Death of a Vodka

Buffalo Trace Newsletter had an article last week with the headline, “Shakers Vodka Brand and Equipment to be Auctioned Online Through June 26.”

Infinite Spirits Inc., the makers of Shakers Vodka, filed for bankruptcy in early 2012 and now the assets are being liquidated. If you go to the auction website you learn that you can bid on the brand, the equipment and a host of other items. The bankruptcy filing shows the company has under $200,000 in assets and liabilities of over $2.3 million.

To me this represents a case study of a start up gone wrong. Got me wondering, what happened and why did it fail?

The story starts in 2003 when a group of entrepreneurs who had created Pete’s Wicked Ale decided to enter the spirits industry. They had sold Pete’s for $69 million to the Gambrinus Company in 1998 and I suppose wanted to parley the money into “the first high-end American vodka.” Their marketing concept was to replicate the elegant 1920s with frosted bottles shaped like Martini shakers.

Shakers Vodka

From what I’ve read, in less than three months from intro, Shakers was number one in their home production state of Minnesota and quickly expanded to 19 other states. They were loved by vodka mavens, received a perfect 100 score from Wine Enthusiast and were Best of Show in the San Francisco Spirit Competition. At one point they marketed five products – wheat and rye based vodkas plus seasonal versions known as rose, violet and summer. The bankruptcy records indicate that they grew quickly from the launch and had annual sales over $1 million.

What went wrong? Successful alcohol industry entrepreneurs with a proven track record, a decent (?) concept, excellent production capabilities (Glacial Grain Spirits in MN), interesting packaging – shouldn’t that add up to a win?

In writing this obituary, I didn’t speak to any of the key players but gathered information from various online resources, so, if any of my readers have first hand knowledge, please let me know. From what I was able to piece together, it appears to me that there were a range of problems that worked together to account for this failure.

A shelf price of over $30 for non-imported vodka? Sure the quality was undoubtedly there and the package was nice, but a higher shelf price than Absolut, Skyy, parity with Ketel One and close to Grey Goose? Sorry, but that shows a lack of understanding of the vodka market, at best, and a touch of arrogance, at worst.

Compound that with distribution issues and some out of stock problems brought on by five SKUs. That tells me that the formula for Pete’s Ale was force fed to the spirits trade. Oh, and they changed the label in 2006.

I think their marketing was a mixed bag. On the one hand the bankruptcy sale press release claims over a billion impressions via social media, local events and radio. (I’m having a hard time believing that.) However, the bankruptcy documents show that they owe more than $286,000 to radio stations across the country and $212,000 to five pro baseball teams for radio sponsorships. Really? Radio ads and sponsorships to the tune of $500,000? That kind of money could have been put to much better use in building the brand. Again, sounds to me like the owners were beer marketing-bound and didn’t understand the spirits business.

Spirits brands fail for many reasons but, in this case, I think the culprit was a formulaic approach brought on by overconfidence and trying to do too much too soon.

So if you’d like to try your hand at marketing Shakers, you can buy the trademark, the bottling equipment, the recipes and the process, the penguins and even the name.

By the way – as of last year, the Gambrinus Company discontinued Pete’s Wicked Ale. Hmmm.

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