The World Is His Orchard
Paul Thomas is driving out of Julian, California, along State Route 79. There’s snow on the roadside and it’s late at night. When we’re not talking highway safety we’re talking hard cider, a drink made from fermented apple juice that began in that unrecorded, prehistoric moment when a giddy hominid discovered that one bad apple spoils the whole bunch but might make for a remarkable alcoholic beverage.
Thomas first encountered hard cider in 1984, while playing soccer in England. Like all Americans, the “cider” Thomas grew up with was straight apple juice. But in the UK, he notes, “apple juice is just apple juice and all cider is ‘hard.’”
Julian Hard Cider, the company he founded in 2008, represents Thomas’ bet that marketing can transform hard cider—what might be seen as a millennia-old commodity—into something that grabs aspirational foreign buyers.
“Our tagline is ‘American to the core,’” Thomas says, adding that he can’t believe no one else in the apple game thought of it first.
“It says everything about who we are.” If there’s any question, the company’s black-and-white logo shows the rest: an angry-looking eagle with a banner in its talons (“American Made Julian, CA”) descends on a pair of crossed pick-axes. It’s like a motorcycle club’s symbol. Even the bottles’ dark glass bespeaks something artisanal, craft-like, early industrial.
“Ninety-nine percent of the hard ciders out there are made out of concentrate,” Thomas says. Not his. “Our apples are handpicked—no bruising, no holes, no insects—and we press them, and the juice goes immediately to fermentation—there’s no oxidation. It’s critical that we produce a cider that is as close to the fresh apple as possible.”
So what does Thomas get for all of his costly, artisanal freshness?
“There’s growing consumer appreciation for fresh-pressed around the world. In Asia, there’s generally a big movement toward quality. People are willing to pay more for quality of product.”
Behind the savvy marketing is a solid businessman whose unique strategy for going global has led to fast, early global growth—and not because he’s independently wealthy or backed by international beverage companies or well-heeled investors. In 2009, just months before he was ready to go global with Julian Hard Cider, Thomas was living out of his car. There—out of pure necessity—he developed a financial gift for tapping internal sources of investment capital and transforming vendors and distributors into global partners.
In seven years, the smallish craft brewer has gone from zero to five foreign markets, including Australia, Hong Kong and the Philippines. He expects to double that number by the end of this year, adding China, Singapore, Korea, Japan, Taiwan and Thailand.
Foreign sales have led to accolades and acolytes. Thomas is a member of the San Diego & Imperial Counties District Export Council and teaches classes on exporting at local universities. He’s a poster boy of U.S. government export promoters—a Small Business
Administration Exporter of the Year in 2014. In January 2015, along with other exporters, he went to the White House to discuss the president’s trade agenda; ahead of that visit, he posted a picture of the White House with three bottles of his favorite hard cider atop the south portico of the White House, like giant empties on a fraternity house.
He’s also a tireless competitor. He was a Navy corpsman in the first Gulf War and a Division 1 soccer player at the University of Connecticut. He’s a volunteer firefighter and a competitive poker player and sailor. He recalls with self-effacing humor a Newport-to-Ensenada race when a boom sweeping the deck of his boat smacked him in the noggin and sent him on a line-drive into the Pacific Ocean.
He races dirt bikes for fun and philanthropy, using his participation in each race to raise cash to buy prosthetics for veterans and orphans, he says. In an early 2015 race in the Baja California town of San Felipe, Thomas says, as he accelerated toward the finish line, a spectator drove through police barricades and onto the track and hit him head on. He landed half a football field from his bike “with my leg on backwards,” he says. After multiple surgeries, still recovering, he seems unbowed.
“I spoke to him in the hospital afterwards and he had not one complaint,” says his longtime friend, David Weild, a New York investment banker and former vice chairman of NASDAQ. “He was his typically upbeat self—amazing. He carried on the business of Julian Hard Cider from bed and through multiple surgeries. That’s Paul.”
TRAVEL BACK WITH ME TO THE EARLY 1980s to meet our global trader as a kid. He’s an adolescent, watching TV in his family’s San Diego home. On the screen, British Prime Minister Margaret Thatcher is shaking hands with a People’s Republic of China official at talks to cede authority over the colony of Hong Kong to the PRC in 1997. Thomas makes a resolution: he’ll be in Hong Kong to see the handover.
Nearly two decades later, in the summer of 1997, we find Thomas on a solo backpack trip in Hong Kong. On July 1, the big day, he says, he “went out to the New Territories with a photographer from Time magazine. We watched the British literally hand the keys to a chain-link gate to a Chinese military officer with 4,000 troops behind him in the rain, ready to cross into Hong Kong. I saw history.”
