--:-- Ryan Hanley: I wouldn't be where I am today if I hadn't made those mistakes. First two years, I wouldn't change it for anything. It took a lot longer for us to get to market because I was trying to learn as I went. I had to make those mistakes. Going through all those pitfalls and speed bumps along the way got us to market in a way that the product was amazing.
--:-- Ryan Hanley: What is it about honey? It seems like everything you do is honey related. Obviously you've tapped into a differentiator in the various beverage brands that you have that we're going to talk about. I want to dig into them and really talk about your entrepreneurial journey. But what was it about honey as a sweetener that made you decide to really leverage it as much as you have as a differentiator in your brand?
--:-- Jack Espy: Totally. Yeah. I get that question a lot. It's funny because I've always loved honey ever since I was a little kid. Even today, I wake up and put honey in my coffee. Have you ever tried that? That's my main sweetener. Then I put it on steak. I pretty much only eat meat and fruit, and I put honey on steak. I put it on everything.
--:-- Jack Espy: How it all started was in the middle of the pandemic. I had just lost my job out of college, which was in real estate finance. Like everybody else, I was at home mixing up one too many quarantine cocktails. One night, I was mixing my two favorite drinks at the time: Moscow mules and Mexican mules. I was making these drinks for my friends, and they were like, "Damn, Jack, these drinks are really good. You should can them."
--:-- Jack Espy: Little did I know—I didn't know anything about business, nothing about starting a company. Naive me was like, "Why not take a stab at this?" We were thinking about different names for this new brand, and I said, "What about the name Mint Bee?" They all said, "Dude, that is the stupidest name I've ever heard of." I said, "Well, there's a mint in a Moscow mule, and bee because Moscow mules and Mexican mules are sweetened with honey." They were like, "What are you talking about, dude?"
--:-- Jack Espy: Little did I know, I was making these drinks wrong. But because I have that honey addiction, I was just happening to sweeten my Moscow mules and Mexican mules with honey, not even knowing that wasn't an ingredient. That's when the light bulb went off. I thought, "What if I took a different approach to this whole industry?" Instead of sweetening these drinks with synthetic sugars like aspartame or sucralose—I don't even like the taste of stevia, and a lot of people don't either—I thought, "What if I sweetened it with the world's first natural sweetener, which is honey?" It tastes amazing. So that's how I started Spirited Hive.
--:-- Ryan Hanley: And also, your other brand, Stripe Soda, is sweetened with honey as well. Spirited Hive was first, correct?
--:-- Jack Espy: That was first. Yeah. That was my first point at creating a brand. I started with that brand and built it up. That started in 2020. Got it to market in May of 2022, so it took about two years to get it on the shelf. I built that brand as a Nashville-based brand.
--:-- Jack Espy: One thing that's always been a pillar in my life is health and fitness. I always wanted to create a better food beverage within the soda category. As I was building Spirited Hive, I saw the same thing happening in multiple other beverage spaces—a lot of "better for you" was all about calories and low sugar or no sugar. For me, I thought, "That doesn't mean it's better for you just because it has zero calories and zero sugar. It means you're ingesting synthetic ingredients, which I don't want in my body." That's why I started Stripe Soda—a better-for-you soda using honey as a sweetener and also aiding in hydration, because we walk around dehydrated every single day without even knowing it. Why not have a great-tasting soda that also hydrates you throughout the day?
--:-- Ryan Hanley: Talk to me about those first two years. It seems like you had to have a lot of faith building a brand for two years before you actually put it out into market and tried to make any money. What were those first two years like getting this thing off the ground?
--:-- Jack Espy: At the time, I thought it was a lot of failure. I was throwing all the spaghetti at the wall and nothing was sticking. I was trying to figure it out. I knew nothing about the beverage alcohol industry, nothing about starting a brand, nothing about being a founder, nothing about being a leader. It took a lot of time to get the product to where I wanted it to be because I didn't want to release a product that had okay branding and an okay tasting product. I wanted everything to be perfect, and it took a really long time to get there.
--:-- Jack Espy: But all those failures—I've reframed my mind a little bit to look at them as lessons. I wouldn't be where I am today if I hadn't made those mistakes or learned those lessons. First two years, I wouldn't change it for anything. It took a lot longer for us to get to market because I was trying to learn as I went. I had to make those mistakes and learn those lessons. It took two years to get there where a lot of other founders who have been in this spot before may have been able to get a product to market in six months or a year. Realistically, it was more like two and a half years. But going through all those pitfalls and speed bumps along the way got us to market in a way that the product was amazing. I learned so much along the way. I would have made those mistakes at some point, but I'm glad it happened early on rather than now.
--:-- Ryan Hanley: When you got to Stripe Soda, were you able to take those lessons learned building Spirited Hive and get out to market faster?
--:-- Jack Espy: 100%. Yeah. We turned that brand around a lot quicker. We're still tweaking the product to this day. We released with one point of branding about a couple of months ago, and we're already tweaking it again. It's always changing. But we got that to market much faster because I knew the blueprint. At least I created that blueprint. I thought, "Let's do exactly what we did, subtracting all the pitfalls, to get this product to market a lot quicker." Before, the blueprint was nothing. I had no idea what I was doing. I was just trying to figure it out as I went.
--:-- Ryan Hanley: What was one of the big obstacles with Spirited Hive that you were able to step around with Stripe?
--:-- Jack Espy: That's a good question. I think the biggest pitfall for me was figuring out the steps involved from having an idea, to creating a product in your kitchen, to producing that on a large scale, to getting it to market, to getting it on the shelf. I saw that as one big hurdle, not all small little hurdles. That's what I broke down in my brain. It's not one big hurdle. We had to break that into multiple steps and conquer each one.
