Selling 10 Million Soup Dumplings and Counting: The Story of MìLà with Caleb Wang

0:00Part of our North Star is to try to mature the Chinese food ecosystem, try to tell the story that Chinese food isn't necessarily just, you know, General's Toast Chicken or what people know as his American Chinese food. And so one, we're just looking for a great partner to help tell that story. And Simu is probably one of the greatest partners who could find because he kind of has the same lived experience, also kind of third culture, and can really be a good partner. So that was kind of the starting point. And then to actually execute on it. I think we sent, we found a friend of a friend of a friend who knew his agent or who knew him.

0:37And we sent a package to him. And I think he just told a story on Jimmy Kimmel Live, but he didn't actually receive the package. His parents received the package. I think they had taken some edibles and were very hungry. So they demolished the package and then told Simu that they were delicious and you should invest. So he came on as an angel investor at first. then over a year we got to know him better and we're like oh that he could um play a much bigger role in helping us um uh improve the narrative of Chinese food um and uh and that was the start of the real shift welcome to the consumer vc i'm your host mike gelb as we dive into the world of venture capital and consumer innovation if you're enjoying this show on whatever platform you're listening to it on whether that's youtube spotify apple or something else click subscribe to be kept in the loop of all consumer news, I also have a newsletter.

1:30You can subscribe at theconsumervc.com for episode updates and weekly deal recaps directly to your inbox. Please note, our content is for informational and entertainment purposes only and is not investment advice. Our guest today is Caleb Wang, who is the CEO and co-founder of Mila. Mila is authentic soup dumplings, Chinese noodles, and chef-crafted sauces made fresh and shipped. We talked about how he and his wife, Jen, first started a restaurant and how that expanded to an e-commerce business and how they were able to raise capital, why they ended up raising, and much, much, much more. Without further ado, here's Caleb.

2:15Caleb, thank you so much for joining me today. How are you? Doing well, doing well. Thanks, Mike, for having us. It's going to be fun. Yeah, this is going to be great. Really excited to talk about your super interesting company, Mila. I want to start from the very beginning, I guess, as regards to soup dumplings. Can you give us a little bit about where the kind of role of soup dumplings is kind of in the Chinese culture? And maybe what the equivalent food would be on the maybe American side or maybe like a different type of cuisine on your end. even in Chinese culture it's a relatively it's a nostalgic food it's pretty special because it's very intricate and I would say the comp in the kind of any other cuisine is something that you really can't make at home that's you appreciate the craft of and so I think that's very different across different cuisines but it's definitely like a special dish that is accessible in China but it's just very special and to, and, um, and people appreciate the craft of, is it, is it, is it typically a food that you found maybe like, like on the, like, um, that's, um, like on the street or like, or like more like kind of more on the inexpensive side?

3:30Is it, is a bit more like upmarket? What's kind of like the, the kind of role of the soup dumpling in that? Yeah, it's kind of everywhere. And it's actually funny. One of my favorite places to eat soup dumplings in shanghai where it got started is in the middle of like a really big kind of historic shanghai park and there's a restaurant in like an island of it it's called it would translate to like um like seven crooked bridges or something like that uh and it's really interesting because the restaurant has three different tiers all selling the exact same soup dumpling the bottom tier is very cheap um but the wait is like three hours long uh and then and then the second tier is like a little bit more accessible it's like a standard restaurant in the third tier, no weight, very expensive, but the exact same food, right?

4:14And so all the same, it's purely like a weight and like ambience time. So I think that speaks to how kind of broad the appeal is. So you could kind of find it anywhere and it's very common in China, but it's also this premium thing as well. Yeah, that's really interesting. I'm a big suit opening fan. I really do love like the texture of it and just it's great. Can't even imagine trying to make one, to be honest with you. It just sounds so freaking hard. And I've seen people do it and everything, but it's unbelievably challenging. So I guess you come from a finance background. Why did you and your wife, Jen, why did you both decide that you wanted to become soup dumpling entrepreneurs?

4:55Yeah, I think it was not a planned thing. It was something that we kind of stumbled upon. We had started a restaurant as a fun side thing. And then during COVID, we had saw really good demand online for soup dumplings shipped. And so we decided to start this new company that focused on DTC shipping for frozen soup dumplings. I would say personally, my dad had opened up a couple of Mrs. Field France purchases when I was young. So I worked in the restaurant space when I was growing up and as a teenager. And so that was like one piece that drew me to it. The second piece is I'd grown up in Shanghai eating like a pan fried version of the soup dumpling, which is my favorite food.

