From Surviving a Plane Crash to Building Baby Formula and Energy Drink Brands: Richard Lavar

30:00Then you'd see it was a little bit, but like, it was like, there wasn't like lifelong Coca-Cola thing. And so that was my number one thing. Like I was like, I felt like some of the leaders don't want to bring up the names, but they were winning because the other companies were just doing stupid thing. They're just winning a little bit of default, not to put that down. But so I saw, I saw an opening that if I, that if I had Kate farms type execution, I could win big quick. So that's number one. Number two, a lot of these new energy drinks were trying to go after the natural food world and they couldn't scale because they were offering to, you know, people want energy at the end of the day.

30:38They want energy. They want to feel good. Like that's what I offer. I, you know, is I didn't want to offer all these exotic vitamins, all these different things. So what I did is I took from my superfood world experience. I took maca and maca is a Peruvian miracle. and in it, it's got your magnesium, your B vitamins, it calms your central nervous system. It's incredible for sexual health. And so this becomes the hero ingredient for your vitamin core. So what I did is I married the hopes and dreams of, of the energy drink, uh, natural food world, energy drink companies that haven't necessarily been able to scale and put it to the masses for the C store, gave them a little bit of an upgrade.

31:20Okay. Give them maca, give them ginseng. Taurine, I knew from my studies was one of the greatest ingredients in the world for your brain. It got a bad rap for some reason because people were dosing it at these crazy high levels. So I brought, right. So I was like, you felt jittery. Cause what I want to do is give you one thing I knew that I could hit pay dirt. Like I did at Cape Farms when I knew if I made it taste like Haagen-Dazs ice cream. If I could make you feel euphoric drinking my drink clean subconsciously, I wouldn't have to shout from the rooftop the product benefits. You would know it when you had it.

31:55So our ACV could be low and I could build a big business. So that's how all the tractions happen. I have less than 1 % ACV in the first year, mostly independents, and we're booking millions and millions of cans sold. But the way I went about it is product philosophy, market philosophy, crowded market of people that are not that passionate. And that I felt that there's a very good chance that with my business experience, dual market threat, ability to build a business, hire the best people that I could actually displace and disrupt the top three or at least two of the top four brands and do it in actually a relatively quick period time.

32:36So went and to be able to have the aspirations to do what I did, I needed to believe in myself and put the cart before the horse, if you will. So if you really believe, if there's a real belief system, like when I laid down the book of the China study to save my daughter, Kate, there's real belief system that I know the product to build. And I know there was an opening in DSD because Celsius went to Pepsi, KDP went C4. And for the first time in a long time, contracts for DSD were open in there. And I had the product, I had the product market fit because the way I do it is I sit with my product with a hundred stores.

33:16I don't call investors, I call nobody. I don't want any employees, I want nobody. And I sit there for hours a day with those hundred stores. I put them in bowling alleys. I put them over here, I put them there. And I let the customer tell me, and I knew when everywhere I put it, it sold. Didn't matter if I put it in a gas station, C store, Sprouts, wherever I put it, I had someone help me put it in the store. It sold. With Kate Farms, I had to put it in like a natural setting. That was it, right? That's all I could sell until I went to medical. So I knew right away I had that going. So now the next thing I had to do was have a thesis.

33:52And the thesis was that we are going to build a superior gross margin product that is going to make you feel euphoric. And I'm going to go grab territory with an incredible team. And I'm going to be one of the fastest growing companies to$100 million. So I don't do what a lot of people do. I don't start a business and see how it goes. I start with the end because if I start with the end of where I'm going and I want to create a billion-dollar business, then what would you do early on if you were creating a billion-dollar business? You would hire the best artists. You would hire the best formulators to work with you.

34:39You would sit down for hours and try to convince the best employees to join the cause early. And what I do is I work backwards from that. So what's really weird about this, everything I did in decision-making, December 2023, when I signed Imaginary as my first investor, till today, 95, 100 % has gone to plan because it's all engineered. It looks like we're throwing commercials out there and doing wild things, but it's absolutely... I know within two quarters when I'm going to go profitable in this company. What's your approach to hiring top talent? If you hire the very best in the world, it's very hard to do.

35:18Then you won't need to micromanage them if you hire the best. If you are a guy that thinks you're an A player and you think you're the best of all these different departments, subconsciously, I believe you will sort of want to do everything to protect decision-making around you being the big genius founder, CEO. And I think this is where founders make the biggest, biggest, biggest, and CEOs mistake. you will get credit for who you are and what you've done by, by having the maturity to make sure you're trying to hire the very best people. And put me, give you an example. They came to Henry Ford when he was launching his second car and they said, Henry, how could a guy like you, you don't know how to build anything.

