[REWIND] #21: Tom Lix (Cleveland Whiskey)

Tom Lix (Cleveland Whiskey) [00:00:00]:

I can use woods like apple and hickory and black cherry and sugar maple and honey locust and all sorts of other sort of interesting woods with some of them with some amazing flavors, I don't have to worry about leakage. I don't have to worry about the angel's share, which is the evaporation that traditional aging has where spirits evaporate over time out of a barrel. And, I can create some things without sugar, syrup, artificial flavor, or color that nobody else can do.

Jeffrey Stern [00:00:27]:

Let's discover the Cleveland entrepreneurial ecosystem. We are telling the stories of its entrepreneurs and those supporting them. Welcome to the Lay of the Land podcast where we are exploring what people are building in Cleveland. I'm your host, Jeffrey Stern. And today, I had the pleasure of speaking with Tom Licks, who is the founder and CEO of Cleveland Whiskey. Tom is a serial entrepreneur. And prior to founding Cleveland Whiskey, he had founded a company called Public Interactive, which he had sold to National Public Radio. And as you'll hear later, Tom really has always He's been a tinkerer through and through.

Jeffrey Stern [00:01:02]:

He spent some of his formative years in the US Navy where in addition to some early bootleg distilling experience, He was cross trained in nuclear physics and thermodynamics along with seawater and freshwater distillation. He was a college dropout who had hitchhiked his way across the country and fought forest fires in Alaska at the age of 17. Cleveland Whiskey has become somewhat notorious in this traditional world of whiskey for their disruptive approach to distillation having found a way with technology, with machinery, and with chemistry to rapidly age their spirits using barrels and infusing it with wood. I won't paint you with the details here as I will most certainly get them wrong, and Tom's explanation will be much better, and his voice is also much more soothing. Cleveland Whiskey is rapidly expanding, though. They're currently in the process of building out a new facility in the Flats, which will increase their production capacity by a factor of 20 And at a new restaurant and bar all on the river just south of Collision Bend. It's very clear to me that Tom is a wealth of experience and a force for good here in Cleveland. Over the last year, Cleveland Whiskey pivoted production capacity to produce and distribute for free sanitizer across emergency medical centers, police departments, Fire stations and nursing homes across Cleveland.

Jeffrey Stern [00:02:12]:

His passion and enthusiasm for whiskey is infectious, which ultimately led to a a spirited, Literally conversation. So please enjoy. Let's start with whiskey.

Tom Lix (Cleveland Whiskey) [00:02:30]:

That's a good place to start with

Jeffrey Stern [00:02:31]:

me, for sure. Yeah. How is it that You recognize your proclivity to distillation and and found yourself with this desire to to me, it's interesting to disrupt this industry that, When I think about it, has been steeped in traditional practice where, you know, making whiskey is is done pretty much, as I understand it, in the way that it has been done for centuries.

Tom Lix (Cleveland Whiskey) [00:02:52]:

Yes. And I I mean, that's very true. And, I suppose if I was more more patient person, that would appeal to me, but I'm not. There's a couple of different ways to approach this because it started at various points in my life, and they all sort of converged when I read an article about the growing middle class in China And how as people entered the middle class, they, looked for affordable luxuries and which made sense, but I thought about it and I said, you know, it's not just affordable luxuries, it's conspicuous sort of luxuries, things they can share and show off a little bit with their friends. And so I started looking at, you know, product categories, what they were buying, and as there was an uptick in the middle class in China, there was an uptick in the purchase of imported scotch and bourbon. So I said, well, that's sort of interesting and you've got growing middle class, You know, not just in China, but throughout Asia and India and South America and Africa, and this was even before Europe and and the US started getting back into brown spirits. I said, here's a here's a business that they take great pride in the fact that it takes a long time, that Takes patience to develop their product. And I said there could potentially be this tsunami of market demand for a product, and they won't able to keep up.

Tom Lix (Cleveland Whiskey) [00:04:03]:

You can't crank up production like cornflakes or computer parts. You know? It takes you, you know, 4, 6, 8, 10, 12 or more years to create a product that's drinkable. And the intriguing part to me was that nobody had changed it in a long They were still doing things the same way, which was fine, and I respect that. And there's certainly a craft to it, but I also thought there should be some technology behind it as well and some science. And I'm really sort of an amateur chemist. I'd be a better I'd I'd be a real chemist if I had a better Tension span, but but I love it. I like it. And I started doing some research and experimenting in my basement, and because I'm not, I I just thought that there there had to be something that I could apply.

Tom Lix (Cleveland Whiskey) [00:04:45]:

And because I'm not a real chemist, I made some mistakes that a real chemist wouldn't have made, and they've let me down paths that essentially got me at least close to the technology that we have today that changes the process and disrupts the industry. And that's, You know, there's other stories along with that, but that's the first

Jeffrey Stern [00:05:02]:

one. So did the innovation and the work you did on On the chemistry side and the accelerated aging process come first, or did the idea of Cleveland Whiskey as a brand come first? What's kind of the thought that the

Tom Lix (Cleveland Whiskey) [00:05:14]:

story there? The brand came second. It was really will be about the technology and and what could you do and and I I I mean, just to give you another quick if you don't mind, I'll give you another quick little Yeah. Absolutely. Okay. So this one takes me back to when I was about 10 years old and that Christmas, I remember getting Two things I remember that I got. I got a chemistry set, which was a big deal back then, back in the day. And, and chemistry sets were far different when I was young. Instance, we all got bottles of mercury in our chemistry sets.

Jeffrey Stern [00:05:43]:

So all the they give to all the children these days.

Tom Lix (Cleveland Whiskey) [00:05:45]:

Yeah. Yeah. It was all the kids who came back from Christmas vacation and got chemistry since we all had dark spots on our index fingers because we poured out the mercury on the kitchen table no less and just sort of, you know, jiggled it around, that's what you did with mercury. But but I get a chemistry set and I also got a model rocket ship. It was made out of galvanized metal. It was heavy. It was meant to go on a shelf, never to fly. But I'm a 10 year old kid with a a rocket ship and a chemistry set.

