Crowdfunding Equity in Exotic Craft Spirits

Roy Morejon:
Welcome to Art of the Kickstart, your source for crowdfunding campaign success. I’m your host, Roy Morejon, president of Enventys Partners, the top full-service turnkey product development and crowdfunding marketing agency in the world. We have helped startups raise over a hundred million dollars for our clients since 2010. Each week, I’ll interview a crowdfunding success story, an inspirational entrepreneur, or a business expert in order to help you take your startup to the next level with crowdfunding. Art of the Kickstart is honored to be sponsored by Gadget Flow. The Gadget Flow is a product discovery platform that helps you discover, save, and buy awesome products. It is the ultimate buyer’s guide for cool luxury gadgets and creative gifts. Now let’s get on with the show.
Roy Morejon:
Welcome to another edition of Art of the Kickstart. Today we are speaking with Peter Nevenglosky, co-founder of Drifter Spirits. So if you haven’t heard of Drifter Spirits, potentially it’s because it’s not on Kickstarter or Indiegogo, it’s because it’s on Wefunder, and they’re actively running an equity crowdfunding campaign. And Drifter Spirits is unique because they’re more of the accelerator for craft spirits. So I’m really excited to speak with Peter today about equity crowdfunding and where his invention or product line started. So, Peter, thank you so much for joining us today on Art of the Kickstart.
Peter Nevenglosky:
Great to be here. Thanks for having me.
Roy Morejon:
Yeah. So, as we spoke offline, I’m a connoisseur of bourbon, but I really appreciate all of the craft spirits that are coming into this world along with the craft beer. So, give our audience a little bit of education, if you would, in terms of the craft spirit market, and then where all of this started with Drifter Spirits.
Peter Nevenglosky:
Yeah, absolutely. So craft spirits… It’s good that you referenced craft beer because the way that we look at it, craft beer is maybe 10 years ahead of craft spirits in terms of maturity. So you’re talking about like a 15 share of beer. Craft spirits is about a 5% of total spirits. So there’s a lot of runway there. It’s been traditionally really, really owned by big box brands, but as consumer tastes are evolving, there’s a huge amount of interest in smaller production, authenticity, where something comes from and all that.
Peter Nevenglosky:
And so, that’s really what we’re about with Drifter. And specifically, as a sub-bullet to that is, consumer interest in categories that have been around for a long time, but are maybe just getting discovered. So we launched initially a cachaca, which is a Brazilian sugarcane spirit. We subsequently launched an aquavit, which is a Scandinavian spirit. Both categories, almost 500 years old. So really new in the US but globally have been around for a very long time.
Roy Morejon:
Yeah. So, give me the inspiration behind starting the company. What was the impetus there to get off your butt and begin a craft spirit company?
Peter Nevenglosky:
Absolutely, yeah. So my background’s in marketing. I did my MBA at NYU and went to work for Dannon or Danone, depending on where you are in the world. Was there for a few years with a focus on brand marketing and a real focus on innovation. So, different types of products but really the same insight as to how you think about building a concept, vetting that, bringing it to market and the like. Learned that I love products, didn’t necessarily love the corporate environment.
Peter Nevenglosky:
Spent a couple of years after that at Red Bull. So in beverage, but not in beverage alcohol, obviously a bit more experiential, a bit more progressive in terms of marketing, but myself and my co-founder, Nate Whitehouse, who’s a lawyer by trade, really just had a passion for spirits. We were living in New York City at the time, and the cocktail scene was exploding and new spirits were being discovered. Mezcal was really coming out of the woods, again, hundreds of years old, but really new for the consumers there. So, it was an exciting time and we were getting exposed to a lot of unique spirits at the time, and that just sparked an interest in digging in further.
Roy Morejon:
Talk about some of those challenges then, in terms of just starting the company itself. As things are exploding and you’re seeing opportunities there, I think a lot of our audience is always seeing or trying to find the next trend and what it is. So what were you seeing in the marketplace that drove you to begin?
Peter Nevenglosky:
Yeah. Again, just seeing this consumer interest in both food and beverage. We started looking at what was out there and where the gaps were. We were exposed to cachaca at a small little [inaudible 00:04:54] in Williamsburg, and just wondered, “why have I never heard of this? What else is there?” And traveled to Brazil and basically fell down a rabbit hole. So it was kind of a classic. There’s 4,000 producers of this stuff Plus in Brazil. It’s the third most drunk spirit in the world by volume. We barely hit the tip of the iceberg in the U.s. so if we could simply find the best there and identify a way to communicate it and generate consumption in the U.S., that was an opportunity unto itself.
