In just four years, Pals has gone from a one-man startup to a category-changing monster. This is the untold story of how four friends took on the multinational liquor giants – and won.

When Pals first appeared, the liquor industry barely noticed. “None of it made sense,” says Kane Stanford, chair of the Spirits Council. A non-gendered approach, minimally flavoured, sold only in 10-can packs. “It seemed like a really crazy strategy.” New Zealanders are the biggest consumers of RTDs (Ready To Drink) in the world – but the liquor trade was unmoved by the new entrant. “We didn’t think that much of it,” one retailer says. “With RTDs, you had to be full of flavour and sugar – that’s what people wanted”.

Dwight Harvie owns 13 liquor stores in and around the Bay of Plenty. Radio DJ Jay Reeve, a Pals shareholder, called him in late 2019 ahead of a trip down to the Mount. “I’ve got some booze I want you to sell in your shop,” Harvie recalls him saying. “He literally put them in the back of his ute.” Still, Harvie took them on consignment, with no confidence that this strange new product would move. “I was a bit of a sceptic at that point,” he remembers.

By the end of the weekend, with no conventional marketing, all 80 cases had sold out of Bottlezone in Mount Maunganui. The phenomenon would soon repeat itself at liquor stores all over Auckland, as an initial run of 6,500 cases sold out in a couple of weeks. A Ponsonby liquor store grew so frustrated it dedicated its chalk board to what it wasn’t selling: “Pals sold out”, the signage read, to stop people coming in and bothering the staff. It was the last summer before Covid-19, and the first summer of Pals. 

At that point, Pals had one full-time employee named Nick Marshall, with his school buddy Mat Croad as strategist, alongside media power couple Anna and Jay Reeve providing marketing and profile. Yet with those first cases, the group had just canned lightning. Despite the challenges of Covid and a wobbly economy, Pals rocketed to become a singular phenomenon in a few short years. A graph of RTD sales glides serenely through the 2010s before step-changing and steepening in 2020. It has inspired dozens of tattoos; people dress as the cans for Halloween parties in London; and it’s already got a cult following in Australia. Pals is currently the 8th most popular RTD brand in New Zealand, with every other name in the top 10 made and marketed by an enormous multinational.

How did all this happen? There have been breakout successes from independent businesses, with craft brewers like Panhead and Tuatara sold for tens of millions, and vineyards which have become internationally famous. But Pals has experienced a unique velocity, building an enormous nationwide business in just four years. Until now, the inside story of how two unassuming friends from Tauranga built this juggernaut has never been told. The pair agreed to give The Spinoff full access to their operation over the back half of 2023. This is how Pals took on a notoriously tough industry and turned it on its head.

The unlikely lads

Nick Marshall’s CV doesn’t profile like someone who would flower into a business savant. He’s a restless soul who grew up alongside Reeve and Croad at the Mount, all less interested in school than in surfing. After a fun few years at the University of Otago, Marshall’s first job was selling HRV heating systems in Dunedin. “I cut my teeth on door knocking, which was brutal,” he says. From there he went through a bewildering array of jobs, none of which stuck. 

There was Herne Bay real estate (“a good lesson to have things in writing”); a superyacht course; some time in Whitianga on the Coromandel selling V and Just Juice; then he flogged energy shots for Independent Liquor before they shut it down. He tried to get down the mines in Western Australia more than once during the Global Financial Crisis, flying to Perth for a job that never came. A year or so later he got to the mines in the Pilbara – “12 hour days, two weeks on, two weeks off”. 

In between there were six months convalescing after a motorcycle accident in Bali. He knocked himself out, and when he came to, the exhaust had cooked his leg to the bone. He returned to the mines, working two kilometres underground as an “underground explosives technician”. A conversation with his grandfather prompted a return to New Zealand. The old man told him to chase his passion for music – but he found “a lot of young kids wanting to be Dr Dre”. Marshall felt out of place and moved on. 

Then he was back in Australia, still dreaming of running a business but chasing the big Australian dollars available to young New Zealanders willing to work hard where it’s dusty and remote. He spent time on mining magnate Gina Rinehart’s railroads, starting at “the bottom of the bottom of the bottom”. Then came yet another stint in Pilbara, this time flying in and out of Melbourne. “You’re probably sensing a theme here,” says Marshall. “Jack of all trades.” 

