Why NA Drinks Are Winning the Culture War w/ Sean Goldsmith
Today's conversation is a fun one. Because it's not just about drinking less, it's about what's happening around us. Gallup recently reported record low drinking rates in The US. And you can feel this cultural shift everywhere. To unpack what's going on, I sat down with Sean Goldsmith, co founder of The Zero Proof, one of the biggest players in the non alcoholic beverage space.
Speaker 1:We get into how this movement grew, from a niche to a cultural wave, why retailers and distributors are jumping in, and why NA drinks are becoming their own category, not just a replacement. Let's get into it. Okay, Sean. Thanks for coming on today.
Speaker 2:Yeah. Thank you very much. Happy to be here.
Speaker 1:Yeah. So I'd love to get started with your personal story And what was going on in your life when you started to question and rethink your drinking?
Speaker 2:Yeah. So for me, it was a a very sudden and and frankly unexpected thing. So I was living in Manhattan. I had just left my career in finance and was just kind of enjoying some time to myself and came back from a long weekend in Miami where I was hanging out with some friends. I used to live there and just woke up after this long weekend and was exhausted and decided not to drink that evening.
Speaker 2:An evening turned into two. And long story short, it's been, jeez, I think, seven seven years now. So, you know, early on, I very quickly just saw I felt amazing. I was sleeping great. You know, I'm sure you've heard all these a number of times.
Speaker 2:I was dealing with stress better. And, so, yeah, I just I leaned in, and it it really changed the course of my life in, in a lot of ways.
Speaker 1:I love that story. I mean, I can certainly relate. You know what I before we get into some of your unique insights as far as, like, what you're doing right now, I'd still love to dig in a little bit more on your your personal history, and that is, you know, you started sleeping better, you felt great. You know, it was like a real transition for you, but a lot of times what happens is over time you start to feel great and that maybe the painful part that made you change has faded away. How did you stay consistent?
Speaker 1:You know, how did you not kinda, like, backpedal?
Speaker 2:Yeah. You know, my my experience is is probably different than a lot of others, but I this happened during the holidays in New York City, which is booze and parties galore. And so it was really trial by fire where I had decided, you know, I'm gonna I'm gonna lean into this not drinking thing, and I still went to all of the social occasions and dealt with all of the peer pressure from my friends, which is kinda silly that as a guy in your thirties, forties, your friends are still still peer pressuring you to drink booze. And, you know, I I remember this one specific party. It was a it was a dinner for an art gallery that are usually kind of awkward affairs.
Speaker 2:And I was going into this. It's like, oh, man. I'm gonna be sober for this. And but I I had such an incredible time and, like, left just feeling so energized because I was really in these conversations and present. And and, you know, doing a few of those parties and kinda realizing I can I can get through the gauntlet was like, oh, this is this is not that difficult?
Speaker 2:And I can still have a great, if not better time.
Speaker 1:Yeah. I mean, a lot of times we think it's we build it up in our heads, and then we avoid it or it gets bigger than it has to be. Then you get there and you realize once you settle in and you get past that initial, okay, I don't have this. I'm going to concentrate on that. You've suddenly realized by and large that it's really, you know, if you're there for not just the alcohol, you're there for the other things, then the alcohol just doesn't play quite a bigger role when it's removed.
Speaker 2:Yeah. And, you know, I just I just made that decision where early on, you know, I, again, was feeling amazing, knew that I could still go out and be social, and just made the decision that I didn't want to drink anymore. And so for me, it was just sticking to that.
Speaker 1:When you were looking back, you know, obviously, you're in this this world of nonalcoholic beverages now deep. Do you ever look back at when you were going to some of those events and things like that that maybe your own products that you're working with now might have made it a little bit easier?
Speaker 2:Of course. I mean, that's that's really how this business got started. My my best friend from high school, Trevor Wolf, we we started this business together, and he to to backpedal a bit, he did Whole30 with his right wife a month or two after I quit drinking, and and same thing for him. He he never drank again. And so we were just talking as friends about what we wanted to drink and what we were going to do, and we were looking around at the landscape because like everybody, we wanted options.
Speaker 2:And, you know, there were three things. You know, besides the the the non ALK one point o, you know, the old established brands. But athletic was out. I think ritual was out and seed lip. And and those were really the the beginning of this of this wave.
Speaker 2:And so we we saw those, and we thought they were very cool, but you couldn't find them anywhere. And and so that was one of the one of the reasons we we started this business.
Speaker 1:Yeah. So, you know, it's so funny because I, you know, I think about when I was making adjustments, it really was just like o'Douls and the old stereotype that you would think of like your uncle that had a drinking problem. That's what he drinks kind of things, you know, and that would really was it. And, you know, I spent some time in Europe and Spain specifically, which I came to realize that they had their own campaigns for nonalcoholic beers and beverages. But I still even, like, early days when I'd go there and look in the aisle, I'd always just be like, you know, that maybe, but but why also, you know, at the same time?
Speaker 1:But now I understand why. Because and it's not just a beverage to replace it. It's something that you enjoy that stands on its own. So you started this company. When did you start feeling like, you know, you had your personal experience and that was your personal decision, but when did it start to feel like something bigger was actually happening culturally?
