Two entrepreneurs, Russian Revolution, Prohibition, A-1 Steak Sauce, Grey Poupon mustard, two buddies having drinks over a failed business and a book turned movie.

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Dave Young:
Welcome back to the Empire Builders Podcast, Dave Young here alongside Stephen Semple, and we’re talking about more famous brands, and you told me what the brand is that we’re going to talk about, and they’ve probably been eclipsed in recent times, but man, these guys were the bomb for a while. Smirnoff’s brand is mainly a vodka brand.

Stephen Semple:
Yep.

Dave Young:
And this goes back to… I don’t know how far back. You’re going to tell us, I assume, but this was the vodka that my dad and his friends drank in the 60s.

Stephen Semple:
Yep, and it’s a fun story because the story of Smirnoff is really a story of two entrepreneurs, the Russian Revolution, Prohibition, A-1 Steak Sauce, Grey Poupon mustard, two buddies having drinks over a failed business and a book turned movie.

Dave Young:
Oh, wow. Let me pop some popcorn and pour myself a glass.

Stephen Semple:
Yeah, sit back, and relax. It’s going to be a little bit of a ride, but you are talking about how big they are. How big they are, in 1982, they were sold to R.J. Reynolds for $1.4 billion, and they are still the best-selling spirit globally with 27,000,000 cases sold a year.

Dave Young:
Amazing.

Stephen Semple:
There are six bottles sold every second. So boom, six, boom, six, boom, six. That’s how big they are.

Dave Young:
There are some thirsty people out there, right?

Stephen Semple:
Yeah, they are a monster. So we’re going to start with Heublein. So Gilbert Heublein is a second-generation business owner, and he was the president of the family business, Heublein, which was a maker of mixed drinks. And so they were making mixed Manhattans, pre-mixed Manhattans, and things along those lines. And the family got into the liquor business quite by accident. So the family had a successful restaurant in Hartford, Connecticut, and in 1875, they accepted a large order of pre-mixed martinis and Manhattans for the annual foot guards picnic. But the event got rained out, so the event was rained out, and they had all of this product left over. And when they went to dispose of the drinks, they discovered that the drinks were, surprise, shelf stable because of all the alcohol in them.

Dave Young:
Oh. All right.

Stephen Semple:
So they started to sell pre-made drinks out of the restaurant, and this became so successful that they ended up building a distillery to satisfy the demand.

Dave Young:
Wow. And this was when?

Stephen Semple:
Oh, this was back in the late 1800s.

Dave Young:
Okay.

Stephen Semple:
So at this time, G.F. Heublein takes over the family business, and they also start developing an interest in other packaged products such as sauces. And in 1903, he bought the right to A-1 Steak Sauce for the North American market. Later in 1936, he buys Grey Poupon mustard. So they have A-1 Steak Sauce and the Grey Poupon mustard, but back to Smirnoff.

So Heublein has this successful business selling pre-made alcoholic drinks, and in 1920 what comes along? Prohibition, which wipes out the liquor business, but fortunately, they’ve got the steak sauce to focus on to keep them going. So they focus on the steak sauce and some other food products. This keeps them alive. G.F. passes away and the business is taken over by his son, John Martin, who is generation number three. And this is also significant, and here’s where I got to give a lot of credit to John Martin. Very few businesses make it through the third generation. He’s the third generation and he’s going to actually make the business go huge. That’s a huge credit to him.

Dave Young:
Often it’s that second generation that sometimes drops the ball. If the founder made it really big and the second-generation guy has a silver spoon mentality, often what happens, is his grandson comes in and really, really kicks it in the butt and it takes off. So yeah.

Stephen Semple:
G.F, we’ve got to give credit to because he was second generation and Prohibition hit, and he managed to keep the business alive through Prohibition.

Dave Young:
Yeah, that’s amazing.

Stephen Semple:
So you know what? I hadn’t even thought about that. We’ve got to give credit to him as well.

Dave Young:
A little different business, but they kept it together.

Stephen Semple:
They kept it together. So in 1933, Prohibition was repealed and John Martin wanted to get back into the liquor business. He expands the packaged food business with the acquisition of Grey Poupon mustard. He’s well-educated in the risk. He’s a big risk-taker and he wants to get back into the liquor business but here’s the challenge. All the old drinks they did were whiskey-based, so they were Manhattans, and things along those lines take time to make industry. It takes time to make whiskey. The industry’s just getting going and he could not find a good supply.

The other thing he noticed was tastes were changing. The big drink was no longer whiskey, it was gin.