--:-- Jack Espy: Once I broke that down, I knew how to get a product from an idea to having package design, printed cans, and getting that product produced. Then it was, "Okay, now we have to get this in front of some distributors. Maybe we start selling it independently." We can do that now because it's not the beverage alcohol market. That was like, "Oh my gosh, this is amazing. Now I can actually sell to Ryan if you had a convenience store." We couldn't do that with beverage alcohol. Everything was definitely expedited a lot quicker. People can actually have it on the shelf and purchase it a lot sooner rather than me trying to figure all that out with Hive, not knowing where to turn next. Once I completed one step, I was like, "Okay, now what do I do? I have no idea." That definitely helped.
--:-- Ryan Hanley: That makes a lot of sense. I think one of the areas of entrepreneurship that I have not spent a lot of time on is retail product creation. Versus a tech startup or a professional services startup, what are some of the unique characteristics of creating a retail product? When I think about this, I think, "I've had a million ideas for something you make in your kitchen. It tastes good. People tell you to do it." People say that all the time. But you heard that and turned it into something we can now buy on shelves at stores. Where do most people start to go wrong? It feels like such a big leap. Maybe it's because of the space I'm in, but coming up with an idea for a tech product or an app and getting it out into the market makes a lot of sense to me. With a retail product, it seems so overwhelming. There are so many cans and so many gas stations. How do you get that shelf space, which I know is really tough? How do you get past that step where most people get dashed across the rocks?
--:-- Jack Espy: The two biggest things in this industry are distribution and marketing. You have to get the product on the shelf, and then you have to leverage marketing to pull that product off the shelf. A lot of these brands today may have a successful product and get it onto the shelf, but they try to go big super quickly. They say, "We have this new beverage. We just raised $30 million. Now we're going after all 50 states or the lower 48 states." That's great, and they may put up some really good revenue numbers for the first 18 months. But getting product onto the shelf doesn't mean anything. When you know a brand is actually doing well is when they start to get repeat orders and their velocities are going up.
--:-- Jack Espy: Velocities mean purchasing points of purchase per store. If your velocities are two, three, four cases per store, then you're doing well. But if you try to cast a really wide net and leverage your points of distribution without leveraging your velocity, your company is going to implode in no time. We just saw that over the past couple of years. There's been a big restructuring within the beverage alcohol space, mainly within cans, because so many brands tried to cheat the system and go after growth rather than profitability.
--:-- Jack Espy: We're taking a different approach. That's why we've been around for five years. We're taking a slow approach, growing market over market independently rather than casting a wide net and going after multiple states at once. Realistically, we're such a small company that we couldn't do that. I could have the ability to raise a ton of money and go after a bunch of states, but it wouldn't be done in a way that would make sense and grow. We want to own each market we go into. Nashville, Tennessee—we're slowly starting to own that market. We've been in there for three years now, and it's taking that long. It takes a long time.
--:-- Jack Espy: To your point, it is daunting. I didn't know that. I was super naive to this industry before getting involved. Sometimes it's beautiful to be naive because if I knew all the headache and all the hoops to jump through, I wouldn't have gotten involved. I would have done something else. But I'm doing it, and I love what I do. In some states, you really have to attack every point of distribution you have and manage every point of distribution you have. It's a huge task and a huge undertaking to grow a product that is actually viable over time. Those two things have to work hand in hand: distribution, getting product on shelf, and then marketing, having good marketing techniques and campaigns to get that product pulled off the shelf. Then people come back for more. If your product tastes good enough, if you get them to buy it the first time from a campaign or great shelf placement, they'll keep coming back. But you have to worry about the other products coming to market because it's a fickle industry. Some people will say, "Oh yeah, I love that High Noon product. But did you see Surfside just came out with a new thing? Let's go try that." It's always working.
--:-- Ryan Hanley: So the idea is you'd rather have a shelf in every store in a market than be in a couple stores in a whole bunch of markets. While it may look better on a scatter plot, at the end of the day, that density creates people seeing it everywhere. They can't get away from it. Every gas station they walk into, every beverage store they walk into. That's the idea—be very dense in one market, and that's how you get traction.
--:-- Jack Espy: Yeah. What we look for—whenever we're doing a general sales meeting or talking to distributors or sales reps—is we don't want to be everywhere. We want to be in the stores that are actually going to sell our product. A lot of these brands go into general sales meetings and pitch, "We're putting a sales incentive on X amount of PODs," which are points of distribution. They go out and get all these PODs, but of the 200 PODs they get, only 75 are good accounts that will keep your velocities up and keep selling your product.
--:-- Jack Espy: When I go in with my head of sales, we take the approach of, "We want to go after your top A and B accounts. We'll put a great incentive plan together for you guys to get those 75 accounts. Then we're not wasting money on the other 125 that maybe get a single purchase through but never reorder again." We take that same mentality across multiple states. We want to live within an ecosystem of eight to 12 states. We're in six right now. We only want to expand to eight to 12 states because the idea is to get acquired. If there's not enough meat on the bone for one of these beverage acquisition companies to come in, they'll sniff through it immediately. If you're in 48 states but your velocities are one case per store, they see that. But if you're in eight to 12 states and you're doing six cases per month in each one of your stores, that's a viable product. There's enough meat on the bone for them to come in, increase economies of scale, decrease cost of goods, and put you through their whole distribution pipeline. They can do that overnight, whereas I can't.
