21 Seeds: Kat Hantas Transcript from https://podmenti.com/t/238f80ac4b27a04c 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 one hundred percent free, and to sign up, just visit gyras.com. That's G-U-Y-R-A-Z. dot com. 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 skews. In all hundred and forty seven stores. All three flavors in all stores will choose how many cases. I think it was like 300 cases. Wow. That's that's great. No, it's insane. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built. I'm Guy Raz, and on the show today, how cat hunt us turned a home hobby into twenty one seeds. An infused tequila that connected with moms and sold for$160 million just three years after launch. 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 springwater 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. Sell the story of your brand. Which is how Mike Cesareo succeeded in a crowded marketplace dominated by giant brand like Evian and Desani. It's a somewhat similar story with today's founder, Cat Huntis. 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 his cat entered early middle age? Those glass of wine really started to hit her heart. And strangely, or maybe not so strangely, her doctor suggested she switch to Blanco Tequila. No 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. Eventually, Kat started throwing chunks of fruit and herbs into her tequila. And soon, her group of fellow moms was also enjoying Cat's home infusions. After almost nine years of serving her homebrew cocktails at her house, Cat decided to make a business out of it. This was in 2018, and she called it 21 Seeds. No. If you went to a liquor store that year, you would see a lot of tequila brands. 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. Just as Liquid Death was trying to appeal to teens and young people who would otherwise drink an energy drink, Cat was targeting moms. Especi wine drinking moms looking for an alternative. But as you will hear, the spirits business is really rough. Fifty states with fifty different regulations. Challenges finding a distributor. And of course Tequila must be produced in one of five states in Mexico. If 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 Twenty One Seeds? Kat and her partners managed to sell it to the beverage giant Diaggio for a whopping amount of money. Now as I mentioned, before she launched Twenty One 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. Yeah, so we dated in college. Uh and that's where You know, his father is is still even today a s a very well known screenwriter. Eric Roth is his name wrote Forrest Gump. That's right, hero for scamp. Actually funny story there, I we were we were still dating at the time And uh I remember sitting at dinner one night and and Eric asked all of us, there was like we were like ten 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 in in the movie. It's like one of the iconic scenes of Force Gump with a like shrimp scampey, fried shrimp. Oh yeah. Remember that scene? Yeah. So I was like, oh my God, we were there. I remember that conversation. So that was really funny. And and I think it it it was through your connection to to Josh and his family that you decide to get into the film industry as well, uh initially as an agent. Um and you you wound up working for CAA, the the town agency and And started out I guess as as most people do in the mailroom, right? 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 um The way that you get promoted out of the mailroom is based on the need, like what whatever sort of desk opens up. So In that way you you don't have as much say in what you end up doing. So you were thinking I wanna represent Clooney and and uh, you know Red Pitt. But that's not necessarily what's gonna happen. 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 a 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. uh that I was sitting across from Um while at CAA. and she would talk to me about books that she was reading all the time. Um 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. And um you guys in nineteen ninety eight, I guess, form Like your own production company and and tell me w about the movies that you wanted to make. We basically thought, okay, let's do Music driven stuff? And horror movies because with humor it's harder, right? Cause you go overseas or somewhere and and the the mu the humor doesn't translate. But with horror A It works if 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-less talent that we really wouldn't be able to get. Yeah. And so I guess w the way it works is you've gotta find somebody to finance a film and then you've gotta find you gotta bid for a script and I I mean it's it's you're and you're up against huge production teams, like with you know, uh Academy Awards and lots of money and so That must just be a tough business for two People just starting out. Yeah. Ninety-nine percent of the time the projects never see the light of day. For a myriad of reasons. Um So overall, um how many films did you guys end up making? 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. It just shows you how hard that business is. Because you guys started in ninety eight, and I know you you kind of wound it down in two thousand seven, but I mean that's That's what, nine years. Yeah, nine years. And and in nine years you make one film and that just shows you how hard that business is. Oh yeah. A 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. 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 Yeah, it's not horror at all. It's it's totally it's totally music driven. Okay. 