Elle Lanning (Camino Partners) - What KIND Snacks Got Right, What Differentiation is in CPG, and How to Back The Right Founders

0:00This episode is brought to you by Vobin from Carta. Vobin from Carta is the easiest way to launch and run your venture investing. They offer SPVs and fund vehicles for GPs at all stages of the journey, from your first syndicate to operating a multi-million dollar venture fund. If you're interested in investing in startups, stick around after the episode where I chat with Gabriel Shin from the Vauban from Carta team, who shares his perspective and tips about how to start investing and how Vauban from Carta can get you set up. The link to Vauban from Carta's website is in the show notes.

0:45Hello, I'm your host, Mike Gelb, and this is the Consumer VC podcast, where we discuss the intersection of venture capital and consumer innovation. If you're enjoying this show, I highly recommend you also subscribe to my newsletter at theconsumervc.com, where you're going to receive all new episodes straight to your inbox and a weekly recap of all the consumer deals that are happening. All content episodes are for informational and entertainment purposes only and is not investment advice. This episode is brought to you by Vobin from Carta. Vobin from Carta is the easiest way to launch and run your venture investing.

1:19They offer SPVs and fund vehicles for GPs at all stages of the journey, from your first syndicate to operating a multi-million dollar venture fund. If you're interested in investing startups, stick around after the episode where I chat with Gabriel Shin from the Vobin from Carta team, who shares his perspective and tips about how to start investing and how Vobin from Carta can get you set up. The link to Vobin from Carta's website is in the show notes. Our guest today is Ellie Lanning, who is the managing director at Camino Partners. Camino Partners is a$350 million business building and investment platform that helps entrepreneurs create enduring value with values as their compass.

1:57It was founded by Daniel Labetzky, who is the founder of Kind Snacks. Some of the Camino Partners' portfolio includes Somos, Kava, and Belgian Boys. We discuss Ellie's time working at Kind, what Kind got right and how they grew, how Camino Partners came together, and what they look for in CPG. Without further ado, here's Ellie. Really enjoyed talking with her.

2:26Ellie, thank you so much for coming on the show and taking the time. How are you? I am good. I'm good. I'm actually just, we had a 65 degree day yesterday that turned into snow this morning. So I'm recovering from that, but. Oh my gosh. Where are you based? I'm in Boulder, Colorado. Boulder, Colorado. Okay. Wow. Wow. That's quite the extreme. That's quite the extreme. So I want to start kind of at the very beginning. and how did you start working at Kind? So I guess if I go back, I studied marketing in college. I left thinking I wanted to parlay that into kind of what I knew growing up, which was more in the pharmaceutical and medical device arena and do sales.

3:16Uh, so I, I tried that and I very quickly discovered, um, that having a career that had very little alignment with my life and lifestyle was not going to be one that, uh, worked for me. And I was living in San Diego actually at the time. And this was when, um, you know, Kashi was like really, I would say pioneering the emerging food space. And so I, which did have a lot of alignment with my lifestyle. So I set my sights on working there. Um, and I ended up joining, uh, the marketing experiential marketing and communications agency that was doing all of that early work for Kashi. Um, and so I spent, uh, several years there really working across Kashi bare naked, got to do work with honest tea, pop chips, great, you know, great brands that were changing the food landscape at that time.

4:22And it coincided with the timing where Daniel was starting to build out the kind team. So he had, for the first, call it handful of years, really worked with a small and mighty team of generalists, kind of trying to see and prove out if he had something with the concept. And so once, you know, you started to see the makings of what the potential was, he started to invest in hiring team with kind of differentiated skill sets. And so I actually took the initial interview with him to test if I had marketable skills. I wasn't like genuinely interested in the opportunity. You know, the brands I was working with at that time were, you know, bigger, had more consumer resonance at that time.

5:21But then I went and met with him and I had met with many founders in my time prior to him, but he was just very unique. You know, I show up thinking I'm exploring this like food marketing job and was trying to understand what he was seeking to achieve. And he's like, we are going to break down barriers between human beings. We are going to make them see their shared humanity. And I thought, well, that is something I know very little about. I might know how to help you sell some of these snack bars if that's kind of part of it. And so it turned into kind of a series of conversations with him that had me deciding to make the leap and, you know, help build behind his vision.

