Trackmind | Strategy to Production

https://vimeo.com/802110855

A little bit about Steve:

Steve is a Co-Founder of Leisure Project, an enhanced hydration beverage that launched in June 2022. In March of 22, Leisure Project became the world’s first Web3 native beverage brand when they launched their NFT powered membership program – the Leisure Project Hydration Club. Members of the club own Leisure's branded NFTs, that are minted on the Ethereum blockchain, and can access rewards like free and discounted products, co-creation opportunities, and more. Steve is passionate about the possibilities that Web3 technology can enable for community centric brands. This interview has been edited for brevity and clarity. Uma: Steve, thank you so much for joining me today. I'm super, super, super excited to talk to you about how brands are diving into NFTs, and I don't even know all the words for it, but blockchain, cryptocurrencies, and all that new stuff that is happening. It's been around for quite some time, but just how it's getting into CPG slowly. So thank you so much for taking the time out to be here. I know you have a busy schedule, so thank you. Thanks a lot. Did you want to say anything before we got started officially? Steve: Yeah. Thank you for having me and helping us tell our story. Happy to be here. It's always fun to do podcasts. I feel like I listened to a good amount of podcasts before I started Leisure, and we started the brand and the business and the community. But ever since, I'm always listening to podcasts, so it's fun on the other side of it. Uma: That's cool. That's amazing. Awesome. So can you tell me a little bit about Leisure Project? How did you come up with the idea? Was there a gap in the market that you identified that you felt like you could fill it with an amazing product? Steve: Cool. Yeah. So I'm Steve Michaelsen. I founded Leisure Project with my younger brother, Alex. We're about five years apart. We were both athletes growing up our entire lives. We both competed at the collegiate level in the US. I was on the track team in college. My brother played football. And essentially, when we were athletes, it was always about nutrition. It wasn't just about working out. And part of nutrition is hydration, so we were drinking Gatorades, Bodyarmors, Powerades, different sort of electrolyte complexes to help us perform on the field. And this was just a part of our daily life. We didn't really think much of it, but when COVID happened, we came together for the first time in living under the same roof for the first time in about a decade. I went to college. I went and lived in a different city. I was living in Portland, Oregon when COVID first started. He was living in LA. And then we both ended up back in Southern California at our parents' house for what we thought was going to be a couple of weeks of fun. Apparently, it turned into four months. And while that was happening, we were bored. Obviously, there was a lot of things happening out in the world that was really depressing, but we were bored. We were like, let's do something about our boredom plus also maybe make the world a better place, the classic entrepreneur's dilemma or question. With the world so down in the dumps, we were like, how do we make the world a more optimistic place? One thing led to another, and I'm not quite sure how we got into let's make a beverage, but we did. And when we got to let's make a beverage, we were thinking, what is something that is going to help make the world a more optimistic place? But also what is something that would help us be more optimistic, positive, feel better throughout the day? And we just kept going back to this idea of hydration and us realizing that it was such a huge part of our lives as athletes trying to perform our best physically. But now that we're adults and we sit behind Zoom cameras all day or at meetings or working on pitch decks or at photo shoots or all these different types of things as marketers, we never think about hydration. All we think about is, when is my next coffee rush? Or maybe it's matcha, or maybe it's something that's going to give you a burst of energy, a 5-hour Energy at the end of the day. But the reality was that everyone we were and everyone around us was chronically dehydrated. Everyone would talk about it jokingly, like, “oh my God, I'm so dehydrated, I can't think, I have a headache”, all these different types of things. And it wasn't really like I had a side cramp at my desk. It was, I'm dehydrated, my brain isn't working. And so we were playing those stories back and forth to each other. And then we were like, wait, why isn't there really a hydration drink for people outside of sports? And coming from former athletes, it was a weird realization for us. But what we started doing is messing around with how we could create a hydration drink that helped us feel better and perform better mentally, along with all the benefits that hydration has for your body. So we went down this path. We talked to a bunch of friends, both personal friends, colleagues. And we were like, okay, people are having this issue with hydration and how they feel usually in the middle, the end of the day. And then we did research, and we realized, shit, your brain is 73% water. When you're dehydrated, your brain doesn't work as well, and it also gets depressed, gets anxiety, gets jittery. So