Speaker 2:Yeah. So this all started very organically where, you know, I I had quit my job and really the the only thing filling my day was surfing in in New York. And so in my in my free time from that very busy schedule would would write these blog posts. And, really, it was it was from a place of personal interest where wanted to learn more about this category that I thought was exciting, wanted to meet some of the players that were involved that were pushing this along. And, you know, it was it was just straight away.
Speaker 2:People were people were reading these articles. People were interacting. People wanted the content. And you talk about being in Europe, but brands from all over the world, you know, this this category is much more developed in Europe. We're we're sending us their products because they wanted to be featured on the blog.
Speaker 2:And so it was just kind of a hockey stick of of readership and and just participation from the from the community. And then we we popped up, and I'll have to send it to you offline, but our our first website was was not as good as our current website. And we popped up a very simple ecom shop, and we I still remember the very first sale we made, but it was it was ritual tequila. That was one of the only brands that we could buy and resell. And, you know, from there, just more people started buying and it was it was a self funded business for the first couple of years.
Speaker 2:And I guess to answer your question directly, you know, it it got to the point where I was like, okay. You know, I'm I'm tapped out. I had put a decent amount of my own money into it, and an inventory business just requires more inventory as it grows. And so we we raised our first round of capital in in 2020. And, you know, obviously, taking on institutional capital and having other people's other people's money is a is a very big responsibility.
Speaker 2:And so I think at at that moment, it was it was officially a business. It it jumped from a a money making hobby that we were really enjoying to, you know, our our life.
Speaker 1:Yeah. Well, I can certainly respect the the V one of your website or whatever it looked like, you know, putting out that MVP or, you know, minimal viable product and and where it goes to is always like, just you gotta get going. You gotta get started. So I'd love to know though, you know, you went and you raised and it still was, you know, not really a shift that had fully happened at 2020. So what was that elevator pitch like?
Speaker 1:What was that that selling the dream to be able to raise venture capital around a movement that is more now coming into, like, the forefront, you know, on social media. The past year, I'd say it's, like, in full swing. But but before that, it was probably a little bit of I wouldn't say niche, but it was just, like, very early on.
Speaker 2:It was very early on. It helped that we had revenue. Like, we we had traction and we had growth, which is always a huge benefit when raising funds. But, you know, for us, it was this this whole journey has been very serendipitous, and and our first our first financing happened because I was walking my dog in my neighborhood. I I chatted with a guy who I had seen in the neighborhood.
Speaker 2:We were new to Atlanta at the time, and I just said hello. And he said, oh, you know, I want to introduce you to a friend who I think would be interesting for you. Had coffee with him. One more step. He said, hey.
Speaker 2:I'm an investor in this fund that I'd like to introduce you to. And I got on the call with this fund, and for me, it was just to get to know you call. And for them, you know, they had already built conviction conviction on the category because it was very new, but it was still popular and you could you would read about the trend. And so we came into this call again where I was just planning to say hello. Nice to know you.
Speaker 2:And they were clearly asking targeted questions that, they had something larger in mind. And so we continued down that path. And so for for us, it was it was one shot, one kill, which, not not everybody is that lucky. It rarely happens that way. But, yeah, I mean, they they were interested in the category.
Speaker 2:They had thought about it, and they had done their work, And they saw that we were emerging as a company in a in a leadership position, and so they they took a bet on us, and it's been they've been great partners ever since.
Speaker 1:Well, so basically, you're telling me that you never look at a dog leash or ignore your dog when it's parking to go out. That's what I would take from that.
Speaker 2:Indeed.
Speaker 1:I mean, that's what entrepreneurship is about, like perseverance, something that you deeply care about and believe in that makes a meaningful impact for other people, and then a lot of luck sometimes. You know? You have to have all those combos working together, and it sounds like, you know, you you kept putting yourself out there. You kept pushing forward. You met the just that one random right person followed up on that next lead, the next lead, and then it leads to big things.
Speaker 2:Yeah. And, you know, I was I was actually thinking about this this morning on unrelated to our conversation, just, how for entrepreneurs, you know, right now it's a it's a difficult environment to raise capital and raising capital is a is a harrowing process. It's it's a lot of no's. Yeah. And I was just frankly thinking how how grateful I was to this to this fund, for for taking an early bet on us and you know, giving us that, the the momentum that we needed at at the right time which has helped us to get where we are now.
Speaker 1:Yeah. You you make me jealous because you know, I've raised venture capital. I've raised from angel investors as well, and it's it's a lot of no's. And if you're the CEO and you're doing a fundraise, that's your job for a while. You're literally not doing much more than that because it really does take that much time and effort.
Speaker 1:At least that was my experience, you know. And then you read about somebody else that went out and raised in like a month, you know, $11.20, $50,000,000 or something. I'm like, how'd they do that? Yeah.
Speaker 2:Or we're out here in San Francisco, you know, we're not too far away from OpenAI, you know, just just taking down millions out of clip.
Speaker 1:Yeah. Yeah. Exactly. Well, so I wanna get back into a little bit more of your insights here from within the business. And so one thing is that Gallup just reported a record low alcohol consumption in The US.
