Javier: Hey, there, beverage enthusiasts. My name is Javier Morquecho, and I'm the founder of SpecialtySodas.com where you can find the largest selection of craft soda and specialty beverages anywhere in the U.S. as well as this Specialty Sodas podcast where ambitious entrepreneurs and leaders in the beverage industry come to share their story. My mission is to build a community within the beverage industry so we can all meet and learn from one another. Today, I'm joined by Jordan Silbert, the founder and CEO of Q Drinks based out of New York. Since 2006, Q Drinks has been making the world's best sodas: clean, crisp, completely ungeneric beverages that enhance the finest spirits and also stand proudly on their own. Using the best ingredients, each bottle of Q has balance, depth, and complexity. Q Drinks are spectacular on their own and good enough for anything you want to mix them with. Flavors include Q Tonic, Q Ginger, Ginger Beer, Q Club, Q Kola, Orange, Grapefruit, and Lemon.
Hi, Jordan. Welcome. Thank you for being here today.
Jordan: Hi, Javier. How are you doing?
Javier: I'm doing good. In today's episode, we will talk about why you started your business and give people a behind-the-scenes look into what it really took to grow your company to where it is today. I want to start off by asking, based on your own experience, what do you feel is the most common problem beverage companies face when they're starting a business?
Jordan: Yowsers. The answer is persistence at the end of the day. That's the hardest thing, just keeping it going. It's a long slog, and there's lots of highs and there's lots of lows. But it's a matter of keeping it going because if you're... got a better product, one that's truly a better mousetrap, like we have and we had. You will win in the long run, so long as you can keep going for long enough. So it's persistence. That's the big-picture answer. And then the smaller picture is how do you get the attention of the world? How do you get the attention of customers, and then eventually the retailers, eventually the distributors? How do you get people's attention with usually limited budgets?
Javier: And so what is Q Drinks?
Jordan: We make spectacular carbonated mixers, so tonic water, ginger beer, club soda, ginger ale, you know, beverages that you mix with very high-end spirits, you know. Big, big, big picture... there's been an incredible premiumization of spirits over the last 10 or 20, even 30 years. Today, more than 60% of spirit purchases by dollar volume are, you know, premium plus, so basically, Absolut Vodka and above. And it just fundamentally doesn't make sense to mix a $30, $35 bottle of whiskey and gin and vodka with a carbonated mixer of mediocre quality. So we make spectacular carbonated mixers, ones that are designed and carefully crafted to mix with high-end spirits to make really terrific drinks.
Javier: When you started the company over 10 years ago, at the time, there was nothing like this on the market.
Jordan: No... that I know of. It turned out that Fever-Tree, now our most direct competitor, was starting about that same time in the UK, but they haven't come to the U.S. by then.
Javier: All right. So before we go on to the details of what you do today at Q Drinks and how you grew the company, let's talk about your background a little bit more. So you went to Brown University, graduated in 1998, and then you moved to California. So how was that transition? And what did you work on in California?
Jordan: So the transition was great, though, you know, like any transition, difficult. And I left my family and my girlfriend, and basically my whole life on the East Coast, and moved to Sonoma County, California, moved to a small little cabin in the woods with no indoor shower, and had a fellowship to do economic development for the County of Sonoma. And economic development in Sonoma is a lot different than, you know, economic development, you know, in a big city where you're trying to attract parts, processing plants or just major industry.
Sonoma as a county is doing fairly well. It was doing fairly well. It was important to keep the economy growing, but you also had to do it in a way that maintained the kind of environmental, and, you know, just the aesthetic beauty that's inherent in the landscape there, and kind of what attracts a lot of people, whether they be tourists or winemakers, to go there. So economic development was a little different.
So I had a fellowship to do that, and had a great time doing that. I started a organization for home-based businesses, which are, you know, microenterprise, basically people moving there either to, you know... someone who's an ad executive in San Francisco who's up there and works kind of... sets up their own shop up in Sonoma, or if someone who is at the beginning of, you know, e-commerce and people selling yo-yos on the internet. But the thought was that it's a great way if you can make it easier for people to kind of start great businesses out of their homes, it's a great way to not only increase the tax base and increase the income, average incomes, and creating economic development in the area, but do it in a way that doesn't unduly impact the environment, you know. People aren't commuting to drive to their house. They're not on the highways. Instead, they're in people's communities during the day. So if something bad happens, they're around to help.
So people thought it was a perfectly good way to support the local economy. So I started an organization. It's a 40... you know, it's been... geez, how long has it been now? Twenty years? Is that right? Almost 20 years. Eighteen years, whatever. Tens of thousands of people kind of supporting them in a way, so doing a variety of different initiatives that support them. Also did some work with telecommunications there.
So that was by day. And then by night, I lived in this cabin in the woods, 200-foot redwood trees over out my door. The main house was... the guy who rented it to me is a really interesting guy and a really dynamic guy. And among other things, he made his own wine. He had a pal who had a pal who had grapes growing up in Cloverdale, which is in Northern Sonoma County. He keeps the raw grapes, and he figured out how to be allowed to harvest them. So he would pick them, and then barrel and then bottle. And, you know, they're all talking about a biodynamic this, organic that. These were, for all intents and purposes, wild grapes that no one was really tending to. Some guy retired and kind of had a field that he wasn't doing anything with.
And so I picked the grapes with him. And every year, he would make a barrel for himself, and each of the other pals will make a barrel. So I got to do it, and I got in on a half a barrel. And we picked the grapes, and then crush them, and then barrel them, let it sit for almost a year, and then eventually bottled them. And this stuff was really good. And the story that I tell is that he would trade I think it was a case of wine to one of the fancy restaurants in Marin in exchange for a gift certificate, so he'd eat dinner there. And it's called Buffalo's Place. So he would go to the restaurant, and, say... I think the waiter or the server would show the wine list and say, "Oh, what's this bottle look like?" And Shawn, the guy, would say, "Oh, it's, you know... have some." The server would say, "Well, I can tell you that if it's good, it's really, really good. But if it's bad, it's really, really bad, and we'll replace it." And that's because we didn't, you know... we didn't add any yeast. We didn't add anything, no sugar, no blends, nothing. It was just like straight up grapes picked in the field, crushed, put it in a barrel, and then bottled.
