21 Seeds: Kat Hantas

Kat Hantas turned her home hobby of infusing Tequila into a $160 million business. Her story began when her nightly glass of wine started to give her headaches, and her doctor recommended she replace it with a distilled spirit, like Blanco Tequila. To soften its harsh taste, Kat infused it with fruit and herbs, and began sharing it with appreciative fellow-moms. She eventually realized that hyper-targeting to moms was the perfect way to break into the male-dominated Tequila business. In 2018, she recruited her sister and a friend to launch 21 Seeds, and despite multiple challenges, their mom-strategy paid off. Just three years after launch, 21 Seeds sold for $160 million to Diageo, one of the largest alcoholic beverage companies in the world. This episode was produced by Carla Esteves with music composed by Ramtin Arablouei. This episode was edited by Neva Grant, with research by Olivia Rockeman. Our audio engineers were Robert Rodriguez and Gilly Moon. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 1:32Guy Raz?

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• 2:16Guy Raz?

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• 3:45Guy Raz?

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• 4:27Guy Raz?

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• 5:11Guy Raz?

  Hey, really quick before we start the show, we have an announcement about a really exciting new thing we're launching: a newsletter. And like our show, the newsletter is designed to be interesting, informative, inspiring, and most importantly, fun. It's 100% free, and to sign up, just visit guyraz.com. That's G-U-Y-R-A-Z dot com.

• 5:48Speaker 01

  We go down to Mexico to do our first production run. And when we went to do that at scale, it just, it didn't work. The equipment was breaking. We were clogging it up with like the pulp, you know, from the fruit. And it was a disaster. And that night, we went back to our hotels and we got the email from Bevmo. And it said they wanted all three SKUs in all 147 stores.

• 6:15Guy Raz?

  All three flavors in all stores, which is how many cases?

• 6:18Speaker 01

  I think it was like 300 cases.

• 6:21Guy Raz?

  Wow, that's, that's great.

• 6:23Speaker 01

  No, it was insane.

• 6:31Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:43Guy Raz?

  I'm Guy Raz and on the show today, how Cat Hantas turned a home hobby into 21 seeds, an infused tequila that connected with moms and sold for $160 million just three years after launch.

• 7:03Guy Raz?

  Some of the most successful brands in recent years aren't necessarily new or even that different from products that have been around forever. Liquid Death is a great example. It's just spring water, no different from other good spring water brands. But if you remember the episode we did with the brand's founder, Mike Cesario, he said something really important. Basically, he said that when dealing with a competitor that makes a similar product, your branding will always be more important than any differences between the two products. In other words, if your water tastes as good as another water brand, don't try and sell the quality of your water.

• 7:46Guy Raz?

  Sell the story of your brand, which is how Mike Cesario succeeded in a crowded marketplace dominated by giant brands like Evian and Dasani.

• 7:58Guy Raz?

  It's a somewhat similar story with today's founder, Kat Hantas. Kat spent most of her mid-30s and early 40s raising her kids. She also had a pretty tight group of friends, women who would gather and hang out and usually crack open a few bottles of wine. But as Kat entered early middle age, those glasses of wine really started to hit her hard. And strangely, or maybe not so strangely, her doctor suggested she switch to blanco tequila. Now, I'm no doctor, and this is not a medical advice show, so I can't vouch for Kat's MD, but at least for her, it worked. A little tequila and soda water didn't seem to give her headaches and sleepless nights.

• 8:42Guy Raz?

  Eventually, Kat started throwing chunks of fruit and herbs into her tequila. And soon, her group of fellow moms was also enjoying Kat's home infusions. After almost nine years of serving her homebrew cocktails at her house, Kat decided to make a business out of it. This was in 2018, and she called it 21 Seeds. Now, if you went to a liquor store that year, you would see a lot of tequila brands. Like, so many, it's almost impossible to know which one to pick. But Kat wasn't necessarily trying to get you, or me, or the frat boys looking for tequila slammers to buy her brand.

• 9:23Guy Raz?

  Just as Liquid Death was trying to appeal to teens and young people who would otherwise drink an energy drink, Kat was targeting moms, especially wine-drinking moms looking for an alternative. But as you will hear, the spirits business is really rough. 50 states with 50 different regulations, challenges finding a distributor, and of course, tequila must be produced in one of five states in Mexico. And if it's not, you can't call it tequila. And so Kat had to find a distiller in Mexico that was willing to work with her. But all of that work would pay off, because barely three years after she launched 21

• 10:05Guy Raz?

  Seeds, Kat and her partners managed to sell it to the beverage giant Diageo for a whopping amount of money. Now, as I mentioned, before she launched 21 Seeds, Kat had spent more than a decade raising her kids. At the time, she left a career as an independent film producer in LA. She got into the industry right out of college, in part through a guy she dated at UCLA, and his name was Josh.

• 10:33Speaker 01

  Yeah, so we dated in college, and that's where, you know, his father is still even today, a very well-known screenwriter.

• 10:42Guy Raz?

  Eric Roth is his name, wrote Forrest Gump.

• 10:44Speaker 01

  That's right. He wrote Forrest Gump. Actually, funny story there. We were still dating at the time, and I remember sitting at dinner one night, and Eric asked all of us, there was like, we were like 10 people, and he said, "Okay, how many different ways are there to make shrimp?" And we all started chiming in with the different ways to make shrimp. And then we broke up, and, you know, he gets nominated for the Oscar. Obviously, the movie comes out, and there's the scene in the movie. It's like one of the iconic scenes of Forrest Gump, where the like shrimp's scampi, fried shrimp.

• 11:17Guy Raz?

  Oh, yeah.

• 11:18Speaker 01

  Remember that scene?

• 11:19Guy Raz?

  Yeah.

• 11:19Speaker 01

  So I was like, "Oh, my God, we were there. I remember that conversation." So that was really funny.

• 11:24Guy Raz?

  And I think it was through your connection to Josh and his family that you decided to get into the film industry as well, initially as an agent. And you wound up working for CAA, the talent agency, and started out, I guess, as most people do in the mailroom, right?

• 11:41Speaker 01

  Yep, and that's where everyone starts. And it doesn't, you know, you've got lawyers in there. People have gone to Harvard and business school, and everybody starts in the mailroom. And the way that you get promoted out of the mailroom is based on the need, like whatever sort of desk opens up. So in that way, you don't have as much say in what you end up doing.

• 12:03Guy Raz?

  You were thinking, "I want to represent Clooney and, you know, Brad Pitt", but that's not necessarily what's going to happen.

• 12:10Speaker 01

  Yeah, or at least I wanted to be on the film side. Like, I don't watch television. But sure enough, as it would turn out, I got promoted onto a television desk. So now suddenly I was in TV and it's really, it's grueling. I mean, you are living and breathing scripts and TV scripts and, and I just had no interest. I, I wasn't part of the, the TV going audience. You know, so I didn't feel like my voice really mattered in that space or I could lend any sort of, you know, creative input that would make sense. So that had run its course and I had met a gal that I was sitting across from while at CAA and she would talk to me about books that she was reading

• 12:51Speaker 01

  all the time. And so I thought that was amazing because I like to listen to stories. And I thought, you know, let's go get a little more experience and then let's start a production company together. So she, she went off to Disney and worked on the development side and I went to Three Arts, which was a management production company.

• 13:10Guy Raz?

  And you guys in 1998, I guess, form like your own production company. And, and tell me about the movies that you wanted to make.

• 13:21Speaker 01

  We basically thought, okay, let's do music driven stuff and horror movies. Because with humor, it's harder, right? Because you go overseas or somewhere and, and the, the humor doesn't translate. But with horror, A, it works as long as it's a good concept. And B, you don't have to worry so much about the A-list actors because anyway, you know, they all die. It's really the idea that sells it. So as like young, new producers, we thought it would be much easier to get movies made based on a great concept versus based on A-list talent that we really wouldn't be able to get.

• 14:00Guy Raz?

  Yeah. And so I guess what the way it works is you've got to find somebody to finance a film and then you've got to find, you've got to bid for a script. And I mean, it's, it's, you're, and you're up against huge production teams, like with, you know, Academy Awards and lots of money. And so that must just be a tough business for two people just starting out.

