SUNY Buffalo State College Management Essay

For the exclusive use of M. Abduldaim, 2022.
9 -7 2 1 -4 1 9
JANUARY 30, 2021
BENJAMIN C. ESTY
DANIEL FISHER
Bespoken Spirits: Disrupting Distilling
“The traditional spirits production process is outdated, imprecise, unpredictable, unsustainable and
inefficient.”
— Bespoken Spirits co-founder Martin Janousek 1
On October 7, 2020, Bespoken Spirits publicly announced it had received $2.6 million of seed
funding for its “sustainable maturation process,” a process that could produce award-winning
whiskeys in just days rather than years. 2 Co-founders and serial entrepreneurs, Stu Aaron and Martin
Janousek planned to use their patent-pending ACTivationTM technology to disrupt, in a positive way,
the centuries-old distilling industry by recreating the same aroma, color, and taste that had
traditionally been achieved by allowing spirits to mature in oak barrels for years if not decades.
Having secured the seed financing from T.J. Rodgers, the retired CEO of Cypress Semiconductors
and the owner of a well-known winery (Clos de la Tech), and baseball legend Derek Jeter, Aaron and
Janousek now had to make several critical decisions regarding the company’s future direction. They
had already achieved their first objective: showing they could consistently produce whiskey with
desired properties at scale. Perhaps the most critical question was whether they should continue
making whiskey themselves or use their technology to process it for others. While the idea of creating
a new line of whiskeys had its appeal and would have clear benefits, it could take years and cost
millions of dollars to enter the crowded whiskey market and build a recognized brand.
The alternative was to create one or more service businesses using their technology. One option,
known as maturation-as-a-service (MaaS), would be to provide “accelerated aging” as a way to
improve the quality, lower the cost, and shorten the production cycle for breweries, distillers, and
rectifiers (companies that blended spirits distilled by others). A second option, known as
customization-as-a-service (CaaS), would be to create customized products (i.e., “bespoken” products
with unique taste profiles) more quickly and at lower cost for restaurants, food retailers, and
corporations. These two B2B businesses would require significantly less capital and might allow them
to achieve their goal of creating a billion-dollar business much sooner.
The surest path to this goal, however, was unclear. At a fundamental level, Aaron and Janousek
had to decide whether to be a product-based or technology-based company, or both. And if they chose
Professor Benjamin C. Esty and Research Associate Daniel Fisher prepared this case. It was reviewed and approved before publication by a
company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are
developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of
effective or ineffective management.
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Bespoken Spirits: Disrupting Distilling
to pursue the technology option, which business—MaaS or CaaS—should they prioritize? With limited
resources, they knew that focusing their efforts was critical if they were going to achieve their goal.
The Market for Whiskey
The global retail market for alcoholic beverages was worth $1.5 trillion in 2020, and was expected
to grow annually at a rate of 8%. 3 The total market could be divided into three categories based on the
beverage’s alcohol content: beer (4%-5% alcohol by volume, ABV), wine (12%-16%), and liquor or
spirits (at least 20% and typically 35%-55%). 4 Spirits required an extra step in the production process
known as distillation to boost the alcohol content. The global retail market for spirits was worth $470
billion in 2020. 5 Popular spirits included vodka, gin, rum, tequila, brandy, and whiskey—the last five
of which were either sometimes or always aged in barrels. Exhibit 1 shows the major segments of the
U.S. spirits market by volume and producer revenues. Sales of all spirits combined were 239 million
cases worth $29 billion (the standard measure of volume was 9-liter cases typically consisting of twelve
750ml bottles). For whiskeys in particular, sales were 60 million cases worth almost $10 billion.
The U.S. whiskey industry could be divided into three segments: producers, distributors, and
retailers. Until 2005, companies could not participate in more than one segment of the value chain (i.e.,
producers could not distribute alcohol or sell products to consumers). Although the regulations had
changed, the industry remained relatively segmented and prices were marked up as products passed
through the supply chain. For example, a producer might sell a bottle of premium whiskey for $30 to
a distributor, who would sell it to a retailer for $42, who would, in turn, sell it to a customer for $60,
thereby generating gross margins of 30% [(price – cost)/price)] for distributors and retailers.
Whiskey production was highly fragmented yet “dominated” by a few large producers (also known
as distillers). The largest companies were Diageo with global sales of $16.8 billion in 2019, Beam
Suntory ($10.7 billion), Pernod Ricard ($10.6 billion), Bacardi Limited ($4.6 billion), and Brown-Forman
($3.0 billion). 6 Despite their size, the top three firms controlled just 12% of the spirits market and each
of them produced multiple popular brands of whiskey. 7 Diageo produced Crown Royal, Seagrams 7,
and Johnnie Walker; Brown Forman produced Jack Daniels (the largest whiskey brand in the world),
and Beam Suntory produced Jim Beam, Maker’s Mark, and Canadian Club. Smaller, “craft distillers”
had begun to appear in the late 1990s, following the rapid rise of craft breweries. By 2019, there were
more than 2,000 craft distillers operating in the U.S. (see Exhibit 2). Occasionally, very successful craft
distilleries were acquired by larger firms. For example, High West Distillery, a 10-year-old company
with annual sales of 70,000 cases, was acquired by Constellation Brands in 2016 for $160 million. 8
Producers created products that were differentiated by their ingredients (e.g., corn vs rye), location
(e.g., Ireland, Scotland, or the U.S.), and the time spent aging in barrels. To be called Scotch, for
example, a “whisky” (spelled without an “e” for products made in Scotland, Canada, and Japan) had
to be made from malted barley and aged in barrels for at least three years in Scotland. 9 The products
were also differentiated by price from a low of $10 for a bottle of Canadian Mist Blended Whisky to a
high of $27,500 for bottle of Yamazaki 55-year-old Japanese whisky. 10 Exhibit 3 shows the price
segments for American whiskeys. The categories ranged from the value segment with retail bottle
prices of under $12 to the super-premium segment with bottle prices above $35.
Distillers sold products to one or more of the 1,600 distributors (or wholesalers) in the United
States. 11 Unlike the producer segment, however, the distribution segment was highly concentrated: the
top two distributors controlled more than 50% of the market; the top 10 firms controlled nearly 75%. 12
Distributors, in turn, sold products to hundreds of thousands of retail outlets. These sales were
2
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Bespoken Spirits: Disrupting Distilling
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traditionally divided approximately equally between two channels: “on-premise” (i.e., bars, hotels, and
restaurants) and “off-premise” (i.e., liquor stores and grocery stores) consumption outlets.
The Process for and Challenges of Making Whiskey
The basic process for making whiskey had not changed in more than 300 years. It began with a
“mash,” a cooked mix of grains like corn, rye, or malted barley (see Exhibit 4). The particular mix
determined the type of whiskey: bourbon, for example, was made with at least 51% corn while rye
whiskey was made with at least 51% rye. Producers then added yeast and let the mixture ferment for
several days. This process produced a “wash” (also known as “distiller’s beer”) with an alcohol content
of 7% to 10%, which was then distilled. Distillation involved heating the liquid to create a vapor and
then cooling the vapor to produce a liquid with higher alcohol content. Because alcohol had a lower
boiling point than water, the condensed vapor had a much higher alcohol content often as high as 140
“proof.” a Once distilled, the spirit (also referred to as “white dog” or “unaged” whiskey) was diluted
with water down to 125 proof and stored in oak barrels to age for as few as two or three years and as
many as 50 years. Prior to filling the barrels, they were heated or “toasted” to draw sugars out of the
wood and then charred (burned) to enhance the whiskey’s aroma, color, and taste as it aged. The cost
of a typical 53-gallon barrel (200 liters) made from American oak was $300 while one made from French
oak was $700 when purchased in bulk. 13 Once the desired aging process was complete, the whiskey
was diluted again, usually to somewhere in the range of 80 to 100 proof, and bottled for sale.
