Episode #466: Sean Goldsmith, The Zero Proof – The Golden Age for Non-Alcoholic Beverages
Guest: Sean Goldsmith is the founder of The Zero Proof, a leading curator, wholesaler, and online retailer of premium non-alcoholic wine and spirits.
Date Recorded: 1/25/2023 | Run-Time: 47:03
Summary: Sean kicks off today’s episode with an overview of the non-alcoholic beverage industry, which has seen a recent boon with more and more people choosing not to drink for health reasons, just like Louisa Nicola explained on the show back in December. He explains the business model, the process of making the beverages, and then I share what some of my favorites were from doing some taste testing before the episode.
Sean was kind enough to make a special code for our listeners, so go to www.thezeroproof.com and use the code MEB15 for a discount.
Comments or suggestions? Interested in sponsoring an episode? Email us Feedback@TheMebFaberShow.com
Links from the Episode:
- 1:10 – Intro
- 2:05 – Welcome to our guest, Sean Goldsmith
- 3:31 – What Sean is up to these days after stepping down from his finance career
- 7:16 – Overview of the non-alcoholic adult beverage industry
- 14:39 – The social aspect of drinking alcohol
- 17:14 – Evolving from a blog into a legitimate business enterprise
- 25:47 – How non-alcoholic spirits are made
- 29:31 – Big success stories of industry leaders
- 34:58 – The most popular non-alcoholic wine on the market
- 35:56 – The process of closing their first funding round
- 38:15 – How they approach the content side of their business
- 40:17 – Plans for the future and the possibility of fundraising again
- 40:52 – Sean’s most memorable investment
- 41:30 – Episode #371: Frank Holmes, U.S. Global Investors, HIVE Blockchain
- 43:32 – Learn more about Sean; thezeroproof.com; discount code: MEB15
Welcome Message: Welcome to “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better Investing starts here.
Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb: What’s up, y’all? We have a great show for you today. And I say y’all because we have my good friend from Georgia, Sean Goldsmith, founder of The Zero Proof, a leading curator, wholesaler, and online retailer of premium non-alcoholic wine and spirits. Sean kicks off today’s episode with an overview of the non-alcoholic beverage industry, which has seen a recent boom with more and more people choosing not to drink for health reasons, just like Louisa Nicola explained on the show back in December.
Sean explains the business model, the process of making the beverages, and then I shared what some of my favorites were from doing some taste testing before the episode. Sean was kind enough to make a special code for our listeners. So, go to thezero proof.com and use the code MEB15 for a 15% off discount. Again, the code is MEB15. Please enjoy this episode with The Zero Proof’s Sean Goldsmith.
Meb: Sean, my friend, welcome to the show.
Sean: Thanks, Meb. Awesome to chat with you.
Meb: Where do we find you today?
Sean: I am at our office in Atlanta, Georgia.
Meb: I think you’re owed a big congratulations, the Dogs.
Sean: Yeah. Yeah. Actually, it was cool that the Dogs won the national championships, but I also made my national television debut during that game.
Meb: What does that mean?
Sean: My brother and I were second or third row right on the 15-yard line on the Dog side. Third quarter, my phone just blowing up with all my friends, “Was that you on TV?”
Meb: And they’re like, “Why do you have your chest painted? You’re an adult. You shouldn’t be having your nipples bright red at this age.”
Sean: Exactly. I was painted up. I had the face paint, I had the spiky shoulder pads. We were there to party.
Meb: My mom was actually a Bulldog, but only for, like, a year. Because I think my grandparents sent her home because she had too much fun the first year of being at Georgia, which any alums, you could probably relate to. My first college trip ever as, like, a high school student was to visit and I was like, “Oh my God, this is the land of milk and honey. This is what college is like? Oh my God.” Congrats now.
Sean: Thank you.
Meb: Enjoy it though. As a Bronco fan, these things, they don’t last forever, so enjoy your time in the sun.
Sean: We got two, so that’ll last me for a while.
Meb: Yeah, just bank those memories. All right. So, I’ve known you for a long time. Listeners, Sean, and his buddy of mine, we grew up in the investment space forever. But here we are, it’s 2023, we’re in January and you’re up to something different. Tell us what you’re doing these days.
Sean: So, I stepped down from my finance career in 2016 and was just figuring out the next steps. So, I was living in Manhattan and due to my wife’s job, we knew we were going to be leaving Manhattan. So, I didn’t really want to set down roots. Floated around for a bit and in the interim, I came back from a long weekend in Miami and went a little hard down there with friends for a few days and was just exhausted when I came back to New York and took a week-long break from booze and felt amazing, was sleeping better, was dealing with stress better, lost weight. That week turned into two weeks, turned into now four years.