Tom Lix (Cleveland Whiskey) [00:06:09]:

So I was convinced that my mission in life at that point was to make rocket fuel. One day, my parents went out. They took my siblings. That was a big mistake. Left me alone in the home, and I just thought that that was my time to make rocket fuel. I took everything down the basement. I needed a a pot to mix it all in. And I went upstairs in the kitchen.

Tom Lix (Cleveland Whiskey) [00:06:28]:

I'm pulling out all these Paws, but I needed something with a good heavy lid because I was gonna make rocket fuel, of course. And I realized that there was this pot up on this, on top of the cabinets in the kitchen. You couldn't reach it. I had to rig up some chairs to get up on the counter, and then I pulled the the chair up on the counter to get up and get that pod. I took. I got it. I took it down to the basement and I started mixing all these chemicals. Now another part is that we lived in an old house that had an old finicky hot water Peter, that you it was a gas hot water heater, and it will constantly flame out.

Tom Lix (Cleveland Whiskey) [00:06:59]:

So you had to relight it again. So there's a box of wood matches down there as well. So now think about it. I'm this 10 year old kid with a rocket ship with a chemistry set and a box of wooden matches, which is really just so dangerous as I think about it. And as I raised my own kids, I was very careful about things like that, but so I'm done mixing things. I'm throwing matches in it. Nothing's really happening. Probably used up all the chemicals in my chemistry set.

Tom Lix (Cleveland Whiskey) [00:07:24]:

Start dragging things out from underneath the sinks and in closets. I'm mixing and everything, and all of a sudden, at One point, these big fat bubbles start, you know, coming up vigorously sort of like boiling almost. A smoke was coming off of it, and I'm Sighted. I'm thrilled. There's I figured I've I've invented rocket fuel. You know? I I mean There it is. And I, but I needed more of the stuff that I just poured in because the bubbles started dying down right away. So I slapped the lid on the pot.

Tom Lix (Cleveland Whiskey) [00:07:52]:

Now it turns out it was a pressure cooker. I didn't even know what a pressure cooker was, and it had a fracture in the lid, which is why my mom had put it up on this top shelf so nobody could use it. But I had slapped this on the lid. I run over to the other side of the basement. I'm under the sink getting whatever it was I had pulled out and had poured into this mixture. And next thing I know, I wake up in a hospital And, apparent I I was lucky I didn't get hit by the shrapnel. The the lid exploded and sent shrapnel around the basement, but it did hit the hot water heater, sparked something, caused a small explosion, which knocked me out, almost burned down the family home. Needless to say, I lost my chemistry set privileges for a couple years, but but that's that's me.

Tom Lix (Cleveland Whiskey) [00:08:33]:

So when I saw this read this article about this demand, I you know, what did I do? I went down to my basement again, and I started exploding Mason jars and experimenting with pressures and temperatures and doing things that just sort of made sense to me back in my 10 year old mode as this amateur chemist, and and that's sort of what got started. But that was where I had some luck. I was able to do things that and and I don't think it's really so much about speed or acceleration. It's really about extraction of flavor and how you do that. You know, I mean, that's how you get up to 80% of the flavor in a whiskey and how you get all of the colors, that interaction with the wood. I've just come up with a way that we can extract flavors more aggressively and do them across a a a range of woods that you can't make a barrel out of because they would leak like a sieve. I'll I'll get carried away as you as you as you ask me questions and anticipate short answers. I I probably never give short answers, but I'm excited about this, and I'm passionate about it.

Jeffrey Stern [00:09:31]:

Yeah. No. It's it's very clear. It's awesome. Relative to that more traditional process, right, like the The how the Kentucky distilleries are doing it. Can can you kinda just lay out for someone, like, explain it like I'm 5, kinda the the differences in the process? And And then I would love to to get your your perspective on that experimentation with alternative woods and expanding the the flavor profile of whiskey.

Tom Lix (Cleveland Whiskey) [00:09:55]:

Well well, let's start with with whiskey in general because I think a lot of people, you know, they they talk about, well, there's bourbon and there's whiskey and things like that. Well, whiskey is the main category. That's the sort of overreaching category. Within that, depending on where you make it or what grains you use to make it, what proof levels, and and I'll get into a couple examples, will determine the type of whiskey. So We're all familiar with Scotch. Right? Scotch is made in Scotland. You can't call it a Scotch if you make it somewhere else, but it's made from malted barley. We make some good malted very good malted barleys here in this country, we can't call them Scotch.

Tom Lix (Cleveland Whiskey) [00:10:27]:

We call them a malt whiskey. There's an Irish whiskey which is very similar to Scotch, although If you're an island or Scotland, you wouldn't wanna be saying that, but but but they're you know, for the American palate, they're relatively similar. And then there's bourbon. That's the big one here. Now bourbon has to be made from at least 51% corn. Most bourbons are made for 75, 85% corn. It has to be distilled at a at a certain proof level. It can't be an o, it has to be aged in a new American oak charred barrel.

Tom Lix (Cleveland Whiskey) [00:10:57]:

And that's sort of that's what makes it a bourbon. So it's a little sweeter than a scotch. There are rye whiskeys made from rye grain. I mean, there's all sorts of relations around them. Bourbon is the big one. Most people think and still think, and and it's in in a thought that's encouraged by the Kentucky Dissolvers Association, that bourbon has to be made in Kentucky, and that is not true. It can be made in any state in the union as long as it's made in a certain way. And, you know, we're here in Cleveland, Ohio, and we make bourbon, and we make rye whiskeys.

Tom Lix (Cleveland Whiskey) [00:11:27]:

And, now 95% of the bourbon is made in Kentucky, and they make some great and wonderful bourbon whiskeys. So, again, as I said, I think most of the flavor is coming from the interaction with the wood. So it's, you know, every day in a barrel, you've got this sort of raw spirit in a barrel, and you've got a 24 hour temperature change. And that temperature change causes a slight pressure change that helps move the alcohol in and out of the pore structure of wood. So imagine the wood is swelling, it's contracting, you know, there's some movement inside the barrel, minimal movement, but that's moving it into the inside Barrel, it's and and and that's what's creating flavor, but it takes, you know, 6, 8, or 10 years, and it's a slow process. And it's been made that way forever. In fact, You know, many people think it was simply an accidental discovery because barrels, they were storage containers. You know? They're built.

