Born on the beaches of Cuba, SC’s Island Brands going head-to-head with Big Beer

By David Wren - The Post and  Courier

When visiting Cuba, tourists are often advised to avoid drinking the water.

Brandon Perry and Scott Hansen think the island country’s visitors should be given an even more important tip: Stay away from the local beer.

It’s something they realized during a vacation to old Havana with their wives a little more than five years ago.

“Cuba is beautiful — the people, the food is great, the cigars, the water, the architecture. They have everything, except they don’t have any damn good beer,” Hansen said.

It could have been too much sun, a few too many Cuba libres or a combination of both, but Perry and Hansen decided then and there it was their mission to single-handedly rescue the island from its cerveza calamit

“We were just a couple of guys bored with our jobs and trying to follow our passion,” Hansen said, explaining why he and Perry thought it would be a good idea to export their new brew from the United States to the communist island.

“Instead of just sending them a beer, we thought: Why don’t we create a beer that would be their beer?”

Things didn’t exactly work out — politics and the U.S. trade embargo on Cuba got in the way — but the two friends from Sullivan’s Island can’t complain. Their unlikely idea born on a sun-bleached beach eventually became Island Brands. And the bored guys who sold their businesses in the tech-based finance and health-care industries now head one of the Southeast’s fastest-growing beer labels.

 

Don't Call it Craft

Island Brands is headquartered on Immigration Street in what once served as Charleston’s city jail. It’s the subject of a running joke for Perry.

“People used to tell us if we made all right decisions, we’d stay out of jail,” he said “Well, here we are. We’re in jail.”

It would be hard to argue with any of the business decisions Perry and Hansen have made so far.

Island Coastal Lager, the company’s flagship brand, had a breakout year in 2020, with a 95 percent growth in sales at more than 6,200 stores in seven Southeast states. First brewed in 2017, the lager will also be available on all Carnival Cruise Line ships when pleasure cruises resume and last year — thanks to a deal with Costco — it made its debut in China.

Island Active — a low-carb, low-calorie beer in a slim can meant to go one-on-one with Michelob Ultra — launched about a year ago, and the company this month is introducing two new beers: Island Lemonada and Island Southern Peach.

Perry and Hansen insist Island isn’t a craft beer company. Its goal is to take on the corporate brands like Coors and Budweiser — what the two friends term “cheaply made, mass-market lagers from corner-cutting multinational beer factories.”

“If there’s a beer style that needs to be disrupted, it’s the macro side,” Perry said. “Those guys are like utilities over there.”

It’s un uphill climb. Island Brands had revenues of $1.6 million in 2020. AB Inbev — the Belgium-based multinational owner of Budweiser, Corona and other big-name brands — had revenue totaling $46.8 billion.

Most corporate beer includes fillers, preservatives “and junk you would not want to drink if you knew what you were consuming,” Perry and Hansen said. Island Brands stays true to the Reinheitsgebot, the ancient German purity law that allows just four beer ingredients: water, malted barley, yeast and hops.

“We sit in the domestic aisle,” Hansen said. “Our price point is premium because we give the consumer a better option in that lane.”

It’s a move that makes sense for Francois Sonneville, one of the world’s top beverage analysts with Rabobank.

“There are many lager drinkers, some who want a mainstream beer at a good consistent quality across the U.S.,” Sonneville told The Post and Courier. “Others want to drink less but better, looking for that special edition lager. You do not need to win over every consumer. Just be clear which consumers you want to target.”

 

Yeti Cooler of Beer

The Island Brands consumer is plainly defined within the company’s crowdfunding documents. 

“Island Brands are made for thrill seekers, outdoor enthusiasts and beer drinkers everywhere,” the investment prospectus proclaims. “Whether you’re hitting the trail or riding the swell, a cold crisp Island is the perfect companion.”

Perry describes the beer as having a “very strong lifestyle overlay.”

“The guys who started Yeti coolers — everyone thought they were crazy,” Perry said. “A $400 cooler? What are you doing? Well, guess what? I probably have $2,000 worth of the stuff. The dog bowl, the tumbler, the coolers. They put together this lifestyle brand around a heavy-duty cooler and every guy who has a Yeti cooler also has a Yeti sticker on the back of his truck. That’s his badge. The business side of Island Brands is more than a beer. It’s a badge.”

Nearly 1,400 people have put their money behind the brand, investing at least $250 apiece for a share of Island Brands stock. In just 40 days, the company raised $1 million through an equity crowdfunding program that’s regulated by the Securities and Exchange Commission. It was one of the fastest fundraising campaigns in the alcohol industry, prompting Island Brands to raise its maximum funding goal to $3.2 million. As of last week, nearly $1.4 million had been raised, helping to give Island Brands a $65.7 million valuation.

