The legal battle cost $500k but was necessary for growth
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BottleKeeper, a company that makes insulating outer shells that keep beer bottles cold, has earned a large chunk of the $4.7B drinkware market. Since its official launch in 2013, the company has sold over 1m products direct-to-consumer while meticulously grooming an audience for future product launches. In 2018, BottleKeeper brought in $13.6m in revenue, growing over 800% from 2015.
In many ways, BottleKeeper has followed a dream startup trajectory. It raised thousands through crowdfunding and appeared on Shark Tank, securing one of the largest investments in the show’s history. After developing a trusted D2C model, it has now expanded to thousands of retail locations. But its path to success was also nearly derailed by copycats. BottleKeeper had to spend $500k on a series of patent protection lawsuits.
This is how BottleKeeper and co-founder CEO Adam Callinan maneuvered through the highs and lows to run one of the most successful DTC drinkware brands.
- Focus on doing one thing really well: Callinan says to learn how to best serve your customer before fragmenting into different customer acquisition strategies.
- You gotta fight for your right to party: There will be copycats and people trying to eat your lunch. When push comes to shove, fighting will likely be expensive. Make sure it’s worth it.
- Harness your power before negotiating: Tempted with many retail contracts early on, Callinan chose to focus on building BottleKeeper’s brand. Today, BottleKeeper is able to attract much more favorable contracts.
Callinan and his cousin Matt Campbell launched their initial crowdfunding campaign for under $1k, with the bulk of the costs going to testing a landing page with AdWords. After hitting their $5k goal, Callinan and Campbell put in a total of $18k to launch the BottleKeeper product and business.
Callinan and his cousin and fellow co-founder Matt Campbell wanted to answer two questions before they launched: Could they get people to buy this product, and could they get them to buy it for real money?
“We wanted to avoid making the mistake of taking validation from our friends and family as a green light to start a new venture,” Callinan says. “The biggest challenge is proving a concept that people we don’t know will be into, and how can we get them to give us money.”
To test these questions, they put up a landing page that showcased the idea and collected emails. They also paid for an AdWords campaign. The next move was a Fundable campaign. The goal was $5k.
“If we couldn’t hit that, we would have closed shop then and there,” Callinan says.
The key validation was people leaving their credit card information at a $20 price point for a very basic product in one size and one color. Originally called BottleCamo, the team ended up changing the name mid-crowdfund.
“We were going after a ‘protect your beer from the sun’ sort of vibe,” Callinan says. “During the campaign, Gizmodo wrote an article called ‘How to Hide Your Beer from the Man.’ We changed our name because we didn’t want to be a product that only helps people break the law.”
The initial costs for their initial landing page and crowdfunding campaign was under $1k, with the bulk of the costs going to testing a landing page with AdWords. After hitting their $5k crowdfunding goal, Callinan and Campbell put in a total of $18k to launch the BottleKeeper product and business.
Fighting off Copycats
In the first few months after starting up, Callinan made a move that would secure the longevity of his company. He filed a patent.
BottleKeeper shipped its first product in 2014, but knockoffs started appearing on Amazon. People would hear about BottleKeeper and search for it but end up buying a third-party knockoff.
“Prior to that, we were never selling on Amazon,” Callinan says. “I never wanted to sell on Amazon because it limited our ability to form a relationship with our customers. Communication is more difficult and super policed by Amazon. But once we saw copycats pop up, we had to be there.”
With the copycats increasing from a few dozen to a few hundred, Callinan decided to file for a utility patent, which is the type of patent anybody would seek for a new or improved invention.
BottleKeeper spent about $500k over 18 months executing its patent infringement defense strategy. It consisted of not just getting the patent but suing copycat companies to get a consent judgment: a public document where the court says that it agrees that the defendants violated the defendant’s patent. The patent went live on Nov. 28, 2016, and BottleKeeper then filed several lawsuits against independent retailers.
“These sellers were pretty much just guys selling knockoffs out of their basement,” Callinan says. “We sued them because we knew they wouldn’t be able to defend it and would want to settle very quickly.”
After winning in court, Amazon was forced to kick off the copycats. The victory was sweet. The $500k price tag was harder to accept. Callinan says BottleKeeper had wanted to spend that money on marketing rather than legal expenses. He estimates they would’ve done $2.5m more in sales that year, rather than $8m.
“It was abusively expensive,” Callinan says.
But the legal bet worked out. In 2018, BottleKeeper grew by ~90%—growth directly attributable to its patent defense. The company’s total percentage of sales on Amazon went from 10% to 30%.
Now, BottleKeeper has a track record of successfully defending its patents in court and capital it can allocate for those expenses.
“Fighting for our patents was a valuable experience that goes beyond Amazon,” Callinan says. “We know how to protect our new products from copycats and have a much better idea of what we’re doing legally.”
The legal expertise remains necessary. BottleKeeper deals with almost 20 patent infringement issues on a weekly basis.
“These are companies that you’ll never see as a consumer,” Callinan says, “because they’ll never get the time to establish traction.”
The Shark Tank payoff
Freed from copycat hell, in 2018 BottleKeeper went on Shark Tank and attracted one of the largest deals in the show’s history. Sharks Lori Greiner and Mark Cuban combined to pay $1m for 5% of the company.
Although Callinan is limited in what he can say about the actual deal, he looks back at the experience with humor and humility.
“We had really friendly editors,” he says. “The filming of an episode takes 45 minutes to an hour of hardcore pitching, Q&A, mayhem, and chaos. They take that and make a 7- to 8-minute episode. They’ve got enough footage to make you look either crazy or amazing. We got lucky they treated us well.”
BottleKeeper was lucky for another reason: The night the episode aired was the Sunday before Cyber Monday, a huge win for an ecommerce company. The company was up about 200% YoY by that point. The timing of the episode helped give BottleKeeper an extra $1m in sales in the next five days, Callinan says.
The episode continues to air online.
“It’s just a gift that keeps on giving,” Callinan says. “People keep finding out about us on YouTube and other channels without us needing to do anything.”
The Retail Future of BottleKeeper
BottleKeeper now has a staff of 8 and is planning to launch a new product in the coming months, geared toward keeping cans cool. And unlike its earliest days, the company is now turning toward retail.
BottleKeeper initially stayed away from launching in retail locations. Callinan wanted to focus on the consumer and believed online sales were the best way.
“You can’t have a relationship with the consumer through a retail store,” he says. “They can’t see your copy, funny emails. You can’t get that at a retail store. It was hard saying no to retail early on when you look at the money they want to spend.”
But the company has recently embraced retail as a solid revenue driver. BottleKeeper is currently one of the fastest-growing products at Ace Hardware and is available at over 2k Ace locations. Among its other 4k retailers are Sur La Table, Dunhams, Meijer, Wegmans, and True Value.
The goal is to be the next Yeti, an Austin-based behemoth that specializes in drinkware and coolers. It brings in nearly $800m per year and has a market cap of $2.27B. Since its IPO in 2018, Yeti increased its marketing spend and targeted more direct-to-consumer channels. Its efforts led DTC sales to grow by 48% in 2018, and the momentum is expected to continue in 2019.
BottleKeeper is more comfortable incorporating retail into its sales strategy now that it has a firm grip on its customers’ experience.
“We wanted to get to the point where people are telling people about us and where to find us,” Callinan says. “If we’re not a recognizable product in retail stores and we don’t own the relationship with our customers, we’re a commodity. If we have the customer, we have a lot more leverage in the process. By the time we did retail, we could work out great deals for everybody and not be forced to take whatever terms were given to us. If we did retail early on, we wouldn’t have had that leverage.”