• 14:21Speaker 01

  Yeah. Ninety-nine percent of the time, the projects never see the light of day. For a myriad of reasons.

• 14:28Guy Raz?

  Um, so overall, um, how many films did you guys end up making?

• 14:32Speaker 01

  Well, we ended up making one film. We had many that we had set up and, you know, were in different stages of development. But we ultimately made one film.

• 14:44Guy Raz?

  It just shows you how hard that business is. Cause you guys started in 98 and I know you, you kind of wound it down in 2007, but

• 14:51Speaker 01

  That's right.

• 14:52Guy Raz?

  I mean, that's, that's what nine years.

• 14:54Speaker 01

  Yeah, nine years.

• 14:55Guy Raz?

  And, and in nine years, you make one film and that just shows you how hard that business is.

• 15:01Speaker 01

  Oh yeah. Anything can happen. You can have your, your, your project set up at a studio. The studio head leaves, um, the new guy just puts everything to turn around.

• 15:10Guy Raz?

  Hates it. Yeah. So you did eventually make a film called Taking Five, which it's about, um, two high school girls that kidnap a boy band. So it's sort of a music slash kind of not horror movie, but it's like a

• 15:25Speaker 01

  Yeah, it's not horror at all. It's totally, it's totally music driven.

• 15:28Guy Raz?

  Okay.

• 15:28Speaker 01

  And we thought we totally nailed the timing because High School Musical had just come out and Eight Mile. And so we thought this is perfect.

• 15:37Guy Raz?

  It's gonna just hit. Yeah.

• 15:38Speaker 01

  Two high school girls who kidnap a boy band. The boy band was played by a real boy band. So we cast a real boy band in the film. Uh, the band in the movie was called Five Alive. The band in real life was called The Click Five.

• 15:51Guy Raz?

  The Click Five. Okay.

• 15:52Speaker 01

  And The Click Five, they had just had a gold album. They were on Jingle Ball.

• 15:56Guy Raz?

  Wow, I've never heard.

• 15:57Speaker 01

  Yes, Guy, because guess what happened?

• 15:59Guy Raz?

  What happened?

• 16:00Speaker 01

  The whole thing fell apart on the last day of our shooting.

• 16:03Guy Raz?

  Oh my God, The Click Five from Boston. They could have been like the new kids on the block, but

• 16:08Speaker 01

  They were.

• 16:09Guy Raz?

  No one ever heard, I haven't heard of them. Oh my God.

• 16:11Speaker 01

  Yes, and I'll tell you why. There's a reason why you've never heard of them. Because it, we had lined it up. Beautifully. We had Craig Calman and Atlantic Records. They pre-bought the soundtrack, which is unheard of for an independent film with no distribution yet, but they believed in it and they thought, they saw what we saw. We're like, yes, timing, perfect. Their second album will come out. The headline song will be Kidnap My Heart that they wrote for the movie and everybody's waiting for it. They were adorable. The lead singer was so handsome, so cute. They were great actors. They did a really good job in the film. On the last-

• 16:44Guy Raz?

  Legit musicians too.

• 16:45Speaker 01

  Legit musicians.

• 16:46Guy Raz?

  Berkeley College of Music and stuff. Yep.

• 16:48Speaker 01

  They were amazing. So, last day of shooting, I get a call from Craig Calman, head of Atlantic Records, and he says, "We have bad news." I was like, "What's the bad news?" He said, "Well, the band, uh, when they rap tonight, after we finish shooting, they are firing the lead singer."

• 17:06Guy Raz?

  Wow.

• 17:07Speaker 01

  Eric from the band, and they don't want to be a boy band anymore. They want to be a rock band. And I was like, is it, I'm like, is this, is there some sort of a hidden camera somewhere? Is this some sort of a joke?

• 17:18Guy Raz?

  Oh.

• 17:19Speaker 01

  What are you talking about? And he said, "And it's worse. They're not going to promote the film because they don't want to be a boy band and they don't want anything to do with boy bands. And they're not going to let us release the song. You can't buy the music. We could play the music in the song, in the movie, but we couldn't buy it on iTunes." So, I, it was like, oh my God.

• 17:37Guy Raz?

  That was going to be a revenue stream.

• 17:38Speaker 01

  It was going to promote the film, right? Like, it was going to do all of the things. And in the end, all of that just disappeared. So, the big lesson was like, you can plan it all so perfectly in this industry, in the movie industry, and still, you know, opening weekend, you could have a tornado hit. You know what I mean? There's still like, something that can completely derail it. And so, sure enough, that's what they did. They fired the lead singer. It, they brought in this new lead singer. They ended up being a rock band and they went nowhere. Their career was over.

• 18:11Speaker 01

  And then our movie went to television.

• 18:13Guy Raz?

  Wow. All right. So I guess this was the cue for you, I guess, also to exit stage right and, um, and, and kind of take some time off. I guess in the meantime, you had gotten married.

• 18:26Speaker 01

  Yes. And it's funny that you say cue because my husband is Quincy and we often call him cue. So, so the cue works on many levels, Guy.

• 18:34Guy Raz?

  Got it. Okay. Okay. So you, you and Quincy get married, I think around 2009, you guys moved from New York to San Francisco for his job. And then by the time you're, you're out there, I think you guys have started a family as well, right?

• 18:50Speaker 01

  Yes. We have Elias and I am pregnant with Abigail. Yeah. So she's born in San Francisco.

• 18:56Guy Raz?

  And, um, I guess sort of around, around this time, I mean, not, you know, um, when you were sort of in your mid 30s, you started to get affected by, by alcohol, particularly by wine. Tell me, tell me what was happening.

• 19:15Speaker 01

  Yeah. So I was 35 and what I was noticing was I would have a glass of wine while I was making dinner and usually a glass of wine at dinner. So I'd have like two glasses of wine and that night I wouldn't sleep well. I'd wake up in the morning and have a headache sometimes, not having felt rested and sometimes I'd sweat. So at first I thought, you know, hey, maybe this is early menopause. So I went to my doctor and, uh, just said, hey, listen, this is what I'm feeling. Um, and is this early menopause? And he said, let's do some blood work and tests and whatnot. And we did. And, and he said, no, everything looks fine. Let's look at what you're eating and drinking. And I would say, you know, a couple

• 19:58Speaker 01

  glasses of wine. And he's like, ah, there's the culprit. Just stop drinking fermented spirits. And I said, okay, well then, you know, what should I drink instead? And he said, blanco tequila. You should switch to blanco tequila.

• 20:11Guy Raz?

  And, and I should mention, I mean, tequila is, I think, it's got to be one of the only spirits that is. Not distilled from a grain.

• 20:19Speaker 01

  Right.

• 20:20Guy Raz?

  Right?

• 20:20Speaker 01

  Yeah.

• 20:20Guy Raz?

  I think, I mean, there must be others that I've.

• 20:22Speaker 01

  As a category. I mean, you can make vodka from potatoes and stuff like, and you can make, you know.

• 20:27Guy Raz?

  I should say grain, but, but it's not from a starch or a grain. It's like, it is literally from.

• 20:32Speaker 01

  It's an agave. Yeah, it's an agave plant. It's, it's, it's a cactus.

• 20:35Guy Raz?

  Yeah.

• 20:36Speaker 01

  So tequila, well, the way that you make tequila, right, is you first you make an agave wine. So you cook the agave plant and then you squeeze it and you get all that juice and then you add the yeast and you take that wine and you boil it and then you condense it, you, you know, you cool it and it rains down tequila, basically. So basically just a distilled spirit, vodka, same thing, right? Gin, you just pass it through a flavor basket. But basically there's nothing living in it anymore, right? Distilled is just cleaner.

• 21:08Guy Raz?

  But he said, try blanco tequila, but why not like vodka or whiskey? I mean, those are also not, right? They're also distilled.

• 21:17Speaker 01

  Yeah, you could do those as well. He just didn't want me to drink an aged spirit because when you age it, you put it in barrels and yes, what leaches in to the liquid is some flavor, but also those things can react with your body. So if you're trying to drink cleaner, just drink a, a white spirit.

• 21:40Guy Raz?

  I mean, what a doctor. I have never met a doctor's like, hey, just do tequila shots. You're gonna be good.

