Two upstart entrepreneurs step into the malternative universe
By Davina Baum
So a guy goes into a bar . . . Wait, a priest goes into a bar. Or maybe it's a rabbi. Or a person of Polish descent? In any case, he's in the bar, and the bartender is waiting for him to order. A Heineken, perhaps, or a Boont Amber. Or a scotch and soda.
But in this scenario, he wants something else. Something refreshing, a little citrusy, perhaps slightly fizzy. He scans the shelves, looking for the right thing. The bartender is waiting patiently--the bar isn't full. Finally, he says, "Barkeep, pop me open a Topo Loco."
That's a scenario that Jim Gill and James Harder dream about (though the religious denomination of the patron probably isn't specified in those dreams, and the bartender might not be referred to as "barkeep").
Creators of a malt-based beverage called Topo Loco, Gill and Harder are throwing their hat in a wide--and controversial--ring. With big guns like Smirnoff, Skyy Vodka, and Bacardi joining longstanding players Zima and Mike's Hard Lemonade, the two men are up against stiff competition. But they think they have an edge and are positioning themselves as the Ben and Jerry of the malt-beverage world--two guys and a VW bus, spreading Topo Loco love throughout California and beyond.
Topo loco is loosely translated as "crazy, awkward guy" in Spanish, although literally it means "crazy mouse" or "mole." Harder says, "We liked the idea of 'loco.' We looked at a lot of different things. It had this crazy awkward feel to it--two guys trying to create a drink inspired by Mexico but originally from Canada but in the U.S. . . . We know we're small enough as it is and we don't have a brand name like Smirnoff behind us, so we'd better damn well get people's attention."
Cleancut, attractive, and young, the two men are longtime friends and business associates, Canadian expats who cut their teeth working in the malt-beverage industry. They continued their careers at different companies, both ending up in the Bay Area--Gill doing marketing for wine and Harder working in the tequila industry. When Harder switched to working on a wine portfolio, he recommended Gill for his tequila marketing position, so at different times they both traveled extensively in Mexico--and both sampled a mixed drink that's a staple there, called a fresca or paloma.
Made by mixing tequila with Squirt and adding fresh oranges and limes, the drink captured their attention, and in subsequent conversations, says Harder, "the wheels started turning.
"We'd been friends for a long time," he adds, "and knew that we wanted to go into business for ourselves." They started a company called Unfiltered Napa and were careful to apply a fundamental lesson they'd learned while working for other companies: Spread the risk. First, they developed a wine portfolio, consulting with wineries to help sell and market their wine. Regusci, a boutique winery, is a primary client; the two also developed their own wine brand, Twenty Bench, in partnership with Jim Regusci.
But everyone's doing wine these days, out of habit or sheer folly--how many malt beverage startups are on the radar? So they started Topo Loco, basing the drink on the frescas they had savored in Mexico. From their office behind the Regusci Winery nestled deep in prime Napa wine country, Gill and Harder are trying pretty damn hard to get the word out.
Everything they say makes sense, but sometimes Gill and Harder seem to be trying a little too hard to push the "little guy" idea. After all, in this hypercommercial world, positioning is often more important than the product itself. The two men are nothing if not marketing-savvy, and even if they aren't Ben and Jerry or Bartles and Jaymes (which was, in fact, a marketing ploy dreamt up by the wine cooler company), they are shoehorning themselves into those boots.
The meeting room in their office is entirely branded. An antique Pepsi refrigerator has been Topo-ized; a Topo Loco surf board is propped up in a corner; a metal cooler with the logo on it sits in another corner. Gill and Harder developed all the branding themselves, and the vibe is very laid-back, surfer-style.
That's what they were going for, they say. They launched the drink in October 2002, in San Diego. Gill says he spends a lot of time driving the Topo Loco '64 VW bus between here and San Diego.
"It's more casual," Gill says. "We're laid-back, not urban-club. . . . We're beachy, California, that's why we launched [Topo Loco] in San Diego--that's the essence of the brand."
The essence of the "brand" is also grassroots. "We've had really good success, because people appreciate the fact that it's a couple of fairly young guys getting into the market, and they know that it's difficult against the big guys," says Gill.