Anyway, I had half a barrel. The stuff was great. Had a great time by day and even a better time at night hanging out with this guy who made his own wine and all his folk musician friends. We'd, you know, grill whole goats and just had a good old time. But eventually, flashing forward to the story, when I had this idea for a better tonic water, you know, I always thought that like, "Well, if that guy could make terrific wine, why can't I make better tonic water?" So, yeah. I lived in Sonoma County, and one of the things I do is make my own wine.
Javier: Yeah. And so Sonoma County is where you first got the taste of making your own beverages. And at that point, were you thinking of tonic water, or was it after you moved back to New York?
Jordan: It was after I moved back to New York.
Javier: Okay. So you worked in yeah, Sonoma, San Francisco, and then 9/11 happened. And then you decided you wanted to move closer to family. And then you worked...
Jordan: I'm from Manhattan. I now live in Brooklyn. I was actually visiting my parents on 9/11. The world obviously blew up, and my flight out on the 13th was canceled. The 20th, I didn't feel comfortable flying. And by the time I flew back on the 27th, I decided that I was gonna move back to New York City and help. So I flew back and packed up my stuff and drove back home. And by, I think, Thanksgiving, I was working, doing economic development for the area below Chambers Street, so kind of surrounding the World Trade Center. And first project was overseeing power washers who were cleaning debris off retail storefronts, you know, areas surrounding the formal World Trade Center site. So I did that.
And while I was there, the idea of the tonic water basically... I had a bunch of friends over to my house in Brooklyn, beautiful backyard. It was a beautiful summer night. It was next summer's, and we were... one of my pals had a bottle of gin. And I picked up some tonic water at the local bodega, and we were drinking gin and tonic after gin and tonic. This was back in my youth when I used to be able to have six gin and tonics on a Tuesday night and be bright-eyed and bushy-tailed at 7 or 8 in the morning on a Wednesday. We were drinking gin and tonic after gin and tonic. And a couple of drinks in, my teeth started getting... it felt a little sticky. One of my friends was telling the same dumb story that he always tells. So I picked up the bottle of Schweppes and looked at the ingredients. And it was 32 grams of high fructose corn syrup, natural and artificial flavors, sodium benzoate. I said, "That's kind of weird." I didn't really thought about what tonic water was, and thought it was something like bitter something or another.
And one of my good friend's, I guess then girlfriend, now wife and mother to his two kids, was drinking Sprite that night. She had like a tummy ache. So I said, "Hey, Sara. Can I look at your can of Sprite?" She said, "Sure." And I looked. Thirty-two grams of high fructose corn syrup, natural and artificial flavors, sodium benzoate. I said, "Guys, these are like the same thing, just different natural and artificial flavors, and one is green and one is yellow. That's crazy." Yeah. I'll never have six Sprites in a night. They're like, "Yeah. Yeah. Yeah."
Anyway, we started talking about other things, because that's what you do. And a couple of more drinks in... granted, again, we had a bunch of gin and tonic, but the Tanqueray bottle was there glowing in the moonlight, this green orb of gin goodness there. And I was like, "Wow. Everything is good with this night." It was, you know, a warm summer night in Brooklyn, a nice, soft, warm breeze. My best friends were there. I was drinking lots of gin, and everything was good with the world. And then I looked over at the bottle of Schweppes, and I was like, "What a piece of crap." You know, it was dented. The thing was going flat. The label was peeling off. It looked like no one had thought about, you know, the design of the product since 1958. And I put my finger there. I said, "I'm gonna make a better tonic water."
Long story short, I did... a long story a lot longer. The next late morning when my head cleared, I figured out what tonic water is supposed to be. It's supposed to be this quinine, which is this like bitter alkaloid that's often used in medicine, or initially used as a medicine, a little sugar, a lot of, and some carbonated water, but that the big soda companies had treated the thing like a soda for the last 60 years, you know, will add... buying their flavors from flavor houses and putting more and more sugar into the product, and really designing tonic water that was the most cost efficient to make as opposed to the most delicious to drink or one that makes the best gin and tonics.
So I ordered some quinine on the internet, a bag of bark on the internet, started mixing stuff up in my kitchen. And my roommate at the time was complaining about, first and foremost, the mess. But he'd also say, you know, "We're gonna get busted for running a meth lab," because we had pots and pans and boiling this. And to his defense, I didn't do such a good job probably cleaning up after myself. But eventually, I came up with a kind of simple syrup kind of thing. And this took a while, granted. Eventually came up with like a quinine simple syrup that I could make homemade gin and tonics with. And I'd get invited over to people's houses for a dinner party, and I'd say, "I make my own, you know, homemade gin and tonic." And people loved it. You put the gin on top, put gin in, ice and gin, dump the simple syrup mixture with quinine in it on top, and then club soda, and then stir it real fast. And people loved it. The bubbles drove me nuts. And I knew I wanted to find a soda plant that could make this stuff because I couldn't do the carbonation myself.
Javier: Well, before you go into that soda, the bottling plant, you were still making a recipe, and you were still working at the alliance in downtown New York, rebuilding initiatives. At what point did you apply to business school? Was it it hadn't happened yet, or...?
Jordan: No. It was a kind of concurrence. I applied to business school. So the job was spectacular for a while. I would come up with ideas, and then get them funded, and then get them implemented, some awesome things. But about, I wanna say two years in, like two and a half years in, it started getting really political. And the money, a bunch of big companies came in and started making sure the money went the way they wanted to go, and some of the politicians stopped allowing decisions to be made really, really quickly. And it just became more of a quagmire than an exciting place to... so that's when I went back to business school. And honestly, I didn't have the idea to do the tonic... I didn't go back to business school to start a tonic water company certainly. I went back to business school because I didn't want to be beholden to like where the government wanted to put the money. I wanted to build and do really interesting, incredible things, and I thought getting to business school would enable me to kind of have more control over what I could do.