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. Two high school girls who kidnap a boy band. The boy band was played by a real boyband, 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. Click Five, okay. And The Click Five, they had just had a gold album. They were on Jingle Ball. Wow, I've never heard of Yes, guy, because guess what happened? What happened? The whole thing fell apart on the last day of our shooting. Oh my God, the Click Five from Boston. They could have been like the new kids on the block, but no one ever heard I haven't heard of them. Oh my God. 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 legit musicians, too. Legit musicians? Berkeley College of Music and stuff, yep. They were amazing. So last day of shooting, I get a call from Craig Helman, 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. Wow. Eric from the band and they don't want to be a boyband 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? Uh what are you talking about? And he said, and it's worse, they're not gonna promote the film because they don't wanna be a boyband and they don't want anything to do with boy bands, and they're not gonna 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. That was gonna be a revenue stream. It was gonna promote the film, right? Like it was gonna 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 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. And then our movie went to television. Well. All right, so I guess this was the cue for you, I guess, also to exit stage right. And um And and kinda take some time off. I guess in the meantime around y you had gotten married. Yes, and it's funny that you say Q because my husband is Quincy and we often call him Q. So So the Q works on many levels, guy. Got it. Okay. Okay, so you you and Quincy uh uh get married. I think around two thousand nine 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? Yes. We have Elias and I am pregnant with Abigail. Yeah. So she's born in San Francisco. And um I guess uh sort of around Around this time. um when you were s you sort of in your mid thirties. You started to get affected by By alcohol. Particularly by wine. Tell me. Tell me what was happening. Yeah. So I was thirty five. And what I was noticing was I would have a glass of wine while I was making dinner, and usually a glass of wine with dinner. So I'd have like two glasses of wine. And That night I wouldn't sleep well, but 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 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. And and I should mention, I mean tequila is I think It's gotta be one of the only spirits that is Not distilled from a grain. Right. Right. Yeah. I think I mean there must be others that I've As a category. I mean you can make vodka from potatoes and stuff like and you can make, you know, uh I should say grain but but it's not from a starcher grain. It's like It is literally from It's it's an agave, yeah, it's an agave plant. It's a it's a it's a cactus. Yeah. So tequila s 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 cheese 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 distilled spirit vodka same thing, right? Um gin, you just pass it through a flavor basket. Um, but Basically, there's nothing living in it anymore, right? Distilled is just cleaner. But he said try Blanco Tequila, but why not like vodka or whiskey. I mean, those are also not right. They're also distilled. 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 leeches 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 Um a a white. Spirit. I mean what a doctor. I have never met a doctor who's like, Hey, just do tequila shots. You're gonna be good. And he didn't say shots. Yeah. I mean honestly, I ha I didn't analyze it that much. I just kinda thought I'll just try it. I'm just gonna go home and try not drinking wine and see how I feel. And and substitute with with white tequila. At first That was a hard pill to swallow, to be honest, because I was like uh That sounds very harsh and aggressive for a Tuesday night. Um 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. No. The way that it it existed. You make ranch water. Club Swed Online. That's what you do. Right, exactly. But then Even that to me I could still taste the harshness of tequila. Mm. And I quite liked wine, so I it needed to be as good. Yeah. Or better. than the glass of wine. And I thought I gotta do something to the S tequila to make it more drinkable and easy to use. So I started infusing it. Infusing it like with vanilla pots or chili peppers or what? Yeah, so the very first infusion that I made was cucumber jalapeno. You just you just took a bottle of tequila and dumped it in a pitcher with cut up cucumbers and Chopped up jalapeno? 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? Fresh. 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. So once you had like that infusion, would you sip it or would you would you Pour in some soda water in a glass and and And some of that tequila. Bingo. I would do what you just described. I would take a wine glass,'cause I also like the ritual of holding the wine glass, so I would take a 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. And I guess I guess when you would have people over You would offer them some of your infused tequila. 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. Um there was like a honeydew kiwi, um, and I would just make bottles of infused tequila. Um different club sodas out, and then just like a charcuterie board of filled with garnishes. And that is how I entertain, even today. Alright, 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 A and Mm At what point in that uh during that time,'cause I'm sure now and again people would be like, Cat, 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. Definitely. Um, but even with them asking for it, I would just make it for them and still was not thinking this is a business. 