On this episode of “Next Round,” host Adam Teeter chats with Felipe Szpigel, founder of F!ve Drinks Co. Szpigel discusses the brand’s aim to can cocktails that are as delicious as freshly made drinks crafted by top bartenders. Then, Teeter and Szpigel discuss the canned cocktail industry at large and why RTDs may be the future of the beverage industry.
In addition, Szpigel details F!ve Drinks’ canned cocktail lineup, including a collaboration with Dante, which has resulted in the brand’s Summer Spritz, Americano, and Gin & Tonic. Then, Teeter and Szpigel talk about the lingering impact Covid has left on the beverage industry, and Szpigel shares his vision for the future of F!ve Drinks.
Tune in and visit https://www.buyfivedrinks.co/ to learn more about F!ve Drinks.
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Adam Teeter: From VinePair’s New York City headquarters, I’m Adam Teeter, and this is a VinePair Next Round conversation. Today, we are speaking with Felipe Szpigel, co-founder and CEO of F!ve Drinks. Felipe, thank you so much for joining me.
Felipe Szpigel: Thank you, Adam. Thanks for having me.
A: So where are you right now?
F: I’m actually in São Paulo. I’ve been spending time here and in Miami for the last year.
A: Wow, so how’s the weather in São Paulo?
F: Well, it’s not that different from Miami, right? I guess after living too long in New York, I needed a little bit more of the sunshine.
A: I love it, so thanks so much for joining us. Can you tell us a bit about F!ve Drinks for those who are unaware of what F!ve Drinks is?
F: Yeah. To start, we make amazing craft cocktails in a can. We wanted to take the fine mixologist or the best of what you can enjoy in a bar to people any time, anywhere.
A: And how did this idea come about? Your background, for those who aren’t aware, is that you worked at AB InBev for quite a while running the craft beer program, correct?
F: Correct.
A: How did you move from craft beer to cocktails? Were you always a cocktail person? What gave you the idea to pursue this and how long has the business been around?
F: Like many of your listeners, I love drinking proper alcohol. Most of the time I would drink beer and actually, I always liked cocktails. Start with a cocktail, and then go with a chaser. Anyways, in terms of my background, I was at AB InBev for almost 20 years, and I did a bunch of different things in different parts of the world. I think the one that connected me into this world was leading the high-end, as you mentioned. We created a division to then find amazing craft partners, bring them on board, integrate them and help them expand their businesses. There were so many great entrepreneurs passionate about it. Let’s say my itch to do my own version of that was coming to fruition. On the spirit side, we had a couple of things in mind. One is, I think the right way of having a proper business is finding business partners that you like and that complement you. I am lucky to have four other partners that are amazing. Chris and Jeremy Cox are geniuses in product, Gus comes from a marketing background, and Roberto has more of a traditional finance background. Someone has to do the math for us. The second piece is that there is still a big evolution into the ready-to-drink space. To be candid, I like full-flavored drinks. I like real things. Even when consuming food and everything else I do, I’m one of those people who look into the labels. We saw this white space of just doing amazing cocktails using real ingredients and just offering convenience to consumers.
A: So when did this idea start to percolate? What year was this?
F: This was the end of 2018.
A: Did you leave AB InBev pretty quickly after or when do you depart and decide to start pursuing this full time?
F: Inside ABI, I was already working on some of these projects. For example, Devil’s Backbone in Virginia and also 10 Barrel in Oregon. I left at the end of 2018, and very quickly, we put the project up. We launched in Miami, July 2019.
A: Wow.
F: In six months, we were up and running.
A: How are you able to do that? Usually, R&D takes forever. Did you already have some formulations? Did you know what you wanted to put in the market that quickly? Was it just based on your experience in the business for so long that you knew how to get it done fast?
F: I think it’s a combination of all of the above. It is a delicate industry, right? The regulations are not simple. Being able to navigate regulations and potential business partners was helpful. We were bootstrapped, but we had cash to get up and running. That was an acceleration to the process. There was not a fundraising period. In terms of the product, I think that’s where Chris and Jeremy come together, right? We loved drinking cocktails even before that, as well as many of the craft folks I knew. We knew what we wanted so in terms of products, they did an amazing job on being able to replicate the flavors of great bars and putting them in shelf-stable cans.
A: I have some questions about that but before we get into the flavors and how you made the cocktails come to life in the can, I’m curious just about the business side a little bit. Did you ultimately raise any investment? Are there any investors in the business besides the five of you now? If you did, what was that process like? How did you go about convincing people that canned cocktails are going to be as big as they’ve now become?
