Behind the Bar The Business of the Bar

This Company Is Disrupting How Spirits Are Distributed

Want high-quality spirits at a lower cost? It just takes eliminating the middle person.

Vodka production at Ublendit
Vodka production at Ublendit. Image:

Ublendit

It’s a business idea that may disrupt the liquor industry or at the very least continue to piss off a lot of distributors. It’s also one that sounds too good to be true: creating spirits that taste better and cost less—often a lot less—than the top-shelf brands consumers have grown accustomed to requesting.

The proof, so to speak, is in the liquor, which ranges from 70-proof Hideout mandarin orange vodka to 90-proof Westside Water bourbon, all made under the Ublendit Spirits umbrella, selling to bars for as little as $5 per one-liter bottle.

John Spagnola, the managing partner of the two-year-old company, understands the skepticism he encounters. “It’s a matter of getting people to try it,” he says. “Then it’s, Wait, this is cheaper and better? And they switch over.”

But don’t take his word for it. Take the word of bartenders and beverage directors. They’re fundamental to what makes Ublendit work (giving those bar pros what they want), how it shapes its mission (“to help retailers [namely bars] be more profitable and successful”) and where it began (talking with bartenders).

Ublendit’s Beginnings

Well, the last part isn’t exactly true, because in the very beginning came an idea for an app. Spagnola was casting about for a fun and disruptive business concept to present to his business partners. As the search swung him across industries, from starting surf camps to crafting PDF-creating websites, he got stuck wondering why liquor could be made so affordably yet sell for as much as it does. Ultimately, he wanted to capitalize by allowing liquor lovers to customize their own reasonably priced bottles, right from their phones. They’d pull up the app, punch in a desired spirit and style, run through a label-design interface and have a personalized product delivered straight to their home.

“Everybody thinks they’re an ultimate craft mixologist,” says Spagnola. “So we were playing toward that, empowering the average Joe to make a custom gin.”

But there’s one small problem: It’s illegal for spirits producers to sell to anyone without a liquor license, which means that his direct-to-consumer idea hit a roadblock. Restaurants and bars possess those licenses, however. Spagnola started running the idea by his favorite tastemakers in the drinks industry. They felt a branded bottle would be cute, sure, but raised more pressing problems they face when purchasing spirits. 

The two biggest issues they named were, first, that superb spirits are expensive, and, second, that between purchase minimums, hidden costs and dubious deals (“buy this so-so spirit if you want to tap into our premium line), dealing with distributors is a hassle.

Catalyst vodka at The Catalyst
Catalyst vodka at The Catalyst. The Catalyst

Spagnola got to thinking about how to tackle those problems, which are related, thanks to distributor markups that can run upwards of 30%. He pursued the idea in cahoots, and in constant communication, with his business associates, Scotts Valley real estate lenders and mortgage magnates Christy and Ryan Buckholdt. 

“I just love businesses and disturbing industries where things can be different and meet an unmet need,” says Ryan. “So we started looking deeper and deeper and came up with the business model we have now.”

Disrupting a Disliked Industry

The short version of the model: Cut out the middle person. The longer version: Forget distilling. Buy the purest base spirits on the market direct from the expert manufacturers, including experienced producers such as JB Thome and Midwest Grain Products (or MGP), so production can be ramped up with a simple request for more. (“They make the best wood,” as Spagnola says. “We build the house.”) Apply smart proprietary recipes and perhaps some barrel-aging and infusing at Ublendit’s own facility. Collaborate closely with and distribute directly to bars and restaurants.

“The entire game plan is scale,” says Spagnola. “I’m happy making $2 a bottle instead of $12 if I can sell more. And if I can’t create a product for less that beats everyone in flavor, I don’t do it.”

The fact that the Buckholdts don’t drink helps Ublendit stay on mission. “We rely on experts in these fields to taste-test, then we create and develop our spirits based on what the public wants,” say Ryan. “I’m not biased, saying mine’s the best. It’s them telling us.”

Today, partner bars and restaurants can taste and select from dozens of gins, rums, whiskeys, vodkas and more in Ublendit’s portfolio, then design a label. Printing, graphic design, TTB approvals and legal consulting are part of the package.

In earlier days, bars and restaurants could craft their own flavor signatures, though that’s now reserved for those willing to commit to a massive order. Jason Cichon, the bar manager at iconic Santa Cruz, California, music venue The Catalyst, worked with Ublendit developers on a Catalyst vodka with a cucumber, kiwi and red clover kick.

“Hanging out in the lab coat designing liquor from the ground up is a playground for any bar manager,” says Cichon. When bartenders asked for Bloody Mary-friendly vodkas, Ublendit’s lab team crafted Monterey Bay signature jalapeño-flavored vodka. When they requested a Malibu-style rum, Ublendit created Navigator coconut rum. When they wanted a blended whiskey that could compete with mainstream versions for less, Ublendit’s development squad, led by J.P. Ditkowsky and Tyler Derheim and informed by a lot of competitor comparisons and bartender taste tests, spent seven months experimenting before reaching a recipe that would work. “We were very intentional, stylistically,” says Ditkowsky. “The final blend came together harmoniously.” 

Chuck Oliver vodka at Number 1 Broadway
Chuck Oliver vodka at Number 1 Broadway.  Number 1 Broadway

Skyrocketing Success

Its original client remains among Ublendit’s biggest cheerleaders. Chuck Oliver owns Number 1 Broadway in Los Gatos, California, and after running 14 nightclubs is approaching 50 years in the industry. He loves to pit his Chuck Oliver vodka against Grey Goose and Tito’s in blind taste tests. Oliver guesses he has conducted 200 three-way tests, and his namesake spirit has won 180 of them. (For the record, he says, Tito’s won the remaining 20.) “It’s a no-brainer to have your own spirit,” he says.

Word-of-mouth from connected industry veterans like him has Ublendit growing quickly. Even amid a global pandemic and accompanying restaurant crisis, the company has gone from $3,000 in sales in January 2019 to more than 100 times that today and continues to experience record-breaking months.

A major driver there has been Ublendit’s house brands, including recently introduced Westside Water. Its original, Hideout vodka, got its start when Spagnola and his sales team approached Grocery Outlet about an exclusive offering, banking that the Hideout vodka recipe would flourish because it was the most popular among its bar partners. 

Like many before him, Grocery Outlet’s liquor buyer balked, but spiking sales returns soon assuaged his concerns and led to the additions of Hideout peach, mandarin orange, vanilla and raspberry, all priced at $7 per fifth. As of late summer 2020, several other large national retail chains are finalizing deals with Ublendit as well.

Meanwhile, Ublendit has three major stadium contracts in the pipeline. Plans for a new 28,000-square-foot facility would make Ublendit an anchor tenant of a much-discussed mixed-use complex in Scotts Valley. In addition to an expanded lab, the company is debating adding tasting room and restaurant components.

Ublendit customer rep Art Mueller worked for 10 years as a bartender and helps his clients write Ublendit-based cocktail menus when asked to. He and Spagnola took this reporter through a tasting that included three vodkas (starring an eyebrow-raising vanilla vodka), a spot-on bourbon, a smoky blended whiskey and a rich dark rum, with not a single miss among them. 

Mueller is well-acquainted with the doubt Spagnola describes. But he’s seeing that change. “When we first showed up, people didn’t believe what we were saying, or they were replying, ‘Oh, I don’t know about that,’” he says. “Now that we’ve been on the market for a couple of years, they’re reaching out to us.”

And Ublendit is reaching new levels of relevance.