How Liquid Death founder, Mike Cessario, created a billion dollar water brand

Name: How Liquid Death founder, Mike Cessario, created a billion dollar water brand
Uploaded: 2024-03-13T09:38:38.000Z
Duration: 2 h 8 min 34 s

The Rise of Liquid Death: A Conversation with Mike Cesario

Introduction to Liquid Death

Yan, the host, introduces Mike Cesario, founder of Liquid Death, highlighting the brand's unique approach to the water market.

Discussion on how Liquid Death has successfully disrupted a commoditized industry and created a compelling brand narrative.

Mike Cesario's Background

Mike shares insights about his childhood and early interests that shaped his entrepreneurial spirit.

He recalls his fascination with skateboarding culture in the mid-'80s and how it influenced his artistic inclinations.

Early Influences

Mike describes his passion for drawing from a young age, particularly inspired by skateboard graphics.

He recounts receiving his first skateboard at age seven and being captivated by its design, which fueled his obsession with skate culture.

Humor and Creativity

The influence of humor in Mike's upbringing is discussed; he mentions watching comedies instead of traditional holiday films.

His exposure to Mad Magazine at age ten blended art with humor, further shaping his creative outlook.

Punk Rock Influence

Transitioning into high school, Mike became involved in punk rock music, which provided an outlet for self-expression as an "outcast."

He reflects on managing a band during high school where he took charge of branding efforts like designing logos and promotional materials.

Educational Journey

After high school, Mike pursued graphic design in college but later switched to advertising to focus on conceptual thinking and humor.

This shift ultimately led him toward a career path that combined creativity with business acumen.

Liquid Death: The Entrepreneurial Journey

Early Career and Creative Aspirations

The speaker reflects on their previous experience working at an ad agency in San Francisco, feeling unfulfilled creatively.

They note that poor marketing often stems from clients' reluctance to embrace creativity rather than a lack of talent within agencies.

Realizing the need for creative freedom, they decided to create their own product to market effectively.

Inspiration from Virgin America

The speaker admired Richard Branson's strategy of revitalizing stale categories by introducing a cool brand.

This approach inspired them to identify a stagnant category where they could establish a unique brand presence.

Discovering Brandy as an Opportunity

After exploring various alcohol categories, the speaker identified Brandy as lacking innovation compared to other spirits like whiskey and tequila.

They conducted blind taste tests with friends, discovering that many couldn't distinguish between bourbon and Brandy, indicating a perception issue rather than a taste problem.

Concept Development: Western Grace

The concept for "Western Grace" was born, named after a punk band song, aiming for an Americana whiskey vibe to reshape perceptions of Brandy.

They sought out distilleries willing to produce the product and networked through LinkedIn to find industry partners.

Lessons Learned in Entrepreneurship

The speaker learned about the complexities of starting a liquor business, particularly navigating U.S. regulations stemming from Prohibition-era laws.

They emphasized understanding legal limitations in marketing alcohol products, especially regarding age restrictions on social media advertising.

Challenges with Partnerships

Insights were gained about choosing partners wisely; having clear roles is crucial for avoiding conflicts during business development.

Despite being younger and less established than his partners, he faced challenges due to financial constraints leading him to step back after two years.

The Journey of an Outsider in the Beverage Industry

Overcoming Industry Norms

The speaker reflects on their 20 years in the beverage industry, emphasizing the challenges of introducing new products, particularly spring water in cans, against established giants like Coke and Pepsi.

They suggest that being an outsider can be advantageous, as it allows for innovative thinking without being constrained by traditional industry rules.

The speaker questions conventional wisdom about product launches, noting that many insiders believe multiple SKUs are necessary for success; they argue that a unique brand can stand out even with just one product.

They assert that interesting brands can capture attention more effectively than those relying solely on shelf space, highlighting the importance of branding over mere physical presence.

While acknowledging the need for industry knowledge to navigate pitfalls, they stress that fresh perspectives from outsiders can lead to significant breakthroughs.

The Spark of Inspiration

The idea for a new beverage emerged while working at a small agency known for irreverent marketing within the organic sector; this experience sparked an "aha" moment regarding health-focused branding.

