133: Why “Vice Wellness” Could Drive the Next Beverage Boom With Jeff Cantalupo

Welcome to Business of Drinks, I'm Scott Rosenbaum. And I'm Erica Ducey. Today we're talking with Jeff Cantalupo, founder and managing partner of Listen, a venture capital firm that is focused on consumer brands. And Jeff has a really interesting background as an investor. He spent a decade in brand strategy at the legendary advertising firm Leo Burnett before founding Listen in 2010. And he's been investing in consumer companies ever since. He also has some really relevant experience when it comes to drink specifically. Jeff was an early investor in Angel's Envy, which was later acquired by Bacardi. And more recently, Listen has invested in go brewing, delta beverage and magic cactus. And what makes Jeff's approach super interesting is that Listen starts with the consumer. So they actually conduct their own first party research to understand where behavior is changing. And then they look for companies that are positioned to take advantage of those shifts. And that leads into one of my favorite parts of this conversation. Jeff explains what he calls, quote, "vice wellness." Yeah, what he is bringing to the table is a clearly defined thesis, right? This argument is that some of the strongest consumer businesses historically have been built around ritual identity and repeat behavior. But wellness is increasingly becoming part of this equation. So he's kind of looking at what happens when you combine those behaviors with products that consumers now perceive to be better for them. And that brings us directly into beverages. So we talk about the emerging idea of social beverage, including non-alcoholic beer and hemp derived THC. And we also discuss how alcohol is not necessarily disappearing. It's more that consumers are becoming increasingly intentional about what they drink in different occasions. And we are seeing that across all data sets these days. Jeff also has a breakdown of what makes a beverage company actually investible. And here he is particularly clear that it needs to be a business that can scale to generate venture-sized returns. Yeah, and there are some practical markers of that. Things like repeat purchase, margins, customer acquisition costs, and finding a path to stronger unit economics. He also explains why omnichannel capabilities, meaning everything from DTC to wholesale and beyond. Those things are now table stakes for the companies that he invests in. So even in drinks, when DTC isn't likely your biggest sales channel, the digital channel can help build audience, and that ultimately drives retail velocity. For me, the academic delights in the fact that Jeff also teaches startup branding at Northwestern's Kellogg School of Management. And here he shares that one of the questions he asks founders is deceptively simple. It's what business are you actually in? And not everyone can answer that. So a brand may technically sell beer, tequila, or THC seltzer, but the stronger positioning might be around an occasion, or a feeling, or a consumer need. So there's a lot in this episode for anyone who is building a drinks company right now, especially if you're thinking about raising capital. So here's our conversation with Jeff Cantalupa of Listen. And now a word from our sponsor. If you're building a drinks business, there's a hundred percent chance that the decisions that you're making right now will shape the next two years. And you shouldn't have to make those decisions in a vacuum. Through business of drinks advisory, Scott and I work directly with founders and leadership teams on everything from consumer forecasting to brand positioning to go to market strategy. We bring the outside perspective, you keep building the business. Email [email protected] and tell us what you're working on. And now back to the show. Jeff, welcome to Business of Drinks. Thanks, Erica. Excited to be here. So you started your career in brand strategy at Leo Burnett before founding Listen. Did you learn about working on large established brands that ultimately shaped how you think about startups and investing in the world of advertising? Our job was really about how to determine what might be culturally relevant to consumers. And how do you tell a story around a brand in culture? And in a weird way, I think a lot of what I learned there translates to early stage investing largely because we're doing the same thing, which is when we see a new idea, a new brand, how do you determine whether or not that could be relevant in culture based on what's happening? And so I think it's very translational, even though it doesn't seem like a linear path to kind of brand strategy to early stage investing, that's a little bit of what I would say. The other thing that really was really formative in my early career at Leo Burnett was in addition to helping big conglomerates manage portfolios of brands, I got a very unique experience inside the advertising world where three years under the decade I spent there, I was kind of asked to help build on innovation strategy for some of these large clients. And so I just saw firsthand how big company has approached innovation and commercialization. And that gave me insight into how innovation should be done from a consumer perspective. It also gave me insight into why a lot of times you see big companies having to buy innovation and it comes back to whether or not they're organizationally designed to do innovation correctly. I think at the speed we're moving it today's society, you're seeing an increase actually in kind of the M&A environment because a lot of innovation is happening outside the walls of big companies. Yeah. And what was it about consumer brands specifically that made you think, okay, I want to become an investor in these types of companies. I mean, it's lack of understanding anything outside of consumer. I spent my whole career working on consumer brands. And so I particularly love the idea of investing in things where you can like touch, see, feel, talk to a consumer and get their response to what it was that made them excited about it. That's not to say that, you know, B2B software or infrastructure isn't good places to go invest. I just, I don't understand the business models. And what