• 21:45Speaker 01

  And he didn't say shots.

• 21:49Speaker 01

  I mean, honestly, I, I didn't analyze it that much. I just kind of thought, I'll just try it. I'm just gonna go home and try not drinking wine and see how I feel.

• 21:59Guy Raz?

  And, and substitute with, with white tequila.

• 22:02Speaker 01

  At first that was a hard pill to swallow, to be honest, because I was like, ugh, that sounds very harsh and aggressive for a Tuesday night. But I, I went home, I stopped drinking wine. I immediately felt better. So I thought, okay, that worked. Now, what am I gonna do to this blanco? Because I was not just gonna start drinking blanco tequila.

• 22:26Guy Raz?

  No.

• 22:26Speaker 01

  The way that it existed.

• 22:27Guy Raz?

  You make ranch water, club soda and lime. That's what you do.

• 22:31Speaker 01

  Yeah. Right. Exactly. But then even that, to me, I could still taste the harshness of tequila. And I quite liked wine. So I, it needed to be as good.

• 22:43Guy Raz?

  Yeah.

• 22:44Speaker 01

  Or better than the glass of wine. And I thought, I gotta do something to this tequila to make it more drinkable and easy to use. So I started infusing it.

• 22:52Guy Raz?

  Infusing it like with vanilla pods or chili peppers or what?

• 22:56Speaker 01

  Yeah. So the very first infusion that I made was cucumber jalapeno.

• 23:00Guy Raz?

  You just, you just took a bottle of tequila and dumped it in a pitcher with cut up cucumbers and chopped up jalapeno?

• 23:08Speaker 01

  That's exactly what I did. Leave it in the fridge and I would stick my finger in the liquid and taste it, you know?

• 23:14Guy Raz?

  Right.

• 23:14Speaker 01

  I'm like, okay, this needs to stay longer. And I would leave the cucumber in then longer. And that would sort of even out, cool off the spice.

• 23:23Guy Raz?

  So, once you had like that infusion, would you sip it? Or would you, would you mix it with, or, you know, pour in some soda water in a glass and, and, and some of that tequila?

• 23:33Speaker 01

  Bingo. I would do what you just described. I would take a wine glass, because I also like the ritual of holding the wine glass. So I would take the wine glass, I would put in one ounce of this infused tequila, add club soda, and like a slice of orange. And that would be my drink.

• 23:47Guy Raz?

  And I guess, I guess when you would have people over, you would offer them some of your infused tequila?

• 23:53Speaker 01

  Exactly. Basically, I would infuse multiple types. You know, I would do the cucumber jalapeno. I'd have strawberry pink peppercorn is an amazing infusion for tequila. There was like a honeydew kiwi. And I would just make bottles of infused tequila, different club sodas out, and then just like a charcuterie board of, filled with garnishes. And that is how I entertain, even today.

• 24:18Guy Raz?

  All right. So this is like your house drink. And, and this was, this is just what you served for a bunch of years. Like you were, and at what point in that, during that time, because I'm sure now and again, people would be like, Kat, this is great. You should sell this at the farmer's market. You should bottle this up and sell it. And people were like, I'm sure people said that to you from time to time.

• 24:39Speaker 01

  Definitely. But even with them asking for it, I would just make it for them and still was not thinking, this is a business. Was still just, you know, for nine years, just making it for myself and for friends. But I had always been sort of entrepreneurial minded, right? I knew I wasn't going to go work for someone. And what I, I started to observe, right, was a lot of my girlfriends in particular, were switching from wine and champagne to tequila. Right? So just to time set this, this was like, you know, 2018, right? So- George Clooney had come out with Casamigos and that really, I think, brought in like a whole slew of tequilas that had come on market. People like wanting, you know, both celebrities and non-celebrities.

• 25:24Guy Raz?

  Yeah, that just, there was like a celebrity explosion of tequilas.

• 25:28Speaker 01

  Unbelievable amounts, exactly. And then guys were switching from beer to tequila. I think to drink, you know, fewer carbs and so on. So I noticed that, that was number one. And number two, I noticed people were ordering, especially women, like tequila soda splash of juice, tequila soda, an orange slice, right? And they weren't ordering shots. And so I thought, huh, that's interesting. Uh, there are all these people drinking tequila for wellness reasons. And they're switching from wine and champagne over to tequila. And there's nobody, it's really being driven by women. And there's nobody really talking to, you know, women in the, in the tequila space. Cause at that time, in the world of tequila, there were shots. So like woo woo.

• 26:13Speaker 01

  And then there was like sipping tequila, right? And the sipping tequila was really being marketed like scotches and whiskeys to a male consumer. And there was nobody talking about, you know, spritzes and that wine occasion and to women. So that's when I was like, huh, there's something here that's not being addressed.

• 26:35Guy Raz?

  Um, it's, it's interesting because, I mean, as, as all this is happening, you could have taken a completely different perspective and thought, you know, George Clooney, all these celebrities getting into tequila, like this is just a mad dash right now. It just seems like, you know, a gold rush that, that, that's probably gonna be a bust.

• 26:58Speaker 01

  I didn't think that, obviously. Because again, the way I was looking at it was I just, I wasn't just thinking about tequila as a category. Like that's the category. I was thinking more about the user, like who is the customer? And what is the occasion in which this consumer is actually going to drink this product? And that's where I found the white space.

• 27:21Guy Raz?

  Yeah.

• 27:23Guy Raz?

  I think you were in your mid 40s at this point. And I say that because I think a lot of people think, oh, you have to be 22 to be a founder of a company. But actually, most companies are started by people, first time founders are in their 40s and tend to be more successful because they have more experience. And so I think it's important to point that out because people think, oh, it's too late. I'm in my 40s, 50s, 60s. We've had people on the show start businesses in their 60s. So at this point, you're thinking, I think I want to do this. So what was your first series of steps? Like, did you start to reach out to someone? Did you?

• 27:59Speaker 01

  So first thing I did was I got to find some partners.

• 28:03Guy Raz?

  You didn't want to do this by yourself?

• 28:05Speaker 01

  Heck, no. Heck, no. I couldn't have done it by myself. And I thought it was really important, just having been around so many founders, it's incredibly lonely.

• 28:13Guy Raz?

  Yeah.

• 28:13Speaker 01

  And your family very quickly tire of hearing about your woes and your friends follow pretty shortly thereafter. They don't want to hear about it. So you definitely need, you know, some people in the trenches with you. And plus, there were things that I hate doing and don't know how to do and didn't want to learn in my 40s.

• 28:32Guy Raz?

  Yeah.

• 28:32Speaker 01

  Spreadsheets, Excel, I don't want to know about those things. I don't want to open bank accounts. I don't want to deal with, like, I wanted to focus on storytelling, marketing, the brand, and sales. That's it. And the good thing was I didn't have to look very far for the finance piece because that was my sister, Nicole.

• 28:51Guy Raz?

  And she lived in the Bay Area?

• 28:53Speaker 01

  Yes. And she had been the CFO of Refinery 29.

• 28:58Guy Raz?

  Which is a hugely, you know, right, like, a very influential website for fashion and food and trends and yeah.

• 29:07Speaker 01

  Exactly. She was their CFO. Then she went on and was the CFO and the COO of Britton Co., which was sort of a millennial Martha type of venture. And then she was, at the time, when I asked her to start this, this business with me, she was the CFO of Angel List.

• 29:26Guy Raz?

  Oh, wow. The, that, which is a way for people to do angel investing. So she,

• 29:30Speaker 01

  Exactly.

• 29:31Guy Raz?

  So she had, you're supposed to start a lot of experience in,

• 29:33Speaker 01

  Oh, yeah.

• 29:34Guy Raz?

  in the tech sector, working for media companies, and she was already in the Bay Area.

• 29:38Speaker 01

  Yes, exactly.

• 29:40Guy Raz?

  And so you, what did you say to her? Did you say, hey?

• 29:43Speaker 01

  I said, hey, listen, you know that tequila you've been drinking at my house that you love? I said, I'm thinking that it's a business and here's why. Do you want to start this tequila company with me? Like, I, I actually want you to be my partner.

• 29:54Guy Raz?

  Yeah.

• 29:54Speaker 01

  Not just, you know, help me on the side. And she said, yes.