And as you know, I loved to drink. We had fun and shared a lot of good meals and good drinks together. And so, it was a big life change for me. But early on in that process, as a lover of food and wine, I realized that I was going to need something more interesting to drink while I was out eating and celebrating. I still wanted to be in the mix and discovered what back then was this small world of premium non-alcoholic beverages, beer, wine and spirits, and was curious about it. And so, my best friend from high school, Trevor Wolfe, similarly quit drinking after doing whole 30.
Meb: What’s whole 30?
Sean: Whole 30 is a month-long challenge. It’s this super restrictive diet, no alcohol, no sugar. Basically, you eat lettuce for a month. And coming out of that and not having booze for 30 days, he, same as me, felt fantastic. So, we were just talking about our experience as buddies and well, what are you doing? Why are we doing this? What do you think about it?
And we had a lot of questions and we saw this cool emerging category, so we started a blog, thezeroproof.com. The conversation back then was largely around recovery and that wasn’t our experience. We just saw a different angle, more lifestyle product focused. So, started reviewing these products, started bringing in ex-French Laundry sommeliers and cicerones, which are the beer equivalent of sommeliers and getting expert opinions. We just wanted to treat the category with respect and really learn about it ourselves.
And we became a fame within this very, very small category pre-COVID. I was spending some personal dollars to fly around the country and meet people and interview people and do the city guide. So, just by our presence, we became somewhat known. Had no plan in place, but we got samples from people all over the world where this trend is much further along, specifically in the Nordic countries in the UK. And everybody wanted to come to the U.S.
That category in total was very small and entrepreneurial, lots of startups. So, we started importing what we thought were the best products to the U.S., figured out how to be an importer. And it’s great because these are non-alcoholic products, so the regulation is much easier. And launched an e-com shop and started wholesaling these products. And that was about two-and-a-half years ago. Started as a blog and started doing e-commerce and wholesale distribution. And in July of last year, we closed a seed round of VC-led financing and hired a team. And so, now we’re pedal to the metal and enjoying the growth of the category.
Meb: I definitely see a bunch of people wandering around in the background. Listeners, Sean has a whole team. I’ve known this story and I’ve followed you over the years and we’ve chat about it and brainstormed, but we’ll let the listeners look over our shoulders and listen in.
But let’s start with the general entire category and opportunity because we’re here in January and it’s definitely seeping into the broad narrative, whether it’s in “The Wall Street Journal,” whether it’s in Joe Rogan talking about Sober October, whether it’s everyone else talking about Dry January. It’s definitely something that is becoming much more commonplace. Obviously, I live in Los Angeles, every menu at this point almost has a mocktail section or a category that’s no longer just O’Doul’s, it’s actually half a page or whatnot.
Sean: It’s thoughtful.
Meb: It’s thoughtful. So, you’re definitely noticing it as a startup investor, have definitely seen a lot of interesting brands popping up over, say, the past five years. So, talk to us a little bit about the opportunity. Because when you and I chatted before, there’s definitely some interesting observations that surprised me about this category in general and who’s the target and where it’s going. So, what do you call it, the non-alcoholic beverage industry, or, like, is there a phrase that y’all use?
Sean: There’s actually a trade group and this is one of the things that they’re trying to do, is single in on language because it’s a little all over the map. But I call it non-alcoholic adult beverage. First and foremost, this is a wellness-driven trend, which no surprise why you’re seeing this a lot in LA. But we’ve seen people get into exercise, we’ve seen people get into yoga and mindfulness. It’s like, “Oh, I’m going to spend my morning doing all these things that are great for me then I’m going to go out at night and have eight drinks.” I think it was just a natural extension of wellness. People want to be healthier and removing alcohol is a good way to do that.
Meb: Was it driven more by the younger generation by the way, or is it broad all around the world?
Sean: I think it started with our generation where you were the people that are drinking and saying like you said, I feel like butt, something’s got to give. A lot of young parents realize that alcohol is not serving them when they go out and wake up hungover and have to deal with toddlers. But we’re seeing it’s a huge, huge societal shift. And these things are very complicated and complex, but big check marks are wellness. And you hear a lot about the anxiety around social media for younger people where you always have to be on because there’s always a camera on you. But that’s part of it. And then I think the rise of cannabis and psychedelics is another.
I was talking to a large institutional strategic investor and they did a quick survey. They were in Texas at a very large Texas liquor store and they were literally just stopping people that were walking to the NA section and saying, “Why are you buying these drinks?” And the number one response that they got was, “Because I’m smoking dope and want something to go along with that.” A huge wellness-driven trend. And to demographics a bit, a lot of people think that these drinks, this whole movement is for people that do not drink or people that are in recovery and it’s actually the complete opposite. Eighty-two per cent of the folks that are buying these beverages are alcohol drinkers. People in recovery typically don’t touch it. Too many triggers.
