ArKay Beverages Was Around Before Seedlip (And May Be Making More Money)
A conversation with ArKay's founder for the company's 10th year in business
Editor's note: The Zero Proof has always been curious about ArKay Beverages. The maker of non-alcoholic spirits was on the scene before Seedlip and it has around 30 different products - including a bourbon whisky, whisky, Scottish whisky, Tennessee whisky, Irish whisky and the list goes on...
Despite picking fights with nearly every major brand, ArKay is almost never mentioned in the American media, and not garnering as much attention as the new brands on the block like Ghia, Lyres and Drink Monday. We wanted to get to know the man behind ArKay and learn what the huge growth in alcohol alternatives is doing for the business. So we had The Zero Proof contributor Justin Joffe contact ArKay Founder Reynald Vito Grattagliano for the below article.
Important: It's an impressive story with some impressive numbers discussed (numbers we haven't verified).
When Reynald Vito Grattagliano launched the first line of zero-proof spirits in 2011, he had no idea that future competitors in the space would wind up giving him a free press.
"We have plenty of companies that copied us," Reynald tells The Zero Proof by phone. "But we love them, because they invested over $15 million promoting in the US. They gave us a very big help because people found ArKay organically - we are the first one in Google [Seach], in Bing, so people found us."
Reynald's family has a long history making alcohol-free spirits - his great grandfather, Eugene Richelmi, distilled the first alcohol-free vermouth back in 1906.
But Reynald's road to ArKay began when he was just a kid, working with his father, a well-known perfumer, and becoming a budding chemist. In 1977, at just 22-years-old, Reynald sold his nail polish business to chemical manufacturer ICI for millions of dollars. At that point, he considered himself a proper businessman. Notable transactions included selling a perfume business to Revlon in 1996, and selling his "Scarlett" scent to L'Oreal.
Reynald claims that the skills he developed as a chemist and perfumer were integral to his process developing ArKay's first formula for whiskey, which he began working on in 2007 after his son came home a bit too imbibed.
"They rate everything from the perfume," Reynald says, unpacking the common knowledge that taste is 70-80% smell. "I need to be a chemist because flavor [can be] delicious in your nose but terrible in your mouth. You need to be a chemist because the flavoring and the chemistry go together to make something delicious, not only in smell but in taste. Try yourself - put perfume on your hand, lick it and you will see it tastes terrible. But try a good whiskey, drink it, and it smells good and tastes good."
Putting his background to work, Reynald set out to create a real alcohol-free whiskey for three years, tweaking his formulations by testing - and failing - over and over again. Then in 2011, after partnering with some fellow chemists at a lab in Switzerland, he perfected what ArKay considers its secret weapon - the "warm molecule."
According to ArKay, this 'molecule' replicates the burn of liquor when, "in contact with the tongue the drink sends stimuli to the brain, the illusion operates, and the mucous membranes of smell and taste saturate and make the consumer believe that he is drinking alcohol." The effect is achieved using extract of capsaicin, an active component of chili peppers.
Once Reynald perfected this edible illusion in 2011, he was able to scale his product development and launch over 30 alcohol-free spirit variants including bourbon, vodka, tequila and more. He landed on the name ArKay from his time spent working on cosmetics in China, where people had trouble pronouncing his first name. Instead of saying 'Reynald,' their pronunciation was closer to 'Arr-K,' and the brand name was born.
Since then, ArKay's product line has expanded to include both spirits formulated to taste identical and spirits designed to be slightly similar, and slightly different in flavor to their more popular variant. "The ones which are similar, people use them as mocktails, and the ones which are identical people drink them straight," Reynald says.
When he started ArKay in 2011, Reynald remembers magazines claiming that they were the O'Douls of the spirit business. Because they were pioneers in the alcohol-free beer category, he took it as a complement. But that didn't immediately translate to sales.
"The first year we were doing maybe 10 bottles a day, it was nothing," he remembers. "I was losing money every day. Then the second year we were doing 500 bottles a day. I'm speaking about a couple of million dollars after a year. After three years we were doing $15 million. Then in 2019 we were doing $48 million. In 2020, we did $48 million."
At the speed things are moving, Reynald forecasts ArKay will reach the $100 million benchmark by the end of 2021. He says that sales in 2021 are up 10% each month, putting ArKay on track to reach that milestone by fall. With its own, large bottling plant, 110 employees, and Reynald's claim that "we do more sales than all our competitors combined," things are seemingly looking up for ArKay.
COVID has also greatly helped the zero proof space grow, Reynald says, because more people are sick, isolated, and living the booze-free lifestyle. He also explains that those regularly taking medication are a largely unrecognized sector of the community.
"A hundred million people are taking medicine every day in the U.S., so those people cannot drink liquor," he says. "They are all shamed because they cannot drink their favorite whiskey or their favorite tequila, so when they discover ArKay or my competitors, it's a relief. They can be happy, they can drink without drinking. It gives them this joy of living the game."
ArKay has also developed something of a reputation for sharing clever press releases with back-handed compliments that simultaneously congratulate fellow booze-free manufacturers while also reminding consumers that ArKay did it first.
In a recent press release promoting its 10th anniversary, ArKay writes, "We are extremely thankful that competitors such as Diageo-Seedlip have followed ArKay´s footsteps to change consumers' lifestyles."
An example of a cheeky press release taken from ArKay's website
Another recent press release says, "Arkay understands the hard work of launching a new brand and more if the brand is alcohol-free; for that matter, Arkay wants to thank Diageo (Gordon's owners) and Bacardi-Martini for launching an alcohol-free drink version on their own. It does feel great to see that the idea of alcohol-free spirits is now a trend that is expanding worldwide."
Considering that ArKay has many variants - 40 at our most recent count - everyone else in the space could be treated as a potential competitor. Nonetheless, Reynald doesn't see them that way. Between his kind words and slightly passive-aggressive press releases, 'frenemies' might be a better way of looking at it.
"If someone looks for very good gin, they look for Seedlip, and then the same person looks for a very good brandy so they look for ArKay because Seedlip doesn't make brandy," he says. "In the end, they are helping me a lot. We have over 70 competitors, and we love them all."