While on that trip, he saw something else.
“I saw Tabasco all across Asia. That is what really blew my mind away—how this family-owned, American company produced one product that was amazing. And at that time, they just focused on keeping the great qualities of the original blend consistent and opening more markets.”
The iconic pepper sauce from Louisiana would become the key to Thomas’ personal historical transformation. “I thought, ‘I’ve got to come up with my own brand, my own product.’”
He spent a few years in publishing, not just selling advertising into his Southern California music magazine, but producing events—getting readers and advertisers together in the same physical space.
“I knew that alcohol sells in good and bad times,” Thomas says. “And I knew that their biggest need is to get their brands into the hands of consumers. I became an expert in ‘experiential marketing’—creating and documenting events for the target demographics of Heineken and other brands. I noticed they always had these TV commercials or billboards with all these beautiful people having fun. My whole thing was that, as a consumer, you never saw those people in real life. So I created that experience in real life.”
But running a magazine was grueling—“every month, it’s like you’re making a new product from scratch”—and he yearned for a single, simple product, a Tabasco, we’ll call it.
The downturn in publishing made his decision easier. “I saw Rolling Stone shrink in size, and Life disappear,” he recalls. “I figured before everything goes to hell, I should start planning my next step.”
And then came his resolution: “I thought, ‘I’m going to take everything I’ve learned in marketing, and use that to promote experiential, live events for my own product. I’m going to put all the wood behind the arrow of my own brand.”
All that waited was his own Tabasco.
GROWING UP IN SAN DIEGO, Thomas says he spent summers in the historical gold town of Julian. Julian is now more famous for its apples; after the summer heat, Southern Californians eager for something like fall foliage drive from all over to pick apples in the foothills rolling up to the Cuyamaca Mountains.
“I noticed that nobody had done much with the apples—I mean, they had famous apple festivals and apple picking and pies, but not much else,” he recalls. “No one was making hard cider.”
As a product, Thomas figured, cider had much to offer.
In the UK, he learned, cider accounted for 40 percent of all alcohol beverage sales. But almost no one was producing cider in the U.S. “I was thinking in the U.S. it’s not even on the radar,” Thomas says.
“Even if [cider] ends up at just 2 percent or 5 percent [of total U.S. alcohol sales], that’s a lot of sales. I was going to fill that gap.
“And I was going to make something that men would like by marketing our product as a classic American beverage. I wanted to connect hard cider with America.” He would produce that connection with “packaging that was all-American, classic— timeless not trendy. “
Third, that same “Made in America” vibe sells overseas, too.
“They love it,” Thomas says. “Without stereotyping, the Asian market loves classic American products. People around the world have a lot of opinions about what America represents now, but there’s a general consensus that the romantic period of the ’40s and ’50s in the U.S. are still appreciated around the world—Harleys, jeans, Elvis Presley. That was something I wanted to reflect with my packaging. It was an opportunity for me—old school American. We could present ourselves as a Jack Daniels [brand] overnight.”
Finally, there was the product itself. Craft beer needs refrigerating and a quick sale—it’s got an expiration date; craft cider needs no refrigeration and, like wine and champagne, the good stuff gets better with age. That fact would now allow Thomas to piggyback export rides in other people’s containers, saving him huge on shipping.
THOMAS MOVED INTO A FRIEND’S CABIN in Julian and made batches of hard cider that he tested on friends. When he hit on the right recipe, he went to distributor Stone Brewing Co. in nearby Escondido—because “they didn’t have a cider” and because they had a parallel product line.
Stone “liked the flavor, and they told me, ‘Come back when you have pricing and packaging.”
THERE’S AN OLD SAYING THAT GOD never closes one door without opening another. What the people who say that stuff don’t tell you is that the hallways are hell.
In Paul Thomas’ case, there’s cinematic quality to all that door closing and hallway walking. Consider: He’s found a product that people—his friends, at least—really like. He’s a marketing genius. He’s globally oriented. And now he’s got this just tantalizing offer—contingent on pricing and packaging—from a brewer and distributor to handle his first production run.
He’s got some cash in the bank, but he’s got something more: An offer to turn that modest stake into something massive.
In 2008, Thomas says, he produced a freestyle motocross event at the world-famous Feria Nacional de San Marcos—the National Fair of San Marcos, in Aguascalientes, Mexico. And when we say “world-famous,” we mean like a human magnet for the traveling/partying international touring class. It’s nearly two centuries old, dating back to a time when harvest celebrations featuring a local saint were still the rage. And it’s huge, drawing people from all over the world to a colonial capital in the springtime, just before the Mexican summer beats the heck out of European and Mexican tourists too stupid to stay in the shade.