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 gonna go work for someone. Um 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 it Just to Time set this. This was like you know, twenty eighteen, right? So George Clooney had come out with Casamigos and that really I think brought in like a whole slew of tequila's that had come on market, people like wanting, you know, both celebrities and non celebrities. That just there was like a celebrity explosion of tequila's. Unbelievable amounts. Exactly. And then guys were switching from beer to tequila, I think to drink, you know. fewer carbs and and so on. So I noticed that that was number one, and number two. I noticed People were ordering uh especially women, like tequila soda splash of juice, tequila soda uh 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 because at that time in the world of tequila there were shots. So like woo woo. And then there was like sipping tequila. Right, and the sipping tequila was really being marketed like scotches and whiskies to a male consumer. And there was nobody talking about, you know, spritzes. And um that wine occasion and to women. So That's when I was like huh, there's something here. that's not being addressed. Um, it's it's interesting because I mean as as all this is happening on you could uh taken a completely different perspective and thought, you know. George Clooney, all these celebrities getting into Tequila, like This is just a a mad dash right now. It just seems. Like You know, a gold rush that that that That's probably gonna be a bust. 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. Yeah. Um, I think you were in your mid forties at this point, and I say that because I think a lot of people think, Oh, you have to be twenty-two to be a founder of a company. But actually most companies are started by people, first time founders are in their forties and and tend to be more successful because they have more experience. And so I think it's It's important to point that out because people think, oh, it's too late. I'm in my forties, fifties, sixties. We've had people in the show start business in their sixties. Um so at this point You're thinking. I think I wanna Do this. First. series of steps. Like did you start to reach out to to to to someone? Did you so first thing I did was I gotta find some partners. You don't want to do this by yourself. Heck no. Heck no. I 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. Yeah. And your family very quickly tired 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 that there were things that I Hate. doing and don't know how to do and didn't want to learn in my 40s. Yeah. 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 s 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. And she lived in the Bay Area? Yes. And she had been the CFO of Refinery Twenty Nine. Which is a hugely s you know Right, like a very influential. Website for fashion and food and trends and yeah. Exactly. She was their CFO. Then uh she went on and was uh the CFO and the COO of Britain Co., which was sort of a millennial Martha. Yeah, type of venture. Um, and then she was at the time when I asked her to start this this business with me. Uh she was the CFO of Angelist. Oh wow, the that which is a a way for people to do angel investing. So she exactly had a lot of experience in in the tech sector working for media companies and she was already in the Bay Area. Yes, exactly. And so w you s what did you say to her did you say hey 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. Yeah. Not just, you know, help me on the side. And she said, yes. She said, Yes, I will quit my job. No, no, no. I won't quit my job. No. No. She's too smart for that. She's a CFO. There's no money in the beginning. 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. I'm just curious. During this time. Were there people who said to you Cat, you know. Th 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 Minuscule. Did anybody push back or or give you any kind of feedback like that? Yes, definitely. Because that would have been responsible. By the way. Yeah, a hundred percent. In fact, That's the only thing that Most everyone sent to us. 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. Hey, welcome back to How I Built This. I'm Guy Raz. So it's twenty eighteen 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. 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. And what would you ask them? And we would ask them, uh, you know, like, do you drink tequila? You know, uh how does it sell in your bar and restaurant? Like what 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 every state has different laws. 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. You have to go through distributors. So your your initial customer is not your ultimate customer, right? Yeah. Um 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 gonna get this done. But You know Listen, we were three smart girls. And um and we just had We we had this belief that there was a white space that nobody was servicing. So it would be you, your sister Nicole, and your friend Sarah Kasing, um, who had worked in w for with some food companies before. Right. And she was a Stanford engineer uh lit that was a friend of mine as a a mom friend, but she had worked in food. Uh innovation. So she she knew how to bring a product. to market commercially and she knew how to deal with, you know, uh the commercialization of a something you're making at home. What I'm curious about is If even in two thousand eighteen, I mean now it's even more so, but i if you went to just even a whole foods in two thousand eighteen. 