“Even I’ve forgotten about half the stuff,” says his friend and colleague Croad. He’d met Marshall in high school, where both were keen sportspeople and surfers. They parted ways for university, but never lost touch. Croad’s path was more conventional: after completing a bachelor of commerce at Waikato, he went surfing for six months, then visited a relative’s winery in the US.

His time at Croad Vineyards revealed to him that he liked the drinks business, but when he got back to New Zealand it was into the depths of the GFC. People were working three-day weeks and jobs were scarce. He found work at a design firm before pitching up at Eco Store, during a period of rapid expansion for the mission-driven sustainable brand. 

From there, Croad moved to NZ Wine Cellars, starting what would become a productive decade working in parts of Woolworths’ vast New Zealand operations. The company sold wine direct to consumers, a skillset he developed further with Vineonline, which leveraged digital channels to do the same thing. He stayed there until 2020, growing it to a $25m business in the process.

Woolworths knew Croad had an entrepreneurial spirit, and that he was likely to eventually leave. It took a while, though, and throughout the 2010s Croad and Marshall stayed close and kept talking. While they lived and worked apart, they always intended to go into business together, and would spend years trying and often failing to figure out what exactly that meant.

Before there was Pals

First, there was the hangover cure in a bottle – with only one problem. The Ministry for Primary Industries “changed all the rules and regulations”, says Marshall. Their drink became a supplement, which meant they couldn’t retail it in liquor stores. These were the only plausible places to sell it, so that was the end of that. “It was a little bit of a fad,” Croad concedes. They pressed on. Marshall had a good look at investing in “an early-stage kombucha business”. Croad nearly invested in Apple Tree, during the cider boom. Marshall got into “online jewellery, in the yoga niche”. Somewhat inevitably, they explored a craft beer. 

One summer, Croad was on a surfing holiday in Bali with his friend Jay Reeve, the radio host, and his wife, TV host and model Anna Reeve. “It was [Croad’s] idea to start a rosé brand,” says Reeve. The thinking wasn’t too deep: “if we’re drinking Rosé, it might as well be ours,” he adds. That idea coalesced into a wine label called Master of Ceremonies, with Croad recruiting Marshall to run it. “He’s easily one of the hardest-working people I have ever met,” says Reeve of Marshall. 

They picked wine because they saw it as “quite traditional, and without being too negative, a little bit boring and stuffy in a lot of ways”. Master of Ceremonies focussed on rosé because, before craft beer, there was “a bloody big rosé boom –– you’d see a lot of guys out around town drinking rosé,” says Marshall. The group’s responsibilities roughly broke down into Marshall running the show day-to-day, Croad bringing the wine industry nous and connections while still working his day job at Vineonline, and the Reeves supplying an adept sense of digital marketing through social media.

They had a hit collaboration with grungy fashion label Stolen Girlfriend’s Club, and always looked for opportunities to innovate, with slushies and ice-blocks and 5L bottles of rosé. It sort of worked, but Master of Ceremonies remained a small operation, hostage to fluctuating grape prices and operating in a very price-sensitive category. Croad and the Reeves were intimately involved, strategising and marketing, but the weight sat heavy on Marshall, and the business required regular top-ups from shareholders. Despite Marshall’s work ethic, it moved 23,000 litres in its best year – representing approximately 0.05% of the New Zealand wine output. 

The big idea

In mid-2019, they came up with an intriguing new idea. It was a move into RTDs, not to replace Master of Ceremonies; merely to complement it. They had no sense that this was anything other than another product line they could put through their existing distribution and marketing funnels.

They would capitalise on the “better for you” trend, which was showing up everywhere in 2019: health-conscious consumers wanted something delicious, but didn’t want it to be bad for them (or as bad for them). From that insight, they created a new spirit-based RTD with sugar-free soda as the core mixer, vegan and gluten free, with subtle flavours and all-natural ingredients. 

It went haltingly at first. They contracted an external agency to come up with names and brand stories. They came up with ideas like “Solid Spirits”, with taglines that evoke their envious competition today. “Stand-up drinks you can trust”; “The natural choice for a solid night out”. Another idea was “Mount Indie”. “Breaking the boundaries”, “Charting new territory”, “A fresh new way to drink”. None of it felt right. 

