Photographs: Julie Bidwell
A lot of guys sitting in bars like to think they’ve just landed on a surefire get-rich scheme, but in Nick Shields case, it actually happened. Chalk it up to the powers of observation.
A few years ago, while having lunch in the friendly confines of Westport’s Black Duck Café, he looked down the bar and saw five women ordering drinks. “It was vodka soda after vodka soda,” he recalls. “Not a beer was being poured.” Shields had reason to do some noticing: He has beer in his blood. Oh, don’t call the police—his family is five generations deep in brewers, going back to Rudolph Haffenreffer, fresh off the boat from Germany, who opened a bottling plant in Boston in 1870. Shields’ own grandfather, T.C. Haffenreffer, had given the boy plenty of advice on the suds business before Shields went off to get a degree at Yale, followed by another in food sciences at Cornell, and then extra studies with the wizards of fermentation at the University of California-Davis.
After college, he managed juice production at Nantucket Nectars, a young company where he soaked up the entrepreneurial energy. He also punched the clock in corporate offices at PepsiCo, Gatorade and Cadbury Schweppes. His father wasn’t delighted with this jumping around, but Shields explained that this was how his generation worked. Ultimately, the variety of experiences prepared him for his next venture.
The brand that resulted from watching those ladies drink that day at the Black Duck is now called SpikedSeltzer and it’s the hit of the beverage industry. The major manufacturers recently took notice and now big changes are afoot, for the company’s founders and the brand. “The idea was to go after the vodka soda drinks people were ordering in bars, but with natural fermentation,” says Shields. Yet the solution was not merely to add alcohol and flavors to seltzer. SpikedSeltzer would be brewed in the same process and facilities as beer. At six percent alcohol, it would have the same kick as a can of brew, but it would be gluten-free and pack just five grams of carbs and 140 calories.
The new drink began in the garage of Shields’ Westport home on Imperial Avenue, where he and his wife, Leila, had started a family. After more than eighty-eight trial runs in five-gallon batches, with Leila testing every one, he came upon the one that scored on maximum refreshment. Naturally, he imagined a business out of this. For advice, he called on Dave Holmes, a longtime buddy and adventurous guy who lived in Rowayton. Their wives, Danielle and Leila, were best friends in Greenwich, where the girls grew up, and the fellows had had plenty of time at gatherings to stand around talking beer. Together, the two created a new company, Boathouse Beverage.
Holmes’ life had taken him from the New York investment scene to knocking around Europe with the family, to Maine where he worked as a carpenter, and then back to New York to get an MBA at Columbia. His specialty was the deep dive into distressed companies, which, he says with his usual ready laugh, “is the best way to continue doing what I enjoy most: finding broken things and fixing them.”
As recently as 2012, the men were still searching for a beer-like drink that was light, crisp and dry as Champagne. They resorted to Champagne yeasts in the fermentation and came up with the right mix. The company was coming into focus in 2013, as manufacturing was under way in a brewery in Utica, New York. The brand found approval from distributors around the Northeast, and they were recommending SpikedSeltzer to other distributors five counties over.
Business progressed until SpikedSeltzer reached fourteen states. Then, in February 2016, the partners experienced what Holmes calls “a very surreal week.” At the time, they were kicked back in the comfy new company digs on Water Street in Norwalk. The calm was shattered when they received calls from three different major beer manufacturers within three consecutive days. The first was a mergers guy. “He said he found our product on a shelf in New York City,” says Holmes. “We’re not sure if that’s true or if he heard the positive word from distributors.” Clearly, some of the marketing scan data from stores in New England showed a surge in demand for the product. “The beer manufacturers had their research tentacles out there,” says Shields.
Indeed, the booze industry has seen a number of pleasant innovations over the years, from wine coolers to hard teas. In the early 1990s, Coors tried a clear beer called Zima, which didn’t catch on, but as the nation’s tastes and appetites changed, a seltzer-based drink seemed just the ticket. Holmes and Shields like to quote Dawn Hudson, the former PepsiCo president, who noted a decade ago that Americans were falling out of love with sweetened drinks, but would never fall out of love with bubbles.
At this time, there were 500 liquor wholesalers in the country and SpikedSeltzer had thirty of them. “To make the leap to 500 takes years,” Shields says, “and some people in the industry say you can’t do that anymore. The big guys are too powerful. So we made a conscious decision. We were going to join one of the heavy players.”
Shields and Holmes had reasons to be wary of the competition. Early on they attended a national trade show at Caesars Palace in Las Vegas and created what might be called a buzz. They knew the likes of Coors and Anheuser-Busch (now AB InBev) were sniffing around. Holmes laughs at the memory. “A Texas wholesaler named Bo Huggins told us, ‘Once you get your head above ground, you better be wearing a helmet. People are going to start firing at you.’” Today, the hard seltzer category the guys helped create has grown to include six new drinks, with two more slated to launch this year. Boston Beer’s new contribution has the name of Truly Spiked & Sparkling.
Their first meeting with a national brand was as nerve-racking as a scene out of The Godfather, says Holmes. The president took them to a room and showed them an imitation of SpikedSeltzer that his people had reverse-engineered. “He said, ‘This is what I’m going to make if you don’t take my offer.’ It was as cutthroat as that.”
Things went much better when they met with AB InBev. Gathering with the company’s brass at the marketing offices in New York’s Chelsea district, Shields and Holmes heard the right pitch—AB wanted to acquire them, but promised to leave them alone. It was all part of a new wing of AB’s business, a unit called The High End. Sensitive to criticism of the company as a rapacious giant, the High End’s intention was to buy up some notable craft breweries, then nurture them. High End now has at least ten in the fold, including Blue Point, Goose Island and Breckenridge.
The price for Boathouse Beverage was not announced, but AB purchased 100 percent of the company and as of May, SpikedSeltzer is available nationwide. Shields and Holmes are staying on to see it grow. And their buttons are busting. “We went from producing tiny batches to 15,000-gallon batches,” Shields laughs. To meet the new demand, they’ll move brewing from Utica to one of AB’s huge facilities north of Syracuse and the possibility of 500,000 gallons a year. Then there are the growth possibilities when you move from spending about $15,000 on ads and sponsorships to side with an outfit that has a $600-million ad budget.
But the guys are swimming in deep waters now. “That was part of developing something new,” says Holmes. “We were able to function as a stand-alone business for a couple years before the big guys began to take notice and make us,” here he pauses to smile, “category validators.”
The raft of imitators has provided competition, but also validation, and the imitation game is only beginning. Yet, fortified by the big boys now, things are looking bright for Shields and Holmes, and rising like bubbles.