How I Started A Vodka Brand Doing $100K/Month
Hello! Who are you and what business did you start?
My name is Umberto Luchini, and I am the founder and proprietor of Wolf Spirit Distillery, which crafts Blood x Sweat x Tears vodka, and imports Tom of Finland Organic Vodka. Our distillery is based in Eugene, OR (in a former laundromat).
Our flagship product is Blood x Sweat x Tears vodka, hand-distilled by Ben Green using locally sourced ingredients: soft white winter wheat from Hamilton Ranch (on the Rattlesnake Ridge in Washington state) and purified waters from our local Cascade mountains. The copper column distilled liquid is then freeze filtered to achieve an exceptionally smooth vodka that manages to retain much of the character of the grain. The brand name derives from Sir Winston Churchill’s famous World War II speech -- "I have nothing to offer but blood, toil, tears and sweat” -- which over time evolved into “blood, sweat, and tears.” That kind of effort captures the spirit of both our entrepreneurial journey and our vodka.
We created Blood x Sweat x Tears for misfits: people who are pursuing their own dreams. I am one of those people: I walked away from a very comfortable CMO job with a multi-national liquor company to found Wolf Spirit, which is named in honor of that kind of independence. I had become a misfit in the corporate world and needed to follow my own path. The first two years were -- I assure you -- almost all blood, sweat, and tears; but now, in our third year, we are off to the races: in the first six months of the year our vodkas became available in 23 states, and by the end of the year we should be in 40, and in important chain stores such as Total Wine and WalMart. Just to put that into context, that type of growth usually takes 4 years.
What's your backstory and how did you come up with the idea?
I was born in Italy, schooled in the UK, started my career in France, then entered the spirits industry in Monaco. When I was given the chance to take a lateral transfer to the US in 2003, I jumped at it and moved to San Francisco. By 2007 I knew America was my home and became an American citizen. By the time I started my own company I had worked in marketing for about 25 years, 15 of those with Campari USA, the U.S. arm of multinational Campari spirits.
For the first 24 years of my career, I had marketed products produced by others. Then, in the 25th year, I was tasked with creating and launching a brand for the company, and Espolòn Tequila came to be. I am proud to say that it is often called “the Tito’s of Tequila” for its rapid growth, and this success gave me the itch to create my own products, rather than market others’. I tried to do this within Campari, presenting many models to show how this could work, but we could not come to an agreement.
So, in my mid-40s I walked away to launch Wolf Spirit Distillery, with the mission to live courageously with great purpose; to be honest; and, frankly, hell-bent on upending the system. Every day, I aim to inspire richer life experiences and to satisfy a literal and figurative thirst for what’s real.
Take us through the process of designing, prototyping, and manufacturing your first product.
The first product I set out to create was a vodka, which is the most-consumed spirit in America by a huge margin.
That being the case, the world is full of vodka but the category is all over the place. Vodka has baggage. Cocktail hipsters swear it off as being boring and having no taste. At the other extreme, slick clubsters and the profitability of bottle service push vodka to the extreme of being all flash, no substance. My distiller Ben and I wanted to connect with our consumers in a real and honest way; from our cores, we needed our vodka to be grounded on our will to create something different.
Creating our vodka itself – often called the “juice” or “liquid” in our industry – is our daily beautiful struggle to make something great. There were more misses than hits at the beginning. We started with potato-based vodka since we had access to very affordable potatoes as our co-founder Brian Kirschenmann is one of the biggest potato farmers in the United States. But the quality didn’t satisfy us: we wanted to create a vodka that had enough character to stand alone, either on the rocks or in a classic martini. So, we switched to wheat, which is a softer cereal to work.
After more than 12 months -- and 3,000 liters of vodka literally down the drain -- Ben created a liquid we all liked. He got us there through brilliant intuition and creating a freeze filtration process. I always give people the example that it is like putting the chicken soup in the refrigerator: the cold separates the fatty acids and esters, and the activated carbon grabs them, making a more clean, smooth, less harsh drink. We didn’t mind having invested the time: no great marketer can mask a sub-optimal product, so we had to have it right.
To start, we produced a small amount for a few stores and restaurants in Eugene. All of the hard work felt easy once we saw local consumers and bartenders loved what Ben was producing.
In the meantime, we were working on the packaging. We started by creating a symbolic vocabulary to communicate our values. One thing we value is grit: the persistence, fortitude, and strength it takes to really forge your own path. We chose a raised, clenched fist to symbolize this. Of course, in the larger world, this is often used as a symbol of solidarity and support. It salutes unity, strength, defiance, and resistance. In this case, we used it to represent the hard work and effort that goes into making every drop of vodka. It represents the strength we have had to show in the face of adversity, the passion that drives us to succeed, and our solidarity in coming together to accomplish every day’s hard work. It also celebrates those values in others.