--:-- Ryan Hanley: So that large beverage roll-up organization is pulling in all the shared services into one. They have economies of scale, but they also have a tried and true distribution model set up that they're requiring you to plug your brand and product into this machine they've built. That machine goes out and almost guarantees the distribution to a certain extent, as long as the product is good and maintains its quality. Is that the idea?
--:-- Jack Espy: Pretty much, yeah. It depends on the beverage acquirers. There are the big five, which I'd love for them to come in at some point because that's what they do. There are others that don't have that distribution or the cost of goods to lower. But for the most part, the big five or six—Constellation, Diageo, Gallo, those kind of big brands—they can easily do that.
--:-- Jack Espy: Also, one big piece of the puzzle is if you're in all 48 states, these big partners work with certain distributors. If you're signed with 48 distributors and of those 48, they work with 22 of them, now we have to spend all this money getting this brand out of those contracts to then sign with them in the states that make sense. That could be a no-go on a deal. There are all these different things you have to work through and think about rather than just, "Oh, Rhode Island wants to bring us in. Let's go with Rhode Island."
--:-- Jack Espy: Three or four years ago, I was doing anything to get distribution. I didn't care about velocity. I was like, "It doesn't matter. Let's just get as much distribution as we can. I need to satisfy investors. I need to make sure we're still growing month over month." Now I'm like, "Okay, we have to think about this strategically. What states are actually going to do a good job for us? What distributors are going to do a good job for us? How can we work together with these distributors to hit our velocities?" That comes down to us at the end of the day, not them. They can help us get there, but it's all about us working as a team to increase velocity and increase sales month over month. Now that I'm learning so much more about this industry, I'm taking a different approach than I was three or four years ago.
--:-- Ryan Hanley: Did you start the business with selling in mind? Or was that something that as you started to get into it and understand the beverage marketplace as a whole, you thought, "We need to be thinking about how this is packaged up"? A lot of the things you're talking about, I don't know that a lot of people would think that far out ahead while they're in growth mode. A lot of people would just be like, "Grow, grow, grow, grow, grow. We'll figure it out when that becomes a problem." But you are taking a very thoughtful and tactical path to set your business up to be as well positioned to be bought in the future as possible. Why that mentality versus growth at all costs, get revenue up, take every opportunity? Was that a mentor? Was that something you just came to? I feel like that's a fairly unique perspective, especially this early in your career.
--:-- Jack Espy: Definitely mentorships. I've talked to a bunch of people I've met in the founder space within beverage. Their biggest piece of advice—it was funny because the first time I heard it, I was like, "What the f*** is this guy talking about?" I was like, "No, I'm going to grow as fast as I can." Then I kept hearing it from founder to founder to founder because it's not sustainable. If you're in this space, the margins are too thin for you to grow that quickly without having to raise a ton of money year over year or quarter over quarter. You can be digging that hole very, very quickly if you want to grow that quickly.
--:-- Jack Espy: It's all about how quickly do you want to grow. Things have changed a bunch within this sector in the past three years. Three years ago, we saw a bunch of brands get acquired because they were just chasing as many cases as they could get. It didn't matter what their velocities were. Obviously you still want to have good strong velocity, but they were going after PODs. It was just, "How many PODs can we get? Let's grow this thing." A lot of these beverage acquirers were like, "Oh wow, look at these brands. Let's eat as many of these up as we can." In the beginning, I was like, "Let's chase growth. Let's go after growth as fast as we can." But the industry slowly started to change because it was like, "This isn't going to be like that."
--:-- Jack Espy: It's almost like the craft beer boom 15, 20 years ago. It's the same exact thing. A lot of brands got eaten up pretty quickly, and then it was like, "Okay, wait, hold on. Now we need to see the viability of not only these brands but the industry in general"—the ready-to-drink canned cocktail industry. The soda space is completely different from what I'm talking about with beverage alcohol specifically. It's changed. In those changes, I've changed my strategy. Let's grow slow. Let's grow smart. Let's go a mile deep and an inch wide rather than the opposite. Let's see what happens. Let's keep going after these velocities and putting these small little goals in place. "Let's try to hit this velocity in this state. Let's try to hit this velocity in that state. Let's try to get this campaign off the ground." Let's keep doing this with the end goal of year over year trying to get a certain case goal. Case goals still matter to us, but it's how did you get there?
--:-- Jack Espy: There are two ways to get to end revenue or end case goals. You have your points of distribution and your velocity. You can have a super high point of distribution with a low velocity that gets you there, or you can have vice versa, or you can have both in the middle. That's what we're going for—both in the middle, balancing each other out. It shows that we have steady growth from a points of distribution standpoint, that we're going after more points of distribution with a good velocity. If a beverage acquirer saw that we were just going after points of distribution, they'd be like, "No, I can smell through that. I know exactly what you're doing." But if it's too much the other way, it's like, "Okay, you're not growing quick enough. Why aren't you growing faster? Why aren't you opening up new markets?" They want to see both working in tandem.
--:-- Ryan Hanley: No, I think that's phenomenal. It translates to many other businesses. My home industry is the insurance industry, specifically the property casualty industry—home and auto, commercial insurance. The exact same thing is true. It's slowing down a little, but 2020 to 2022 was a huge M&A cycle for insurance agencies, very similar to what you're saying. There are these large roll-up organizations constantly looking for new brands or new models to roll into this shared service model. It's similar but different. There's a way to grow an insurance agency that is very attractive to roll-ups. There's another way of growing that would be kind of similar to your focus on point of distribution—a bunch of scattered different policy types, different carriers, accounts that maybe only have one policy. It shows maybe you're growing, maybe your top line number looks good, but managing that book of business on the back end is so much work and has so much cost that you have a lower EBITDA, your margins are lower, and now you're less attractive.
