Brewbound Awards 2025: Rising Stars - Rationale Brewing

Speaker 1 [00:00] Let's bring in our next rising star. It's Rationale Brewing, the non-alcoholic beer brand. Joining me now is Rationale founder and CEO Jamie Fay. Congratulations, Jamie.

Speaker 2 [00:14] Justin, cheers. Thanks for the acknowledgement and stoked to be here having a conversation with you about rationale. Feel like we've been, uh, having these conversations for a few years now.

Speaker 1 [00:24] We definitely have had been having these conversations, but it's great to get to honor you and the team that over there at Rationale. So let's dig in. It's been a big year for rationale, one in which it feels like you're on the path to really professionalizing the business, and you sort of laid out a vision that includes expanded relationship with octopi, some beer industry vet's coming on. And really uh, a capital raise that might take you to the next level. So, why don't you tell us a little bit about what's going on at Rationale?

Speaker 2 [00:59] It's been an interesting journey the last four years, and you're right, I'd say 2025 was the year that has defined the brand. We finally have a really strong strong foundation underneath us, which starts with having access to capacity and really being able to scale the business to the next stage of growth. And with that it's also allowed us to really start to bring on board some strategic partners and uh full-time employees into the business that we haven't had up until now. So the hiring of David Macon to join our team and head up our sales division has been incredible, um, and then alongside that we've spent the last really 18 to 24 months really focused on going deep into existing markets. We haven't done a, done a lot of new market expansion. We wanted to build the business a mile deep before we go a mile wide, so 2026 is also setting us up for now expansion into some new strategic markets where we know there's significant non-alcoholic growth taking place within the category and our role in helping build that. And then lastly would be um the raising of capital. Most people know that we're, we're hustlers. We have over 90 investors in our business today. Um, we've done that proudly. We haven't grabbed any big VC checks or PE checks to this point, and we've really been raising the money through not only friends and family, but we've now attracted this incredible group of mavericks and ambassadors that believe in the brand and love the beer and know the journey that we're on. And so 2025 we're able to um really start to raise capital that could fuel growth and right now we're in the final stages of wrapping up, which will be our final bridge round that will take us to a Series A that'll happen. In early 2026, so yeah, we finally have the foundation to grow and we have the team in place and early read right now from a lot of the feedback that we're getting from retailers is that we're going to have some significant distribution wins and then our goal is and our role is to prove that distribution and drive velocity and continue to do what we've been doing the last three years.

Speaker 1 [03:04] How many markets are you in now and which markets are you really looking to enter in 2026?

Speaker 2 [03:10] Yeah, so we are in 8 states today. We're primarily on the west coast, so California, Oregon, Washington, Arizona, Nevada, Colorado, Idaho, Texas, and Texas actually was a market we launched just over A year ago, but as we look to 26, we're going to be entering new markets up in the Great Lakes, so Wisconsin, Michigan, Illinois. We're also filling in some of the voids on the west coast that we don't have right now to help with our chain distribution, and then we're pretty stoked that we're launching in Hawaii as well in January. So you're going to see us go from 8 states to 14 to 15 states by the 2nd quarter, the latest of 2026, and what's super cool about that is that even though we're only in 8 states, we're the 8th ranked in terms of the dollar growth contribution to the. Category nationally and that's up against some really big players that have much broader distribution so we really see our role in helping continue to drive category growth as we expand into new markets and what drives all of that is our velocity just because we have such healthy strong velocities with the brand building we're doing.

Speaker 1 [04:24] You've expanded your partnership with Octopi, which is the Wisconsin contract brewery that's owned by Asahi. What has that unlocked for the business?

Speaker 2 [04:36] It's, it's a great question. What is, what it has unlocked is a roadmap to growth for us as we look to being in 14 states by the end of the 2nd quarter, but when you look at 2027 and 2028, we're going to want to end up being a national brand someday, and it's really difficult to do that if you don't have access to capacity and also the ability to consistently brew and innovate. So for us it's put in place a brewing team that we can now partner with in R&D within that facility. It's also allowing us to now have a hub in the central US, so you think about just the sheer cost of freighting beer across the country. Now we will be centralized in the Midwest. It can go east or west, and then the scalability, just our ability to go from much. Larger batches, which brings obviously efficiencies into the business and then ultimately the R&D work that we continue to do, we pride ourselves on having what we believe is the best tasting craft non-alcoholic beer in the market and we want to continue to push the limits on that and we believe that brewing team over there is best in class in the industry and we've early on been incredibly stoked with the beer that they've been putting out.

