The Month End Podcast

Episode 25: Adam Kost • Country Luau

September 30, 2022 Adam Kost Season 1 Episode 25
The Month End Podcast
Episode 25: Adam Kost • Country Luau
Show Notes Transcript Chapter Markers

The Month End provides emerging inventory-based brands real life knowledge in the accounting, finance, and operational world. Our guests are not only similar brand founders and owners, but key stakeholders and contributors to the industry. Each episode provides a glimpse into the vast experience and insight from its guest’s unique background in a casual, conversational tone.


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In episode twenty five, Accountfully's CEO and Partner, Brad Ebenhoeh, sits down with Adam Kost of Country Luau to talk about his line of hard seltzers inspired by the laid back vibes of Texas Gulfcoast beach parties.  Coming from a background in the big beverage world of brands like Heineken, Waterloo, and working on campaigns like The Most Interesting Man in the World, Adam wanted to create a hard beverage company that gave back and paid homage to the music scene of his hometown in Austin, TX.  Country Luau embodies both with its foundation, Mixed For Music, and providing a beverage that fits into any beach or backyard get together.


SHOW NOTES + VIDEO RECORDING:  http://www.accountfully.com/podcast​​s


The Country Luau Website:  www.countryluau.com


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Brad Ebenhoeh:

Welcome to The Month End CPG community chat, The Month End will provide emerging CPG brands real life knowledge into the accounting, finance and operational worlds. Our guests will be key stakeholders from those same brands as well as other key contributors in the industry. In episode 25 of The Month End podcast today we have Adam Kost from Country Luau, how're you doing today?

Adam Kost:

I'm doing great, Brad. How are you?

Brad Ebenhoeh:

I'm doing great, doing great. Outside of some technical issues at times. We're rockin and rollin here. So excited to chat about you know your background as well as country Luau, which is a super cool up and coming ready to drink product. So let's get started with your background and then we'll get into Country Luau, and then we'll get into all the other topics we're going to discuss.

Adam Kost:

Sounds good.

Brad Ebenhoeh:

So give us a little background about yourself.

Adam Kost:

Yeah, so I got about 20 years in the beverage industry started out on the retail side, running nightclubs in Las Vegas and some bars in San Diego eventually moved over to sales roles that Heineken as well as brand and trade marketing roles. Working on fun campaigns like The Most Interesting Man in the World and relaunching brands like Strongbow Cider. I've also had the opportunity to take on some really cool roles with companies like Pernod Ricard working on spirit brands like Jameson and Malibu and the Glenlivet and eventually matriculated over to a B InBev, working in their ZX ventures group on things like e-commerce, and then kind of downsized to some startups working with milestone brands on a tequila brand called Dolce Vita, tequila, and then eventually shifted over to head marketing at Waterloo. We eventually sold that business and which was a really exciting experience and, you know, had the opportunity to jump into something on my own.

Brad Ebenhoeh:

Awesome. So a lot of a lot of extensive experience definitely in sales and marketing space. So yeah, so let's get into Country Luau. So what is Country Luau? What is the brand? What are you selling? And then we'll get into more details after that.

Unknown:

Yeah, so Country Luau was just a really awesome take on kind of this Gulf Western genre that I've been really passionate about, since I was a young guy growing up in Texas and kind of hitting the Galveston beaches and, you know, kind of traveling around the Gulf Coast on family adventures. I wanted to create something that was spirits-based, behaved a little bit like beer, given my background, and then obviously knew how to develop some really good flavors. From my time at Waterloo, I created this, you know, unique brand in a crowded space that really stood out and addressed a market that was really underserved. We wanted it to be really fun, laid back, unpretentious. And for me to do my own company, it really needed to have a purpose as well. When you look at things that I'm passionate about, and what our consumers are passionate about building out our Mixed for Music platform, where we give 2% of revenue back to musicians and music organizations was a really big pillar of our company and something that was really missing in the alcohol industry but found, you know, really common in you know, adjacent categories like sparkling water or just wellness brands in general.

Brad Ebenhoeh:

Awesome. Definitely. I'm with that. What flavors are you selling?

Adam Kost:

So we've got four flavors, with three different types of spirits. We have a Yuzu Ranch Water with tequila, a Strawberry Daq Shack with rum, and then our Mango Mosa and Pineapple Jalapen-Y'all is made with vodka.