--:-- Ryan Hanley: What I love about what you're explaining in detail—and details are great, don't hesitate to go as deep as you want—is the lesson here is you can be an early stage entrepreneur. Inside of five years, I'd still consider that early stage, especially since you just launched three years ago with Spirited Hive. You can be early stage and be thinking about packaging and how you grow to be attractive to potential buyers at the same time. It doesn't have to be this chaotic, hell-bent on growth, nothing else matters, we'll figure that problem out. That's one way to go, but it also seems like you may be exchanging early-stage growth and maybe vanity metrics for some ticking time bombs in your business down the road. Is that what I'm hearing?
--:-- Jack Espy: Totally. For us, we have to stretch every single dollar we can. We're still growing, which is amazing, and we're growing in the right direction, which is great. However, we're still a small brand, and I don't want to do any serious raises. If it makes sense in a couple of years where it's like, "Okay, now to get that next step, we're really going to have to bring on a Series A and really go after it," then we'll do it, whatever it takes. But we're trying to stretch every single dollar. We're trying to be as smart as we can on what we can do from altering current business—"Should we continue to produce with this co-packer? Should we go somewhere else that allows us to free up some more cash? Do smaller production runs? Do we increase our minimum order quantities with our distributors?" All of that is thought through. Before, I was just like, "I don't know, whatever's the industry standard." I think it's okay to go against industry standards as long as it works for your brand and what you're trying to achieve.
--:-- Jack Espy: Now we're trying to leverage marketing as much as we can. That was the biggest thing that took us up until six months to a year ago to really figure out. So much of the industry—a lot of these brands think that once they bring in a distributor and once the cases get on the shelf, their job is done. Now it's up to the distributor to sell through it. It's like, "No, you have to put all these campaigns out there. You have to get those three points where someone sees it three times for them to buy." That is the hardest part by far. If people think distribution is hard, yeah, distribution is hard. But getting people to buy your product is very, very hard because there are so many products out there. You go to Total Wine, you look at the shelf, and you're inundated with all these different brands. What do you choose? You choose the ones you know. You go to High Noon because you've seen it. You go to Sun Cruiser because you've seen it. Spirited Hive? I've never heard of that. Why would I buy that?
--:-- Jack Espy: That's why we always have to be in front of the consumer—from paid ads to marketing incentives, campaigns on the shelf like "Enter to win a trip to Nashville," events, activations, getting people to try it. We've shifted our budgets more towards marketing to help us go through more product quicker and increase our velocities from a retail standpoint. My head of sales—you talked about mentors—I brought him on about a year and a half ago, and he's changed everything. He's taught me so much on not only sales but marketing as well, and how to leverage campaigns to not only get good shelf placement but also to deplete product at the shelf. You can kill two birds with one stone. That's the biggest thing for me with building this brand, not knowing anything about it when I started—what can you learn from other people, and who can you bring on that you put in the seats that really know what they're doing and can help you get to your end goal.
--:-- Ryan Hanley: So how do you do that? Because I'm thinking about the liquor store that I go to. Again, we'll talk Spirited Hive before we talk Stripe, right?
--:-- [Discussion continues...]
--:-- Ryan Hanley: And, you know, this is relatively new, last three to five years, but this canned cocktail boom has been, like you said, similar to the craft beer boom. Now there's two entire—gotta be 24-foot sections inside this place that are just nothing but four and 12-packs of canned cocktails. So as you think about Spirited Hive and how you separate, how do you start to craft that message? Why would I go with a Spirited Hive versus a Surfside versus a High Noon versus a Lucky One that Dave Portnoy just came out with? If you're sitting next to those brands, what are the things that you're actually doing as a DTC brand to stand out? What is the marketing? How does the messaging work? How does the placement work on the shelves? Is it slipping the guy a fin on the side when he's stacking the shelves? How does all that actually work?
--:-- Jack Espy: Totally. Yeah. It was interesting, and it's funny to think back on this, but when I first started this brand, I wanted to be the better-for-you canned cocktail, 100% sweetened with organic wildflower honey. That was our hook. Every single time, it was, "We're the better-for-you canned cocktail, 100% sweetened with honey." And it's stuck with us ever since. Our flavors are amazing and unique, but our big selling point is that we're utilizing a different sweetener. It isn't synthetic, doesn't leave an aftertaste, and is a better-for-you product rather than all these other ones.
--:-- When I first went into my first multiple distributor meetings, even to this day, I get called out for it. They're like, "Better for you? How is this brand better for you? Your calories aren't super low." And although our calories are relatively low—I mean, we're 7% ABV around 160 calories, nothing crazy—I was like, "Well, what's your definition of better for you?" And he was like, "I want to see zero sugars. I want to see really low calories." And I was like, "Okay, cool. We're going from the standpoint of better-for-you ingredients rather than calories."
--:-- It was like this for the first year. No one was really claiming better-for-you in that space because a lot of the people that drink alcohol don't care. But there is a segment of the market that's more of a white space—people who love health and fitness, just like myself and probably like you. I don't know if you drink, but for me, I love health and fitness, but Thursday night I probably have a drink, tonight with my family I have a Hive, I have a couple of Hives over the weekend. To me, it's all about balance and embracing the balance in your everyday life. It took a long time for that to happen.
--:-- We've gotten a lot of press around that, which is great. Some of it was kind of negative in the beginning, but now it's turned to more positive. Now you look at the space, everyone is claiming better-for-you—even products that have the worst ingredients ever are claiming better-for-you, and it's on every packaging across most of the RTD category. So that was our big call out, but our main call out is that we're 100% sweetened with honey.