The speaker expresses frustration over why healthy brands aren't marketed as engagingly as unhealthy ones, questioning why fun associations are often reserved for less healthy options.

They highlight a cultural disconnect where energy drinks dominate certain lifestyles despite their own preference for healthier choices; this realization pointed to a gap in the market.

Reflecting on how big companies invest heavily in marketing fun experiences around their products, they see potential in creating similarly appealing narratives around healthy options.

Their entrepreneurial spirit was ignited by recognizing how advertising professionals could play a crucial role early in product development rather than merely promoting uninteresting products later.

Defining Brand Strategy

The speaker critiques traditional business practices where MBA graduates create brands without considering cultural relevance or consumer psychology until after launch.

They advocate for integrating advertising insights from inception to ensure products resonate with consumers and have compelling branding from the start.

This approach positions brands more powerfully within competitive markets by focusing on emotional connections rather than just functional attributes of products.

As they explored opportunities within beverages, they identified water as an area with minimal functional differentiation among brands but significant branding potential.

Ultimately, they conclude that successful branding is key since consumers often choose based on brand identity rather than taste or functionality alone.

Liquid Death: A Disruptive Water Brand

The Rise of Water as a Beverage Category

Water has become the largest beverage category in the U.S., surpassing carbonated soft drinks, with an annual market value of $20 billion.

The speaker emphasizes their expertise in branding, suggesting that successful brands can emerge even in saturated markets like water.

Reframing Water Branding

The speaker discusses how traditional management consultants would suggest conventional branding strategies for water, focusing on clarity and purity.

They highlight their approach to branding Liquid Death as a stark contrast to industry norms, aiming for a unique positioning.

Inspiration Behind Liquid Death

The concept was influenced by John Beberg's book "Think Wrong," which advocates for innovative thinking beyond conventional methods.

The speaker notes that human brains tend to replicate past successes due to survival instincts, making it challenging to innovate.

Innovative Thinking Process

To achieve true innovation, one must consider seemingly bad or dumb ideas; this process can lead to unique concepts that defy expectations.

Many ideas initially perceived as foolish may actually hold significant potential upon deeper analysis.

Embracing 'Dumb' Ideas for Innovation

The speaker suggests that truly innovative ideas often seem laughable at first; if an idea is too obvious, it's likely already being pursued by others.

Examples like Uber and Airbnb illustrate how unconventional ideas can disrupt industries despite initial skepticism about their viability.

Launching Liquid Death

In the early stages, selling the concept of Liquid Death was challenging; they created a Facebook page before the product existed to generate interest.

By leveraging social media and engaging with industry consultants, they navigated production challenges while building a following online.

How to Successfully Launch a Beverage Brand

Initial Challenges and Idea Validation

The speaker describes the initial skepticism surrounding their beverage idea, noting that even franchisees were unsure about its viability.

After realizing there was no production capability in the U.S., they found a manufacturer in Austria willing to produce their product.

A successful Facebook page with more followers than Aquafina helped validate the concept, making it easier to attract investors.

Importance of Execution Over Ideas

The speaker emphasizes that ideas alone are worthless; execution is what creates value. Many people have great ideas, but only those who can execute them effectively succeed.

Investors became interested once they demonstrated a solid operational plan and execution capabilities.

Funding and Production Logistics

The first round of funding was a "friends and family" round, raising $150,000 necessary for production.

They relied on small investments from previous colleagues rather than large sums from wealthy family members.

Physical Product Impact on Perception

Once the first shipment of cans arrived, it changed perceptions significantly; investors began to see the tangible product as real potential.

Meeting with Science Inc., an investor known for backing Dollar Shave Club, highlighted their strategy of disrupting traditional markets through direct-to-consumer sales.

Distribution Strategy and Early Sales Success

The speaker acknowledges that while direct-to-consumer sales were essential initially, retail distribution would be crucial for long-term success due to high shipping costs associated with heavy products like water.

They launched at $20 per case online and achieved impressive early sales figures—$100,000 in the first month after launching on Amazon and their website.

Marketing Strategies That Drove Demand

Their marketing strategy included targeted paid social media ads before privacy changes limited ad effectiveness. This approach led to high returns on ad spend by capturing consumer interest effectively.