36:06You don't have any engineering experience. You don't have to do anything in the company. You don't have marketing. You have no personality. You don't have any, like you can barely sell the investors. for how, what do you, he said, you know, under my desk, I have 33 buttons and I can press the buttons to any one of these people and get the best people. The best founders and entrepreneurs are, have some ability to attract the best to their team to do it. And the sake of your enterprise is, is, is it has to, that has to happen. You need to be able to do that. How have you been able to do that? I think that my reputation probably preceded itself with KFarms and that I was able to solve such a complex network of problems.

36:54I think my ability to capital raise. No one wants to join a startup with a founder that can't succinctly really give confidence to investors to make sure that you've got to really believe that there's a road to the future. And I think the next part about it is the ability to tell people that I'm going to allow you to have so much fun and build what you want to build here. Allow them to make mistakes and fall on their face. And I think that people that have really kind of done diligence on me is that if I think that you love power for power's sake, you're going to have a problem with me. Like, I'm not going to do well with you.

37:36But if you like, if you just love to bring the best people around you and you love to work for the company and there's no agenda other than building beautiful things and you build a network of trust around you, I think there's a really good, I'm a really good person to work for. And so I think just instilling that confidence because the talented, most talented people in the world, what they want to know is that you're not going to go bankrupt with your burn, right? energy drinks in particular in beverage need to be run by a person understands how to get the money and why you need to burn and when you're going to turn off the jet engines of that burn and give job security to everyone and confidence that you're going to be able to get that done and that my friend was built on day one like all that was built first day before i sold drink beverage very well known it's very capital intensive business right like beverage it's heavy this is you know i think my opinion part of the reason why you have a lot of companies that launch don't launch as beverages but but you have you know a lot of powders for example just because beverage is just so freaking hard on its own well first of all when you're approaching retail what got them interested in Lucky?

38:53Obviously, you have this great track record of Kate Farms, but what about Lucky themselves did they think, hey, we're going to give you all a shot? When the draft comes, everyone thinks they know who's going to be the next great person or the next great quarterback. And they can measure everything, but you can't measure you can't measure that special quality that, um, what I call an intangible of an athlete. A lot of times the great high school stars don't go on to be great and same in business. It's not the words you say it's, it's, it's sort of some intangible of, of what allows you to grab all of your partners to join the cause.

39:40Um, it, and that's why I've probably started very few businesses because I won't start it. I'll bring myself to an edge. I won't start it unless I really know, like there's a conviction inside that. And so there's, there's a coalescence of a lot of things happening with lucky. Number one, you got a unique founder story. Never since Paul Newman's has there ever been a, a true life story told through a, through a CPG product twice daughter. Now it's the dad, right? So that's interesting. That's, that's differentiated. We have product differentiation. It's not just another energy drink. It's different.

40:16It's less ingredients is more. It's cleaner. No aftertaste is the claim. We think we delivered on all that. And the name, the name went from very risk averse to one of the greatest names ever. Like, have you ever met 8 billion people on planet Earth? We all have one thing in common. We all want to be lucky. So we jump from the shelf. People give us a shot. Now, if the product's great, which the retailer, then you get repeat customers. To give you sort of why I'm so excited about Lucky right now. And we just got back two days ago that on our digital Amazon and D2C, we had a 52 % 90-day rolling repeat purchase from one to three, which is unheard of.

41:05Like premium is 30 to 40. Elite, elite of elite of elite is 40. We just had a 52%. And we, products part of it, but also we're investing heavily in the entertainment part of our business. We're trying to connect with the consumer through an authentic story, make them laugh, cry, mischief, mayhem. You never know what's going to come. And the overriding story is that we're not ticking the box in marketing where young people are disenfranchised, they're upset and they love authenticity. And so I think the buyers are the same way. We're standing out different from everyone else. Yeah. I mean, it certainly has kind of an anti-brand or like punk rock energy when you see on the social accounts.

41:52How as well, when it comes to marketing, how do you think about the different entertainment channels they actually want to engage in? Obviously, there's organic social, but does it make sense, for example, to even look at sports or other channels that might be a really great introduction for people too lucky? There's a duality to our business, right? It's like there's this carefree artist that's going to say what he wants to say to represent the human experience, which is wild, you know, up and downs and make you laugh, make you cry outrageous content. But then there's a brand halo of our brand, which is we will, our first thing was to get eyeballs through, we brought the marketer, the first employee from Liquid Death over to, to sort of give this, get a lot of traction.