There were a variety of chemical, financial, and environmental challenges associated with making
whiskey. Gary Spedding, a Ph.D. chemist who studied the whiskey-making process, noted that many
distillers had tried and abandoned efforts to accelerate the aging process. In one article, he wrote:
An incredible amount of biochemistry, chemistry and physics is involved in maturation of distilled
spirits…Multiple attempts have been made and many fancy systems have been applied by distillers
to try to beat Mother Nature and Father Time in producing “matured” spirits in “rapid time” …
Hundreds of compounds with differential solubilities and reactivities are present in the barrel-aging
spirit. Altering one chemical component’s concentration has multiple ramifications within the
chemical system…If the attempt, via the use of modern processing technologies, is to produce a tasty
product acceptable to the consumer, with many of the required attributes present in a reasonable
harmony, then there is nothing wrong with that approach. To say they have reproduced a fully
authentic and identical-tasting product to one matured over an extended aging period is a
completely different story. 14
Because the process was so complex, it was difficult to know how a batch would turn out at some
point in the future. Given the lengthy barrel aging process (three to 50 years), it was extremely difficult
to create new products with specific taste profiles particularly if consumers’ tastes were changing over
time. As a result, the established producers stuck with time-tested recipes and processes, which meant
that consumers tended to “drink their father’s whiskey.” (Historically, more consumers were male). As
a result, and much like the biotech industry, the large producers typically let smaller craft producers
experiment with new products and then bought the most successful ones.
Besides complex chemistry, the barrel-aging process also presented a number of financial
challenges. First, it took a long time. The combination of large upfront costs and distant revenues made
it difficult to sustain operations in early years with negative cash flows, and created a relatively
a Proof referred to the alcohol content by volume: AVB = Proof / 2. A “proof gallon” (a standard measure) was defined as one
gallon of spirits at 100 proof, or 50% alcohol by volume. A gallon of distilled spirits that was 160 proof (80% alcohol and equal
to 1.60 “proof gallons”) could be diluted with a second gallon of water to produce two gallons of 80 proof (40% alcohol) spirits.
3
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Bespoken Spirits: Disrupting Distilling
unattractive economic model at least in a present value sense. Exhibits 5 and 6 show a simplified
economic analysis and discounted cash flow model, respectively, for producing premium whiskey.
Assuming a 10% discount rate, a typical mid-sized producer could expect to earn approximately $4 in
present value by making and selling a $30 bottle (wholesale price) of 5-year-old whiskey. Of course, a
new producer would have to sustain five years of losses along the way, but might be able to sell an
aged whiskey at a higher price, typically $3 to $5 more per bottle per year of aging. 15
A second financial challenge was that the product disappeared over time: a small percentage of
spirit—colloquially known as the “angel’s share”—would seep into the wood and evaporate each year.
Depending on the type of wood, temperature, and barrel size, approximately 4% of the spirit
evaporated every year and as much as 10% might disappear in the first year. 16 Across five years of
aging, one could expect to lose as much as 20% of the whiskey, and up to 50% over 20 years.
Finally, the process had environmental challenges: the barrels were often used only once to make
whiskey. They could be reused for other types of spirits, but with much less impact from aging process;
used to flavor other foods such as syrup or jams; used as fuel to impart a specific taste; or discarded.
Having to discard one of the most expensive inputs in the production process was wasteful and costly.
Consumer Trends Affecting the Whiskey Market
The Bespoken Spirits team believed their products would benefit from four consumer trends
currently affecting the whiskey market. First, more people, especially younger people were drinking
liquor rather than beer or wine. According to one survey, 50% of Millennials (ages 24 to 39 in 2020)
preferred liquor compared to only 35% of Boomers (ages 56 to 74 in 2020). 17 An interest in reducing
calories and experiencing more varied tastes (the “cocktail culture”) were motivating this shift. Within
the aggregate liquor category, the fastest growing segments were whiskey, tequila, and brandy. 18
Second, consumers, particularly tech-savvy Millennials, preferred high-priced, premium products,
a trend known as “premiumization.” As shown in Exhibit 3, the “super premium” segment was the
smallest but fastest growing segment in the American Whiskey market.
Third, there was a growing interest in new products and unique experiences. One of the most
successful entrants in recent years was Fireball Whiskey, a cinnamon flavored whiskey that “Tastes
like Heaven, Burns like Hell.” Donna Crecca, a food service industry consultant, summarized this
trend: “Millennials and Gen Z entered legal drinking age with a different palate than previous
generations. They’re more in tune with rich, complex, and even savory flavor profiles…[T]hey seek a
more complex or unique flavor profile and authentic back story.” 19 To satisfy the growing consumer
interest in new and unique products, retailers and restauranteurs were experimenting with new
products. According to one chef, “…you are always looking for unique and special things to bring to
your guests. Being able to partner with another very creative local business to develop my own
signature whiskey to serve in my restaurants was a very natural progression.” 20 In addition to taste,
consumers were increasingly drawn to companies with more sustainable business models. A recent
Nielsen survey found that 48% of U.S. consumers “would definitely or probably change their
consumption habits to reduce their impact on the environment” and Millennials were twice as likely
as Baby Boomers (75% vs. 34%) to change their habits. 21
Finally, younger consumers were more willing to experiment. According to Aaron, 54% of Baby
Boomers knew what they wanted to buy when they went into a liquor store, while only 25% of younger
generations knew. A recent survey confirmed this assertion: younger drinkers were more open to try
new drinks (18% versus 8% of the general population), more likely to equate price with quality (40%
versus 27% of Baby Boomers), and were “more likely to tell their social networks about their choices.” 22
4
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Company Background
Aaron and Janousek met in 2006 while working together at Bloom Energy, a San Jose-based startup
focused on developing fuel cells (see Exhibit 7). Aaron, a Cornell graduate with a degree in electrical
engineering, had held both strategy and marketing roles in a variety of startup companies over the past
30 years. At Bloom, he was vice president of marketing and product management. After leaving Bloom
in 2010, he became the chief commercial officer at Blue Jeans Network (video conferencing) and then
the chief operating officer at PsiQuantum (quantum computing). His partner Janousek had a PhD in
Material Science and had been vice president of technology development at Bloom. Later he became
an Entrepreneur-in-Residence at Khosla Ventures and founded several technology startups. While at
Bloom, Aaron and Janousek began to play golf on Saturday mornings followed by coffee and wideranging discussions. Over time, the discussions gradually displaced the golf as their friendship grew.
The original idea for the company grew out of Janousek’s frustration with how expensive high-end
wines and spirits were. As a member of a wine and whiskey club, his inability to get really good spirits
at reasonable prices raised a simple question, why not? Barrel aging whiskey was an arcane process
that took a long time and added considerable expense. He said, “Fifty years ago, we put a man on the
moon, but we still don’t know what’s happening inside the barrel, and still don’t know how to make
good whiskey quickly. It’s a chemical process that we should be able to understand and control.”