Liquid Death's Unique Marketing Strategy

Building an Audience through Social Media

The announcement on Facebook about the product being available on Amazon leveraged an existing audience, leading to organic virality as people shared the post.

Challenges in Retail and Distribution

Initial skepticism from retailers regarding Liquid Death's placement on shelves due to conservative mindsets in major retail headquarters. This necessitated a strategic approach to market entry.

Targeting Bars for Initial Sales

The strategy focused on selling directly to bars where social interactions occur, positioning Liquid Death as a fun alternative that could generate conversations among patrons.

Success in Bar Sales

Bars reported significant sales increases, moving 10 cases a week of Liquid Death, showcasing its appeal compared to traditional bottled water options. This success informed further distribution strategies.

Leveraging Beer Distribution Networks

The company utilized independent family-owned distributors within the beer industry, which allowed them access to a broader market without needing ownership ties like those required by Coke or Pepsi.

Creative Communication Under Constraints

Necessity of Innovation in Marketing

Limited resources forced the brand to innovate rather than replicate traditional marketing strategies used by larger companies like Coke and Pepsi, emphasizing creativity over budget.

Attention as a Core Marketing Principle

Effective branding is fundamentally about capturing attention; startups must find cost-effective ways to gain visibility without large advertising budgets typically associated with big brands.

Strategies for Gaining Free Attention

Startups should focus on generating organic interest through social media shares and press coverage instead of relying solely on paid advertisements, which can be prohibitively expensive for smaller brands.

Challenges and Strategies in the Beverage Industry

The Survival of Small Brands

Small brands often need to leverage free publicity to survive, as financial mismanagement is a leading cause of startup failure in the beverage sector.

The beverage industry is particularly challenging due to major corporations controlling shelf space and exclusive distribution deals across various venues.

Distribution Dominance

Major brands like Coke and Pepsi dominate distribution networks, ensuring their products are consistently stocked in retail locations.

New entrants must price competitively with established brands, which can be difficult if they cannot achieve economies of scale quickly.

Profitability Challenges

Achieving profitability requires significant scale; many startups fail because they underestimate the time needed to reach this level.

Startups often face a daunting challenge likened to "jumping off a cliff and building a plane on the way down," highlighting the risks involved.

Timeframe for Success

Research indicates that it typically takes around seven years for a brand to become sustainable within the competitive landscape.

An analysis of top innovations revealed that 50% declined in year two, and 80% were no longer present five years later, underscoring high failure rates.

Market Dynamics

Established companies can launch average products that appear successful initially but may not sustain long-term success due to market dynamics.

Innovative brands often take about seven years before achieving mainstream distribution and operational efficiency.

Risks of Staying Small

The concept of "escape velocity" is crucial; small brands must invest sufficiently to deter competitors from easily replicating their success.

New brands entering large retailers face strict sales thresholds; failing to meet these can lead to rapid removal from shelves.

This structured overview captures key insights into the challenges faced by small beverage brands while navigating an industry dominated by larger players.

Liquid Death's Unique Marketing Strategy

Sustainable Sales Tactics

The key to sustainable sales for new brands is building a solid customer base over time, as seen in successful companies after five to ten years.

Digital marketing allows brands to find their audience more effectively than traditional grocery store placements, which rely on chance encounters.

Digital vs. Retail Sales

Selling beverages online can be more expensive due to the need for higher pricing; however, Liquid Death successfully sold $20 cases digitally before entering retail.

Their first retail partner, H Foods, recognized the uniqueness of Liquid Death and agreed to a national launch based on an established digital audience.

Building Audience and Distribution

A pre-existing customer base from online sales helped drive initial success in retail stores like Whole Foods by offering lower prices compared to online purchases.

Balancing audience growth with distribution is crucial; if one outpaces the other, it can lead to struggles in market performance.

Innovative Super Bowl Approach

Instead of spending $6 million on a Super Bowl ad, Liquid Death opted for a creative alternative that generated buzz without significant financial risk.

They aimed for a "small bet" strategy where they could spend minimally while still potentially achieving high visibility during the Super Bowl season.

Creative Advertising Strategy

Recognizing that Walmart sees 100 million visitors weekly—more than the Super Bowl—they decided to leverage this foot traffic creatively through their product packaging.