Meb: It’s too close to it.
Sean: Too close. Really the whole purpose of these drinks is to replicate that exact alcohol occasion and flavor and experience. So, it’s very close. And so, it’s mostly the drinker often while drinking alcohol on that alcohol occasion. It’s a very high-end consumer that’s just trying to live a little bit more mindfully and take steps to be a little healthier.
Meb: As a beer guy, I remember O’Doul’s was really the one back in the day and it just was not good. And so, part of the uptake in my mind was always this mental attitude towards non-alcoholic drinks is they’re just gross. I would rather drink water or anything else other than O’Doul’s. And then I had a moment, by the way, maybe it was like two years ago, was at a buddy’s house and he had the Heineken 0, I think, or 0.0, whatever it’s called. I was like, “I’m going to try this because these have always just been atrocious.” And I was like, “Oh my God. This is actually on par.” Or if it’s not on par, maybe it’s 95%.
And so, you’re seeing this trend. You’re not just seeing it with alcohol but with the alternative meats, with Impossible Burgers where they’re getting to be in some cases on par, even better than a lot of the offerings out there. So, that was a huge surprise to me. By the way, listeners, we’ll talk more about it later, but his website is called The Zero Proof. But he’ll give you a code for a nice discount. But I tried some and my wife this week. And so, didn’t know that there’s an entire category of not only beer but also wine and spirits. And the wine was really good by the way.
Sean: It’s great.
Meb: So, tell us a little bit about the offerings. What’s the pie of what are people looking for? What’s the breakdown?
Sean: Before jumping into that, I just want to touch on something that you said that I think is important back with O’Doul’s. That was created for people that were in recovery or couldn’t drink for medical reasons. In addition to liquid excellence, it’s got to taste good if people are going to drink this. The flavor has improved but also this shift in marketing where this is now a cool way to live a healthier lifestyle while still doing the things that you love to do and being social. And there’s a lot of money coming into this category right now, and obviously with investment brings advancement.
But the breakdown. So, beer is the biggest. It’s 75%, 80% of this NA adult market. It’s been around the longest, it’s the simplest to understand. It comes in a can or a bottle, you crack it open and you drink it. And also you maybe saw Athletic Brewing, which is this darling in the NA beer space. They just raised a $75 million series D. Huge money coming into beer. Distribution is very well established and the market is way more mature because it’s been around for a long time with O’Doul’s and others.
Wine is next. Wine is about 20% of the market, and that is where I think we’re getting ready to see an explosion of growth. We’re seeing that from our website sales, from our wholesale sales, people are just really adopting wine. And then the smallest is spirits and RTDs, so canned cocktails. And that’s 1%, 2% of the NA pie. And the entire business right now according to Nielsen is worth about 11 billion bucks. But it is still only 1/2% as big as the alcohol market. There’s a lot of room to grow.
Meb: You just need the Spuds MacKenzie of the non-alcoholic category. Before we get into the specific offerings, I was thinking last night, I was chatting with my wife, you met, about it. And as I was thinking about drinking this wine, which was very good, I said, “I wonder how much of the day-to-day consumption for me, how much of it is caught up just in habit, how much of it is the ceremony of having wine while you cook or a beer while you barbecue, how much of it is the ritual and how much of it is the taste, and how much of it is the effects.”
And so, I was trying to combine all these things. And so, we were cooking last night, we had some of this. I don’t think it had any knowledgeable impact other than I feel better today. Same thing with coffee in the morning. All these categories of things that are mind-altering substances, I think, well, if I try this mushroom coffee, MUDWTR, Everyday Dose, whatever it is, that’s probably better for you maybe. I don’t know. I was trying to distil that and it’s interesting to think about, listeners, because I’m not sure. I didn’t have a conclusion. But I think a lot of it is caught up in that ritual and ceremony.
Sean: A lot of it is the ritual and ceremony. And this is just my personal experience, but I just went cold turkey after this weekend in Miami, which by the way was right in the middle of holiday season in Manhattan, which is just party central. Having these drinks around, you fulfill the need, you feel included, whether you’re just with your wife at home or out at a party.
And personally, I liked being a little bit more mentally with it in these social situations. It had been a while and I was like, “Oh, this is great.” But for me, it’s been an easy transition because, one, the flavor of these drinks are great, like you said. I mean, the sparkling wine tastes like you’re drinking a sparkling wine, and honestly, most people would have no idea that they weren’t. So, you’re just not catching the buzz and I think that’s a huge part of it.