Tom Lix (Cleveland Whiskey) [00:12:15]:

They've got a a bulge in the middle so you could roll them down a dirt road or up onto a ramp onto a ship. There's a whole series of, you know, stories around how that might have happened. Some say it was during the ages of the Roman Empire when the empire was starting to fade and and the, barbarians were attacking the supply routes and and spirits which were distributed to armies and navies, you know, forever, at least, up until recently before I joined the navy. I I missed it by a a few years. But but you would get a ration of spirits. And so these rations might have showed up. Maybe it took longer to get to them than usual, and these Roman soldiers realized that the spirits in those barrels were tasting better, that somehow something was happening. So, ultimately, it became part of the generally accepted practice that you would age and get flavor in a barrel.

Tom Lix (Cleveland Whiskey) [00:13:05]:

With bourbon, it's interesting because we by law, we have to use a charred barrel. And the charring actually helps as well, that inner layer of charcoal. But another story around that is that that was the 2nd accident accidental discovery in that there might have been a barrel shortage at some point back probably 100 of years ago. Again, barrels were made by hand. They still are to a large extent, but made by hand. And, if if distillers were happening and people were putting more things in barrels and populations were growing, then there might have been a shortage and they would have looked for other sources. Now there were no other containers. You didn't have plastic or stainless steel or anything else.

Tom Lix (Cleveland Whiskey) [00:13:43]:

It still had to go in wooden barrels. So maybe used barrels would be a a way to get a barrel for your spirits. And some of the barrels that were being used were being used to store and preserve fish. That was a pretty common practice, a layer of salt, a layer of fish, a layer of salt, a layer of fish, seal it up, it would preserve the fish pretty well. And I'm sure that barrels that had been used to store and and, and preserve fish were probably pretty cheap on the used markets because they would have smelled like fish. Right. And, but some enterprising soul decided to, you know, buy them up cheap and burn out the insides to get rid of that flavor. And then somebody who might not have thought about scraping out that inside char, who was, you know, another lazy distiller like me, said, well, I'll just I'll just fill it up.

Tom Lix (Cleveland Whiskey) [00:14:28]:

And when they would have emptied that barrel and tasted what came out of it, they would realize that, wow, it tastes even better because of the charring. So that's sort of the historical approach. Now if I think about the spirits aging slowly in a barrel, well, I should be able to prove at the or or improve that because I can use pressure variations. Imagine taking a sponge and put it in a bucket of water. When it's in the water, you'll you can squeeze it. It's dry in your hand. And when you let it go, the water rushes into the pore structure of the sponge. We've all had that from doing dishes or washing a car.

Tom Lix (Cleveland Whiskey) [00:14:59]:

We know how a sponge works. Well, what I do is I take young spirits. I put them in pressure capable stainless steel vessels, and I put a measured amount of wood in there as well. Again, that's where the flavor is coming from. But I don't put the spirits inside the wood. I put the wood then inside those tanks with the spirits, and then I apply pressure variations, relatively high pressure into a vacuum, pressure into a vacuum. I do that frequently. There's a couple of other sort of trade secrets involved that I'm doing.

Tom Lix (Cleveland Whiskey) [00:15:25]:

But I'm essentially moving the spirits aggressively into the pore structure of the wood and then extracting it aggressively as well. Now that means I can do it faster, but more importantly, I can now use woods that nobody else can use. Because we use oak not because somebody was pressing enough to say, gee, that's gonna give spirits a great flavor. It's we use it because it holds liquid. I'm sure that people build barrels out of any number of woods, walnuts and and apple trees if they could find big ones or fir trees or whatever, but they either most of them would have leaked like a sieve. But I can use woods like apple and hickory and black cherry and sugar maple and honeylocust and all sorts of other sort of interesting woods, with some of them with some amazing flavors. I don't have to worry about leakage. I don't have to worry about Angel's share, which is the evaporation that traditional aging has where spirits evaporate over time out of a barrel.

Tom Lix (Cleveland Whiskey) [00:16:21]:

And, I can create some things without sugar syrup, artificial flavor, or color that nobody else can

Jeffrey Stern [00:16:27]:

do. Yeah. I mean, the the proof is in the pudding Or in the in the whiskey rather.

Tom Lix (Cleveland Whiskey) [00:16:31]:

So to speak. Yeah. Yeah. For sure.

Jeffrey Stern [00:16:33]:

The, I've I've had it. It's fantastic.

Tom Lix (Cleveland Whiskey) [00:16:35]:

All

Jeffrey Stern [00:16:35]:

good. I'm curious, like, in this industry, is there Is there a certain notoriety that Cleveland Whiskey has garnered? You know? What what is the perception of of you guys pushing this disruptive, innovative approach In this industry that has been entrenched in in this way that things have been done historically.

Tom Lix (Cleveland Whiskey) [00:16:51]:

Well, there's sort of 2 ways to look at it. There are the traditionalists. There are the writers and the reviewers and the pink people who come from the very traditional background. And many of them, not all of them, but many of them think that we're heretics, that what we do is sacrilege. Well, here's an interesting case. We had one of our one of our first releases, and we released our 1st bottles in March of 2013. We've been doing blind taste tests with our product against, another brand. I'll I'll mention it because I do it all the time, Knob Creek, which is a great small batch bourbon.

Tom Lix (Cleveland Whiskey) [00:17:21]:

It's aged 9 years traditionally in a barrel. It's one of the one of the berms that I used to drink, and we did blind taste test. And I and I was hoping that we would make a product good enough where we could compete and maybe 30% of the people might like us as opposed to Knob Creek. Well, it turns out after 36 100 taste tests, we were preferred by 54% of the people. So we knew we were onto something and doing something pretty good, but the traditionalists weren't happy with what we were doing. We had this 1 reviewer who did this 3 paragraph review, and it started with the idea that it was immoral. And that it was ethically wrong and immoral to use science and technology use, use whiskey. And and he went on and on and and really preached about it because he was almost a fanatic about the idea that this was somehow wrong.