we're like, wow, there's really an opportunity here to build a product and a brand that speaks this way. And so that's what Leisure is. It's a feel-good hydration drink to help you feel better, both mind and body. And we essentially were like, what if we created the Gatorade for the next generation? We think about Gen Z. There are a lot of conversations around Gen Z and mental health. There's also a lot of aspirational shifts that have happened with Gen Z. When we were kids, I wanted to be Kobe Bryant, or I wanted to play in the NFL. Or I wanted to be an Olympian when I was doing track. But kids today just aren't as inspired by sports as previous generations, especially young men. We're in this cultural renaissance, especially for young men. Men are now expressing themselves more creatively than they had in previous generations, at least in the US. And so we were like, let's make a Gatorade for that kid that wants to be the next great creative. It's not hydrate the next LeBron, but hydrate the next Billy Eilish or the next Mr. Beast or the next whomever. Those were the things that we were doing in terms of product, but NFTs, that's the whole conversation here. What we had realized when we were making the product and when we were building the brand is that those are great, but at the end of the day, this is 90% water and an aluminum can with a label on it that looks really cute and cool and interesting. In order to actually win, you need to have a community of people that are aware of your product and that the product serves their needs. So we're like, okay, how do we do this? And at the same time, NFTs were really popping off. I had gotten down the rabbit hole of Top Shot after friends convinced me and invited me for a long time, and I rode that wave a little bit. And I was like, okay, this is weird, but I'm fine making some money here. And then you started seeing brands that didn't exist one day and then were billion dollar valuations the next day. And I was like, okay, sure, there's maybe some weird stuff going on and maybe some illegal stuff going on, but there's something about human psychology, sociology of crowds, of people gathering around one idea. And so we were like, okay, this is happening. We're building this beverage. At the same time, why don't we create an offering of an NFT community that would get a bunch of people excited about participating in the launch of a new brand and participating in the growth of a new brand? And so that was the idea. And then we ended up with the Leisure Project Hydration Club with our little Leisure creature characters right here. Some people think it's a Kool-Aid man. I would say that it looks like a Leisure creature. But the whole idea is to bring a bunch of people together that are interested in CPG and Web3 and like the drink. Get them free products. Get them early access to new products to taste. Give feedback. Give them discounts on products for their life. And in a lot of ways, it's like Web2.5 is how people describe it, but it's just allowing people to participate in a new brand they've never really been able to participate in before. Uma: Participate. Right, right. And so after you got the idea, what was the biggest challenge that you had? Did you have it with distribution formulation or setting up your membership program? What was the challenge? Steve: Yeah. I think there's challenges every day. We're dealing with the challenge right now. My brother is dealing with getting a pallet to go from one place to another. And it's like there's a lot of things. I think there's a lot of things that are out of your control and you just need to control as many things that... Things that are in your control you need to have as organized as possible and have relationships with people knowing that some things are going to go awry and you just are going to have to fix it. But in terms of the product, I think the biggest... There's a lot of things. When it comes to the product side, there's no textbook. There's gatekeeping that happens in this industry. And it makes sense because there's gatekeeping in that you can't find a lot of stuff on Google, but there's no gatekeeping because once you actually start talking to people, they tell you everything. This is what you need to do. This is what you need to talk about. This is the distributor. This is what it's going to cost. This is what the margin needs to be. But you need to actually go and do it. You can't just Google search, do YouTube and just think you're going to figure it out because you're just not going to get where you need to be, at least at the beginning. You can obviously iterate from there. When it comes to the NFT, I think the hardest part of that is I think NFTs have gone through a bunch of different iterations. I probably don't even know half of the iterations that they have in the last two years. I think the most difficult part of that was actually with us with timing of when we launched. Unfortunately, it was around the same time as when Russia invaded the Ukraine. And so it was such thing where we had this really engaged community that was excited about it, and then that happened. And we were like, okay, this is not a time to be doing something, in some ways, frivolous as an NFT launch. So we paused and recalibrated and figured out a bunch of different things. But since we launched, and we've had a successful launch, and