Dave Young:
Okay.

Stephen Semple:
And he also notices a little tasteless drink called vodka coming on. So enter our second entrepreneur to this story, Rudolph Kunett, who’s an immigrant from Russia, who’s also a GM for a cosmetic company, but he’s an immigrant and he wants more. He’s reading the newspaper one day and he notices in the newspaper a small company for sale that has a recipe for vodka.

Dave Young:
Okay.

Stephen Semple:
He also recognizes the name from his hometown. The name is Smirnoff. And in fact, before the Russian Revolution, his family sold grain to the Smirnov family-

Dave Young:
Oh, wow.

Stephen Semple:
From making of the vodka. But few know about it, and few have had it, but the Smirnoff name is famous in Russia. It actually was the official vodka of the Imperial family. And 15 years earlier, Vladimir Smirnov was one of the richest men in Russia. But when the Bolshevik Revolution happened, private industry was outlawed. He was arrested, and put in front of a firing squad, but before they were able to execute him, there was a raid on the prison and he escaped in the confusion and ended up in Paris.

Dave Young:
Oh, wow. Okay.

Stephen Semple:
He has almost nothing, just the family name and this recipe for a charcoal-aged vodka. Places an ad in the United States, the ad is seen by Rudolph who buys the rights.

Dave Young:
Oh, my gosh.

Stephen Semple:
Right?

Dave Young:
That’s amazing.

Stephen Semple:
He bought the rights for the US for 2,700 bucks, and in March 1934 opened the first vodka distillery in the United States. It’s triple distilled and filtered through this birch charcoal. And it’s unique because it uses this white beach charcoal and it has this clean, neutral taste, but it’s hard to get Americans to like it and he’s made this big investment. In the first year, he sells 1,200 cases, bringing in $25,000. But look, he’s bought the rights and built a distillery. He’s facing ruin. He wants to cash out. So he approaches John Martin to sell it, and John Martin buys the company for $50,000 and gives Rudolph the job as the Head of Advertising.

Dave Young:
Nice. Okay.

Stephen Semple:
Because John Martin sees the potential of vodka in America as a mixer, not as a drink, as a mixer.

Dave Young:
This is cocktail time.

Stephen Semple:
It’s cocktail time. Now, along comes World War II and this puts everything on hold again. But following World War II, they start to really look for cocktails that they can use vodka in. So John Martin is in Los Angeles, and he stops in at a bar called The Cock and Bull, which was run by a buddy of his, Jack Morgan.

Dave Young:
Okay.

Stephen Semple:
Jack had been importing ginger beer into the United States and had not been successful. So here’s John Martin with his vodka thing that he can’t get going. And here’s Jack with this ginger beer thing that he can’t get going, and they start commiserating over their failures and they start deciding to mix the vodka with the ginger beer, add some lemon juice, and the Moscow Mule is born.

Dave Young:
Amazing. Yeah, it’s the classic, “You got peanut butter on my chocolate, you got chocolate in my peanut butter,” story.

Stephen Semple:
Right. “I got this shitty thing I can’t sell. You got this crappy thing you can’t sell. We’re going to pour it together. We’re going to add this other thing.” And next thing you know, “Huh, we got this thing.”

Dave Young:
Please tell me that the only thing they had to pour it into was a copper mug.

Stephen Semple:
See, that’s the only part I don’t know. But as the story goes, they drank so much, they can’t remember how they came up with the name.

Dave Young:
I love it.

Stephen Semple:
John Martin starts to sell Smirnoff with the recipe for vodka as the mixer, and things start happening, but they face another problem.

Conflicts are starting to grow with Russia, so there are lots of anti-Russian feelings. And so the Moscow Mule, while it started getting going, was no longer welcome in bars.

Dave Young:
The anti-communist frenzy.

Stephen Semple:
Yes, but John Martin decides to fight back. So what he does, you’re going to love this Dave, Polaroid cameras had just come out. So he goes and he buys Instamatic Polaroid cameras. So for young people listening into this conversation, Polaroid cameras or an instant camera where you press it, thing comes out, hold onto it for a second or two and the picture emerges in front of you. And it was amazing at the time.

Dave Young:
Oh, yeah.

Stephen Semple:
It was really cool. So here’s what he did. He went out and he got an Instamatic Polaroid camera, “And if you try this drink, I will take a picture of you and you can take it home with you.”

Dave Young:
Oh, cool.