Tom Lix (Cleveland Whiskey) [00:18:10]:

The 2nd paragraph said, but it doesn't matter because you can't use science and technology. It just won't work to make something any better than the perfection that it already is. And I I get it. And, but then the 3rd paragraph was, I'm still gonna give Cleveland Whiskey a fair and impartial review. Now, obviously, that probably wasn't gonna be the case, and and I'm sure it wasn't because he went on to say I mean, just to summarize and excuse my language, but he said our product tasted like sheep piss. Sheep piss. Now I we posted that review in its entirety on, I think on Facebook first. And, of course, the first comment was, you know, how the heck would he know what cheap piss taste like, and if that if that's what he's been doing, if that's what he's been drinking, he should be disqualified from ever reviewing these products again.

Tom Lix (Cleveland Whiskey) [00:18:56]:

And And, you know, so so there's once and now, admittedly, that was a number of years ago. I think we've gotten more people come over to us as we've released more products. And The beauty of the fact that we can do things quicker is we do r and d faster. So what we make today is better than what we made 6 months ago, and that's better than what we made the year before that. So we're getting better at what we do. And I think also from a consumer point of view, they're less concerned about it. They're you know, Taste is what matters. Age is a little bit irrelevant even though all the marketing has been about that it takes patience and and it takes time and whatever.

Tom Lix (Cleveland Whiskey) [00:19:31]:

But We know we're up against that, but, you know, so was the automobile when it came out. You know, it had to replace horses and buggies. And and even there, you know, we had to use some language. We had to continue using language we took from the horse and buggies days where we still talk about the number of horsepower in our car engines. So we'll see. We'll see.

Jeffrey Stern [00:19:50]:

So I just kinda wanna dive into the the business side of things a little bit. You come across scientifically this this, Alternative approach to the distillation of whiskey, I think you you recognize that you're onto something. Mhmm. But how do you then take this idea, this innovation that you have, And turn it ultimately into a business.

Tom Lix (Cleveland Whiskey) [00:20:09]:

Well, just to give you a state of our business, so we now distribute in 16 states. You know, we do pretty well. We've been growing regularly. We had our first profitable year in 2019. In the midst of the pandemic, we had a 2nd profitable year in 2020, and in 2021, in the Q1, our revenues were up 32% year on year. So we're growing. We're doing well, and that's despite, you know, some of the crazy tariff issues. In 2017, we were doing 20% of our business or almost 20% of our business in Europe, and that sort of closed off when we started getting into tariff wars.

Tom Lix (Cleveland Whiskey) [00:20:44]:

And that's a whole other discussion. But I'm hoping that that sort of goes away sooner rather than later, and that'll help our growth as well. So Business wise, we're doing fine. We do a lot of work to try to get people to try us, to sort of cut through the negativity that the traditionalists have about us. And I and I think we're, you know, we're getting fans, and we've got a, you know, going market. In fact, we're were the early stages of taking a historic building and repurposing it, and rebuilding it, and rehabbing it, and turning it into a new facility for us. We've outgrown our current space and this will give us 20 times the capacity. And even as we're building this, I'm looking for what are we gonna have to build after that because I think we're on this trajectory that is pretty positive and pretty aggressive.

Jeffrey Stern [00:21:30]:

And that that development is here in Cleveland. Right?

Tom Lix (Cleveland Whiskey) [00:21:33]:

It is. Yes.

Jeffrey Stern [00:21:34]:

Yeah. So just to to build on Cleveland for a moment, I I was actually just recently speaking with Mac Anderson, who's one of the founders over at Cleveland Kraut, now Cleveland Kitchen. Right. And to me, there's something just genuinely authentic in the way That they and and you are using Cleveland as a brand. And I'd love to get your perspective on Cleveland whiskey And and the Cleveland component of it and and how you think about, you know, both from place and from brand, that that idea.

Tom Lix (Cleveland Whiskey) [00:22:03]:

Well, you know, it's interesting because I'm not originally from Cleveland. Now my my mom was born and raised here, and, she met my father in college at Fenn College, now Cleveland State, but he was from the East Coast. It was right after, you know, World War 2 as a veteran, and, you know, I was really born and raised on the East Coast. She moved back here late in life. I came out to help care for her when she had some, you know, medical issues and wound up falling in love with Cleveland. I think it's a great place, for a lot of different reasons. I think it's a great place. But when we came to branding the company and came to branding are products with the Cleveland name, I wanted to be convinced that that was gonna be appropriate because I I knew how it would to work here in Cleveland, but I wanted to have a national and international brand.

Tom Lix (Cleveland Whiskey) [00:22:51]:

So I hired an outside research firm, somebody out of Connecticut, to do some national research for us, at least. They did I don't know how many 100 interviews, but we tested across a series of different names. And the Cleveland name, I won't tell you what the other ones were because we may use them as some other brand names at some point, but the Cleveland name tasted best. It didn't just test well. It tested best in terms of, you know, preference for purchase, in terms of perception, and everything else. And and, essentially, the people said that Cleveland to them stood for and this was back, I think, in 2012. Cleveland stood for something that was authentic and genuine, hardworking, entrepreneurial, and the and the the word that just struck me so beautifully, and I said, okay. This is what we're gonna use, was edgy.

Tom Lix (Cleveland Whiskey) [00:23:36]:

That Cleveland now now that wasn't from people here in Cleveland. I didn't I knew how they would feel about Cleveland or at least I thought I did, and I was proved right. But I wanted to so I didn't we didn't talk to anybody in Cleveland. We talked about all people who are out of staters, and we took out from the analysis people who had lived here, who had relatives here, or anything like that because I wanted to know what other people felt about Cleveland. Because it's interesting, I think Cleveland one of the challenges Cleveland has is that, and I consider myself a Clevelander now, or I I this is my home. It's gonna be my home forever. So, I think one of the challenges as Clevelanders is that we don't give Cleveland enough credit that we are more negative to Cleveland than people from outside are. We do some amazing things.

Tom Lix (Cleveland Whiskey) [00:24:19]:

This is a great city. We have fresh water. We have, you know, health care facilities that rival I'm I'm from Boston, originally. Yep. You can tell from my very, very heavy Boston accent, I'm sure. But, so most of my professional and working life was around Boston. You know, we have, health care systems that certainly rival the best in Boston. We have great educational institutions.