what I was kind of ingrained in me from the beginning of my career was, how do you listen to the consumer, thus the name of our firm? And if you, if you listen appropriately, maybe you can help kind of figure out where things and culture are going. And that's, that's where really where the, the opportunities for investing is. Yeah, I mean, and it seems like that really carries through everything that I've seen like on your website and everything that the company has written about sort of emerging trends. And really, it does seem like a big part of listen's approach is identifying those shifts in consumer behavior before they come obvious to everyone else. So what is the mechanism to do that? Well, we try to do a lot of it by doing our own first party consumer research. And I like to tell everyone Eric, like, investing is very, it's a hard business. At the end of the day, it's really about timing. And our job is to be early and right, which is not easy to do. The way that we've always approached it is we start with trying to understand consumers directly. And so at any given time, we are fielding kind of direct research studies on areas that we're interested in as it relates to changing consumer behavior. And we're going out and we're talking to consumers. We're doing ethnographies, we're touring fridges and freezers, we're doing all the things that you would do to get really smart around how people are buying or shopping at category or why people are maybe changing brands or products in their daily routines. And we do that very specifically. So we one have a view internally about where we think consumer behavior is going. But two, when we meet entrepreneurs that are building in those spaces, we feel better educated to ask the right questions and say, hey, we've talked to the consumer that I think you're targeting. Here's what we've heard from them. Tell me how your brand is positioned to win that mindset or that occasion. Yeah, yeah. And I've heard you talk about consumer obsessed entrepreneurs. So what does consumer obsession look like in one of these founders that you might be interested in working with? I think it's really reflective of the way that we approach things, which is I think you got to constantly be listening. And so consumer obsession for us is the entrepreneur that is just obsessed with the audience that they're serving and bringing the audience to the table through decision making. So what we look for is like, how do they do that? How did they come up with the idea in the first place? How much consumer research did they do? How do they make decisions? And is the consumer part of the decision cycle? How do they capture insights today? How are they using data? These are types of questions that we'll get into when we're diligently in a company in an entrepreneur to really understand is like, is it kind of going through the motions? Or is consumer obsession really built into the design of the company? Yeah. Well, listen tends to invest in what you've described as critical inflection points for brand value. What is it that needs to be happening in a business for you to feel that it has reached that point? It's different in all types of businesses and categories, to be honest. But I would say that what we're really looking for is early signals that there is consumers really adopting the brand and the new products into their lifestyle. And that can be a number of things. It can be early retention signals in terms of subscription numbers. It could be interaction or engagement on a topic that the brand is trying to create kind of authority. around, right? So it could be just starting with content and saying, hey, we believe this is the future of where x, y, and z is going. And all the sun, you see a community forming around that perspective and high levels of engagement. That tells you something. It's a signal that the point of view and the provocation of the brand is starting to resonate. And so those are the types of signals we're always looking for, which is like cultural resonance in a way that's actually measurable. And it can be both from a business kind of revenue and retention perspective, or from a narrative and narrative innovation perspective. Yeah. Well, let's bring it down to the sort of like practical category and then brand level. So what is it that you are most excited about investing in right now? And how would you say your thesis has changed over the past few years? Well, I'd say we've been we've been consumer at large from day one at listen. And our job every time we raise a new fund is to kind of take a step back and say, hey, the tipping points that we've been excited about in the last fund, are they still here? And if so, what is what is the future of them look like? As well as what are the new tipping points we're excited about to invest against? And I would say if you look back at the last three to four years of our investing activity, as well as the thematics we've been researching directly, I was a broad stroke view is that we're really excited about the tipping point around health and wellness. I think a lot of people would say that. But if you drill down against that, what are we really kind of in the way that we articulate what we're looking for is really the thesis we have around what we call vice wellness. And what that means is we're starting to see, you know, if you look historically, a lot of the best consumer businesses have been, unfortunately, in vice categories, right? So, you know, alcohol, tobacco, you name it, there's always been brands that have been built that have really strong retention and really great unit economics, largely driven because these are products or brands that are reflective of identity that people like to badge with as it relates to what they're doing or what was kind of important to status at the time. And so if you take that concept of vice, the economic models are incredibly strong. But obviously, we've kind of moved into this world, we'll re-believe the new status symbol is actually wellness. And if you have vice types of behaviors and economics coupled with wellness permission, you start to see some really exciting things as it relates to where we can go and best. And so that's been a in overarching thematic, we've been