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. Uh did you guys do that? Did you walk through stores and like look at the bottles and then w at any point did you think, Oh, there's just so many brands here. How are we gonna break through? Like I don't I'm just curious how ha uh about your thinking process. Yeah. Basically there were some flavored tequila 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 as a category, the three of us as 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 I 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. Sorry, so you you want to make a tequila that does not have uh those qualities does not taste like a jolly rancher. Um and For the The drinker, the consumer You're thinking of a specific type of woman, right? Yes. Mons. Moms. Yes. The three of us are moms. Yeah. So Nicole, Sarka, and I are all moms. And That is who I was observing. And Moms have a a lot of pain points, right? Whether you're working at home or working outside 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. Yeah. And um the way that we thought about it, right, was okay. Who we're trying to get tequila into the house. Yeah. 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. Yep. Right. So Our whole idea was Mom's control. The shopping. They make those decisions. So We're gonna put this product where she can find it. Right? We're gonna tell her how to use it, give her permission. to bring a hard alcohol into the home because prior to twenty one seeds, Really, women would bring wine and beer by that for the house, and they weren't In the business of really buying hard alcohol. Uh for the house. And we really change that behavior. Alright, so now you've got You start you're doing some research here and you're talking to people You're getting feedback. And Um But tell me w how you Um You know Is it like going to'cause you can go to like Sonoma County and you know, find a wine maker to make you your own, you know, bespoke wine brand. Like it's not that hard to do. Um how how do you do that? Uh, presumably getting over Mexico because it's like champagne, right? Tequila has to be made. in a certain part of Mexico with certain using certain methods. That's right. So the first thing we did was we um we hired a lawyer. We hired a booze attorney. Um We thought we got a Wrap our heads around like First of all the legalities of how you sell tequila, right? And then we also thought though a 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? Yeah. I wonder what When you went down it's it's it's in Oaxaca, right? Noxa is for uh Mezcal. Sorry, sorry, it's in Jalisco, Jalisco. Yeah. So you're down in Jalisco. And y you know, I'm imagining three American women going down to Mexico saying, Hey, we want to make these infused tequilos with fruits, like you must have run into some people who were kind of like not cool with that because That I you know, I'm just imagining they're thinking, Well that's not what tequila is. 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. 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. I mean what was so complicated about the ask was that 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. So it wasn't just the actual making of it, also the storage. Like we needed to build refrigeration, being able to f 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. Uh 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. 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. Hm. Alright, but then you also have to Стартін конверсайз with distributors because This is a business that requires distribution. So Even before you had a product You had to get y had to try and get meetings with distributors. So what was your pitch to them? 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 gonna push easy at home cocktail solutions from for her to her, you know, through online, like True. Pinterest and Instagram and Facebook and so on. And There were like No thank you. Wait, why wait I 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 mark it to moms. That's interesting. No one said that? Uh well, they just said it's a pass. Really? I'm surprised. Yeah, they because at the time tequila was being marketed to men and being sold like scotches and whiskies. And that was what was what that that is how tequila was being marketed back then. But it's not that long ago. I mean we're talking twenty eighteen and I'm thinking I know. Dollar signs here. But I again I would you needed these people. You could not enter this space without Without their support. You can actually, and that's how we did it, um, because you can do it through We we launched with Park Street. Okay. 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. So if yeah. So if you can sell it in yourself, you have to sell it in yourself. This is a key 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 o 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 kinda out of luck. Totally. This distributor essentially They're willing to just d you know, you can send'em a check and they'll deliver your product, but they don't have the resources to actually position it on the shelves or to you know to to to to make the pitch for it. You had to do all that. Exactly. Interesting. Okay. And and so that that was how we launched. Okay. But just backing up for a sec,'cause we haven't w I know that the tequila's now being you got this 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.'Cause you know, starting a a a beverage brand is not Cheap. So Like I'm thinking You go to a bunch of investment companies, uh uh V Cs and You know. You've got A pretty solid team there. Is it is Is that what you did to raise money? So initially the three of us each put in the money to just It and it was Uh I wanna say A hundred thousand dollars. Yeah. We put in the hundred thousand dollars for the year of twenty eighteen to just Si if we could actually bring this. you know, make this product. Do the the the development of the actual product. I gotcha. So you so you have you've you've secured a distributor. You've secured a distiller. Let's talk about um the the branding and the label and the name. Now. Because that's also important. Absolutely. And so what we did was we we took a walk to that tequila aisle and kinda looked at the aisle. And the first thing we noticed was that First of all, there was no color, like it color was missing from the aisle. So we knew we wanted it to be bright and 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 um that you would feel proud to give as a gift. So a lot of we we needed the label in the bottle to do a lot of heavy lifting for us because that was where a lot of the marketing was gonna happen. Um and then what was interesting there was, you know We actually hired a design agency that was very, very Prominent? in the space. Yeah. And it and it actually one of our big mistakes that we made. Because you you hired this very expensive firm. Ideas for a label. Yes. And and and this does not work out. They you fired them? 