Tom Lix (Cleveland Whiskey) [00:24:42]:

We have world class well, actually, well, actually, world class, but we have blue collar and white collar professionals, and you need them both for a great ecosystem and a great center for entrepreneurship. You know, it's funny. I we've had a number of politicians come through the Distillery, including president Obama came through. It was the only time our a sitting president had ever gone through a distillery. But we also also had mayor Jackson come in, and I was telling him this story. And I said the other the other thing that we have that compares to Boston because Boston also had it had the same issues, and it resolved them. It just resolved them faster than Cleveland did. And I said the other thing was a corrupt local government, a history of corrupt local government.

Tom Lix (Cleveland Whiskey) [00:25:21]:

And he got a frown on his face. And I said, look. I I'm talking about a history of corrupt local government. I think what that has changed here in Cleveland, And I said, and that's for the betterment, then people will invest, will get outside investment, and I think we're seeing all that. I mean, I see neighborhoods and and and people and I just think this is a phenomenal place to do business, and great, hardworking people, decent people, and and we've seen that in terms of the support that we have for the company and for the and for the brands around the

Jeffrey Stern [00:25:52]:

world. Yeah. No. That that all resonates very much.

Tom Lix (Cleveland Whiskey) [00:25:55]:

Yeah. Yeah. It's a it's a phenomenal place and and it's and it's underrated, but I am so glad to be here and so glad to have put roots down here and and continue to put roots down here, even building a new facility here in Cleveland.

Jeffrey Stern [00:26:08]:

Yeah. One of the components that that you underwent in the last few years here that I I really wanted to to dive a little deeper on was the crowdfunding equity campaign that that you did. I really think that's Such a an awesome vehicle for people who love the brands to be able to to own it. And I'd I'd love to just hear the story of Of how how that came to be and how that experience has been in the aftermath of it.

Tom Lix (Cleveland Whiskey) [00:26:33]:

So I'm glad you asked that question because that takes me back to Boston again because I remember when the Boston Celtics I know I shouldn't use that name here, but the Boston Celtics sold shares for the first time to the public. And that was such a big deal. I mean, it was really newsworthy. Everybody was excited about it. All the fans got in there. Even if they're buying just a couple of shares, now they were owners of this team, the team that they loved, and it it just meant attendant not that attendance wasn't high already, but attendance went up, you know, season ticket holders or, you know, whatever, it it just it just was phenomenal. It resonated in the community. So when the rules changed about equity crowdfunding, you know, we couldn't do anything on Kickstarter where you couldn't sell equity because, you you know, the perks would have been whiskey and you can't really give away whiskey.

Tom Lix (Cleveland Whiskey) [00:27:20]:

So So we had to wait until there was so we could actually sell shares. But when that came up, I said this is a great idea to get people involved in the company, give them a chance to own this company, and have have, you know, have thousands of people as owners, I think that would just only serve us well. And and that would also be a group of people who would be advocates and evangelists and out there telling their friends and relatives and everybody else about this whiskey and about owning the company and everything else. So we were one of in 2016, we were one of the first, Might have been one of the first 10 or something like that, companies that actually go out and do equity crowdfunding. We raised, you know, close to $1,000,000 that first time brought in, I don't know how many people, but we did another round then again in 2018. We had out of those 2 rounds, we had over 1600 investors. You know, again, raised almost $1,000,000 that way as well, but it continues to help us grow the business. You know, people go into stores and they say, well, why aren't you carrying you know, and and whether this is in Tucson, Arizona or, Rockport, Maine, you know, say why aren't you carrying Cleveland whiskey? And it really helps us.

Tom Lix (Cleveland Whiskey) [00:28:27]:

It helps us get distribution. So that I think has been phenomenal. We have this group of evangelists out there rooting for us, supporting us, you know, providing ideas and sending me notes and saying, hey. Have you thought about doing this or thought about doing this or I I know somebody who can help you with this. And then most recently, we just concluded a round where it wasn't an equity ground, it was a a note, but we actually did what we called a whiskey bond where people loaned us money and we paid a competitive interest rate. It was a 6 year note. At maturity, the idea is you can take back your interest and your principal or you can convert some or all of it into whiskey. And, that because we're gonna we're gonna we're securing, essentially, those notes with barrels that we're putting aside from

Jeffrey Stern [00:29:11]:

Right. It's like collateralized.

Tom Lix (Cleveland Whiskey) [00:29:12]:

New facility. Exactly.

Jeffrey Stern [00:29:14]:

Literally against whiskey.

Tom Lix (Cleveland Whiskey) [00:29:15]:

Yeah. So so it'll be their whiskey, in fact. So their bond is identified with a specific designated barrels. So in the end, whether they own a part of that barrel or all of it, they can say, yeah. You know what? I wanna take 20% of it as whiskey, or I'll take a 100% of it as whiskey. Again, just another way we can connect with the community of owners. And, again, I think I just think it's just great. And we We oversubscribed in that round.

Tom Lix (Cleveland Whiskey) [00:29:40]:

The limits on equity crown funding changed on March 15th, but we ended our round on March 1st. We raised about 1,200,000 in that round, and that's, you know, 200 some barrels we're putting aside to be the assets that to port those bonds, and then people will get to choose what they want.

Jeffrey Stern [00:29:57]:

Yeah. That is incredible. It's just such this right alignment of incentives, I think.

Tom Lix (Cleveland Whiskey) [00:30:02]:

Yeah. It it really is.

Jeffrey Stern [00:30:03]:

You kinda laid out the current state of of the business, the development in the flats. But I'd love if you could kinda paint a picture of, You know, 5 years, 10 years out, how you're thinking about the business and, you know, the the kind of impact and and and products that that you're hoping to to get out there.

Tom Lix (Cleveland Whiskey) [00:30:20]:

Yeah, you know, it it's it's hard to plan too far in advance because the markets continually change. The tech you know, I mean, we keep trying to sort of improve our technology in what we do. You know, for us, certainly, we'll have greater distribution here in this country. But I think as the tariffs go away, and again, there's a lot of initiatives make that happen. As they go away, we'll be back in Europe. We'll be back in Asia. And I think there are tremendous markets for us there. And and it's all good because I I think about bourbon is something you can only make in America, and there's a demand for it around the world.