They threw them all out and tossed names back and forth, until they settled on a simple, evocative four letter word: Pals. Its concision appealed because Master of Ceremonies had felt unwieldy. They gave a design brief to a mutual friend from The Mount named Sam Baker. It contained a section called “general vibe” which described the aesthetic. “Natural, fun, relaxed, minimal, unisex, thirst-quenching.” Baker came up with the friendly logo, and the illustrations. They felt instantly that he’d cracked it.

Even then, it was a bumpy ride. They very nearly printed an illustration of a duo on a motorcycle for their first run of cans, until they showed it to a retailer for feedback, who pointed out that the association between driving and drinking was frowned upon within the Advertising Standards Association’s alcohol code. Had they gone ahead, it’s likely they would have had to destroy a third of their first run; a potentially devastating blow. 

It was one more near miss before a massive hit. In October 2019, they put out that first range of three new products: a gin and soda flavoured with lemon, along with a pair of vodka sodas, flavoured with lime or watermelon. It was both the biggest production run they’d ever made, and the smallest they would ever do again. The product went out to market, adroitly marketed through Jay and Anna. “They have a following, and each have quite different audiences,” says Marshall. “Leading on from the wine, it was quite natural for them to be posting about Pals. Plus back then you didn’t have to put #ad on.”

Many still think of Pals as Jay and Anna’s business, and while that’s true in a way, it was built on the relentless grind of Marshall. Then in 2020, Croad quit his job with Woolworths, and they’d hired a couple of staff who’re still with them today. They held their breath through the first lockdown, which meant they couldn’t sell, while beer and wine went huge at supermarkets. The next summer was bigger again, and before long, Master of Ceremonies was dropped, so they could focus on the screaming demand for Pals.

Kane Stanford chairs industry body Spirits NZ, while also running Bacardi NZ, which sells a number of direct competitors to Pals. He came up with the infamous Bigfoot brand while working at Independent Liquor, and is thus well-placed to examine how Croad and Marshall went about their business. Stanford describes the approach to marketing RTDs pre-Pals as putting a big stack in a prominent spot in the store – often paying rent for the privilege – and giving away hats and T-shirts. This was known as the best way to move what were fundamentally sugary drinks, with extremely over-the-top branding.

Pals did none of that, but it moved so fast they couldn’t keep up with demand. Its emphasis on social media and festivals has made it stand out from the start, and built a formidable moat which makes its consumers fiercely loyal. “If you haven’t got it, they won’t shop with you,” says Sanjay Jamnadas, owner of the Kingsland Liquor Centre.

Before Pals, his was never a store that sold a lot of RTDs, with his customers focussed on wine and craft beer. In fact, Jamnadas only agreed to take some cases because he liked their wine product, and knew they were headquartered just up the road. Now Pals is his single most popular product. It started with young people, before moving up to their parents. “Now the grandmas are drinking it,” he says.

While it’s ubiquitous on Instagram, Marshall is adamant that it’s not an influencer-driven success. “We’ve never paid influencers. That’s the perception. Jay and Anna know a lot of them – they’re just connected in that world,” he says. “But we’ve never done it.”

Despite a general decline in drinking for Gen Z, Pals developed a huge following with young people from the start. “When we launched Pals it just stuck a different cord,” says Anna Reeve. “I posted that we would be dropping stock to a store in the Mount and people were there waiting when we arrived.” This led to a kind of frenzy, with people hunting down stock and posting when they found it. Anna Reeve, who has an extensive background in social media and marketing with brands like Red Bull, remains awed at the way it grew. “I’ve never seen an audience engage, create content and advocate for us the way they did.”

A fairweather friend

As much fun as Pals can feel for its consumers and those who make it, there is always an underbelly with any liquor brand. For all its category-busting success, it’s worth remembering that alcohol remains a hotly divisive subject within New Zealand. According to Amohia Te Wairoa, an alcohol-focused organisation within Te Whatu Ora, “In 2007, around 800 deaths of New Zealanders were attributable to alcohol”. This impacts men at nearly twice the rate of women, and Māori more than twice the rate of tauiwi. It’s a factor in roughly one in five fatal crashes, two in five violent incidents, and around a third of family violence incidents.