Brad Ebenhoeh:

That's awesome. And currently, where are you selling?

Adam Kost:

So we're currently being sold in four states. We're in Texas, Arkansas, Tennessee and South Carolina.

Brad Ebenhoeh:

Right where the country music hits. Right. Well, awesome. And you've been around or you've been selling for what, like 6-7-8 months by now. Right?

Adam Kost:

We launched the brand, right at the end of March, if not early April, and seen some really incredible traction with the consumer. We're still really in that market validation phase. But I think we've come out with some really awesome insights and a game plan that allows us to create some predictable results around the country.

Brad Ebenhoeh:

Awesome and then outside of that, like how are you being just from kind of this this Mixed for Music program? I'd love to get into that a little bit more as well as kind of a reverse influencer like how are you kind of doing this kind of unique cool marketing play to help support you know, your product growth but also like, you know, musicians, as you've already kind of discussed

Adam Kost:

Yeah, we have two ways we attack it. One is through a grant program, you know, which musicians can find on our website, where they apply essentially, for a grant. We review their application with a lot of our partners. And, you know, we decide to give them money to fund things like studio hours or mastering an album or a piece of equipment they need or, you know, over the summer, even there was a case where it was gasoline, so they could make it to, you know, show in a in another state. So, you know, we're really focused on the emerging musician in that space. And then, you know, what we like is that that scalable to every local market around the country and being able to recruit emerging musicians in those music economies. And then secondarily, we have a grant program, or not a grant program, but we support music organizations like music Health Alliance, which is a national music organization. And they really focus on health insurance or health problems that musicians who are that are usually under insured. And giving them the medical support they need, which can be really kind of a critical need for musicians once they get ill. And so we love working with those guys, we believe there's a national and scalable partnership with them as well. And then we also support an organization called Himele, which is a Hawaiian music organization that was really focused on the steel guitar. And the continued education of the steel guitar, which is found really popular in country music. And country music owes a lot to the state of Hawaii, for their contribution to kind of modern country music and that tropical sound that you can find in a lot of classic songs.

Brad Ebenhoeh:

That's awesome. Well, you know, when you're when you're driven by a specific passionate purpose, and that helps support the brand that really, it really makes being an entrepreneur, and the ups and downs, a lot easier to kind of keep powering through. So now let's get into the nuts and bolts here of just kind of the conversation. So number one, to confirm this is your first brand that you've kind of ever been the founder, the CEO, the launcher of the product, right?

Adam Kost:

Yeah. Okay, so how is it going versus what you expected? From your past? I mean, I'll say, I think it's going going really, really well. You know, at times, I think, you know, when you join a project, and I've been fortunate enough to join projects, like Dolce Vita, and Waterloo, who were, who were already really moving really fast, and I just kind of got to get there and pour a little bit more gasoline on something that was growing really well. You know, in the beginning, without exposure, a lot of the times it's kind of like watching paint dry. And, you know, you're so used to kind of explosive growth on the brands that you've had the good nature to, to have worked on like the DOSXX or Jameson, and you know, everything was growing 30 to 60%. And, you know, on the startups even greater growth rates there. So when you're getting started, it can feel really hard when you don't see those familiar growth rates. So, but you have to really kind of settle into what is your forecast? What was reality based on? And so far, we're delivering our expectations, and a bit more.

Brad Ebenhoeh:

Awesome. And then what hats do you wear, you wear all hats? Do you have other employees consultants, like, you know, what is your day to day look, like, I guess, is what I'm trying to say.

Adam Kost:

Yeah, so so far, technically, I wear all the hats. But I've been able to kind of find partners like Accountfully to support me on the finance end of things and, you know, a good agency called Proof to help me on the creative end of things. And then, you know, also finding partners to help us outsource some of our sales functionality as well. So it's really about, before you build out an organization, find really good partners to help you in the early phases that act as extensions of the company, but you don't need to necessarily hire those out day one. And then of course, I'm really kind of ingrained in the marketing side of things and our distributor expansion strategy and route to market strategy.

Brad Ebenhoeh:

Awesome. I love the brand, love the package. So the creative folks did a great job in that.

