Sammy Hagar's Tequila Dreams

The former lead singer for Van Halen opened a bar in a tiny town in Mexico as a lark. Today, his Cabo Wabo Enterprises is a booming business

by Stacy Perman

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Sammy Hagar, former lead singer for the mega-band Van Halen, is renowned for his soaring vocals and stadium showmanship. However, for the past 15 years, Hagar has earned another reputation: entrepreneur. As the founder and front man of the 200-employee, Novato (Calif.)-based Cabo Wabo Enterprises, with about $60 million in revenue, Hagar is behind a top-selling line of premium tequilas, as well as a growing chain of tequila bars, aptly named the Cabo Wabo Cantina.

"Like many people, my first introduction to tequila was probably around the toilet," jokes Hagar, who at 59 still has the youthful exuberance of an arena rocker. "Still, I dug the salt and lime. It was a fun drink."

But in 1982 he sampled the good stuff—premium blanco tequila—during a visit to Cabo San Lucas, a small Mexican fishing village on the tip of Baja California. "It changed my life. I had the true taste of tequila, and I became a blanco freak," says Hagar. Thus a businessman was born.

Ten years later, Hagar opened his first Cabo Wabo Cantina in that same speck of a town, envisioning a place where he could drink tequila and play music when he was bored. "It was just an ego trip," he says. "The town wasn't even big enough to accommodate the idea."

In fact, his business manager quit over the project. "She thought it was the stupidest idea," he recalls. "She said I'd spend a half a million dollars, we'd get sued, and it would be a money pit."

Famous Friends

Although Van Halen and the band's manager also thought it was a lousy idea, Hagar got members of the band to come in as partners. Together, he says, they invested a total of about $400,000. The Cantina kicked off with an MTV party, forwhich the music network flew in 300 fans. But Hagar says that following the launch, business slowed to a trickle, and the village, little more than a ghost town at the time, couldn't support it.

"The guys in Van Halen got sick of it," he says. "We lost money for five years—about $40,000 a year—[but] that's pocket change to those guys.… They said the place was too hot, there were no telephones, and no TV. But that's what I loved about Cabo." So Hagar took sole ownership of the Cantina.

Then things turned around. Hagar brought in a new manager to run the bar. At the same time, Cabo San Lucas started to earn a reputation as a tourist destination. The surge brought new infrastructure, paved roads, and new hotels. And people began flocking to Hagar's cantina.

Before long, Cabo Wabo was out of debt and turning a profit. "We first made about $30,000 to $40,000 a year, and then we started making a lot of money," says Hagar. "I didn't give a crap about profits. I thought if this place could just break even it would be a great place to play." Soon, rockers like Iggy Pop, U2, and Guns 'N Roses began flying down to play at the little cantina.

Packed House

By 1996, Hagar decided he wanted to produce a premium tequila to sell at the bar. He partnered with the Rivera family that had owned and operated a distillery in Jalisco since 1937.

It was a tiny operation. At first they sent Hagar their handmade tequila in jugs, vats, and five-gallon gas cans. Hagar stored it at the bar in a little barrel and served it in porcelain bottles with cork stoppers.

"Every step of the way, this was organic," explains Hagar. "I had no intention of starting a tequila business. I just wanted this to be the best tequila in the world and sell it in the bar. Period."

However, Hagar's business continued to grow as Cabo San Lucas developed. In 1998 the town became part of the cruise-ship circuit. "[The cantina] was packed all the time whether I was playing there or not," says Hagar. And more and more people discovered his Cabo Wabo tequila. "It was way beyond my hopes and dreams. It just exploded, and I knew this could be a real business."