Speaker 1 [05:47] You started a bridge round of capital before you launch a Series A round next spring. What are your plans for the raise and what's that gonna allow rationale to do that you haven't been able to do yet?

Speaker 2 [06:02] For now, we're closing it, which is close to a $4 million round. So we have room left. If anyone's listening to this and would like to participate, call me. But this bridge round is going to get us to Q2, and then the Series A is going to unlock substantial investments into existing markets, but also some new markets that we want to expand into. We're not trying to be a national brand overnight, and we have committed to our existing retailers and existing wholesalers because there is so much growth potential in these existing markets that we want to invest back into them. So you'll see us just continuing to increase our capacity and our distribution and our revenues in existing markets and then as we look to 27, you'll see us likely go from 14 states to potentially 20 states. We're working really clear or closely with three-tier Don Bichell and that team on building out a strategy. That really aligns with where the category is growing, where the white space is, because what we want to do is come into markets and be value added and be a part of helping drive category. We don't want to be eating up category. We want to help drive growth, so being smart about the state you enter is really critical. So that capital is going to really unlock all of those, I think you'll also see. Add in more sales infrastructure with people and resources. You'll see us investing heavily into sampling and into events. We really believe, especially in this category with so many new consumers coming in, trial is critical. So on the marketing, sampling and trial side, that's going to be a big investment for us as well, that Series A cash.

Speaker 1 [07:39] You mentioned bringing on David Macon as VP of sales. He brings a lot of experience from Firestone Walker and New Belgium and other big brewing outfits. You've also brought on Phil Towler as acting CFO and Jennifer Briggs as a, as your advisory board chair. What do they bring to the table for rationale that maybe you were missing before?

Speaker 2 [08:03] I come from 30 years of consumer goods experience, but I was not in beer, so I came in and there was a lot I knew, but I will tell you there was a shitload I did not know. And so, I will tell you, if I'd known 4 years ago, the complexity and the adversity of having to navigate. The three tier system and just the sheer work that it would take, I probably would have made some different choices and markets and team members very early on. However, now we're at the stage where we have absolutely what I think is probably the best in class advisory board in place, and they're helping us navigate to your question earlier on where would we spend our capital, where were we going to go next. They're helping us make the right strategic choices because. This advisory board has been around the block, and they saw the craft era and the boom, and they know where there's weaknesses there and where there's learnings. And so we're really wanting to apply everything that has taken place within the craft beer industry in the last 10 to 15 years to make sure that we don't repeat those mistakes, but also that we accelerate and lean in where there were opportunities in the past. So Dave Macon has been around the block enough times that he really understands. Nuances of how to partner with wholesalers, um, how we approach those wholesalers, uh, in turn, we also have, um, with Three Tier and Dom Bichell really understanding the category and the data and the analytics. So strategically we make the right choices. So each board member is playing a role. We just brought on a gentleman, Scott McGuire, who's a former PepsiCo supply chain. Executive that was also at Laird Superfoods. So everywhere we know we have opportunities to be the best version of ourselves, we want to lean into our board members. So that advisory board is really making sure that any choices we make, they're the best choices for this brand and for this business, and ultimately they're as I representing 90 plus investors we have today. And ultimately as we want to get ourselves to a Series A, they're going to help guide us.

Speaker 1 [10:02] Well, we toasted with it earlier at the top of the show and you, you launched Japanese style dry this year and I, I really love this beer. You get that hint of cherry blossom on the back end. What is this beer doing for your portfolio?

Speaker 2 [10:19] Part of what we've looked at is just the category itself, and we didn't want, we don't want to, we don't want to be putting a me too style beers, and I, I, I sympathize with the retailers today because they're getting flooded with a ton of non-alcoholic beers, and most of them are very similar, so. As we look to wanting to help drive drive growth within the category, you're also trying to attract new consumers into the category, and how do you do that is through new styles of beer that they may not necessarily, they may be enjoying on the ABB side, but they can't find it on the NA side, which obviously a Japanese style dry lager that would be a great new new new way to bring a consumer in. Uh, because I can't find it, but then also wanting to live into some flavor profiles that necessarily aren't there but are subtle. And so the Japanese style dry, unique in its style, um, very slight cherry blossom twist which you noticed with the floral, and that's just, it's a unique style of beer. Now the rest of our portfolio when we launched early on, we were really trying to live into what the consumers were looking for. So when we launched 4 years ago, hazy IPAs were the thing. So that was, that's where we started. It's what I drank. Uh, but we quickly added our Mexican lager into the market because that's what consumers were asking us for in our sampling events. So the one thing that is maybe not, I, I'd say it is a little bit unique to us is that we are absolutely active hands-on founders, so we are out in the market every day. And so we've learned, you know, how to evolve our portfolio and that Mexico Lager now is 50% of our total revenue, but it was developed because of what the consumers wanted and then we layered in our West Coast IPA because we knew that that's a consumer, a craft consumer favorite. And then we saw how well Kos, the Kolsch category was doing with very limited options, so we thought, hey, can we bring in a Kools that would be a very different style, of which, by the way, ours, we're using this incredible yeast strain if you get a chance to try it. So we've tried to evolve the portfolio. Now what we don't want to do is have too many items and too many SKUs in the portfolio. So you're not going to see us adding 2 or 3 more items in the next year. I think you'll see us holding with what we have. We'll do some R&D and innovation that will rotate through our variety pack, but the Japanese lager really was the first foray into bringing something new to the category that can help bring new consumers in. Well,

