What Happens Next – Sunday May 2, 2021 Online Universities, the Rebirth of NYC, Wine, Bourbon, and Tequila David Epstein

Larry Bernstein: Up next, David Epstein, co-founder of Tom's Town Distilling Company, a manufacturer of craft bourbons, gins, and tobaccos. All right, David. Take it away.

David Epstein: In 1896, the son of a furniture salesman is born in St. Cloud, Minnesota. That boy's name is F. Scott Fitzgerald. In 1917, after a stint at Princeton University, Fitzgerald heads to Fort Leavenworth, , just outside of Kansas City, drafted as a soldier in the European theater of World War I. The head of Fort Leavenworth at the time, by the way, was the future president of the , Dwight D. Eisenhower, whom Fitzgerald despised.

He wasn't at Fort Leavenworth long, but F. Scott Fitzgerald would no doubt have heard of and most likely been in awe of, a young swashbuckling bootlegger named Tom Pendergast, the future emperor of the Midwest, the boss of the Paris of the Plains: Kansas City. Tom's reign was so complete and so powerful, that the Las Vegas of its day, Kansas City, was known simply as Tom's Town. As Scott Fitzgerald leaves Fort Leavenworth with a head full of ideas on fabulous wealth, booze, power, and raw politics, and he writes The Great Gatsby about five years later in 1923. The Great Gatsby is, in short, the fictitious novel based on a very real person named Tom Pendergast, the city boss of Kansas City, Missouri.

For me, being the grandson of a rival bootlegger to Tom Pendergast, I, too, have been enthralled with this part of my family's lore for decades. When I began Tom's Town Distilling Company five years ago, I knew very well that authentic characters like Mr. Pendergast were rare, and complicated, and extraordinary. January 19th, 1920 was the first day of Prohibition. I call that, “the greatest day of Tom Pendergast's life”. For the next 13 years, Boss Tom ruled Kansas City and most parts of the Midwest like a personal piggybank and fiefdom. The alcohol flowed, the cradle of jazz was born, and the Roaring Twenties become synonymous with cocktails, jazz clubs, speakeasies, and little if any acknowledgement of the rule of law.

This period in American history ended not in one year, not in five years, but thirteen years later on December 5th, 1933. By the mid-1930s, Mr. Pendergast had finally played his last card at the poker table of American politics, and he was finally put in prison for failing to report a bribe on his taxes. A Kansas City star goes to visit him in prison and asks him, "How did you do this? 250 speakeasies, the birth of jazz, and not one alcohol-related arrest in the entire city's history." His answer was, "The people are thirsty." That is our tagline.

Almost 80 years later, I founded Tom's Town with my business partner with a desire to build an authentic craft distillery that paid homage to the era of Mr. Pendergast, my grandfather, and

1 with an eye towards creating game-changing spirits that reflect the spirit of the Jazz Age, but for the modern eyes or the palate of current tastes. In the heart of , we built an Art Deco tasting room, urban distillery, and event space. In 2019, over 90,000 customers walked through our doors, and many became the evangelists for our libations and spirits and spread the word. In 2021, we announced our partnership as the official gin of the Kansas City Chiefs.

No doubt, the pandemic has not been kind to many facets of the world's economy, and the craft spirit industry is no exception. You may be saying, "No way. I hear that everyone is drinking more and more, and all spirits are getting sales records all over the country." The pandemic has been good for drinking, but devastating for brands that rely on in-person discovery. There is no doubt much will be said about the overall volume increase in alcohol sales during the pandemic, but those statistics are results from the established corporate brands and not craft distillers. According to Nielsen, off-premise sales, which means liquor stores and grocery stores, are up about 30%. Despite this massive growth, sales revenue for craft distilleries is expected to decline by $700 million in 2020, about 40% of this sector.

Now, the pandemic has in some ways changed how consumers buy liquor and, of course, where they're consuming liquor. A quote I saw from a board member of the Oregon Distillers Guild said people are drinking, but they are not shopping. A really stunning illustration of this is that large-volume bottles, one liter or larger, saw an absolutely massive spike in sales, rising about 80% over the period in 2019. Most, if not all, of these craft distillers sell their spirits in the traditional 750 millimeter bottles, and those in fact remained stagnant during the pandemic. The key for craft distilleries remains three things: distillery visits, bartender menu recommendations, and in-store tastings, none of which could have occurred in 2020.