6:16That's amazing. That's amazing. Obviously, what Kind has grown into, it's really quite incredible. um you know there's of course so many you know cbg brands out there um what do you think since you worked at kind for over 10 years and um you were obviously very much in the thick of it what do you think were like maybe the three things that you thought kind got particularly right that actually made it so successful well i'll start first and i'll start with this i won't necessarily say these are in order of priority because they all had to happen together. But I'll start with this one because I actually think it's a bit overlooked today.

7:03And that one is the product itself, right? And so when you look at how we started with the fruit and nut bars, you know, what kind is most known for the clear packaging you see and understand what you're eating, Um, that was not only a product type that, you know, wasn't available here in the U S. Um, but it was also a product type that wasn't being manufactured here. And, and it's a surprisingly difficult, um, item to manufacture. And so here you had this product where the, the branding and the packaging around it, you know, that really kind of hit on the consumer trends and tailwinds. But then what you also had with that is a runway, a really clear head start, because once you have that, others will come, right?

8:09It's just a matter of time. And so if you find that in easy to replicate, easy to recreate products, your, you know, your runway is much shorter. And so for, you know, for me starting there in 2010, I say, you know, the first four or five years where I was, you know, a part of building the kind brand, which became more of our moat, the only thing that looked like kind on shelf was kind. Um, and, and you knew, we knew that others were working on manufacturing similar items. It's just that that took, uh, quite some time because it wasn't, you know, a ready-made manufacturing process here. And so I start with that being really important.

8:59And, you know, Daniel talks about when he's advising people, he talks about these, um, three phases of like your own journey to launch a business. And it's the creative, right, where you're dreaming up and building the idea, the critic. And that's where I some people I often see people skip that step. And that critic is like, why and what could go wrong with this? Right. And so I think like, when I tie that to product, you know, entrepreneurs today need to be really honest with themselves as to like, do they have an incremental benefit product or service? Or do they have a truly differentiated one?

9:47Because trading on kind of marketing and brand building alone is a really tough road. And so I think, you know, he definitely went through that phase in his like critic journey. And then, you know, what he says is once you answer that very, you know, very true and kind of self-reflective way, then you become the crusader. And that's where like nothing, nothing stops you or gets in your way. So that I would say was the product piece of the equation. Um, the other piece of it, um, that I would highlight, and it goes back a little bit to what I was saying about my initial interview with him, which, you know, was very unexpected.

10:34The, the reason for this brand and business being was always much bigger than the products that it was selling. And so it gave us a one, I mean, that like ignites team, you know, to like wake up every day and not only think about selling healthy foods, but to think about like bringing people together, connecting people across differences. How can our brand play a role in that. Like there's, there was a much bigger opportunity set that, that set up for us by being on that journey from like the very early days. So I think that was an important kind of one of the three things, if you will. And then the last one I would say was the culture.

11:26So we built a, and, you know, we were, this was one of the most important things to us in the everyday, right? Because it's something you have to focus on every day, but we built an ownership culture that, you know, was supported both kind of structurally, like everyone was an owner, had an equity stake in the business. We've won together. And then there were behavioral pieces of it, right? In terms of how you reinforce that. And so our kind of anchor tenants for our culture was this idea of hungry and kind, and that the balance of those is really where like the, the unlock was. And so, you know, how do you have a, how do you give way to a team that's waking up every day, like feeling like this is not a company they're working at.

12:20This is their company that they are waking up and advancing every day. And that difference just really helps you to outperform the next. No, that's, that's extremely helpful. So it seems like in terms of maybe the three things, or maybe even four things were the differentiation of product, they weren't, no one was producing that product in the States. Also, no one was, No other bar was actually featured, that product that was more like nut based. And as well as on the brand side of things, no one was going kind of clear with their labeling. And actually, you can actually see the bar, which is very unique.

