Sun, Oct 01, 2006 page12

• Entrepreneurs searching for a piece of the liquor action

  Many would-be spirits barons are men with lots of money, hoping to increase their social standing by means of their own liquor brands

  • NY TIMES NEWS SERVICE
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  Clinging to a strawberry-red, pyramid-shape bottle of Starr African Rum, the two-year-old brand he owns, Jeffrey Zarnow, 33, ducked into the restaurant Parea last week to confer with its head bartender, Arin MacDonald. Parea, on East 20th Street, New York, is adding a US$14 cocktail made with Starr to its fall menu, and Zarnow wanted to sample it.

  The bartender slid an orange and red mixture of raspberry puree, honey, apricot and Starr, which is made in Mauritius, onto the long sand-color bar, and Zarnow, wearing a white suit, beamed. "Beautiful drink," he said. "Beautiful."

  Before he owned his own rum, Zarnow's highest profile occupation was being a friend of the actor Matthew McConaughey. That was fun, but not so much fun as his new life sponsoring parties and trying to build a liquor brand, he said, ducking into a Town Car to head to a charity event, the Fete de Swifty, on East 73 Street, whose hosts included Mayor Michael Bloomberg and Liz Smith.

  

  Jeffrey Zarnow, right, at a charity event in Manhattan last week, promoting his brand, Starr African Rum, held by Barbara de Portago, left.

  PHOTO: NY TIMES NEWS SERVICE

  "Last week," Zarnow said, "it was one night I had a party with Bono, one night with Petra Nemcova and one night with Dazed and Confused magazine."

  Drink up. Just as it can seem that every woman with social ambition is designing her own handbag or jewelry line, there's a freshly distilled ticket to social standing for men -- introducing your own liquor. There is the caffeine-infused p.i.n.k. vodka, started by a 32-year-old former Washingtonian; Cabana Cachaca, owned by a 27-year-old former banker; TY KU, a sake liqueur started by two 20-somethings in a Columbia University business class; and the brands are proliferating.

  Many would-be spirits barons are young or youngish men with disposable cash, hoping to increase their social profile one fashionably designed bottle at a time.

  "I get to travel down to Brazil every month and to Miami and all over the place," said Matti Antilla, 27, the owner of Cabana, a brand of cachaca, a Brazilian rum often used in caipirinhas. "And I'm meeting great people and having a great time of it."

  Antilla had spent time in Brazil as an analyst with JPMorgan's natural resources group. He was drinking caipirinhas late one night at a restaurant in California where he had moved to work for his family's real estate business, when it struck him that there was no major brand of cachaca on the US market.

  He got in touch with Nicolas Barquin, whom he had met playing squash in New York after graduating from Amherst. By April this year they found a Brazilian distiller, a French bottle-maker and a New York label designer and were serving their new product at a party at Bungalow 8, attended by the actress Jordana Brewster and socialites like Tinsley Mortimer, Ted Roosevelt V, Amanda Hearst and John de Neufville, people Antilla knew from his postcollege days going out in New York.

  "A lot of what I've done initially with Cabana is get my friends behind it in New York and for them to get their friends behind it," Antilla said.

  Now he sends out e-mail messages to a list of more than 500 similar "friends that go out," asking that if they order bottle service at clubs, they choose Cabana. And when he is in New York he goes out nearly every night to clubs like Marquee and Bed as a "brand ambassador."

  He has sold 300 cases of Cabana so far in New York, he said. He hopes to introduce the brand in Miami in the winter, most likely with a party at a club being opened by a friend, Reinaldo Bibolini, known on the scene as Bibs.

  "I don't miss my banking days," Antilla said.

  Besides exotic travel and an entree to clubs, Fashion Week after-parties and charity galas -- which all seem to have a liquor brand as a sponsor these days -- another allure of the boutique spirits business is its low start-up cost. All you have to do is find a distillery, design a bottle and start marketing, said Brian Sudano, the managing director of BMC Strategic Associates, an industry consultant.

  "It wouldn't cost you more than a quarter million," he said. "And you probably could get it up and running for less than 100 grand."

  The prospect of big markups is enticing: It costs US$3 to US$5 a bottle to produce a spirit that can be sold wholesale to bars and liquor stores for US$15.

  But that doesn't mean that creating a sustainable business is easy. In the last 20 years, Sudano said, Skyy Vodka is the only hard alcohol introduced by small-time entrepreneurs that was successful over time.

  Eric Schmidt, the research director of the Adams Beverage Group, which tracks the industry, said, "There have been more than 600 new hard liquors introduced in the past four years, some by big players, some by small, and few will succeed."