very interested in hyper interested in ritualistic type of brands and experiences that people can really identify with and badge with as it relates to kind of the new routines that they're adopting in their life on an everyday basis. Yeah, well, let's talk about that concept even more. So social beverage is something that listen has really led some a lot of thought leadership around. Tell me about the concept and how significant do you think this social beverage concept in category could become? It's a great question and social beverage is fun because it, you know, I get a lot of pushback from people about whether or not some of the beverages we've been investing in are quote unquote social. But I think the idea behind the area is that people are starting to make different choices, particularly within the occasions that they're looking to solve for with the beverage format. And you could say, you know, from a high level perspective that, you know, when and how often you're drinking alcohol has started to shift. So let's just start with that as a construct. That could be true. I think there's a lot of a lot of articles that are getting it right and a lot of articles that are getting it wrong as it relates to what their true behavior change. But I do think in the in the cycle of health and wellness, people are starting to make more moderation decisions as it relates to what they're putting in and on their body. And if you take that from an alcohol perspective, there's a significant amount of occasions that were previously alcohol occasions that people are looking for alternatives. That doesn't mean everyone's going sober. That doesn't mean people aren't going to still drink alcohol. I think it just means there's more intentionality with regards to what they might be choosing in those moments. And so the idea behind social beverage for us was, what are other products that are finding their way into those moments? And what are the behaviors around them? And so high level, you know, that could be anything from a non-alcoholic beer, which is people that love beer and love the flavor profiles of beer, but just don't always want the alcohol can can that be a big category? And we've made an investment in the space to things where, hey, I might not want an alcohol, but I still want to feel something. And that could be new active ingredients in beverage, things like, you know, hemp derived THC, or you've started to see a lot of things like Kava or Kana, these new active ingredients that are starting to find their ways into beverage. And I think a great example of all of that would be, you know, there's feelability associated with a lot of beverage categories and occasions, including one of the largest, which is energy, you know, that's not going away. And I think there's new forms and functions around energy, but that's kind of what we mean. These occasions that people are looking for alternatives and kind of the formulation innovation that we're starting to see with regards to what else could fit those occasions. And are there net new occasions to be built up? Yeah, yeah. I love that idea of feelability because you definitely see that in the hemp derived THC. And I know that you've invested in Delta beverage and magic cactus in that area. And then there's the other side of it, which is, you know, having the social moment with the like NA beers and one of your investments is go brewing. So just taking those three brands, what did you see across those businesses specifically that made you say, you know, these are the ones that we want to take a bet on? Yeah, it's great. I mean, I think first and foremost, I'll go back to our original conversation, which is like all of those founding teams are consumer obsessed in go brings case. Joe, Joe Chura, the founder of that business, you know, personally kind of went through an experience where he started to really cut back on alcohol and be more intentional about what he wanted, but he he loved the flavor of beer and he craved it. And he just didn't feel like there was a lot of brands doing not not called beer well from a flavor profile perspective. And so he spent two years trying to perfect, you know, actually doing not called beer the right way and how you would brew it the right way. And he's vertically integrated. So he has elasticity to to try new things all the time. And he's won, you know, a couple of world beer cups for a couple of his flavor profiles, but he's also kind of positioned a brand as a bit of an alternative to what else is out there. So I think what's really inspired us about what Joe was building was he was super consumer obsessed. He has a beer club, which is probably the largest membership club in not a clogged beer that makes is an existence. He gets a lot of feedback from his consumers and his members around what they're looking for. And because he's vertically integrated, he has so much fun bringing new innovations to market. And so from that standpoint, we really believe that someone was going to solve this kind of next generation requests from consumers, which is I love to try new things. And is there an innovation platform around NABIR that can actually kind of deliver on that for the NABIR consumer? And so that's an example of, you know, pure consumer obsession at the center of what they were building, but a business model through the vertical integration that actually reflects kind of the innovation that I think is needed to kind of get the craving of what consumers want. Yeah, let's lean in on that vertical integration for a minute. So, you know, a lot of beverage founders, they're told to stay asset light and, you know, not have huge capex expenditures. What are the conditions in which owning production becomes an advantage instead of a burden? It's a great question, Erica. And I would argue that this kind of gobs and flows in the world of investing, right? I've been investing since 2010 now. And I've seen dramatic shifts in terms of what investors want to see from consumer entrepreneurs. You know, at one point early in my investing, it was like, yeah, vertical integration is great. It means you're doing something hard. It can create a moat. And there's an asset value there. And then it went very much to what you just described, which