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Start Your Business Success Stories

Gutsy Entrepreneur's Rum Hasn't Lost Its Punch

Nicholas Pelis sold his house because of rum. But his story has a happy ending . / Credit: Image of Denizen Rum and drinks courtesy of Denizen Rum

Stories that begin with a bottle and the sale of a house rarely have a happy ending. But the saga of entrepreneur Nicholas Pelis is not a cautionary tale. Though his story began with a similar narrative arc, it comes to a decidedly more upbeat conclusion.  A 13-year veteran of the liquor industry, Pelis left a job in San Francisco, moved cross country back to his native New York, sold his house there and took the proceeds, plus money he raised from friends and family, to launch Denizen Rum, an artisan blend of Trinidad and Jamaican spirits that has the taste of dark rum but the mixability of white rum.

Pelis has worked for some of the marquee distilled spirits industry brands and distributors in the U.S., including Diageo, Moët Hennessy, William Grant & Sons and SKYY Spirits. He was becoming disillusioned with the pace of innovation in his industry, especially when it came to rum, the second-largest spirits category in the country.

Rum, he felt, had lost its punch. Most rum producers were filtering out color and flavor to create a spirit to compete with vodka, the nation's best-selling booze category.

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"The flavor was being distilled out," Pelis told BusinessNewsDaily. "Rum wasn't a big category they were focusing on."

Innovation in the category was likewise getting short shrift, he said. The major distillers and distributors weren't putting a lot of effort into new product innovation. They used a lot of product line extension, which made the industry appear to be following a business model of innovation by acquisition.

"A lot of great new products are created by small entrepreneurs," Pelis said.

Old-school rums were known for having heavy flavors that are characteristic of dark rums. Pelis was convinced that it would be possible to create a new kind of rum that blended those kinds of bold smooth flavors, smooth flavors with the mixability of the white rums that dominate the market.

He experienced his entrepreneurial epiphany when he was with SKYY in the San Francisco Bay area. Pelis and his wife moved back to the East Coast, sold their house and moved in with his in-laws to cut down on expenses and generate the seed money to fund his vision.

"We moved back to New York because my wife was pregnant," he said.

In addition to the profit he made on his house, Pelis raised an additional $300,000 from friends and with a total grubstake of $410,000 set out to create a new spirit that would be named Denizen. Pelis had his vision; now he needed a product.

He visited a number of distilleries in the Caribbean, the mother lode of rums, to scout out the raw materials for his new spirit. There was an embarrassment of riches in terms of the kinds and quality of rum available, but he couldn't find a blending house that could create the taste he was looking for.

His journey then took him to Amsterdam in Holland, where rum blending has been taking place since the early 1700s when the Netherlands colonized much of the Caribbean. After two weeks he found a blending house that could consistently create the kind of rum he was looking for.

Denizen starts with aged and fresh charcoal-filtered Trinidadian rum from the famed Angostura distillery, where they are column-distilled and aged for up to five years in small bourdon oak barrels. The master alchemists in Amsterdam then added 15 types of Jamaican pot-distilled rums to create crystal clear white rum with three dimensions of flavor reflecting long-time traditions in rum production that have been distilled out by mass-produced modern rums.

"We call it a liberated spirit," Pelis said.

Bringing his product to market was the thorny part, he said. Because of a labyrinthine set of rules regulating the distilled spirits industry in this country, a legacy of Prohibition's "Noble Experiment," spirits producers cannot sell directly to retailers or bars and restaurants; they are required to sell through a wholesaler.

. Credit: Photo of Nick Pelis courtesy of Denizen Rum

The two biggest wholesalers in the U.S. serve between 85 percent and 90 percent of the market, which can make national distribution a hard nut to crack for a newcomer, Pelis said.

"They can be picky," he said. "They want to see some pockets of success."

After multiple rejections from distributors, Pelis put together his own dedicated sales team and began to hand-sell Denizen to a target group of so-called ambassador bars in New York City to give the brand street cred.

The brand quickly gained traction with top bartenders at some of the city's most popular watering holes and began winning plaudits from critics.  Since Denizen's introduction in 2011, it's become the most-awarded white rum, Pelis said.

Critical acclaim and rum aficionado word-of-mouth soon won Denizen a wider audience and entree to the national stage.  In addition to some 150 bars and liquors stores in the New York City area, Denizen  is also being distributed in Atlanta and is served at Smuggler's Cove in San Francisco, which recently made the Sunday Times of London's list of "The 50 Greatest Bars on Earth."

Pelis has recently signed a national distribution deal with Southern Wine & Spirits, one of the country's largest distributors. He hopes this relationship will help propel Denizen from its current place as a producer of 31,000 bottles of rum to become a top-10 rum producer with an annual output of 100,000 cases within the next five to 10 years.

"This is our first chance to work with a big distributor," he said.

A 750 milliliter bottle of Denizen retails between $15.99 and $17.99, about $1 to $ 2 higher than most white rums, Pelis said. Rather than approach the market with a higher-priced product with large margins, Denizen is taking a volume approach with lower margins initially.

"Our margins will increase as we get economies of scale," he said. "We wanted to over-deliver on quality at these price points."

Does Denizen live up to the brand's brag? The critics think so. It received a gold medal and was rated a "best buy" by the Beverage Testing Institute.

"Denizen Rum is a game changer for white rums!" Kevin Gray of the Cocktail Enthusiast wrote.

It's an impressive maiden run for a brand that has relied so far solely on social media and its Rum Mixology blog to get the word out. Pelis announces all promotions and awards on Denizen's Facebook page and Twitter.

"That's where our target consumers discuss new products," he said.