Adam Kost:

The packaging was all done by a family member, my cousin Anson. He's an incredible artist and is the creative director at The Santa Fe Reporter. And we kind of cooked this thing up, you know, kind of at the end of 2020, we started working on it. And he's just done an outstanding job evolving the brand.

Brad Ebenhoeh:

Yeah. Well, kudos to Anson. Great work on that. So let's kind of get into a couple different topics here. So number one, kind of inventory supply chain. So as you're moving forward with creating a product, literally, you had experience within, you know, the industry from the past, but how did you go about sourcing product? You know, manufacturers, packaging, you know, putting together your supply chain? How did you kind of handle all that process?

Adam Kost:

Yeah, supply chain is a weird one. You know, you think it's gonna be easier than it is. And then it turns out, really, you hit all these kind of fun roadblocks, like along the way. And, you know, it's really critical to any startup to really focus on supply chain and the right partners in that space. You know, who do you source your spirits from? Are they quality, a sustainable source, you know, what is their service level, you know, trying to evaluate multiple vendors versus just the available vendor. You know, and we got really lucky, really early on product development, where we locked up with a flavor company, and an ingredient company that loved our idea, and ended up doing all of our product development for us pro bono, because they believed in the brand, which was really, really cool. And then we had some hiccups along the way with our co-manufacturing, which I invite everyone to be hypercritical on and, you know, we had a facility early on that we thought we would be with longer than we were. And as we transition out of them, it gave us the opportunity to reevaluate our co-manufacturing capability, we found an even better partner. So sometimes problems, you know, in your supply chain world can really kind of turn into benefits as well. So it's, it's really interesting how it works. Problems, solutions can turn into really big kind of positives. But yeah, it's a wild one out there, you know, in finding the right partners who are going to be fair with you on pricing along the way, and you know, that you feel are going to deliver consistent quality as well, because there is some variability out there in quality. So you just have to be super careful and mindful of all things supply chain all the time.

Brad Ebenhoeh:

Yeah, I think people would drink Country Luau in the wild, wild west, right, that kind of vibe.

Adam Kost:

I kind of joke. It's kind of like the Snoop Dogg quote. Yeah. You know, "I got my mind on my margins and my margins on my mind".

Brad Ebenhoeh:

Yeah.

Adam Kost:

So supply chain is obviously critical to that. So always be thinking margin!

Brad Ebenhoeh:

Is there a specific kind of KPIs, you look at like from you brought up your co-man and always assessing and reviewing? Like, is there specific KPIs that, like someone can or you review or looking at in relation to your co-mans or supply chain clearly costs, delivery, you know, timing, but you know, like, what, is there anything specific else that you look at? Or you are starting to look at more and more?

Adam Kost:

Well, it's obviously you get on the co-man side, you're always looking at yields, right? So what percentage yield? Do you get out of your raw materials that you're working with? You know, for us, we're not, you know, such volumes yet. So you know, some of our ingredients that we buy, we do have some spoilage on because we don't use all of them. So you have to kind of build that into your margin structure as well. Lead times are not necessarily a KPI but something to be mindful of because, you know, your longest lead time ingredient is your bottleneck to your next production run, right? And then kind of, you know, payment terms, and working capital flow is obviously very critical to how you want to build inventories and your ability to forecast the future is hyper critical to working with partners and making sure you have, you know, the space to produce when you need it, right. And that's not necessarily a KPI either. But, you know, the master KPI is continually looking at margin improvement, you know, on the supply chain, co-manufacturer side, ingredients side, it's always putting pressure on that I think a lot of young founders that I've advised in the past don't really keep an eye on it as much. They're more concerned about revenue. And they're just like, "wow, we're we have revenue, it's very exciting". But, you know, we found a 10% increase in margin between our first run the second run, that's a fist pump, you know, and so it's really that one KPI is going to kind of dictate your future. So it's working capital and margin are critical.

Brad Ebenhoeh:

It always goes back kind of the basics, and I feel like there's kind of getting a shift from revenue growth across kind of just small businesses in general to margins kind of profitability, I feel like it was lost for a while, I think it's starting to kind of come back just from, you know, where we're at in the kind of the overall economy and stuff today, just from my visibility. How do you manage inventory when you reorder, you know, what tools are you using for all that?