is asset light. There's a lot of co-manufacturers out there. Just go do it, get it out there and see if you can run. And so I actually think we're kind of coming back to another aspect around. Well, vertical integration can be an asset to a business. And it's investible. If you believe your business model is reflective of what can create the moat in the long run. And so I think it really is dependent on what the brand is trying to build. And how far you take vertical integration in terms of your true moats versus what it can be used for in a sandbox as a relates to innovation. And so in goes case, they felt very strongly that they had to have the agility to innovate flavor profiles and differentiation themselves and control quality. Because what they were trying to build against was they didn't think there was a lot of quality and a beers out there. And so they wanted to own and operate that side of it. Now, as we scale, sure, will we do it all out of our own facility or will we start to add on co-manufacturers once we solidify the right formulas? I think that's something that will be in the cards as we continue to scale because you want to be smart as it relates to how you scale that. But I think owning and operating the sandbox to do innovation correctly there was something that has gotten Joe to one have. He's incredibly awarded beers in the market to kind of created this fan base that loves the innovation that he's bringing to market. Yeah. And I was looking at go brewing a little bit more. They've built, as you mentioned, across DTC as well as wholesale and Amazon. So I wondered. You know, How important is that kind of omnichannel activation when you're evaluating a beverage company? - So it's great question. And I would argue that five years ago, I was actually very hesitant to invest in beverage. And the reason was because one, it's capital intensive and two, it's gonna be one on retail. And I don't necessarily think that that changes today, although I do think that there's ways to be a little bit more capital efficient. But I think today and over the last five years, if you're not an omnichannel brand, your ability to actually infiltrate culture is drastically impacted. And I think you have to have muscles at a company that allow you to make noise online, whether or not the volume will ever come from that channel, direct to consumer. You, one, can build fans and direct insights. And two, you can make noise that actually supports getting cans off shelves when you're in retail. So I don't, I think it's table stakes to be good at omnichannel business building in today's world. And that's a cross categories. I think a beverage historically wasn't, quote unquote, needed because most people would say, well, the unit economics of DDC beverage don't work. We've seen companies in our portfolio prove that wrong. We have DDC beverage companies that have unit economic models that actually work. And I think that is because they understand digital, the way that traditional beverage founders didn't. And I think that gives them an advantage. One, both in that channel, but two, in making noise to then drive retail conversion. And I think that digital is going to become in a incumbent on every management team in beverage to understand how to translate digital activation to instore attribution. And so we spent a lot of time with our companies understanding that muscle before we make the investment. And all of our beverage companies that we've invested in, I'm proud to say have great skills at making noise digitally and tracking that back to instore activation. Yeah, that's great to hear because so many brands that I talk to, they say it's so hard to accurately track and measure that ROI. So do you have any advice for effective ways to do that? Yeah, I think what's really interesting and exciting to me about what we're seeing in kind of the technology innovation landscape, right? Is that there's all this subsidizing going into AI by venture capitalists, which is phenomenal 'cause I actually think consumer brands are benefiting 'cause they get to use these tools. And what we're starting to see some of our companies do is actually build their own systems as it relates to how they're tracking or how they're doing promotional activity, both digitally and in store around premise and relating that back to sales, strategies, and velocity data. And so I think that what's becoming very clear is that that is a strategy that needs to be in place and the tools that you're able to use to track back that attribution or there's some really creative ways you can do it now. And so I'm excited because I feel like retail has always been a lagging indicator as it relates to how people are coming into a category. And that data for an entrepreneur is hard because you have to wait to get it before you can activate on it. But we're starting to see more real-time capture of velocity at the store level related to promotional activity that you can use from an input standpoint. And so I'm hopeful that we'll get attribution to a pretty good place, similar to what you see in D2C. - Yeah, yeah, that's fantastic and so overdue. Well, let's dig into alcohol for a minute. So you were an early investor in Angels NV which was ultimately acquired by Bacardi. - Looking back, what was it about the brand that told you it could become something big? - This goes back to what I mentioned earlier around timing. I think when we invested in that business, I feel like it was the dawn of the renaissance of dark spirits, right? It was dark spirits were starting to have a moment. There was a kind of a sexiness bringing brought back to that category. And specifically when you think about culture, right? The era of Mad Men. And what's happening in and around culture was starting to bring back some of this cocktail culture that I think is what made that investment top of mind for us. But I think it was that, right? We felt culturally that Brown spirits were having this kind of a revival moment. We felt like the brand and innovative itself, specifically in that category, the bottle has to say so much, but the bottle design at the time was very, very differentiated on shelf. The even the naming, which is kind of an ode to a bourbon term which is during the