CPG FYI: What’s the relationship between perfume and alcohol?
Grattagliano: When you have a perfume in your hand, it gives you the smell. But when you eat something, it gives you the flavor. Between the smell and the taste, it’s a big difference.
So I tried to work on a formula with taste and smell of whiskey, but it was missing the kick, or the burn, of alcohol. I came up with the burn by inventing a warm molecule, and created Arkay.
CPG FYI: You seem to have been ahead of the curve as well in selling directly to consumers. Why did you choose that over retail distribution?
Grattagliano: With online, you could sell direct to the consumer. You don’t spend money with distributors, you don’t spend money with stores. Because the stores tell you, “give me this, give me that.” At the end, you get nothing and they get everything.
CPG FYI: You also dabbled with Amazon early on?
Grattagliano: I was on Amazon in 2011 until 2012, and then I pulled out. I came back about six months ago, and we’re doing fantastic on Amazon.
CPG FYI: In the last few years, you’ve had some company in the zero-proof spirits space. How is that going?
Grattagliano: In 2016, Diageo invested in Seedlip, which was a very good alcohol-free gin, and then in 2019 they started working with a company called Ritual making an alcohol-free whiskey.
At the beginning, people were buying Arkay out of curiosity or necessity. But many people didn’t want to put $50 on a bottle because it might not be so good. Because Diageo copied me, it gave more credibility to my business.
CPG FYI: You’ve got a lot of Muslim fans. Why is that?
Grattagliano: For Muslims, liquor is considered haram—against god. So those people buy Arkay because it’s something they want and they please their god, they please their faith.
We’re doing very well in Pakistan, Saudi Arabia, Kuwait, Bahrain, Malaysia and so on because we give them the possibility to have fun, but without any issue with their faith.
CPG FYI: You’ve spent money on a billboard in Times Square, ads on buses, some television and in-flight magazines. What are you doing now?
Grattagliano: Zero. In 2019, we spent $10 million on advertising and did $36 million in sales. In 2020, we wanted to start advertising again and then boom—the coronavirus came. We didn’t know what was going on, so my wife and I decided to stop.
Can you imagine today if I had signed for a multimillion-dollar campaign in Times Square and there’s nobody there? It would be a disaster.
CPG FYI: Along with so-called sober bars, what other types of distribution does Arkay have?
Grattagliano: This is a sweet move we’re doing. There are a lot of bars starting a new movement called sober bars. Bars without alcohol. All of them are either carrying Seedlip or Ritual or Arkay.
And also, we got a little bit of distribution with Budweiser in Maine. We did very, very well until the coronavirus arrived. We had to stop the distribution because the stores closed. But they are very interested to increase buying from us, because there are requests from stores.