To symbolize our spirit, or strength from within, we chose the all-seeing eye – the one on top of the pyramid, which is commonly used to represent non-physical, spiritual ideas; most people will recognize it from one-dollar bills. We used it to again acknowledge strength from within. As masters of our craft, we are creators of our own destiny. Our spirit gives us the strength to work toward this every single day. We are the body guided by the mind, and we can achieve anything we set out to achieve. And we do it with integrity.
The rest of the artwork is connected to our story, as founders and passionate professionals; to our birthplace, Eugene, and to our greater home in Oregon and the Pacific Northwest. There were a thousand other details and decisions, even down to the typeface, which we custom-designed.
Then, there was the question of the physical bottle. I had fallen in love with a certain bottle shape years prior, in my former job, and knew I wanted to use it one day. I started off with a clear, “classic” bottle in mind. The choice of black, matte glass was a pure coincidence: I happened to see a black matte bottle of Prosecco and loved the “screen-print” quality of the design as well as the fact that it made the Prosecco feel more like a premium Champagne. I made the gut decision to use the matte black glass and to screen our symbols to visually tell our story as they wrap around the bottle.
While getting the juice right took a year, the packaging only took about 6 months start to finish. We were able to count on the many decades of experience that the Wolf Spirit team had in sourcing manufacturing partners -- from raw ingredients to cardboard box suppliers. We had access to talented designers and artists who loved, and lived, the mission of the company. The main challenge, as for most start-ups, was to be able to afford the top ingredients, materials, and talent despite limited funds. This is where the personal connections and the will to be part of an exciting entrepreneurial journey became crucial.
Our start-up costs, before a single bottle was produced (let alone sold), were more than $1.5 million dollars. If we had opted to buy neutral grain spirits from the open market and had someone else produce it for us, we would’ve probably done all of this for less than $300K. This shows not only the dedication and belief of the team but also the willingness to put everything on the line to get the best and most compelling product out there.
Having worked in the spirits industry for more than 15 years, I was aware of the legal and regulatory requirements to get our business up and running. The Federal authorities assigned to help distillers operate proved helpful and tolerant of start-up constraints. The only major issue faced was to gain Federal approval of the label. We were rejected twice: the first time because the original label portrayed an “anatomical” heart (for the “blood” part of Blood x Sweat x Tears), which was considered “deceiving” as it could lead consumers to believe the product could have health benefits. The second time was because we had the world “flavor” on the back label, something that vodka is not allowed to say since it is by definition “colorless, odorless, and flavorless.” As any alcohol producer or marketer will tell you, label approvals can have a bit of a “lottery” aspect; however, in the big scheme, we were able to move forward with very few changes to the original design.
Describe the process of launching the business.
I started with just my own savings. My father had always banked a full 50% of his salary, and I always followed his example. I live in a very small apartment and do not spend much money on clothing or frivolities. So, I had money in the bank; multiple business models; and incredible fire in my belly. The next step was to set up a distillery, which is of course extremely expensive: not just a distiller’s salary, but space, equipment, permitting, insurance, cost of goods, etc. So, for that, I found an excellent partner, Brian Kirschenmann: one of the biggest potato farmers in the US, and one of Ben's best friends.
I designed our first brand – Blood x Sweat x Tears vodka – and Ben started making it in our distillery. The idea and name for the vodka were just from my life: the name celebrates the struggle and risk of living outside of what society expects. It also celebrates the grit and humility – and blood, sweat, and tears -- it takes to find success when you have chosen that path.
Just like it took us more than a year to come up with the actual vodka, it took us another year to figure out that while I was a great marketer and Ben was a great distiller, neither of us were great salespeople. By the end of 2018, we had beautiful vodka and a beautiful bottle. But, not so beautiful, we had a warehouse full of it, unsold. We had to change something, and fast. So, we brought in three more partners: our CEO Bradd Levitan, who is one of the best salespersons in the liquor industry, particularly when it comes to stores; our VP Stuart McGuire, who is one of the best salespeople in the industry when it comes to restaurants; and our COO Larry Margolis who is a master of distribution. Within three months we were sold in 23 states, with another 17 due to come on board by the end of this year.
Since launch, what has worked to attract and retain customers?
Our first goal was to be present in high traffic chain stores (for example, places like Total Wine); then (and now), the most important goal was to give consumers a chance to taste our vodka: you cannot build a spirit brand without trial, so we invest heavily in “in-store tastings.” You have probably seen these in your local liquor store. Alcohol brands cover the costs to make these happen so that consumers can try before they buy. I have executed many, many in-store tastings myself, simply as part of owning the brand, but also to gather direct consumer feedback. Our current conversion rate is about 28%, which we are happy with considering we are a new brand that generally costs $25/bottle.