Meb: It was the Oddbird Blanc de Blancs was the one we had. Well, an added benefit, listeners. Sean’s always been handsome, but he’s definitely a little slimmer these days, a little less jolly would be the right word to say than when we used to hang out in Manhattan. That’s an additional benefit. All these extra calories, so many people, I’m going to have my two glasses of wine with dinner. You do that five nights a week, that adds up pretty quick.
Sean: It adds up. And then waking up in the morning and I’m going to have the Danish or I’m going to have the McDonald’s biscuit just to coat the stomach. So, it definitely compounds.
Meb: Anthony Bourdain would’ve said the Szechwan, that was his recipe. Anything super spicy. This is a big trend. We see all the forces shifting. We’ve tried to do a few podcast series on this show over the years on trying to get ahead of some emerging trends. We did an entire Africa startup series, we did one on space, both of which I think we were ahead of the curve and we’ve seen just massive inflows in the startup and VC world. I think we’re starting to see this now. There’s been some big names. You mentioned Athletic Brewing, which I haven’t tried yet.
Sean: Super good.
Meb: Yeah, would like to. Let’s talk about you guys, this evolution of a blog to now a legit enterprise. So, let’s dig in. So, you started blogging and then how’d you go from there?
Sean: We had no plan in place for revenue. We had no idea what we were doing. And because I wasn’t working at the time, I was focused on this full-time. And when we got all these samples from around the world from people, small brands that wanted to be featured on our site, they all wanted to come to the U.S., nobody would bring them over, so we just saw an opportunity to learn how to be an importer and bring these brands over. And when our first pallet, and I think we literally imported one pallet, which for cost-effectiveness is not the best way.
Meb: Did you just have delivered to your house, this entire pallet? Where did this go?
Sean: No. This is kind of another discussion, but we’ve found a really cool Atlanta startup called Saltbox that is like a WeWork for warehouses. They take a big warehouse and chop it up. We spent 1500 bucks a month on a small little unit to just receive our product. And thank God Trevor is better at web stuff than me, but he threw up an e-com shop and had just a few products and then literally started calling people on the phone, just calling shops on the phone like, “Hey, you want to buy this?”
We were dialing for dollars and just really organically took the organic traffic that we had, started pointing it to an e-com shop. That was the genesis. And now we are regularly bringing over 40-foot containers of product, which is 24 pallets at a time. And with domestic companies bringing over multiple truckloads, we have a slightly bigger warehouse now. And e-com has exploded, but we’re really leaning heavy into the wholesale side of things. One of the things about these products is because they don’t have regulation, outside of beer, which is treated like alcohol in, like, six or seven states, Georgia being one of them, that has to go through three tier.
Sean: Yes, it’s totally silly. Wine and spirits are wide open. You can sell them however, through the mail, you can self-distribute. But we have made the decision that working with three-tiered distribution alcohol distributors is the way forward. The customer is the alcohol drinker, the occasion is the alcohol occasion, the buyer on the retail side or the restaurant side is the alcohol buyer. We’re going through that channel. So, we’re really leaning heavy into that and building out state-by-state distribution this year.
Meb: Is it just as a natural development where you mentioned importing, is just the brand development across these three categories, beer, wine, spirits, just happened abroad or is it mostly Europe first, or are they just higher quality, or what’s the domestic/international situation right now?
Sean: Germany was probably the OG for non-alcoholic beer. They’ve been drinking it for a long time as, like, a recovery drink after sports. And culturally, I always say that the U.S. is not the global leader in moderation. The Nordic countries are just a lot healthier and they were just playing around with interesting non-alcoholic drinks. And in the UK, the government actually got behind this moderation movement and put in lots of money to it to raise awareness. So, where there’s money and support, there’s going to be more fertile ground for business.
It’s catching up in the U.S. We’re getting brands coming out of the woodworks all over the world domestically and we just saw an opportunity to widen the offering here in the U.S. and also deal with an interesting drink is an interesting drink, a high-quality drink is a high-quality drink. And it was just a way to quickly start getting some new and interesting products onto the U.S. scene at a time when it really needed it.
Meb: Today’s episode is sponsored by The Idea Farm, my own private curated research service that gives investors access to research reports often used by the world’s largest institutions, funds, and money managers. These reports come from some of the most respected shops in investing, many of them costing thousands of dollars. We also send our favorite investing podcasts from the past week, so you can be sure to only listen to the best of the best.