The market that Harder and Gill are squeezing into is tightly packed and heavily marketed. Liquor companies have taken full advantage of the fact that malt beverages are not beholden to the same strict advertising standards as hard liquor; malt-beverage companies can advertise on television, and they do. Drinks like Smirnoff Ice and Skyy Blue are joint ventures between Allied Domecq and Miller Brewing Company. Instead of making expensive commercials with sleek women in bathing suits slurping seductively, Gill and Harder have made themselves (or at least their marketing personas) the face of Topo Loco.
The Topo Loco packaging, with its bold red and yellow colors, is summery and inviting. The bold hand print on the logo is Gill's hand. The six-pack box reads, "Original citrus hard soda made with blue agave" (the plant that, when distilled, makes tequila). The liquid inside the clear glass bottles is cloudy, and has a clean, bright nose--a little like Orangina.
The liquid itself is lightly carbonated, citrus-tart, with a sweetish finish and no chemical aftertaste. Gill and Harder were adamant about using all natural flavors. The men, naturally, don't want Topo Loco ghettoized as a summer drink--there are so many other months for potential sales--but popping open a cold Topo Loco at a July barbecue is a natural association.
Gill and Harder not only put a lot of thought into the drink itself but also into its packaging and market positioning. "We took a look at the category," says Gill, "and saw that everyone seems to be doing the same kind of thing. They're all lemonade, very lemon-flavored. We saw all the big spirit brands jumping in. We knew that we could produce a brand that tastes different from that and [which is] also extremely refreshing."
The two set to work trying to replicate the drink they had tried in Mexico--but without tequila, since adding spirits changes the taxation, cost, and distribution.
"We were told from the get-go," says Gill, "that it would be extremely difficult to get your malt base, that you have to have a specific kind of malt, how would you get glass [bottles], you're small guys, and all the big companies are now in it in a big way."
But they kept at it, refining the flavor with a "flavor company," finding the right glass supplier, developing the branding. "We wanted [the look] to be really genuine, authentic," Gill says, "kind of like the old soda bottles or the Mexican beers like Corona [that have] staying power."
Malt beverages, also known as malternatives or alcopops, have traditionally been classified in the same realm as beer, meaning that they're under the same restrictions as far as taxation and regulation. Malt is brewed like beer but is then treated to remove any of the characteristics associated with beer, producing a clear alcoholic base that is then flavored to get the desired taste. Malternatives generally have a similar alcohol content to beer; Topo Loco is 5 percent.
Zima, which was heavily marketed by Coors as a "clear beer," first hit the shelves in the early '90s. The market remained fairly static until the late '90s, when Mike's Hard Lemonade was released. A flurry of hard colas and lemonades, like Doc Otis and Hooch, followed, and then the major label spirits got into the act, flooding the market in the past few years. Smirnoff Ice, Mike's Hard Lemonade, and Skyy Blue are the big three in market share.
The category has been under tight scrutiny from the beginning. Malternative manufacturers were quickly attacked for allegedly positioning their drinks to underage drinkers. Considered an alternative to beer, malternatives are typically sweeter than beer and incorporate characteristics of soda but without the hoppy edge. Consumer groups were alarmed that the words "lemonade," "soda," and "cola" would attract young drinkers. (Wine coolers suffered the same attacks in their day; critics were concerned that the sweet, alcoholic drinks would serve as gateway drinks to the hard stuff.)
Most recently, in March, the Alcohol and Tobacco Tax and Trade Bureau (the newly retooled federal agency that regulates alcohol) issued a proposal to reclassify "flavored malt beverages" with stricter standards if they derive their alcohol content mostly from flavorings containing distilled spirits rather than from the malt fermentation process itself.
While Harder and Gill are concerned about where Topo Loco falls in the potential reclassification, they say that the effect won't be that great. "We . . . had already decided to derive more of our alcohol from fermented blue agave," says Harder. This will move it out of the malt beverage classification to a fermented product with only minor distribution changes.
When it comes to alcohol, distribution is a little more complicated than just dropping off a few cases at the bar. Distributors want to work with companies that will make money for them. Untested new beverages aren't a priority for the average distributor, who generally deals with a high-volume list like Coors or Miller. Gill and Harder were told, again, that they wouldn't be able to find distributors, until they came upon Crest Beverage, which handles Corona, Coors Light, and Red Bull.