42:43We have 400 ,000 followers on TikTok almost. And I think almost a half a million total in social. We had like 2000 in June, right? So last June, the brands just exploded. But the way we see it is our heroes are the flawed, the broken, the comeback stories. So when we sign an athlete, we want to know, like, it's not about the tattoo, but we want to make sure you're not hurting people or whatever, or you could be Tiger Woods, but if you're a bad character we don't yeah we you'd be the greatest athlete in the world but we want to know your heart who you are and we love the comeback story so when we look to our like we signed butterbean like a 90s fighter to make a comeback in fighting like it sounds crazy but he really wants to fight like to that that's important a comeback of a 58 year old fighter who says those guys are all fake we want to i want a title shot back and we're going to call out jake paul or one of those guys Or we look at Pharaoh Brown.

43:44He broke his leg in the college game at Oregon Ducks, and he almost had his leg amputated by doctors, and NFL said he could never come back and play, and he was a walk-on, and now he's playing for the Miami Dolphins. or another great kid is Tommy DeVita from the New York Giants. I just signed him. You know, flashy kid, but his heart is gold. Such a good kid. Such amazing story of walking on and capturing New York hearts. But those are our Rory's or Tiger Woods for us. And we want to, as we move to the future of possible Super Bowl commercials, the halo of the brand is to tell a story of let's accept each other and let's bring the high school cafeteria together of the jock, the nerd thing.

44:33And let's stop judging and let's just, we're spinning on this rock and this flawed experience called life and we're all doing the best we can. How did you approach and think about pricing as well? Because obviously it's a clean product as well. I know that you're very focused, obviously, on the gross margin as well and making sure you have great, obviously, being very, very healthy on that front. Within the competitive set, how did you think about price? And also, how did you think about different distribution channels that you wanted to get into? I believe now you're at 10 ,000 stores, if that's somewhat accurate.

45:10How did you think about which types of retailers you actually wanted to be in? Yeah. So it started off with going deep into territories, right? So no billion dollar brand has ever exited, really. This is going to be a stunning stat, you know, unless you win Polar and Big Geyser. And, you know, Big Geyser has, you know, got three energy brands, C4. There's 200 energy brands in the world. C4, they've got Celsius and they got lucky. So I knew I had to win the pillars, so I was looking to get to them early with my data. And so just the knowledge of understanding that you got to win the Northeast because the rest of the country will sort of fall from that.

45:52You got to win the Northeast. And we went C-Store. C-Store is$14 billion in consumers, large formats,$8 billion. And we wanted to win the C-Store in 2024, 2025. We hit Albertsons in large format. We'll explore. We thought our demo is going to be 90 % male, 10 % women. It's actually almost 40 % women in a large can, which shocked us a bit. So we will look to try to get into the hearts and minds of consumers at concerts and stuff and culture that we will look to get out this summer into a lot of concert series. Probably look to move into a 12-ounce sleek for women at some point, compete with Alani News and Celsius is the world that we believe we've got something clean.

46:40We've got something pretty clean. And then, of course, at some point late in 2026, we'll start testing or late 2000, pardon me, 2020, we'll start testing club. You know, stuff like that. But really our focus right now is the gym business. We have a beta alanine, which is a pre-workout. I dosed it down so you don't get the tingles. So gym business, you know, C-Store 7-Eleven right now we're with and Quick Trip and we're exploding with Circle K. But yeah, this is what we just started our retail footprint. So next year we'll be in about 30 to 40 ,000 doors next year. and march towards$100 million.

47:22That's fantastic. Recently, you raised your Series A1, led by Maveron. Congratulations. We've had a couple Maveron investors on the show. First, why raise the Series A1 now? And also, what resonated with investors the most for Lucky? My ability to build the team resonated. I would say that was the most powerful component. You know, usually a brand kind of putzes along product market fit. You know, if you get, if you hit fire, like a Olipop or something like that, and you start working on these things, like I worked on all these things that you usually see in a year or three brand gross margin.

48:03Like, so like I can prepare and get this company ready for dual path, like in the next two years, like, like, so there's things I've done just as a beverage expert that you don't see a lot. And I'm really happy that I've made those promises happen. But yeah, I think that what's really is building the team. And then the real idea that I've been thoughtful to a data science about how we're going to grab territory, win the hearts and minds of the people and turn on profitability. and a belief that I'm going to do that, like engineered real belief to the investors. I think that that gives comfort.

48:50But yeah, we're going to be, you know, we're an energy. We need to get out there and do what we're doing. But like this is not going to be a company that's limping around with 30 margins trying to find an exit. We will find that place. So all those things are in place. The great thing about Maveron was we had several lead investors that wanted to be with us, But Maveron was so such a conservative firm. And when they spent time with me, Dan flew out to my house and spent time with my wife, Dan Leviton. Just got to know why I was doing it, who I was like the questions were were so deep. There was so much diligence on me talking to my board, talking to my best friends, really getting to know who I was and why I did things.