Peter Nevenglosky:
So we came into it with that idea, we traveled down to Brazil, spent six weeks tasting over 400 different cachacas in different regions. So literally, friend of friend of friend, took a week off, drove us around. We showed up at spots and just tried to bumble our way through the communication. We then ended up sneaking 50 bottles back in a suitcase, 47 made it, blind tasted those at bartender friends in New York, fell in love with that produced by a third generation woman distiller down there. Her name is [Katya 00:06:08], her farm is about four hours outside of the city of Rio. And so she grows her own cane, produces a super sustainable, really rustic old school, high quality production process for it.
Peter Nevenglosky:
And so we kind of found the product, if you will. And then it was about, how do we build this to something meaningful in the market? How do we look at consumption? And having something that is not just a “me too” to what else was out there? So we really looked at the main competitors, the biggest being Leblon, which is Bacardi owned now. They were hyperfocused on one drink, which is the Caipirinha, it’s kind of the classic that people know. If you go down to the beach in Rio, you’re going to have a Caipirinha. And the brand was very evocative of kind of girls on the beach and soccer.
Peter Nevenglosky:
And so we were like, “Hey, how do we build an anti-lock to this? How do we look at cocktails beyond the Caipirinha? How do we look at unique offerings in the age range?” Like I mentioned the Amburana to you when we were talking before. We have this range of unique aged spirits, and then how do we package it in a way that is differentiated and engaging? So we really hearkened on this idea of 50’s and 60’s Rio, the start of bossa nova, the world discovering Brazil. And we developed a pack that is truly unique and a concept that was about going beyond the Caipirinha. That’s kind of how we got the idea started.
Roy Morejon:
Yeah. I’m obviously new to the product launch side of a spirit brand, but I would feel like this is something that truly takes a more influencer approach with the bartenders of the world to get the knowledge out there.
Peter Nevenglosky:
A hundred percent. And it’s actually… we really look at the bartender, whether it’s the Instagram bartender or the bar director or bar owner, as the person who… they’re the experts. And when they tell you something is good and compelling, and they educate you on it, it’s so much more impactful than when we do it, right?
Peter Nevenglosky:
So we actually had the fortune, we had this kind of classic New York moment where we were at a coffee shop, we had a prototype bottle out with some juice in it, we were interviewing somebody and there’s this guy kind of eyeing the bottle. And eventually I stand up and I just start talking to him. We ended up talking for like 15, 20 minutes, says he owned a couple of bars. We talk about price point, he tastes the product, finds it interesting, but I didn’t know who he was. So he wrote down his email and it was petraske.sasha @ gmail.
Peter Nevenglosky:
So Sasha Petraske was one of the guys that started the cocktail movement, the Renaissance that we’re in. He owned a bar called Milk & Honey, and subsequently other bars called Little branch, Middle branch, and the like. And so it was kind of this amazing moment that could only happen by happenstance. So we ended up launching our product at Milk & Honey, when he moved it to a different location, it was a construction zone. So we did three days for press and trade three months before we actually launched.
Peter Nevenglosky:
And it’s just this incredible endorsement that… if you know the guy, you would know that you couldn’t pay him for that, right? It just resonated with him and he wanted to help, and so we ended up doing that. So that was really an impetus to us getting our name out there in New York. And in turn, a number of other key markets, with amazing bartenders who are really progressive and really knowledgeable. And we were lucky to have a lot of that community embrace what we were doing.
Roy Morejon:
Yeah. That’s amazing, man. In the New York minute, right? So what have been some of the bigger challenges that you guys have encountered when starting this brand?
Peter Nevenglosky:
Yeah, absolutely. I mean, I think that, first of all, probably the biggest challenge in spirits is distribution route to market. And so we knew innovation, we knew marketing and we had a really rigorous approach to bringing it out. What we had no idea is about the sales process, the role of the distributor and the way in which business is done. We didn’t come from the industry.
Peter Nevenglosky:
So there is a mandated three tier system in the U.S with regard to spirits. Those laws come out of prohibition. Each state has different laws related to that. So you could work with the same company in a different state, and you’re almost working with an entirely different system. And so you literally have to launch each state as you would launch almost a new market, and you have to learn the ins and outs and make a compelling case to even access distribution, let alone get their sales reps motivated to sell your product.
Peter Nevenglosky:
So, it took us six years of building that up to a point where we had access to 40 plus States. And we were working with very large distributors who had a focus in craft who we can get outsized influence from, but it was very much a steep learning curve. And I think it’s the reason that most craft spirits don’t really move beyond a 20 mile radius from their production facility, because it requires a lot of effort, innovation, shoe leather, networking, et cetera, to make that impact at a broader basis.
Peter Nevenglosky:
And so that’s kind of what we realized, while it was the biggest challenge, having overcome that challenge, we realized that was the crux of what we truly had done. We had a beautiful brand that was well appreciated. We did 1.3 million in sales last year on Aqua, great margins on it, really kind of the leader in that space. But what we really owned was the route to market, the distributor relationships, the key account relationships. And so that provoked us into launching Svol Aquavit, and it turned the idea of building a portfolio now of eight to 10 brands under Drifter Spirits.