Speaker 1 [12:37] I think you're doing that for sure and uh it's very interesting to hear that the Mexican style logger is, is making up 50% of your business.

Speaker 2 [12:48] Yeah, yeah, it's, it's, it's by far, by far, I believe the most approachable of at least our portfolio, and when you take a look at this, the rest of the non-alcoholic category and why some of the brands and some of those styles are doing so well, it's, it's approachable and. I think what we need to be really cognizant of is that as consumers are coming in, you can't just blow their minds with these big hoppy NA craft beers. You really want to be able to put styles out that resonate with them so that it's the entry point into what eventually will evolve. When I see the craft not all category 3 to 5 years down the road once the Consumers are in, they're going to be expecting more and wanting more, and that's when I think the portfolios will start to evolve and they may have, you know, much newer options and higher, higher IBU hops, and they will just bring more than what the craft consumer would enjoy. But for us, we wanted to meet the consumer where they're at today, and that so far has been successful.

Speaker 1 [13:43] When we look back on 2025, what are you going to count as rationale's biggest win of the year?

Speaker 2 [13:50] The biggest win for us. And this is from a strategic business standpoint, was locking down our supply chain. Because it's very difficult to be able to grow at the rate that we expect to grow and or to raise capital with the supply chain that cannot deliver on that growth. And so for us strategically, it was one of the most important components that we needed to lock down in 25. I'd say alongside that would be a lot of the feedback that we have received from retailers and wholesalers on our thought leadership. And our category, uh, role, our role in building the category, we're not looking at this as just bringing rationale in a wholesaler's house or into a retailer and trying to build our own business. We really have this perspective on wanting to do good for the greater. Uh, great, the greater good of all of the brands within the category. So we have been really focused on the data and analytics, and the feedback that we've gotten is that we're showing up as best in class for a business of our size that we're really leaning into that value add. So I'd say the feedback we've received from wholesalers and retailers around our role and how we're showing up makes me proud because ultimately coming from the consumer goods industry, that's, that's what you want to show up as a category thought leader and I believe today we are.

Speaker 1 [15:16] So when we look ahead to 2026, what do you see as the biggest opportunity or opportunities for rationale?

Speaker 2 [15:23] Our biggest opportunity is also our biggest challenge will be is that right now we're the number one velocity brand in Southern California. We have 3 of the top 7 SKUs from a velocity standpoint. So our biggest opportunity is to continue to drive velocity because ultimately that's where retailers look to have the high performers that can help drive category growth. Wholesalers want to bring in brands that they know they're going to move cases through the warehouses. So our biggest opportunity is to maintain what we're doing, which is driving the category growth and the velocity. And then the second component will be from just a sheer growth in the new markets is repeating rinse and repeat what we've already done in some of our existing markets, specifically California, as we enter some of these new markets in Wisconsin, in Illinois, in Michigan, really showing up and being the best partner possible for retailers and for wholesalers. It's, it is a hustle. I mean, we are out at retail every day. Um, we were hiring a team and staffing up a team. We have very high expectations of ourselves and we want to earn that respect and earn that opportunity to be on these trucks and be on the shelves with retailers. So our opportunity is to continue to do what we're doing and it becomes more challenging as more brands. Enter the space and retail shelves get more crowded and wholesalers warehouses get more full of other products across the total beverage spaces that you've got to help maintain your role and that's our opportunities to do that for them because ultimately that's cyclical will come back to us. Well, Jamie,

Speaker 1 [17:01] we couldn't be happier to honor rationale and yourself and your team. So congratulations to y'all.

Speaker 2 [17:08] Thanks, Justin. I appreciate it. Cheers.

Speaker 1 [17:12] Cheers.