• 29:57Guy Raz?

  She said, yes, I will quit my job.

• 30:00Speaker 01

  No, no, no, I won't quit my job.

• 30:01Guy Raz?

  No.

• 30:01Speaker 01

  No, she's too smart for that. She's a CFO. There's no money in the beginning.

• 30:06Guy Raz?

  Gone nights and weekends, basically, on this.

• 30:07Speaker 01

  Yeah, all night long. And she even had kids younger than my kids at the time. Like, her kids were still little. And, you know, she was, she's the woman who like, has the baby and then is, you know, on the laptop in the room.

• 30:20Guy Raz?

  I'm just curious, during this time, were there people who said to you, Kat, you know, this is gonna really not work because you're up against George Clooney types and celebrities and mass market brands. And like, you've never made a beverage before, let alone an alcoholic beverage. Like, just the, the chances of this working are just really miniscule. Did anybody push back or, or give you any kind of feedback like that?

• 30:52Speaker 01

  Yes, definitely.

• 30:53Guy Raz?

  Because that would have been responsible, by the way.

• 30:56Speaker 01

  Yeah, 100%. In fact, that's the only thing that most everyone said to us.

• 31:03Guy Raz?

  When we come back in just a moment, a lesson from Kat on how not to make a label for your brand new tequila. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 31:21Guy Raz?

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• 32:48Guy Raz?

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• 33:33Guy Raz?

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• 34:18Guy Raz?

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• 35:01Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2018, and Kat, her sister Nicole, and a third partner are trying to ignore anyone who's telling them that infused tequila is a bad idea. And instead, they dig in and start doing a lot of research.

• 35:21Speaker 01

  We had so many conversations with, we basically would talk to anybody who was in the business, touch the, the industry in any way, shape or form.

• 35:29Guy Raz?

  And what would you ask them?

• 35:30Speaker 01

  And we would ask them, you know, like, do you drink tequila? You know, how does it sell in your bar and restaurant? Like, where does it land in terms of how it performs? And we would just, as much information just about the, the industry and how do you price it and who do you buy it from? And like, do you know those people? Could you set us up with those people? So I would say in almost all those cases, they would say to us, it's a really tough business. It's a very complicated business because, you know, selling booze in this country is very complicated. It's

• 35:57Guy Raz?

  Every state has different laws.

• 35:59Speaker 01

  Exactly. Exactly. And it's a three-tier system. Unlike wine and beer, you, you can't sell directly to your consumer as a, as a hard alcohol brand, like as a spirits brand.

• 36:08Guy Raz?

  You have to go through distributor.

• 36:09Speaker 01

  You have to go through distributors. So your, your initial customer is not your ultimate customer, right?

• 36:14Guy Raz?

  Yeah.

• 36:15Speaker 01

  We were selling tequila to women, but we didn't come from beverage and we certainly didn't come from alcohol. So they're like, well, you guys are insane for even thinking that you're going to get this done. But, you know, listen, we were three smart girls and, and we just had, we, we had this belief that there was a white space that nobody was servicing.

• 36:39Guy Raz?

  So it would be you, your sister Nicole, and your friend Sarika Singh, who had worked in, with some food companies before.

• 36:47Speaker 01

  Right. And she was a Stanford engineer, that was a friend of mine as a mom friend, but she had worked in food innovation. So she, she knew how to bring a product to market commercially and she knew how to deal with, you know, the commercialization of a, something you're making at home.

• 37:08Guy Raz?

  What I'm curious about is if even in 2018, I mean, now it's even more so, but if you went to just even a Whole Foods in 2018 that sold liquor, you would see tons of tequila on their liquor shelves. You'd see tons of bottles. It's like now it's even more, you know, just saturated, you know, like, like energy bars, but.

• 37:31Guy Raz?

  Did you guys do that? Did you walk through stores and like, look at the bottles? And then, at any point, did you think, oh, there's just so many brands here. How are we going to break through? Like, I don't, I'm just curious about your thinking process.

• 37:43Speaker 01

  Yeah. Basically, there were some flavored tequilas on the market. We tried those flavored tequilas. And it was exactly the problem that we had with kind of flavored spirits in general as a category. The three of us, as three women, we all felt the same way. We, our problem with flavored spirits is that they tend to be overly sweet, have a weird aftertaste like you're sucking on a nickel, and smell like a Jolly Rancher. It's, the way I would describe it is like, it's like trying to spray perfume on someone with really bad body odor. Nothing improves. The body odor's still there, but you're just masking it with like, the perfume. And now the perfume doesn't smell as good, and the person doesn't smell better.

• 38:26Guy Raz?

  Sorry. So you, you want to make a tequila that does not have those qualities, does not taste like a Jolly Rancher? And for the drinker, the consumer, you're thinking of a specific type of woman, right?

• 38:40Speaker 01

  Yes. Moms.

• 38:43Guy Raz?

  Moms.

• 38:44Speaker 01

  Yes. The three of us are moms.

• 38:46Guy Raz?

  Yeah.

• 38:47Speaker 01

  So Nicole, Sarka, and I are all moms. And that is who I was observing. And moms have a lot of pain points, right? Whether you're working at home or working outside the home, and you're managing the household, raising the kids, you need to have energy, you have to have a good night's rest, you know? You have to be able to get up and do it all over again.

• 39:08Guy Raz?

  Yeah.

• 39:08Speaker 01

  And the way that we thought about it, right, was, okay, who, we're trying to get tequila into the house.

• 39:16Guy Raz?

  Yeah.

• 39:17Speaker 01

  For that wine occasion, to replace the wine, get rid of the wine, and insert the tequila. That happens through retail purchase, right? Through buying at the grocery store. Like in California, you can buy alcohol in a grocery store.

• 39:30Guy Raz?

  Yep.

• 39:31Speaker 01

  Right. So our whole idea was moms control the shopping. They make those decisions. So we're going to put this product where she can find it. Right? We're going to tell her how to use it. Give her permission to bring a hard alcohol into the home. Because prior to 21 Seeds, really, women would bring wine and beer, buy that for the house. And they weren't in the business of really buying hard alcohol for the house. And we really changed that behavior.

• 40:01Guy Raz?

  All right. So now you've got your start. You're doing some research here and you're talking to people. You're getting feedback. And tell me how you, you know, is it like going to? Because you can go to like Sonoma County and, you know, find a winemaker to make you your own, you know, bespoke wine brand. Like, it's not that hard to do. How, how do you do that? Presumably getting to Mexico, because it's like champagne, right? Tequila has to be made in a certain part of Mexico.

• 40:33Speaker 01

  Yes.

• 40:33Guy Raz?

  With certain, using certain methods.

• 40:36Speaker 01

  That's right. So the first thing we did was we, we hired a lawyer. We hired a booze attorney. We thought we got to wrap our heads around like, first of all, the legalities of how you sell tequila.

• 40:49Guy Raz?

  Yeah.

• 40:49Speaker 01

  Right? And then we also thought the, a booze attorney would, could point us in the direction of, you know, who are some of the distilleries down in Mexico that are making tequila for people?

• 41:02Guy Raz?

  Yeah. I, I wonder when, when you went down, it's, it's, it's in Oaxaca, right?

• 41:07Speaker 01

  No, Oaxaca is for mezcal.

• 41:08Guy Raz?

  A mezcal, sorry, sorry. It's in.

• 41:10Speaker 01

  That's okay. It's Jalisco, Jalisco.

• 41:11Guy Raz?

  Jalisco, forgive me, Jalisco, yeah. So you're down Jalisco. And, you know, I'm imagining. Three American women going down to Mexico saying, hey, we want to make these infused tequilas with fruits. Like, you must have run into some people who were kind of like not cool with that because that, you know, I'm just imagining they're thinking, well, that's not what tequila is.

• 41:32Speaker 01

  To be honest with you, I would say they were sort of open to it, but the, the real issue for us was really, in order to be able to infuse at scale, we needed to make some modifications at the distillery. And that's where the conversations became a little more complicated. Like, you want to do what? And you are, don't come from beverage, and you've never started a spirits brand, and you know, you're three, you know, girls. It is a very macho business still down there.

• 41:59Guy Raz?

  Yeah.