Marshall does dwell on this at times. “It’s a tough thing sometimes to know that there are problems in a society associated with a product you’re creating.” He says his maternal grandfather was an alcoholic, and he once sat down with his mother and asked, “how do you feel about me being in the alcohol industry?” She told him that she believed it mattered that Pals are 5% and not 7%, and that it promotes its 10 packs as made for sharing, not bingeing. He says she shares his belief that its low sugars are material in terms of its overall impact on health.

Does Pals’ low-sugar give it a true connection to the “better for you” movement? Andrew Galloway is sceptical. He’s the head of Alcohol Healthwatch, and concedes that “there may be some modest benefit to health from lower calories.” Still, he believes that might be outweighed by consumers drinking more as a result. “A claim of health benefit, or indeed an easier-to-drink alternative, may increase alcohol consumption – and, by virtue of the way it’s marketed, it may have more appeal to young people.” While Pals does promote its 10 packs as being made for sharing, it must be aware that a significant part of its consumer base will buy a box with the intentional of drinking all 10 that night.

Still, these are issues throughout the industry, and alcohol is a drug consumed by roughly four in five New Zealanders each year. And for all its success, the multinationals still deliver far more of it than Pals do. Pals currently commands around 4% of the total RTD sector and sits in eighth place, according to figures supplied to The Spinoff by a source unrelated to the company. It’s a long way behind Long White, in second place, and the monster that is Woodstock, with 15% market share – still the dominant player in RTDs.

Despite its challenges, Pals has managed to carve a big and seemingly unassailable position amongst a certain demographic. You can picture them: young Instagram users in decent jobs, affluent enough to hit the festivals all summer, who want to have fun but are watching their carbs. They can afford $30 or more for their drinks, and do a lot of the brand’s marketing for it. It’s a covetable audience which has retained its loyalty despite numerous attempts to take it on: there are now a large number of Pals-a-like brands, including Odd Company, Greenhill and HeyHey.

And then there’s Grins, founded by All Blacks Damian McKenzie and Anton Lienert-Brown. They brazenly launched a brand with a big, hand-drawn logo on a block-coloured can, with little illustrations to tie it all together. It’s still going – but it hasn’t touched Pals.

A factory visit

On an unseasonably warm Friday in mid-October, Croad and Marshall head to a vast industrial building, the size of several rugby fields, for an important meeting. The pair have driven out to Glen Innes for a final taste test of Pals’ new canned cocktails, conducted at the place where all their product is made: Free Flow Manufacturing, another startup which has grown alongside Pals.

The canning plant creates a concentrate of spirit and flavours which is then mixed with soda water on a hi-tech production line. It’s minutes away from being poured into cans, but the client has to sign off a test batch first. This is made in a much more organic way, with a sodastream in the company’s kitchen. 

Croad and Marshall want to try them in a particular sequence – gin first, then margarita, before the chilli version, as the spice will impact the palate. “Yep, that’s how I remember it,” says Marshall of the gin fizz. “It tastes like a gin cocktail you’d make at home.” That’s the market they’re aiming for, he says: an older demographic looking for a convenient cocktail. “We want something you would savour a bit more, rather than boofing them in the sun.” 

Croad and Marshall are joined by Hayden Lomax, who works for Hawkins Watts, another key partner – they supply the natural ingredients Pals prides itself on. Lomax compares Pals’ to Whittakers versus giants like Fonterra. He describes dozens of tastings before a new line is commissioned: “I’ve never had that level of refinement with any customer.”

After a couple of hours spent tasting and waiting, all the batches are approved, and the first of the new canned cocktails hits the production line. Croad, Marshall and Lomax put on hi-vis and hairnets and head down to the shop floor to watch the cans snake through the factory. The whole cavernous space is given over the new range: there are palettes of the new cartons and cans stacked high at one end of the warehouse, while down the other end the first finished products come off the line. 

A few minutes later they head upstairs and crack a classic marg. Croad says when he tasted the most recent “beige” version of the regular range, the emotion he felt was relief. With this one, it was something he hadn’t felt in a while: excitement.