5:39And so it kind of was a coalescence of had some really good skill sets that I learned in finance. But this is like a really good passion project that is very culturally relevant. And there was something super interesting about working and maturing the Chinese food industry in America. And so both both me and Jen got drawn into it very serendipitously. and it's been a great journey over the past couple of years. So it first started off as a restaurant and you had it going as a restaurant and then COVID hits. And during COVID, then you decided to transition or realize that maybe there's a market here on the DDC side or selling online.

6:24Can you talk a little bit about that kind of transition that you saw? And also, also to like going from a restaurant, um, a, you know, restaurant model to a, um, to an actual like CPG model, um, um, when it comes to your dumplings. Yeah, totally. So, um, for us, it was a little bit different, um, uh, had started the restaurant as one entity and that was a fun kind of, uh, passion project that we had done with a couple of friends. And then during COVID, what we saw is just so much demand on the e-commerce side. So we really decided to lean in, create a new entity and go after the DTC market. And that grew for two to three years.

7:08And what we found really interesting was there was just not that much good authentic Chinese food that people could just get delivered. There's like sit down good dim sum restaurants in select cities, but it's just not accessible across all of the U.S. And so that's what the DTC market allows to unlock, which is just shipping really good frozen soup dumplings to anywhere else. Obviously, as we think about a broader market, CPG allows us to make it even more accessible. So there's no shipping costs. People don't have to buy$100 worth of dumplings. And so that's kind of the next leg that we're growing into starting this year.

7:45Was that challenging, though, on the CPG side? Because I'd imagine you're dealing with then frozen product on the soup dumpling side. Talk to me a little bit about if there were supply chain challenges when it came to actually... Because it sounds to me like it sounds pretty complex because you're dealing with frozen food products. You're then shipping the frozen food products in single parcels rather than if you're doing wholesale and you actually have pallets of it. So you're actually selling a truckload, which actually then might offset you on the frozen side. If you could speak to a little bit on the supply chain side too, that'd be really helpful.

8:22Yeah, totally. So you're right. It's super complex. And we have a very temperature sensitive product. Think of it as ice cream. So if it's just dips below a certain temperature for an hour, then kind of goes bad. So we really overinvested in a couple of things, especially on the packaging and logistics side to make sure everyone gets their soup dumplings in good shape. So one of the first things we did was we invested in a lot of different warehouses because what happened during COVID is the reliability of the carriers like UPS and FedEx got worse because just the demand for shipping was so strong.

8:58So they weren't able to deliver reliably to the customers as reliable as in years past. And so our solve was just to get more warehouses so you could reach the same areas with more coverage. So we have five warehouses that ship products, whereas before two warehouses could cover the entire U.S. So that's the first thing. And the second thing on the packaging side, we really just overinvested in all the stuff that would keep the products present, whether it's specialized packaging or dry ice or kind of just instructions. And then the third thing is just data. So just collecting data on every single package, if it's delayed proactively reaching out to the customers, if we see different melt rates in certain regions, switching carriers or over-investing in dryness in that area.

9:50So a lot of different things that we did to kind of set this up. And did you, did you on the supply chain side, were you, were you like more so vertically integrated in that you were producing all the dumplings in your, in your restaurant? Or, or did you also kind of have like outside help in terms of like a third party using that in terms of production? Yeah. So we actually have our own production facility. It's not made out of the restaurant. It was for, you know, in the very early days. Yes. And then, so, so that's all vertically integrated. And then we also ship like half of the warehouses that we use to ship product.

10:26That is also kind of our internal employees. How also did you think about maybe financing the DDC side? And maybe what was like the first moment that you felt like, oh, wow, this is actually working? Was there like a revenue threshold or was there something specific? Maybe it was the community that you were building got to like a certain scale that you thought, oh, wow, like there's a lot of organic kind of customers here growing. What were kind of like the metrics that you were kind of tracking that you then thought you and Jen were like, oh my gosh, this is like a real business? Yeah, totally.