• 41:59Speaker 01

  So there was a bit of that, but um, really, it was about finding a partner who was willing to sort of innovate with us.

• 42:07Guy Raz?

  And what was so complicated about the ask was that because you're infusing fruits and, and in, in the tequila, they has to sit there longer presumably. So you'd have like, almost like vats, like, like how wine is made?

• 42:21Speaker 01

  So it wasn't just the actual making of it, also the storage, like, we needed to build refrigeration, being able to store this, the, the ingredients in refrigeration that didn't exist down there. So it was a real leap of faith that the distillery had to take, you know, to, to go on, to actually make this product. So we found a distillery that was willing to do that. And it turned out it was owned by a woman.

• 42:42Guy Raz?

  A woman-owned tequila distillery, which probably was rare and is still rare. And she was cool. She was like, I'm, I'm in. I can do this with you.

• 42:51Speaker 01

  Yes. And she actually, you know, she, her mother, this was actually really rare. Her mother owned a bottling facility in Veracruz. And she saw a lot of herself in us.

• 43:03Guy Raz?

  Hmm. All right. But then you also have to start having conversations with distributors because This is a business that requires distribution. So even before you had a product, you had to get, you had to try and get meetings with distributors. So what was your pitch to them?

• 43:23Speaker 01

  Yeah, so we, we put together the pitch. We said, here's what we've observed. This is drinks as easy as a glass of wine, half the calories. We're going after the mom consumer and we're going to push easy at home cocktail solutions from, for her, to her, you know, through online, like through Pinterest and Instagram and Facebook and so on. And they were like, no, thank you.

• 43:47Guy Raz?

  Wait, I'm curious why they would say that because that to me is a very good business argument. I'm thinking, wait a minute, this is interesting. So they're gonna market to moms. That's interesting. No one said that?

• 44:01Speaker 01

  Well, they just said, it's a pass.

• 44:04Guy Raz?

  Really?

• 44:05Speaker 01

  Yeah. Because at the time, tequila was being marketed to men and being sold like scotches and whiskeys. And that was what was, that, that is how tequila was being marketed back then.

• 44:14Guy Raz?

  But it's not that long ago. And we're talking 2018 and I'm thinking,

• 44:17Speaker 01

  I know.

• 44:18Guy Raz?

  Dollar signs here, but I, again, I would, you needed these people. You could not enter this space without, without their support.

• 44:27Speaker 01

  You can actually, and that's how we did it. Because you can do it through, we, we launched with Park Street.

• 44:33Guy Raz?

  Okay.

• 44:34Speaker 01

  Park Street is a distributor that, you know, checks the box on the three tier system. They are the ones who are delivering the booze to the customer, writing, you know, doing all of that. They just don't have a sales force.

• 44:46Guy Raz?

  Ah.

• 44:47Speaker 01

  Yeah, so if you can sell it in yourself, you have to sell it in yourself.

• 44:51Guy Raz?

  This is, this is key because the distributor also is the one who's positioning it in the store and having the conversation with the liquor store owner and, and the manager. And also like they're kind of, right? They're also your sales force, but, but, but basically if they don't believe in your product, you're kind of out of luck.

• 45:10Speaker 01

  Totally.

• 45:10Guy Raz?

  This distributor essentially, they're willing to just, You can send them a check and they'll deliver your product, but they don't have the resources to actually position it on the shelves or to make the pitch for it. You had to do all that.

• 45:25Speaker 01

  Exactly.

• 45:26Guy Raz?

  Interesting. Okay.

• 45:28Speaker 01

  And so that was how we launched.

• 45:31Guy Raz?

  Okay, just backing up for a sec because we haven't, I know that the tequila is now being, you got this distillery in Jalisco, this woman owned distillery and they're working on the product. Let's just go back to California for a second and talk about money. Because, you know, starting a beverage brand is not cheap. So like I'm thinking you go to a bunch of investment companies, VCs and, you know, you've got a pretty solid team there. Is that what you did to raise money?

• 46:02Speaker 01

  So initially, the three of us each put in the money to just, and it was, I want to say $100,000.

• 46:11Guy Raz?

  Yeah.

• 46:11Speaker 01

  We put in the $100,000 for the year of 2018 to just see if we could actually bring this, you know, make this product, do the development of the actual product.

• 46:22Guy Raz?

  I got you. So you have, you've secured a distributor, you've secured a distiller. Let's talk about the branding and the label and the name now, because that's also important.

• 46:37Speaker 01

  Absolutely. And so what we did was we took a walk to that tequila aisle and kind of looked at the aisle. And the first thing we noticed was that, first of all, there was no color. Like color was missing from the aisle. So we knew we wanted it to be bright and stand out, but not be like, we wanted it to feel premium. We were thinking like, we want it to almost be like a beautiful bottle of perfume that you would feel proud to give as a gift. So a lot of, we needed the label and the bottle to do a lot of heavy lifting for us because that was where a lot of the marketing was going to happen. And then what was interesting there was, you know, we actually hired a design agency that was very, very prominent in the space.

• 47:19Guy Raz?

  Yeah.

• 47:20Speaker 01

  And it actually took up a big piece. That was one of our big mistakes that we made.

• 47:25Guy Raz?

  Because you hired this very expensive firm to put together.

• 47:30Guy Raz?

  Ideas for a label.

• 47:31Speaker 01

  Yes.

• 47:31Guy Raz?

  And this does not work out.

• 47:33Speaker 01

  Yeah.

• 47:34Guy Raz?

  You fired them?

• 47:34Speaker 01

  Yes. Now, it's important to note that every brand that they have brought to market, like so many of their brands are for men. I mean, but those were the big spirits brands. Like, they had worked on many, many spirits brands. All of them, I would say the majority of them, you know, are being marketed to men. And so they kept pushing our label and the design into a sort of very masculine, like mustache handlebar kind of vibe. And we were like, that's not what we want. And so we'd give them notes and they would just ignore our notes. And it was actually very, a little bit scary, right? Because here we were, totally unknown. We were going with our gut.

• 48:12Guy Raz?

  Yeah.

• 48:12Speaker 01

  And we thought, we can't keep doing this. We can't keep giving them these notes and them ignoring them. So we fired them.

• 48:19Guy Raz?

  How much, how much did they cost a month? I'm curious. What was the retainer? Like 50 grand?

• 48:24Speaker 01

  I mean, I think we had only put in at this point $100,000. So it was like, almost, I would say almost half our budget was going to this.

• 48:31Guy Raz?

  Yeah, I'm sure.

• 48:32Speaker 01

  And it ate up a lot of time for us, which was quite valuable because, you know, we needed, we had sort of, I can tell you about these sort of early meetings that we had in terms of the final piece, which is who are the retailers, right? We wanted to be where mom shop. So we had pitched a big retailer in California that had many locations, like 147 locations throughout California selling alcohol.

• 48:58Guy Raz?

  This was Bevmo, I think, right?

• 49:00Speaker 01

  That's right.

• 49:00Guy Raz?

  And Bevmo is going to be critical for you in California because if you were going to go to every liquor, mom and pop liquor store, that would just take forever. But Bevmo, you know, is-

• 49:11Speaker 01

  Mission critical.

• 49:12Guy Raz?

  Probably 100, 150 or more stores in California alone, right?

• 49:16Speaker 01

  Yes, exactly. And more importantly, Guy, going back to our consumer. She's not going to make a separate trip to that mom and pop store. She's buying her stuff where she buys her stuff.

• 49:26Guy Raz?

  Right, because that that demographic is not going to like the corner liquor store.

• 49:30Speaker 01

  Exactly.

• 49:31Guy Raz?

  Right.

• 49:31Speaker 01

  Yeah, so we had through like a friend of a friend of a friend.

• 49:34Guy Raz?

  Yeah.

• 49:34Speaker 01

  We had, you know, we were able to get to who at the time was the liquor buyer at Bevmo. And and just pick their brain on this idea, right? And actually, to your earlier question, Guy, he was the one who was like, actually, I think this is a good idea.

• 49:52Guy Raz?

  Mm hmm. I'm not surprised because it's an innovative brand, right, Bevmo, but yeah.

