Recent economic turmoil has hindered new venture funding and prospects. According to CB Insights, in Q3 2022, global venture funding fell to $74.5 billion, down 34% from 2021 and a nine-quarter low. The looming risk of recession and persistent scarcity of resources further emphasizes the potential for entrepreneurial success – especially for companies that rely on sales and distribution in a competitive consumer market.
Founded by a leadership team of spirits industry experts in partnership with maestro mezcalero Don Fortino Ramos, The Lost Explorer Mezcal is beating the odds with mission focus, strategic clarity, operational excellence and agile digital skills.
Despite a launch that coincided with the start of the pandemic, their business model saw rapid success – ranked as the most awarded mezcal of 2021, including multiple awards at the prestigious San Francisco World Spirits Competition.
A delicate balance
Mezcal is the fastest growing spirit category. According to Nielsen, exports to the US more than quintupled since 2015. The momentum continues, with Modor Intelligence forecasting roughly 20% annual growth worldwide through 2027.
While large conglomerates dominate the beverage industry, startup The Lost Explorer Mezcal traces its uniqueness to premium offerings and sustainable production. CEO Tanya Clarke explained, “Celebrating the Earth is at the heart of our brand purpose and sustainability has been at the heart of our business since the beginning. We are deeply committed to the sustainable production of high-quality, handcrafted mezcal in a way that not only benefits the local mezcal-producing community in Oaxaca and supports a sustainable mezcal business, but also protects the country’s biodiversity.
“Debts include maestro mezcalero Don Fortino as a shareholder of the company, rainwater conservation and ambitious biodiversity practices such as composting waste and replanting at least three agaves for every distillate,” she said.
This nascent ambition required a leadership team that could navigate the pandemic’s serious detours and unexpected market obstacles.
CFO Olesya Esclapez credited cross-disciplinary collaboration for the successful transition, emphasizing: “I work closely with the sales, marketing, production and inventory teams to grow and expand our business. Adaptability and resilience are key. We bring together long-term ambitions and flexible short-term plans. This has been our mindset since the beginning.”
Novel and agile
Traditionally, consumers are exposed to alcohol brands through “channels of commerce” such as restaurants, bars and clubs. With the hospitality arena closed by the pandemic, brands had to move to “off-store” and “direct to consumer” promotions.
To achieve that goal, the leadership team formulated and implemented a data-driven marketing strategy targeting both distributors and consumers.
Positioning mezcal alongside other high-end brands relies not only on excellent liquid quality and sustainability credentials, but also on distributors’ trust 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 pricing in the agave spirits category,” said Esclapez.
“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 our brand’s handcrafted, small-batch and sustainability credentials.” Each variety of mezcal comes in a custom bottle, made in Mexico from over 55% recycled crystal residue, is hand-labeled and sealed with natural beeswax from Guadalajara, Mexico,” she detailed.
To ignite consumer interest and demand, social media effectiveness was essential. “The mezcal category is still in its early days and very fragmented, so our priority was to establish ourselves as a consistent luxury brand and gain market share. Usually, the industry spends millions on advertising. However, as a small start-up, we have a laser focus on Instagram and other networks, 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 was about supporting the vision with efficient operations.
Beyond consumer responsibility and marketing initiatives, Escalapez offered three key, often understated, recommendations for CFOs and CIOs tasked with building brands.
1. Distributor perception enables growth. “Social media can quickly build a following. We may market to consumers, but our distributors deliver our product and they have to look good on us. For example, Amazon in Europe is the largest customer for the luxury collections of the largest spirits companies. Convincing distributors to carry and prioritize our brands means sales and market share,” she highlighted.
“All industries are affected by global supply chain challenges. We ensure we meet the needs of our partners, carefully select our target markets and increase our logistics spend to avoid disruptions in supply and sell-through – thus building the solid foundation that a leading brand requires,” added Esclapez.
2. Data automation transforms revenue management by building trust. Esclapez said: “In general, our teams cannot focus on value-added activities without reliable, transparent and timely reporting data. Our financial systems aggregate and profitability data across jurisdictions. It is important from a regulatory perspective, but also drivers of pricing strategy, product allocation and market share. Such insights are critical to successful revenue management and business growth.”
3. Expansion requires credible long-term planning. While many new spirits brands focus solely on the US market, The Lost Explorer broadened its launch to include Mexico and key strategic markets with strong retail and luxury brands – particularly the UK, Australia, Greece and Italy. Future expansion plans underway target Latin America, continental Europe and the Asia-Pacific region.
“We quickly realized that to meet growing global demand, we had to increase our production capacity, while preserving the quality of our mezcal and maintaining our replanting program – which is critical to our sustainability goals,” she said. “That’s why we carefully monitor our cash burn and invest early in CAPEX, so we’re well-funded to open new markets in the coming years.”
These three principles link concepts to cash flow, foster cross-disciplinary collaboration, and foster stakeholder relationships critical to lasting success.
A newcomer to the competitive spirits industry just thirty months ago, The Lost Explorer Mezcal is a thriving business located alongside some of the most well-known spirits brands. A meaningful mission, clear differentiation, solid revenue management and disciplined leadership paved that path. Who’s ready to toast to success next time?