Speaker 1:So it feels like, and as I mentioned, a little bit of a cultural inflection point. How are you seeing this play out, I guess, in real time?
Speaker 2:It growth. You know, it is, like you said, the the latest Gallup stats came out and drinking is at its lowest point since they've started this poll in like 1938. I believe it's 54% of Americans are drinking now and that's down about 10 points from the average. So that's, I mean, that's a huge number of people that have stopped drinking completely. But the other the other trend that's moving along with that is even the folks that are drinking alcohol are drinking less.
Speaker 2:You know, wellness is wellness is the reason. Everybody wants to be healthier and perform at a higher level and you know, I think folks are realizing that alcohol really isn't helping them do that. So, you know, it's been really from what we're seeing on the website, you know, as as the largest online retailer for the category is we're getting more and more customers every day. And I think what's wild is, I mean, still today, 60 to 70% of the people buying every day are new to us as customers, which means they are likely new to the category. So, you know, we're and then, we're also seeing this in in the larger retail world where, you know, I know from discussions with major retailers that they're seeing 90 to a 100% growth year over year in the non out category.
Speaker 2:And behind the scenes, like I think starting in January, you're gonna see some really big things where the major retailers, they took a while to understand this category. You know, where's it gonna go in the store? Who's gonna be the buyer? And they're seeing the growth and they're figuring that out. And when they buy in, it's gonna be a huge explosion of growth for the category.
Speaker 2:And kind of the the third thing is on the on the distribution side with alcohol distributors. When because we we own brands and import brands that we distribute around the country. And in the early days, we would take any distributor that would wanna take us to the dance. Like, we just wanted a route to market. And that has now flipped where we're in a very fortunate position to have some of the best distributors in the country asking us if we'd like to work together.
Speaker 2:You know, it it's And so it's taken some time for these powerhouses. I mean, the really the the people that control distribution, to buy in, but but they are bought in. So kind of behind the scenes, there's a lot happening that I think while we've seen incredible growth to date, like it's just the beginning where as these big stakeholders buy in, it's just gonna unlock really the next phase of growth. And also I was having, I was having a discussion with an executive at one of the biggest beer companies in in the world. And, you know, he was just saying how they're thinking about the category specifically with beer.
Speaker 2:But in some of the markets in Europe, non out beer is up to 15% of the alcoholic market. And here we're at a couple percent. And there's just no reason to think that The US won't track the way the rest of the world is tracking in terms of penetration of these alternative drinks.
Speaker 1:Yeah, absolutely. I mean, it's funny and we're gonna get into this a little bit around like how people are drinking non alcoholic drinks, but I think I can see like in Europe, for example, where having a drink at lunch has been sort of a ritual and culturally speaking with every lunch and how that doesn't really necessarily function where it would be adopted, you know? But I think also like growth will come in not just people that drink nonalcoholic, but also like people that and you can comment on this later, but, you know, how people drink, non alcoholic, because like maybe they don't drink here traditionally at lunch, but since it's non alcoholic, they might start having a beer with lunch or something like that. So expansion in just use cases also. But before we do, I want to get into, you know, the perspective from the retail and also restaurants and which was interesting that you said around distribution because my grandfather actually owned an Anheuser Busch distribute, was a distributor in St.
Speaker 1:Louis, and I know how large that is a big massive part of the chain that a lot of people don't realize. So can you comment, like, how is it received from, like, let's say restaurants and retail and also distributor? Has that shifted? Are they excited? Is it a necessary thing that they just have to do?
Speaker 1:Like, how is that looked at?
Speaker 2:I think generally they they have shifted and are continuing to to shift greater. And it's it's organization by organization. You know, a lot of these guys have spent thirty, forty years selling booze and some people just don't get it. And, you know, we're not gonna get buy in from them and that's fine. But if you're working in the alcohol industry, you're, you're seeing the dip.
Speaker 2:You know, if you're working in the restaurant industry, you're seeing those numbers because people are drinking less alcohol. It's just a fact. And so they're looking at and thinking of ways find growth and you know, clearly they're settling in on our category as one of those. So, yeah, I think you've got some folks that just don't get it because love alcohol and that's the business that they've worked in for a long time. But we're seeing more and more folks certainly at the executive level that are seeing the light and are really excited to introduce these products to a larger audience.
Speaker 2:And I mean, I can say just moving around San Francisco, my wife and I eat out all the time. I mean, isn't a menu in this city that doesn't have a pretty significant non alk list, which is awesome.
Speaker 1:Yeah. That is awesome. When I visited there, I I was pleasantly surprised. I'm starting to see it more. And I mean, I'm gonna say this, like, with hyperbole, but of course, there'd be pushback about selling alcohol because, like, the perfect product are drugs, and alcohol, you know, is a drug that people like.
Speaker 1:So, of course, like, there's gonna be some pushback. It's like, there is high demand now that we're getting more educated. Of course, that's starting to shift. Okay. Let's pause here for today.
Speaker 1:We'll pick it up tomorrow with more behind the scenes with Sean and what's next for this category.
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