11:00So the initial round, we financed ourselves. And then luckily for us, the way economics work, there's kind of three buckets. There's the product costs, there's the shipping costs, and then there's the marketing costs. And I guess there's four, there's an overhead. Luckily for us, when we first started during COVID, marketing costs were so close to zero. And so we actually were able to bootstrap relatively efficiently. And we were very inefficient on the product costs and the logistics costs. But because marketing costs were zero, and there's so much inbound demand during COVID, and the repeat rates were so good, it was relatively affordable to scale.

11:35And then when we looked at kind of the aha moment was really when it was just the amount of organic demand from places outside of Seattle. That was really interesting for us. The repeat rates were really interesting for us. And then the third piece was the efficiency of Facebook and other paid channels were really interesting to us. You know, we were spending a very little amount, but we just could see that we could easily scale and efficiencies would still be there. And then the last point was, okay, those metrics are all good during the pandemic, but what happens after the economy reopens? So we really waited until that place and we saw metrics were still good.

12:16And that, that realized that helped us realize this is a bigger thing. And then we took on some, some outside capital. How were your, in the beginning, like how are your marketing costs kind of close to zero or, or, or were zero? And also how do you, how are you able to kind of generate that, that lots of inbound? Yeah, I think it was, it was just a product that's a step function change better than what's on the market. because prior to this, you just couldn't get soup dumplings at home. Like if you can go to a restaurant, but that's$2 a dumpling, you could get delivery, but then the soup dumplings aren't, the soup is congealed.

12:54So it's relatively unique to have a CPG product that's just so much better than the market because there's just less innovation potential in a lot of different categories. So that ultimately drove word of mouth. And then during the pandemic, because people couldn't go to restaurants, like it just is a product that resonated super well. So very high click-through rates, very high conversion rates on Facebook. So CACs were not zero, but it's really, really close to zero. And so that helped fund the business. Cool. That's awesome. No, that's great that CACs were close to zero, especially during these past couple of years when it comes to marketing costs and everything that's been going on with Facebook and Apple and the update 14.5 and everything.

13:50So that's awesome that you're able to get close to zero. How also, did you ever feel like you needed to, do you think that soup dumplings were pretty, as a product, how did you feel about Do you feel like that it needed like expansion when it comes to your product in terms of who, who, what types of customers would actually appreciate and actually would like this, this product, although they might not have heard about it before or, or tried it? Yeah, that was the kind of a learning process for us. Certainly we didn't plan for soup dumplings to be a large, you know, skew or a large market, but I think the answer is enough people have traveled to China or traveled to the East Coast or been to some dump dump some house that they really like this product.

14:37And it resonates with enough of the US. And so we often look at our customer data and kind of look at where our customers are versus the census. And it looks very, very similar. And so our conclusion is just enough people have tried it and there's enough love for soup dumplings. So it's pretty broad appeal, which was a positive surprise to us. That's great. Great. And what, at what point did you, I know that you said that from the beginning, you, you financed yourself until maybe you couldn't or made sense to bring an outside capital. What was, what was your approach when it came to actually raising that capital?

15:10And, and, and, and in terms of your first round, at what point were you in your business scale wise? Yeah. So the first round was inbound and we had gotten a couple inbounds already. And that was the point where I think for our business, like, OK, reopening has happened. Unieconomics still looks strong. We believe that we found product market fit and there is a big need for something like this. and is really exciting for us to achieve our vision of, you know, making good Chinese food accessible faster. And that was the decision point for raising the round. So initially it was inbound and we were a call at three and a half million in revenue at that point.

15:50I heard that on the investment side, inbound was helpful. You saw that there was a big opportunity here that you imagined that you can actually build a much larger, a larger company. and that you're still, your metrics, even as things were opening up as restaurants or what have you were actually opening up, that your metrics were still pretty strong. So it felt pretty like a robust business that you're actually building. Yeah, so the decision point for us was we had passed the reopening and the metrics were still good. And the metrics were good for frozen DTC shipping. And so that gave us conviction that when we got into the CPG channels, which are like theoretically easier from a margin perspective than DTC shipping, it would also do well.

16:38And so then that capital, there's a lot of inbound interest at that point. And we're lucky enough to find a good partner for our seed round. Did you decide to go into retail or kind of remain? I know that obviously in retail, like the margins aren't as great, but at the same time, you're able to, from a volume perspective, typically, go far and beyond. And of course, I think like 80 % of grocery happens within retail and online. What has been your approach when it comes to actually going omnichannel and into grocery? Yeah, totally. So yeah, our perspective is just meeting the consumer where it is.