They auctioned advertising space on their product cases, promoting it as reaching more people than a Super Bowl ad at a fraction of the cost.

Successful Auction Outcome

The auction attracted interest from major brands and concluded with bids exceeding $500,000, significantly covering production costs of just $10,000.

Liquid Death's Unique Brand Strategy

Building a Fan-Centric Brand

The speaker emphasizes the distinction between "fans" and "consumers," highlighting that Liquid Death has cultivated a dedicated fan base who actively engage with the brand.

Unlike typical beverage companies, which often lack passionate users, Liquid Death aims to create a genuine connection through entertainment and branding.

The brand encourages fans to wear merchandise as a form of identity expression, similar to music bands, fostering community among its supporters.

Merchandise as a Communication Tool

Fans of Liquid Death use apparel not just for brand loyalty but also to express their disdain for traditional marketing tactics.

A personal anecdote reveals that wearing Liquid Death merch signifies opposition to conventional marketing rather than an affinity for heavy metal culture.

Innovative Marketing Approach

The brand's strategy involves parodying common advertising tropes, making it relatable and engaging for consumers who dislike traditional marketing methods.

Innovation is crucial; the introduction of new products like electrolyte tablets reflects Liquid Death’s commitment to expanding its healthy beverage platform while maintaining humor in branding.

Scaling and Future Plans

Liquid Death aims to establish itself across multiple beverage categories without creating separate brands for each product line, which is atypical in the industry.

The focus is on building a sustainable business model that prioritizes healthy products while exploring various growth strategies including potential acquisitions or IPO opportunities.

Investor Insights

Discussion about scaling includes insights into investor relations; notable celebrity investors like Tony Hawk contribute to the brand's visibility and appeal.

Emphasis on balancing growth with profitability challenges traditional startup models that prioritize rapid expansion at all costs.

Liquid Death: Building a Unique Brand in the Beverage Industry

Early Investments and Partnerships

The speaker mentions early investments in Liquid Death, highlighting notable shareholders like Martha Stewart and Live Nation, which has been a significant partner.

Liquid Death became the title sponsor of the Download Music Festival in the UK, receiving positive responses from attendees.

The brand experienced substantial growth, leading to more interest than needed during capital raises, allowing for selective investor choices.

Maintaining Brand Spirit Amid Growth

The challenge of maintaining brand spirit while scaling is addressed; building a dedicated team is essential.

Liquid Death aims to create strong brand loyalty through entertainment, similar to models used by Red Bull and Monster but focusing on comedy rather than action sports.

Entertainment as a Core Strategy

The company invests in comedians akin to how Red Bull invests in athletes, emphasizing their expertise in creating humor-driven content.

The speaker contrasts typical marketing with high-level entertainment production, asserting that creating successful comedy requires professional skills beyond basic advertising.

Understanding Market Trends

Liquid Death's branding is described as "edgy," yet it remains tame compared to mainstream entertainment standards like popular Netflix specials or blockbuster comedies.

The discussion highlights how horror and comedy films have become major box office successes, indicating a shift towards darker themes resonating with audiences.

Branding Beyond Functional Benefits

The beverage industry often focuses on functional benefits; however, true branding transcends these aspects by fostering emotional connections with consumers.

A key point made is that brands cannot solely rely on functional advantages (like recyclable materials), as competitors can easily replicate these claims.

Advice for Aspiring Entrepreneurs

Emphasizing execution over ideas, the speaker encourages those with innovative concepts to focus on effective implementation rather than just having an idea.

Navigating Founder's Challenges

The Importance of Honesty in Self-Assessment

Founders must be brutally honest about their strengths and weaknesses to identify the right team members needed for execution.

Hiring top talent is essential, but it comes at a cost; founders may need to offer equity to attract skilled individuals.

No one can excel in all areas (marketing, operations, finance); it's crucial to recognize the need for specialized expertise in each department.

Turning Ideas into Reality

The transition from idea generation to actual implementation is challenging; identifying the right people is key to making ideas a reality.

Closing Remarks and Engagement

The discussion concludes with appreciation for insights shared and encouragement for audience engagement through subscriptions and reviews.