Intrigued, he wondered if material science and data analytics could be used to accelerate, control, and
even tailor the aging process? If so, the implications were enormous. Janousek said:
“Advantage is all about the learning cycle—how fast you learn. If we could develop a learning cycle
that was 100 to 500 times faster than the current producers [aging in one week rather than five or
ten years] then we could dramatically change the production process, the economics, and ultimately
the industry. No one could compete with us. The established producers don’t have the ability to
experiment quickly or with much precision. So they rigidly stick with what’s worked in the past.”
In 2016, he started experimenting with making whiskey in his garage. Through careful analysis of
the inputs and the process, he was gradually able to refine the resulting product. Yet by his own
admission, the early batches were terrible. After six months and some 500 experiments, the whiskey
was getting quite good. He then enlisted some knowledgeable friends to test the products. About a
year later, he had a product that held up well in blind taste tests against more well-known brands. It
was at this point, in late 2017, that Janousek first mentioned the idea to Aaron. Aaron recalled:
“As Martin described the idea to me, I immediately thought it had all of the markings of what you
look for as an entrepreneur and an investor. First, it had a massive market. Second, the market was
ripe for disruption given the shifting consumer demographics and preferences. Third, it used a new
technology that was differentiated and defensible. And fourth, it had a mission—in this case
sustainability—that evoked passion beyond the clever business idea. With these four attributes, we
knew we had something. The only question was whether we could make the technology work.” 23
They incorporated the company in early 2018, and named it Bespoken Spirits. As the products
continued to improve, they decided to enter tasting competitions. In the summer of 2019, Bespoken’s
Bourbon Mash Whiskey won gold medals at the MicroLiquor Spirits Awards (June), a competition
focused on emerging brands, and at the New York World Wine & Spirits Competition (August) where
it competed against whiskeys that had been aged for up to 10 years. 24 Then in March 2020, Bespoken
won eight medals (two gold, two silver, and four bronze) at the San Francisco World Spirits
Competition, the largest international spirits competition in the U.S. 25 These medals gave them the
confidence to start selling their products at retail outlets and building the company.
5
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Bespoken Spirits: Disrupting Distilling
They pitched investors on the idea that science and technology could be used to replicate the effects
of barrel aging, but with greater ability to tailor the whiskey’s aroma, color, and taste (ACT) profiles.
One of the first investors was TJ Rodgers who had invested in Bloom Energy. His investment in early
2019 allowed them to move the company into lab space in Menlo Park. About a year later, they invited
Derek Jeter to invest given his expertise in building brands. Aaron first met Jeter when he had invested
in Blue Jeans Network several years earlier. Jeter, seeing the opportunity, quickly agreed to invest.
As they pitched the company to potential investors, they said the initial goal was to create a $100
million business en route to creating a billion-dollar business. Given recent acquisition pricing for
spirits companies had occurred at $1,000 per case sold, this implied Bespoken would need to sell
100,000 cases per year to merit a $100 million valuation (annual sales of $35 to $40 million). As
precedent, they looked at companies like High West Distillery, which sold premium whiskies at a retail
price of $75 per bottle that were blends of whiskies produced by other distillers such as MGP
Ingredients. 26 The acquisition of High West at $2,300 per case set the high mark for acquisition
pricing. 27 Other success stories included the privately-owned Tito’s Handmade Vodka and Diageo’s
Bulleit Bourbon. Founded in 1995, Tito’s was selling 100,000 cases per year by 2005 and became the
best-selling spirit in the United States by 2019,. 28 Bulleit reached annual sales of 100,000 cases in 2012,
13 years after it was founded, and currently sold more than one million cases per year. 29 Over time,
these companies had built strong and recognizable brands which helped drive their sales.
Bespoken’s ACTivationTM Technology
Bespoken was not the first company to attempt to accelerate the aging process. Others had
experimented with smaller barrels to increase the ratio of wood to liquid and agitation to ensure more
contact with the wood. 30 Janousek believed a different approach, a much more precise and carefully
controlled approach, could be used to refine a spirit while still using only traditional ingredients.
The basic process involved adding a precise mixture of “micro staves” (small blocks of wood) to a
source spirit and controlling the environment (temperature, pressure, agitation rate, etc.) in which the
chemical reactions occurred to rapidly infuse the spirit with specific aromas, colors, and tastes (see
Exhibit 8). Each micro stave contained 1/25,000 of the wood in a traditional barrel and varied by the
types of wood used as well as the precise levels of toasting and charring. Janousek meticulously
recorded the physical properties of all inputs and then, after three or four days of processing, the
chemical composition—the “chemical fingerprint”—of the resulting spirit. Using this process, the
Bespoken ACTivator™ could produce 500 proof-gallons per week. Because of the speed, they did not
lose any volume due to evaporation. Equally importantly, it required less than 3% of the wood and less
than 1% of the energy normally used to barrel-age whiskey. 31 Janousek was quick to note that their
process did not require any chemical additives nor did it use artificial coloring or flavoring. The current
ACTivator™ cost approximately $100,000 to assemble though future models would cost half as much
and have ten times the capacity. To protect their technology, they had or had filed for approximately
10 patents on the equipment and the processes in an attempt to prevent imitation by competitors.
Once the ACTivationTM process was complete, they asked expert tasters to assess the quality and
determine how closely it matched the desired ACT profile using blind taste tests. With this feedback,
they repeated the process until they achieved the desired properties. Over time, as their data base of
experiments and their understanding of the process grew, the time to achieve a desired profile shrank
dramatically. This meant they could quickly tailor products for specific customers and capitalize on
emerging consumer trends in less than four weeks and sometimes as little as one week.
6
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Some early critics complained that accelerated aging took the art and romance out of producing
whiskey. 32 Aaron disagreed:
I would argue that our approach adds more romance, art, and creativity to the whisky-making
process because we have a lot more levers to create customized spirits that customers want. It’s like
today’s use of computer-aided animation versus the old hand-drawn animation. Computer-aided
animation is still art, but it’s so much more powerful, so much more versatile, and so much more
economical than the hand-drawn method, and the industry evolved in that direction. 33
By 2020, Bespoken was producing and selling five types of whiskey and one dark rum (see Exhibit
9). These products had won 22 medals in six competitions within six months. 34 One judge at a recent
competition said, “[This is a] fun craft rum with lots of spicy and darkly toasted flavors; this is a
distillery to watch.” 35 According to Janousek, “This is further proof that a spirits’ color, aroma, and
most importantly taste, can be designed and precisely controlled through science, resulting in premium
spirits that can be adapted to a wide range of palates, from commercial appeal to highly discerning
aficionados.” 36
Despite the awards, there were the inevitable critics. For example, in an “open” tasting of Bespoken
products (i.e., the reviewer knew what he was drinking), the reviewer said, “[T]his is not a bad entry
for a bourbon…but there was very little that was exciting about this drink either. Easy to drink, but it
tastes young.” 37 And another critic said, “It’s not a flavor profile I love, and it did taste a bit young. But
if you placed it before me in a blind tasting, I wouldn’t have guessed it was a whiskey speed-crafted
via some crazy technology.” 38 Acknowledging the criticism, Aaron responded this way:
We take every piece of feedback seriously and it helps influence what we do going forward. Because
taste is in the eye of the beholder, we’re always evolving our products and methods. Part of our value
is that we can create different things for different people. If a person doesn’t like a bottle because it’s
too dry or too fruity, we can quickly create a new bottle for them or their demographic that matches
what they do like. And that’s exactly the power of Bespoken process, and our value proposition. When
you try one of our bottles, it’s just one of the over 17 billion b varieties we can make. 39
The Three Business Models
When they presented the company to the public for the first time in October 2020, Aaron described
Bespoken Sprits as a combination of three well-known companies:
We are a cross between 23andme, Nespresso, and Impossible Foods. We’re like 23andme because
we’re correlating customer preferences with recipes and final products which is like mapping a
spirit’s genome. We’re like Nespresso because our machine, the ACTivator™, takes spirit and our
proprietary recipe pods and produces whiskey quickly, although obviously on an industrial scale.