F: I think people are still figuring out that this is going to be a huge, huge business. I was lucky enough to see the craft movement and how big the industry has gotten. It’s still developing with the number of players and I also was part of the beginning of the seltzer movement. AB InBev had partnered with Spiked Seltzer, the originator of the category even before White Claw and Truly came out. I think the insight here is that liquor is an $80 billion-plus industry that’s growing.
A: Yeah.
F: Most people drink the product mixed, so if you can offer something amazing and ready to drink, there’s no reason why people wouldn’t drink it. Especially with the many occasions where you need convenience right outside of the bar setting.
A: Right.
F: Again, most of us that partnered on the first rounds had lifelong work in the industry. We got all of our savings and put it behind the business. We wanted to have control and direction. I am still the majority shareholder of the company, and the ability to run my vision was critical. Now, our vision in fundraising is whenever you can get more cash, it will help you accelerate the growth of the business.
A: Totally.
F: We will likely come up with another round soon, but the way we’ve looked at it so far is looking at people that can contribute with cash but can also complement in a strategic sense. We did the rounds at the end of September last year. Companies at the beginning valued it at $10 million, so we sold 10 percent of the company. Back then, we looked at people in other industries. We looked to access capital in entertainment, so our idea was to have more expertise and discover things that we honestly didn’t know. People can help us in guiding the best direction for the company.
A: I know that ZX is an investor, correct?
F: Yeah.
A: And that’s when they invested?
F: They were part of the first investment rounds.
A: Very cool. That is very helpful in terms of getting to scale and people who know the industry, even though you do as well. That’s cool. Going back to the flavors, one of the biggest things that we’ve talked about a bunch is that flavors in canned cocktails are really hard to get right. That’s what other people who I’ve spoken to have said they think is ultimately holding the category back is that ability to replicate fresh citrus juice and keep it shelf-stable. Having had some of the cocktails you guys make, they are really on point with flavor. What are you doing? How do you think about flavor in terms of what you’re delivering to the consumer to ensure that it can be as delicious as that cocktail you’re getting at the cocktail bar?
F: Yeah, thanks for the compliment, first of all. I think the quality of the cocktails is what makes us stand out. For us, the philosophy was always to make something similar to what we would drink at the bar. Even today, most of the time when we go to venues, hotels, and golf courses, I generally come in and ask, “Can you make a Margarita, a Moscow Mule, and use top-shelf spirits?” Then, we taste it together with our drink, and we’re always at the same level. I think the discussion of our cocktail being at that level is something that blows people’s minds away. We took the same craft philosophy that we and our partners would use, which is no compromise to the flavor profile. Also, to go back and innovate on the process to be able to get the right product out there. Two things make a huge difference. One is the quality of the ingredients. We work with amazing craft spirits. For example, Oregon Spirits. In our collaboration, we use Mancino vermouth, which is one of the best vermouths in the world today and comes from Italy. There’s no compromise to what we put in. And it’s the same thing with the fresh juices. For example, in our Summer Spritz, because we need that fresh cucumber flavor coming out, we press the cucumbers right before we mix it and before we put in the Key lime.
A: Oh, wow.
F: It is the same thing when we use mint or hibiscus leaves. I mean, we steep it into the tank. It’s similar to doing a humongous batch of a great craft cocktail that you would have at your favorite bar. The other piece, for us, is we didn’t want to add anything. Citric acid is not lime, so you have to figure out a way of using lime and working with lime so it doesn’t oxidize, and then it maintains the flavor profile. I think the summary here is we focus on the no-compromise route, and it doesn’t matter that we pay higher taxes. It doesn’t matter that in New York, we can’t sell in grocery stores because it’s spirits-based and not malt-based or fermented sugar. We wanted an amazing product and we developed the innovation on the back end to be able to get there. We’ll get to the consumers in whatever way, shape, or form that legalities allow us to have access to consumers.
A: You rolled right into my next question, which was about that access. One of the reasons people are giving for these explosions of Truly and White Claw — besides the fact that the market was poised for a sessionable, full-flavored beverage that was low in calories — is the accessibility of it. I’m in New York and you used to live in New York, so we would call those convenience stores bodegas. You would go to any bodega or grocery store and buy them quickly. Whereas for the fastest-growing spirits-based seltzer, High Noon, the discussion has been surrounding it being held back a little bit based on the fact that in a lot of markets it has to be bought in liquor stores? How are you combating that? Saying you’ll meet the customer where they are is interesting, but what are you doing to make sure the customer knows you exist and can find you as easily as possible?