So Thomas runs this event with motocross riders doing backflips, somersaults and handstands and just suicidal stunts for the ecstatic Mexicans in attendance. It was like Vegas. “We averaged three shows a day, with 15,000 people per show per day, for four days a week for a month,” Thomas says.
It was a huge success. “I made a good amount of money to start Julian Hard Cider.”
A few months later, he says, he gets a call from fair officials: do it again next year, they say. “But I’m doing Julian Hard Cider, so I can’t. They said, ‘Do it again and we’ll triple your money.’ A lot of things in Mexican business can be screwball. But this was legit. So I said okay. And it kicked my butt.”
He put all of his money back into the production. “Again,” Thomas says, “it’s a huge event. They’d expanded capacity to accommodate 25,000, and we’re just killing it.”
Then disaster strikes. A few days in, the World Health Organization tells Mexican federal officials they ought to close the fair immediately. Swine flu is sweeping through Mexico. Catastrophe is incubating in the crowds of Mexicans thronging the fair. When the national death toll hits 81, the Mexican president assumes emergency powers, banning all public gatherings. Movie theaters, promenades, sporting events—everything is shut down. And for the first time in 181 years, on April 29, 2009, the world-famous Feria Nacional de San Marcos closes early.
The angel of the apocalypse passes over Mexico. By May the epidemic is winding down. But Thomas has lost everything—not “everything” figuratively. Literally. He returns home penniless, moves out of his apartment, and into his car.
“Paul told me over the phone that he might not make payroll. He confided that part of the sacrifice he made to make ends meet was to live in his car and to drive the trucks to make sure deliveries remained on track,” says Thomas’ friend John Kilcullen, founder of the how-to books for Dummies series. “I was shocked—not only that Paul was sleeping in his car and what that must have felt like, but that his tone of voice in sharing this story remained calm. He did not ask for sympathy. He did not ask for a personal loan. It was clear Paul would do everything in his power to keep his company afloat, keep making payroll and keep serving his customers no matter the personal sacrifice.”
One year later, Julian Hard Cider was an international brand and turning a profit.
HOMELESSNESS TURNED OUT TO BE A KEY to discovering the finance strategy that would help Julian Hard Cider go global. Necessity was the parental unit of ingenuity.
Kilcullen had told Thomas that, when it comes to investment capital, “Always go where the money is. Go internally. Don’t take out a loan. Don’t borrow.”
“The last thing I wanted was to burn relations with friends and family. And do you know who has money?” he asks me. My head swims with possibility, but before I can answer, Thomas answers himself: “Your own distributors have money.”
So Paul Thomas made his distributors his investors—in North America, in Europe, and in Asia. He approached them with what sounds like an improbable deal: I will sell you Julian Hard Cider, and you will pay me COD, Cash on Delivery. Not in 30 or 60 or 90 days.
You will pay me immediately. Now.
Who would take such a deal? Lots of people, apparently. And not because they’re charitable, but because those distributors get more than a golden elixir, but the promise of Thomas’ reinvestment in their market.
What about the people who say, “Send me a sample”? Forget them. Or the distributor who says, “We’ll take your product on 60 days”? Forget them too. “We get offers all the time from people who want me to send the product with terms. But even shipping a small amount costs so much in terms of time, and effort and our money.”
That first pitch can take place over the phone or on something like Skype or WebEx. “As a small-business exporter, I can’t be everywhere,” he says. “So if they don’t pick you up, you’ve just blown three to five grand [on travel].”
So along with the promise of reinvestment, there must be—on this first telephonic or online how-do-you-do—something more: there must be evidence that you understand the distributor’s market.
If you’re cash-poor, in other words—or just averse to borrowing other people’s money or even spending your own—you must be plan-rich, he says. “If you want that COD, you must focus on your plan, your presentation. If someone were to come to me and say, ‘I have a great product here, so you’re going to do well,’ I’d ask how they know. But a lot of companies don’t have an answer. That’s just a sales pitch!
“Nobody expects a crystal ball. They know you can’t promise everybody’s going to be rich. But if you can mitigate risk for a potential partner, they’re going to be more receptive to bringing your product on board on your terms.”
When he finally gets a commitment, Thomas tells me, “When I start getting paid, I will turn around and reinvest my money back into your market with a visit. And I’ll bring someone else, and we’ll work with your sales team, we’ll visit your accounts. We’re not just taking your money. We’re putting the money to work for our partnership.”