distillation process, the evaporation part of the bourbon, they always say that's the angel's share. And so the angel's envy was really about what was left in the bottle was better than anything. And so I think the story value around the brand, the team that was operating behind it, the distiller, Wes Henderson did just a name in the history of bourbon culture. We felt like it had all the components to kind of break through. And then the go-to-market strategy was very much kind of liquid ellipse, but using kind of, you know, the number one influencer in that world, which is bartenders. And so we felt like they had a lot of the components, but more importantly was timing. We felt like the cultural timing around that investment made sense. - Yeah, yeah. Well, that leads me to ask, is there any condition under which you would invest in an alcohol brand today? - It's a great question. You know, we haven't invested in alcohol on quite some time. I think I never want to say never 'cause it's a $260 billion industry. I think people are changing maybe their behavior around what they're looking to drink in some of those moments, but that doesn't mean alcohol is going away. And so to me, I think yes, assuming that it was the right brand with the right tailwinds around the right kind of approach or segmentation in the market where you felt like it could be culturally resonant. And so I think it would take a lot for us to kind of get there on it. And we'd probably want to see a lot of kind of early traction in the form of true kind of business growth and business momentum in an area that we think is still growing within consumers. So whether that's RTD, which is obviously a growing space in the overall kind of alcohol world, but format, function, profile, formulation, but more importantly brand positioning, I think we'd have to be spot on for us to get excited about it. - Yeah, yeah. Okay, well let's zoom out again. So when an emerging beverage or CPG founder first comes to you, what are the first few things that you want to understand about the business? - There's three ways to do innovation in consumer. And those three ways to do innovation are product innovation. The second is business model innovation and the last is brand narrative innovation. And so I think what we want to see is how are they approaching those three things? So one is a true product innovation. Is there formulation innovation? Is there differentiation in the way that maybe the delivery mechanism is being thought of? And how is the product in it or is it format or packaging innovation? Those are things we're looking for in terms of how they're going to market. Second is business model talks about this already. Do they have what it takes to be an omnichannel brand? Even if some of those channels aren't going to be volume channels. So do they know how to digitally market? Whether or not that becomes a massive channel for them, it's important muscle we believe regardless. So how's the business model innovation? Do they have an advantage in their supply chain? Is there a reason that their cogs are going to be better and their margins are going to be better? And then lastly brand narrative innovation, which I think is table stakes in today's world, which is what is your wedge going into the market? How do you actually change consumer perception about what you're doing and why they have to come on board with the brand? And so I think that's what we're looking for. And overarchingly built underneath that, which is the consumer obsession that kind of made their decision process against those three things. So here's what I learned from consumers. Here's why I formulated what I did. Here's why my go-to-market has this business model innovation. And here's why my brand narrative is going to break through. So started from the long-winded answer, but that's a little bit of what we look for. - No, that's fantastic and so useful. Well, kind of building on that. What stage do you typically want to meet a company? Like is there a seed round or a series A or series B? Or what does that look like? And are there certain metrics or certain achievements that a company should have already hit? Like milestones before which you say you were not interested in the conversation. - We don't have hard and fast. I would say our core investment strategy is to write kind of checks from a million dollars up to $5 million into businesses that are what we would say at an early stage and flexion point around where the brand can go. And so I think we don't have like hard and fast rules, where it's like it's got to be $5 million of revenue or whatnot. I think what we're looking for are early indications of residents with the consumer base that they're targeting. I think it's rare that we invest pre-launch. We have is I don't, I don't again have hard and fast rules about everything, but when it's the right entrepreneur, the right story, the right product, and we think the market's kind of ready for what they're trying to introduce. We have written pre-launch checks on the lower end of our check size. Just to say, hey, I think we're, this is exciting, but we're not gonna make it a core investment check yet, but we wanna have a seat at the table. But I'd say predominantly what we're looking for is early indications of traction, really smart go-to-market strategy and kind of a unit economic model that we think is an investible, unit economic model. So we don't, you know, the business doesn't have to be profitable, Bye. Especially in beverage, we have to believe that there's a pathway to unit economics that are going to make sense for this thing to break out and for them to have the right margin profile for them to ultimately be a highly profitable business at scale. And so, you know, very obsessive around can economics, how those are built supply chain opportunities to drive cogs down, but dress margin up and then marketing efficiency. You know, I think operating leverage and marketing leverage are the two ways that consumer brands win. I'm very excited to be investing today because I feel like it's first time in a long time, you can get operating leverage earlier in the life cycle of business largely because I think you are getting benefits from AI and leverage around your consumer