And finally, we’re like Impossible Foods because we’re redefining an antiquated production model
and creating a process that’s much more sustainable.
Given the new round of financing and their limited financial and human resources, they now had
to decide how to proceed. Should they continue selling whiskey to consumers and/or should they sell
their processing technology and services to businesses? Because their technology accelerated the aging
b The 17 billion figure was based on combinations of different types, mixes, and seasoning processes for wood (seasoning could
vary by process—natural vs kiln dried—and time), different kinds of raw spirits (both type and proof level), different levels and
techniques for toasting and charring, different proof levels of the target spirit, and different activator settings (temperature,
pressure, agitation, and time).
7
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Bespoken Spirits: Disrupting Distilling
process, enhanced the flavor profile, reduced production costs, and allowed customization, it appealed
to different customers for different reasons. The question was whether they should target whiskey
drinkers (a B2C company) or business customers interested in using their technology and services (a
B2B company).
A Product-based Company
To analyze the implications of building a company that sold 100,000 cases of spirits per year, Aaron
built a detailed financial model using both publicly traded companies and successful startups as
benchmarks. (Exhibit 10 shows financial data for several publicly traded spirits companies.) Based on
the model, he concluded it would likely take up to 10 years and require more than $100 million of
investment to enter the crowded whiskey market and achieve name recognition: $40 million for
marketing, $40 million for sales, $15 million for R&D, and $20 million for general and administrative
(G&A) expenses. Although operating profits would cover much of this investment, they would still
need to raise $20 to $30 million of funding depending on the growth rate and case pricing. Reflecting
on the model and the histories of the successful startups, Aaron said:
There’s a playbook for this kind of business which we’ve learned by studying the success of Tito
vodka, High West whiskey, and Bulleit bourbon, among others. The good thing about building a
consumer business is that you control the process—there’s a more known relationship between
what you put in and what you get out—and you establish a brand which helps protect the business.
Making whiskey has given us chance to learn about the market, explore the sales process, and
understand consumer preferences. As a first-mover, we have a lot of data and accumulated
knowledge, our patents, and scale as well as credibility in the market to keep us ahead of other firms.
Until this point, Bespoken had developed products primarily to “prove the concept.” They had
convinced people that the technology worked—they could make high-quality whisky consistently and
at scale, and they could tailor the process to achieve desired ACT profiles. The “go to market” strategy
had them utilizing a contract bottler for production, selling to retailers via distributors, and pricing
half-sized bottles (375ml) for $30 each (the same retail price point as many premium whiskeys in
standard 750ml bottles). At this price, a customer could try a single bottle at a reasonable $30 entry
price point or two different types for the same $60 price they would pay for one bottle of another
premium brand. With an equivalent retail price of $60 per 750ml bottle, Bespoken could expect to
receive a wholesale price of $30 per bottle (or $360 per 9-liter case) once retailer and distributor margins
were factored in. They also chose unique bottle shapes and brightly-colored labels to attract attention
in advertisements and on shelves.
According to the model, the business would generate gross margins in the 60% to 80% range. But
given the heavy investment in sales and marketing, the operating margins would be negative for at
least five to seven years. Before they could decide if this were the right direction to go, they had to
answer a number of product and financial questions. First, related to their products, should they
remain focused on whiskeys primarily, or expand into other barrel-aged products like gin, rum, or
tequila? Knowing the keys to success were having a good product, which they did, and building a
powerful and evocative brand name, what steps were needed to build the brand? With regard to
finances, how much capital should they raise, when should they raise it, and from whom?
A Technology-Based Company:
Alternatively, they could build one or more service business based on their processing technology.
Currently, they were exploring two service businesses: one based on providing maturation services
(the MaaS business) and the other based on providing customization services (the CaaS business).
8
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For the exclusive use of M. Abduldaim, 2022.
Bespoken Spirits: Disrupting Distilling
721-419
Maturation-as-a-Service (MaaS)
The target customer for the MaaS business would be breweries, distilleries, or rectifiers that wanted
to improve a young or low-quality product, or introduce a new product quickly. For breweries, they
could take excess or expired beer (an intermediate product in making whiskey) and run it through their
process to make premium whiskey. For distilleries, they could help firms by accelerating the “time to
revenue,” rapidly reproducing or refining successful products, or creating new products without
having to wait several years. Finally, rectifiers, unhappy with the blends they had produced, could use
the technology to enhance their ACT profile and price. For example, Bespoken had recently helped a
company that had purchased 200,000 gallons of whiskey. The owners loved the whiskey when they
first tried it, but were less excited about the batch they received which had been produced at scale.
Aaron said, “They asked us to refine the spirit to that profile they [initially] fell in love with.” 40
Depending on the source spirit, the refining process could add from $5 to $15 or more to the retail price
(i.e., making a “value” product into a premium product) or increase demand at the original price.
Under this model, customers would ship spirits to Bespoken’s facilities in California in bulk (by
tanker trucks or containers), where they would be processed for $2 to $10 per proof gallon ($0.30 to
$1.60 per 750ml bottle) depending on volume and recipe complexity, plus the cost of shipping. While
all of the processing currently took place in California, the ACTivatorsTM could, and eventually would,
be put on trucks and driven to or set up at customers’ production facilities. This model was expected
to generate gross margins ranging from 50% to 80% depending on price and experience (i.e., it would
increase over time). Exhibit 11 shows the time and economic savings for a typical distillery from using
Bespoken’s processing technology. On the one hand, a distillery could distill and age their own spirit
for five years; could buy “white dog” (unaged spirits) and age it for five years; or buy 5-year-old spirits
and sell that directly. The total cost of producing and aging the spirit would be approximately $7.16,
$5.47, and $9.19 per bottle, respectively. Alternatively, that distillery could buy “white dog” spirits and
let Bespoken refine it at a cost of say $7.50 per proof gallon for a total cost of $2.77 per bottle. Using
Bespoken would save up to five years and as much as 50% to 70% of the cost.
The Covid-19 pandemic created a heightened interest in the MaaS business for two reasons. First,
the sudden closure of restaurants and bars meant that many breweries had excess beer which was
expiring worthless. That beer could be used as a mash and distilled into premium whiskey, and
Bespoken could process the whiskey to enhance its ACT profile. With a handful of large breweries and
more than 8,000 craft breweries in the U.S., this could be a large, but potentially fleeting market
opportunity. 41 At the same time, the pandemic left many craft distillers short on cash and looking for
ways to accelerate if not generate cash flows. Whether craft distillers could sell incremental volume
would remain to be seen. Bespoken had also been able to offer value to distillers going after the rapidly
growing ready-to-drink (RTD) cocktail market by allowing RTD cocktail producers to take their
younger spirits and make them taste like their older spirits for use in RTDs while continuing to sell
their older spirits as premium products at premium price points.
