Excerpted from forbes.com.
Recent economic turmoil has stymied new venture funding and prospects. According to CB Insights, in Q3 2022, global startup funding fell to $74.5 billion, marking a 34% decrease from 2021 and a nine-quarter low. Looming recession risk and ongoing resource shortages further stress entrepreneurial success chances — especially for enterprises reliant on sales and distribution to competitive consumer markets.
The Lost Explorer Mezcal, started by a leadership team of spirits industry experts in partnership with maestro mezcalero Don Fortino Ramos, is beating those odds with mission focus, strategic clarity, operational excellence and nimble digital savvy.
Despite a launch that coincided with the the pandemic’s onset, their business model delivered quick success — ranking as 2021’s most award-winning mezcal, including multiple medals at the prestigious San Francisco World Spirits Competition.
Mezcal is a fast-growing spirits category. According to Nielsen, exports to the U.S. increased more than fivefold since 2015. The momentum continues, as Modor Intelligence forecasts approximately 20% annual growth worldwide through 2027.
While large conglomerates dominate the drinks industry, startup The Lost Explorer Mezcal roots its differentiation in premium offerings and sustainable production. CEO Tanya Clarke explained, “Celebrating the Earth is core to our brand purpose and sustainability has been at the heart of our business from the very outset. We are deeply committed to sustainable production of high-quality, handcrafted mezcal in a manner that not only benefits the local mezcal-producing community in Oaxaca and empowers sustainable Mexican enterprise, but also protects the land’s biodiversity.”
“Commitments include maestro mezcalero Don Fortino as a company shareholder, rainwater conservation and ambitious biodiversity practices such as waste composting and replanting at least three agaves for every one distilled,” she noted.
That fledgling ambition required a leadership team that could navigate the pandemic’s severe distribution detours and unexpected marketing hurdles.
CFO Olesya Esclapez credited cross-functional collaboration for that successful shift, highlighting, “I work closely the sales, marketing, production, and supply teams to expand and grow our business. Adaptability and resilience are key. We balance long-term ambition with flexible short-term plans. That’s been our mindset from the start.”
Traditionally, consumers are introduced to alcohol brands through “on-trade” channels via such as restaurants, bars and clubs. With hospitality venues shuttered by the pandemic, brands had to move to “off-trade” and “direct to consumer” promotion.
To achieve that reach, the leadership team devised and implemented a data-driven marketing strategy aimed at both distributors and consumers.
Positioning the mezcal alongside other premium brands relies not only on exceptional liquid quality and sustainability credentials, but also on distributors’ confidence and belief in the brand proposition. “In addition to sales and marketing, effective revenue management is key to brand building. We monitor and analyze market penetration and competitive price positioning in the agave spirits category,” Esclapez emphasized.
“It’s important that our distributors, customers and consumers around the world understand the rationale behind our premium price positioning and the value associated with the hand-crafted, small batch production and sustainability credentials of our brand. Each varietal of mezcal comes in a bespoke bottle, made in Mexico from over 55% recycled crystal scraps, is hand-labeled and sealed with natural beeswax sourced from Guadalajara in Mexico,” she detailed.
To spark consumer interest and demand, social media effectiveness was essential. “The mezcal category is still in its early days and very fragmented, so the priority for us was to establish ourselves as a consistent luxury brand and gain market share. Normally, the industry spends millions on advertising. However, as a small start-up brand, we have a laser focus on Instagram and other on-line platforms, where we invest with a sophisticated, targeted media approach to reach consumers with luxury and sustainability interests, which is more effective and efficient,” she said.
That business model hinged on supporting the vision with effective operations.
Beyond consumer engagement and marketing initiatives, Escalapez offered three key, often understated, suggestions for CFOs and CIOs tasked with brand building.
1. Distribution partners’ perceptions enable growth. “Social media can quickly build followers. We could market to consumers, but our distributors deliver our product and they need to view us favorably. For example, Amazon in Europe is the biggest customer for the luxury portfolio of the largest spirits companies. Convincing distributors to carry and prioritize our brands translates into sales and market share,” she underscored.
“All industries are affected by global supply chain challenges. We ensure that we meet partners’ needs, carefully select our target markets and increase our logistics spend to avoid supply and sell-through disruption — that’s how to build the firm foundation that a leading brand requires,” Esclapez added.
2. Data automation transforms revenue management by building trust. Esclapez noted, “In general, our teams cannot focus on the value-added operations without reliable, transparent and timely reporting data. Our financial systems consolidates and profitability data across jurisdictions. That’s important from a regulatory perspective, but also drives are pricing strategy, product allocations and market share pursuits. Such insight is critical for effective revenue management and business growth.”
3. Scaling requires credible long-term capacity planning. While many new spirits brands focus on the US market only, The Lost Explorer widened its launch to include Mexico and key strategic markets with strong on-trade and luxury brand networks — specifically the UK, Australia, Greece and Italy. Future expansion plans underway target South America, mainland Europe and the Asia-Pacific region.
“We quickly realized that to meet growing global demand, we had to expand our production capacity, while preserving the quality of our mezcal and maintaining our replanting program — which is critical to our sustainability objectives,” she observed. “Therefore, we carefully watch our cash burn and invest early in CAPEX, so we are well funded to open new markets in the next few years.”
Those three principles connect concepts to cash flow, promote cross-functional collaboration and invigorate stakeholder relationships critical to lasting success.
A new entrant to the competitive spirits industry just thirty months ago, The Lost Explorer Mezcal is a thriving business positioned next to some of the most iconic spirits brands. Meaningful mission, clear differentiation, sound revenue management and disciplined leadership blazed that path. Who’s ready to toast success next?
Read the article on forbes.com HERE.