13:02It made kind really stand out. And the other two that, you know, I really love that really kind of interact with each other of you had this greater mission, this kind of bigger for product, which ignites a team. and as well as when you also have ownership and you have that ownership model that also brings in the culture and it also ignites the team because then everyone's kind of on the same mission that actually they want this product to obviously it's not just a salary you're also really you're actually kind of attached to this this product um as well which is which is awesome um what are some of the things that you also saw like kind work through or maybe was were like challenging during the kind experience when you were there that you want to now, you know, as an investor, you want to kind of pass it along to founders?

13:50So I would say, well, the culture piece is, that is like, that's a work in progress. That is a, like every day. I mean, you have to start with what leaders and company owners that really care. But that is something that I think, you know, we were focused on helping our companies with because that's just an everyday endeavor. And I think, you know, the other thing that I would say in that, that was something is, you know, it's hard to foresee. like when I joined kind, I could have never imagined the kind that is today. We kind of always talked about like you got to base camp and then you could see, you know, a new kind of plane or horizon, then you get to that next.

14:50And so, you know, what is, what is like very difficult in that when you are a fast growing company is how do you construct your talent strategy with that in mind. You know, there's very few people that can, that are, they're really valuable at the early stage, but then when something scales to be, you know, half a billion, a billion dollar retail company, like it's different types of talent, it's different needs and challenges. And so we certainly, I think, struggled with how do you evolve and like still really honor and respect the people, the key talent that got you from point A to point B. And then now when you're moving from point B to point C, you know, I think oftentimes there is some self-selection in that that happens, but then there are tough decisions that you have to take in that.

15:46So I think, you know, that was certainly some of the harder moments for us in our journey. uh the other thing that i would say is uh it goes back to you know like the first four or five years that i was a part of kind the only thing like it on shelf was it but then boy that fifth and sixth year the number of things like it on shelf you know it exploded it was like this potential like death by a thousand cuts era where you know what we had to figure out was like how do we stay out ahead? How do we deal with a different type of competition? How do we deal with things that are really trying to draft off of all that we've been building for the last several years?

16:34And, and, you know, another thing was like, some of those things looked a lot like it, but did not match in quality, which is bad for the category, people come in and try it, and then may never come back. And so what is, you know, how does that reshape your toolkit? Like when you're a category of one that goes to a category of call it lookalikes, what is that strategic toolkit? How does your consumer messaging change? How does your selling strategy and customer messaging change? And how do you ensure that your business still comes out of that on top? Um, that was certainly a piece of it. It's like, there were, there were pivotal moments where it's like, you lost a big account.

17:30And like, you know, I, I told, um, I told Daniel, as we were going through like a transitioning from managing the day to day, like I had some reflections on the, the biggest things I learned from him. And it's like, Oh my gosh, you know, this idea of like, get back up, get back up, get back up. That is a guy that probably wasn't my natural wiring. It is through osmosis of, you know, partnering with him for 13 years. And so you're going to have those all the time. And how do you quickly frame what it is, what does it mean for your business? And then how do I counteract it? And that might be like trying to win back that customer, that might be building more deeply and competitive customers such that they have to bring you back in.

18:25And so you're going to have a number of those kind of setbacks on the path as well. No, those are all, I mean, excellent points. I also can only imagine, you know, when you finally seen you maybe onto something onto a new type of category or onto just a product differentiation that's working. And then it's kind of a gut punch to see all these other brands kind of come up in the same category. And especially if they're not like the right, you know, quality that actually the actual damaging side, which I didn't think about how that actually damages the category in the long run. And it could be detrimental.

19:07It's also a funny balance to play because you also don't probably don't want their problems, their products to be too good as well. Um, so it's, um, but, but, but just kind of understanding that and, and how you actually deal with that and, um, not get kind of too down and out that that's happening. Um, that makes a lot of sense. Um, so how did, um, so Daniel like launches, um, Equilibra, right? And so what's, um, what was, what's kind of the journey of, uh, being part of Equilibria And also why the rebrand now or like the difference between what you initially set out to do or the name versus now with Camino?