A tiny giant

The relationships with Free Flow and Hawkins Watts nod at what’s different about Pals. To understand why, it pays to think about how it can be so big, in terms of its volume and distribution, while still being so small: just 12 staff with no outside investment beyond its founding group. It’s partly because it has built its business on partnership, rather than ownership. This is something only possible in the current era, with many businesses operating in accessibly-priced niches of the manufacturing industry. This means that an outfit like Pals can start and scale without the capital demands which would once have characterised its business.

By contrast, consider Lion. The brewery was founded in Auckland the same year Te Tiriti was signed. It took over 100 years and multiple mergers, acquisitions and ownership changes to become the biggest brewer in New Zealand and, for a while, one of our largest companies. It would ultimately be acquired by Japanese beverage conglomerate Kirin, but not before reaching a vast scale, with over 1,000 employees, many working out of the enormous five-hectare Newmarket site which for years functioned as its brewing base.

Pals isn’t anywhere near Lion’s scale – the brewer had huge Australian holdings and was valued at around NZ$10bn when Kirin took it over in 2009. But until recently, it was typical for those involved in making booze to buy huge amounts of precision-engineered steel, rent warehouses and employ a large staff just to make their product. This was not only costly, it also entailed significant risk; the recent challenges to breweries like Epic and Deep Creek show what can happen when the tide turns.

It also means that startup beverage companies are often dominated and run by people from a particular background: breweries by brewers and wine companies by vintners. Pals is different in that, while Croad has a significant background in consumer goods and alcohol sales, the pair have largely stuck to a relatively narrow focus on brand, product, marketing and sales; leaving manufacturing and distribution to third parties. 

They have deliberately turned down opening a bar due to a lack of hospitality experience, and are staying away from the US and UK for fear of diluting their focus. While some might view this as forgoing margin or opportunity, it has allowed the company to scale fast without the slog of regularly tapping investors for cash. 

It also means their business rests almost entirely on the quality of those partners. Pals would have struggled to grow without Free Flow – and Free Flow would have been a smaller operation without Pals. Scott Day is managing director of Free Flow, an “engineer by trade” who fell into contract manufacturing after a negative experience with someone he’d picked to make Vista, a flavoured water brand he owns. In 2019 he had a much smaller operation, capable of filling 3,000 cans an hour. Then Pals came along. 

“The first summer, I don’t think either of us could keep up with demand,” he says. “We were running constantly, and they were constantly sold out.” Day believes it’s the quality of the brand they’ve built which has driven their growth. It meant they quickly had to move to larger premises and buy much more serious equipment. 

“We were doing 10,000 litres a day. Now we’re doing that in an hour.” Day is in such a hurry that the new operation has yet to take down signage from the previous tenant. It’s for Brancott Estate wines – a New Zealand winery owned by French giant Pernod-Ricard, and exactly the kind of labour and capital-intensive multinational alcohol brand which Pals has outpaced in recent years.

Cocktail hour

At 1pm on the last day of October, the Pals team gathered for an all-staff meeting at their offices just off Auckland’s Karangahape Rd. The meeting is instructive about the culture of the company. All bar one are under 40, and wear typical creative-class uniforms: Vejas and MacBooks. They work in an airy, reconditioned warehouse, scene for a monthly planning meeting, held to align different parts of the business on what each is up to. Today’s is particularly important, as a half hour into it something momentous is scheduled to happen. The company will announce its first truly new product range since its launch four years ago: the canned cocktails.

The company has until now stuck diligently to a tight format,  adding one or two new flavours to the core range each year. This the cocktail announcement is freighted with excitement – and risk. To this point Pals has really only made hits, all of which have been 10 packs of pastel 330ml cans, sitting around 5% alcohol. At 2pm, the social posts go live and the group will start to get a read on what its consumers think of the idea.

Already, the business already has some sense of how one crucial audience has responded: liquor retailers are buying it. “Initial forecasts have been blown to smithereens,” says Pals head of sales Mark Reeves. “It’s highly likely we’ll be sold out.” Within days, that has been proven true – Jamnadas and Harvie are both empty of the product and awaiting a restock. That might take a while, as Marshall says they’re on a “mad tequila scramble” to get product out of “quite an interesting area of Mexico”.

While it’s a brand-new product for them, the margaritas don’t have quite the same sense of shock-of-the-new originality as the first range. On a high table alongside the couches where the Pals meeting takes place is a box of Alba – a four pack of chilli margaritas. It’s a near-identical pitch: the classic margarita in a 250ml can, spiced up (this time with Kaitaia Fire). 