49:36And, you know, I think the term Maverick is probably a little bit of how I go. I go for it. Right. But having the vote of confidence from Maveron, Jason Stauffer over there, they were behind Starbucks going public. And also Dan bringing on his best friend, Dan Ginsberg from Red Bull, the ex-CEO of Red Bull, was big because he approached him on several dozen portfolio companies and he didn't have an interest. So Dan Ginsburg brought Red Bull from$75 million to$1.6 billion in revenue in six years. So we're talking about a pretty serious guy. And so, yeah, I just think of just building the right people around me.

50:29What have you learned most from Ginsburg thus far? Go deep into these territories. is, you know, what I've learned from Dan and very high, they love the idea that we're looking for high character people, that you could be the most talented person in the world, but if you're low character, it's not a good place for lucky. If you're low character, I mean, if you're high character and you're low performer, we can always teach you how to be a high performer. We really believe in that. So I just, the alignment on those values are very, very important. I think from Dan is Ginsburg, which was to, to go deep and to, I think he's a big believer in the fact that a lot of companies don't professionalize themselves early enough to be able to take advantage of potentially, let's say the, you're sitting around like on a dance floor waiting for the girl to come to ask you to dance.

51:31That's kind of what the acquisition game seems to be sometimes. But having a company that's a dual threat process, um, is, is, is, if you can, is a really great idea to build because, um, the, the favors in the strategics corner and a lot of these liquor companies are not doing well in beer companies. They're going to be looking for an energy drink, but having the company ready to, if we're going to be a world beater, we don't know quite yet, But if we're going to be a world beater, the fact that I'll be ready and these guys know how to help me get how to do that is just crazy. Great for me. How how overall I'm just thinking about energy drinking and especially Red Bull and marketing and how Red Bull spends a lot of money on marketing.

52:17Energy drinks in general, I'd imagine, would have to spend a lot of money on marketing or sponsorships, partnerships, stunts. They're creating these really unique experiences for the consumers. I'm a big Red Bull fan in terms of what they've done. How do you think, as an emerging brand, how do you think about marketing spend and where did it actually make sense? Because imagine in energy, you probably have a lot more percentage of sales devoted to marketing, maybe in comparison to other categories. The MER, the ROAS, the way that consumer adoption, it sort of tells if your marketing is working or not, right?

53:06So you start off with a big idea. I always start off with very simple, big ideas, which is, you know, 50 % of the world, if you will, want coffee. 50 % of the world hate coffee and they want energy drinks. So it's a massive daily consumption that's never ending. And now that they've gone to zero sugar in low sugar products, the consumer, without sacrificing taste, the consumer feels really, really, the category is not going. It's growing unbelievably fast. So, the way I think of marketing is that you're either good at it or you're not. I mean, I think you need eyeballs to the marketing. I think the old days of just taking out a billboard or getting a NASCAR race team or whatever, I think is not necessarily as effective as winning the hearts and minds, getting in the experiential, like, for instance, at the U.S.

54:08Open. getting uh having we had all the coaches wearing we couldn't afford the players but i got all the coaches wearing lucky year all last us open so i i go to this i think of ways of marketing and secondary ways um you know we we went out to the to the golf event out in scottsdale that crazy one after them before the masters yeah yeah and we were out there you know with lucky stuff and lucky lucky readings and stuff. So, so the way I look at marketing is we're in a, we're in a world of, um, you know, TikTok is obviously our dominant, our, we didn't really think it was going to be that, but we're one of the top selling brands on TikTok where, if you will, primarily a TikTok marketing brand for digital.

54:53Um, and we're looking for always looking for secondary, um, and memorable opportunities to connect with the young generation as they shift preferences from legacy brands that may have captured their attention for a short period of time, and it's up for grabs for them. And what we want to do is tap into the belief that we're giving a cleaner beverage and that we're giving content in a way that entertains them as they like to be entertained. That makes sense. I'd imagine also just in today's world, you can do a lot more for less, I would think, just because of organic social, to be honest with you.

55:36Well, that's it right there. It starts off as these huge sort of, now we have these email lists that are just massive and we introduce a flavor and it just goes crazy. Son of a peach is our latest flavor and Rizberry. And we start off with higher dollar marketing items to tell the story. And now the shareable content's out there and it's just sort of, it's, it is a lower cost thing, but the prize is pretty big. And the, you know, the model is, is, can allow us as long as we're grabbing territory, grabbing share, and also grabbing repeat customers at such a high rate, then you need to pour gasoline on it.