Javier: And you were still tinkering with the tonic water idea in business school.
Javier: And you were a full-time business school, or working day...?
Jordan: Full-time, full-time.
Javier: And while you were making your recipe, you met one of your professors, Barry Nalebuff. And what did you talk to him about?
Jordan: So Barry is one of the founders of Honest Tea along with Seth Goldman, who is also an incredible guy in a lot of ways, incredibly smart, but also really wonderful about supporting students' and young people's entrepreneurial kind of thoughts. He's very, very open-minded and very excited about new things. So I told him about this, and he got excited about it. And I told him I wanted to do an independent study. This was, I guess, the beginning of my second year of business school. My first year of business school was not what I was hoping it to be. It was very rigid and very academic, and a lot of, like, doing problem sets, you know. Rather than trying to figure out what the problems are and trying to figure out how to solve them, I was doing like math homework, which, I guess, is important, but it's not the way you're gonna build a great company.
So I had a great summer internship at business school. I went down to Panama, and I came back and worked in real estate/economic development in the colonial old quarter of Panama City. And I came back. And I said, "You know what? I don't wanna be doing math homework." I wanted to figure out how to do wonderful things. And I had this idea for a tonic water company that I was thinking about, and then I told Barry about it. And he said, "It sounds interesting." Here, you know, "I'm happy to do an independent study, but I don't want you to write a 100-page business plan. The hardest thing for you is figuring out how to make the thing. So here's what I want you to do. You've got one assignment, and it's on the last day of the year. I want you to be able to put a bottle on my desk. So you gotta figure out how to make it."
So that's when I started calling different soda plants. And eventually, one soda plant up in Worcester, Massachusetts made the mistake of picking up the phone. And I was about to ask a [coima] question. I said, "You know what? Can I come up and ask you this question in person?" So basically, I spent that year commuting up to Worcester. Every time I would have a question, I would ask him, but I would just drive up rather than call him. First of all, because I was in school and I had the time to do that. But second of all, now that I've spent a lot of time in soda plants, I see that no one ever picks up the phone ever. So once I kind of had an opportunity to talk to the guy, I would just drive up there and have an in-person conversation every time I was there. And so that's when I started working with a soda plant and making a prototype.
Javier: And this was Ginseng UP bottle. Am I correct?
Jordan: Correct. Paulo... sorry. I just got a text.
Javier: Oh, okay.
Jordan: Yeah, Paulo.
Javier: Yeah. And this was the only company that responded to you? Or there were other ones, too?
Jordan: This was the only one. Like I called a bunch. No one called me back. He just picked up the phone once. Paulo Dasilva's a great guy, and a bunch of other small beverage brands had started with him. And he's just, in retrospect, kind of known for giving the small guy the chance. But he's just a wonderful, wonderful person.
Javier: When you went up to the bottling plant, what kind of questions were you asking? And what did you learn that you needed to do to, like, make your first bottle?
Jordan: The short answer is everything. The longer answer is carbonation, you know, preservation techs and techniques, how to, like, commercialize the product, I guess, is the long and short of it. It's like one thing to make something in your kitchen. But with a carbonated beverage, it all matters whether you can make it on the line, especially because we were trying to do things that other people weren't doing, you know. First of all, I wanted a lot of carbonation. We treat carbonation like an ingredient, and each of our flavors has a different carbonation level, all of which are much higher than most other factory mixers. Then we also don't wanna use sodium benzoate or other preservatives, so we had to figure out how to kind of balance the product in order to not do that. And that's a little technical. And then at the end of the day, I wanted it to taste fantastic, not only the first day you produce it, but, you know, a year or two later as well.
Javier: Okay. And at the time, yeah, you wanted a lot of carbonation, so you had to get thicker bottles. Where did you find the bottles?
Jordan: Ultimately, we had it made by Vitro Packaging, now Owens-Illinois. They have a custom mold and we made them.
Javier: And you had to come up with your designs. So at the time, you were thinking of silkscreening the design. Can you talk about that experience? And then after, how you met Jonah.
Javier: Oh, yeah, Johan.
Jordan: So do you want both stories or just the Johan story?
Javier: Both stories. First the silkscreen, and then the Johan...
Javier: So, yeah. We had a first designer. And, you know, in retrospect, everything's my fault, right? But we came up with a design that was much better on a paper label than silkscreen, and I got it. I found a silkscreener in Queens who would do it, and had it silkscreened. We were supposed to fill our first prototyping run on Tuesday, so I picked it up on Friday. And it looked absolutely horrible, like absolutely horrible. Like I still get nauseous when I look at it, but I had one or two lying around the office just to remember from whence I came.
I picked it up and I was driving back. I was, at that point, staying in a friend's apartment in Manhattan. I was driving over the Triborough, and I was going down, I remember it was the east side. And I would stop every four blocks and throw out, you know, four cases at a time. Just that I knew this is not what I was doing. This is not what I wanted to do. It was just so upsetting. So I was just throwing it out in trash cans, but I didn't have a commercial way to dump stuff. So I would space it out by every four blocks or whatever. I didn't want to get in trouble. Anyway, I threw all the stuff out. And then that night, I was going out with my, at that point, new girlfriend, who's now my wife and mother of my two children.
And at that point, I was drinking Manhattans, so it had nothing to do with gin and tonics. But by the... I think it was either the third or the fourth Manhattan, kind of figured up a kind of plan. First thing I was gonna do was wake up in the morning and drive up to Waterloo, New York, who's a... they're a reseller of glass bottles. I could buy, you know, physical pallets of the product. Then I would drive that back to Worcester and have blank bottles to fill on my prototype and run. I would then tell people I wasn't gonna disclose the design, because I didn't want them to, you know, color their impression of the product based on the beautiful design. Basically, I knew I needed a better answer.