F: Yeah, and compound that with Covid.
A: Totally.
F: I mean, there’s no on-premise, no events, even the travel industry. I want to come back to the point where we thrive on the channels we are present at. For example, in our home market in Florida, customers like ABC Liquors or Total Wine, you can’t go into a store in Florida today and not see our product. It’s great to have support and perform as a top-five seltzer brand, including all the brands you even named. That includes longtime brands such as Mike’s Hard Lemonade, we’re just behind White Claw, Truly, High Noon, and sometimes Bud Light Seltzer. We’re right up there. I think there’s no escaping the fact that we made the selective choice of going for the product quality. Even if it’s less available, consumers will gravitate towards better-tasting products at some point. The second piece is on the marketing side. We try to punch above our weight by doing fun stuff, getting articles written about it, and even you giving us this opportunity with the importance of VinePair. It’s a great way for us to get the word out there and get people to try our products. Finally, the last one has been important because we had planned to have a distillery down in Miami with an experiential component as a way of innovating, getting consumer feedback, and also building the brand. We quickly pivoted to the online part of the business — right now, it’s currently around 10 percent of our sales.
A: OK.
F: It’s a great way of us getting early feedback, putting innovation out, playing with the packaging, and also learning feedback from new states. Unfortunately, due to the regulations and even the cost of doing business online with platforms like Facebook or Google charging you so much for ads, it’s not a profitable part of the business. But it’s a great marketing tool to be able to connect to consumers, though.
A: In terms of the ingredients, you mentioned some Italian vermouth. Are you making a lot of the ingredients for the cocktails? I’m talking about the spirit bases. Are you sourcing them from other well-known spirits producers? When you do source them, let’s say you use a well-known rum. I don’t know if you do, to be honest. I’m not trying to put words in your mouth, but I am curious, how much do you then think about putting a particular brand on the side of the can or not? How much is that going into your thought process for the creation of all these different cocktails?
F: It’s a great question. We’re not producing spirits today. We’re sourcing them. All of them are recipes developed for us or with us because again we want those flavor notes at the end product.
A: Right.
F: There is a development process, so we have this combination of great spirits makers that are flexible to create a recipe for us. We developed the products and packaging, to your point about brand naming, and our whole idea was to collaborate with others. That’s why, for example, we collaborated with Dante.
A: Right. I was gonna ask you about that, too.
F: Yeah, so I’ll start with that Dante example and then bridge back to the discussion on the spirits. I was a huge fan of Dante. Actually, on the day I signed the formalization of the company, that’s where I went to celebrate and had a Negroni.
A: Oh, awesome.
F: Our partnership came up many months after that and I’ll tell you this story over a couple of drinks in New York soon, but it’s one of those synchronicities in the world, right? It’s a longer story, but it’s interesting. I knew the founders from doing business in the past but didn’t know they were founders of Dante. Anyway, I think the whole idea there is that our cans are so simple and minimalistic. They’re almost like a white canvas for you to paint on.
A: Yes.
F: It is this whole idea that if there is someone that has something to say or put out there, we’re more than happy to use our brand for that. I think the collaboration with Dante is that, well, they had just won the best bar in the world. I love the place, and they make amazing cocktails. Now, could we take our cocktails to the next level by sharing the same vision we had? Let’s say, making the mixology available to many more people and being able to do that on a larger scale and put it outside of the bar setting, right?
A: Right.
F: I think that philosophy is what we put on the brands. I think the Mancino is an example where they’re doing amazing work. They’re working with us on the recipes, our drinks, and how to take our drinks to the next level. We might as well put the name there, right? I’m not against putting a famous brand or a big brand on the label, but I think it’s less about that. It’s more about the philosophy of collaboration and doing something that we’re both passionate about.
A: Will the Dante collaboration be ongoing, or was that a one-time thing that I saw?
F: We never know the future, but we did it for the long term. I don’t think we even talked about this or most people know about this in the U.S., but we also launched F!ve Drinks in Brazil. Some of the founders are Brazilian. I have a daughter, so during the pandemic, I spent so much time here that I said we might as well launch F!ve Drinks before I go back to the U.S. But Dante is a well-known brand here. They did a bunch of pop-ups already in the last couple of years, so expanding it outside of the U.S. is a huge opportunity. For example, in Australia, this ready-to-drink market is huge. It’s even bigger than the rest of the bottle spirits industry.
A: Right.