Customization-as-a-Service (CaaS)
Instead of focusing on saving customers time and costs, Bespoken could also focus on producing
customized products for a range of customers. These products might have a signature taste profile or
resemble a more well-known product, but cost less to produce. The target market for the CaaS business
would be smaller businesses such as fine dining restaurants (there were 5,000 in the U.S. with an
average check of more than $50 per person), luxury hotels (approximately 1,000 in the U.S.), and bars
and nightclubs (60,000 in the U.S. but only a fraction might be potential customers), as well as some
larger businesses such as grocery chains (40,000 outlets in the U.S. with larger chains such as Kroger or
9
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For the exclusive use of M. Abduldaim, 2022.
721-419
Bespoken Spirits: Disrupting Distilling
Walmart dominating the market) or corporate customers looking for gifts for employees, customers,
and/or marketing programs. 42 As an example, Bespoken had recently produced a batch of thousands
of proof gallons of Japanese style whiskey for a grocery chain in the Western U.S. Interestingly, it used
the same source spirit as a Bespoken house brand, but produced a very different end spirit by design.
In contrast to the MaaS model where Bespoken simply processed the spirit for customers, they
would be responsible for sourcing, processing, bottling, and shipping the spirit under the CaaS model.
As a result, the CaaS model would require more capital to fund inventories, buy machinery, and pay
for incremental space. Offsetting the need for more capital were two clear benefits: the sales cycle
would be dramatically shorter for most CaaS customers and the CaaS model provided some
opportunity for “light customization.” For example, a company might order bottles with the Bespoken
Spirits label as well as the company’s name or logo as gifts for employees, clients, or conference
attendees. The current cost for the CaaS product ranged from $200 to $500 or more per 9-liter case
(approximately $15 to $40 per 750ml bottle) depending on the specific type of spirit and volume, and
the sourcing, labeling, bottling, and taste profile. Though costs would vary by project, the CaaS
business was expected to generate gross margins from 50% to 80%.
Other distilleries such as Maker’s Mark had started to customize their products for customers.
Maker’s COO Rob Samuel’s said, “For the first 57 years of the brand’s life, we were the only distillery
in the world that made a just one product…[But we] get calls and requests on a weekly basis from
restaurants and stores that want to buy a barrel of Maker’s…” 43 To meet this demand, they created the
Private Select program where customers could buy a barrel of whisky and design their own variant of
the firm’s traditional whiskey using combinations of five different wood staves and nine weeks of
aging. 44 According to the firm’s web site, they could make over 1,000 different combinations, at a cost
of approximately $13,000 per barrel (or $54 per 750ml bottle given the company’s estimate of 240 bottles
per barrel). 45 Thus, Bespoken could do the same thing with vastly more taste profiles at a fraction of
the cost and in significantly less time.
Conclusion
The first few weeks of October had been incredibly busy for Aaron and Janousek with more than
25 press interviews following the company’s public announcement regarding the seed financing.
Hundreds of publications from around the world, ranging from the Financial Times and Barron’s to
Business Insider and TechCrunch, had written stories about the startup and its ability to deliver a
“premium-quality spirit in days rather than decades.” 46
While it felt good to have money in the bank, a collection of award-winning products, and growing
name recognition, the partners knew they had to move quickly. Both industry insiders and other
entrepreneurs had surely taken note of what they had accomplished and what they hoped to achieve.
Having proven the technology, they now had to decide which direction to go and which business
model to adopt at least in the short term. Should they remain product focused, ramp up the technology
and services businesses, or continue to develop both? Having alerted the world to a technology that
could solve the innovation, environmental, and financial challenges associated making whiskey, they
now had to commercialize the technology and begin the climb towards a $100 million valuation and
onwards towards their billion-dollar goal.
10
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
For the exclusive use of M. Abduldaim, 2022.
Bespoken Spirits: Disrupting Distilling
Exhibit 1
Sales of Distilled Spirits in the United States in 2019 (Producer/Wholesale Sales)
Type of Spirit
Volume
9-Liter
Cases (mil)
Producer
Revenues
($ millions)
Average
Price per
Case ($)
26.6
17.9
9.5
4.9
1.2
60.1
$3,979
$2,131
$2,370
$1,061
$236
$9,777
$150
$119
$249
$218
$195
$163
11%
7%
4%
2%
1%
25%
14%
7%
8%
4%
1%
34%
15.1
19.9
9.8
24.1
20.1
74.1
15.8
239.1
$2,677
$2,470
$918
$2,348
$3,382
$6,585
$865
$29,022
$178
$124
$94
$97
$168
$89
$55
$121
6%
8%
4%
10%
8%
31%
7%
100%
9%
9%
3%
8%
12%
23%
3%
100%
Types of Whiskey
Bourbon/TN Whiskey
Canadian Whiskey
Scotch
Irish Whiskey
Rye Whiskey
Total
Brandy/Cognac
Cordials/Liquors
Gin
Rum
Tequila
Vodka
Other
Total
Source:
721-419
Share by
Volume Revenue
Distilled Spirits Council of the United States, Spirit Data by Category, Product Fact Sheets and casewriter estimates,
available at: https://www.distilledspirits.org/spirit-data-by-category/, accessed 12/24/20.
Exhibit 2
Data on Craft Spirits Producers, 2011-2018
Craft Spirits Producers
Sales by
Market Share by
Volume
Value
Volume
Value
(000 cases) ($ billions)
(percent) (percent)
Large Producers
Medium Producers
Volume
Number (000 cases)
Volume
Number (000 cases)
Year
Number
2011
2012
2013
2014
2015
2016
2017
2018
280
455
656
906
1,163
1,439
1,748
2,001
1,950
2,470
3,120
3,880
4,930
5,842
7,160
9,021
$0.8
$1.0
$1.3
$1.8
$2.4
$3.0
$3.7
$4.8
1.0%
1.2%
1.5%
1.8%
2.2%
2.6%
3.2%
3.9%
1.2%
1.4%
1.8%
2.3%
3.0%
3.8%
4.6%
5.8%
5
10
16
20
23
24
28
34
1,099
1,627
2,278
2,615
3,045
3,327
4,096
5,242
21
29
42
55
73
91
106
124
646
607
567
831
1,289
1,765
2,127
2,615
7-Yr CAGR
32%
24%
29%
21%
25%
32%
25%
29%
22%
Source:
Casewriter analysis of data contained in the 2017 and 2019 Economic Briefings, American Craft Spirits Association,
available at: https://americancraftspirits.org/news/craft-spirits-data-project/, accessed 12/4/20.
Note:
Medium craft producers made from 10,001 to 100,000 gallons per year (5,259 to 52,576 cases). Large craft producers
made from 100,001 to 750,000 gallons per year (52,577 to 394,317 cases).
11
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
For the exclusive use of M. Abduldaim, 2022.
721-419
Bespoken Spirits: Disrupting Distilling
Exhibit 3
Price Segments in the US Market for Bourbon/Tennessee Whiskey (as of 2019)
By Volume
Retail Price
750ml bottle
Value
Premium
High-End Premium
Super Premium
Total
Source:
3,674
7,065
12,348
3,481
26,568
14%
27%
46%
13%
100%
Historical
5-Year
CAGR
3%
5%
6%
19%
7%
$224
$739
$2,212
$804
$3,979
6%
19%
56%
20%
100%
4%
5%
7%
20%
8%
Casewriter analysis of Distilled Spirits Council of the US, Bourbon/Tennessee Whiskey 2019 Fact Sheet, available at:
https://www.distilledspirits.org/wp-content/uploads/2020/04/American-Whiskey-2019.pdf, accessed 12/4/20.