Alba is a much smaller business, but like Pals it has fierce loyalists. One colleague saw the canned chilli margarita as too close to Alba’s new product – yet the Pals founders say their new range was in development for months before Alba’s appeared. The competition is not just from below – international giant Gordon’s “is on a tear”, which has bumped Pals’ gin product down a few notches, something they’re hoping the new gin fizz will counteract.

The meeting is divided into sections representing different disciplines within the business – operations, sales, marketing – and spends a good chunk of time discussing its Australian operations. It’s currently the main export market, but has complexities. Spirits are much more highly taxed there, so a four pack of cans runs at a lower alcohol percentage and costs almost as much as a 10 pack in New Zealand, adjusting for exchange rate. There’s an activation – a form of in-person marketing event – at a cafe called Glory Days in Bondi Beach, a suburb of Sydney which is a Pals illustration made flesh. The umbrellas are “like a billboard on the beach”, says Holmes. 

At 2pm, marketing manager Kate Collins interrupts to say “the post is live” – meaning their cocktails have just gone public. While they’re continuing with general business, minds can’t help but wander to the new product. “How many likes are we on?”, asks Croad. “637 in 12 minutes,” replies Collins. “Holy shit.” The meeting ends. “Shall we crack one?” Mat hands out chilled samples to the office. “That’s yum,” says one staffer. “Too late now if it’s not,” jokes Marshall. The meeting breaks up with the group running a sweepstake over how sales will go. It ends up overshooting all estimates.

The end game

Pals is still growing incredibly fast, but there are persistent questions about where it is headed. Some in the trade are surprised it hasn’t sold to one of the industry giants. Croad and Marshall are adamant that they’re not building it to sell it, and as evidence, they point to their status as a B Corp, a kind of international club of businesses which say they’ll look after their people and the planet, and go through a lengthy and costly certification process to prove it. The way Croad and Marshall go about their business has convinced the retailer Jamnadas that they’re in it for the long haul. “If they weren’t serious about the brand, they would already have sold,” he says.

The desire to hold it close might be connected to a cautionary tale which looms over Pals. Part Time Rangers was another RTD, founded by brothers in their early twenties, launched a little before Pals, and which once had real momentum too. The brands had a number of similarities – soda-based, low sugar, sold in 10 packs. Part-Time Rangers’ hook was that a percentage of proceeds went to animal welfare charities. “We were quite impressed by their marketing and clever ways of bringing their brand to the market,” says Marshall.

Exactly a year after Pals launched, Part Time Rangers was bought by international behemoth Brown-Forman, owners of Jack Daniels and others, for a rumoured $27m. One industry insider says the history of popular startup brands acquired by multinationals is often chequered, with few maintaining their original energy. That is particularly true for Part Time Rangers itself. Less than four years after being acquired, its fate is up in the air. “The brand has been deleted,” says Jamnadas. “It doesn’t exist no more.”

That is something Croad and Marshall couldn’t abide. The pair are fiercely competitive. When not at Pals, Croad plays basketball and golf. Marshall trains alongside Israel Adesanya at City Kickboxing and is 2-0 in his amateur MMA career. They, along with the Reeves, have become a formidable opponent for the established power structures of the liquor industry.

“Nick [Marshall] has sales, tenacity and perseverance,” says Croad. “I have the connections in regards to bringing this thing to life and trying to scale it. And [the Reeves] with the personality, the connections, and being loved and known by everybody. That can go a long way in business.” 

Anna Reeve agrees. “To this day, I get so many incredible messages of support from complete strangers here in New Zealand and across the world,” she says. “We have been stopped at festivals and in the street for people to show us Pals tattoos they have gotten. It’s the ultimate compliment, that people have such an affinity with Pals to do that.”

It’s all part of what makes Pals different, and helps explain why it has become a singular story within the booze trade. “There’s nothing like it,” says Stanford, who has worked in alcohol wholesale for more than 20 years. Jamnadas doesn’t recall a growth track as steep in his 27 years in liquor retail, saying that the Pals team are “marketing geniuses” above all else. “What Pals did was come up with a concept,” he says. “And they won.”