we have this awesome community, we have 400 holders that are around the world, predominantly in the US, 1,000 NFTs within our membership program. We have holders that are smuggling cans overseas, in the Philippines, in Columbia, in India. Their family or friends come to visit them from the US, and they're like, "Hey, when you come visit, can you order this and then bring a couple cans when you visit?" I'd love to try it. So that's been really cool. I think the hardest part is we're a really small company and brand. It's really just me and my brother, and then obviously, the community's involved, but keeping that engagement going and being a brand in a community that's helping serve the needs of people that were interested in participating in the brand. Uma: Right. Yeah, that's true. Brands often do subscription models. So when you started this membership program, was there a specific reason why you chose one cryptocurrency over the other? I think you used Ethereum, right? Steve: Yeah, yeah. Ethereum. And that is a really good question. One of the pillars of our brand is to make hydration in terms of a can. Typically, Gatorade, plastic bottle. All the sports drinks, hydration drinks, electrolyte drinks tend to come in plastic bottles. Occasionally, they come in cardboard, but we wanted to be in an aluminum can. There's a lot of talk around Ethereum and cryptocurrencies being bad for the environment. I think a lot of it is blown out of proportion, but we're not here to argue that. And obviously, things have changed since when we first launched with proof-of-stake and proof-of-work changes. We originally wanted to go with Solana because it was a more sustainable option. There were reasons why we didn't do it. And the main reason was that at the time, and I think still pretty much today, there was no integration with checking a wallet to validate a token enabled with Shopify. So we ended up going with Ethereum because we worked at the time the only app and tool that was out of the box type of thing where you could validate your NFT to get a discount or get a free product. So on our website, if you own our NFT or you own an NFT of a partner community that we are doing a promotion with, you can actually get discounts on our website just by validating the NFT. It's like a normal membership program, but there's also just the added utility of you having this artwork that is on the blockchain and you can do this type of thing on our website. So that's why we went with Ethereum. I think also, Ethereum has the strongest infrastructure of awareness and also people on the backend building and doing things, so it felt like the right way to set up the brand for the future. So that was why we ended up going with Ethereum. Uma: And would you... or rather, is it possible to use other cryptocurrencies in the future, expand into them once, I guess, there's a little bit, not stability in the market, but with the technology that supports this? Steve: Yeah, definitely. We've had people approach us to do all different types of NFTs. There's been some communities that have done that. Doodles 2 is launching on Flow blockchain. There's now a lot of Solana NFTs that are bridging to Ethereum and launching new collections on Ethereum. There's been a lot of different things. You can do anything. I think the reality is the balance of having an NFT community and having a beverage company, very different worlds. They come together in a pretty seamless way and a useful way in the way that we built it out. But do we need to be launching NFT collections every week? Probably not. And also, most of the NFT and most of the crypto conversation is on Ethereum, so for now, we're focused on staying there. Two months ago ChatGPT didn't even exist, and now it's the only thing people are talking about. Uma: Yeah, that's true. That's true. And when you were setting up, you mentioned Shopify. So right now in terms of using cryptocurrencies for purchasing products, what is the e-commerce infrastructure like for that? Was it very difficult for you to find something? Steve: That was actually surprisingly easy. Coinbase Commerce has been around for a long time. So yeah, there have been people that have purchased our products with Ethereum through Coinbase commerce. It's just like when you're on a website and you're purchasing. It's a Shopify website. You can use Apple Pay. You can use Google Pay. You can use a credit card. You can use PayPal, all those different things. You can use Coinbase if you want to. Uma: Okay. Oh, that's pretty cool. Obviously, we've seen how much cryptocurrencies have dropped quite a lot in the last 12 months. Has that impacted your membership program or anything in general that's related to the program? Steve: Yeah, I think the main thing that 's impacted is the engagement. Any community, no matter how big, whether it's Bored Ape or Doodles or us, if anyone said that engagement has not dropped significantly since when we were first coming out of the market, they're just flat out lying to you. I think in other ways, it's also changed, but the reality is we were very open and honest from the beginning that this vehicle of membership program was to participate in a way that's a little bit more connective than just following a brand on Instagram or joining their email newsletter. We have NFT holders or members that we invite to different events that