Anheuser-Busch and Keurig are teaming up to make a $399 'Keurig of cocktails.' Here's how it works.

Drinkworks essentially distills a cocktail down to a highly concentrated pod of alcohol and mixers.

The machine is used to add the correct amount of water or sparkling water to create a beverage.

Each sleeve contains four pods. Each cocktail pod costs $3.99, with beer (which we didn't test) costing $2.25 per pod.

We taste tested Drinkworks' margaritas, Moscow Mules, and Mai Tais. Other options include White Russians and sangria, as well as Beck's beers and Stella Artois cider.

Toothman says that the company's Vermont distillery works to create "high-end, premium cocktails," and then concentrate them.

Each pod has a barcode that works as a recipe for the machine, which reads the code and adds the appropriate amount of water and carbonation at the correct temperature.

Currently Drinkworks is selling the machine for $299 in a St. Louis, Missouri, pilot. As the machine rolls out across the state and in Florida and California this year, the machine's standard price will be upped to $399.

Early fans of Drinkworks are upper-income people who regularly entertain at home, especially empty nesters and young parents, Toothman says.

It's a high price tag for a machine that, essentially, dilutes premixed cocktails — the same thing many people do with something like margarita mix.

However, Toothman says at least some home entertainers are seeking a gadget that churns out different cocktails for guests. After they buy the machine, Drinkworks has noticed many start using it regularly for their everyday, personal needs.

Business Insider taste testers can vouch for the quality of the drinks. Each cocktail we tried was tasty, with surprisingly complex flavors — and would be a fine addition to a house party.