On this “Next Round” episode, host Zach Geballe chats with Nathaniel Davis, CEO of Drinkworks, about how the brand is making home bartending easier than ever. Davis details how Drinkworks operates as a “Keurig for Cocktails,” allowing users to mix up drinks at the push of a button. The machine is designed to make a wide range of cocktails, beers, wines, and more.
Listeners will learn about the plethora of cocktails that the brand offers, such as a Margarita, Mojito, White Russian, and a Chambord Royale. Then, Geballe posits challenges that the brand faces in using fresh ingredients while being shelf-stable and offering customization options. Finally, Davis shares some of the brand’s future plans.
Tune in and visit https://www.drinkworks.com to learn more.
Listen Online
Or Check out the Conversation Here
Zach Geballe: From Seattle, Washington, I’m Zach Geballe and this is a “VinePair Podcast” “Next Round” conversation. We’re bringing you these episodes in between our regular podcasts so that we can explore a range of issues and stories in the drinks world. Today, I’m speaking with Nathaniel Davis, CEO at Drinkworks. Nathaniel, thanks so much for your time.
Nathaniel Davis: It’s a pleasure. I am a big fan.
Z: Oh, that’s always good to hear. Let’s start with a little bit about you. How did you get into the beverage alcohol industry, and what were you doing before Drinkworks?
N: Well, I grew up in breweries. I was a brewer by background, brewmaster by training. My background is in microbiology, so I came in on the technical route. I worked at a big brewery at Anheuser-Busch as a frontline manager making beer in Fort Collins. Then, I started writing recipes and developing recipes. That’s where I spent a couple of decades in the industry, at the interface between product development, beverage development, innovation, and commercialization. Ultimately, I ended up leading the global R&D program for Anheuser-Busch, the world’s largest brewer. I moved over to Belgium for a couple of years and then back to New York in that capacity. We were working on big innovation programs — one of which was thinking about how to rethink dispense and the whole form-factor of beer. That actually led us to the conversations with Keurig eventually to form a joint venture, so it led directly to the creation of Drinkworks.
Z: Yeah, so why don’t you tell our listeners a little bit about Drinkworks for those who aren’t familiar. What is it, and how does it work?
N: Sure. Drinkworks as a company is a joint venture. It’s a separate, independent company, but it’s backed by Anheuser-Busch on one side and Keurig Dr. Pepper on the other, so you can imagine the combination of alcoholic beverages and technology. That’s been our mandate from the start, to innovate in the space at the intersection between alcohol and technology. Now, of course, it’s not specific to beer. It’s more multi-category, but really driven by technology and capabilities from the dispense and the appliance side of things, where Keurig’s expertise and background really come into play. Our first product launch was the Drinkworks Home Bar, which is basically a pod-based cocktail and other beverages where you pop in the machine, you press a button, and you get a huge range of cocktails, beers, wines, and more.
Z: OK, that’s good to know. I wasn’t totally sure of the breadth of offerings through the appliance. When this whole concept was being developed and iterated, were there some cocktails or beverages more broadly that you felt that you had to be able to do, or then what’s the point?
N: Well, the entry point really is you need a problem to solve if you’re going to be a startup. The problem is really anchored in cocktails. People love cocktails. They love to explore when they go out, but most of us don’t know how to make them. Even if we do, we don’t have a huge, well-stocked bar, so that’s the core problem that you are solving. It’s a complex category. It’s hard to navigate, and it’s full of ingredients. You need to have the know-how in order to make it at home. People love drinks when they are going out. They can navigate a menu, but we wanted to leverage the technology in order to allow people to do that in their kitchen, home bar, or just at home hosting with friends. That’s our entry point, so it’s about variety, but you’re asking about specific cocktails. Generally, cocktails are a little bit more complex. They have multiple ingredients that are unusual, and that people don’t necessarily know. Plus, it’s not just anyone’s cocktail. It’s the full portfolio, breadth, and variety that you’re able to have. That is the magic of the system.
Z: How customizable are the cocktails? Let’s say you’re someone who likes a Martini, but you have a preferred amount of vermouth that you like. Are you stuck with what’s in the pod? How does that customizing ability work with the appliance?
N: Yeah, I would say that we go for convenience over customizability. We battle customization with a variety of options, rotating skews, and lots of innovation. We have found that our users value convenience above all, even above customization. We’re not speaking to an aficionado in a home bar that has very strong opinions about whether it’s dry or extra dry in the Martini.
Z: Sure.
N: They are looking for variety. They’re looking for interesting new flavors. They’re looking for exploration. Generally speaking, when we were doing the development, we found that interrupting and asking people, would you like it short or tall? Would you like it really sparkling and very effervescent or slightly more smooth? Those questions derailed the whole concept of push-of-a-button convenience.
