I had a great idea for a vodka in business school. Starbucks had just acquired Ethos Water and their model of branding and differentiating a commodity with helping others seemed perfect to apply to vodka. The word "vodka" comes from the word water, after all.
I would create a vodka where a share of the profits would help others. Tom's and Warby Parker didn't exist yet, so my brand--Social Spirits was the planned name--would have been at the forefront.
I did my research and found it wasn't hard to start a vodka. I assembled a team and got started.
Then we learned the hurdles of starting a premium vodka and stopped. In fact, I came to believe you'd have to be crazy to do it.
Yet people do. Most fail but some succeed.
What it takes to succeed as a premium vodka tells you what it takes to succeed in many premium markets, partly because the product--the liquid itself--is so difficult to differentiate.
The brand around it is everything.
So when I heard that Absolut decided to catch up to the current brand leaders who had passed them by decades ago, I was curious if they could do it. A startup could burn through millions without getting anywhere. With their assets, might they just have more to lose?
I met Jonas Tahlin, CEO of Absolut's new Elyx brand, and talked about his leading an initiative the market has anticipated for a generation. I was pleasantly surprised to find him and his approach authentic and the initiative steeped in culture and history in what many consider undifferentiated products.
In fact, I learned that today's connected world nearly requires you to become part of your brand. Grey Goose, Belvedere, and so on don't connect to an actual person. Jonas sounded deeply connected to his brand, a prospect that could work, but creates tremendous personal risk, a risk I personally wasn't willing to take.
If, according to Peter Drucker, "there are only two things in a business that make money--innovation and marketing," we can learn from Jonas. We have to if we want our businesses to thrive. I found his approach comprehensive, anxious, lonely, necessary, and responsible.
Let's hear from him.
Joshua Spodek: Let me see if I understand the context. You're leading a major initiative amid long-term inertia in your company, in the market, and in your brand. On top of that, your company is acting slowly and late. Is that about right? If so, is it as challenging as it sounds?
Jonas Tahlin: Inertia is a reality that I am dealing with. And yes, it does make life incredibly challenging. Absolut Elyx is a luxury vodka (we would argue it's the first "real" luxury vodka in the market) and high end vodka is not as hot now as it was 10 years ago.
There's an infatuation with brown spirits and tequila right now. So you can certainly argue we are late in the game with Elyx, which does create inertia. It is also true that Absolut Vodka--the original--is a proud and storied mainstream brand rather than a high end one and it is a well-known fact that innovating upwards, or premiumizing, is more difficult than doing it the other way around, as in coming down in price from a higher place.
So yes, creating a luxury vodka franchise from Absolut in that context is incredibly challenging. Good news is it seems to be working. We are the fastest growing high-end vodka in America and people seem to love what we do.
It just means we have to work that much harder and be really differentiated in all we do.
JS: Can you put up any barriers to entry?
JT: Not in vodka. Anyone can go to a distillery and ask them to produce a vodka for you.
Use an off-the-shelf bottle and design a label and you are ready to go. In America there is something called the 3-tier system. It's a law that dates back to when prohibition ended and it means that a liquor supplier cannot sell directly to retail or bars--an in-between wholesaler needs to do that for you.
So once you have your bottle, your label, and your liquid you can go to any one of these wholesalers and ask them to start selling it. Hundreds of new vodkas launch in America every year.
The business case looks really good because it's a high margin business with low apparent barriers to entry. However, the real barrier is in getting someone to actually start drinking your vodka and that requires huge skill and resource. 99% of new vodkas fail so there is an inherent barrier to entry in that it takes a vast amount of time, skill and resource to break through the clutter.
JS: Being well funded sounds like it gives you entry to the market, but money alone won't get you a foothold. How are you creating an opening?
JT: You have to start with an excellent product. Some will argue that all vodkas taste the same, but it's not true--to win you have to create a product which is exceptional and where people perceive a difference as we have with Elyx.
But it's not enough. You have to tap into the cultural fabric and make your vodka the symbol of its times, like Absolut Vodka became a symbol of pop-culture in 1980's New York City or Grey Goose became a cultural symbol of its time with night club bottle service. And what both those brands had in common was a passionate entrepreneur or agitator who were the face of those brands.
Michel Roux for Absolut and Sydney Frank for Grey Goose. And that's what I am challenging myself to be with Elyx--I can only hope to be as successful as those two guys.
JS: Your strategy sounds personal. How personal is this launch and brand to you?
JT: It's incredibly personal. I have taken it upon myself to see Elyx through to become the next phenomenon in vodka. It's my baby and I take it extremely personally. I personally live in the brand home for Elyx in California (Elyx House LA) and there is not a second that goes by without me thinking of our next move or what we could do better.
It's fun and it's exhausting in equal measure. But I will not quit until we have created the next cultural phenomenon.
JS: It sounds like that personal connection translates into authenticity. Is that your goal? If so, how do you actually implement it?
JT: You can't do this job sitting in an office directing a team of people and advertising agencies. I make it a point to personally know the owners and main operators of the best venues in America. It means going out late and it means being visible.
I think the authenticity comes from knowing me as a person and having a real relationship. It also comes from creating a vodka of authenticity. There is so much BS in vodka with unsubstantiated claim or outright lies. One such brand is incredibly successful right now...but I think over the course of time, quality and honesty will win.
Out of the 10 largest liquor brands in the world only two are younger than WW1, so it's really about the long game.
JS: To be so connected with such a challenging launch with no guarantee of success... is that scary?
JT: Oh yes, there have been so many times where I asked myself what the hell I got myself into. I had asked for a high end Absolut since I joined the Company in 2006 and when it finally came when I was CMO I asked for this CEO job to be created for me.
To spin off Elyx into a separate company and to headquarter it in America. It is unlike anything I have ever experienced in my professional career--the pressure is on in a big big way.
There is no one else to blame if it doesn't work. And if it does work the credit will go to my team. And seeing how difficult it is to break through there have been plenty of sleepless nights.
They didn't teach me how to be an entrepreneur in business school so I have had to learn the hard way. When things go bad it hurts because I take it so personally. But when things go well, and I have to say they are, it is so tremendously satisfying I'm smiling from head to toe.
But there is a lot of work left for us and even though Elyx deserves to become a mega success, we have a long way to go.
JS: How do you create aspiration and authenticity at the same time with a generation that apparently values transparency?
JT: It's very difficult, but it is doable. In our case we build authenticity through integrity, and we create the product with a huge amount of integrity.
Attention to detail and an obsession with quality that people wouldn't believe. And we act with integrity by giving away a week's worth of safe water to people in need with every bottle of Elyx sold. It's not something we shout about it's just the right thing to do.
We have provided over 20,000 people in the developing world with access to safe water for generations to come through our sales of Elyx and our bespoke copper drinking vessels on www.elyxboutique.com. After all we are a luxury vodka made with 57.7% water and access to safe water is a luxury for billions of people around the world. So we are made with integrity and we act with integrity, but that's not what we talk about, it's what people can discover if they dig deeper.
We create aspiration by having the most amazing parties that I host at the Elyx houses (our permanent and pop-up brand homes) and by having the most beautiful copper barware and drinking vessels in the industry in the most aspiration restaurants, bars and nightclubs in America!
JS: Marketing today has to be very two-directional. How does an interested customer engage with your brand?
JT: The best way to find us is on Instagram @absolutelyx or on places like www.elyxboutique.com. But so far we haven't been great at dialogue--it's been more monologue to be honest--so we need to work on that. But then again there is always the next challenge to get onto and this might be it.