--:-- From shelf placements, where we can kind of tie people in is one, they like to see that. Two, in Tennessee, our big selling point is we're a Tennessee, Nashville-based company. A lot of people, when they go to Nashville—whether they live there and want to drink local, or if they're coming in and want to experience Nashville—they want to go to Broadway, they want to do all these different things, but they want to embrace that honky-tonk vibe. One of our new merch lines we launched is "Raise on Honky Tonk and Hive." It's our big thing that we're pushing. So they want to drink local, and it's always figuring out what is a cool campaign that we could do at retail level, eye level, that someone who has never seen this product before sees and thinks, "I want to buy this."
--:-- One of the things we did up in Michigan was we're in a bunch of Meijer's up there, which is the major grocery store chain up there. One thing we did was the "Raise on Honky Tonkin' Hive" campaign—win a trip to Nashville. You entice people to come in, see that, scan to enter to win, and then, "Oh, I'm going to give this a try. Let's see what this tastes like." We really pride ourselves on the fact that our product is so good that they're going to come back for a second time. But you still have to stay in front of them because it's not so much that your product isn't good enough—it's what other campaigns are these other brands running that will take their attention off of Hive onto a new brand. So you always have to stay in front of them.
--:-- To your point earlier, it's so daunting. This space is totally right, and I didn't know any of this. It's always staying in front of the consumers 24/7. It's so hard because you can lose an account like that if you take your eye off the ball.
--:-- Ryan Hanley: So there's so many different ways to get into that, from marketing to distribution and all those things. It's like a dual product approach—distribution and marketing—to be able to stay on top of that.
--:-- The placement piece is so interesting because there's another liquor store I go to sometimes that's a little more convenient but very small. All of their products that would be in your category—they have one cooler. The very standard national brands like a Surfside or a High Noon are in there, and then every other brand is stuffed in the bottom of the cooler or warm on the side of the cooler just sitting there. I'm like, man, if you walk in and you're just looking for a four-pack and you don't want beer but you want something canned—maybe you just like the way you feel better the next day if you have a vodka or tequila instead of a beer—you're just going to take the cool four-pack that's sitting inside the fridge, even if it's not exactly what you came in for.
--:-- I apologize if these are too nerdy, but I'm so interested in the business because I don't know that much about it. You get the distribution point, right? The distributor says, "Hey, I have 20 locations. This is the average volume," whatever metrics they give you. You go to that distributor and say, "Hey, we're willing to do this deal. We want to be in Michigan." How does it cost you money? Is it the quality of the product? If you start hitting a certain amount of volume, do you then not have to pay for the placement? How do you actually get that distributor to make sure your product is eye level, center cut—where you want to be? How do you make sure your product actually gets seen by the people when they walk in the store?
--:-- Jack Espy: The super interesting thing about the beverage alcohol industry is that what you described—trying to pay to get on the shelf—is completely illegal. You can't do that. That goes against Tied House laws. These laws are back from Prohibition, so it's super archaic. This industry is super archaic.
--:-- Whereas with Strive Soda—I was just in a store because that's a San Diego-based brand—and the guy was like, "You know, I like this brand. It tastes good. But what's in it for me? What are you going to do for me?" And I was like, "Well, we want this shelf placement. If I buy out this other product, can we get it on the shelf?" And he's like, "Yeah, there's two cans left." And I'm like, "Okay, cool. Let's buy those two cans and we'll put it on the shelf." There's always something in it on that end. There's obviously gray area in the beverage alcohol industry, and we always try to stay away from that because we truly leverage and truly believe that our product is good enough to withstand and go against these big guys. And it is.
--:-- To answer your question on how you get it on the shelf: when we go into these distributor meetings, we pitch to these distributors in general sales meetings. We have a new product releasing in the spring, so we're getting our annual operating plan all ready to go to start pitching to all these distributors. The big thing is we come up with these campaigns. "It's five o'clock all summer long"—we want to do a giveaway or have a big shelf display that calls out all these different things that makes us so much better. It's an "enter to win" or whatever that allows us to get the distributor to go out because there's an incentive behind it.
--:-- So, Ryan, you're a distributor rep. If you go get 10 of those displays, we'll pay you $100 for each display. That gives you the freedom to go hunt and get as many as you want. That will get us onto those campaigns. One, it attracts distributors because they're like, "Oh wow, this is awesome. They've got their stuff together." Two, it gets the sales rep out there into the market to go start getting that onto the shelf. However they do that, that's up to them with their relationships with these liquor stores and chains. Three, what that does for us isn't even the campaign. It's more or less getting the product in front of the consumer, having things around it, bells and whistles, drawing your attention to here. It's a big display versus, to your point, being on the side of the cooler sitting there where you don't know what it is. It gives it credibility. It shows, "Oh wow, how did this brand get this when all these other brands are just sitting here on the side?"
--:-- That's really hard to do as well because you have to stay in front of your distributor: "Hey, we've got these campaigns going." That's what my head of sales and my head of marketing have taught me over the years and over the past couple months. We always have to have a campaign in place because if you don't have something in place, that shelf placement is going to go to a different campaign from a different company that's going to steal your spot. You always have to be staying in front of it because that will help with your velocities too—always having a big shelf placement.
--:-- The biggest thing for us is if you're not cold, you're not sold. It's specific in this industry within beer and canned cocktails. You always have to be cold because no one wants to go buy a warm four-pack. Usually they're buying it for later that day or they crack one when they get home.
--:-- Ryan Hanley: Or in the car, depending on where you are located. I'm not advocating for that, friends.
--:-- So can you sell—and I just don't know the laws here—could you sell online? If I wanted to go on your website, could I buy four-packs and have you mail them to me? Is that legal?