portfolio, but marketing leverage is critical because awareness and the funnel that you're building is ultimately what will drive down marketing costs over time and culture building is part of that. And so word of mouth and influencers today. Are really the barometer for whether or not people are going to be interested in trying a product and then making it part of the routine. Yeah. And I know that listen puts a lot of emphasis on repeat behavior. So tell me what a really compelling repeat purchase story would look like to you. I think to me, it comes, it comes down to like the retention economics around a business. So let's, let's use a brewing or like a magic cactus or a delta as an example, all of which have direct and consumer channels. And what got us excited about all of those brands is that when you look at their cohorts on an ongoing basis, the, the amount of repeat and then the unit economics and the, and the LTV that those consumers are spending within the first three months, six months, and then you are highly exciting as it relates to not just beverage economics, but consumer products. D to C economics in general. So what I would say is best in class and what we're always looking for is how quickly do you pay back your marketing costs on a margin basis for the core and more importantly, how quickly can you then get to two X on a margin basis to customer acquisition costs from your LTV. And so those are the high level metrics we're looking for in all three of those cases. We were seeing kind of unprecedented returns on investment as it relates to how quickly you pay back and how quickly you get to two X on a margin to customer acquisition cost basis. What that tells us is one, the teams are really good at marketing and CAC customer acquisition costs and two, the people that like the products are coming back and spending more quickly. And so that's what we're looking for those types of signals as it relates to while products resonating the consumer seems to be dialing in and in some cases ordering cases of this stuff on a monthly basis, which, which I think says a lot largely because you're paying in a D to C world for shipping and all these other costs associated with I need this product. I want to have it in my lifestyle and in my routine. And so that's that's what we're looking for on the on the D to C side. And I think hopefully that then translates into retail. Velocity and retail repurchase. Yeah. Yeah. And let's talk a little bit about founders. What makes you believe that a particular founder is uniquely suited to build a, you know, consumer brand. Again, the obsession with why they're building in the space that they're building or the audience that they're building for. And I'd say a lot of cases you're you meet founders that are that like built the product they wish they had for themselves, right? Like, man, this, this was missing in my life. I wish it existed. And I built it. And so like that one that tells you one that they are kind of representative of hopefully a very large consumer base themselves, but to they really know what the needs and expectations are of that consumer. And they're relentless around why the product quality and the approach to giving that consumer what they want is just kind of something that is they're not going to give up on. And so I think that's one archetype of a founder that's founder market fit in a way in which they solve their own problem. Another founder market fit that we've seen is like they they understand the audience so well because either someone they're close to is part of that audience and they wanted to have a solution for that person or they built a kind of like an authority within that audience before they even launched a product to solve that audience's needs. So they had an obsession with trying to understand a group of people and what was missing from their lives. And that's why they then went after creating the products or the brand that they wanted to bring to market. So I think we look for a lot of that. And then I think we look for like equal parts operational excellence and brand marketing intuition and those things sometimes are at odds, quite frankly, because a lot of, you know, when I think about right brain left brain, right, like you can't have everything, but when you find the entrepreneur that has. You know, the the duality of understanding and lately how a brand should be making noise and owning a narrative, but is equally obsessed with like the unit economic model and the go to market strategy. That's when you know we we've seen some founders that we back just they kind of bring a next level to what it what it takes to win. Yeah, and I think like that understanding of unit economics is is so challenging. I think you know consumer brands. They just require so much capital for inventory distribution marketing like all of the things and learning how to manage that is incredibly complex. So are there certain markers that you're looking for to understand whether a consumer brand can actually hit the type of venture scale returns that you'd be looking for down the line. Yeah, let me were obsessed with you know, when we meet entrepreneurs, do they have an absolute command on the details of the unit economic model. The way we're going to diligence it is super deep into the model is the model built around assumptions that we believe are actually backable. Do they have clear pathways against kind of cogs reduction or marketing efficiencies or operating leverage that we think are right are the percentages of those things as it relates to revenue in the ballpark of what I would want to see as a business scales. And are they when you ask them those questions. Are they an absolute command of the answers. And I think that's what separates in my opinion, the great operators from founders that are that are great visionaries, but not great operators. And and I think especially in in beverage is so hypercritical because a lot of times you're dealing with inputs that are commodities or things you don't have total control over like tariffs. And so, you know, just understanding how how they thought about it. How did they build the model. Do we think it's actually backable based on what we've seen scale and that's kind of how we're