F: There is an opportunity as well to get something out there. I think both sides hope it’s ongoing and a bigger opportunity, but I’m really proud of the three products that are already out there: the Summer Spritz, the Americano, and the Gin & Tonic.
A: You seem to do a lot of limited releases. You’ll release a really cool new cocktail and it seems like it’s limited, at least. Was that always part of the marketing strategy as well? Putting a cocktail out there, see if it hits, and then maybe do it more later?
F: That is a piece of the craft industry that I loved. I think it’s also a critical piece of this ready-to-drink space, where people want variety. If the Moscow Mule is your top seller, variety packs are something that’s important. Again, someone’s entry to the brands, whether they’re going to someone’s house or they’re bringing people over, they want more variety. Those are the two biggest selling units, but the way to innovate is, we will keep getting things out but cycle through the ones that our consumers did not get as excited about. I’ll give an example. I like Gin and Tonic, right? For me, it is a summer, outdoor, higher-volume drink — the one that I can keep going to because my palate doesn’t get tired. I was bullish when we launched the first three flavors because I wanted to launch my gin and tonic. A London dry gin, a good tonic, and a nice splash of lime. I loved our Gin and Tonic, but I was likely one of the few people that loved it. Then, we launched the Paloma and a Watermelon Vodka Soda, so we had all of our products. Now, I can kill the Gin and Tonic. We have an upgraded version from the collaboration with Dante. Yet, I think for us, the sweet spot is having half a dozen flavors out there at the given time but launching a few during the year and cycling through. I think that’s going to be the business and let the consumer taste it and decide for themselves which ones they like the most.
A: Very cool. That is interesting. Now that we’re coming out of the pandemic and people are in-person more, where do you see F!ve Drinks headed in the next year?
F: Great question. We still have so many people that haven’t tried our product yet. We have two big challenges. One is just getting people to sample and then decide for themselves if we’re worth the $10 for the 4-pack. In general, people think it’s worth it after they try the product. More than 80 percent of people think so, which is great. The second piece for us is category education. Not all cocktails are created equal. Even from my past life, before some of the good stuff that is out there today including our brands, I had a prejudice to the category. I thought it was going to be malt-based, sugary, or full of artificial flavors. It was not my thing. It was a thing for many people, but it was not my thing.
A: Right.
F: Together with the sampling and just distribution in general, I think the biggest opportunity we have is educating consumers that not all cocktails are created equal and that we and some other people are worth the shot. The other thing with the pandemic that we’re seeing is as things start opening up, there is a challenge with the limited service in hotels or bars and events. Even you and me, right? I mean, are you going to be OK if so many people touch your product? Where were the eyes? Suddenly, you have a really good product. For example, there’s a bunch of hotel chains in South Florida that already carry our product. The One Hotel, for example, is one of our top on-premise customers. We are on the beach service, the pool service, and on the minibar right now. We will never be a substitute for a great bartending program, but for that flexibility of the additional occasion or the speed-to-service. Now, you don’t need to compromise in terms of quality. I see that and ask, “Why would you have to be 30 minutes in line in a venue to have a decent cocktail while you can grab a cocktail right at the same speed you would get a can of beer? And it’s a very good cocktail, right? I mean, it doesn’t depend on the bartender. The best bartenders already pre-batched the huge batch back in our production places. I do believe that transit, travel, and then larger on-premise venues that need the speed-to-service are huge opportunities for us to get distribution, sampling, and then build back the brands.
A: Yeah, that makes a ton of sense. Someone was telling me in an anecdote recently about a canned spritz that they had created. They were being told this by a big on-premise bar of theirs that was saying, “When we’re packed, these are easy to sell to people who don’t want to wait.” If the bar is three people deep and you’re just looking for something quality without the pomp and circumstance, it helps the bars out a lot. I definitely hear you that I think this isn’t just an off-premise product. There’s a huge potential for these canned cocktails on-premise.
F: Yeah.
A: Felipe, thank you so much for taking the time. It’s been really interesting to learn more about F!ve Drinks and what you guys have been up to in your trajectory. I appreciate it.
F: Thank you, Adam. It’s great connecting, and thank you for the space. Also, thank you to everyone that’s listening. If you haven’t tried the F!ve Drinks cocktail yet, the Moscow Mule is a top seller but we also have this amazing collaboration with Dante, the best bar in the world. We would love to get your feedback, too.
A: Awesome. Thank you so much for taking the time, and hopefully we’ll be in touch again sometime soon.
F: Same here. Thanks, Adam.
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 are 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.
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