So I had the idea, I said I was gonna fill blank bottles and not disclose my design. And then I was gonna call Johan, who was one of my wife's friends back when she lived in San Francisco. He's a designer who had just left MAC Cosmetics to set up his own shop. He had a partner. The partner left another agency who did like the branding behind Mini Cooper and things like that. So they put up a shingle and no one was calling them yet. So I called them up, and I think I was one of their first customers. But I told him my issue and worked with him very, very closely to design a bottle that was as beautiful as the liquid we were putting in it.
Javier: And this...
Jordan: Johan. The company's Aruliden. They're wonderful. They're absolutely blowing up. They've done stuff for Herman Miller, Puma, like literally the best of the best since me, which is really nice to see.
Javier: And you were still in school at this point, right?
Jordan: No, I was done with school.
Javier: Oh, okay. So did you turn in the bottle as your final project?
Jordan: I did, but it wasn't so good.
Javier: Oh, okay. All right. So, yeah. This was through school. And then after school, after you graduated from business school, you worked on this full-time, right?
Javier: How were you...
Jordan: So I graduated business school. And my best friend, who now is my business partner and works with us or me, he had gotten a job that was gonna send him to Australia for six months. And he had an apartment on 43rd Street to 8th and 9th in Manhattan that I could use. He would give me for six months. I had to give him a little equity in the company and ultimately just clear out for... he had come back for like two weeks during that six months. I just had to clear out during that time. So I got that. And then seven people gave me $5000, so $35,000 in cash. And that's what I used to buy those glass bottles up in Waterloo. That's what I used to, you know, pay Paulo for the first production run.
Javier: And who were the people who provided this initial funding? Family and friends? Or did you have to look...?
Jordan: Yeah. Friends and family, yeah.
Javier: Okay. And yes, so you started with $35,000. How did you spend that money? And did you spend it too quickly?
Jordan: No, I didn't spend it too quickly. I basically got a prototype that was wonderful. And then I somehow got it on some bottles. I get to design on those bottles, and I used that and sold the product into a couple of fancy bars and restaurants in New York City, so Milk & Honey, Gramercy Tavern, Little Branch ,and Blue Hill at Stone Barns, like literally the best of the best. I, you know, would show up with a backpack with my tonic water and say, you know, "Hey, whom do I talk to about this? I got a better product," and eventually sold it into those four, and started delivering it to them in a borrowed station wagon.
Relatively quickly on, Simon Ford, who was at that point at Plymouth Gin, called me up, and they were doing a big event at Rockefeller Center. He wanted to do ultimate gin and tonics where people would get his gin and my tonic. And the people were paying $1500 for a tasting plate of gin and tonics. So I said, "Sure. What do I need to do?" He said, "You will want to bring 10 cases next Thursday to Rockefeller Center and we'll have a grand old time." So we did. It so happens that Florence Fabricant from the New York Times was there. She's the head writer for The Times Dining section. She loved the tonic water. She loved gin and tonics.
And the next morning, I got a call from the fact-checking department of the New York Times that we were gonna be featured in the New York Times. I said, "Oh my God. That's pretty awesome." And, "Oh my God. I don't have a website. I don't have anything." So I scrambled and got a website up in the next three days. And by the time the article hit by next week, I had a website. And so I got something like 800 calls from places all over the world for people who want to buy the tonic water. You know, bars in Japan were calling me. And I said no to just about everybody except a couple of fancy bars and restaurants in New York City. And then the flagship Whole Foods store in Austin, Texas, they wanted to buy a pallet worth of the product. So I said yes. I then Googled to figure out what a pallet was. And once I figured out what a pallet was, it's like, "Whoa. How do I get one of those things to my house, and load it up with tonic water, and then get it down to Texas, you know, figure all that out?"
And I sent it down there. And then Jen, my girlfriend, and I went down for three days, down to Austin, Texas, and did a sampling by day, and by night, a Tex-Mexico... we can drink margaritas. But by the end of the long weekend, we had sold through a whole pallet worth of tonic water. I said, "Well, I may have something here." So I went to the Whole Foods in New York City and sold into the Whole Foods in New York City. And I would tell the people, you know... at that point, it was literally easier to sell it on a store level at Whole Foods than it is now. But I sold into the stores when, you know, I said, "I'll do a demo, and I'll keep doing demos until it sells through." So I did it and it went well. Eventually, relatively quickly on, I get expanded out to a whole region and kept doing the demos. I did something like 28 demos in 29 days or something ridiculous, but started to create some momentum is the answer.
Javier: And all of this is still with just the 200 cases. Or did you already have to do a second production run?
Jordan: So the Whole Foods in Austin, Texas was the first batch. You know, it's been 10 years now, but I believe the Whole Foods in New York City were a second batch. I convinced Ben at that point to come home, and I convinced him to quit his real job and come work for my fake job. And he set up kind of the production side of it, and I would do the sales and marketing side. But I believe that was the second one we did. And his runs were hellacious. Nothing ever went as well as it should. We started at 5 in the morning, which is a little tough if you're used to going out until 1 or 2 in the morning selling to bars and restaurants. We would last a week. And it would a lot of physical labor, which was fun and gratifying, but certainly draining. But yeah, I think it was probably the second run with Whole Foods.
Javier: And were these initial first run and second run... were you selling at a profit or a break even?
Jordan: If you ask me or if you ask Ben? The answer is no. We were probably losing money on every bottle. We had a gorgeous design. We also had no economies of scale, so we were probably losing money on every bottle.
Javier: Okay. And you were losing money, and you still had just that $3500...
Javier: Or $35,000.
Jordan: At some point, I think after that the New York Times article... and again, it's been a long time. But I think after that New York Times article, I had the New York Times article, I had Gramercy Tavern, Milk & Honey, and Whole Foods. I then went out and raised some money, and I raised about $500,000.
Javier: Okay. How did you raise this money?
Jordan: I had a friend from summer camp who worked at a hedge fund, and his bosses put in a bunch of the money. They had like a thing they do, like an investment thing they do on the side for like fund investments. And the concept, everybody gets. From day one, everybody got the concept. Like, "Oh, if you drink better gin you should have better tonic water." So they really got it. Obviously, they saw the circles under my eyes, so they knew I was gonna work my tail off. They took a bet on it. And so they put, you know... it was a little less than $500,000, and not all of it was from them. But they put in, I believe, the majority, and certainly led it.