Roy Morejon:
Impressive, man. So let’s jump into then the active equity crowdfunding campaign going on over at Wefunder. You guys have raised six figures, over $116,000 in capital raised just on that platform alone. Talk about the process of evaluating platforms, because I’m sure you had a few different choices, why you chose Wefunder and some of the steps that you took to launch the campaign with such great success.
Peter Nevenglosky:
Yeah, absolutely. We come into the pandemic doing this raise privately. And so the full raise is $750,000. We’d raised 300 and the pandemic hit and it was kind of like, “Okay, what do we do here?” Simultaneous with we had a lot of people we wanted in on the deal like bartenders bar owners, who maybe weren’t writing larger checks, but were excited to be a part of what we were doing. So it was kind of an opportune time to do that. We looked at and had conversations with Wefunder SeedInvest, StartEngine, Republic. Those are the four, I guess, we looked. And we’ve known people who’ve raised on all of their platforms and successfully on all of them. Ultimately, we kind of felt Wefunder was the lowest hanging fruit to execute it quickly with a wide network.
Peter Nevenglosky:
We liked some of the people we’ve dealt with there. We actually, in the past, we had a debt raise in that platform. So we had already done a lot of the legwork on building a profile, it was more of an update. So it kind of made the most sense for us to move quickly on that. And I think, as with a lot of these, and you’re the expert beyond me, but it’s about getting early interest from people that are connected, getting some momentum there, showing momentum as you’re continuing to get news that’s exciting within the landscape of that.
Roy Morejon:
Talk about a little bit of the marketing prep work that you were able to do before the campaign launch.
Peter Nevenglosky:
Yeah, absolutely. I mean, I think really we’d already prepped the deck, the story, et cetera. So it was more about, how do you take a flat slide presentation and make that something compelling in terms of a video, in terms of telling the brand story, but telling the business story as well. So it was kind of a combination of understanding how to pull that apart and understanding which tools were more interesting versus others. Because we’ve got a ton of brand material with regard to Aqua and Svol, and telling that story, but then it was a really about telling a concise business story about who Drifter is as kind of the accelerator, as you put it. And why it makes sense, as a business that is, one, can generate cash in the short term and, two, can retain branded equity, so potential [inaudible 00:15:06] in the medium to long term.
Roy Morejon:
So all the marketing efforts that you’ve put forth on this Wefunder campaign, where have you seen the biggest return so far?
Peter Nevenglosky:
I think it’s honestly probably with regard to personal network, getting the word out, and that’s a great thing about crowdfunding is that you can do that, right? You can post about it, you can widen the net. And then, as well, we’ve got some exciting innovation in the pipeline. So it’s great to be able to simultaneously announce those efforts while also linking back to the raise.
Peter Nevenglosky:
So, for example, we signed a joint venture with the Orendain family. So they are one of the five original tequila families, the only current independent. Others are Cuervo, Sauza, the like, right? And we’re going to be doing a project with them, which will be a rustic, old school style, super high quality tequila, and then an experimental range under the same brand umbrella. So being able to announce that and then track that back to, “Hey, get involved,” through a personal and kind of also wider network of social media, we found was a really good result.
Roy Morejon:
Yeah, absolutely. So what’s been the biggest thing or one nugget, in terms of a takeaway of launching your equity crowdfunding campaign, that could help out the next entrepreneur out there?
Peter Nevenglosky:
Yeah. I mean, I think you kind of hit on it is, how do you really spend the time in the prep? Thinking about not just what your story is and the content, but also what the content flow from launch after is. Because that is incredibly important, is having news to generate and hit on, to keep momentum, to keep people who’ve looked at it to come back and actually execute, right? Even friends, who really support us and love us, might open it up, look at it, have the intention of doing it, forget about it. And so creating a contact cycle, and creating kind of a feedback loop with them and reaching back out in the right way, is incredibly important. It’s not just get it ready, it looks good, it’s going to do the work itself, right?
Roy Morejon:
Absolutely. It is not the field of dreams. If you build it they will come, right?
Peter Nevenglosky:
No, it’s not.
Roy Morejon:
Yeah. Unless you’re giving away the booze for free, right? Then I think they might flow, but otherwise, yeah…
Peter Nevenglosky:
It’s not a good business model, but people love asking.
Roy Morejon:
Indeed. Well, Peter, this has been amazing. This is where we’re going to jump into the launch round, where I’m going to rapid fire a handful of questions at you. You good to go?
Peter Nevenglosky:
I’m good to go. Let’s do it.
Roy Morejon:
So what inspired you to be an entrepreneur?