Z: Gotcha.
N: A lot of the options that we have for customizability into just simply a great tasting drink at the push of a button in 30 seconds. We just simplified the offering. If we want to offer a sparkling or still Margarita, then we’ll just launch those as two separate pods. There are lots of options that we’re opening up now because it’s a connected machine with a downloadable app that opens up options in the future to customize recipes as we really get our user base growing and get feedback.
Z: Gotcha. OK, so let’s talk about some of the challenges here. Again, mostly sticking with cocktails for the time being. Are there particular ingredients that have been difficult to work with?
N: Yeah, let me explain the primary challenge that is the nature of our technology. What’s going on with the system is you are popping in the pod. Everybody is pretty familiar with Keurig. In our case, what’s going on is the machine is pulling in water, chilling it down to near zero degrees, and it holds it. If the pod calls for carbonation, we have a mini carbonation tank that will blast carbonate on demand. Then, it’ll pop the pod and blend it all together. Just so you understand the depth of what’s going on, our pods are small. We’ve got two sizes. We’ve got a 50-milliliter pod, which is the main pod, and we’ve got one that is twice that size. We are making everything from 4-ounce Manhattan, to a sparkling basil Tom Collins that is 10 to 12 ounces. You get a range and a huge range of sizes of drinks out of the pod that is super tiny.
Z: OK.
N: First of all, we’re operating in concentrates, mineral water, cask-strength rums and tequilas, still-strength gins, and vodkas. We do our own blending, sourcing, and distillation on site. We reverse-engineer cocktails in a form that is highly concentrated. Then, the machine can do the rest of the magic with the final dispense, preparation, shaking, blending, and carbonating on demand so it’s freshly prepared. One trick is that you’re dealing with is limitations of stability, limitations of super-low water versions. Our Margarita cask-strength tequila, a super-powered triple sec of our own — “super-powered” meaning super-low water, super-high alcohol that is highly concentrated — and lime juice also being in a concentrated form. That is what we’re dealing with at the technical level. More specifically, citruses are always tricky to get that fresh twist note. Our teams are amazing at freshness. The background from brewing and keeping our oxygen very low keeps it fresher than the other RTD-type formats I’ve seen. The biggest challenge is really navigating super-concentrated systems, and then thinking through how the machine is going to fix it because it’s totally unique to this thing that we’ve created.
Z: For sure. I’m also very curious about two different things you touched on there. Let’s start with this idea of very high-proof spirits that are going in and also potentially very concentrated fruits or other types of flavoring agents. You mentioned reverse-engineering the drinks — and you don’t have to share specifics unless you care to. Are the ratios when you’re making the pods familiar to what a typical bartender would be familiar with, or because it’s such a low water content, are you getting different ratios of ingredients than I might recognize from a standard recipe?
N: The way that we do it is we first make the drink that we call the gold standard. Obviously, there isn’t just one Mai Tai on the planet.
Z: Sure.
N: We find our gold standard, and it needs to have an opinion. What’s nice about a portfolio is you’re not averaging and going for the middle of the road. You can have a little bit of an edge and a little bit of an opinion on each of the cocktails. We decide what the profile is that we want to do and we make it. In fact, that’s the basis upon which we use to decide whether or not we’ll launch a product. It has to meet or exceed in a blind taste test versus the fresh gold standard that we define coming out of a pod, which is super hard to do. The ratios are the same, except that they’re modified. Once you start to take water out and deal with them in concentrates, the ratios of the concentrates would be different. However, we deal with these curious intermediates that are unusual and then blend those, but a lot of the ratios are the same.
Z: Gotcha. I’m also curious because this prompted another question. Within the cocktail category, even within the category of a specific drink, not only are there differences of what someone might want in terms of their specific recipe or ratio of things, but the cocktail category has a longstanding tradition of upselling. You can make a Manhattan and make it with a well bourbon or a very expensive bourbon. Is there a range in the pods if someone wants premium ingredients?