Javier: At this point, you had already raised money. This was your second time raising money. What kind of legal structure did you have in place? What kind of support did you have? How did you know what to do to raise money and to give each person equity? Or were they doing it as a loan?
Jordan: So it was equity. It was straight... I forget if it was common or if it were preferred. I believe the first one was preferred, and that was because... I have to clearly look that up. But the reason for that was because one of the things I remember at business school said... they told me that the entrepreneur should always be preferred, because that's what you're supposed to do. Because if the thing goes down, people should get paid out before you. I said, "Okay. Fine." So I did preferred, but it was straight preferred. When people ask me about business school, it's like this is where the business school part helped the most was in these early fundraising rounds. So I actually had taken a class in it and kind of had a sense of how the whole thing went. When I lived in San Francisco, I worked for a couple of startups before 9/11, so I had a decent sense of it. We had a lawyer. The first lawyer was not good. He screwed a bunch of things up. I needed a second lawyer. So the second round, I guess what we now call the third round, was a lot better. I think the answer is we did our best. We muddled through.
Javier: What advice would you give to someone... or actually before you go with that, how did you know that you needed to raise more money? You just ran out and the demand was there?
Jordan: You know, first, again, I went to business school, so I had some sense of it all. But working capital is a really big deal. And that's one of the things that's always hammered into me at business school. You know, in order to sell a bottle of tonic water, I needed to buy the glass, and I needed to pay the co-packer. I needed to buy the ingredients. Even if I myself wasn't taking that much money, if anything, you need to pay all these people before you sell it. And you know when you sell it, you don't get paid for another 30 days. If you're growing quickly, you need cash to make the best next bottle of tonic water. So I know I needed that.
I guess I also had aspirations. Like it's ridiculous. You go to fancy bars and restaurants, and the tonic water's absolute crap. That's ridiculous. Like you're paying $9, $10, $11, $12, $15 for your gin and tonic that's not good. Like that's ridiculous. You have someone over at your house and you serve them a gin and tonic and the tonic water is not good. That's ridiculous. You had a tough week, a tough day. You wanna pour yourself a gin and tonic, and the tonic water's not good. Like that's ridiculous. And like I'm not alone here. So I knew a lot of people want to drink a better tonic water. So I knew that was not gonna happen with $35,000.
Javier: Yeah. And do you remember what you were pitching or how you were pitching back then?
Jordan: I think it was, you know, telling more of a story, you know. You showed the premiumization of other categories, whether it be spirits, beer, or water. And then you also just show a picture of a Tanqueray bottle or a picture of, you know, a Ketel One or a Grey Goose bottle, and just like it doesn't make sense to put Schweppes in there to mix with it. And people just got the concept. And granted, this was pre-2008, so this was probably 2007, I wanna say. It was just a different climate. So the storytelling, I probably got away with a lot better than I would have a year or two later. But that was kind of the story, kind of showing them, "Hey, tonic water premiumizes in the same way other categories premiumize. This is a huge opportunity."
Javier: And how much research went into what you were telling in terms of like the data of the premiumization of these drinks?
Jordan: So the answer is some. But I took Barry's advice and knew that what was actually much more important was creating a better product, like literally a better mousetrap. Like you can have the best investor presentation in the world, but if your product ain't good, you got no shot. And then probably taking it a step further, you can have the best product in the world, but if you haven't sold it to anybody, it's gonna be hard. So I went around getting validation from, again, literally the best bars and restaurants in the country. Milk & Honey was like the grandfather of this modern mixology movement. Gramercy Tavern, if they hadn't just won best restaurant in America, they were certainly known for being one of the best restaurants in America. Then Whole Foods was obviously Whole Foods. So to be able to show that, I think, was pretty compelling. And again, that's more important than, you know, "1.2% of the tonic water market is premiumized. We expect that to get to 6% by 2026." Like that is what you do when you don't have a great product and some great success stories.
Javier: Okay. And when you were selling into like Milk & Honey, did they just get it immediately? Or what was the process for getting it into these places?
Jordan: So Milk & Honey is a funny one, but I'll start with Gramercy Tavern. Now, Jim Meehan, who, at that point, was the head bartender there and later went to start PDT, which remains one of the best cocktails places in the country... he, you know, asked me who my distributor was. He was like, "I wanna buy. Who's your distributor?" I said, "Distributor? I don't even know what a distributor is." So he get me set up with finance, and that took a little while. But Sasha at Milk & Honey knew a guy like me would have no idea what a distributor is, so, like, he asked me to deliver it after close. And I said, "Sure." And then he told me to close. I said, "Oh, what time does it close?" He said, "2:30 in the morning." So my first delivery was to Milk & Honey at 2:30 in the morning, and he paid me cash out of the register.
Javier: Nice. And going on after this, you got into all these restaurants, I mean, these locations, and you got into Whole Foods, and that provided your validation. You needed to raise money. You did your second production run. Were you still using the same Ginseng UP at this point, or did...?
Jordan: Yup. We still used Ginseng UP for getting out, but it was a couple of years, at least three years.
Javier: Okay. And you wanted to do a 400,000 production run. Was that at this point? Or was this...?
Jordan: So, you were talking about the bottle. So we wanted to buy a bottle straight from the producer rather than buying it from a reseller... You're probably... At first, we were losing money on every bottle we made, and then we switched our design pretty quickly to do it. So I mean, they were somewhat profitable on each bottle. But still it doesn't make sense to buy your glass bottles from a reseller. You can get a much lower price from buying it direct from the producer. So we called the producer, and told that the minimum run was 400,000 bottles. And I said, "That's a lot of bottles." And we saved our pennies and still tried to sell into a lot of places so we can get the volume up so that we're not carrying 400,000 bottles for 26 years. But eventually, we got to a point where we could afford... maybe it would be wise to buy 400,000 bottles at once. And so we put an order in with our glass manufacturer.