As a next step, we are growing our distribution in bars and restaurants: while we sell less volume that way, it is truly an even better way to allows consumers to try (a cocktail) before they hopefully buy (a full bottle). In this sales channel we also benefit from the halo effect of the great bars and restaurants that carry us, and the fact that the consumer is in effect paying to sample him- or herself. Plus, we make some money, as do our distribution and restaurant partners.
We use social media to reach our consumers, and traditional trade media to help build our distribution. From experience, we know it is too early to undertake heavy consumer marketing campaigns, such as advertising: at this point, they just won’t deliver adequate ROI for us. Similar to the way that great marketing can’t make up for a sub-par product, great marketing can't make up for lack of distribution. The customer needs to be able to both find and try a brand before s/he can be expected to plunk down $25 to buy a bottle of Blood x Sweat x Tears, or even mention it to others.
For our web site, we started with just a landing page. As the brand grew, we added the brand backstory and a press page; now we are working on the nationwide store locator. Similar to the way the whole company is grown, we focus on lean development when and where it's needed.
Our site gets about 1,500 monthly users. Our June and July social media campaigns drove web traffic heavily, with a high watermark around 5,000 visits per month; our current organic traffic is around +300 visits/month, with large spikes during campaign periods.We are also growing on social: in 2019 we are +519% in Facebook followers, and +49% in Instagram followers.
This FB video post, showing the true reality of our distillery, had 6.3K views: BSTvodka; and this one, a little more romantic but true to our mission of encouraging everyone to follow their own dream, had 14K views and 2.3K likes: BSTvodka
Our social/digital ad campaign for Blood x Sweat x Tears included a branded photo and video content placed across FB/IG/YT and digital display. The campaign was promoted in Florida and California, our top two states from a distribution standpoint. Our goal was to promote the spirit of the brand, letting like-minded consumers know there is a vodka out there built for them, and then to drive those engaged consumers to our website to learn more, including where to buy Blood x Sweat x Tears.
We had originally been interested in growing our email list, but after a few weeks of the campaign being live and promoted, we shifted focus to website traffic, awareness, and social following growth because we noticed that consumers wanted to engage with the brand in real-time. Rather than capturing email addresses to use later, we wanted to harness the power of instant engagement.
To that end, FB Messenger has been one of our most valuable tools. Connecting digital efforts to liquor sales are very difficult due to laws requiring that liquor distributors exist as “middlemen” between liquor brands and consumers. However, we've seen great success when we engage with curious consumers directly through Messenger. It's a high-touch strategy, but we've helped individual consumers find bottles, special order bottles, and in some cases encourage their local liquor stores to carry Blood x Sweat x Tears. Through Messenger, we've turned a small group of consumers into brand cheerleaders that are organically spreading the word through their communities. This feels like the most authentic way to use digital platforms, and truly “fits” Blood x Sweat x Tears, which is the antithesis of glossy corporate vodka.
We use Sprout Social for our ongoing organic social content campaigns as well as reporting and approval processes. We've tried several different software packages, but find that Sprout has the easiest publishing and scheduling interface. Plus their reporting is super clean and easy, really hitting everything critical to a new brand. We use FB Business and Google Data Studio for some additional reporting. In sum, our social campaign is doing well, and our next step will be to focus on even more states.
I am happy to say that we are getting repeat orders in nearly every market: as I guess is probably the same in most industries, with strong relationships getting the initial sale is not too hard. The real victory comes with repeat business, as this means the consumer is pulling the product off of the shelf. For us, we see this happening fastest in states such as Florida where we have great distribution and a strong schedule of in-store tastings. We are well-placed in stores due to our relationships, and the packaging is a big draw.
How are you doing today and what does the future look like?
Today we’re operationally close to breaking even, though that does not include the multi-million dollar investment in the distillery. As we have only been selling since March 2019, this is a fairly remarkable financial result: in 2018, we showed almost $0 in revenue; by the end of 2019 we should be close to $1 million, and our margins are above 50%. We are definitely helped by having worked in the industry for decades, so the little spending we do undertake is very effective: for example, despite being a newcomer, we are managing to keep our marketing cost to about $5/bottle, which is only slightly above the average of big companies with established brands. Our cost of goods, whilst high due to our “low” volumes, are within the range that allows us high double-digit gross margins.
Looking ahead, I keep my focus on short and long-term goals for the business, as well as short- and long-term goals for myself. The short game for both the business and myself is to maintain focus, keep motivation strong, and of course survive: as often said of entrepreneurial ventures, this is a marathon, not a sprint (on a side note, I am personally a serial marathoner, just finished my 10th Ironman, and also run ultra-marathons). For the business, our goal is to establish a portfolio of brands that are the envy of the industry. Each will be craft in nature, national in distribution, authentic in its story, profitable, and -- ultimately -- alluring to investors. Personally, the goal is to enjoy every minute of this extraordinary entrepreneurial journey that I started more than two years ago. Along the way, I want to provide consumers with meaningful stories and enjoy some outstanding products.