N: We had to decide very early that we were going to have a huge variety because it’s basically table stakes. When people buy into the system, especially if they’re buying the machine, there needs to be a huge set of choices and the expectation that there’s always going to be new things around the corner. We said, “Well, how can we help our users navigate a complex field of choices?” We landed on using the bar menu because that’s what people understand as the natural way to navigate cocktails. We’ve got collections that are the clusters that you’d see in a really comprehensive bar menu. There are 40 cocktails, by the way, in our system. We’ve got classics like the Margarita, Long Island Iced Tea, Mojito, White Russian, and the like. Those are classics with our opinion and our version of it. Then, we’ve got seasonals that are coming in. We’ve got Spring Sippers and the Summer Solstice collections for cocktails that are rotating through seasonally, plus the winter cocktails that come out in the fall. We’ve got a brunch collection that’s just for weekend mornings like Mimosa and a morning Margarita. We always stick a Margarita in there. Also, to answer your question about choice and tiers, we’re been inspired by Keurig. Keurig is an open system where they’ve opened up the technology and brought in lots of different coffee companies. I think that is amazing, and we’ve learned from them to open up the system and open it up early. We actually have a top-shelf collection, where we’ve got several Brown-Forman brands starting with Gentleman Jack Manhattan and Chambord, which we’ve done several iterations. We’ve got a Chambord Raspberry Martini. We’ve done a Chambord Royale and a Herradura Margarita. It’s a more classic shaken-up style, stronger, tequila-forward Margarita with Herradura as opposed to our Drinkworks classic, which is more mainstream, a little sweeter, a little less tequila-forward, and a little more sour than one lime in terms of its intensity. You’ve got a lot of tiers and choices. Once we start to get brands in, it really does open up. We’ve got Elijah Craig and Heaven Hill coming up, and more to follow as we open up the system with a lot more people that we’re talking to now.
Z: Very cool, so you were talking a little bit about these collections of pods. Well, that’s probably not the right word because it’s going to be confusing, so I would say grouping of cocktails. When the team is thinking about what they want to add beyond seasonality, which is obviously a big driver, are you keeping an eye on what’s trending in the cocktail space more generally? Let’s say if the Negroni becomes really trendy, then you have to be able to offer people a Negroni through the system. How do you decide what cocktails to add, and where is that information coming from?
N: We’ve got the landscape of popular cocktails, and we’re watching trends all the time. We think of it in several ways because we’re not seeking to launch four giant canned cocktails in lemon, lime, orange, and strawberry to go mainstream. We’ve got a huge portfolio that can cover seasons, occasions, and taste profiles. We think of our portfolio in one of those dimensions. Either we’re adding seasonality, in which case then you worry about occasions and taste profiles but you’re right that those keep everybody engaged, interested, and looking forward to the next round. If we’re looking to add in, we’re always thinking about where there is a hole so we might add interest, value, and learning for our community that is exploratory and then get the profile right. The Negroni is a great example. We launched our Negroni, a chocolate Negroni with chocolate bitter because trying to try to go after the brand name bitter in the system is very difficult to recreate unless you’re using it exactly. We wanted to take it in a totally different direction. It was too much for a lot of our users, I would say, of the bitterness. I’m a huge Negroni fan, and I pushed it, frankly. We use our limited-time offers where we just come in and out for six to eight weeks. We try something and we get feedback. If they say it’s amazing, then we put it into a collection but that was not the case for our users. I struggle sometimes with trying to impose my own tastes and my own interests into the portfolio. We listen to the people who use the system. They say, “Hey, this would be great if we had one of these…” There are bloggers in our user groups on social media that are very vocal about what’s missing. That’s an inspiration, and then we couple that with our own internal review of what’s incremental to what we already offer. In terms of palate, profile, size, degree of refreshment, or intensity. There are things that are late-night, after-dinner sippers that are winding down cocktails for 10 p.m. on Tuesday. Then, there’s a Saturday afternoon refresher that is going to be big and bubbly. You just want to look at the whole range of the portfolio to cover a week’s worth of vacations.
Z: For sure. Since you’ve mentioned both the partnership with Keurig and also the obvious similarity to both in technology and interface, one of the things that always made sense to me about the Keurig for coffee is the much more shelf-stable nature of fresh beans and the lack of effort that it requires from the user. Also, price-wise, there is something about the Keurig that fits somewhere in between inexpensive brewed coffee at home and inexpensive coffee at a coffee shop. Price-wise, where do these cocktails sit between buying the bottles and making a drink at home and getting a cocktail at a bar?
N: You’re absolutely right that the Keurig concept and a lot of the coffee experience inform the way that we thought about creating the product and its commercial aspects, like price. You’re right that convenience is what’s driving variety, and quality are the hallmarks of the Keurig system in coffee. Those are the same pillars that we stand on for adapting that concept into the cocktails. Similarly, you’re bringing home, in our case, something which cannot be done at home. People do not have a bar and do not have the knowledge to make this variety of cocktails, so there’s quite a lot of value there. There is a premium to the cost of the raw ingredients. Our pods, depending on the size, start at $3.50. Most of them are $4, and the top-shelf collection is around $5, which is premium to the penny price of the raw ingredients if you had the ingredients, didn’t waste any, and knew how to make it. It is a dramatic discount to your local bar, where it might be four or five times that price, depending on where you live in the country.