56:24and you can always here's another thing our margin is crazy it's 54 percent which is high but we also have a 26 trade spend this year so people that know this business know that when you get down to a down to a scaled beverage you're probably down to a 17 18 trade I mean some soda companies that I want to mention they were 13 14 so we have wiggle room to get in the 60s and that's that's really exciting for investors. The poppy sale and the Ollipop fundraise, predominantly actually like the poppy sale. Does that, because there really hasn't been that much strategic kind of, it's been a bit of a lull per se when it comes to strategics.

57:07Did that give you some confidence? No, it did the opposite. For me, these are unbelievable companies in culture. and I don't think the prices were that great, right? I mean, if you look at body armor, I think they exited at six, seven, eight billion dollars, right? Something crazy like that. Vitamin water, three and a half billion. I think when you get too big, you get so big, you need to make sure you're going where you're, if you go into the public markets, you've got five years of double growth. You've got this great growth story ahead of you that's just not going to be disrupted, whether you've launched some items to be contribution margin digitally that are a little cheaper to ship because they're they're lower weight etc we have plans for all that can't tell too much but um it i think that they i think the best analogy i'm big on on analogies is that it's like sitting on a dance floor and you're waiting for everyone to come acquire you That's not leverage.

58:14Leverage is when you've inspired the world and you think you could become a world beater and you think your story has a lot of heart and soul to it. And if the price is right, you'll stay private, but you will go if it's a bad situation for investors. So I think that they've had the advantage. I think some of them have seen the big acquisition prices and perhaps the founders have gone and these companies don't sizzle the way they used to. But I'm not impressed with all the M &A activity at all. I think it's actually, I think it's good, but I think it makes me, it strengthens my idea that I should be building a dual path company here.

58:59Got it. So that might be, then you might be thinking, okay, if these are the prices that, you know, strategically willing to pay for what are, you know, generational companies, then it might make more sense to say independent or go kind of more of the IPO route, if that makes sense. 100%. Like, I'd love to say, God, I know what's going to be required. I know all this different stuff. But, you know, this is about the possibility of a tremendous outcome at Cape Farms. I called it the summer of love. Oatly and Beyond Meat had gone public in 2021 when Oatly went. It was just astronomical. I wasn't the CEO, but at the time we didn't have our audits done, so we couldn't go.

59:43So I think that if you really have the ability to go be a world beater, you're doing yourself justice by at least giving yourself that option. And I think there's a lot of hunger for the alcohol companies to need to take a position with a great company that's going to be a world beater. That's probably the next. The top three have taken their positions. They'll probably be hungry for more. But lucky, the symbol sounds pretty good. L-U-C-K. What's been harder, building a brand for hospitals and healthcare or building one for mass retail? Once you've broken down, which takes many more years, many more in the hospital, you've broken into the system.

1:00:31You kind of own your customer. They love you. And you almost don't become a plant-based company. You become a superior nutrition company that's loved by many and being disrupted there is highly unlikely. But to do that is one in a gazillion chance to break in the medical industry. So that is the hardest thing I've ever done in my life. Creating a formula shelf stable, you never have to eat again. I mean, I don't know how I'm alive. It was the hardest thing I've ever done. But doing what I'm doing, it takes a different type of thing. It takes such an ability, what I told you earlier, an intangible.

1:01:12An intangible, like who's going to be the Tom Brady, who are you handicapping? It must be very hard for venture capital firms. it's an incredible odyssey to be able to put together all the ingredients to become loved by consumers so all in all medical's harder good to know well richard richard thanks so much for your time it's been a an absolute blast yeah and hey if you ever want to get an update or come back and i've really had had a good time or more other topics that you wanted that we didn't get to i'm glad to be here and really it's a privilege for you to bring me on. Thank you. Would love that.

1:01:49Would love that. Would love to do an update. Would love to do an update. Richard, thanks again. And if you're ever in LA, I also do play tennis. I know that you were, you were also a pro. I'm not nearly as good as you, but, but, but we'd love to play. You know what? Don't offer because coffee and tennis, I'll do it, buddy. I'm going to look you up. Oh my God. Well, well, well, you're going to kill me, but, but, but I'd love it. I'd love it. Let's do it. Yeah. Say thanks to all your listeners. And there you have it. Richard, thanks again so much for coming on the podcast and spending time with me.

1:02:19Thank you to High Beam, our presenting sponsor. And if you're loving the show, please subscribe to the newsletter at theconsiderobc.com. You won't be sorry. Until next time.