"They loved the product," says Gill. "Their president and owner tried it and liked it and said, 'I can't commit, but I'll take it to the sales department, and if they like it, I'll call you.' Fifteen minutes later they called and said, 'We want to give it a try.'"
In Sonoma and Napa, they found Clark Miller Distributing, and they've recently landed several other distributors in the north counties and Central Valley, as well as Hawaii.
Clark Miller Distributing carries Coors as its main brand (it's not associated with Miller Brewing Company) and distributes through Sonoma, Marin, Mendocino, Napa, Solano, and Lake counties. Vice President Matt Miller says that the response to Topo Loco has been "tremendous." According to Miller, deciding on what beverages to carry depends on two things: what's in the bottle, and who's making the drink. In the case of Topo Loco, he was convinced on both counts.
Miller says that Topo Loco is "very smooth; it's unlike anything in the industry. So I think it's a good product." And he's clearly enamored of the grassroots stylings of Harder and Gill: "When you meet Jim and James, you want to do business with them. You want to help the entrepreneurial spirit, whether it's water, juice, beer, or liquor. . . . The approach that Jim and James are taking is really very unique to the industry. They're two good guys making a jump into an arena that is controlled by huge multinational corporations."
Topo Loco's success means success to Clark Miller too, of course, but if Miller were worried about the bottom line, he most likely wouldn't have taken on the risk: "We're so happy that we can help them in any way we can . . . to get them some success."
The drink is now available at many independent stores--even tony Dean and Deluca in St. Helena carries it. Harder notes that the independents are where they're most likely to make the connection, "whereas the Safeways and Albertsons of the world say, 'What's your national advertising campaign?'"
Krissy Harris, a manager at 1351 Lounge in St. Helena--which carries Topo Loco--says, "People who order it say it's one of the better if not best malt beverages they've tried, but most don't order it again." 1351 is "mostly a martini bar," she says, and "you don't see hardcore martini drinkers rolling up to the bar and saying, 'Oh, a fruity malt beverage--let me have that.'"
Which is to say, malternatives have a gender issue. It's something that Gill and Harder have struggled with. Malternatives are often thought of as girly drinks largely because they're generally much sweeter than beer. Gill estimates that Topo Loco drinkers break down into a 60 to 40 split between women and men; age demographics generally skew young, between 21 and 30.
"Probably more women like this type of drink," Gill notes, "but more men are starting to drink it. They may not drink them every day, but it's an alternative for them; they'll switch between beers." He points out that Topo Loco is markedly less sweet than some of the other malternatives.
"Men don't want to drink something that's really sweet," Gill continues, "or that gives them heartburn. We're beer drinkers; we developed it so we could drink it. It's not for everybody, but it's an alternative to beer drinking, or if you don't drink beer, it's a perfect beverage."
While the reclassification issue and a drop in sales across the category have lead some to call an end to the malternative boom, Gill and Harder pay little mind to statistics. They have a beverage, and they want people to like it. "A lot of people jumped in, trying other things," says Gill. "They didn't do as well as their corporate parent wanted them to do, and they had big expectations. We don't try to lead anyone down the garden path and say that this is a spirit product. It's not a Bacardi, it's not a Smirnoff; it's Topo Loco. We tell people what it tastes like; we're not duping anybody."
The duping he's referring to is the accusation levied against drinks like Smirnoff Ice and Bacardi Silver that the use of the spirits name leads people to believe that they're buying a spirits-based drink. Topo Loco makes no such claims, in fact there is no mention of tequila anywhere on the bottle or packaging.
As summer rolls around again, Gill and Harder are hard at work lining up the Topo Loco fans. Determination is not lacking, and it seems as though they would be at every summer barbecue across California, if they could, spreading the word.
Taking cues from companies like California Cooler, which counseled Gill and Harder to "build in your own neighborhood, build from one county to another," they're beating the pavement on the road to Topo Loco greatness. The hard work is worth it, says Harder. "For the time being, we're just having fun. It's been a great experience."
Adds Gill, "One step at a time, one distributor at a time, one account at a time. Case by case--that's how we're approaching it. We're counting on it. We've pretty much bet the farm on it. If it doesn't work it won't be for lack of trying. We know we've got the product. We just hope we can get it in people's hands."
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From the June 19-25, 2003 issue of the North Bay Bohemian.