But we're now four months into 2021. The pandemic has eased in the United States, and the Roaring Twenties are inching their way back. In fact, in Ken Burns' PBS series Prohibition, there are several scholars that said they "woefully underestimated" the impact on the 1918 pandemic on the Roaring Twenties. As Fitzgerald himself said, "We never wanted to look in the rearview mirror again." With the massive shift in cultural attitudes at the time, the country, indeed the world, ushered in a decade of partying, an explosion of societal changes that hadn't been seen since the Civil War.

I believe we were on the doorstep of a similar revolution, hopefully without the bookend of a Great Depression, that will rival the Roaring 1920s, where social media, consumer online shopping, and a general feeling of community and craving for social interaction away from the screens and back into the physical world is inevitable. As anyone knows after reading Sapiens, we are not just social animals, but wired to be part of something greater for our own survival. So let's all go belly up to the bars and toast the Roaring Twenties with a Tom's Town martini, gimlet, or Manhattan, or, as Jay Gatsby himself said, "And so with the sunshine and the great bursts of leaves growing on the trees, just as things grow in fast movies, I had that familiar conviction that life was beginning all over again with the summer."

2 Larry Bernstein: Our last speaker in this panel, is Mike Novy. Mike is the president and chief operating officer of 818 Spirits, which is Kendall Jenner's new tequila brand.

Mike Novy: So if you haven't seen 818 tequila in your local liquor store or restaurant yet, you're not alone. We're actually launching our brand on May 17th in California, and then it should be in most of the states where you are residing in July, or just after. So 818 Tequila was the brainchild of Kendall Jenner, who grew up in a reality TV family, but she's also carved out a really strong career as one of the top-earning fashion models in the world today.

I'm going to tell you that I think that reality TV star is an ideal face for consumer products for several different reasons. First, by the very nature of how we know them, which is watching them in their homes from the comfort of ours, we feel more intimately connected to them, and second, because they hustle. Reality TV stars are part actors, part entrepreneurs. They know how to work hard. Case in point, Kendall Jenner, the founder of my company, 818 Tequila, grew up in reality TV, but has transcended not just into modeling, but into a series of other businesses.

So, celebrities get connected to brands fundamentally in two ways. One is a company who owns a brand goes looking for something to energize it. But they go looking for a celebrity spokesperson, and then they create a backstory about how that celebrity has a passion for this category, or for the brand. The second way is that the celebrity has an idea and searches out a business partner to bring the idea to life. That's the way that my company came into the world.

I was actually working on another business when this one came along. I had a checklist for the things that needed to be there for this to make sense. I think this is the blueprint for how a celebrity or, in this instance, a TV reality celebrity and model can be successful in the spirits business. So first I asked, "Is Kendall committed to the business and willing to put in the hours on the type of activities required to build a business in this industry?" So first and foremost, it was clear to me that she comes from one of the hardest working families that I've encountered. It's just fundamentally in her DNA. Two, Kendall is in tune with styles and brands, and she felt like there were many good tequilas on the market, but none that spoke to her as a consumer. She was willing to put in a lot of time and effort to try to formulate and create, and then bring to the world something that actually did just that.

So her vision was a next generation tequila brand that was more casual, more approachable, more youthful, more social in terms of that social interaction, as Carol spoke to, that consumers are looking for, and also more socially conscious. As an aside, 818 is the area code that Kendall grew up in, and she wanted something in this name that symbolized inclusiveness, so a consumer being figuratively invited to make a connection with Kendall through a drink that she, Kendall, loves, at a place that is the most personal to her.

3

For the past four years, she has been working on this idea, going from finding someone who could help her locate distilleries to someone who could guide on all the regulatory hurdles that are required. Then there's just your fundamental business management, brand marketing, and supply chain that all had to be put together. Her work ethic and commitment to me wasvery clear when, on the first call that I did with her, she first was willing to make the whole group shift their schedule to a Saturday trip to go down to Guadalajara to go over to Tequila so that I could be a part of that trip and then, secondly, tell the group that was flying privately out of LA that they would be wheels-up at three in the morning so that by the time they hit the ground in Guadalajara and got over to Tequila about 45 minutes away, they would have a very full day of work. Again, that was a full day of work on a Saturday. She won me over with that one.

But then I wanted to know, "Is the celebrity, in this case, Kendall, accessible for whatever's needed, not just for the fun stuff?" So even this past week, Kendall has been involved in every facet of the business. She's done Zoom calls with me with national account buyers; we went up

4