Tom Lix (Cleveland Whiskey) [00:30:52]:

I've driven Hondas. I have a Volvo right now. Mhmm. You know, so so I might buy a car that might be assembled here in America, but, certainly, parts of it are made in other places. I buy, you know, coffee from Colombia. You know, those things that you wanna buy and that we use in our our daily, in our in our, you know, just general life, I think it's great. And and we're in this world market, So it's great that we have something that we can sell overseas, and that keeps sort of a balance between everybody. So I'm I'm thrilled that we're actually making something that has some market demand.

Tom Lix (Cleveland Whiskey) [00:31:22]:

And that's really where I wanna put a lot of our initiative, and I think where a lot of our growth will occur is in those world markets.

Jeffrey Stern [00:31:30]:

Got it. I see. So I wanna actually take a a step back here. I'm glad we kind of set the context with Cleveland Whiskey. But but as I understand it, it's not your 1st entrepreneurial rodeo. Perennial rodeo. And I'd love if you could tell us a little bit more about your your own just personal history of entrepreneurship and and background prior to to Cleveland Whiskey.

Tom Lix (Cleveland Whiskey) [00:31:49]:

You know, it it's it's varied. So so let me let me tell you about my first sort of entrepreneurial initiative or my first sort of real business. It's not really a real business, but but the story I remember and something my parents used to tell me is, I guess, I was about 5 years old, and I'm sitting on the front porch At my home, I was living in Central New Jersey at the time. And I remember this guy came up to the neighbor's house, missus Myers' house, and he knocks on the door. And, when she gets to the door, he says Western Union. Now, you know, a lot of people less and less people know what Western Union was, that there was such a thing as the telegrams, were essentially the Twitter of 19 fifties sixties. You know? It was like a short message. It wasn't it was delivered partially electronically, but then you got it written, you know, written down or typed out and delivered to you personally.

Tom Lix (Cleveland Whiskey) [00:32:41]:

But she says Western Union, and, he hands her an envelope. And I watched this transaction, so I'm seeing the Western Union. He was wearing a cap and a little knapsack of some kind. Here's the envelope, and she gives him some money. So I thought that was pretty interesting because I had a little cap and some sort of, you know, pillowcase or knapsack. I knew where my father kept business envelopes in a desk drawer. Wasn't supposed to touch them, but I knew where they were. So I went and got those, loaded up this bag, and I started going and knocking on doors.

Tom Lix (Cleveland Whiskey) [00:33:11]:

Now I didn't realize that something was supposed to be in the envelope. I had no idea that there there was a transaction occurring. All I knew is what he gave an envelope. He gave money gave me money. So imagine now a 5 year old kid knocking on your door, And when you come to the door, you say Western Union, and I would put my hand out, like, expecting some money, and they all gave something to me. And so, you know, I I think that, at the early age of 5, I was on my way to being, creating my 1st global enterprise, except that while I was allowed to sort of walk around the neighborhood by myself, I couldn't I wasn't allowed to cross the street by myself at that point, you know. So my territory was a little limited. So maybe that was one of my first adventures.

Tom Lix (Cleveland Whiskey) [00:33:54]:

But I've had, you know, I've had some software and Internet application companies, one of which was sold to well, now it's owned by National Public Radio. But I've had other other ones that failed, other ones that, you know, went bankrupt and I went bankrupt through the process. You know, I had a company called Bulldozer Camp, the quintessential blue color experience for white collar professionals where I had about a square mile on the Snake River in the state of Washington, and we were putting huge bulldozers and dump trucks and, you know, construction grade, not the things you see on regular highways, but the ones that are used for mining and, white collar professionals coming and driving around, and and that just didn't quite get off the ground the way I'd hoped to, but They're

Jeffrey Stern [00:34:36]:

pretty heavy.

Tom Lix (Cleveland Whiskey) [00:34:36]:

Yeah. It was it was it was, you know, that was good. But yeah. So so I've I've done a number of things along the way. When I moved here to, Cleveland to care for my mom, I took a job at Lake Erie College out in Painesville, a small liberal arts college, and actually taught entrepreneurship out there and marketing out there. I have a doctorate in business from Boston University, and I you know, first time I really was an academic. I don't think of myself as academic, but it was a great experience. Became the director of their center for entrepreneurship there for a little bit while I was starting to get Cleveland Whiskey off the ground.

Jeffrey Stern [00:35:11]:

With that kind of breadth of experience that you have, what are the kind of lessons and learnings that you've taken into the business of Cleveland Whiskey and things that That you've learned through this this most recent

Tom Lix (Cleveland Whiskey) [00:35:22]:

endeavor. Well, I I think it's sort of a cliche, but I I I really do believe that you have to you can't be afraid of failure. You you just have to keep picking yourself up and failing often, I think, is is good. You know, I had a little sticker or a little magnet on my wall here in front of me up till about a week ago, and then I gave it to my distillery manager. It says don't make the same mistake twice. And, you know, so you you learn by failure. You learn by, you know, improving. We're really big on experimentation here, which is why we're making stuff that's better today than it was before.

Tom Lix (Cleveland Whiskey) [00:35:56]:

So I think I think also a lot of people in sort of entrepreneurship land, they get caught up in writing the perfect business plan, researching it and writing it, and and and I've gone through phases like that where I knew I spent way too much time on a business plan, when you know that the moment you get out there, it all starts changing. You know, I mean, you need it often to raise money and and things like that, but you have to ultimately get out there and do it. So that I that's, I think, is the the biggest thing, and you have to and if you fail, you get up. And if it the the first idea doesn't work, you try another idea. You know, I've had things that worked and things that failed, and you just keep plugging away. And you have to enjoy it too because because then if you're failing, If you're not enjoying it, then it's really bad. But the great thing about being in the whiskeys business is that, you know, I so look forward to coming into work every day. It's just, it's just a great job.

