September 27, 2004

By T.L. Stanley 

LOS ANGELES ( -- It's music industry lore and Hollywood movie cliche that rock stars fritter away their millions on partying and booze. Not so for rock veteran Sammy Hagar, who's actually bringing in money by turning what started, in his own words, as "a stupid  rich-rock-star whim" into a growing multifaceted business.

Clubs and tequila Mr. Hagar, who has his brand logo tattooed on his arm, created and oversees Cabo Wabo Enterprises, which includes two restaurant/nightclubs, a hot-selling premium tequila brand, a growing entertainment festival and a budding merchandise line.

Unlike many marriages between brands and musicians, Mr. Hagar isn't a celebrity endorser licensing his name. He built his Cabo San Lucas cantina in the '80s because he wanted a place to play music when he vacationed there. He later bought a local tequila manufacturer.

Accountant quit

His friends and advisers thought he was crazy, he said, and his accountant quit, saying the ventures were a waste of money. Instead, the cantina flourished and the tequila sold.

Mr. Hagar is now assembling the first sales force for Cabo Wabo tequila, which is a top-five seller in the super-premium-tequila category dominated by such brands as Patron and Cazadores, according to Adams Beverage Group. The top sellers moved between 200,000 and slightly more than 300,000 cases in 2003, Adams statistics show, upward of twice the Cabo Wabo volume, which Barry Augus,  who heads Cabo Wabo Enterprises, expects to reach 110,000 cases this year. 

Band/brand integration Live Sammy Hagar performances are the picture of brand integration, with giant Cabo Wabo bottles getting rock star positioning on stage and waitresses delivering "Waboritas" to Mr. Hagar and the band. Winners of radio contests, who sit in bleachers on stage, sample the tequila.

Cabo Wabo is now stepping up paid advertising, with its the first major print and outdoor campaign, created by two boutique agencies, Meat and Potatoes and All Things Possible, both in Los Angeles. On Board Entertainment, San Francisco, is Cabo Wabo's event marketer. Spending on marketing and media for the brand, though modest, will triple to about $3 million next year. 

Mr. Hagar is in discussions to open more cantinas, some stand-alone and others connected to casinos or hotels, in cities as varied as San Diego, St.Louis, New Orleans and New York. He expects to open at least two next year,and two or three the following year. Each is wholly owned by Cabo Wabo Enterprises, has a performance space and features a Mexican-influenced menu with regional touches.

A variety of merchandise

Cabo Wabo merchandise, through a recently signed deal with licensing firm Signatures Network, will start production in the coming months. The apparel, barware and other goods that reflect a sand-and-surf party lifestyle will be sold in boutique retailers. Mr. Hagar is planning a Cabo Wabo cookbook based on the dishes served at his Cabo San Lucas and Lake Tahoe cantinas.

"I didn't know it would grow like this," Mr. Hagar said during a Florida stop on his current tour with Van Halen. "When it started to look like a real business, it was hard not to take the ride."

Other marketers are hitching on. There is his annual Cabo San Lucas birthday bash, a free event for fans, and a Nokia-sponsored event for bar owners and liquor distributors. The amped-up celebrity quotient includes performances by Mr. Hagar's band, the Waboritas, Chad Smith from Red Hot Chili Peppers, Smash Mouth, Kenny Chesney and Billy Duffy from the Cult.

Risks and rewards

In flexing his entrepreneurial muscles, Mr. Hagar joins a growing list of musicians and celebrities who have launched everything from fashion lines to food products under their names. Those steps can be both risky and rewarding. "In Sammy Hagar's case, he's thought beyond the obvious, and he seems to have a real passion for what he's creating," said Lucian James, brand strategist at San Francisco-based Agenda.

Mr. Hagar does not disclose sales for his enterprises, but Cabo Wabo executives said he could retire now as a multimillionaire from sales of the tequila and its related businesses. In his core business, Mr. Hagar has a newly released CD called The Essential Red Collection, and a Van Halen record, Best of Both Worlds. Because the music business is struggling, the Cabo Wabo empire is a way for Mr. Hagar to generate revenue and attention, said Jonny Podell, a 30-year music industry veteran who has been the longtime agent for Mr. Hagar, Peter Gabriel, the Gipsy Kings and others.

"Diversification is a great hedge from an artist's point of view," said Mr. Podell, a former ICM agent who recently founded his own firm, Podell Talent Agency, New York. "In Sammy's case, he started building this business long before the music industry started declining. But this is certainly a way for an artist to have a life after 50."