--:-- Jack Espy: It depends on the state, and it's ever changing. We sell in Connecticut, and through Connecticut you're allowed to ship out of Connecticut to most states. I think it's like 36 states, and that literally changes day to day. Some states get added, some get taken off. Since we have distribution and a really good distributor up there, we can sell out of Connecticut and ship to you. What state are you in?
--:-- Ryan Hanley: New York.
--:-- Jack Espy: Yeah, we can send to New York. We actually used to distribute in New York in liquor stores, but it's such a tough market because it's very pay-to-play. It's like, "Look at all this shelf space. What are you going to do for me?" We just didn't really get involved in that whole pay-to-play because I was like, "I don't want to start business off on that foot. I don't really want to continue that." It's kind of like a hostage situation. If I'm going to give in here, at what point does it end?
--:-- We're in a lot of states. New York is only in liquor stores. Tennessee is a franchise state, so it's only liquor stores and you can only have two per liquor license. So let's say you owned a liquor store that gives you the right to have two stores. Now we have to go manage all of those stores with my reps. Florida is different. Michigan is different. Those are chain states. We just got into Publix Liquors. We had to make one presentation—and obviously there's so much more than just one presentation—but we gave a really great presentation and we are there to help our distributors sell through at Publix, to hear their velocities, help them. We got 370 stores from one pitch, and those get managed by our distributors. Same thing up in Michigan. Each state is very different.
--:-- Then you have states that are Class C states or Class B states, which is where I'm at right now—South Carolina and Texas—where on-premise accounts like bars and restaurants have to buy through the liquor store, not through a distributor. It all boils down to this idea that the United States is the United States, but at the end of the day, each state is pretty much its own country, not only from beverage alcohol laws but gun laws, everything. That's what I've learned a lot of. I never thought in a million years I would know, "Oh, Class B state. Oh, franchise states. Oh, control states"—which is where the state actually buys the alcohol. That's like New Hampshire, North Carolina. Those are the places with package stores.
--:-- Ryan Hanley: Don't most of the states call them package stores still?
--:-- Jack Espy: Exactly. Yeah.
--:-- Ryan Hanley: So because you can sell direct and you're also trying to constantly bring people back to buy more, are you doing direct—and I'm going to use the word "community" but community in the virtual sense—are you pulling people into a newsletter, your social feeds? Are you doing anything from a digital or content marketing standpoint where you draw someone in? Maybe someone buys a couple four-racks in Michigan and sees on the packaging they can get on some newsletter. Do you have campaigns to draw them in so you can stay in front of them digitally?
--:-- Jack Espy: Lifestyle marketing with Hive is definitely a lot harder than it is for Strive. For Strive, direct-to-consumer is huge. We're about to get Amazon up and running. We're about to get Walmart up and running. This brand is a lot newer—we just launched like three months ago—so we're starting to grow our direct-to-consumer not only through our website but also through Amazon and Walmart. We're still going after retail in San Diego because it's a San Diego-based brand. We're trying to take that same approach: grow small but still go after chains. We're not so much constricted by state laws because we're free to hunt whenever, wherever, but we still don't want to go too big too quickly.
--:-- With that brand, we're trying to build this community not only through email and SMS but around the product itself. We're trying to do a lot of events, get people trying it, really get it out there. It's a breath of fresh air because I could go do a little pop-up tent on the side of the street here in Charleston and sample my product. If I did that with Hive, I'd be arrested immediately. You can't do that. So there are things with this space that are much easier but also harder. That's a lot that I'm learning most recently—it's not apples to apples. It's apples to oranges.
--:-- The beverage alcohol industry has much more constraints but at the end of the day is very supplier-focused to a certain extent, whereas the non-alc industry is much more like the Wild West. But there are a lot of complexities in it too that I'm slowly starting to learn as I go. Do I work with KeHe and UNFI? Do I go DSD like distributors? How do I do that? We're slow, and I'm getting all this knowledge as I go. I'm still learning those lessons and making those failures as I go because it's new. It's something that's different than the beverage alcohol industry, which is super exciting. I'm very happy that I'm learning these as I go because we're still so small. We haven't even really got our feet underneath us yet on the Strive side. But I'm trying to take as many lessons I've learned in Hive and bring that over to Strive so I don't make those mistakes again on this brand.
--:-- Ryan Hanley: Have you done anything with influencer marketing? It seems like with DTC brands in general, influencer marketing can play a huge role. The right person talks about your product, puts your can down in the shot on a podcast or on their Instagram, and you can see massive lift. Have you dipped your toes into that space, and how does that work for you?
--:-- Jack Espy: With Strive, yes. We're getting into that right now. We haven't done anything recently because there were a couple of reasons why we launched middle to end of August. We've been in market September, October—two months. Initially when we launched, we weren't fully sure how we were marketing the product because it's a new industry. We didn't know if we wanted to go full-in on soda, if we wanted to go hydration, if we wanted to do a balance. Now we realized that we are soda. That's how people drink our product. Hydration and honey are just additional benefits that come with having a great-tasting soda.
--:-- Now that we know that, we've been able to fully update our website to really portray that. Now we're ready to bring people on because we didn't want to bring people on too early where they could be messaging something that we didn't want them to message and that we weren't even sure about. Now we have this really good brand book. We're like, "Okay, this is how people are drinking our product. This is how they love to have it in their everyday life. Now let's have our influencers come on and start portraying that message, use that UGC whitelisting, all of that stuff, get it out there." That's something we're going to start doing in the next couple of months.