Tom Lix (Cleveland Whiskey) [00:36:46]:

It's it's wonderful. I was a marketing consultant for a number of years. I was the president and chief operating officer of a fairly significant market research and and market consulting company. And, you know, you'd write these reports, make these presentations, and half the time people would just put it on shelf and, you know, and it was frustrating sometimes when you would see a competitor come out with a product that you had told this other company they should be making, you know, and they had the chance to do that and they didn't. The beauty here is that I'm actually making something. I'm making something tangible. I'm making something that you can try and that people buy and drink and experience and have a have a good time with, and and that just thrills me. Doing it here in Cleveland has been an a double benefit because pre pandemic when we could have open houses and and we will have them once again at some point, you know, we would have hundreds of people come into our facilities for an event and I was always amazed and humbled when people would come up and say thank you for doing this and thank you for doing this in Cleveland.

Tom Lix (Cleveland Whiskey) [00:37:45]:

That's just one of the other wonderful great things and genuine things about Cleveland to the people who live here and live in the Cleveland metro area, is that we believe in this place and we want everybody to everybody to succeed and that's important. You don't find that everywhere. So this is a a special

Jeffrey Stern [00:38:03]:

place. Yeah. I I can, that again, it resonates. There's definitely a lot of that support. I I feel like I would be remiss if I didn't ask you about, you know, your your favorite Cleveland whiskey Flavors that you're that you're putting out there. What you know, your favorite cocktails, your favorite drinks? You know? What's your go to?

Tom Lix (Cleveland Whiskey) [00:38:22]:

So they're all my babies. I I really I love them all. It's hard to say. You know, I'm always excited by the ones that we haven't released yet, you know, so and I can't talk about those. But, you know, I think the most recent thing we've released into the market was a wheat penny bourbon. It's a wheated bourbon. And that one has sort of an interesting side story to it because every bottle has a wheat penny on it. So it's the wheat chief pennies.

Tom Lix (Cleveland Whiskey) [00:38:46]:

They stopped making them in 1958. That was the last year they made them. But as a kid, you know, my mom would always tell me, you see a penny on the street, you you pick it up, and it gives you good luck. So I you know, like a lot of kids of my generation, We collected pennies. We collected coins. We had big jars of them, and I had mayonnaise jars and pickle jars and water cooler jars and everything else filled with all these pennies. And, I was thinking about doing a wheated bourbon, and I said, oh, man. Wouldn't it be cool if I could actually drill a little depression inside the stopper and actually glue a wheat penny on there because it's got the wheat cheese on it.

Tom Lix (Cleveland Whiskey) [00:39:20]:

You have to look at it to to sort of see it. And so everybody, Every bottle would come to it, and so that became our wheat penny bourbon. We finished that with black cherry wood, so it's one of the unique things we can do. It tastes awesome. Hasn't been out that long, but one more than its fair share of gold and double gold medals, so it's doing really well. And Eshu, you asked me about a favorite cocktail. So, You know, I drink whiskey typically without adding anything to it unless it's our Christmas bourbon, and then I mix that in a warm cider. Sorry.

Tom Lix (Cleveland Whiskey) [00:39:50]:

Christmas bourbon is is great. If you haven't tried it, it's, you know, nutmeg, cloves, cinnamon, allspice, a little vanilla, touch of orange peel, and you mix that in, you know, microwave a little bit of, warms, of cider and mixing Christmas bourbon, it's great. But, otherwise, I just put in a little bit of ice. And my side story on that is don't use ice cubes. Heaven forbid, though, don't use the rocks because whether they're steel or actually rock, sometimes you get little tiny chips in your glass and you may not notice it. So I I always tell people, please don't use the rocks, just use chips of ice. You know, smash it, put it in a little bag and smash up that ice and put in a chip and and so try it just neat without any ice first and you'll get the flavor as it was intended, and then add 1 chip, and it will change the aroma and it'll change the flavor entirely. Try that.

Tom Lix (Cleveland Whiskey) [00:40:42]:

Then do it again, another chip, and you can do that, you know, 6, seven, 8 times before you've even have the equivalent of a single ice cube. Now, you know, I do that because I can get a lot of flavors. My late Wife used to tell me, well, I only did it because I was cheap and I could get buy 1 drink and have sort of 8 or 9 flavors out of it. So but but but that's how I drink it and that's how I encourage people to to at least try it that way. But but here's the other thing. I'm not a whiskey snob. If you wanna drink it and mix it in Coke, as long as you're using Cleveland whiskey, I'm happy. Go for it.

Tom Lix (Cleveland Whiskey) [00:41:15]:

Yeah.

Jeffrey Stern [00:41:16]:

Oh, yeah. I'll certainly be using the chips Instead of,

Tom Lix (Cleveland Whiskey) [00:41:20]:

chips, really. Yeah. Because the ice cube just dilutes it so quickly and so

Jeffrey Stern [00:41:25]:

fast. Yep. You know? Gotta explore the the depth of the flavor. I'm all

Tom Lix (Cleveland Whiskey) [00:41:29]:

in for that. Absolutely.

Jeffrey Stern [00:41:31]:

So I saw that you had founded the 1st university sponsored Motorcycle club in America. And I I gotta ask you about that. I I started writing a few years ago, and I would love to hear about that story.

Tom Lix (Cleveland Whiskey) [00:41:44]:

Wanda well, so I was so so I wasn't the founder. I was the cofounder, but so I was going to Penn State at the time, and so this was It was a dirt riding, club, and we convinced that the the, quote, outing club at that time, which was, you know, sort of the outdoorsy nature, you know, hiking, all all stuff which I loved, you know, we were on the same trails, and I convinced the university that it was best to sort of bring us into the wing and then you'd have a little they'd have a little bit of control as to where we rode and where the hiking trails would stay pristine, and that's how that got off the ground. I also lived in a dormitory where I lived on the 2nd floor of the dormitory. We didn't have any elevators, so I would actually ride up the stairwell to park my bike in my room at night. I had a BSA 4 40 1, a single cylinder thumper. It was really noisy. But, ultimately, all the members of the club gravitated to that dorm. They all got transferred and we essentially had I was president of the dorm.