True to the goal of creating a lifestyle brand, investors get a little swag to go with their stock certificates. Stickers, hats, pint glasses, membership in the company’s “founders’ club” and other perks are distributed depending on the investment level. Top-tier investors got a three-night Bahamas fishing expedition with Perry and Hansen, with transportation on the Island Brands seaplane.

Those who don’t have the money to invest can buy into the brand through the company’s website, where items such as tap handles, tie-dye shirts and custom Vans brand slip-on shoes with the Island Coastal Lager logo are for sale.

“Our idea with the crowdfunding was to give everybody a little piece of ownership and we’ll have ambassadors all over the place,” Perry said. “It’s really an amazing model because you’re marketing to people who want a piece of it — they want the shirts and the hats and they want to share it with their friends. The deep engagement is amazing. And we’re just on the very tip of it.”

 

Few Assets, High Potential

Perry said people are surprised there’s no brewery hidden somewhere on Sullivan’s Island. In fact, Island Brands doesn’t even own a brewery. Its beer has been produced by the New Belgium brewery in Fort Collins, Colo., but will soon move to a co-packing firm in Florida that specializes in beer production. The move will roughly triple Island Brands’ profit margins, Hansen said.

Island Brands’ 17 employees don’t work from a centralized office but are scattered throughout the beer’s distribution footprint. For example, Chad Webb — the chief operating officer who recently joined Island Brands after 25 years with the Budweiser of Greenville distributorship — runs his side of the business from Melbourne Beach, Fla. Future growth won’t come from hard assets, but from technology and licensing.

The company relies heavily on social media platforms like Instagram to tell its story — and to let others share their photos and spread the brand. Island Brands will introduce an app this spring that will let beer drinkers scan their grocery receipts for loyalty points that can be used to purchase merchandise or turned into cash for donations to nonprofits focused on conservation and poverty relief.
Perry envisions Island Brands-licensed fishing charters and vacation home rentals, all of which could be accessed from the app.

A new clothing line is on the horizon featuring the Japanese snow monkey that was meant to be the mascot for the Cuban beer that never happened. The snow monkey drawing was among the street art Perry and Hansen saw during their vacation to Havana, and they’ll be sharing some of the money from clothing sales with the artist.

And, later this month, the first Island Cabana Bar will open in Charleston at a waterfront site near the company’s headquarters. Other locations under consideration include Florida cities Key West, Tampa and Delray Beach.

More beer is on the way, including three fruited versions of Island Active, another fruited version of Island Coastal Lager and a non-alcohol brew. Distribution will expand to Mississippi, Louisiana and Texas, and Costco is looking at stocking the beers in stores in Japan, Australia and New Zealand.

“It’s been a lot of learning and a lot of challenges, but I think the rewards are pretty great,” Perry said. “We’re building something that a lot of people are highly engaged with and they are loyal to us and our brand, and we hear that.”

 

The Island Vibe

Sonneville, the beverage industry analyst, said Island Brands is smart to create a community around its beer that keeps the brand in the consumer’s mind long after the night’s last top has been popped.

And, while Island Brands isn’t interested in competing in the craft beer segment, Sonneville sees some similarities — premium ingredients, a focus on authenticity and taste and a shared sense with the consumer that there’s more going on than a push to sell as many 12-packs as possible.

“Most craft beers are focusing outside the lager category, to distinguish themselves from Budweiser, Miller or imports like Corona and Heineken,” he said. “But there are also consumers who are willing to pay craft prices but like their beer to be a great lager.”

Store owners throughout the Southeast are banking on that. Within the next two months, Island Brands expects to increase its points of distribution by more than 20 percent in chains such as Publix, Walmart, Harris Teeter and Lowes Foods, according to the crowdfunding prospectus.

While there can always be too much of a good thing, Island Brands’ founders say they are being careful to avoid overexposure.

“We had a rapid expansion in the beginning, and through our learning we recognize there’s value in going deeper rather than wider,” Perry said. “You know, a mile deep rather than a mile wide. We could open in 50 states tomorrow, but we think smart expansion makes the most sense. Building a brand takes a long time and a lot of hard work.”

Wherever the brand goes, though, it’ll have a nod to those early days in Havana, when Perry and Hansen dreamed of bringing Cuba a beer it could be proud of.

That’s how the Island Coastal Lager color scheme was designed. White for the color of the sand at Varadero, a Cuban beach, with a blue strip across the top of the can that matches the color of the resort’s ocean water.

“We want people’s lips to touch the water of Varadero,” Hansen said, “and get that same vibe we had.”