going to beat it up. But we're looking for absolute command on on those details. Yeah, yeah. And I'm interested to know, you know, are there businesses that you might really like as products or the founders amazing or the company is fantastic, but it just doesn't fit the venture capital model and what are the characteristics of those types of companies. There's so many products and so many entrepreneurs I meet that that I love. And to me, I think venture capital is a very, you know, I personally think it's in consumer. It gets misinterpreted a lot. And what I mean by that is like when people hear the word venture capital, they think about, you know, the 100 million dollar rounds. They're reading about in the paper that are going into AI companies or infrastructure builds that need true venture capital, which is like, hey, this doesn't exist yet. We need to understand whether or not it could exist. And it's going to cost a lot of money to determine. But if it works, the return can be absolutely massive in consumer, especially consumer products, you know, innovation exists, but true novel innovation is usually what I would describe as kind of evolutionary versus revolutionary. And in that world competition, no matter what is going to be an existence. And so how you build your business operational execution will determine the winners. And so what I think about is, how much capital should it take for this business to get to a point where you believe you can have escape velocity. And what will that need? Can the category support that? And can the innovation and the team actually build a brand that will help take it there? And is it, is it venture returnable, meaning are there enough buyers in the category from an M&A perspective that are going to pay that purchase price based on your entry price, where you can have a true venture outcome. And so, I think, unfortunately, there's a lot of categories or products that likely can't get to venture outcomes. And that's not because it's not a great product. It's because maybe the dynamics of the M&A landscape or the chess board of people that might want to buy that innovation just aren't such that they're going to pay the multiples that you would need or it's going to be too capital intensive to actually get there where there's not there's so much dilution that you can't really have a breakout success. And so, I think you got to be eyes wide open on like where are companies that you're investing in going to actually trade. And where I see the biggest issues in consumer venture capital is that people invest in early stage consumer brands as if they're going to get 10X multiples like technology companies, but they all end up trading at retail multiples at exit. And so you got to be really disciplined in terms of how you enter and how you exit because the only two things that matter in our business are the price you buy in the price itself. Yeah. Yeah. Well, I saw that you teach startup branding at Telag Northwestern University, my alma mater go cats. I read in that class, you make a distinction between managing and existing brand and creating one from scratch. So I was interested in hearing your articulation of what is different between building a brand, you know, when you don't yet have consumers or brand awareness or a much consumer data compared to a brand. brand that already exists. The biggest difference for me is and I've done both of these things. because in Leo Bernat, my job was to work with, you know, scaled brands and maintain their relevance, right? As an advertising agency, that was our job. And in my current business, at Listen, we're partnering with these idea-stage businesses and helping them use brand to build business. And so part of the reason that that class has kind of foiled that way is that the big difference to me is that when you're when you have a brand that already exists, evolving the way a consumer thinks about that, sometimes comes with a lot of baggage. And so it's challenging. Now, the good news is that you have scaled distribution and you have all these other things. You have insights from consumers to help inform how you want to go take that narrative and try to change it. But consumers these days are hypercritical. If your entire history, you've been a brand that has these types of ingredients and XYZ and kind of fit into the lives this way and all the sudden, you want to be a brand that is like about healthy ingredients and all this other stuff, there's, it's just, it's a much more challenging strategy shift as it relates to what you have to do. And startup world, you have a clean slate. And I think what part of the approach to our classes, your opportunity to create a narrative breakthrough when you're at the beginning is so exciting, because every decision you make from what you put into the product to how you go to market, toward, to, you know, the rubric that you have around decisions you'll make can be formulated. And therefore, it'll be much harder as you scale for consumers to call bullshit, excuse my language, on whether or not your brand is what it says it is. And so, you know, brand ultimately is ultimately what a consumer is going to tell their friends they think it is. And your ability to inform how that narrative takes shape is what early stage branding is about. And I think when you have a clean slate, you can make all these decisions that kind of reinforce why, why you're building what you're building. And so that's, that's a big difference in my mind, which is in the big world, you're kind of trying to manage narrative evolution with something that has a lot of history and a lot of in some cases baggage in the startup world. You have a clean slate where you can help make all the decisions reflective of the brand you're trying to create. Yeah. And my understanding is that you teach students to use consumer insights to unlock brand strategy. So for a small founder without a large research budget, what are the most effective ways that they can develop meaningful consumer insights early on? Get scrappy. I love this. I think you can get meaningful consumer insights without a budget. And that, you know, starts with just doing, doing interviews with people that you think are in your customer group yourself to standing