We found out... I got a phone call I guess a week or two before the stuff was supposed to be made that we were being shorted 280,000 bottles. Like egad, that's a lot to be shorted in. And we, you know, had started selling the stuff, so I kind of needed the bottles. And let's say I was furious and asked my sales rep what was going on. And it turns out that Stirrings, which was a kind of non-carbonated mixer company owned by Diageo, had recently tried... it was about to launch a carbonated mixer line, and they wanted to use the exact same bottles that we were doing. And because they were owned by Diageo, they got preference over us. Obviously, that's frustrating, so we did two things. One, we bought the difference in glass bottles from a reseller and then decided that we were gonna crush them, which we did. And the next time we needed 400,000 bottles, not only did Stirrings not need that many, they had to have their production schedule around our production. It's because our stuff was taking off and we were selling and needed to buy more, whereas theirs wasn't. And so now we have a wonderful relationship with our glass company, and we're delighted.
Javier: What's the glass company?
Jordan: This is Vitro Packaging down in Mexico.
Javier: Oh, Vitro Packaging. And so the other thing is... I'm not sure where in the timeline this is, but in 2008, there was a recession. And you had investor money, but you had to throw it away.
Jordan: Yeah. This is probably the third... I never count that $35,000. So it's one, two... yeah, it was probably the third round raised, almost $1 million. It was really gonna step on the gas, you know, our business was doing great. We had sold into a lot of bars and restaurants not only New York City, but we were shipping into some of literally the best around the country by FedEx Ground. We had a couple of the distributors around the country. We, I think relatively quickly, had gone national with Whole Foods, so we were in all the UNFI warehouses. And we were starting to grow pretty quickly, and we wanted to kind of expand the team and making sure we had enough working capital. So I raised some money and a million dollars in checks. No, it's not a million. I guess just under a million dollars in checks. And that was I guess the Fall of 2008. And it was one of those days where the stock market crashed by a bunch, and everybody was really scared. And it was, you know, cash-under-mattresses time.
So people called me up and asked me to rip up their checks. And I had a business growing, I don't know, 50%, 60% at the time. It seemed like the sky was the limit. We were doing great, but we needed the cash. So I had to rip up all the checks. And clearly, I could have just deposited it. Obviously doing that would've been a pretty jerky move, so I didn't. So I ripped up all the checks and got really drunk. And then the next day, I came up with a plan again, and both Ben and I stopped taking a salary. And we moved in with our girlfriends and went without a salary, I forget, seven, eight, nine months... a long time. We moved in with our girlfriends, and happy to report that both of us are happily married. Both of us with two kids with wonderful wives.
But we kind of kept everything going. Eventually, I guess... yeah, about nine months later, we did another round for a lot less money and a lot worse terms. But we got some cash and then kept things going. And again, going back to that first question about persistence, like at the end of the day, that's the hardest thing, just keeping it going. Because if you do have a better product and you're willing to work your tail off, I really think you are... I tell you that I should be able to win this. We should be able to win this, you know, it's a matter of keeping it going through inevitably difficult times.
Javier: Yeah. So you had to not take an income. You had to move in with your girlfriend. Ben had to do the same thing. And you were still selling the products at a loss at this point?
Jordan: No, no, no. We had stopped selling the product at a loss. Basically, when Ben came in, we figured out that our design was unsustainable. We were doing some unbelievable like three-step frosting process not done online. No, we had redone it. We were making a little. I forget what our gross margins were, but they weren't nearly what they are today. But we were not losing money like we were at the beginning.
Javier: If someone is trying to make a beverage right now, what kind of gross margins should they have when they...
Jordan: So should they get or did they get... like that's a very different question. We approached our business very different than most beverage companies. We recently completed a private equity transaction, so I'm pretty aware of it all. But we kind of break even, make a little profit. And we're not huge, but we see other companies with $3 million, $4 million in sales and $30 million in losses. Like that's not the business that we are gonna run. It's just not the way I look at the world, and I just don't think that's the way you should run a business. Some of that, I think honestly, is colored by our experience back in 2008. We always wanted to be at a point where if things really went sideways, we could, you know, pull a plan up and not crash, so that it would make us more comfortable. And I think as a result, I think we're doing pretty well now, you know, the 57% CAGR, compound annual growth rate over 10 years, which is pretty damn good. But we certainly could have grown more quickly if we had been a little more risk-tolerant in terms of how much money we spent. But I would say 50% gross margins is something that a company should be targeting.
Javier: And going back to the recession, like you mentioned persistence is important. And you told me a story about once you have the option that you can quit, you probably will quit. So what kind of mind-set did you have going into business?
Jordan: After the SEAL Team Six shot Osama bin Laden, I read one of those books about SEAL Team Six, and they were telling some story about their hell week. And there is this bell that they have where anybody's allowed to ring the bell at any point. They could tap out, and they're out, and then they know that they can't be a SEAL. Apparently, an important part of this book, they said that they allow people who ring the bell to have a second shot, and say, "Oh, you can actually go back. It doesn't really count if you... you can go back into it." And in the book he said, you know, often, people go. And he said never has he seen somebody complete the whole week after ringing the bell once. Because once you conceived of the concept quitting, that's gonna pop into your head again. And things get really hard and really miserable. But if you've already thought that quitting is an option, you will eventually quit.
So it's kind of the same thing with us, like we really kind of thought quitting is not an option. And so that we're gonna push on through and make it. I'm gonna be successful no matter what. And again, a lot of that is just because we truly, fundamentally believe it's like obvious that there should be better carbonated mixers to mix with better spirits. You know, this isn't some new category of new juice or whatever that may or may not make sense. I don't know. Like this, just like it's so obvious that there should be better mixers mixed with better spirits. You put a gin and tonic together, it's like two-thirds tonic water. And people are spending $35 on a bottle of gin. You should have good tonic water. People putting Moscow Mule together, you know, it's two-thirds or three-quarters ginger beer. You're spending $30 on a bottle of vodka. They should have better ginger beer. So it makes sense there should be better mixers.