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. Yeah. And we thought we can't keep doing this. We can't get giving them these notes and them ignoring them. So we fired them. How much how much should they cost a month, I'm curious. What was the retainer? Like fifty grand? I mean I I think We had only put in at this point a hundred thousand dollars, so it was like Almost I would say almost half our budget was going to this. Yeah. I'm sure and it ate up a lot of time for us, which was quite valuable because You know, we needed w we had sort of I'll I can tell you about these sort of early meetings that we had in terms of the 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. This was Bevmo, I think, right? That's right. And 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 Yeah, is it Mission critical. hundred and fifty or more stores in California alone. Right. 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. Right. Cause m uh that that demographic is not going to like the corner liquor store. Exactly. Yeah. So we had through like a friend of a friend of a friend, we had, you know, we were able to get to who at the time was the liquor buyer at Bevmo. And um and just Pick their brain on this idea. Right. And actually, to your earlier question, Guy He was the one. Who was like I actually I think this is a good idea. Mm-hmm. I'm not surprised'cause it's an innovative brand. Right moment, yeah. Exactly. And he thought, you know Um, the kettlebotanicals had come out and he was like it's sort of Like a d 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's on fire as a category. And this could be kinda like the kettle botanicals in the tequila aisle. And the kettle botanicals is like Like Hendrix Jin and all those spin offs that came out of that world, right? Like all those those kind of apothecary kind of brands of of gin. 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 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 gonna 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 pit your product, and then if it 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. Right. And the line review this is Bevmo's line review. Yes. Where they basically y it's like a it's like a dog and pony show. Everybody comes there. Exactly. Uh then at that point Um 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 uh 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. So they came up with the label that we now n that I now know it's which is has the f prominent the fruit and the vegetables. Yes. Like almost like a photorealistic image on the bottle. twenty one seeds with that like sort of sunburst. um design. Yeah, it's it's actually the from the top view, the top of an agave plant. But yes. Okay, I got you right. So you get the first bottles out. I think What? U or samples of it of this when by the end of twenty eighteen? Yeah, so by the end of twenty eighteen and we call up our our friend at Bebman, we say, Okay, we have our bottles. Now we were Frankensteining it, right? Like pouring the liquid in. Um And we made our appointment with this guy and we go down to Bevmo and you know on a Friday Uh, we confirm the meeting and we get there on Monday and we pick up the phone there's no receptionist at mo and And we were fifteen 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 th 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, 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, you didn't know he wasn't working here on Friday. The guy your contact who's like come see me I like this. He's no longer working there. 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. It could have been like the click five, right? Like Totally. Like do everything right and then you get to that moment and And they fire the lead singer and don't want to be a boy band anymore. Yeah. When we come back in just a moment, how Cat 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. 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. 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. Um I my meeting just canceled, I'll take the meeting. And we were just like, oh wow. So we go in to the meeting, uh 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. So Katu We set the meeting with Gary and Uh, I email him just to find out how many people are gonna 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 gonna 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 Diage and Bocardi and Constellation and all their brands, right? Yeah so that shelf space is very, very coveted. Um so 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 shin 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. Yeah. 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 reviews. We go in. We pitch for the product line. And she tastes them all. 