Exhibit 4
Source:
< $12
$12 – $20
$20 – $35
> $35
Cases Segment
Share
(000)
By Revenue
Historical
Sales Segment
5-Year
($mil)
Share
CAGR
The Process of Making Whiskey
Used with permission from Garrett Gardner (the creator) in an email dated 1/13/20. Original image available at:
https://champagnewhisky.com/2013/03/02/end-of-the-line/.
12
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
Source:
$180
$12
$15
$207
5
$1,035
53
$19.53
$0.68
$3.00
$9.22
$12.22
$0.50
$0.20
$0.50
$6.02
$2.01
$0.40
$0.35
$0.25
$0.50
$1.50
*Assumes 50% of Operating Expense Is fixed
Label
Labor
Shipping Carton
Shipping/Freight
Total (variable) COGS
G&A Expenses
Utilities
Rent/Equipment
Selling
Marketing & Advertising
Total Operating Exp.*
Total
Bottle and Closure
Bottling, Selling & Distribution Cost
Per BOTTLE
Rent/Facilities
Insurance/Other
Energy
Total per Year
Number of Years
Total Cost for all Years
Gallons per Barrel
Undiscounted Cost/Gallon
Cost per Year per Bottle
Per BARREL
Production
Storage
Bottle, Sell & Distribute
Variable COGS
Operating Expense*
Total
Quantity Produced
Output
Bottles
303
proof
proof
“Angel’s Share”
by final year
liters @125 proof
liters (calculated)
liters @90 proof
750ml bottles
gallons
liters/gallon
liters
$3.00
$9.22
$20.13
Cost Per
Barrel
Bottle
$1,360
$4.49
$1,035
$3.42
Input
Barrels
1.0
125
90
53
3.785
201
5
4%
18%
164
64
227
0.75
303
Summary Table (*ignoring timing*)
Distilled Spirits are
Final Product is
1 Barrel Distilled Spirits
Metric Conversion
Qty. of Distilled Spirits
Years of Aging
Evaporation (per year)
Total Loss
Quantity of Aged Spirits
Water Added
Quantity of Final Product
Liters per Bottle
Number of Bottles
Production and Output
-13-
Casewriter assumptions and analysis based on three sources: Eastside Distilling, 2019 Annual Report, available at: https://www.eastsidedistilling.com/annual-reports , “The
Long Haul” by D. Snyder in Distiller Magazine, 10/1/16, available at: https://distilling.com/distillermagazine/the-long-haul/; and L. Bryson, “Why is Bourbon So Damn
Expensive?” The Daily Beast, 3/1/18, available at: https://www.thedailybeast.com/why-is-bourbon-so-damn-expensive?ref=scroll. All accessed 12/14/20.
$1,360
53
$25.66
$20.00
$100
$75
Rent/Equipment
Administrative
Total Production Cost/Barrel
Gallons per Barrel
Cost per Gallon
Cost/Gallon (excl. Barrel)
$640
$545
Raw Materials–Mash
Corn
$350
Rye
$115
Barley
$30
Yeast
$50
Total
Other Production Expenses
Labor (Distiller)
$290
Utilities
$50
Amer. Oak Barrel
$300
Total
Per BARREL
Storage Cost Per Year
The Cost Structure for Making Premium Whiskey (Undiscounted Analysis)
Production & Raw Material Cost
Exhibit 5
721-419
For the exclusive use of M. Abduldaim, 2022.
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
For the exclusive use of M. Abduldaim, 2022.
721-419
Bespoken Spirits: Disrupting Distilling
Exhibit 6
Source:
The Economics of Making 5-Year-Old Premium Whiskey per Bottle (Pre-tax Analysis in
Dollars Assuming a Discount Rate of 10%)
Casewriter analysis based on the assumptions and analysis in case Exhibit 5.
14
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
For the exclusive use of M. Abduldaim, 2022.
Bespoken Spirits: Disrupting Distilling
Exhibit 7
Source:
Bespoken Spirits Cofounders Martin Janousek (left) and Stu Aaron (right)
Company documents.
Exhibit 8
Source:
721-419
Bespoken’s ACTivationTM Technology
Company documents.
15
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
For the exclusive use of M. Abduldaim, 2022.
721-419
Bespoken Spirits: Disrupting Distilling
Exhibit 9
Source:
The Bespoken Branded Product Line and Examples of Custom Products.
Company documents.
16
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
For the exclusive use of M. Abduldaim, 2022.
Bespoken Spirits: Disrupting Distilling
Exhibit 10
Financial Data on Publicly Traded Distilleries, FY2019 (US$ in millions)
Revenue ($mil)
Profit Margins
Gross Margin
Operating Margin
Net Margin
Return on Capital
SG&A / Revenue
Total Assets
Sales/Assets
Inventory
Inventory/Assets
Days of Inv. Outstanding
Debt-to-Total Capital
Total Enterprise Value (TEV) Multiples
TEV / Revenue
TEV / EBITDA
Source:
Note:
721-419
Eastside
Distilling
Corby Spirit
and Wine
MGP Brown-Forman
Ingredients
Corp.
$16
$117
$363
$3,403
35%
(85%)
(108%)
(41%)
62%
23%
17%
13%
21%
13%
11%
12%
64%
33%
25%
16%
120%
39%
8%
31%
$36
0.4
$12
35%
421
56%
$174
0.7
$47
27%
377
3%
$323
1.1
$137
42%
157
17%
$5,553
0.6
$1,654
30%
463
56%
2.4
n/m
2.9
9.9
2.4
14.8
10.2
29.4
Casewriter analysis of data from Standard & Poor’s Capital IQ database, accessed 12/7/20.
Eastside Distilling produced high-quality, award-winning craft spirits (Portland, OR). It was founded in 2008 and
sold 137,000 cases in 2019. 47
Corby Spirit & Wine manufactured and distributed premium spirits and imported wines (Canada).
MGP Ingredients supplied premium distilled spirits (aged and unaged) and specialty wheat proteins (Atchison, KS).
Brown-Forman manufactured and distributed fine quality branded wine and spirits (Louisville, KY). Brown-Forman
owned several whiskey brands including Jack Daniels, Woodford Reserve, and Old Forester
17
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
0
$0.00
$0.00
$17.50
($40.50)
($17.03)
($27.69)
70%
49%
61%
The “Distill Own Spirit” assumes a small- to medium-sized producer. The “Buy White Dog” and “Buy 5-year-old” scenarios use prices from a major distiller such as MPG
Ingredients. White Dog spirits are unaged spirits. They would require five years of aging or treatment with the Bespoken process to have the taste profile of a 5-year-old spirit.
$2.77
$9.19
$5.47
$7.16
Note:
Conversion from Source Spirits in Proof Gallons
to Finished Product in Regular Gallons (Ignoring Angel’s Share)
Gallons
Proof
Distilled Spirits Proof Gallons
1.00
125
Finished Product Regular Gallons
1.25
100
Liters per Gallon
3.785
Number of Liters
4.73
Liters per 750ml Bottle
0.75
Number of 750ml Bottles
6.31 per proof gallon
$7.50
0
5
$34.53
$58.00
5
$45.19
Final
Cost Per
Bottle*
Casewriter analysis based on case facts and company information.