• 49:56Speaker 01

  Exactly, and he thought, you know, the kettle botanicals had come out and he was like, it's sort of like a similar proposition in that it's, you know, a little lower ABV and it's, you know, that's like lighter vodka with flavor and this is tequila with flavor. I get it, like, he thought, I could see that tequila is on fire as a category. And this could be kind of like the kettle botanicals in the tequila aisle.

• 50:22Guy Raz?

  And the kettle botanicals is like, like Hendrix gin and all those spin offs that came out of that world, right? Like all those.

• 50:29Speaker 01

  Yeah.

• 50:30Guy Raz?

  Those kind of apothecary kind of brands of of gin.

• 50:34Speaker 01

  Exactly, and so he actually was one person that was very encouraging to us. And so he said, listen, once you get further along and you have a finished bottle, you know, they had these things called line reviews, which we hadn't heard of until, you know, we had this conversation. And what a line review is, is all the major retailers, which is where we wanted to be, right? Our strategy was like, we're going to go where mom shop, mom shop in grocery store chains. They shop at Target, they shop at Walmart, so we needed to get into those accounts. And those line reviews happen once a year in the spring. And you have to be ready with your product, everything done in like January. And if you are lucky enough to be invited to present at a line review, you have an opportunity to pitch your product.

• 51:17Speaker 01

  And then if if they decide to take you, then you go into their resets. So they completely reset the stores, all the shelves in the spring. And then based on how those products perform, then they do plug and play in the fall, which is like a reshuffling. So basically you have like, kind of like one chance to get in there.

• 51:34Guy Raz?

  Right. And the line review, this is Bevmo's line review.

• 51:38Speaker 01

  Yes.

• 51:38Guy Raz?

  Where they basically, it's like a, it's like a dog and pony show. Everybody comes there.

• 51:43Speaker 01

  Exactly. Uh, so then at that point, uh, we had been working, uh, with like a consultant, uh, this guy had, that had been in the, in the spirits industry. And he had worked with another design firm. Um, and so he said, listen, these three girls, they've already spent a fortune. You know, a big chunk of their budget. They don't have a ton of money and they're really, they have some interest from Bevmo, right? To, to, to, to show something. Can you work on this very tight timeline and, and deliver at this amount of money? And they said, yes. And they did an incredible job with our bottles.

• 52:18Guy Raz?

  So they came up with the label that we now, that I now know it's, which is, has the prominent, the fruit and the vegetables.

• 52:26Speaker 01

  Yes.

• 52:26Guy Raz?

  Like almost like a photorealistic image on the bottle. 21 seeds with that like sort of sunburst, um, design.

• 52:32Speaker 01

  Yeah, it's, it's actually the, from the top view, the top of an agave plant, but yes.

• 52:37Guy Raz?

  Okay, I got you right. So you get the first bottles out, I think, what, by, or samples of it, of this when? By the end of 2018?

• 52:47Speaker 01

  Yeah, so by the end of 2018 and we call up our, our friend at Bevmo and we say, okay, we have our bottles. Now, we were Frankensteining it, right? Like pouring the liquid in and, and we made our appointment with this guy and we go down to Bevmo and, you know, on a Friday, uh, we confirmed the meeting and we get there on Monday and we pick up the phone, there's no receptionist at Bevmo. And, and we were 15 minutes early because we were very excited and, um, we're talking, talking and 15 minutes go by and nobody comes to get us. And so I, we're thinking, oh, maybe we should email, send an email because maybe there's no receptionist. So they probably don't have assistance. So we send an email and then five minutes later, this lady comes out and she says, hey, uh, you know, you're here to see so and so.

• 53:31Speaker 01

  Um, yes, uh, well, so and so doesn't work here anymore. And we're like, well, we, we said, we just talked to him on Friday. What do you mean? Well, he didn't know he wasn't working here on Friday.

• 53:40Guy Raz?

  The guy, your contact who was like, come see me, I like this. He's no longer working there.

• 53:46Speaker 01

  Correct. And back to my movie days, I'm thinking, when the studio head leaves, you're done. You don't want to be known as that person's tequila.

• 53:54Guy Raz?

  It could have been like the click five, right? Like.

• 53:57Speaker 01

  Totally.

• 53:58Guy Raz?

  Like you do everything right and then you get to that moment and.

• 54:00Speaker 01

  And they fire the lead singer and don't want to be a boy band anymore.

• 54:03Guy Raz?

  Yeah. When we come back in just a moment, how Kat manages to avoid a humiliating encore to the boy band debacle. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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• 56:07Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's late 2018 and Kat and her partners are sitting in the headquarters of Bevmo having a very awkward moment. A woman there has just told them that the buyer who liked their product and wanted to give them a chance doesn't work there anymore.

• 56:26Speaker 01

  So we were sitting there, we're like, do we run? Should we just get out of here? Like, she doesn't know who we are. Like, this is our chance to go. We should go. And as we're debating whether we should just get up and leave, this guy comes out and he says, hi, I'm Gary. I'm the new so-and-so. My meeting just canceled. I'll take the meeting. And we were just like, oh, wow. So we go into the meeting and we tell him our story. He tastes the product and you could see his face lit up. He's like, wow. He was blown away. This is really good. And he said, okay, you know, if you get your product done and ready, then let's do the line review.

• 57:09Speaker 01

  So, cut to, we set the meeting with Gary and I email him just to find out how many people are going to be in a line review, just so I bring enough product for sampling and all of that. And I don't hear back from him. But we'd already made the appointment and I thought, you know, he's really busy because he's in line reviews. So this is fine. Let's just bring more product than we need. And so we say, okay, we're going to go into our meeting on Friday. And our thinking for the, for the labels was like, okay, everyone's telling us at most we might get two SKUs approved. There's no way. If you get one, you're lucky as a new brand, right? Because we're competing for shelf space against Diageo and Bacardi and Constellation and all their brands, right?

• 57:52Guy Raz?

  Yeah.

• 57:53Speaker 01

  So that shelf space is very, very coveted. So...

• 57:58Speaker 01

  And by the way, in spirits, you don't have to pay slotting fees like you do in non-alcohol. So it's a little more fair in that you, if you really do have that shining product, you can get through and it's not a matter of how much you can pay, right? With the slotting fees you have to pay. So we get there, same thing, we're waiting, we're waiting, we're waiting, and nobody comes. And we're like, where's Gary? So then we send another email and again, this person comes out and it's not him. And they're like, well, he's, he's gone. He's leaving Bevmo. He's no longer the person that's in charge of spirits. And they're like, this woman, Kim, the new buyer, she's doing the line. We go in, we pitch her the product line and she tastes them all.

• 58:44Speaker 01

  And she says to us, she's like, you know what? These are really good products and I think we'll end up probably bringing in one or two of these.

• 58:51Guy Raz?

  Yeah.

• 58:52Speaker 01

  And we said, great, you know, do the, you know, margarita two ways. Spicy margarita with a cucumber jalapeno and a regular margarita with a Valencia orange.

• 58:59Guy Raz?

  But you knew then and there that they were gonna, they were gonna make an initial order, which is encouraging.

• 59:03Speaker 01

  Yes, we felt really good about that. But we still had to actually make it at scale and that was a real problem.

• 59:11Guy Raz?

  Because?

• 59:12Speaker 01

  Because we'd never tried it before. So when we took our, we go down to Mexico to do our first production run using, you know, the instructions that we have come up with. And when we went to do that at scale, it just, it didn't work. And it was taking way, way too much time and it was, the equipment was breaking. We were clogging it up with like the pulp, you know, from the fruit and it was a disaster. And so that night we went home, it was like day one. And that night we went back to our hotels and we got the email from Bevmo. That was the PO.

• 59:49Guy Raz?

  And that said?

• 59:51Speaker 01

  And it said they wanted all three SKUs in all 147 stores.

• 59:57Guy Raz?

  All three flavors in all stores, which is how many cases?

• 1:00:00Speaker 01

  I think it was like 300 cases.

• 1:00:02Guy Raz?

  Wow, that's, that's great.

• 1:00:04Speaker 01

  No, it was insane. So now we had to get it to work.

• 1:00:07Guy Raz?

  And you got to get the money to finance this, right? Because a few hundred thousand dollars, you're going to need more than that.

• 1:00:13Speaker 01

  Yes.