Also included in the subscription, we send out our quarterly valuation updates like the CAPE ratio so you can see which countries appear to be the cheapest for new investment dollars in the stock markets all around the world. We also have the Quant Backtester, which allows you to evaluate various strategic and asset allocation strategies going back in time. So, all this can be yours with a subscription of The Idea Farm. And best of all, you can try it out for a free no-risk 30-day trial. Are you ready for an investing edge? Visit theideafarm.com to learn more.
What do you see as you look around to the genesis/development of this space over the past few years, where is most of the new dollars, branding, everything is focused? I see a lot about spirits. Of the three categories, is there one that seems to be garnering the most attention now? I saw you guys got a Sbagliato Bundle, was that a “Game of Thrones” reference from the actress?
Sean: We put that up two weeks before it went viral.
Meb: Oh my God.
Sean: We beat it on that one. So, it worked out well for us.
Meb: Listeners, if you don’t know what I’m talking about, which I’m sure you don’t, one of the “Game of Thrones” actresses was in an interview and this amazing British accent or whatnot and her co-actress asked her what her favorite drink was and she said a Negroni Sbagliato with Prosecco in it. And I cannot do it justice. And it went viral. It was just the funniest. So, anyway, I saw you guys had a Sbagliato Bundle. I was going to buy it. It looked great.
Sean: So, yeah, I mean I think going back to that Athletic Brewing $75 million series D, you’re seeing the biggest absolute dollars go into beer because it’s the biggest market by far. Heineken’s dumping a ton of cash into marketing their beer 0.0. Athletic is now one of the top 10 biggest craft brewers in the country, that’s of all craft brewers. And I think you’ll continue to see that. But winners are being chosen right now. Obviously, always room for new entrants. But Athletic is really dominating, Heineken’s big and I think wine is next. It’s about 20% of the market. People are starting to work it into their daily routine. We’re seeing on our website we have people that will buy a case of wine on our website every week, every couple weeks.
Meb: They have the, like, Franzia of non-alcoholic wine yet? Is there, like, a legit box company that’s really leaning in hard?
Sean: I don’t think there’s boxed yet. But the biggest non-alcoholic wine is still Fre, F-R-E, which is owned by either Gallo or Kendall-Jackson, one of the giant winemakers. It’s inexpensive and widely distributed, but ultimately in the beverage game distribution is key. Whoever has distribution and is able to get that product out there where people shop and get it in front of people is going to win. And I think wine lends itself very well to that. And the gatekeepers, if you will, are starting to wake up to the opportunity.
We’ve had talks with lots of high level both on the distribution side and on the brand side, the big alcohol conglomerates. They’re all aware of this, they’re all watching. Some are tip-toeing in, but it’s warming up. And wine is something that they get. And if you’re a salesperson for a distributor, you carry around your bag with six or seven bottles, five of them are alcoholic and you can just go to all your accounts and it’s an easy pitch. You said you loved the Oddbird wine, take this Oddbird and make your non-alcoholic menu. And you repeat that across 40 states and tens of thousands of restaurants, and that’s a real business.
Meb: So, with beer and wine, you have the traditional beer and wine-making process, fermentation, everything else. Do they make them and take the alcohol out, or is there a process of which the alcohol just is never a part of it? I assume with the spirits, alcohol is never… Educate us. How does the drink get made?
Sean: In each category, you can either start with alcohol or build something completely non-alcoholic. In beer and wine, it’s largely the same. With beer and wine, you can take alcoholic beer or wine and remove the alcohol, get it below that 1/2% threshold and then add stuff back in to build up for what you removed.
And on the beer side, and this is what Athletic does, you can also do a full fermentation, a full brew without it ever getting above 1/2%. Philosophically, I like that better. You’re not taking away, you’re just creating. And also I think the results that Athletic is getting and other brewers that are doing the same thing are extraordinary.
In wine, you use something called vacuum distillation where within a vacuum it’s just a big tube, a big container, the wine spins down rows of cones and then you actually shoot heated wine back up through the center. And because it’s in a vacuum, the temperature just has to be slightly above room temperature. And so, a very low level of temp will push the alcohol out. Then same thing, you take that base wine and you have to rebuild it a bit to give it some body, to give it a little bit of that mouth feel.
Most people with spirits are just building a completely new beverage, mixing different flavors, plant-based extracts and trying to create that alcohol, whatever the analogue is. If it’s a gin, they’re taking different botanicals and trying to make a really great NA gin.
Meb: What’s interesting as the science evolves, I remember there was a whiskey company, there’s one in San Francisco that was doing this and then one in LA that was trying to synthetically age their whiskeys through “science,” but through coming up with flavor profiles and everything that was in a 20-year-old, 30-year-old whiskey and replicate it. And I think they’ve had minor success. I don’t know that it was ever really a huge success.
