Global Drinks Intel: What‘s the back-story to Lobos 1707?
Diego Osorio, founder of Lobos 1707: I moved to America about 15 years ago from England. I’d been acting and directing for most of that time. I went a few months without a job and you have to put that creative output and passion into something. I was talking to my cousin, who still works in the family company with wine and spirits in Spain. I wanted nothing to do with it – I’m an artist! He suggested that I do my own thing and combine what I’d learned from growing up around bodegas and wineries with storytelling. I thought that was really interesting, so that’s what I set off to do.
I knew it had to be tequila, because that was my poison of choice. At the time, the category was still fresh; it wasn’t what it is today.
When I started researching, I discovered I had a great-great-grandfather that moved from Spain to Mexico in the 1700s. By coincidence, his name was exactly my name. I took that as a sign. Then I learned that he’d taken barrels of sherry with him and filled them with the local spirit, which is what we know today as tequila. I was aware of what the whiskies and the bourbons of the world were doing with sherry, but no one had ever done it with tequila. I could see a unique entry.
I visited the south of Spain and stole 21 sherry barrels from my family. I also got a Spanish master distiller to come with me to Mexico on a paid vacation and got him together with a Mexican master distiller. Three hundred and twenty six different iterations later, we got to what Lobos is today.
It was never meant to be a company but after two and a half years, I realised I was in the hole for a lot more than I could afford on a passion project. I approached some of my friends and that snowballed into big friends and big investors who thought we have something special here and we should make a company out of it.
GDI: Are you out of the hole?
DO: We are very much out of the hole! We’re obviously in growth mode, depleting about 50,000 nine-litre cases last year.
GDI: Where did you seed the brand?
DO: This is the first year that I’m starting to build a plan. We first launched in New York, Florida, a little bit of Atlanta and Los Angeles with what we thought was six months of inventory – It lasted three weeks. Then we had to rearrange the whole company and launched again in April. We’re aligned nationally with [distributor] Southern Glazer’s Wine & Spirits in the US. We’re also in Canada and have just launched in the UK.
GDI: Where is Lobos 1707 positioned price-wise?
DO: We’re in what the industry calls ultra-premium. Our joven is priced at around US$40 and the reposado is closer to $50. We’re probably a little more expensive than Casamigos and Don Julio, but under the Clase Azul and the Komos levels.
GDI: Higher-end tequila is quite the battleground at the moment. How are you securing stand-out?
DO: Call me naive, but I believe we’re at the crossroads between craft and culture. We’re the only company that has the liquid to support how cool we are. It sounds very egocentric, but we focus on both aspects. Our reposado is selling in clubs in Las Vegas, but it also won best reposado at the San Francisco World Spirits Competition.
On top of that, we have some investors who are literally writing the future of culture and defining what’s quote- unquote cool.
We’re trying to focus on both things, which is hopefully a differentiation.
GDI: Is celebrity important to Lobos?
DO: It happened really well in vodka and obviously, George Clooney has been very successful in tequila. But there’s an authenticity that comes with tequila. Consumers are very smart – they can smell an endorsement or fakeness. We don’t consider ourselves a celebrity brand because our celebrities are all investors.
I don’t believe in the authenticity of some of the celebrities selecting barrels and agave plants. You’ll never see any of our celebrities doing any of that. What we’re doing is working. It’s cutting through the noise, which is great.
GDI: Which celebrities have you got backing the brand?
DO: [Basketball player] LeBron James is probably the most prominent. We also have Draymond Green, Fred VanVleet and Zach LaVine from basketball, and Arnold Schwarzenegger – He’s a national treasure!
These investors help us get to places and things that we would never be able to afford if we had to.
GDI: Did you have an exit strategy when you started? Does it still apply today?
DO: I really think this is a legacy play. A lot of the guys involved who trusted me with their money just want to build something that they can look back on and say: “We did that.”
Time will tell whether we have an alignment with a massive supplier to help us do that or not. I’ve had conversations with most of the big players out there. We’re very happy building it as we go along. I hope I get some help from one of those guys sometime, but it’s not something I actively desire every day.
GDI: Do you eye acquisition announcements from your peers with envy?
DO: Success isn’t a pie that everyone takes a piece of and there’s less for you. Look at Brown-Forman, Diageo, Pernod Ricard: They all have multiple whiskey/whisky brands, for example, that are at the same price point. It wouldn’t be surprising for those larger companies to add another tequila brand to their portfolios.
When our time is right and the right partner comes, hopefully we’ll all be very happy.
GDI: In the meantime, the ground is shifting under premium-plus tequila as the price of agave is falling.
DO: Those pressures don’t really affect a brand of our size. We work with a [growers] co-op in Mexico and we have very healthy margins. So, we got a bit of an advantage from the agave drop. I think the bottom’s dropping off for brands that are struggling to get finance. Before, anyone that wanted to, could launch a brand, but now we’re seeing smaller brands slowly disappear.
We’re on the small side, but hopefully approaching medium size. We’re just three years old – We’re building the plane and reading the manual as we go along.
At the same time, the consumer’s still doing the same thing – they’re drinking a little less and they’re drinking a little better.
GDI: What advice would you give a spirits start-up?
DO: A lot of people jump into promotion, design of bottle and that kind of thing. If what’s in the bottle is not good, you can sell it, but they won’t come back. Don’t take consumers for granted. They really care what’s in the bottle.
The other piece of advice is, you have to love the liquid that you built because you’re going to be trying it a lot!