Adam Kost:

Still, just using kind of spreadsheet math, you know, we're not big enough to really warrant any specific kind of tools to do that, I think we are always kind of looking at velocities relative to our distribution, and kind of where we're going to move next forecasting on that. And then, you know, in early phases, we've just gotten, you know, a lot of benefit from having a product with a really, really high quality product with a really great shelf life. So we can build inventories, and not necessarily have so much concern about spoilage. Because our product is designed to be very shelf stable. So when that again, that was all part of our product design strategy. Where you know, other founders who were using kind of a lot of fresh ingredients that oxidize very quickly, they're going to be under far more pressure given kind of lower shelf life. So we've got a great shelf life, which allows us to kind of get in front of inventory. And I think as we grow, we'll start trying to, again, increase our inventory turnover ratios throughout the year. And produce more frequently with less volumes as we kind of hit those minimum order runs, and can do them frequently.

Brad Ebenhoeh:

Awesome. So then how are you managing cash? When buying inventory, you know, number of days, to your point, like your products shelf stable, so it's not our number of days of inventory on hand, your overall cash cycle from when you outflow cash to when you receive cash from you customers? How do you view or like, check, look into that function?

Adam Kost:

Yeah, so like the cash conversion cycle is really important. Along the way, we'll take you know, early on, I think it's better to be de-risked on the co-manufacturing side, obviously, minimum order quantity is also push you up into taking more inventory on and kind of early phase, especially if you want to get into a quality co-man because most of them won't allow you to do low MOQs that are worth a while you can jump into kind of a lower quality co-man that'll you know run ya 1000 gallons at a time, but generally, their prices are high, and their quality is low. So it's a perfect storm for, for risk, or having some sort of failure along the way. So you know, early on, if you are fortunate enough to raise enough capital, you know, you can build an inventory, and you can be mindful of the inventory cycle. Or you can be less concerned about kind of, you know, always, always producing a new batch of product, right. But, you know, you have to design the product well, and it all starts from concept. And not all brands are designed that way. So it's different for every founder and team

Brad Ebenhoeh:

100% definitely agree with you on those aspects, from an aspect of, you know, you come from the sales and marketing side of things like what is your KPIs, you're viewing on kind of the sales marketing side of things. So you already talked about margins, but you know, just from a customer lifetime value or kind of metrics like that, do you do use those or other ones?

Adam Kost:

Yeah, so alcohol is tough, right? Because it's achallenging category to gain data on, right. So, you know, you start to look at your market, you know, if you look at a geography, you look at revenue, you look at your marketing investments, you look at your working media, your non-working media, and you start to kind of develop a contribution margin by market. I think that's the best way for me to look at the business is to see them on a geographic basis. You know, versus saying "hey, it's kind of saying hey, this marketing investment on its own what is the return on that?, because we don't have a lot of transparency in the alcohol industry, you know, on that unless you want to come and be a direct to consumer brand, but alcohol is still you know, really driven by physical retail sales. Now, you can, you know, you can, if you got the capital to do it, you can invest in partners like Drizzly and you could start to get a row as on you know, if you push media to their platform, but now you're marketing a lot for partners like Drizzly and you got to spend like 50 grand to get the data. So you got to really kind of kick these big media investments out to start getting clarity on return on adspend but we found a way through some really cool vendors that are giving us transparency on, you know, SMS programs that we're able to integrate into our marketing strategy that will actually give us transparency on conversion. So it doesn't tell us the whole story, but it tells us a story that we can start looking at. And once we hit that flywheel, you know, level where we're starting to see, positivity of that marketing investment, that's when we'll start to begin to pour gasoline on tactics like that.

Brad Ebenhoeh:

Gotcha. It's just very interesting to me. What is your planned in your brain now, like, first kind of full time hire literally, your number one, your company have one right now with a bunch of partners, but like, you know, building out your team kind of long term as the brand, you know, scales and grows? Do you have a like a plan to attack on that?

Adam Kost:

Yeah, it's a really gangster head of sales. So it's, you know, invest in things that create revenue, right. So nice to have a really talented marketer to market with or play with and sandbox marketing, but, you know, invest in things that help you create revenue and make a difference. You know at retail.

Brad Ebenhoeh:

I couldn't agree more. Well, good. Well, you know, we're nearing the end of this conversation. Just before we get into the last couple of specific questions that I always end our podcasts and like, what is what's next for Country Luau and the brand going forward from, you know, expansion standpoint?