Stephen Semple:
So he would go in the bars and go, “Hey, Dave, if you get a Moscow Mule, I’ll take a picture of you with the Moscow Mule and I’ll give you a picture and you can take it home.”

Dave Young:
Nice.

Stephen Semple:
And what he would do is he’d take two pictures, he’d keep one, and customers were amazed by the pictures. And also, the bartenders were like, “Hey, can you take a picture of me making the drink?” So he would take pictures of the people in the bar, which also got them having the drink, halo effect, you’re attaching your brand to a hip new, trendy technology. And then you go down the road to the next bar and say, “Hey, I’ll show you a picture of the other people I did. Do you want a picture yourself?”

Dave Young:
Yeah. So now there’s this social influence thing going on, right? “All these other people tried one. You might like it too.”

Stephen Semple:
Yes. And it creates this viral campaign, “Be one of the first,” word of mouth. “Hey, look at this picture I had of myself with this Moscow Mule.” Right?

Dave Young:
We think of things like Facebook and Twitter, and it is like, “Oh, the world didn’t have social media back before computers.” Like the hell it didn’t. This is nothing but a slow, non-digital Instagram or Twitter feed.

Stephen Semple:
Absolutely.

Dave Young:
Or Facebook.

Stephen Semple:
Absolutely.

Dave Young:
Right? I take the picture with me and I show people, “Look at this picture.” They go, “Oh, what are you drinking?” “Oh, that’s called a Moscow Mule. But look, I got a free picture of myself.” “Yeah, but look at the drink. How was it?” “I liked it.” “Okay.” Right? It’s like this is exactly what social media does.

Stephen Semple:
Right. Social media is not new. It just is bigger and faster.

Dave Young:
Yes, yes.

Stephen Semple:
But there were lots of people before the world of the internet who were creating influencers and social media and this is how he did it, with a Polaroid camera. So Smirnoff starts being seen as trendy, innovative, and the future, all because of this. And by 1955, they’re now selling a million cases a year, and they have 99% of the vodka market. But he wants to catch gin. This is the era of the martini and gin is the fave, right? So guess what he decides to do? He decides to put vodka on the silver screen in a new movie based on a book. It’s a foreign movie and a foreign book. Everyone thought he was insane, but he puts vodka in the hands of Sean Connery in the movie Dr. No in 1962, “Shaken, not stirred.”

Dave Young:
There’s actually a funny Canadian whiskey tie-in to that. Before James Bond’s drink was vodka martini, shaken, not stirred, you know what it was?

Stephen Semple:
What was it?

Dave Young:
Canadian Club.

Stephen Semple:
Oh, is that right?

Dave Young:
Yeah. It was like a CNC that’s in a promotional video that Canadian Club put out. We play it at the Whiskey Marketing School in our level one class, and I’ve always thought that story was like… They talked about how it was James Bond’s drink, but they didn’t mention it till it wasn’t, right? Till it wasn’t, then it was never again.

Stephen Semple:
Right.

Dave Young:
So cool, cool tie. It’s good to know the rest of this story.

Stephen Semple:
I don’t know how he got it in, but there’s another Canadian tie-in to James Bond. So we’re going to go down another little rabbit hole here.

Dave Young:
Okay.

Stephen Semple:
So you always say that the producers, the Broccolis, actually own the movie rights to James Bond, and they are Canadian. They live in fricking Newfoundland.

Dave Young:
Oh, wow.

Stephen Semple:
That’s a whole story and I think that’s an idea for another podcast.

Dave Young:
Okay.

Stephen Semple:
We have got to do a whole thing on James Bond.

Dave Young:
What were we talking about? Oh, Smirnoff.

Stephen Semple:
So the first James Bond, they put Smirnoff Vodka in his hand, vodka dethrones gin, and martinis with that movie.

Dave Young:
Wow.

Stephen Semple:
In 1976, 1976, vodka surpasses gin as the bestselling spirit. And in 1982, the company was sold for $1.4 billion. And today, Smirnoff is the bestselling spirit globally with 27,000,000 cases a year sold.

Dave Young:
Wow.

Stephen Semple:
But the other thing is everyone thought he was insane because the James Bond thing was like, if you think about it, was foreign movie on a foreign book with an unknown actor.

Dave Young:
Yeah, but it was also a movie that by then, by Sean Connery’s time, that movie had established itself as one of the very first franchise movies.

Stephen Semple:
Yes. Yes.

Dave Young:
Right? So you know there’s another one coming out.