19:50So Equilibra was, I would say, something that we kind of set up and named as we were still heads down in the majority shareholders and day to day management of kind. Um, and so it was, you know, something that we set up and we were parking some capital and assets with, um, but still like our full-time job at that time was continuing to grow and build kind. Um, and so then, you know, we, we formed a strategic partnership with, um, Mars that was really born from a place of like the next phase of growth for kind was on a global scale. We took and tried to do that in a couple markets our own. And we realized that we wouldn't be able to do it with the level of speed that the opportunity required and the resources.

20:47And so we looked for a partner that was kind of values aligned that had existing global infrastructure and that led us to Mars. And then as of end of 2020 into 2021, we transitioned, we're still involved and stakeholders there and have an advisory role. I say we're both, you know, spiritually aligned with kind always will be, but then have a stake and continued alignment and support that team there. But then we were able to turn and say, OK, you know, what what is it that we want to spend the rest of our time on now as there is more time? And so that got us to do some work as to really kind of putting on paper what our philosophy is about business, what our key kind of learnings were.

21:50And a lot of that equilibria didn't translate to that well. Um, and really what we took from that is that there isn't, you know, and, and when we were on the operator side, we were kind of sold often like a playbook approach. Um, and that's not real, you know, like certainly there's, uh, transferable lessons, but what works for one brand and business does not mean like applied to the next. It will be a recipe for success. And so we really got to this idea of like, everyone will have its own unique journey, its own twists and turns, its own set of critical decisions. And that, because we took our kind journey that way, is the reason why kind became kind.

22:45Because we didn't subscribe to playbooks. We didn't subscribe to, you know, a, we called it the and philosophy, like your mind so often forces an or, but if you can stop and say, it's not either or like what's the and here. And so because we didn't subscribe to this idea of playbooks or answers from, you know, what's happened from those ahead, you know, our journey unfolded the way it did. And so Camino, which means journey in Spanish, which is, you know, Daniel's native language, felt like the best translation of that and really communicating to this idea, this idea to entrepreneurs, founders, managing teams that, you know, we're excited about that.

23:34We're excited to step into your journey, to join you on your journey, to be an informed and informative partner along the way. But we're not going to bring you like a playbook. We're not going to tell you do this the way we did it at Kind. We're going to give you our lessons and we're going to draw from those what works for your business or doesn't. I think that's a really great point about no playbook. what I kind of feel like when, you know, I, for example, just came off of doing this panel in Austin last week. And there were three entrepreneurs, all like fantastic, fantastic people on stage telling about their journey, stuff like that.

24:21And what was really cool is I talked to one entrepreneur and said, it's so interesting how they think about building their businesses, because my approach is completely different. And I feel like when you actually learn someone else's journey, it actually is a learning for you because it's a great learning for you of like, okay, this resonates. And this is actually very similar to what I think for maybe my brand or what I'm building, it makes sense to do. Or this part maybe doesn't resonate, period, or maybe doesn't make sense for this. So it's almost like when you have these conversations, it's almost like learning more about yourself and in terms of what you're building, which is really cool.

25:01Well, like I would give you a great example. So, you know, kind, we did a lot of what's called field marketing. We had a lot of like feet on the street, local ambassadors sampling the product. And so, and we weren't the first to do that, but a lot of people are like, well, kind did field marketing. We should do field marketing. And I tell people, do you know why kind did field marketing? because we learned about our consumer funnel and nine out of 10 people who tried Kind would buy and repeat purchase. So that made sense for us. That wasn't us saying, oh, well, this brand did field marketing, so we should do it.

25:44It was saying like, that is the most, if you can get someone to try this product, you've got like X number of annual purchases from them. It's a very efficient approach. And so that's where, you know, I step back and I try to like help under, you know, break down what people know about their business, the consumer interaction with it, et cetera, because it might not be a trial issue. It might be an education issue. It might be. And so that's why I think, you know, oftentimes this like playbook approach isn't nuanced enough, I guess. Yeah, no, that's a great, really great point. Really great point about that there really isn't one right way to scale or to grow a brand and maybe paying attention too much of what someone else did and maybe copying that.