And I don't know. There's a lot of other ones out there. And, of course, our stuff tastes better than everybody else's. And I think we're pretty smart. And I think our stuff looks pretty good. Like we should win. So it's just one of those things I've never conceived of quitting. So we've definitely had tough days and tough weeks and tough months and tough halves and tough years, but we never thought about quitting. We just kind of believed too fiercely in what we're doing.
Javier: And when you say you had a tough time, what counts as a tough time? Does it have to do with sales? Does it have to do with not being able to produce, not being able to fulfill orders? What is tough, like one example?
Jordan: So sales hasn't ever been a problem. People want to buy our stuff. So there's been times where I didn't have money. The way I think about it is every step away from the consumer is incrementally harder for us. So from day one, people wanted to buy my better tonic water. When we also came out with other flavors, they wanted to buy that. Like immediately, people wanted to buy it. And the press wanted to write about it, and even a bunch of retailers wanted to sell it. But it was every step away from that consumer that got harder. So it took a little while to get the retailers to buy it. You know, the progressive ones like Whole Foods went first. But some of larger conventional ones took a little longer, you know, we're now at Target, Safeway, Kroger, literally the biggest retailers in America. So it will just take a little while there.
And then distributors are even harder. I think some of that is that I don't have experience in the industry. I don't have the relationships. You know, I don't know the guy who owns a distributor. So it just takes a little while for them to get on board. You know, we're not another vodka, or another craft beer, or even another coconut water. We were something that's a little bit different. I don't think it's totally different, you know. It's not some newfangled, you know, juice or probiotic or something. But it's just a little different. They've never been selling high-end carbonated mixers before. So it just took them a little while to grow in. And, look, it's going great right now. It just took a while. And when you are working really, really hard, not making much money, and you have kind of a pace which you want things to succeed, when things take a while, it can be frustrating.
Javier: And how are the discussions different when you're talking to the larger distributors and the larger retailers? You said it takes longer, but are they looking for something different than the pioneering companies?
Jordan: Yeah. They don't want just to hear a story about why this thing's better. They want to see a track record of success. And rightly so. They deserve that. They have a different customer base, so they just want to see a track record of success. And like I had to build it inch by inch, foot by foot, you know, mile by mile, and you gotta keep coming with both a story story, but also a quantitative story of success elsewhere. And that really helps.
Javier: And in order to provide this quantitative story of success, what kind of analytics or software or tools are you using to show your growth?
Jordan: So it's sell-through numbers. What people want to say, like if someone puts it on a shelf, will it sell? And so it's not radical software. It's you gotta get those numbers good to be good. And you get access to those numbers in a variety of different ways, but then you're not a retailer. Some retailers provide you with that data. Some retailers, you can pay for that data. Sometimes you can pay for syndicated data. So it really depends on where you're at, and we do all of those. We have a pretty strong story. Actually, I'm just gonna take that back. We have a very strong story to tell at this point, and it's important to make sure we spend the money on the data, and we need to make sure that story is told in an effective way.
Javier: Okay. And we have just about 10 more minutes, and there's a lot of stuff I would wanna talk about, but let's just try to go quickly through some final questions. How important is it to have a partner in the business with you?
Jordan: So I think very important. And I would say it for a reason that I guess, as someone who's married, makes a lot of sense, but before I was married may not have made a lot of sense. It's to go through the ups and downs with somebody. And when you get punched in the face, when something goes bad, it's like great to have somebody that's totally invested in the same way you are, feeling the same thing. And to commiserate together, to think things through together, is really valuable. But even more valuable than that, it's to share the success with somebody. Yeah. We've had a ton of successes, and if you're just by yourself, you just can kind of wash over and deal with the next issue on your to-do list. But when you have somebody who's a true partner that you can celebrate the successes with, it's really an incredible feeling, and it keeps you going even in the tougher times.
Javier: And what's to stop another competitor to just come in and do what you're doing?
Jordan: So, I guess, any time, anybody else can start up a company. That's not the hard part. I think there is some credibility that we've established. We're now building out a distribution network on a liquor channel side, which I think is not gonna make us impregnable... is going to certainly give us an advantage. But I think it takes a long time to build a beverage company. You gotta expose your product to lots and lots of people. You gotta gain credibility first with kind of thought leaders, and kind of the people taste make, and then kind of build it out, and that just takes a while. You know, Schweppes and Canada Dry, the big carbonated mixer companies, could they come up with something? Sure. It will be crappy. It will be called Schweppes Premium or Canada Dry Premium. We've created a real sense of authenticity and credibility among literally the most discerning drinkers, you know, and bars and restaurants in the country. That takes a while. You could try it. But I also think with our product line, there's less of a need today than there was 10 years ago. And I guess, even Fever-Tree's, that there are some good options for better carbonated mixers. But 10 years ago, there certainly weren't.
Javier: Yep. And what is your biggest challenge today in your company?
Jordan: I thought you were gonna ask me personally.
Javier: Oh, like...
Jordan: That's my two-year-old waking up at 5 in the morning. If I can just get him up to 6 in the morning, the whole world will be great. That's the biggest challenge. The biggest challenge in my company is how do you scale up? We've only recently closed an investment round, and we now can make some strategic investments. And so how do we do that in a really effective way? And how do we do that... you know, we're not an internet company where all of a sudden it puts 40 people in New York, a hundred people in one building. We have people all around the country. And how do you get them all working together, building this company in a way we know it can be built when they're not here? That's the really hard part.
And yeah, you have fun doing it. You know, when I think about where the persistence comes from, going back to the very first question, and I tie that to the question about a partner, I think the persistence needs to come from having fun. It just has to be enjoyable. Some days are pretty hard. And if you're not having a good time, it makes it really hard to stay focused and stay committed. But if you're having fun, it makes it a lot easier. Working and having fun is building this company with people that you like, that you respect, and that you really wanna work with. So from my perspective, it's how do you build a team of really great people all around the country who are all kind of pushing in the same direction, and how do you do it in a way that is not gonna be, you know, fun fun, but how do you do it in a way that is exciting and challenging, and, yes, fun.