But the funny part was the one in LA, I think it’s called Lost Spirits, they built a tasting room, which was a little more of a tasting tour and we went to it. This is pre-COVID, so I imagine it still exists. I don’t know. It’s LA, so you have a bunch of unemployed actors that are really good tour guides. I was like, “Man, these tour guides are so good at what they do.” Anyway, but we’re talking and I said, “You guys have been sold out. Like, I tried to book one.”
And I kind of ran through the numbers. I was like, “Wait a minute. You charge this much per tasting, you do this many.” I’m like, “You guys do, like, $3 million a year in tours.” I’m like, “You don’t even need a whiskey. Like, you could just have a tour. It’s like a Disneyland of tour tasting.” Alternative business model ideas are curious. But the point was, as the science evolves, it’ll be interesting to see the replication and entirely new categories of what gets created from these spirits. Which one do you think is the closest there? If you had to rank 1, 2, 3 beer, wine, spirits, what do you think is the closest on the Impossible Burger scale to getting to be really good?
Sean: I think you nailed it. I think it’s beer, wine, spirits. That’s largely a function of market size and money being invested into the space.
Meb: Talk to us a little bit about that. So, I’ve seen a lot of decks over the years for these brands. You mentioned Athletic Brewing. Let’s do this first. Tell me some of the stories of any big successes in this space, whether it’s abroad, whether it’s U.S., and then I also want to hear your top two or three favorite spirits, beers, wines that people can get from your website.
Sean: We’ve talked plenty about beer and Athletic, but they’re the success story. Company started in, I think, 2016 and now it’s probably going to be sold for multiple billions of dollars.
Meb: How much of this, I wonder, is Athletic Greens, which has been the number one podcast sponsor for probably five years?
Sean: Yeah, no kidding.
Meb: Tim Ferriss. And I wonder how much of it they just nailed the branding. Whether it’s placebo or not, I don’t even know what is in Athletic Greens. I’ve tried it. But I wonder if it’s just, like, this nutraceutical placebo, no one eats enough greens, slapping Athletic on it. And the same thing with beer is, like, what a great branding. You’re an athlete, you’re going to be healthy, drink beer, but this is going to be better for you. What a good branding concept. So, good for them.
Sean: It worked out well. Another thing that they did was they got all of these ambassadors that were triathletes, surfers, any athlete, basically, they would just give them free beer and you were part of the Ambassador squad. So, they really leaned heavy. It’s past just the name. I mean, that was really the early marketing effort. And by the way, ex-S.A.C. guy, Steve Cohen is the founder.
Meb: Oh boy. He needs some wins. Come on, these guys. It’s like when I hear Tim Griffin $16 billion last year, I was like, “Good for him. Keep going.” So, Athletic Greens, huge success. I actually haven’t tried it, so I’m going to order some. You guys don’t do beer, do you?
Sean: No, because we’re in Georgia. So, shipping beer would be illegal.
Meb: Oh, that’s right.
Sean: On the wine side, you’re starting to see some breakout winners. There’s a company called Leitz, which is an alcoholic winemaker. Really the winners now are companies that have been making alcoholic wine, decided to start doing non-alc wine. And again, it’s because they have these distribution relationships.
Getting distributors is crazy hard. They’ll drag you along for a long time. So, if you’re already doing business with them, you can just say, “Hey, you’re doing well with our alcoholic wine. Here’s our non-alc wine. Pump it, start seeing how it does.” But there are a couple companies that you’re starting to see on a larger scale. One is Giesen out of South Africa, G-I-E-S-E-N. Another is Leitz out of Germany. This is a winemaker that couldn’t drink himself. So, for years he has been making non-alcoholic wine as a passion project and they are really starting to scale up.
You’ve seen them in larger retailers around the country, larger grocery stores around the country. I’m very bullish on two brands that we represent. One, you mentioned, Oddbird. We just got that in the country. I’ve been trying to bring them over for close to three years. So, we just got it over. We’re just starting distribution there, but huge interest, lots of early success. ISH, which we bring in from Copenhagen. Oddbird is from Sweden, ISH is from Copenhagen. You tried their rum. I think ISH’s spirits are the best.
They also make incredible sparkling wines and I think we’re going to see huge success for those this year. Spirit side become good friends of mine, but there’s a company called Spiritless that started with Kentucky 74, a whiskey. They now have a tequila as well and some canned cocktails. They’re starting to get some serious distribution. They partnered up with RNDC, which is the second largest distributor. They have distribution in like 42 states. With that power behind them, they’re able to push product a lot of places.