happen, mainly in LA because our distribution is only in LA at this moment. We have NFT holders that'll go to a store and pitch us. It's still happening. It's just not what it might have been if it was still as crazy as it was when we first came out. But we're coming up on a year of being an NFT community, which is pretty cool. We have some fun ideas as to how to get some engagement going again and bringing the community into future plans. Uma: That's amazing. That's really cool. And so in terms of talking about CPG brands, what trends have you seen in this crossover between NFTs and CPG? Are there a lot of brands that are doing this? Steve: Yeah. I think we're probably the only brand that did it our way. And I know that there were a lot of brands that were planning to do it that ended up just completely killing it. There's across all different types of forms. You had alcoholic brands, non-alcoholic brands, all these different types of things that happened. You had a Dow that was trying to be the next Proctor and Gamble/Unilever that I don't know what the latest is with that. Some brands that I think have done really cool things, I would say Taika doing the collaboration with Friends With Benefits and making a product that the Dow was like, yeah, we love matte. We love yerba mate. Let's help you, Taika, a brand that a lot of the members already drink, and the owners, the founders of Taika, are in Friends With Benefits. Let's help you make a new thing. Let's share some revenue profit. Well, I'm not exactly sure what the split was. And Friends With Benefits put up money to help develop the product, which is pretty cool. So that was really cool. I think what Perfy did with the Doodles was really cool. I don't know if you saw that, but essentially the owner, the founder of Perfy minted a Doodle or bought a Doodle. I don't know if he minted, but I think he bought a Doodle. And then when he came out with his Dr. Perfy flavor, which is essentially his better-for-you Dr. Pepper that tastes amazing, by the way, he called his Doodle the Dr. Perfy. And so there was a limited time release. I think I just saw recently that it just sold out, so now it's going to be going back to their normal branding. But that was pretty cool because he was able to use the IP of the Doodle for his can, and it got a lot of buzz both in the crypto and in the CPG world. I think the smaller brands have done more interesting things. I think Liquid Death was cool. They seem to still have pretty strong engagement, and their artwork is very interesting. But I love everything Liquid Death does. They made water cool and interesting. Uma: Yeah, they did. Steve: It's mountain spring water, but every other brand that was mountain spring water was Voss or Evian. They brought some personality and some flavor to a tired category, and they're obviously winning because of it. I'm trying to think of some other brands that have done some things. I think there's going to be a lot of really cool stuff that happens with high-end spirits, if anything. I think there's a lot of utility with NFTs that will get used. I think of what Bevel is doing with watches, and I see that happening more and more in high-end goods, luxury goods, where you would have an NFT that's validating it on the blockchain as well as the typical paperwork. But you can't fudge blockchain. There's no lying. So there is lying and there's stealing, but you can track it pretty easily. So I think high-end spirits, that's going to be a thing. That's not just a trend. I think that'll have staying power. I do think the way that we did it will be a thing that happens. I just think it's hard to do it right now. Yeah. Advice we were giving to a lot of people before, and I'm glad that it actually has held true, is there is no way we could have done what we did to launch a community after, unless we were completely flushed with cash, with VC money and could hire people to do it because the reality is the day-to-day of a small CPG brand is fucking chaos. Sorry for swearing. I don't think I'm supposed to. Uma: It's fine. It's fine. It's fine. Steve: But it's chaos. You're just trying to figure out if a pallet arrived. Did the right pallet get there? There were two pallets in the truck. One was supposed to go somewhere. One was supposed to go to the other one. It's like you're constantly doing that, and you can't also be trying to curate and foster a community. It's just not going to happen in those early days the way that it needed to happen in the early days of NFTs. So I'm really happy that we did it. And we had the whole brand done. We had the whole product done and it was like, hey. Our invitation to the people that joined was like, "This is what we are doing. Do you want to participate? Do you want to be involved?" And they did, and they knew going into it was this is what you're getting into versus trying to do it six months in. It's really tough because the reality is you're just not going to have the time once you actually have liquid in cans or bottles or whatever you're doing to try and manufacture hype and everything. Uma: Yeah, that makes sense. So before you started, were there a few things or, let's say, three things that you knew about the business before you actually started? I know you said a lot of stuff is not available on Google, so you learned a lot as you were doing things. But something you wished