17:15And our North Star is really good Chinese food as accessible as possible. So as part of that, obviously, omnichannel is very important. Retail is very important. And so we stay DTC exclusively until 2022. And then during 2023, effectively this year, we started getting into retail with the test and learn approach and just kind of seeing where it resonates, where it doesn't. And next year will be kind of the big scale year into retail. Got it. And what, and what on the innovation side of the product, what was, what do you think, why do you think that there wasn't that much innovation when it came to soup dumplings, making soup dumplings, you know, taste delicious that were traditionally frozen down in the frozen section of a grocery store, for example, versus what you all did?

18:00That's a very good question. We often do a retro on for our next product, how do we make it as successful as soup dumplings? Not obvious, right? I think the first thing I would say is what would be a standard approach for new product innovation? You probably look at spins data. You probably look at what sells in grocery today, and that's probably the category. You probably want to make a product that competes in that category. Well, right now, there is no soup dumpling velocity in spins. Like it just like not a thing in mula or natural. And so it's probably just doesn't even register to like create soup dumplings as a category.

18:34That's like the first piece, right? It's just not that large of a market from the outside perspective. The second piece is to do it right and to make the flavor profile very authentic. I do think you need a vertically integrated team, like on the R &D side, who really understands the ingredients because the ingredients are so nuanced. To make no compromises on the integrity of the product, that's a pretty hard thing to do. And then also to have a production team in-house who will follow the rigorous steps and the quality steps for making a good soup dumpling because a lot of the steps are very manual.

19:08It's like if there's a hole in a dumpling, it's going to leak and that ruins the entire process. Whereas for regular potstickers or dumplings, that is not really a consideration. So there's a lot of care that goes into making a soup dumpling. And so it's just really complex to set that up. It's unclear if the size of the prize is big, if you just look at current revenue data. And so that's probably why no one has tried to do it yet. Got it. Talk to me a little bit about, as well, as you think about Mila's brand positioning, as well as why did you rebrand from XCJ to Mila in the first place? Yeah, totally.

19:50So XCJ was, it stands for Street Food Avenue. And initially the restaurant actually sells Sinjin Bao, which is a pan fried soup dumpling that you see on the street. And that was kind of the scope of the restaurant idea. And that name made sense. But as we go into, as we just grow Mila bigger, XCJ no longer fit, right? It's first off soup dumplings, which is our hero product, is not really a street food. It kind of goes back to the question you were asking earlier. Separately, the goal is to get a lot more broad. So we already have soup dumplings, noodles, sauces, we have ice cream. And so mila was a really interesting name for us because in Chinese, it means sweet and spicy.

20:30And it really talks about how we can do, we're participating in all of Chinese food, all the way from sweet to spicy. And also it's a more memorable and easy to remember name for folks. And I think all those things kind of fit together. When do you think about category expansion, since you are in different categories? How do you think about the rollout of that? Because of course, getting new categories requires more complexity, as well as it's already quite a complex business with being frozen or have to be at a certain temperature from the shipping side or else the product goes bad. How do you think about, obviously, I mean, it seemed like for the name, the name you want to be kind of in multiple areas, sweet and savory.

21:19How do you think about what product expansion in general? Yeah. So for us, it's all about where we can add the most value for customers. And I think the freezer aisle, there's a lot of room for expansion and quality products. And so for the short to medium term, we'll focus on the frozen aisle and just, um, and, and, and stay there. Uh, I think, you know, there's a lot of appetizers, a lot of meals that we can do. Um, and, uh, the, the next step is certainly, you know, scaling soup dumplings. Can you talk to me a little bit about the role of, of, uh, Simu, uh, Liu, um, and, and how you were able to kind of guess, uh, start that relationship, built that relationship, and as well as how we became part of the company?

22:06Yeah, totally. So I think part of us, part of our North Star is to try to mature the Chinese food ecosystem, try to tell the story that Chinese food isn't necessarily just General Toast Chicken or what people know as American Chinese food. And so one, we're just looking for a great partner to help tell that story. And Simu is probably one of the greatest partners who could find because he kind of has the same lived experience, also kind of third culture and can really be a good partner. So that was kind of the starting point. And then to actually execute on it, I think we sent, we found a friend of a friend of a friend who knew his agent or who knew him.