Meb: You guys got a Robert Parker version in the non-alc world, or is Robert Parker rating any wines yet? Being not particularly palate gifted in the wine world, the quant numbers appeal to me where at least say I’m going to get a 95. At least people weren’t going to hate me if I bring this to their house. Has there been any development there in the world of non-alc wine or is it not there yet?
Sean: As far as I know, Parker hasn’t given points to any NA wines yet, but we’re definitely getting people that matter talking about it. We sell ISH to 11 Madison Park, which is a 3 Michelin restaurant in New York. And we’re selling the same wine to Alinea Group in Chicago, another 3 Michelin restaurant.
Meb: Never been to either, man. I need to go. Did 11 Madison Park, did they go vegetarian? Did I imagine that?
Sean: I think they went vegan.
Meb: Vegan, huh?
Sean: People that matter are really leaning into the space. Some more friends of mine, they have a company called Proxies where they make these very funky wine proxies out of different juices and vinegars and spices. They’re doing collaborations with very famous chefs and sommeliers. The right folks are leaning in. But I’m going to reach out to Parker and see what the deal is.
Meb: I have some friends, shout out to Esters, which is a great wine bar in LA. And they had a non-alc tasting a couple weekends ago and it was packed. I think it was full capacity. So, interesting to note that people actually come out for that as well. On the wine side, I have a guess but do the sales or the development tend towards red white bubbles or is it kind of across-the-board mixed?
Sean: People are buying a ton of red wine right now, still red wine. And then from there, we’re seeing the Sauv Blancs, the Chardonnays and then getting into sparkling. I think the sparkling wines are the best right now. The bubbles act like alcohol does, as a flavor carrier in your mouth that adds volatility to the experience. The reds are the toughest.
The best way to look at the trends really is with alcohol. If people are buying mostly red wine at the shop, they’re buying mostly non-alc red wine. They’re buying to fill that occasion. But it’s cool because with our website, we’re able to see day by day, month by month what people are buying at SKU level. And top 10 is heavily dominated by wine and red is tops in that.
Meb: It’s just had, like, a record January, so congratulations. Your company is crushing it. So, tell us a little bit about The Zero Proof. You guys did a funding round. What does it look like and how, as you look forward to the future 2023, 2024, what’s that look like for you guys?
Sean: So, closed our round in July and had the initial team already ready to go, was just waiting for the check to hit to hire everybody. Let’s see, we’ve got seven, maybe eight people now, including our guys that hold it down in the warehouse, which is no easy job. I spent most of January in there with them.
Meb: Just like a little young Elon Musk just sleeping on the car production floor.
Meb: Whatever it takes.
Sean: If things don’t work out here, I know I got a job at Amazon in one of the warehouses packing boxes because I am adept. It’s just all about growth. It’s so early in this trend and so early in our business that there’s just so much intrinsic growth built in. But we really look at our business in two channels. We have our e-commerce channel and we have our wholesale channel.
On the e-commerce side, we just launched a new and improved website and we’re continuing to dial and tinker. You know, nothing’s super sexy, but hey, what happens if we improve the checkout process here? Does conversions go up 20%? So, really starting to tinker there, work on ads. We’re working on some bigger brand partnerships, selling across different platforms and growing volume that way.
And then on the wholesale side is starting to work…we’re launching distribution in several new states in the coming months. And it’s a big process with a playbook of its own where here in Georgia we’re going to be launching with a distributor that has 150 salespeople. So, your job becomes training these distributors and training these salespeople, and building out incentive programs and educational programs to get them out there moving. And so, investing heavily into the wholesale side of the business, bringing on people to be in market to support that growth. And then on the website, continuing to just do performance marketing and grow and improve the conversion rate there, and more fun being always looking for interesting new brands, domestic or abroad, to plug into what we’re building.
Meb: You’ve always been really gifted at writing, copywriting, and reaching the end consumer. How much of the website now are you guys still really doing content and curation? Are you doing emails? How do you approach the content aspect of this business? Or is it just all TikTok, oldie dancing, or what?
Sean: We are getting into the TikTok. I’ll tell you an interesting story about that. But we started out as a content platform with lots of really great SEO articles, but education is super important in this category. For some reason, when you remove the alcohol out of something, even if it’s a gin or a bottle of wine, people just don’t understand what to do with it. So, how things are made, how they taste, telling people how to use them, lots of recipes, lots of articles about different products, highlighting new products and how to use them is still cornerstone.
We are leaning heavier into social media, TikTok, talking about different recipes or talking about stories in the news. I’m still learning TikTok. But these trends, these micro trends emerge like Negroni Sbagliato where you have to very quickly capitalize on the zeitgeist that will last for maybe four days, but one of them is posting an article in the background and just talking about it, “Hey, biggest dry January in history. Here are the five reasons why this is the biggest dry January in history.” Investing more in there, bringing on some TikTok natives.