Javier: How big is the team today?
Jordan: So right now, we are 16. We were nine at the beginning of the year. We'll be 22, 23 by the end of the year.
Javier: And what's the challenge? Is the challenge mostly geographic? Or what are the challenges of having the team be on the same mission?
Jordan: So first challenge is we're all human beings, right? So people are different. You know, people aren't robots. So we're human beings, and you just gotta get people kind of aligned on priorities and objectives and kind of the way in which everybody works. So that's one of them. And then it becomes harder when you're not all together. Ben and I have known each other for almost... Jesus, more than 30 years. We met when we were nine, and we have now been working together for almost 10 years. So he and I, you know, we can finish each other's sentences. We know what's going on in the other person's head at all times. You know, you're not gonna create that type of a relationship with every other person on your team. But how do you create something approaching that where you're kind of aligned and you know what's going on and you really feel like you're working together? That's hard to find the right type of people. And then even when you have the right type of people, it takes a lot of work to keep those relationships strong. And we've been kind of... the directions we want them to move.
Javier: Yeah. So you mentioned you're not an internet company. And just that had me thinking, going back when you first were making your beverages, you just threw up a website, and you didn't think much thought into it. How important is an online presence to your company?
Jordan: So it's a good question. It's something I'm actually thinking about a bunch since we have not yet refreshed our website or our social media presence since our fundraising round. We actually have never had a marketing person in our company for 10 years until last month. I've always thought that sales is where we needed to focus the energy on. You gotta make the stuff, and then you gotta sell the stuff. And our stuff tastes so good that the way we're gonna get consumers to buy it is to have them try it. So we spent I guess marketing dollars on in-store demos, but we didn't have a marketing person. We've had a demo person, and it wasn't even her full-time job. She did it as one-eighth of the things that she did, and then get placed in a lot of bars and restaurants where people could have it, you know, with a wonderful dinner, like, you know, a wonderful gin and tonic, a wonderful Moscow Mule. And that was her sales function, to get it into those bars and restaurants. And frankly, a lot of those bars and restaurants came to us anyway. So we have never had a marketing person.
We now have a marketing person. We should be doing more with our marketing. We have liquor brands contacting us literally every day wanting to do events with us. They know that our products make their spirits taste better, and they want to have their spirits enjoyed in the best possible light. And they put on all these events. So we should be doing a lot of those. We recently hired a marketing person. So we're trying to figure out where we're doing best and we're thinking about online. My thought right now is that our website needs to be wonderful, needs to be as terrific as the liquid in your bottle and your bottle itself.
The Instagram and the Facebook, I don't know. I still haven't decided. We're kind of going through that right now. I definitely see other people doing it. But again, we're pretty confident that our stuff tastes better than any other carbonated mixer on the world. And my gut is that we should be spending as much energy getting as many people to try our products as possible and not look at it on a phone or look at it on a computer. And sometimes you want people to get affirmed. Once they try it, they wanna research it. "Oh, yeah. That's why it's so good." But the question is how much the social media adds on top of that trial efforts. And that's something that we haven't quite figured it out, but we're working on it. I guess we'll have an answer in the next couple of months.
Javier: Okay. And how about doing online sales? How important has that been for discovering new areas to sell the product or to get retailers to sell it?
Jordan: So, we do a pretty healthy business on Amazon. And at the very beginning, we were servicing bars and restaurants and even some individual consumers all around the country. We set up a pick and pack third-party logistic company relatively early on in our company, because we wanted to make sure somebody who is kind of a thought leader or someone who was the person in their crowd that found the newest best stuff could access our stuff. So I think that is important. At the end of the day, we are selling liquid in glass, which is heavy, and relatively fragile, and expensive to ship. So it's just like never gonna be particularly cost-effective to service people by the case via the mail. It's just much less cost-effective than shipping a whole truck to a distribution center, which then goes out... probably a full truck to an individual store. It's probably gonna be much more cost-effective in the long run. But I think the online sales are a great way to kind of start things off.
Javier: And okay. So the mission of the Specialty Soda's podcast is to share stories of other entrepreneurs and leaders in the beverage industry, because there's great value in learning from those who came before you. So Jordan, is there anybody who you admire in the industry and would like to see as a future guest on the show?
Jordan: So again, Barry Nalebuff I think is wonderful. Other person that I work with pretty closely right now is Tom First, who's one of the founders at Nantucket Nectars. He was the managing partner of First Beverage, and we did a deal with them. And he's on our board, and I think he's wonderful, and wonderful in the way an entrepreneur is wonderful. He's just very flexible in his thinking with some very, very strong opinions. But if you present him with an argument or evidence to the contrary, he will switch immediately and then believe in that even more strongly. So he's been really, really helpful as well.
Javier: And if anyone wants to reach out to you, how can they do that?
Jordan: They can get me at firstname.lastname@example.org... will get to me.
Javier: Okay. And you said that you've been pioneering the craft soda movement. So is there one last thing you want people to remember about Q Drinks?
Jordan: We make the best carbonated mixers in the world. They will truly make your cocktail spectacular.
Javier: Okay. All right. So once again, this is Jordan Silbert, the founder and CEO of Q Drinks, based out of New York. Since 2006, they have been making the world's best sodas: clean, crisp, completely ungeneric, and they enhance the finest spirits. And they can stand on their own. They use the best ingredients. Each bottle of Q has balance, depth, complexity, and they're good for anything you want to mix them with. So I encourage you guys to try it out.
If you guys enjoyed this conversation, please feel free to like and share this episode. You can also subscribe to Specialty Soda's podcast in iTunes and Google Play, or you can join our email list. So stay connected, and don't forget to leave a review or join the discussion in the comment box. We look forward to continuing the conversation with you. And thank you, Jordan, for being here. And thank you, everyone, for being a part of the Specialty Soda's podcast.
Jordan: Okay. Thanks, Javier.
Javier: Okay. See you guys next time.