Through starting the business, have you learned anything particularly helpful or advantageous?
Looking back, I should’ve given myself more time to learn about the regulatory process in vodka distillation, so as to have avoided making some expensive mistakes. The key learning is that even if you think you know your industry very well, there is no way you can know all the aspects of the industry, so it is wise to cautious when tackling new elements of the business. On the other hand, one thing that worked out particularly well was – and is – investing in a best in class commercial team. It’s all about route to market, and investing in the right people turned around the trajectory of our business.
The most important habits I must maintain are focus, resilience, and flexibility. I must enforce a delicate balance of not changing strategy too often, but being nimble enough to change it when I realize that something is not working out as hoped.
The other best decision was to follow my instincts in terms of product and packaging. Everyone was discouraging me from launching a vodka. I, on the other hand, thought that craft vodka had room to grow and the numbers are now proving it. I also followed my instinct in the packaging, going against the established norm that vodka needs to be in a clear glass to communicate “purity” to consumers. As nearly 80 million cases of vodka are sold every year, I believed consumers had already a fairly strong understanding that vodkas are inherently pure and clean - especially when priced above $20/bottle.
Regarding outside forces, the craft spirits trend is certainly helping us, particularly as we are one of the few craft spirits with national distribution. Multiplying that, due to the speed and scale at which we were able to set up national distribution, Blood x Sweat x Tears gives chain retailers and restaurateurs one of the very few options to offer their customers a new, super-premium craft vodka. Most of the other vodkas that have a national footprint – so, therefore, can be stocked by national chains – are brands that have been around for a long time, and are from huge companies rather than small entrepreneurs like us.
Another consumer trend helping us is the current quest for flavor: due to the freeze filtering, Blood x Sweat x Tears vodka has a very distinctive taste, which is right on-trend. Ditto authenticity: anyone can come visit us in Oregon to watch the vodka being made, 100% by hand. Lastly, the entire mission of the brand really seems to resonate: more than 95% of US employers are small businesses, and 67% of US jobs are with a small business. The independent and “maker” cultures are alive and well, and its disciples seem happy to celebrate a brand that celebrates them.
What platform/tools do you use for your business?
CRM is too big a word for it, but we do email significant information to our distributors, mainly to stay relevant and in their minds. Any newer, smaller supplier will get very little to no share of mind from any major distributor; thus, it is important to keep a steady stream of positive and impactful information flowing to your distributors. Third-party trade or consumer media coverage is useful and can be generated fairly quickly. But, by far the best feedback comes when we are able to let distributors know of national chain restaurants that will be carrying the Blood x Sweat x Tears: this is because the distributor will most likely be able to make money off of this, so it is news they really care about.
What have been the most influential books, podcasts, or other resources?
I was deeply influenced by two books: Contagious by Jonah Berger, on the power of word of mouth, and The Long Tail by Chris Anderson, which explains the rise of the niche in a world where everything is available to everyone. Both inspired me to start my entrepreneurial adventure, as I learned that you do not have to be “big” to succeed.
Advice for other entrepreneurs who want to get started or are just starting out?
For myself, I have learned that the most important habits I must maintain are focus, resilience, and flexibility. I must enforce a delicate balance of not changing strategy too often, but being nimble enough to change it when I realize that something is not working out as hoped. I see a lot of new entrepreneurs shifting strategy too often, usually driven by external investors who don’t know the business well, or by financial pressures that force changes of direction. Sticking to a direction for enough time to give it a proof of concept is one of the most important “arts” in entrepreneurship . . . and yes, that is an art, as there is unfortunately no manual that will tell you when it’s right to change strategy.
I find a lot of similarities between entrepreneurship and endurance sports: to succeed at either, you need to be dedicated, stay focused, and accept that you're going to have ups and downs but you need to keep running right through them. As Virgil, the ancient Roman poet, once said: “Come what may, all bad fortune is to be conquered by endurance.”
Are you looking to hire for certain positions right now?
We are currently working with consultants who add value in specific roles. When the time comes to hire, we generally handpick personnel whom we know or have worked successfully with in the past. The spirit world is very small, so if you have your ear to the ground, you usually know the talent available around you. That being said, while we are currently not looking for any new hires, we are always open to consider those who share our same vision and can step right in to move the needle very fast and effectively within their area of responsibility.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Wolf Spirit Distillery has provided an update on their business!
Over 1 year ago, we followed up with Wolf Spirit Distillery to see how they've been doing since we published this article.
2 months ago, we followed up with Wolf Spirit Distillery to see how they've been doing since we published this article.
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