I think you and I have aged out of our TikTok creating base. I was talking to an in-house marketing guy for a very, very large VC that invests in food and beverage and he essentially consults for all their portfolio companies. And he said that nobody’s advertising on Meta anymore, Facebook and Instagram, obviously a bit of an overstatement, but it is all TikTok and all Amazon.
Meb: Amazon. That’s interesting. Makes sense. It’s closer to the purchase. Any other initiatives you guys are planning on, any other plans? Give us some insight into the future. What’s it look like? And you guys going to ever do any more fundraisings or is it one and done?
Sean: We’re probably going to go back out there. We got fortunate where we secured our financing before everything fell off a cliff because things got super icy. But with that, I was running the business a little bit more conservatively. And we’re already close to break even, and if we really wanted to get there, could get there, which is awesome. It helps me sleep better at night. But yeah, I’ll probably be back out there in six or eight months raising again. I’ve started warming the waters.
Meb: What’s your most memorable investment? Do you have any that come to mind from that category over the many years of being involved in the investing world, good, bad, in between?
Sean: Ooh, let’s see. We’re talking just, like, equities back in the old days.
Meb: It could be anything, man. It could be equities, bonds, options, your buddy’s pizza restaurant.
Sean: I’ll tell you my single largest investment, and certainly the most fun has been this. I funded this for the first year-and-a-half, two years, and I think it will also be my most profitable investment. But more traditional, I had a lot of fun on HIVE. If you remember HIVE Blockchain.
Meb: We’ve had them on the show, but you can tell the listeners if they didn’t listen to that one, what it is, what happened.
Sean: HIVE Blockchain was one of the first, if not the first, publicly traded crypto stocks. And it came out during the crypto boom, so it just went to the moon. There was all this pent-up capital that didn’t know how to buy Bitcoins, they bought HIVE. But I don’t know the story exactly. There ended up being some kind of fraud where the servers weren’t there, the assets weren’t there, and so it round-tripped. Then I just started loading up on that after the round trip and the crypto boom part deux. And everybody that thought this company was a joke, it went right back up to its pre-crypto highs. So, in terms of profits, that was probably one of my highest-profit trades.
Their investing story is actually my wife’s. So, she’s a doctor, she knows nothing about business. But her dad, who was a banker was like, “Hey, you have a few bucks sitting around this account, why don’t you pick a couple stocks to buy?” And so, I was researching Chipotle at the time and I said, “Oh, why don’t you buy Chipotle?” And it was like $40 a share. Then she wanted to buy something medical, so based on no research, but just what she knew in the medical world, she bought DaVita, which was dialysis. She’s like, “No, we do tons of this.”
And so, Chipotle ran from like $45 to $770 and DaVita 4 or 5xed, Warren Buffett took a position in it. And so, I was like, “Why don’t we sell at 750 bucks for Chipotle?” So, she made almost 20x on Chipotle and then 5 to 6x on DaVita and she’s like, “What do we buy now? I need you to double my money again.” I’m like, “Babe.”
Meb: Rinse, repeat. This is easy. God, why don’t you retire from this medical career and we can just be stock pickers? You got a special discount for our listeners? You want to tell ’em about it? Also, where do they go? Where’s the best place to find if they are non-alc curious and they want to load up on the Negroni Sbagliato with Prosecco in it?
Sean: The code for all of your listeners, MEB15 and that will get you 15% off, anything you want to try, wine, spirits. We have a lot of different bundles, like Meb was saying, the Sbagliato Bundle, different cocktail kits if you just want a one-and-done solution. Head over, check it out and pick something up.
Meb: Listeners, you can try to see if their software works by typing in MEB50, maybe you’ll get 50% off, MEB90, see if you’ll get 90% off. See if there’s a kink in the code. No, that’s cool.
Sean: We hid some Easter eggs in there.
Meb: Was the domain available when you reserved it? Because that’s a great domain.
Sean: Yeah, we got that back in the day. That’s how early we were. We couldn’t get zeroproof.com because it was parked by some guy who threw up one of those college project websites.
Meb: Yeah. Well, GoDaddy is not even doing it, so you can probably put in a lowball offer and still get it. But thezeroproof is just as good. And by the way, you guys come up quite a bit on organic search as I was digging around in the past week looking for some recipes and stuff. You guys show up, so kudos. Somebody’s doing the right writing over there.
Sean: The SEO play was good.
Meb: This was a blast, man. Thanks so much for joining us today.
Sean: Yeah. Thank you, Meb.
Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at email@example.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.