ounce cans this year Because we've been in these big 19-ounce cans that you're holding and that was because we didn't have much scale. We could really only make sense of being in one can size. So it's one can size for single serve, grab and go, then the same can in a multi-pack. But what we realized when we really dug into a lot of research and work is that people don't really want to drink giant cans on their couch at home for the home occasion.
Speaker 2:The smaller 12 ounce cans are what people prefer for that take home occasion which you kind of see in all the categories, whether it's flavored, sparkling, iced tea, like smaller is for the home occasion and that also enables us. This year we're selling those 12 ounce cans in six packs, which get us down to like a 6.99 to 8.99 price point, depending on whether it's water or sparkling or tea, and getting below that $10 price point in mass grocery is a huge unlock. Almost all non-ALF brands other than Energy in their multi-packs are in a sub $10 price point where, even though we've been growing like crazy, we were selling 19-ounce cans in an eight-pack for anywhere from $14 to $16, which was almost double the cost of any competitor sitting next to us on the shelf.
Speaker 2:So we're excited that this year, kind of moving into that sub-$10 price point, it's going to really level the playing field, accelerate household penetration because it's a lot less expensive to try the brand, whereas if you've never tried Liquid Death, if you're going to spend $15, it's a little bit of a stretch for some folks so excited about that.
Speaker 1:It's been fascinating as a beverage analyst and I covered Coke and Pepsi for gosh well over 20 years, probably closer to 30. And just looking at that, they call it the price, package, architecture, but also the point of sale. So being able to create that grid of which package for which customer, for which actual consumer, and there is so much growth to be had by having the right thing at the right place at the right time. And so it often doesn't require another flavor, it's just let's get the packaging right.
Speaker 2:Completely. I think price and pack, as I've learned, you know, more in beverage is so critical, Like we never had a packaging hierarchy, it was just nope. There's one and I think now, finally that you know we have enough scale where you can produce multiple packs efficiently, it made sense to do a proper pricing and pack architecture. And yeah, we're still gonna have the 19 ounce cans for the cold grab and go single serve. That works great in convenience stores and sometimes I think, for entrepreneurs.
Speaker 2:Disruption is important. But some things maybe don't need to be disrupted, like look at the beer industry. Any case of beer you buy in the grocery store is a 12 ounce can and any single beer can is a big 24 ounce tall boy. Like they've spent decades figuring out. That's the right thing. You might. That might not need to be reinvented. So sometimes it's good to take a cue from certain things or certain size and prices for a reason and you know, take that in mind as you're thinking about how you fit into that and you can be disruptive elsewhere with, like, the brand, the marketing, the product itself, the liquid. But sometimes some of these pricing and pack architectures are already sort of created for the categories.
Speaker 1:Just in terms of international exposure and plans and also production. Can you just talk about the history there and what your goals are longer term?
Speaker 2:Yeah. So we originally had to produce our still water in cans in Austria because back in 2018, there was not a single co-packer in North America who could put mountain spring water into cans. It didn't exist. So I found a co-packer in Austria because I had to start looking outside the US, and they happened to be able to do it because they owned their own mountain spring water source, but they also had big canning capabilities because they made energy drinks as well as bottled water there. So they said, oh yeah, we can totally can water for you. So at that time, when you really looked at the cost of cans and shipping it to the US, it actually wasn't that bad. In fact, at that time it was maybe the same price, if not less, to actually produce here, because there was a can shortage in the US around 2021-ish and it was really hard to get cans in the US. So luckily, we didn't have that problem producing in Austria Once COVID hit and then in 2021, ocean freight, as most people know, 4x'd almost overnight.
Speaker 2:So all of a sudden, our cost to ship the product to the US went absolutely through the roof and that hung around for almost two years. So after about a year of that we said, hey, it's time We've got enough scale, let's bring all of our supply chain to the US domestically. So basically over the next year and a half we sort of got US co-packers for our mountain water SKUs and then also for our flavored sparkling and our iced tea and it's really, as of it was early last summer, we were fully transitioned to the US. So we stopped working with our Austrian co-packer late last year and as we think about international now, we don't have any plans to really pursue that in the next couple of years because we have this US supply chain and now it's just not efficient to try to be shipping product from the US over oceans to these other places.
Speaker 1:When you think about margin, Is that what you were doing in the UK? Because there was some news on the UK recently.
Speaker 2:Yeah, I mean, if you look at just for a test launch that we did in the UK, we had almost no marketing investment. We did over 2 million in retail sales the first year in the UK, which I think the stat I heard was 98% of new brands there that launched with almost no awareness, which we had no awareness in the UK. It was 1% brand awareness when we launched that. 98% of them don't even hit 1 million in sales. So for us I think it was a pretty decent test. But the reality was once last summer came along and we realized, hey, the economics of having to start shipping product from the US to the UK instead of Austria are just not going to make sense. So let's just pause on that for now, really focus on the US and growing the US, and then we can kind of come back to international once we have a bit more scale and can kind of make the margins work for us there.
Speaker 1:Yeah, that makes a lot of sense. Well, mike, you've been incredible. I've loved having the discussion around marketing because I think something you said is just so true to repeat it again that it's very hard to stay ahead of the game based on product attribute and the value of a brand, just as we see in fashion, is where the magic is. So, being able to keep that brand healthy, alive, fed, and I think you've really carved a unique space in humor and in authenticity. It's super exciting to watch. It really, really is. So I really appreciate your time. Any thoughts you want to leave us with? I know that a lot of entrepreneurs are probably going to have watched this, as well as investors, and I don't think there's an easy way to invest in Liquid Death because it's private right now. But any thoughts you have, please go ahead.
Speaker 2:For me beverage, even though I had no experience in beverage. What I did have experience in was marketing and brand. And I think for most entrepreneurs, if you're going gonna start something, the key ingredient for winning has to be something that you know better than most other people. Because I knew in most beverage the winners are determined by brand, to your point. They're not determined by ingredients, they're not determined by flavor profile, they're determined by brand. So the fact in beverage that brand is so critical and that was my strong suit it made sense for me to kind of pursue that. But I think some folks they might go into entrepreneurial things purely because they see an economic opportunity, but they're not the person that's got the expertise for what's really required to win in that space. So that's what I would say.
Speaker 1:And there's also the staying power you need. You just have to keep that belief going, because I know that the journey is long and hard, the fundraising can be torturous, and so I think some of it is just having that staying power to be willing to go all out with it, right yeah?
Speaker 2:you have to. The more you love something and the more you care about something more than the average person, the more you're willing to go through that. If you don't really care or love it that much, it's hard to go through hard things. But if you really love it and you really care, it's a lot easier, I think, to get through the tough stuff.
Speaker 1:Well, Mike, thank you so much for your time. I can't wait to do this again in a year and see just what's happened.
Speaker 2:Yeah, I would love to.
Speaker 1:I'm sure it's going to be great. Thanks again.