• 1:00:13Guy Raz?

  To, you got to pay the distributor, you got to make the tequila. I mean, this is now, you got the bottles. And by the way, what was the, just as, just as a curiosity, what was the retail price going to be per bottle?

• 1:00:23Speaker 01

  Based on their margins and stuff, the retail price was going to be anywhere from like $32 to $34.

• 1:00:30Guy Raz?

  Okay.

• 1:00:31Speaker 01

  Yeah.

• 1:00:31Guy Raz?

  Now you needed to raise some money. So, did you think about going to professional investors, institutional investors, or VCs, or?

• 1:00:41Speaker 01

  Initially, we did not. Initially, for the seed round, we were just going to focus on friends and family.

• 1:00:46Guy Raz?

  Okay.

• 1:00:46Speaker 01

  We focused a lot on women because we wanted to be predominantly female owned. So we went after a lot of female investors, which typically in the Bay Area, they get left out of stuff, right?

• 1:00:58Guy Raz?

  So you could go to your, to these people and say, hey, we have this purchase order. We're raising money. And, and I think the first round, you raised a few million dollars.

• 1:01:06Speaker 01

  Two million, yep. We raised $2.15 million.

• 1:01:09Guy Raz?

  But now, you really have to build awareness. Now, I, how did you guys begin the process of building hype? I mean, because you're not going to go to bartenders, you're not going to be, and you have a very specific customer in mind. Let's be honest, many of whom are not huge barflies.

• 1:01:28Speaker 01

  Yeah.

• 1:01:28Guy Raz?

  Like, you don't see a lot of moms sitting at the bar pounding drinks.

• 1:01:34Speaker 01

  Quite the opposite. You don't see them doing that really at all.

• 1:01:37Guy Raz?

  And, you know, a lot of, the playbook again was like throwing these parties, getting these really like, really attractive young people at a bar and get everybody hyped up. And, and it's like, you know, Red Bull and, you know, whatever night, you know? You weren't going to do that. And also, that costs a lot of money. So what was the first step you were going to take to build awareness? Because now this is going to go into Bevmo by the end of 2019.

• 1:02:03Speaker 01

  It actually launched in Bevmo, April of 2019.

• 1:02:06Guy Raz?

  Oh, April of 2019, okay, wow.

• 1:02:08Speaker 01

  Yeah. Now, The plan was, right, we're gonna go where she is. So basically, we're gonna go on Pinterest. We're gonna go on Facebook. We're gonna go on Instagram. And then we did get a little lucky, right? In that we ended up on television right away because Bevmo did a thing for Cinco de Mayo. So basically, like, any touch point of press that we got. And obviously, you know, we did know a lot of people in publishing. So we were able to get some articles written about us. Like, we pitched Pop Sugar, for example, which is a very similar site to Refiner29. And we pitched the article to them about an easy three-step spicy margarita that you can make at home.

• 1:02:53Speaker 01

  And even if you don't know anything about how to make cocktails. And we would take those pieces of content and amplify the heck out of them. And one of our investors was an esthetician for Jessica Alba. And Jessica Alba fell in love with it straight away. And she just posted, you know, my favorite new adult beverage on her Instagram. And then we were going out and doing giveaways, like tons of giveaways on social media.

• 1:03:22Guy Raz?

  How would you do giveaways?

• 1:03:23Speaker 01

  So basically, you can't give away alcohol.

• 1:03:26Guy Raz?

  No.

• 1:03:26Speaker 01

  And you can't give away, like, a gift card to a retailer.

• 1:03:30Guy Raz?

  Yeah.

• 1:03:30Speaker 01

  All we would give you is the value of three bottles of tequila. So what you would ultimately win was just 100 bucks, basically.

• 1:03:39Guy Raz?

  Ah, okay, got it, okay. And also, I curiosity, at this point, when you're doing all this stuff, are your co-founders still doing their full-time jobs?

• 1:03:49Speaker 01

  No.

• 1:03:50Guy Raz?

  Wow, okay.

• 1:03:51Speaker 01

  Uh-uh.

• 1:03:51Guy Raz?

  Yeah, okay, so you've got this going. And by the end of this year, 2019, you guys sold, and they ordered 300 cases. By the end of that year, you had sold 1,800 cases. But I have to imagine that was in other retailers, not just Bevmo.

• 1:04:07Speaker 01

  Yes.

• 1:04:08Guy Raz?

  So where else were you selling these in mom and pop?

• 1:04:11Speaker 01

  We got into Molly's Stones.

• 1:04:12Guy Raz?

  Oh, Molly's Stones, okay, yeah.

• 1:04:13Speaker 01

  We're still following the same playbook.

• 1:04:15Guy Raz?

  You want places where moms shop?

• 1:04:17Speaker 01

  Places where moms shop. If she doesn't shop there, we don't want to be there. So we were very, very focused, which was what allowed us to really stretch our dollars, right? We were also wanting to get a distributor, right, that actually had a sales force. So we wouldn't have to go out and do all this ourselves.

• 1:04:34Guy Raz?

  Yeah.

• 1:04:34Speaker 01

  So we were kind of, we were also marketing to those folks. And the thing about those folks is they pay attention to certain accounts. So we went out and got into those accounts.

• 1:04:45Guy Raz?

  Which are?

• 1:04:45Speaker 01

  Which are like High Times in Newport Beach.

• 1:04:50Guy Raz?

  That's a liquor store?

• 1:04:51Speaker 01

  Yeah, it's a liquor store that's independent because most spirits brands at launch are not at Bevmo in 147 stores, right? So they're in the mom and pop shop. So there's certain mom and pop liquor stores that they pay attention to. So we wanted to make sure we were in those stores so we could go on the radar of those folks.

• 1:05:11Guy Raz?

  The distributors who could then bring you out beyond California to make you a national brand.

• 1:05:16Speaker 01

  But also to just be our distributor within the state of California. At this point, we're still doing everything ourselves.

• 1:05:21Guy Raz?

  Yeah.

• 1:05:22Speaker 01

  The, another lucky thing happened to us at the end of the summer of 2019. Another one of our investors knew Katie Couric. And so Katie Couric had tried 21 seeds at her house. And that summer, New York Magazine interviewed her and said, what was your favorite finding from the Hamptons that summer? And she said, it was 21 seeds. And I think it's going to be the next Casamigos. So then, of course, we took that and marketed to our distributors and marketed to the buyer at Molly Stone's and marketed to Bevmo and pushed that out. And people don't, they think that it just happens and that's the end of it. You have to push all of that out to all of the people.

• 1:06:00Guy Raz?

  Um, you would eventually get a distributor, but I don't think that happened until COVID. So COVID was a, turned out to be kind of a bonanza for booze because everyone started drinking more. I mean, some of these companies couldn't make enough of it.

• 1:06:18Speaker 01

  Yeah, my sister, who was like, she was an amazing forecaster. And during the pandemic, she knew stuff was going to really start to shut down. So she had the foresight to bring a lot of product in stateside. So we overbought so that we wouldn't run out of of supply. And part of that is because when you're in the chains, you can't run out of stock. Otherwise, they'll move someone else into your slot. They don't just run empty shelves, which then turned out to be great for us because we had product to sell. But by that point, we were now in Total Wine & More. We were regionally in Whole Foods. So we had expanded to more stores in California.

• 1:07:01Guy Raz?

  By the way, were you profitable?

• 1:07:04Speaker 01

  Um, for 2020, we actually were profitable because it was, um, you know, you didn't have to spend as much money on things like flying to distributors and opening a market. So like those kinds of expenses, um, you know, can really add up. And we didn't have any of that stuff. We were able to open all of those markets over Zoom, which it saved us a lot of money.

• 1:07:28Guy Raz?

  All right. So so 2020 is turning out to be a good year, a very good year. And you guys get a, I think, by the by the middle of that year, you do secure the biggest distributor called Southern Glazers to agree to distribute your product. And and by the middle of 2020, are you still only in California? Or at this point, are you outside of California?

• 1:07:52Speaker 01

  At that point, we're outside of California as well. We're in New Jersey and we're in New York.

• 1:07:57Guy Raz?

  And by the way, when Southern Glazers became a distributor, that, I mean, what did that mean? Because you're you're focusing on big retailers. So Bevmo, Molly Stones. What other big retailers did you start to get into?