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. Yeah. And we said great, you know, do the You know, margarita two ways, spicy margarita with the cucumber jalapeno and a regular margarita with the Valencia orange. But you knew then and there that they were gonna they were gonna make it initial order, which is a encouraging. Yes. We felt really good about that. But we still had to actually make it at scale, and that was a real problem. Because 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. And That said. And it said they wanted All three SKUs in all hundred and forty seven stores. All three flavors in all stores, which is how many cases? I think it was like Three hundred cases. Wow. That's that's great. No, it's insane. So now we have to get it to work. And you gotta get the money to to finance us, right? Because a a few hundred thousand dollars you're gonna need more than that. Yes. Uh, and by the way, what was the just at just as out of curiosity, what was the retail price gonna be per bottle? Based on their margins and stuff. uh the retail price was gonna be anywhere from like thirty two dollars to thirty four dollars. Okay. Yeah. Now you needed to raise some money. So Did you think about going to professional investors, to and institutional investors or V Cs or Initially we did not. We initially for the seed round we were just gonna focus on friends and family. Okay. We we focused a lot on women because we wanted to be predominantly female owned. So we went after a lot of female investors. Um, which typically in the Bay Area, they get left out of stuff, right? So you could go to your to these people and say, Hey, we have this purchase order. We're raising money and uh and I think the first round you raise a few million dollars. Two million, yep, we raised two point one five million dollars. But now You really have to build awareness. Now I I how did you guys begin the process of building hype. I mean because you're not gonna go to bartenders, you're not gonna be and you're you have a very specific customer in mind. Let's be honest, many of whom are not huge Bar flies. Yeah. Like you don't see a lot of moms sitting at the bar Uh pounding Drinks. Quite the opposite. You don't see them doing that really at all. And you know, a lot of b the the 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. Um you weren't gonna do that. And also that costs a lot of money. So What was the first step you're gonna take to build awareness?'Cause now this is gonna go into Bevmo By the end of twenty nineteen. It actually launched in Bevmo April of twenty nineteen. Oh, April of twenty nineteen. Okay. Wow. 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 uh Pop Sugar, for example, which is a very similar site to Refinery Twenty Nine. And We pitched the article to them about An easy three-step spicy margarita that you can make at home 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. um on her Instagram. And then we were going out and doing giveaways, like tons of giveaways on social media. How would you do giveaways? So basically you can't give away alcohol and you can't give away like a gift card to a retailer. Yeah. All we would give you is the value. of three bottles of tequila. So what you would ultimately win was um just a hundred bucks basically. Oh, okay, got it. Okay. And and and When you're doing all this stuff. Are your co founders still doing their full time jobs? No. Wow, okay. Yeah. Okay, so so you've got this going and and by the end of this year, twenty nineteen You guys sold and they ordered Three hundred cases. By the end of that year you had sold eighteen hundred cases, but I am have to imagine that was In other retailers, not just Bevmo. Yes. So where else were you selling these in in Mommy? We got into Molly Stones. Oh Molly Stones, okay, yeah. We still following the same Playbook. You want places where moms shop. Places where mom 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. Yeah. 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. Which are like High time in Newport B. Um That's a a liquor store? Yeah, it's a liquor store. that's independent because most spirits brands at launch are not at Bevmo in a hundred and forty seven stores, right? So they're in a 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. The distributors who could then bring you out beyond California. To make you a national brand. But also to just be our distributor within the state of California. At this point, we're still doing everything ourselves. Yeah. The another lucky thing happened to us at the end of the summer of twenty nineteen. Another one of our investors who New 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 gonna be the next Cas Amigos. So then of course we took that and marketed to our distributors and marketed to the buyer at Molly Stones 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. 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 for for booze because everyone started drinking more. I mean in uh some of these companies couldn't make enough of it. Yeah. My sister who was an like She was an amazing forecaster. And during the pandemic, she knew stuff was gonna 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 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. Um but by that point we were now in total wine and more. We were um regionally In whole foods, so we had expanded to more stores in California. By the way, were you profitable? 