  One hurdle for any new spirit is the faddish nature of cocktails. One month rum drinks are all the rage, and the next there is a thirst for herb-infused vodkas. Even if a liquor is versatile enough to remain in favor, it still has a long way to go to become a nationally known brand, which requires being picked up and supported by a distributor.

  Distributors may agree to carry a new brand in a few regions, but unless it is a novel product with lots of marketing momentum, it is likely to get lost in the huge number of brands the company sells, Sudano said.

  "If you go into hot clubs in New York City and get a lot of people to support your brand, then go into a distributor, they'll say, `Sure, we'll take it.' But they don't put focus behind something unless it's really hot," he said.

  Until that happens, it's night after night of promoting your brand locally at clubs and parties.

  David Mandell, 32, goes out most nights in New York to promote p.i.n.k., the caffeinated vodka he introduced in May. Last week he was at a p.i.n.k.-sponsored party for the film Shortbus.

  "A week and a half ago we did Kelis' surprise birthday party for her husband, Nas, at the Canal Room," he said.

  Mandell, the former chief of staff to the Federal Aviation administrator in Washington, experienced his "aha!" moment one night early in 2003 at Skybar in Los Angeles, where he was on a business trip.

  "I was consuming an energy drink mixed with alcohol and said to a very good friend of mine, who is now my CFO and COO, `Why can't we take the characters of the energy drink and just add it to the alcohol without adding any of the calories or carbs?"'

  For the next two years, Mandell spent nights and weekends overseeing p.i.n.k.'s development. The name is an acronym, but Mandell will not say for what. Mandell projects that by the end of this year the company will have sold about 10,000 cases of p.i.n.k., which comes in a frosted white bottle with a pink hue and retails for US$40.

  To make it in the liquor business, it helps to have spent one's early 20s as a Wall Street Turk, dropping hundreds of dollars for bottle service at nightclubs and getting to know bartenders and club owners. That would describe Courtney and Carter Reum, former investment bankers who plan to introduce VeeV, a flavored hard alcohol early next year.

  "This seemed like the best thing for our age in life, our skill set, our contacts," Carter Reum, 28, said by telephone from Los Angeles, where he and his 25-year-old brother are doing nightly market research by going out to clubs. "We're our main demographic."

  It also helps to have celebrity friends or associates who know other celebrities.

  "If you've been in Jamie Foxx's bedroom, you've heard of us," said Zarnow, the purveyor of Starr Rum.

  Starr sponsored Foxx's Oscar-night party last year, and Zarnow subsequently heard from a mutual friend that Foxx keeps a bottle of the rum on his bedroom mantelpiece. "You can't pay for that kind of publicity," he said.

  Despite the crowded and competitive playing field, there have yet to be any Al Capone versus Bugs Moran-type run-ins on the dance floor of Bungalow 8 between would-be liquor kings. But some sniping has already surfaced.

  "Cabana is not too good," said Steve Luttman, the owner of Leblon, a rival cachaca that was unfurled during Fashion Week last year with a flurry of 19 parties in seven days. "The product is relatively poor quality in nice packaging."

  Luttman, 41, had been working at LVMH Moet Hennessy Louis Vuitton, helping the multinational liquor and fashion giant introduce new brands. On the day after his 40th birthday he quit and started Leblon.

  "It's the ultimate midlife crisis," he said. "Instead of buying the fast car or getting the blonde, I started my own liquor company."

  While some ambitious entrepreneurs dream of reaching the top of the ladder like Skyy, others seek only a handhold on its first rum-soaked rungs. Douglas Loughran, 30, was working as a manager for a company that owns liquor stores in Colorado. Missing his native Philadelphia, he quit, returned home and worked as a mechanic and then as a tree remover.

  One night at a Nepalese restaurant he spotted a bottle of Khukri, a rum sold in a bottle shaped like a Himalayan dagger.

  Loughran discovered no one had the US import license for Khukri. He negotiated with the distiller in Nepal to import it. His first 300 cases arrived this summer, and now Loughran regularly drives to New York for sales trips to restaurants and bars.

  "It's really fun," he said from his office in Ambler, Pennsylvania. "You're around booze and bars."

  UN Liquors on First Avenue sells Khukri. Loughran says it will enter a few clubs in the next month. He said the MGM Grand hotel in Las Vegas has also placed an order.

  "When I first moved back here," Loughran said. "I was taking down big trees during the day and doing all the research at night on this rum business. This is a little bit easier on the back."
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