on street corners or standing in the category you want to go position your brand and talking to people as they're shopping the shelf and trying to learn. And the other thing I would say is like there's so many amazing tools now that you can go do social listening. You know, Reddit is an amazing deep dive of opinions about categories or ingredients, et cetera. So, you know, have a field day with that. But I think there's, there's a lot of social signaling that can be done in very cheap, scrappy ways to help inform why you're, why you're going to market the way you are, why you're formulating the product, the way you are, why you're narrative you think might break through. Yeah. And you know, we see a lot of beverage companies define themselves almost by category, like we are tequila, we're an NAB or we're a THC shelter, right? But I wonder from your perspective, is starting with the category sometimes the wrong or positioning is the consumer need or occasion becoming more important in how you position the brand in some ways like if you're going to go sell into a retailer, how they categorize what shelf you might be on is important for you to know and have the context. But my view on the brand building is is the ladder of what you just said, which is it's really about what emotional or or headspace you want to own for the consumer. And one of the exercises we do with all of our companies that we invest in is actually something we call what business are you actually in. And and I think it's a fun way to kind of provocatively get at different ways or different things to tease apart in terms of what you can own or what you can win. And you know, the best example of a brand we all know that that just did this phenomenally is Nike, right? Nike is not the shoe business, they're in the motivation business, which is why just do it has been the campaign that they've lived on for, you know, years. And and that idea I think is what's propelled them to be who they are. And so I like to challenge all of our entrepreneurs and think differently, like what business are you actually in? And so that might manifest itself in an occasion, you know, going back to the beverage category, like maybe it's an occasion you want to own, or is it is a feeling that really you're in the business of trying to own? And so I love that from a brand perspective with the recognition that when you go to sell into some of these retailers, you're going to have to talk their language and say, Hey, I want to be on the functional beverage shelf or hey, I want to be in the, you know, in the hemp derived THC category. Yeah, yeah. So let's say that you were advising a beverage founder who's hoping to raise venture capital in the next year, year and a half. What would you tell them to focus on right now? I focus on getting getting the initial data that you think is going to be attractive. So if you're pre-launch, get that, get those consumer insights from the people that are that are basically saying, I have to launch this product, because look at the demand, or build the, build the blog around the positioning and the narrative innovation where you start to see people engaging with your brand even though you don't have a product in the market. So start to build traction. And if you do have a product, get it, get it in people's hands, get the feedback out there, start to learn, understand how you're starting to build the, the funnel muscle around awareness to consideration to trial and start building that case around the story for why your branch should exist and why culture is going to adopt it. I think that's that's where I'd be spending my time as an entrepreneur over the next year and a half and and really working on kind of that story creation that has some data behind why it's investable. Yeah, that story is so important. Well wrapping up, there's a last question we like to ask every guest, which is let's say that a drinks entrepreneur asks you for a book, an online class industry group, person to follow, someone or something that would provide them insight or inspiration on their journey. Who or what would you recommend? Wow. This is a good one. I mean, just from a biased perspective, I would say in our portfolio, Joe Chura, who's the founder of Go Brewing has has built a great just personal brand around the way that he's building the business. So I think he shares an incredible amount of insight into the way that he's approached that go into into the way is he's using AI into the way he's using innovation as a way to kind of build a brand. So that's that's from our kind of listened bias perspective. I think from kind of a media or near, you know, keeping up with what's happening in the category perspective, I think what, what BevNet is doing is great and they're usually breaking a lot of their early innovation stuff. So I'd follow them. The other place I think is a little bit alternative to that is go follow some of the some of the studios that are doing the best brand work in beverage. And so there's a couple of them out there, but like the creative studios, I think that are doing the latest packaging designer did the packaging for expiresy brand that you think is nailed it. Follow the way that they came up with that design or a lot of them will post kind of case studies on the way that they did that. I think it's it's great learning for entrepreneurs as it relates to brand building your packaging design. Well, that's great advice. And I think a good note for us to end on. So Jeff, thank you so much for joining us on Business of Drinks. Thanks Erica. It was great conversation. Thanks for joining us on Business of Drinks. Subscribe on YouTube at Business of Drinks podcast. Follow us on Spotify or listen in on Apple or wherever you get your podcasts. Please tap the notification button so you'll be the first to know when a new episode drops. And help us spread the word. Click those star ratings, give us a review and share episodes or clips on your socials. It really helps us reach new listeners. Finally, if there's something that you'd like us to cover on the podcast, tell us. We're at [email protected] or reach out via Instagram or LinkedIn. We love hearing from you and we respond to each and every message. Thanks and see you next time.