Adam Kost:

Yeah, well, we've got incredible partnerships. You know, with our music positioning, we've got an incredible partnership with American Songwriter. One of the, you know, the best national music industry publications out there. So we're looking to blow that out. We're sponsoring the Pilgrimage Music Festival next weekend here in Nashville, which is huge, you know, huge thing for a little brand like us, but again, kind of supporting the music industry. We look forward to blowing out our Music Cares, or our music, Health, Music Health Alliance partnership across the country, and we look forward to future expansion, you know, into really strong markets that index with our consumer.

Brad Ebenhoeh:

Awesome. Well, I think my in-laws will be at the Pilgrimage Festival, we'll tell them to stop by.

Adam Kost:

We'll have the the Daq Shack trailer rolling out there. It'll be fun.

Brad Ebenhoeh:

What's your favorite flavor by the way?

Adam Kost:

I tend to lead with Yuzu and Pineapple. Those are my two jams that I end up hitting and really, really easily. Yuzu just so citrusy and light and delicious and is a really kind of fun modern take on a really crowded and homogenous Ranch Water segment. And then pineapple we I call it sessionable spice. I like a little a little Hey, how are you? My my drink every now and then. And I love a good pineapple flavor. So I mean, you can drink a handful those you won't be overwhelmed by the heat and it's just really fun. All of them are hyper refreshing and sessionable which is really great.

Brad Ebenhoeh:

What's the what's the alcohol percentage on there?

Adam Kost:

5%. So it's a you know, it's great for the consumer because it's a transferable alcohol level that allows them to drink responsibly. In sessionably without getting over their skis on ABV scatter. In this category, refreshment is driving a lot of consumer choice. Refreshing and super high ABV is a dangerous thing for consumers. Yeah, they don't necessarily love it, because then they're on their second cocktail and they're like, "What the hell is happening?"

Brad Ebenhoeh:

Well, yeah, and a lot of the ones a lot of that RTDs or even just the craft beers that exist, it's like, "Whoa, this is eight and a half. I had no idea," and it can mess you up versus just kind of some consistency there. Well. Alright, let's get to the final two questions, Adam. Number one, what does one CPG industry do for fellow entrepreneurs?

Adam Kost:

Understand your consumer and you know, if it's a two part answer, understand your consumer, understand your market and your market size. Super critical exercises; do the research, spend the time, validate your insights, do research on the insights again, revalidate them before you push off the dock, super critical.

Brad Ebenhoeh:

I would expect that answer from a sales and marketing guy. And then what is one industry don't from the for the CPG brand owners.

Adam Kost:

Don't panic. So I think it's you know, don't spend money where you don't need to spend money. I think you know, again, it's about patience. When you're starting a new business. You can get attracted to a lot of shiny objects. You can look at competition and get lured into doing you know monkeys see monkey do strategy and don't over invest in things that don't produce revenue? Be smart with your money.

Brad Ebenhoeh:

Awesome. I couldn't agree more. Well Adam, this was fantastic. Great chat. Great insight from from your perspective and again cool brand. For those folks out there countryluau.com Is there any other locations for the listeners to go to to check out your product?

Adam Kost:

You know, come grab us at independent retailers all over Nashville. Total Wines in Texas, South Carolina and Tennessee. And if you're out of state and you're curious about our product, you can also buy us on our website. We do serve as 32 states across the country through e-comm.

Brad Ebenhoeh:

Awesome, awesome. Well, Adam, again, kudos to you so far. Love the product, love the brand. I'm excited to see kind of where this takes off and really appreciate your time and insight on the podcast today. So there it is Adam Kost Country Luau Episode 25 The Month End. Hope you all enjoyed. Take care Adam.

Adam Kost:

Cheers, guys.

Adam Kost shares his background
Country Luau flavors and options
Where to find Country Luau
How Adam's first founded brand is going compared to his previous experience as a big beverage marketing pro
What Adam's day-to-day looks like
Overview of sourcing and supply chain
KPIs Adam reviews and monitors
How Adam manages inventory
Cash management overview
More sales and customer specific metrics Adam reviews
Adam's hiring plan
What's next for Country Luau
Adam's favorite flavor
Adam's CPG "Do"
Adam's CPG "Don't"
Where to buy Country Luau