His willingness to travel to a distant market is like a gift, he says, and it sparks the cycle of reciprocity.
“Everybody understands that’s how it’s done. At first you can do this online or whatever, but then you’ve got to meet them face to face. Especially in Asia. In the Asia market, meeting someone in person really says a lot about who you are. It says honesty and respect and integrity.
“It really works,” he says, almost surprised himself, it seems. “If you make the time to meet with an honorable company—an honorable company—they feel obligated to put a lot of effort into generating sales for the partnership.”
COD payments do something else: They incentivize Thomas’ distributors to move Julian Hard Cider. It does the distributor precisely no good to leave the product sitting in a warehouse, or gathering dust on store shelves.
So this is what Thomas did when he went global: “My first two, even three accounts were COD—as many COD orders as I could get before they finally demanded terms.”
In turn, he demanded terms from his own vendors in the U.S. “It’s all about cash flow,” he says. He’d show his vendors that he had deals with distributors. They gave him terms based on the timing of payments from those distribution deals.
“I got my COD payments, and turned around and paid off the guys with terms. We were small, so we had to be smarter with our cash flow.”
The result, Thomas says: He’s “barely had to borrow money throughout the years. When we open markets, they have to work with us as partners. Now we do that with 40 or 50 distributors and importers.
“It was easier to go and open the kimono and show them a business plan for their market. They give me terms. That was their investment. Instead of looking for money for expansion, I tell people to put that time into developing a better sales and marketing plan to get COD terms from your partners.”
Transforming his business relationships into investors has given Julian Hard Cider an intellectual advantage in the marketplace, too. “These aren’t just business relationships. These partners are like my own team. By treating them as partners, I’ve added like 10 or 12 brainiacs to my team.”
PART OF THOMAS’ MARKETING has always been “Putting the brand in the hand.” The hand into which he’d like to place Julian Hard Cider is typically young and connected to an Asian person.
“People are people no matter where you go—especially young people,” he says, young people who, unlike their parents and grandparents, are plugged into a kind of global youth movement. Thanks to social media, they see what their trendsetting peers are doing from Beirut to Boston, from Belgium to Beijing.
The Julian Hard Cider demographic “runs between 24 and 44 years old,” Thomas says, “and that group, what they really want is to get the most bang for their buck, and to get the most brand for their buck. Brand cache and image has a lot to do with buyers, especially young buyers—and especially young buyers in Asia.”
After generations of poverty, they’re just getting some cash, these Asian young people, and they’re looking for tips on how to spend. Consumption bespeaks social status.
“The image of what they have in their hands reflects what their friends and colleagues think of them,” Thomas believes. “In China and Korea in the last 25 years, all those people have seen TV and movies. The rest of the world has luxuries they haven’t had access to—until now.”
GOING GLOBAL OFFERS ADVANTAGES TO ALL companies, but perhaps especially to smaller operations. Building foreign markets is like diversifying your portfolio, Thomas says, “like an insurance policy” against downturns in one market or even several. Because economic downturns are frequently counter-cyclical—China is down when the U.S. is up, for instance—diversifying your sales markets is like building a firewall.
“When China was booming, things here were tight and rough,” Thomas says. “But overseas—the euro? The yuan? They were strong. It was a great time to export and keep the cash flowing. Our product was affordable. They could pick something up from us that seemed to be a huge discount to them. But as things overseas slow, domestically our orders are increasing again.
“Small business exporters are the ones that are most affected by changes in the domestic economy. Most of us don’t have cash stashed away for a rainy day. We live on a basically fixed income. By participating with your district export council, your Department of Agriculture, Commerce Department and with U.S. embassies overseas, you can get a lot of help to get over there.
“By creating opportunities in other markets that involve other currencies, we can always find someone somewhere who can buy our products,” he says. “If you’re solely dependent on the U.S. for sales and the dollar goes sideways, you’re in a tough situation.”
The lessons he learned about exporting, he learned by asking experts, of course, but also through pain. And the key lesson: Keep moving. Even when your leg is on backwards. Even when you’re working from your home office and your home is your car. Even when you’re in a hospital bed—for our fourth or maybe fifth conversation, after yet another post-motocross surgery, this one “like a root canal without Novocain—but all is good.”
In January 2015, just before his collision with the wrong-way truck and then the earth in San Felipe, Mexico, Paul Thomas was standing in the White House. He was being honored for his global business success. The president was actually seeking his advice. And what was he thinking? “I was thinking, ‘How crazy is this? Six years ago I was homeless.’ Perseverance is everything, man.”
The World Is His Orchard