Not many companies are challenging the country’s top-selling spirit brand, but Splash Beverage Group is aiming to do just that with its most recent acquisition.
The Florida-based group announced plans to scoop up Texas’s Western Son Vodka last month, a move that will provide a distribution center for Splash’s other companies and a portfolio addition that is being positioned as an alternative to Tito’s.
Splash Beverage was founded by Robert Nistico, an early employee and former vice president and general manager for Red Bull North America, and former CEO of Marley Beverages, which was acquired by New Age Beverages in 2017. Splash launched as a multi-brand portfolio company, with the idea to offer logistics, production, back office and sales support as the rudder to the marketing engine of each individual brand. The company kicked off with hydration drink Tapout and Salt Tequila but was at zero revenue when William Meissner, president and CMO joined in 2020.
That year canned wine Copa De Vino and Pulpoloco Sangria were added, and the company went public. In its latest half-year earnings reported in August, net revenue growth increased 31% to $11.1 million, but was largely driven by its B2B and B2C e-commerce beverage platform, Qplash, meanwhile quarterly beverage revenues were down.
But Western Son’s 150,000-plus square foot production and distribution campus in north Texas might be the biggest catch for Splash. The location will serve as a centralized production and distribution hub for the group’s existing brands in addition to any future acquisitions, creating logistics cost savings in favorable shipping lanes, reducing freight expense and ultimately increasing margins, according to the company. With it comes the expertise of Western Son president Carlos Guillem, who will oversee the entire company’s supply chain.
“The idea of this distribution campus, being where it is, means we can move from what is today a network of three production location third parties that are capturing margin from us, and bring that to Western Son in Pilot Point Texas, and either save that money or Western Son can capture that margin as its own entity,” Meissner said.
There were other attributes that made Western Son an attractive buy—the same criteria that Splash looks out for as it eyes more M&A targets. In September, the group announced a “non-binding term sheet” to fund acquisitions, which will act as a credit reservation agreement for multiple acquisitions.
Future targets will have revenues between $20 million and $75 million, and have proof of concept in a geography. They should also be in a position to work with Splash’s network of largely independent wholesalers across the country to grow depth of distribution graphically.
“This brand is going to either work in our network or doesn’t create any new skill sets for our sales team to adopt and grow,” Meissner said.
The “Western Spirit” Potential
Western Son was founded in 2011 and has sold 309,000 9-liter cases over the past year, and generates 80% of its volume from 11 states. To create a bigger footprint, Meissner is building on the brand’s “western spirit.”
“Today, with social media, with digital, people are really embracing the idea of country, of the Western U.S., that pioneering spirit, and kind of a step back to being outside,” he said.
Companies like Lone River’s Ranch Water have found a national audience by leaning into the same ethos and celebrating its Texas roots. Perhaps the most successful example though is Tito’s, the original Texas vodka that now, selling at millions of cases per year, likely comes from agribusiness-made bulk grain spirit that’s distilled once in Texas to keep up the Austin-centric brand.
When the simple kraft-paper label entered in the 90s as a premium, affordable vodka, other luxury brands like Grey Goose and Kettle One started to plateau. Meissner is now searching for room in that premium tier, where Tito’s has a 60% of share of the category off-premise according to the latest NIQ data.
Lawsuits and journalists have criticized Tito’s for misleading consumers as if it is still a handmade or craft brand, but according to the numbers drinkers don’t seem to care (sales are up 4.9% in the last 52 weeks ending September 9 off-premise according to NIQ data provided by 3 Tier). Meissner thinks Western Son – a Western vodka made in Texas that’s a few dollars cheaper than the category leader – has an edge as the authentic vodka underdog. It also offers flavored versions, which makes up about half of its sales. Expect a ready-to-drink cocktail in the next few years, he said.
“Our insights have come in that say people align this brand very much with a Tito’s or Ketel One from a quality perspective,” he said. “So I think we’re right there on a quality when you are calling a vodka at a restaurant, but it may lower that cocktail’s price to the consumer or the restaurant can capture more margin because the cost is better.”
That’s the case for Patterson Park Patio Bar in Houston, Texas, which uses the vodka as its well product. Kayla Vernon, marketing director, said that the product is a staple as a high quality spirit that its clients recognize.
“Even better, it’s made in Texas,” she said.
But Splash will need to test that proposition outside of Texas— so far the brand is doing well on-premise in New York, Florida and its home state, according to Meissner. Off-premise sales were down 29% in the last 52 weeks ending September 9 compared to the same period last year according to NIQ data provided by 3 Tier. Plans are to continue to deploy its salesforce with an on-premise focus to build awareness, while expanding its chain accounts into other states.
“Our marketing plan is to grow geographically, grow our depth of distribution in velocity where we are already, and then and then to innovate and add items,” said Meissner.