26:44Maybe it'll work, but probably it is, as you say, a lot more nuanced than doing that per se. I'd love to dive in a little bit more about Camino Partners. It's a$350 million fund, but you also as well incubate companies. How do you think about splitting the incubating versus actually investing? On the investment side, what typically is your average check size? So as you mentioned, we're unique in that we're kind of business builders and, you know, partners and hopefully accelerators of other people's businesses. And so on the building side, you know, the first brand that we've incubated and are co-founding and launching is it has a very, I say, unique set of ingredients.

27:41Those ingredients are co-founders that we've had a lot of time and seat and experience with, right? So Miguel, who's the CEO, was the CMO with us for several years at Kind as we were more scaled. Rodrigo, who is a co-founder and head of product, there was, um, with kind for, oh my, I mean, at one point he, he was one of the early generalists at one point he was doing product development, legal marketing, you name it. Um, and then as we became a more specialized company, he did product development. Um, and then you have Daniel as the third co-founder. And so you've got this idea of time in seat and experience together that I think helps form kind of speed of trust.

28:41Then you had what we saw as like a real kind of market white space. And so what we looked at there was how much Mexican cuisine had really advanced and become more true to what you would experience in Mexico, in the restaurant space here in the US. But then if you went into the store and saw it on shelf, you know, Rodrigo and, and Daniel and Miguel would tell you like, when you're in Mexico, you don't get offered a hard or a soft taco, like those hard shells tacos don't exist. That's American Mexican. And so this idea of like what how you were able to experience their culture in a restaurant setting they had so much pride for how far that had come and then such disappointment at their culture not being represented on the store shelf pair that with our experience building food businesses and you've got kind of speed of trust you've got market opportunity that plays against our existing skill sets.

29:51And so that's where, you know, that's much more of an investment of our time in the upfront than it is of capital, because you're not talking about, you know, things where you're, you're just talking about smaller drips of capital to, to get something like that off the ground. So I think for that, on that side, we think of like the way we really think about it is a bit of like a road tested kind of founder and entrepreneur that, you know, hopefully we know somewhere through our existing network and connections that has an idea that is, um, that we believe that there really is kind of white space and differentiation.

30:40Um, and that, we believe we have strong values alignment with, because the only thing I can guarantee you is that things will not go to plan. So like, we got to be able to do that well together. And it's an emotional, like starting a business from scratch, it's an emotional journey. And so, you know, that's like, that's probably that piece of it is even more valuable than the capital and how you support each other in the early days. On the other side of things, we are looking for what we call more ready to scale businesses. And so these are, you know, businesses that have already really kind of proven and found early demand vectors that we see the potential to go across multiple channels.

31:43And that really, the name of the game is going to be keeping your foot on driving that demand, but building the infrastructure and the practices within the business to keep up with that, which was, you know, true to our experience at Kind. And in those businesses, we're trying, again, it's a deployment of our time as one of the higher value things that we bring to the table, we're not, you know, showing up for a quarterly, a quarterly board meeting where I, in the case of like Belgian boys, you know, I meet with Anouk weekly, um, and we're sorting through kind of what are the biggest things on her plate as, you know, she's a first time founder CEO.

32:29How can I help to triage those? How can I think about where our team is, uh, aiding her team? How can we think about like talent gaps that she has? So it's a very active and engaged partnership. And so with that, we have to be able to deploy enough capital to then have reason to deploy that time. And so our average investment size we target is 20 million. No, that's really helpful. And the first company you were talking about, by the way, that was Somos, right? That's Somos, correct. Cool. And with Somos - Hopefully you tried that at Expo. I didn't. I didn't. Unfortunately, I'm so sorry. I'm so sorry.

33:08I definitely I. It's okay. I'm sorry for you. Yeah, I know. I know. I, I, I clearly, clearly I just didn't do expo, right? Clearly I didn't. But next time, next time. But with Somos, now that was incubated while you were still at kind, right? Under kind of kind with, I just had like this partnership with, with Mars or no, No, no. So that is, that has no connection to kind other than the fact that the two co-founders were people that we had worked with that kind, but like Miguel, Miguel had left kind and was at Cholula. And so that was kind of getting back together with him. Rodrigo had left kind, was in Mexico, which is actually where we produce all of that food.