$0.00
$0.00
$19.53
$19.53
Total
Cost
Savings per Proof Gallon
vs. Bespoken Process
Time in
Savings in
Dollars
Years
Percent
-18-
Source:
10
$20.70 for rent, insurance, & utilities
$207.00 with 53 Proof Gallons
$3.91
$10.00
Use the Bespoken Process
Buy White Dog and Process It
0
$0.00
Annual Storage Cost
SqFt per Barrel
Cost per SqFt
Cost per Barrel
Cost per Proof Gallon
$58.00
Buy 5-Year Old Spirits
Includes Barrel Cost
5
$5.66
Cost Per Proof Gallon for
Total
Undiscounted Bespoken
Storage Processing
Barrel
$300.00
53 Filled with proof gallons
$5.66
$15.00
Buy White Dog and Age
Includes Barrel Cost
5
Storage
Time
(Years)
Barrel Cost (American Oak)
American Oak
Regular Gallons
Cost per Proof Gallon
$20.00
Distill Own Spirits and Age
Must Buy Barrel
Source
Spirit Cost
(125 Proof)
Economics of the MaaS Business (Includes Production and Storage Costs Only; Does Not Incorporate Discounting for Time)
Customer Option
Exhibit 11
721-419
For the exclusive use of M. Abduldaim, 2022.
This document is authorized for use only by Mustafa Abduldaim in Spring 22 BUS 498 Case Competition taught by RODERICK FRENCH, George Mason University from Jan 2022 to Jul 2022.
For the exclusive use of M. Abduldaim, 2022.
Bespoken Spirits: Disrupting Distilling
721-419
Endnotes
1 Dave Barr, “Bespoken Spirits To Accelerate Whiskey Aging In Days,” Startup Fortune, 12/13/20,
https://startupfortune.com/category/entrepreneur/, accessed 12/14/20.
2 Bespoken Spirits press release, “Bespoken Spirits L:aunches Sustainable Maturation process to save Industry $20B+ Each
Year,” Global Newswire, 10/7/20, https://www.globenewswire.com/news-release/2020/10/07/2104974/0/en/BespokenSpirits-Launches-Sustainable-Maturation-Process-to-Save-Industry-20B-Each-Year.html, accessed 12/10/20.
3 “Alcoholic Drinks,” Statista, https://www.statista.com/outlook/10000000/100/alcoholic-drinks/worldwide, accessed
12/15/20.
4 Bryner, Michelle, “How Much Alcohol is in My Drink,” LiveScience.com, 7/29/10, available at:
https://www.livescience.com/32735-how-much-alcohol-is-in-mydrink.html#:~:text=On%20average%2C%20the%20ABV%20for,how%20each%20beverage%20is%20made, accessed 12/24/10.
5 “Spirits,” Statista, https://www.statista.com/outlook/10020000/100/spirits/worldwide, accessed 12/15/20.
6 Bhavana Thorat and Roshan Deshmukh, “Whiskey Market,” Allied Market Research, July 2020, p. 29, via EMIS; Jake Emen,
“Who Owns Your Favorite Liquor Brands?,” Eater, 1/26/16, https://www.eater.com/drinks/2016/1/26/10830410/liquorbrands-hierarchy-diageo-beam-suntory-pernod-ricard, accessed 12/8/20.
7 Mordor Intelligence, United States Spirits Mrket, 2019-2024, page 41, available at:
https://www.mordorintelligence.com/industry-reports/united-states-spirits-market, accessed 12/10/20.
8 Tripp Mickle, “Constellation Brands Acquires High West Distillery for $160 Million,” Wall Street Journal, 10/4/16,
https://www.wsj.com/articles/constellation-brands-acquires-high-west-distillery-for-160-million-1475625536, accessed
12/9/20. “Our Story,” https://www.highwest.com/our-story, accessed January 11, 2021.
9 “FAQs,” Scotch Whiskey Association website, https://www.scotch-whisky.org.uk/discover/faqs/, accessed 12/10/20.
10 “Suntory Announces The Yamazaki 55 Years Old,” 1/30/20, https://www.nomunication.jp/2020/01/30/suntoryannounces-the-yamazaki-55-years-old/, accessed 12/8/20.
11 “Buyer’s Guide,” American Distilling Institute, https://distilling.com/resources/directory/buyers-guide/, accessed
12/18/20.
12 “The RNDC-Young’s Deal Creates A New Landscape Within The Middle Tier,” Shanken News Daily,
https://www.shankennewsdaily.com/index.php/2019/06/14/23247/the-rndc-youngs-deal-creates-a-new-landscape-withinthe-middle-tier/, accessed 12/18/20.
13 See “The Surprising Truth About Oaking Wine,” Wine Folly, 2/8/17, available at: https://winefolly.com/deepdive/oaking-wine/, accessed 12/24/20. Assumes a bulk purchasing discount of 18%.
14 Spedding, G., “Eighty Years of Rapid Maturation Studies,” Part 3, Distiller.com, 9/16/18, available at:
https://distilling.com/distillermagazine/eighty-years-of-rapid-maturation-studies/, accessed 12/24/20.
15 Dr. Horst Luening, “Whiskey: Price and Age,” Whisky.com, available at:
https://www.whisky.com/information/knowledge/about-whisky/about-whisky/whisky-price-and-age.html, accessed
1/12/21.
16 Houston, J., “What Is the Angel’s Share?,” Whiskey Wash, 4/20/16, https://thewhiskeywash.com/whiskey-styles/american-
whiskey/what-is-the-angels-share/, accessed 12/22/20.
17 Morning Consult, “American Drinking Preferences—Alcohol Industry Trends,” slide #6, August 2018, available at:
https://morningconsult.com/wp-content/uploads/2018/08/Brand-Intelligence-American-Drinking-Preferences.pdf,
accessed 12/24/20.
18 Wilson, Rob, “Top 10 Trends Affecting the Spirits Industry, Vol. XX, Issue 45, 9/10/18, available at:
https://www.lek.com/insights/ei/top-10-trends-affecting-spirits-industry, accessed 12/24/20.
19 Patricia Cobe, “Beer, Wine or Spirits: What’s Winning With American Drinkers?,” Restaurant Business, 8/3/18,
https://www.restaurantbusinessonline.com/beverage/beer-wine-or-spirits-whats-winning-american-drinkers, accessed
12/9/20.
19
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Bespoken Spirits: Disrupting Distilling
20 Billy Lyons, “Restaurants Are Leveling Up by Creating Their Own Signature Craft Spirits,” Fortune, 8/3/19,
https://fortune.com/2019/08/03/restaurants-signature-spirits/, accessed 12/23/20.
21 “Was 2018 the Year of the Influential Sustainable Consumer?” The Nielsen Company, 12/17/18, available at:
https://www.nielsen.com/us/en/insights/article/2018/was-2018-the-year-of-the-influential-sustainable-consumer/,
accessed 12/24/20.
22 Shanna M., “What are the biggest millennial drinking trends (alcoholic beverages only)?,” Wonder, 6/30/17,
https://askwonder.com/research/biggest-millennial-drinking-trends-alcoholic-beverages-only-jmnkqqpco, accessed
12/23/20.
23 This quote is a combination of comments made during interviews with the case writers and a podcast (Taste Radio, Episode
105, 11/20/20, by Ray Lativ). The podcast is available at: https://www.tasteradio.com/insider/2020/taste-radio-insider-ep105-how-to-disrupt-an-industry-consider-a-tailored-strategy/, accessed 12/24/20.