• 1:08:11Speaker 01

  Target, Walmart. We got in to Whole Foods nationally. So what made that possible was having this national distribution deal with Southern. Because these big guys, when you're multiple states with Walmart, they don't want to deal with a bunch of different distributors. You know, they want to deal with one distributor in multiple states.

• 1:08:34Guy Raz?

  And and by, I guess, by early 2021, you start to get inquiries by.

• 1:08:42Guy Raz?

  But people potentially acquire you, you start getting like incoming from brands that are interested in you, unsolicited.

• 1:08:50Speaker 01

  Unsolicited, yes, because, you know, we're now on Nielsen.

• 1:08:55Guy Raz?

  Nielsen rates, I didn't know Nielsen does ratings for Spirits too? I guess they rate everything.

• 1:08:59Speaker 01

  Yeah, they rate everything. So there's Nielsen and IRI data. And we were now on the leaderboard. Like suddenly this little brand, 21 Seeds, is now suddenly the leader in flavored tequila. And it's actually growing serious share. So we started to get inquiries.

• 1:09:20Guy Raz?

  And I mean, I imagine when you started this, you had this idea of, you know, eventually, hopefully we can get acquired. But these conversations are happening fast. And, and so one of the, the suitors that approaches you in 2021 happens to be Diageo, one of the biggest beverage companies in the world, alcoholic beverage companies. They also own, I think, Casamigos and Don Julio and probably other tequila brands. And, and they wind up making you an offer. Tell me a little bit, I mean, I know that some people get uncomfortable talking about money and, you know, and that stuff. And I don't, I think it's amazing, just three years in, you get this offer. It's a $160 million offer.

• 1:10:02Speaker 01

  Yeah. So on, by every measure, we had set, accomplished everything we'd set out to do. And now it was like, how is this gonna, how is this brand gonna live on forever? Right? And get even bigger. We also knew that there would be quick copies, copycats, right?

• 1:10:21Guy Raz?

  Oh, yeah.

• 1:10:22Speaker 01

  I mean.

• 1:10:23Guy Raz?

  In a second.

• 1:10:23Speaker 01

  In a, already they were, there were already two brands that had totally copied us, you know, and that were being sold. So, and that, we knew there were more coming. So we knew there was like, we needed some air cover, right? If we were going to take this brand globally. And when we looked at Diageo, we thought, hey, listen, they actually are the biggest in tequila, which we thought was a huge positive, right? Because they have Don Julio and Casamigos. So the on premise already knows their brands really well. So you can piggyback on that, you know, knowledge.

• 1:10:56Guy Raz?

  Yeah.

• 1:10:56Speaker 01

  And they had nothing in flavors. So we were totally unique in their portfolio.

• 1:11:01Guy Raz?

  Like, once Diageo is on your side, you know, you can go, you go everywhere.

• 1:11:05Speaker 01

  Yeah. And, you know, and then we thought, are, is this a good deal for our investors? You know, are our investors making money? And so like, by all accounts, the, our investors were like, are you kidding? It was one of our best investments that we made of the year, you know? And we didn't even keep their money for very long.

• 1:11:20Guy Raz?

  No.

• 1:11:20Speaker 01

  Because the $4 million we raised, they, we only had that money for like a year and a half, you know? So it was like, everybody was happy, we were happy, and we felt like this brand now has a home and is gonna go and save everyone from drinking crappy margaritas.

• 1:11:38Guy Raz?

  So they, they acquire the company, 100% of the company, I think, right?

• 1:11:41Speaker 01

  Yes.

• 1:11:42Guy Raz?

  And, and you and your partners become?

• 1:11:44Speaker 01

  Ambassadors.

• 1:11:45Guy Raz?

  Brand ambassadors. And that's what you are still now, right?

• 1:11:49Speaker 01

  Yes. No, totally. Like, if a truck gets stuck in customs, I'm not the call.

• 1:11:53Guy Raz?

  Not your problem.

• 1:11:54Speaker 01

  Not my problem in the middle of the night, you know?

• 1:11:56Guy Raz?

  You're, you're just sipping tequila, maybe on the middle of the night, but.

• 1:11:59Speaker 01

  Drinking it in the spritz.

• 1:12:01Guy Raz?

  Yeah. And now they, obviously they have a massive marketing budget and, and, and just the ability to just move product.

• 1:12:12Speaker 01

  Yeah.

• 1:12:12Guy Raz?

  I think they sold, in their first year of, of owning it, they sold like, I don't know, 70,000 cases, maybe more than that. I think you guys sold, by in your last full year independently, you sold 66,000 cases.

• 1:12:25Speaker 01

  Yeah, exactly. So yeah, we still meet with customers, like our big customers, and get to pitch ideas that they either do or don't do. It's up to them. They get to do what they want. And that frees us up to, to go and be creative and do other things.

• 1:12:40Guy Raz?

  So I know that the journey, we just talked about it, you know, for a long time, was, was grueling and challenging. But when you look at it from 35,000 feet, it's like, whoa, that was like. A total of four years from like a less from like launch to exit.

• 1:12:58Speaker 01

  Yeah, like three years from from the day we ended up on shelves, almost to the day, three years, like we we got on shelf in April of 2019 and we closed the deal with Diageo March of 2022.

• 1:13:09Guy Raz?

  It's unbelievable.

• 1:13:10Speaker 01

  Yeah.

• 1:13:11Guy Raz?

  I mean, when you think about this, right, the fact that you, you know, you took 10 years away and then you come back into this business and obviously you built a network and you had some advantages because of your place in life and and, you know, the people you met and you were in San Francisco and there's a lot of, you know, tech people there and influential people there, but still like you still have to make a product that that works, right? How much of this story and what happened do you attribute to to the work you put in? And how much do you think had to do with luck and timing and good fortune and, you know, being at the right place at the right time?

• 1:13:49Speaker 01

  I like to say timing versus luck because luck sort of feels like it's happening to you, but timing, you know, with the movie, the timing was awful because they decided they didn't want to be a boy band anymore and I couldn't have planned it. And with this one, the timing was perfect. We hit every trend going on in spirits at the time and the the market was ready for this product. For sure, there were moments of luck, you know, that went our way. And then the rest of it is just hustle, making yourself, you know, in every step of the way, kind of seem bigger than you are so that you can make the money go further, you know? And that is so hugely important and I think played a huge role in why things happen so quickly for us.

• 1:14:33Speaker 01

  We connected those dots and did a really good job at it.

• 1:14:37Guy Raz?

  That's Kat Hantas, co-founder of 21 Seeds. What do you, what's your like go to food with tequila? Because I think a lot of people would say chips and salsa, right? Like, what, what, is that your go to?

• 1:14:51Speaker 01

  So I love to make Greek food, so this drink's so light. You know, I don't think it like complements the way that you look to wine to like bring out certain flavors, but I think of it more like it's refreshing and it accompanies nicely.

• 1:15:06Guy Raz?

  You gotta get Diageo to do like an Uzo-inspired tequila, like an aniseed-infused tequila. You're combining your two things.

• 1:15:17Speaker 01

  Yeah, I'll bring it up in the next innovation meeting.

• 1:15:20Guy Raz?

  You can then start exporting tequila to Greece and maybe like, you know, like you did to wine with moms in America, you could do to Uzo.

• 1:15:30Speaker 01

  Actually, Uzo, like a licorice-infused tequila would be delicious, actually.

• 1:15:34Guy Raz?

  Delicious.

• 1:15:35Speaker 01

  You know what? I'm gonna make it this weekend. I'm gonna do it this weekend, Guy. I'm doing it.

• 1:15:38Guy Raz?

  All right, send me the bottle.

• 1:15:40Speaker 01

  Okay, done.

• 1:15:42Guy Raz?

  Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyraz.com. This episode was produced by Carla Esteves with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Olivia Rockman. Our audio engineers were Robert Rodriguez and Gilly Moon. Our production staff also includes Carrie Thompson, Alex Chung, John Isabella, Chris Messini, Devin Schwartz, Catherine Seifer, Sam Paulson, J.C. Howard, and Elaine Coats. I'm Guy Raz, and you've been listening to How I Built This.