--:-- On the Hive side, we had a kick-ass influencer program that I ran for a little while, brought someone in to run it. It was doing really, really well for a while. The thing we didn't really realize is people don't really buy ready-to-drink cocktails online. We didn't know until we actually tried it. It was really fun building that program. We had some amazing influencers on there who really loved the product, believed in it, believed in our mission and this whole idea of "Who's your hive? Who's your community? Who are the people that you love to be around?" It could be your close friends, your new friends, your old friends, work friends, whatever. Bringing this sense of community together and creating that hive. We did an amazing job doing it.
--:-- But at the end of the day, we're in the business of making money. From a direct-to-consumer perspective, it just wasn't coming through. We were still doing great month over month from our sales perspective, but how much we were paying all these influencers versus how much we were making from this play from direct-to-consumer wasn't working. The problem with that is, to your point, with most other industries, whatever marketing tactic you use, you pretty much have something that you can look at from a statistics standpoint and be like, "Okay, we launched this marketing campaign and we received $100,000 in revenue from that marketing campaign." It's not as easy within consumer packaged goods because we don't know. Let's say you're one of our influencers, Ryan, and we saw that on one post you brought in $2,000 worth of revenue from direct-to-consumer, but we have no idea about your followers who went out and bought that at retail level. It's so hard to really judge that.
--:-- You can look at it two ways. Is the idea for this campaign for influencers on the Hive side all about revenue and that's it? Or is it getting the product out there, getting people seeing it? For a while we were really going after health and wellness influencers, which again was kind of seen as "Why are you doing that?" But within that space, everyone knew Hive, which was amazing. We do anticipate bringing that back at some point in time. But our main focus right now is getting our ambassador side of Strive and Hive up and running, and then getting our UGC and whitelisting up and running for Strive to really test that out. Strive Soda is so much more of a direct-to-consumer product than Hive is, so we're going to hopefully see a much bigger uptick in revenue from launching that program than we would with Hive.
--:-- Ryan Hanley: Do you see yourself—and I'm assuming there's a parent business that sits over these two brands—do you see yourself as someone who's going to take beverage as a whole, not just alcohol or non-alc, but this beverage space as a whole? Do you see this as you've got a bet, like a beverage brand incubator? Is this something where every couple years you'll bring a new product out? Or do you think between Strive and Hive you have enough to do, and it'll be more flavors and more variations inside of that? Now that you kind of have this roadmap, do you become almost like an incubator to bring new products to market because you have a template for doing it in a way that is successful and packaged up properly? Do you see that as a potential path for you?
--:-- Jack Espy: That would be a dream. Honestly, Honey Holdings owns both brands, which is a fun name.
--:-- Ryan Hanley: That is a fun name.
--:-- Jack Espy: I would absolutely love to continue building brands. My bandwidth won't allow that. I'm already kind of tapped out as it is juggling both of these brands. I think once Hive is either acquired or is at a point where there's a new CEO running it, my whole idea is to keep innovating and building brands. The reason I would have never built Strive if I didn't see that gap in the market where I was like, "This is what I really like. I really want to create a better-for-you product. Is it a soda? Is it a hydration beverage? It's only sweetened with honey because no one's done that." And I was like, "Do I do it? Do I not?" And I was like, "Screw it. There's no time like the present. If I'm in over my head, I'm in over my head." But to do that a third time, I just wouldn't be able to do that.
--:-- One thing, to your point, we're already innovating. I've got an innovation call next week with my team on what are the new products we're releasing. We have a really exciting product that we're releasing with Hive in the spring, which I'm super pumped about. Do you know when this episode will be released?
--:-- Ryan Hanley: A couple of weeks.
--:-- Jack Espy: I'll just—I mean, it's not really a secret. We're coming out with a tea. All of our products are 7% ABV. We have three core products: our take on a Mexican mule, which is a ginger and lime infused honey; our take on a Cosmo, which is our best seller—the girls are absolutely obsessed with that one—that's a cranberry and lime infused for our vodka; and my favorite, our take on a Tom Collins, which is a lemon and juniper berry infused honey for our gin. All those are 7% ABV, only sweetened with honey.
--:-- But we're releasing a new version that's a little bit different. It's going to be 4.5%. Because of all these beverage alcohol laws, some states don't allow you to sell. In Florida, for example, if you're 5.9% and under, you can sell in grocery. Since we're at 7%, we can only sell in liquor stores. Now we're going to be free to hunt at grocery stores and convenience stores in Florida. This is a 4.5% spiked tea with a vodka base, sweetened with honey and a little bit of lemon. I don't know if you golf, Ryan, but it's a perfect golf drink.
--:-- Ryan Hanley: I was going to say, it sounds like an amazing golf cocktail.
--:-- Jack Espy: Oh, it is. The whole plan behind it is the "Honey Hills Country Club." We're doing all this merch that's going to be releasing around spring, early spring, and throughout the summer. It's promoting a perfect summer beverage. I'm super excited to release that. We've also got some new innovation on the Strive side. We're going to be releasing two new flavors next spring/summer, so that's super exciting. And there are ideas underneath Strive that may not be liquid form, which will be really cool. We're working on some very exciting stuff on both brands.
--:-- Ryan Hanley: Now one last question for you. You've kind of taken the lead on, as you've mentioned a couple times, "better for you," and an ultimate—probably even the bigger differentiator versus that language—is the honey. Sweetening with 100% honey. Have you seen, or how do you handle, mimicry? I'm assuming someone has seen, "Hey, these guys are seemingly differentiating and doing pretty well with this honey-only sweetening." Have you seen people start coming out to the market with a similar formula, similar branding, or trying to be the honey sweetener play as well? Or do you guys still kind of own that space? And when people do start mimicking you, how do you keep yourself separated?