Peter Nevenglosky:
My parents were entrepreneurs and I guess I didn’t know I had it in me. I kind of figured it out midway through college. I actually started a band with a friend and it was a hardcore, loud band, and I ended up being defacto band manager. I ended up kind of just jumping in, really enjoying the problem solving aspect of it. The how do we do this? Test this? Learn that? And I guess it was just in me and subsequently did kind of some side project stuff for a while until I eventually jumped in.
Roy Morejon:
Nice. So if you could meet with any entrepreneur throughout history, who would you want to have a craft spirit with?
Peter Nevenglosky:
Oh, wow. I mean, I guess, I don’t know if he’s an entrepreneur, but I guess he is, but Hemingway probably would be a really interesting character to have a cocktail with. And also had a real love of rum, which we can, I think, relate on.
Roy Morejon:
Of course. So what would have been your first question for him?
Peter Nevenglosky:
I kind of think what started it all as well, right? I’m always intrigued by that aspect of like, how did somebody end up where they are? Because I think almost no one necessarily laid out the path that they ended up on. There’s obviously intent and iteration, but I think it’s very rare that somebody decides at 10 years old and ends up doing that, right.
Roy Morejon:
Yeah. So what’s your favorite cocktail?
Peter Nevenglosky:
Oh, yeah, here’s a good one. I really love this cocktail that we ended up doing at the launch with Sasha Petraske, we called it the Pan Am. It was a little contest we did within his bar group, using Avua Ambarana, its aged in this native wood in the teak family. So it’s Avua Amburana in a stirred cocktail with orange curacao and a dry vermouth. Really simple one, one, one ratio, stir it, looks like a clean martini, but it’s incredibly complex and interesting with an orange twist.
Roy Morejon:
That sounds delicious. It’s almost five o’clock, let’s do this.
Peter Nevenglosky:
There you go.
Roy Morejon:
Any book you would recommend to our listeners?
Peter Nevenglosky:
Yeah. I haven’t fully digested it, my buddy from who owns Death and Co., Dave Kaplan, suggested this book Traction, which I picked up, the pandemic hit, but I’m really excited about the concepts within it and really adaptation. I kind of hate reading something without adapting it in the sense of this, so something I’m kind of in the process of digesting and considering how we might implement.
Roy Morejon:
Nice. Yeah, definitely a good operating system for the entrepreneur right there, for sure. All right. Last question, Peter. And I know this is your first equity crowdfunding campaign, so I’m interested to hear your take on what does the future of crowdfunding look like?
Peter Nevenglosky:
I think it’s going to be more and more prevalent. I mean, people are getting more accustomed to and more interested in diversity of investment. So I’m excited about it. I don’t imagine this is going to be our last raise, whether it’s within this venture or some other venture, I think it’s a great way to get it out there. So I think it’s going to keep expanding. I think more platforms will arise. I think there’s kind of been… I’ve sensed the carrying capacity issue at Wefunder, honestly, in terms of their resources and a number of things that are in the six fig figure universe at any one time. So I’m interested to see how that expands and how maybe some of these platforms become a little more specialized, in terms of industry verticals and things like that.
Roy Morejon:
Absolutely. Peter, this has been awesome. This is your opportunity to give our audience your pitch, tell people what you’re all about, where people should go and why they should check you out.
Peter Nevenglosky:
Absolutely. So Drifter Spirits is an accelerator for craft spirits. We’re taking two brands that we currently operate, scaling to eight to 10 brands over the next five years with the intent of a $10 million plus business that’ll spin off over two and a half to the bottom line. We have some really nice terms with a fair valuation. On Wefunder it’s a minimum $500 investment. We’re going to be live through the end of September, so the next few weeks, but it’s a really exciting space. We’ve got a really efficient model and some truly interesting innovation that we’re building onto the platform.
Roy Morejon:
Awesome. Well, audience, thanks again for tuning in, make sure to visit artofthekickstart.com for the notes, the transcript, links to the campaign and everything else we talked about today. And, of course, thank you to our crowdfunding podcast sponsors, the Gadget Flow and ProductHype. Peter, thank you so much for joining us today on Art of the Kickstart.
Peter Nevenglosky:
Great being on. I really appreciate it.
Roy Morejon:
Thanks for tuning into another episode of Art of the Kickstart, the show about building a business, world and life with crowdfunding. If you’ve enjoyed today’s episode, awesome. Make sure to visit artofthekickstart.com and tell us all about it. There you’ll find additional information about past episodes, our Kickstarter guide to crushing it and, of course, if you loved this episode a lot, leave us a review@artofthekickstart.com/iTunes. It helps more inventors, entrepreneurs and startups find this show and helps us get better guests to help you build a better business. If you need more hands on crowdfunding strategy advice, please feel free to request a quote on inventuspartners.com. Thanks again for tuning in and we’ll see you again next week.