Google actually had. Steve: Something I wish Google actually had or something that I knew? Uma: Something wished Google had. Something you wished Google already had. Steve: That I wish Google actually had. Getting your ingredient suppliers to be the right ones that are high quality and not going to cost you arm and leg. I think also understanding freight a little bit better would've been helpful. And just thinking about understanding if you have a great freight provider that can actually get you the best price versus just accepting the shipping costs that the provider is just going to say, it sounds really simple, but if you've never worked in a physical product, I think that is something that you're like, oh, the cost is so good. But yeah, that's shipping cold chain from New Jersey to your production run that's on the West Coast. It's going to cost you hundreds of dollars, if not thousands. It sounds really dumb, but there's just so many little things like that where you're like, oh, duh, of course we should have done it differently. And then you iterate, and it's better. Again, we're a team of two. We're new to the industry. We're a team of two, and we're figuring out a lot of things. And that's why we're strategically staying relatively small and focused on Southern California. We want to figure out a lot of things while we're small and keep the margins in a good place where we're not shipping all over the country and really build our community in LA. And then obviously, we have our NFT community. There's a lot of things you have to learn by fire, and I think most entrepreneurs, their biggest advice that I've ever heard and you'll see in Twitter threads or on LinkedIn is you just need to start because you're not going to know... There's a lot of commentators out there that'll say, "Oh, these are all the books you need to read. These are all the people you need to speak to." But the reality is you're not going to actually learn until you do it. So yes, listen to me on my podcast, but if you have an idea, just go do it. You're never going to know if your idea was good or bad or right or wrong unless you actually put it on the market. And there's a lot of ways to do it cost-effective. There's a lot of ways to do it that are not cost-effective. And it's just a matter of putting one foot in front of the other and actually going and doing it. Uma: And doing it. That's true. So what's next for Leisure Project? Where do you see yourself in the next 5 to 10 years? Steve: In the next 5 to 10 years? I think we're going to be making Americans very leisurely within the next 5 to 10 years. I think we have a really interesting opportunity to fill a gap in the market for both product and for brand. There really isn't a brand in the hydration category or anything tied to electrolytes that's as fun, inviting and creative as we are. So I think that's really going to resonate both in the short and the long term as younger folks are more interested in being creative and they're also more cognizant of how they feel mentally. I think that we have big plans to be a national brand and potentially international. Maybe there's some Canada happening. The reality is with beverages international, total world domination is pretty tough. And the US market is big enough where if you have a lot of success, you can see a pretty good outcome in terms of an acquisition. But we're really focused right now in the short term to set us up for that. I think there's going to be, unfortunately, a lot of brands that people love and adore that are going to struggle with the financial markets that are happening. And so we're being really cognizant of that too and keeping our burn super low and not trying to expand too fast because the reality is the biggest reason CPG brands don't make it is they run out of cash. And the biggest way people run out of cash that we have seen and we have heard is that they grew too fast. And if you grow too fast, it costs a lot of money to ship 16-ounce cans. It's heavy. So you gotta push it around the country, and you have to make sure once you get on that shelf, you get off that shelf and get back on it again and work with your distributors to actually be good service providers for you. And until you actually have those relationships and everything ready to go, you're going to burn a ton of money. And we know that we're going to burn a ton of money, even if we are cognizant. It's just the reality of CPG. And so our focus is really on the now, really mastering a lot of fundamentals. We have exciting news that's going to be dropping maybe before or after this podcast [inaudible 00:29:31], but we're going to be doing some cool things in summer of 2023, hoping to get some more chain authorizations, local but natural accounts like a Sprouts or Whole Foods, maybe testing some conventional stuff. But yeah, I think when it comes to the community side of it too, we want to integrate our community a lot more into future product lines that we have. Whether it's a new flavor or it's maybe a powder or something like that, we want the NFT community to feel empowered to participate in all of that. And yeah, I think the world is going to be a better place because we're in it, so that's cool. Uma: Yes, yes. That's good stuff. The last question. So what would be your advice for founders? I know we already covered this a little bit, but is there