--:-- Ryan Hanley: I mean, you know, it's a form of flattery, always. If someone's trying to mimic you, you're doing something right, which is awesome. And yes, we've had a couple of brands in the past and present that have taken our same play from a sweetener form. But also, I always look at it as the more the merrier, because that's only educating more people, opening up that space to be bigger within the category. We'll be able to have a smaller market share of that, but at least it's expanding.
--:-- If we're just one brand out there that's only sweet with honey as a soda that's hydration, people are like, "Oh, cool, that's awesome, I love that drink." But if multiple brands are doing it, then it's expanding. From a selfish perspective, I'd love to be the only one in the space. But with these other brands, we'll grow more. At the end of the day, my whole thing is I want people to have better-for-you products that are actually better for you. If that means there are more products coming to market, so be it. I don't really care.
--:-- We're seeing honey being used all over the place in new protein bars that are sweetened with honey rather than sucralose or aspartame. For me, I'm like, "Oh heck yeah, that's amazing." Let's keep that innovation going because it's leading in that direction. I care about health, I care about fitness, I care about feeling my best, and I also care about other people feeling their best. The only way to do that is to have more products in the market for it to be more viable.
--:-- On the Hive side, we've had multiple brands in the space that have been sweetened with honey. I think it's totally fine. When it gets to the point where packaging is being copied, that's when I'm like, "Wait, hold on, let's figure this out." That's always tough because you have to get lawyers involved and try to avoid that as much as possible. But you're never going to be free of it. It's always going to happen if you're doing something right. People are going to copy you.
--:-- We've seen it at the high level. I don't know if you've been looking, but Anheuser-Busch copied—was it Suncruiser or Surfside? They came out with a brand that looked identical to it.
--:-- Ryan Hanley: I saw something. I saw an article, a headline.
--:-- Jack Espy: Yeah, so it's going to happen regardless. That's the main point of flattery right there. If a massive brand is copying you, or a massive beverage conglomerate is copying you, then you know you're definitely doing something right. But you still have to protect your best interest at the end of the day.
--:-- Ryan Hanley: Dude, I know there are a lot of people that health and wellness is important to who listen to the show. And I know there are a lot of boozers as well, people who are always looking for products like Strive Soda. They may enjoy their afternoon soda, and if I can get rid of all the sweeteners and feel good about what I'm drinking, I think there are a lot of people who will be interested in what you're doing.
--:-- If they want to get deeper into your world, learn more about the products, buy the products, see if they're in their area, or see if they can have them shipped to them—where should people go? How do they get deeper into both your world, like you specifically if you're doing anything or talking about this stuff online, and the products themselves?
--:-- Jack Espy: Totally. If you're interested in Spirited Hive, just go to @SpiritedHive on Instagram and spiritedhive.com. We ship to around 37 different states—37, 36—so go on there. If you are in Michigan, Florida, Georgia, Tennessee, Texas, and Connecticut, we sell in liquor stores in all those states.
--:-- On the Strive side, we're just getting kicked off. If you guys live in San Diego, we sell in most of the convenience stores and grocery stores in that area. You can also buy us at strivesoda.com. If you want to get in touch with me, I'm on social media a good amount. If you want to shoot me a DM with any questions you have, or founder questions or anything, it's @JackEspy.
--:-- Ryan Hanley: Espy, I appreciate the hell out of you. I really enjoyed the depth. I could have gone another hour with you here. I really love the depth that we got into in the business. I appreciate you taking the time and kind of nerding out, because I think even if someone's not in the same business as you, a lot of the problems you're approaching and how you're thinking about them, you're doing in the right way. So much of getting better at what we do individually is learning from other spaces that aren't our own. So I love these episodes, especially when we go deep like this. I appreciate the hell out of you and your journey, man. Thanks so much.
--:-- Jack Espy: Awesome. Well, Ryan, I really appreciate you having me on. It was a great conversation and I love getting deep too. I love educating people on an industry that I knew nothing about only so long ago, and getting other people to know it. It's business advice, even if it's not in your industry. It's business advice at the end of the day, or what you've learned, lessons you've learned along the way. So I really appreciate you having me on. I loved it a lot.
--:-- Ryan Hanley: Yeah, no, I love it, man. I think the other thing from your story that I think is really admirable is that five years ago, you didn't know a single thing about this space. So many people have ideas, things they want to do, an entrepreneurial spirit inside them of something they may want to build. We don't realize that while five years at the start feels like a long time, five years in looking back probably feels like yesterday to a certain extent. So it's not as long a time to bring your dreams and turn them into something tangible that you're actually making money at and doing every day. I think it's a wonderful story. So thank you so much, bud.
--:-- Jack Espy: Of course. Ryan, I'll leave you with this. One piece of advice I could give any potential entrepreneur, mainly for people who are scared to take that first step: I don't always want to look at my story, but my story is different to your point. I knew nothing about the beverage alcohol industry. I knew nothing. My whole background was real estate finance, real estate development to go work for someone else. I had never had a job. I knew nothing about business. And I took that step.
--:-- It doesn't matter if it's a well-calculated step or if it's a super messy step and you have no idea what you're doing. The biggest thing—and I know it sounds so cliché—is just taking that step of going full in. It will be super scary, but you'll learn it along. If it means a lot to you, you'll learn everything you need to know about that industry and you'll become a pro at it in no time. But you just have to take that first step.
--:-- Ryan Hanley: I love it, bro. I love it. Nothing but success to you. I appreciate the hell out of you.
--:-- Jack Espy: Awesome. Well, thank you so much, Ryan.