Tom Lix (Cleveland Whiskey) [00:42:39]:

We had a a group of bikers in, you know, again, dirt riders. Yeah. I'll tell you another little side story. I currently own a 1970 BMW R65 are r sixty slash five. So it's a vintage bike, although it's got parts from, you know, Honda CV 7 fifties and things like that. But it's a it's a Beautiful bike, and I just got that recently. That's my current bike.

Jeffrey Stern [00:43:04]:

It's fantastic. A question that, you know, we ask everyone on that we're ultimately trying to paint a a collage of is, you know, people's favorite hidden gems in Cleveland. Mhmm. Things that other people might not necessarily know about. So with that, I'll ask you about your favorite hidden gems.

Tom Lix (Cleveland Whiskey) [00:43:21]:

Well, my favorite hidden gem, of course, is the distillery. So I want everybody to know that we do exist. Yes. But, you know, I don't know. I think there's so many other ones. I I think the well, So this is this is gonna sound a little crazy. It's it's not just a place, but it's a condition. So when the winter storms

Jeffrey Stern [00:43:43]:

hit Yeah.

Tom Lix (Cleveland Whiskey) [00:43:43]:

And you're driving on 90 coming from the east, and you're just and you're not at dead man's curve yet Yep. But but the waves are crashing up over the highway. You know? These huge 20 foot waves are coming up because the wind has picked up. It's freezing cold. Weaves are crashing over the thing, and you get to drive through them. Now it's crazy dangerous. But but that is, like, my my one of the greatest experiences I've had here in Cleveland is driving through that weather when the winter waves are crashing over the highway. Now, obviously, I slowed down and everything else because you have to because this gets icy, but

Jeffrey Stern [00:44:26]:

You can't go on a dead

Tom Lix (Cleveland Whiskey) [00:44:27]:

man's curve. Yeah. That that's a real so so that's probably a very untraditional hidden gem, but I think that that is one of the coolest things in Cleveland.

Jeffrey Stern [00:44:35]:

That's awesome. I would say, as I do most of the time, that everyone should go and try that, but I

Tom Lix (Cleveland Whiskey) [00:44:40]:

No. No. No.

Jeffrey Stern [00:44:41]:

No. I'm not sure

Tom Lix (Cleveland Whiskey) [00:44:42]:

everyone should go and try that. But you should maybe pull over before you get there and just watch it because it's just, it's just sort of amazing watching the now, Chris, I'm I'm from the East Coast. I'm used to ocean waves crashing onto things. So I think maybe it's a little bit of me reminiscing about the ocean, but, man, you can get that effect off of Lake Erie, and, it's It's pretty cool.

Jeffrey Stern [00:45:05]:

Well, everyone should go to the the show house and and the the new development in the flats.

Tom Lix (Cleveland Whiskey) [00:45:10]:

Yeah. Absolutely. Absolutely. Yeah, we'll be at 601 Stones Levy. It's gonna take us some time to get down there, but we're right on the river. It's pretty much one of those places that has not developed yet in the flats. Were the 1st ones to go down there, were the pioneers. I I was inspired by the history of Great Lakes Brewing and, you know, their entry into Ohio City and what they did and what Ohio City is now.

Tom Lix (Cleveland Whiskey) [00:45:34]:

And I thought it would be a good thing to sort of be that pioneer here as well, which which leads me to one thing I do wanna say. So I wanna tell you about our mission statement. Cleveland Whiskey, we've got a really simple mission statement. It's make good whiskey and do the right thing. That's it. It's not complicated. It's easy. We all remember it.

Tom Lix (Cleveland Whiskey) [00:45:52]:

And it was interesting because, like many of my colleagues in the distilling business, we made, hand sanitizer during the pandemic. We actually partnered with Cleveland Clinic. We made just almost on, you know, day 1, the moments people realize this was gonna be in shortage. They sent over a a team from their pharmacy group. They helped us with blending, putting things together, and getting on the road, and then we wound up producing for their 51,000 frontline health care workers. We distributed sanitizer to, you know, all the fire stations in Cuyahoga County, in the metro area, police stations, emergency medical services, nursing homes, we never took a dime for any of it and, felt that it was sort of consistent with our mission statement, and it was something an opportunity for us to build sort of, you know, re reinvigorate ourselves as a company to to solidify the team that we have. And, not only what it was it doing the right for the community, but it was doing the right thing for us. And so I'm proud of, you know, all the people who work here and contributed.

Tom Lix (Cleveland Whiskey) [00:46:53]:

We had salespeople who were in, you know, bottling sanitizer and doing, you know, shuttle runs, taking it places. And so, anyway, you know, we're part of this community. The community has given us so much. It was an opportunity for us to give back a little, and so that was a good thing. It was the right

Jeffrey Stern [00:47:09]:

thing. Yeah. Thank you for doing the right thing and for making good whiskey.

Tom Lix (Cleveland Whiskey) [00:47:13]:

Yeah. Thank you. Thank you.

Jeffrey Stern [00:47:14]:

Well, Tom, I I really appreciate you coming on today and and telling your story. Your enthusiasm for the product and and what you're building is very apparent, and, I really enjoyed learning about it.

Tom Lix (Cleveland Whiskey) [00:47:25]:

It's totally my pleasure, and we'll have to do this again, you know, in a year or so when I can update you on the new building maybe, you know, maybe do it down in the new

Jeffrey Stern [00:47:35]:

building. That's all for this week. Thanks for listening. We'd love to hear your thoughts on today's show, so shoot us an email land at upside dot f m or find us on Twitter at podlay of the land, at thetagan, or at sternjefe, j We'll be back here next week at the same time to map more of the land. If you or someone you know would make a good guess for our show, please email us or find us on Twitter and let us know. And if you love our show, Please leave a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Taekan Horden and Jeffrey Stern developed the Lay of the Land podcast in collaboration with the Upcompany LLC.

Jeffrey Stern [00:48:12]:

At the time of this recording, we do not own equity or other financial interests in the companies which appear on the show unless otherwise indicated. All opinions expressed by podcast participants are solely their own and do not reflect the opinions of Founders Get Funds and its affiliates or actual and its affiliates or any entity which employs us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on this show. Thanks for listening, and we'll talk to you next week.