24 Kilgore-Marchetti, Nino, “Accelerated Whiskey Aging Company Bespoken Spirits Nets Some Awards,”
TheWhiskeyWash.com, 3/5/20, available at: https://thewhiskeywash.com/whiskey-styles/american-whiskey/acceleratedwhiskey-aging-company-bespoken-spirits-nets-some-awards/, accessed 12/24/20.
25 “Bespoken Spirits Wins Eight Awards at the 2020 San Francisco World Spirits Competition,” PRlog.org, 3/30/20, available
at: https://www.prlog.org/12816494-bespoken-spirits-wins-eight-awards-at-the-2020-san-francisco-world-spirits-competitionsfwsc.html, accessed 12/24/20.
26 Ethan Fixell, “A Utah distillery proudly drags the whiskey industry’s dirty little secret out of the shadows,” Quartz, June 2,
2016, https://qz.com/697411/a-utah-distillery-proudly-drags-the-whiskey-industrys-dirty-little-secret-out-of-the-shadows/,
accessed 12/9/20.
27 The $2300 per case figure was calculated by the casewriter based on 70,000 cases sold and an acquisition price of $160
million. See: Tripp Mickle, “Constellation Brands Acquires High West Distillery for $160 Million,” Wall Street Journal, 10/4/16,
https://www.wsj.com/articles/constellation-brands-acquires-high-west-distillery-for-160-million-1475625536, accessed
12/9/20.
28 Ginger Cowles, “Vetaran goes back to work to help Tito’s vodka boom,” Austin American-Statesman, 11/15/05, via Factiva;
“Tito’s Is Now Officially America’s Best Selling Vodka,” Vinepair, 1/14/20.
29 Lucy Britner, “‘Diageo needs to be one of the best incubators of new brands’ – CEO,” Just-Drinks, 8/4/17, via Factiva.
30 Wayne Curtis, “One Man’s Quest to Make 20-Year-Old Rum in Just Six Days,” Wired, 5/30/17,
https://www.wired.com/2017/05/brian-davis-lost-spirits-distillery-aging-rum-fast/, accessed 11/5/20.
31 Bespoken Spirits, Investor Presentation, October 2020, p. 14.
32 Gapper, J., “Technology Cannot Distil Whiskey’s Old Romance,” The Financial Times, 10/9/20, available at:
https://www.ft.com/content/e892ae79-0f41-4826-bb6f-5ca8373a57a3, accessed 12/14/20.
33 This quote is a combination of comments made during interviews with the case writers and a podcast (Taste Radio, Episode
105, 11/20/20, by Ray Lativ). The podcast is available at: https://www.tasteradio.com/insider/2020/taste-radio-insider-ep105-how-to-disrupt-an-industry-consider-a-tailored-strategy/, accessed 12/24/20.
34 Bespoken Spirit investor presentation, October 2020, p. 12.
35 “Bespoken Spirits Rum,” https://www.tastings.com/Spirits-Review/Bespoken-Spirits-Rum-USA-375-ml-04-01-2020.aspx#,
accessed 12/22/20.
36 Bespoken Spirits press release, “Bespoken Spirits Whiskey Wins 10 Awards Including ‘Bet of Category’ at ADI’s 2020
Judging of Craft Spirits,” Digital Journal, 4/21/20, http://www.digitaljournal.com/pr/4657852, accessed 12/22/20.
37 John Dover, “Whiskey Reviews: Bespoken Spirits,” Whiskey Wash, 9/3/20, https://thewhiskeywash.com/reviews/whiskeyreviews-bespoken-spirits/, accessed 11/5/20.
38 Kirk Miller, “A Derek Jeter-Backed Spirits Company Wants to Mature Whiskey in Days, Not Years,” InsideHook, 10/12/20,
https://www.insidehook.com/article/booze/bespoken-spirits-derek-jeter, accessed 12/22/20.
20
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Bespoken Spirits: Disrupting Distilling
721-419
39 This quote is a combination of comments made during interviews with the case writers and a podcast (Taste Radio, Episode
105, 11/20/20, by Ray Lativ). The podcast is available at: https://www.tasteradio.com/insider/2020/taste-radio-insider-ep105-how-to-disrupt-an-industry-consider-a-tailored-strategy/, accessed 12/24/20.
40 Miller, Kirk, “A Derek Jeter-Backed Spirits Company Wants to Mature Whiskey in Days, Not Years”, Inside Hook,
10/12/20, available at: https://www.insidehook.com/article/booze/bespoken-spirits-derek-jeter, accessed 12/24/20.
41 Rachel Arthur, “‘Craft brewers are facing new realities’: US craft beer grew 4% in 2019—but 2020 will be a difficult year,”
Beverage Daily, April 15, 2020, https://www.beveragedaily.com/Article/2020/04/15/US-craft-beer-grew-4-in-2019-but-facesdifficult-2020-with-coronavirus, accessed 12/23/20.
42 The fine dining figure comes from: White, L., “The Fine Tuning of Fine Dining,” FESMag.com, 2/1/18, available at:
https://fesmag.com/topics/trends/15478-the-fine-tuning-of-finedining#:~:text=As%20of%20October%202016%2C%20the,firm%20CHD%20Expert%20North%20America. The luxury hotel
figure comes from: Hoisington, A., “Number of Luxury Hotels in the U.S. Set to Grow,” Hotelmanagement.net, 6/25/19,
available at: https://www.hotelmanagement.net/development/number-luxury-hotels-u-s-set-togrow#:~:text=The%20U.S.%20will%20have%201%2C067,growth%20rate%20of%201.7%20percent. The number of grocery
stores is from: Foodindustry.com, available at: https://www.foodindustry.com/articles/how-many-grocery-stores-are-therein-the-united-states/. Finally, the number of bars and restaurants is from “Bars and Nighclubs in the US,” IBISWorld.com,
12/8/20: https://www.ibisworld.com/industry-statistics/number-of-businesses/bars-nightclubs-unitedstates/#:~:text=Bars%20%26%20Nightclubs%20in%20the%20US%20%2D%20Number%20of%20Businesses%202001%E2%80%
932026&text=There%20are%2059%2C221%20Bars%20%26%20Nightclubs,of%20%2D1.9%25%20from%202019, all accessed
12/24/20.
43 “Maker’s Mark Unveils Private Select Single Barrel Program,” Market Watch, 10/3/16, available at:
https://www.marketwatchmag.com/makers-mark-private-select-september2016/#:~:text=Each%20barrel%20yields%20roughly%20240,to%20retailers%20this%20past%20spring, accessed 12/24/20.
44 Maker’s Mark website: https://www.makersmark.com/ca/how-its-made/makers-mark-private-selection, accessed
12/24/20.
45 “Maker’s Mark Unveils Private Select Single Barrel Program,” Market Watch, 10/3/16, available at:
https://www.marketwatchmag.com/makers-mark-private-select-september2016/#:~:text=Each%20barrel%20yields%20roughly%20240,to%20retailers%20this%20past%20spring, accessed 12/24/20.
46 Evans, Judith, “Silicon Valley Start-up Launches ‘Nespresso machine’ for Whisky,” Financial Times, 10/7/20, available at:
https://www.ft.com/content/3926e3bf-352b-4c47-8acb-d9b47dfa11cb, accessed 12/24/20.
47 Zacks Small-Cap Research Note on Eastside Distilling, Inc., 1/30/20, p. 45. Available on ThomsonOne, accessed 1/15/21.
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