Z: Yeah, absolutely. OK, I think this is my last question, although it might prompt another one. Besides at home, where we’ve seen a lot of implementation where people are buying Keurig is, of course, things like hotels, where people want to have a cup of coffee in their room and don’t want to order room service or go down to a restaurant. I would imagine that there’s great potential here for a hotel minibar. Is that something that already exists? Is that in the works? How are you looking at that other dimension of installations, I suppose?
N: Yeah, absolutely. The first product that you see is for the home, for hosters at home, whether they’re hosting themselves on a Tuesday, or people who like to elevate the experience and seek a more premium drink and broader variety than they can otherwise accomplish on their own. What we saw was, it was getting pulled into the professional space or away from home space. Also, offices, so basically any place that either doesn’t want to have a fully stocked bar, doesn’t have a fully stocked bar, or doesn’t have a trained bartender but that wants variety and interest, is a natural fit. Yet, it’s solving slightly different problems than it is at home. Offices naturally cropped up and very much changed to 2020 when the offices shut down. Other public spaces, lounges as well, so we got pulled into, for example, arenas, stadiums, VIP suites, lounges, public spaces, and in hotels now. The machine is a bit large for a singular hotel, although we’re in boutique hotels, suites, and higher-ends. We’re in a huge number of Airbnbs, where people want to enhance and attract people that can basically have a home bar at your disposal with 20 different cocktails and you don’t have to think, just press a button. That is a perfect feature at an Airbnb. That obviously triggered a follow-up and pipeline to go more dramatically into the away-from-home space, including hotels, cruises, offices, and the like. It’s a natural fit. It just solves different problems, and some of that will take slightly modified appliances.
Z: This actually prompted a question which I can’t believe didn’t occur to me before. Another piece of home bartending or at-home cocktail consumption that can be challenging for people is glassware. How does the machine work with the glassware that people tend to have at home?
N: Well, I think you’re hitting on the difference between the drink in a home-bar system and RTDs in a can.
Z: Right.
N: It is experiential, but I think of the whole cocktail category as experiential. Even though I’m simplifying the ingredients and the recipes that you value, we’re simplifying that. We’re nudging and teaching people about glassware and garnishes. What we found is that our users are naturally hosters. They’re generous hosters. They have people over when they can. They do it frequently, and they think of a special occasion for themselves or for their partner as a hosting moment or at least the mindset. They step it up, so they tend to have glassware. They tend to have a few options for glassware. These guys are not deep experts in terms of our user base. They tend to lean in when the time is right to garnish. That is a very simple entree into the cocktail world. A little bit of glassware and some garnishes. Now you add ice into the mix. We can teach people to be extraordinary hosts, but while simplifying a big chunk of it. That’s what we’ve thought. We’re embracing glassware as a thing that people should learn about. We’re very visual and constantly prompting about the appropriate glassware and the differences between one and the other. Ice is a big thing that we’re nudging on because you can do a lot of customization and modification at the ice level. Then, the last one is garnishes. Garnishes are a half step from a twist, dash, or splash, and suddenly you’re in the customization world and you’ve taken on a journey of exploration on your own. We find that engages people completely.
Z: Very cool. Nathaniel, thank you so much for your time. It was really fascinating to hear about the system. I know you showed it off to some of the folks at the VinePair office a couple of years ago, so it’s a little bit familiar to the team, but it’s very exciting. I haven’t seen one in the wild yet, but then again, I haven’t really been out of my house in 14 months, so hopefully soon.
N: It’s a pleasure. Thanks for having me, and thanks for the chat.
Thanks so much for listening to the “VinePair Podcast.” If you love this show as much as we love making it, then please give us a rating or review on iTunes, Spotify, Stitcher, or wherever it is you get your podcasts. It really helps everyone else discover the show.
Now for the credits. VinePair is produced and recorded in New York City and in Seattle, Wash., by myself and Zach Geballe, who does all the editing and loves to get the credit. Also, I would love to give a special shout-out to my VinePair co-founder, Josh Malin, for helping make all this possible and also to Keith Beavers, VinePair’s tastings director who is additionally a producer on the show. I also want to, of course, thank every other member of the VinePair team who is instrumental in all of the ideas that go into making the show every week. Thanks so much for listening, and we’ll see you again.
Ed. note: This episode has been edited for length and clarity.
This story is a part of VP Pro, our free platform and newsletter for drinks industry professionals, covering wine, beer, liquor, and beyond. Sign up for VP Pro now!