22:47And we sent a package to him. And I think he just told a story on Jimmy Kimmel Live, but he didn't actually receive the package. His parents received the package. I think they had taken some edibles and were very hungry. so um so they demolished the package and then told simu that they were delicious and you should invest so so he came on as an angel investor at first then over a year we got to know him better and we're like oh that he could um play a much bigger role in helping us um uh improve the narrative of chinese food um and uh and that was the start of the relationship that's awesome um how also do you think about um because most i believe like most chinese products um um most chinese food products it's typically in the restaurant um that they make the purchase and of course um it's not so much in the grocery store how are you um which i know is one of like the big themes in terms of um um what have also a big market that you're that that you're tackling um but how do you think about also kind of changing people's perception when it comes to chinese food and and getting them to actually shop um for you know products like like soup dumplings and like sauces and other things in store versus, you know, only having only thinking about it in like a restaurant perspective?

24:04Totally. A hundred percent. It's a great question. I think there's two elements to it. The first element is I think a lot of ethnic foods, there is a price ceiling associated with it. So like, Hey, Chinese food in particular is like Chinese food is cheap. And then because it's cheap, the restaurant or the food manufacturer can't actually invest in quality ingredients to make it better. And then it's kind of a self fulfilling prophecy where it's like a good cheap food, but it's like not super healthy or like, you know, there's no high ceiling for that food. So one of the things we're looking to do is change that.

24:37And the Simu partnership helps in just telling the narrative and the craft that goes into Chinese food that allows us to invest in premium ingredients to make it kind of comparable to other cuisines. So that's like the first piece. The second piece, and it's our observation that the restaurant market for Chinese food is very large. I think according to Yelp, according to OpenTable, it's called 8 % to 10 % of ethnic foods purchased. But in the freezer aisle, it's like 2%. And I think the reason is because the products in the freezer aisle, the quality bar is just relatively low, and it doesn't help you replicate the Chinese food experience at a restaurant.

25:15And so if you're actually able to make restaurant quality Chinese food, that 2 % should become more parity with the 8%. And that's just share creation and incremental velocity to the retailer. I had a previous guest who, Gail Becker, who was the founder of Kali Power. And she sold her first product was Kali Power pizzas. And she was saying how getting in a freezer is like the most competitive spot in a grocery store. Because, of course, there's only limited freezer space. There's only a limited amount they can do. I mean, obviously, there's obviously limited shelf space in general, but freezer is not.

25:57I know that you have like a, as you mentioned, like a big rollout kind of coming in here on like 2024, but how are we able to kind of get, you know, your brand within Freezer, which is a very, very kind of like competitive spot within a grocery store, especially in a category that, you know, is very much overlooked, Chinese food, but to the retailers, are they also seeing that it's overlooked? Or what are those like conversations have gone? Yeah, totally. So I think the first thing I'll mention is we have a great team on the retail side to manage those conversations and tell the story. So without them, it would be very hard to execute like this.

26:33And in the backdrop, we really, here's kind of the buyer's perspective. Asian food is the fastest growing ethnic channel within food. The freezer aisle is growing very quickly and this huge wholesale change across all types of food to, it's just kind of a better restaurant quality food in the freezer. that's a huge theme and Asian food is like a quickly growing thing, right? So we're playing in a good space right now. And then you layer on top of that, like who are the emerging brands that you want to back? Well, we have a really good social following with a really large D2C business. So we're bringing incremental customers to folks.

27:09And that's a huge advantage. Then they taste the product and they're like, oh, like it's really good. And then now that we are actually in retailers, our velocity story is very strong. We're performing quite well on spins and in club and in the top 10%, 20 % of SKUs. And so now that we have that data, it's even easier to have these retail conversations. Would you go on Amazon? It's tough to go on Amazon because frozen items don't typically have a home in Amazon. People aren't used to buying frozen products in Amazon. Amazon doesn't have frozen Amazon Prime. And so it's just like not a thing. So we've looked in it.

27:53We think the revenue opportunity is just not that big and the complexity is relatively high. So if we had a shelf stable product, I think we would go on Amazon, but it doesn't really make a ton of sense for a frozen product, at least today. That's really interesting. It makes sense. And I think that also one of the benefits from a customer perspective of why you use Amazon, Of course, obviously the search bar in Amazon is huge in terms of having that kind of customer intent that people want your products. But from a brand perspective, I'd imagine if you can't capitalize on Amazon FBA and the two-day shipping opportunity, then from a customer perspective, they might not even shop for you, for example.