particular advice from your experience you want to give? Steve: Particular advice from founders tied to NFTs or just generally? Uma: Just in general. Steve: Okay. Yeah. If you're a first-time founder, what is my advice? I think, again, just go and do it. [inaudible 00:31:00] now. Whether you want to do it big or you want to do it small or you want to do it somewhere in between, try something. Here's my advice. Get feedback from people that aren't your friends and family. And if they try your product and they sip it and they say, "oh, it's good," actually ask them what they don't like about it because when they say, "Oh, it's good," they don't actually like it of course. If a bunch of people say they don't like it, that doesn't mean your product is bad. It means you should figure out what they don't like about it and figure out if there's a theme. So for example, we've had a lot of success in the market, but we had a pretty consistent theme of reasons people didn't like the flavor. And we took that feedback, and we iterated upon it. We were able to do that because we had a very tight distribution in Southern California. If we had national distribution and we spent $1 million on the production run or more and we earned all these different accounts across the world and you have no one in the field to actually talk to consumers and get their feedback and then you just get railed on your e-com with reviews that are going to hurt you forever, that isn't the way you want to start the business. Start small. Or go big, but really, you're going to have to do some testing to actually get it going. But get feedback, and ask for it. And if someone is saying, "Oh, it's not for me," ask them, "Why is it not for you?" for example, some people would be like, "I actually think this is good tasting, but I prefer to have powder for electrolytes," or whatever. Or people are like, "Oh, this is actually pretty good, but I just don't have sugar. I'm not into sugar." But some people might be like, "It's too sour. It's too tart. It's bitter." And we took that feedback and were able to iterate it, and now we have a product on the market that's in Southern California and on our e-comm that's significantly better but still has a similar flavor that people that loved before don't hate it. So still love it. So that is probably tangible advice. And again, it's simple stuff, but when you're building something and you're in the moment, you forget simple basic stuff, whether it's the freight thing or it's getting customer feedback, consumer feedback, whatever, those types of things. It adds up. I think also, too, feedback is like don't be afraid to cold call or reach out to people on LinkedIn, especially in CPG if you have a really compelling reason to be connected to them and you think that they could help you because, for example, our advisor that is on our cap table now, we reached out to him because we saw a YouTube video that he spoke in of this is what you need to do in your first year as a beverage company. We watched a YouTube video, and again, there's no textbook on how to do this. We typed in, "How to start a beverage company." We got down a lot of paths that were terrible, but we watched a YouTube video of a former founder, couple exits, and we're like, "Oh, okay, fuck it." Sorry, I swear a lot. Uma: It's fine. Steve: We reached out to him, and since then, he's been super helpful. He's now an advisor. He is on the cap table. But reach out to them and be like, "Hey, we're thinking of starting a beverage company," or, "We want to start a cooking company," or, "We have an ice cream brand. We saw that you had success doing X, Y, Z. We would love to learn from you. Do you have time to connect?" And then you build that relationship from there, and you go. I think a problem that some entrepreneurs have is they try to do everything themselves or try to learn everything themselves and not actually do or get advice from other people. And yeah. So that was a couple different answers to one question. Uma: All good. That was good advice. Most of the time, you have to just do it and learn from your experience because there is no textbook answer to everything because even if there is, it's not going to apply to your situation necessarily. So that's good advice. And it's coming from your experience, so that's even better. So yeah. So awesome. Those were all of my questions. So thank you so much, once again, for being here today and talking about your brand and how you're going to make America more leisurely in the next few years. I'm super excited to see that. And if I get the opportunity, I'm also very excited to try the beverage, so I'm going to see if I can get it in New York. I'm based in New York, so I'm going to try to see if I can get it. But yeah, thank you so much. Steve: Yeah, you can order on our website. It's leisureproject.co. That is also our social account for both Instagram and TikTok. On Twitter, if you're big on Twitter, we're leisure_project. Unfortunately, leisureproject.co is like two too many characters on Twitter but yeah. And you can find us on LinkedIn, wherever, but feel free to message me if you are so inclined. But yeah, thank you so much, Uma. Enjoying our Feature Series so far? Check out other interviews and follow us on Instagram and LinkedIn to stay connected and see more stories of incredible business leaders like Steve Michaelsen.