Stephen Semple:
Right, because there were also multiple books. Yeah, but here’s the interesting thing. John Martin was really great at recognizing the halo effect, right? The halo effect of the Polaroid camera, was because not only did it create social media, but it was cool and so cool and innovative, and trendy. So that meant he attached his brand to that. The movie placement wasn’t just any movie. It was a movie that was about technology. There was new technology in it and it was trendy. Right?

Dave Young:
Yeah.

Stephen Semple:
But the other part is he stayed true to his roots. The whole idea of doing mixed cocktails was not new to him. That was the family business DNA. They started doing it and had to get out of it because of Prohibition and got back into it.

Dave Young:
And all these things that we talk about all the time, right? Sampling.

Stephen Semple:
Yes.

Dave Young:
We’ve got to get people to try it. The social proof, the proof that they tried it. They’re showing you the pictures so they show that they liked it, and it’s show, not tell, right?

Stephen Semple:
Yes.

Dave Young:
It’s a show, don’t tell.

Stephen Semple:
Yes.

Dave Young:
Show people what this is like. Don’t tell them how good it is. Show them an international, mysterious, elegant spy enjoying your product.

Stephen Semple:
Yes, and it was a fun attachment because even the Polaroid one would’ve been fun, because you imagine somebody going to a bar, “Hey, I’m going to take a picture of you.” And remember, the Polaroid thing was we would all gather around it and watch the picture emerge. “Oh, could you take my picture? Give me one of those drinks.” Right? It’s also then the attachment would be in that fun, positive emotional thing, which I thought was just brilliant. And as you pointed out, Dave, social media, 1950s style.

Dave Young:
And they created some brand loyalty. I’ve got a story about that going back to my childhood, if you want to hear it.

Stephen Semple:
Sure. Let’s hear it.

Dave Young:
Smirnoff Vodka, my dad, as I’ve mentioned before on the podcast, ran a small radio station in a little nowhere town, and his best friend was his biggest competitor. It was the guy that published the newspaper in town.

Stephen Semple:
Okay.

Dave Young:
And so they’d go head-to-head against each other in the street all day, and they’d go home in the evenings, and often their family would get together with our family and they’d have cocktails. Well, his friend Jack… By the way, Jack ended up being my best man. I think if Jack was still alive, he’d be probably 120, or 130 years old. He was in his 90s when we got married. So he was a Smirnoff guy.

Stephen Semple:
Right.

Dave Young:
My dad was a scotch drinker, but just bar scotch, just Carty Sark. And Jack was a vodka guy, and my dad always made the case, “You can’t taste the difference between two different vodkas,” especially in the 1970s.

Stephen Semple:
Right.

Dave Young:
It’s like vodka is vodka. It’s just a clear distilled spirit. It’s basically just alcohol and water to whatever proof you want it to be. But Jack’s like, “No, I insist on my drink being made with Smirnoff.” And so my dad would buy an even cheaper vodka than Smirnoff and just pour it into an empty Smirnoff bottle. And he actually did that in front of Jack.

Stephen Semple:
Right.

Dave Young:
Right? So he is like, Jack sits down at the table and dad pulls a bottle of Smirnoff out and it’s empty. He is like, “Oh, wait a minute. Let me fill this back up,” and gets a funnel out and fills the Smirnoff bottle with cheaper vodka and then makes a drink for Jack and Jack’s like, “Fine, as long as it came out of the Smirnoff bottle, I like it.”

Stephen Semple:
I think that’s hilarious.

Dave Young:
So yeah, so that’s my memory of Smirnoff, and I think that that’s a nice little illustration of brand loyalty, right?

Stephen Semple:
Yes. Yes.

Dave Young:
Jack Lowe was a Smirnoff guy.

Stephen Semple:
That’s how he saw himself and the world was not going to change that.

Dave Young:
Yeah. Shaken, not stirred.

Stephen Semple:
Shaken, not stirred. Yeah.

Dave Young:
Great. What a fun story. James Bond and Canadian whiskey and Russian Revolution, all of it.

Stephen Semple:
Hey, don’t forget, A-1 Steak Sauce because that’s what kept it all alive?

Dave Young:
I feel like going out to a nice steakhouse tonight and having myself a vodka tonic and a big rib eye.

Stephen Semple:
There you go. There you go.

Dave Young:
All right.

Stephen Semple:
All right. Awesome.

Dave Young:
Thanks for sharing that story.

Stephen Semple:
Thanks, David.

Dave Young:
Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five-star rating and review. And if you have any questions about this or any other podcast episode, email to questions@theempirebuilderspodcast.com.

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