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 kind 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. Alright, so so twenty twenty is Turning out to be a good year. Very good year. And you guys get a by I think By the by the middle of that year you do Secure. Um The biggest distributor called Southern Glazers. um to agree to distribute your product. And and By the middle of twenty twenty, are you still only in California? Or at this point are you outside of California? At that point we're outside of California as well. We're in New Jersey and we're in New York. And and by the way, when Southern Glazers That m I mean, what did that mean?'Cause you you're you're focusing on big retailers, so Bevmo, Molly Stones, What other big retailers did you start to Get into. Target. Walmart. Mm-hmm. Um, 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 wanna deal with one distributor in multiple states. And and by I Guess by early twenty twenty one. You start to get inquiries by potenti but people who want to uh potentially acquire you. You start getting like incoming From Brands that are interested in you. Unsolicited. Unsolicited, yes, because You know, we're now on Nielsen. Nielsen rates I didn't know, Nielsen does ratings for for spirits too. I guess they rate everything. Yeah. Yeah. They rate everything. Yeah. So there's Nielsen and IRI data. Um, and we were now on the leaderboard. Like suddenly this little brand, Twenty One Seeds, is now suddenly the leader in flavored tequila. And it's actually growing serious share. So we started to get Inquiries. A and I mean I imagine you when you started this you had this idea of oh, 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 twenty twenty one happens to be Diagea, one of the biggest beverage companies in the world, alcoholic beverage companies, they also own I think Casamigos and Don Julio and and uh probably other tequila brands and and they wind up making you an offer. Um ta tell me a little bit about I mean, I I I know that some people get uncomfortable talking about money and you know, and that stuff and I don't um I I think it's amazing. It's three years in. You get this offer. It's it's a hundred and sixty million dollar offer. Yeah. So on by every measure we had set accomplished everything we've set out to do, and now it was like how is this gonna How's this brand gonna live live on forever, right? And get even bigger. Um, we also knew that there would be Quick copies. Copycats, right? Like hundred I mean. In a h already they were there were already two brands that had totally copied us, you know, and that were being sold. Um so and that we knew there were more coming, so we knew there was like we needed some air cover. Right, if we were gonna take this brand globally. Yep. And when we looked at Diagea, 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 Cas Amigos, so The on premise already knows their brands really well, so you can piggyback On that You know, knowledge. Yeah. And they had nothing in flavor, so we were totally unique. in their portfolio. Like once Diagio's on your side. You know. You can go you go everywhere. 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 y we didn't even keep their money for very long because the four million dollars 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. So they they acquire the company, a hundred percent of the company, I think, right? Yes. And and you and your partners become ambassadors. Brand ambassadors. And that's what you are still now, right? Yes. No, totally. Like if a truck gets stuck in customs. I'm not the call. Not your problem. Not my problem in the middle of the night, you know? You're you're just sipping tequila. Maybe on the middle of the night, but Drinking it in the springs. Yeah. And now they obviously they have a massive marketing budget. and uh and and and just the the ability to just move. Product. Yeah. I think they sold the in the first year. Of of owning it they sold like. I don't know. Seventy thousand cases maybe more than I think you guys sold. But in your last full year, independently, you sold sixty six thousand cases. 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. Um, and that frees us up to to go and be creative and do other things. So um I know that the journey we've just talked about it, you know, for a long time was was grueling and challenging, but when you look at it from thirty five thousand feet, it's like Whoa. That was like A total of four years. From like a less. From like launch to exit. Yeah, like three years from st from the day we and ended up on shelves almost to the day. Three years. Like we s we got on shelf in April of twenty nineteen and we closed the deal with Diageo in March of twenty twenty two. It's unbelievable. Yeah. I mean when you think about this, right, the fact that you Y you know, you took ten 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? Um How much of the This story and where what happened do you attribute to Two the work you put in and how much do you think had to do with luck and timing and good fortune and Yeah, being at the right place at the right time. I like to say timing versus luck, because luck's 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 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. Um, and then The rest of it is just hustle. making yourself, you know and 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. We connected those dots and did a really good job at it. That's Cat Hontis, co-founder of Twenty One Seeds. Um What do you W what's your like go to Food. with tequila.'Cause I think a lot of people would say Chips and salsa. Right. Like what what is that your go to? So I I love to make Greek food, so this drink so light. You know, I don't think it like compliments 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. You gotta get Diagio to do like an uzo inspired tequila, like an aniseed infused tequila. You can you're combining your two things. Yeah. I'll bring it up in the next innovation meeting. You can then start exporting tequila to Greece. And maybe like You know, like you did to wine. In with with moms in America, you could do the Uzo. Actually Uzo uh a licorice infused tequila would be delicious, actually. Delicious. It would be you know what, I'm gonna make it this weekend. I'm gonna do it this weekend, guy. I'm doing it. All right, send me the bottle. Okay, done. 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 guy.com. This episode was produced by Carla Esteves with music composed by Ramtin Arablui. 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 Massini, Devin Schwartz, Catherine Cypher, Sam Paulson, JC Howard, and Elaine Coates. I'm Guy Raz and you've been listening. to how I built this.