Being Hardheaded Has Its Benefits, Particularly During A Reboot

0:00What does the Chicago CPG scene look like? How are SPACs faring? And what does it take to get buy-in from investors on relaunching your company? Find out this week on the NOSH Podcast.

0:21Hi, everyone. I'm your host, Carol Ortenberg. On the NOSH Podcast, we go inside the business of natural, organic, sustainable, and healthy food. Today, the team discusses their own ag adventures, a recent trip to the Chicago Venture Summit, and the state of SPACs. Then in our featured interview, we hear from FitJoy President Norman Tolliver about the efforts involved in essentially relaunching and repositioning the company as a salty snack brand. Joining us today are reporter Lucas Southerd. G'day. And editor-in-chief Jeff Kleinman. Hi, Carol. Thrilled to be here. Anything of note you've been up to recently, Lucas?

1:01Other than a little trip to Chicago last week, which I think we're going to talk about, just enjoying the nice weather, really. We had a packed weekend of tulip festivals and antique truck shows and all kinds of stuff that small children tend to enjoy more than I do. Who doesn't love an antique truck show, Lucas? That's what I did with my dad growing up was we went to antique car shows. I mean, it wasn't terrible. It was honestly, it was mostly for like actual like truck, like antique truck guys. Like I thought it'd be like a lot more like kid friendly, like, you know, kids love trucks. But it was mostly like men in the demographic of like 40 to like 80 with.

1:48Trucks? Yeah, t-shirts with trucks on them walking around and taking pictures of big old like big rigs. You know, my four-year-old did get to sit in a big rig and like pull the horn and press a bunch of buttons. And so he enjoyed that part. So that's great. I mean, and I love the image of 80-year-olds walking around with truck T-shirts on because that's actually what a lot of three-year-olds do too. But I think the event you wanted, Lucas, was a touch a truck. Yes. And we have been to those. They have one yearly out here in Berkshires that is quite an extravaganza, and that is much more kid-friendly.

2:31I don't know what touch a truck is. I just know the documentary Hands on a Hard Body, where you have to keep your hand on a truck. And the person who keeps their hand on a truck the longest wins the truck. If you haven't seen the documentary, highly recommend. But I don't know what— Also a musical with the book by fish guitar player Trey Anastasio. Wow, we are really covering a lot of ground and none of it is related to Nosh stuff here. I love it. The highlight of the hands on a hard body documentary is when one of the participants reveals that his secret is having a Snickers bar during the break.

3:11And eventually he bonks out. I think he comes in second or third. But the line is all those Snickers bars really just weighed him down. on my end I did a lot of yard work this weekend it was a sad day in the communal garden uh we're allowed to pitch uh you know random folly to plant and someone suggested sesame this year I had no idea you could grow sesame in Massachusetts and it turns out really doesn't like being grown in Massachusetts uh so the whole sesame bed we came in it was just like keeled over it was not good tried giving it a pep talk. I don't know how well it's going to do. Can you describe what a folly is?

3:57I don't know if I understand what pitching a folly means necessarily. Well, so there's very serious business in January where we go through every crop planted in the garden. This is a five hour long Zoom meeting. And at the end of it, if there's something you want to suggest, you can suggest it. And this is not just like, I think we should do 10 tomatoes. It's let's decide exactly which varietals of the 10 tomatoes we're going to suggest. Did you pitch any GMO crops? No. Oh, golly, no, Jeff. That would not have gone over well with this crew. How dare you even suggest a GMO in the communal gardening group, Jeff?

4:43It's like you can get kicked out right away for even just thinking that. We do grow soybeans, but not GMO soybeans. I have given up on gardening because of the rabbits and rats and other creatures here in East Cambridge. I'm doing flowers. Very happy about that. Well, I did see one interesting thing in my email this weekend. A brand sent out a note to their entire email list saying they were up for a category review at Whole Foods and encourage their fans to go out, buy all the products in the stores where they already are sold to show demand, and then call Whole Foods and ask them to, you know, carry their products nationwide.

5:25I certainly, you know, maybe I've heard of this. I don't know if I've seen as public a plea here. Yeah, I'd be interested in hearing, you know, what the retail refs think of this. I mean, there's all kinds of sort of well-known sales boosting gamesmanship that brands do when they're trying to show business or repeat business. Who was that brand a while back that got in trouble for just buying? Hampton Creek, now just. Yeah, reams and reams of its stuff. But you'll have folks go in and buy their own products and then sample them to everyone, which I think is a good double hit, right? I worry that if that's your only source of interest, you're probably not doing yourself a service.

6:21But salespeople have all kinds of great ways to gin up sales. Of course, the issue is eventually, you know, it's going to hit your margins. You know, if you're just buying product that you've already made, it's not really a sustainable kind of thing. But, you know, if you're sort of underlining demand that might exist already, you know, I think it sort of shows the ability to support a product in market. What I'd worry about, though, is, you know, if this is your one kind of shot and you've set the expectation that your demand is so high, what happens when you get on shelf in all those stores?

7:05Can you maintain these levels? Or is the buyer going to say, hey, you know, we thought we were going to see this. That's not the case. Sorry, you know, you're disco. You know, it just sets you up in a very precarious position in my mind. Yeah. I mean, you don't want to create the impression that you can do something that you can't. But I think, look, movies take out ads in the newspaper to say, not just come see it, but how about making us a critical darling? You know, there's all kinds of ways of working the refs. As anyone who's been watching the NBA playoffs this year will certainly agree. I have to leave that to you and Lucas.

7:50I'll agree.

7:54I'll keep my opinions about what's going on in my beloved Golden State Warriors series to myself. But yeah, in any sport, it's always easy to blame the refs on anything and to thus also try to play to the refs as much as you can. And I'm sure that accounts for the CPG industry as well. Yeah, but you can't manipulate the score too much, right? Yeah, it's a little harder in the world of food and beverage. Lucas, I appreciate your restraint there. I felt like you were biting your tongue perhaps a little. Well, I just know that if you really want this podcast to go off the rails, then just get me talking about the current state of the playoffs because I've got a lot of hot takes amongst many NBA talking heads on ESPN.

8:45Maybe we'll do an extended cut with those hot takes. But in the meantime, I know you were in Chicago last week, as you alluded to, for the Chicago Venture Summit. Tell us a little bit more about that. Yeah, it was called the Chicago Venture Summit. It was technically like a two-day event, although there was really one main day of events. And then the day before it started, that was Thursday. And then the day before it started was a kind of partner event with Naturally Chicago, with the Naturally Network. And they did a couple panel talks and then a pitch slam where two allergen-focused brands took home the, I believe it was$200 ,000 each in advertising package.

9:31and the two brands global and every body eats three words were the two winners uh global does like early allergen introduction for babies and toddlers uh with like kind of these it's really kind of cool globally inspired food products like you see like pad thai and veggie tikka masala and they were like so basically babies that eat better than i do is that what you're saying yeah well it's an interesting concept because it's like introducing like spices but also textures like it's not just like puree the founder uh had a great pitch i'm i'm blanking on her name but i did get to talk to the founder of everybody eats after the show her name is trish thomas trish thomas excuse me and they they self-manufacture basically crackers that that kind of cater to consumers with dietary restrictions so not just like a gluten-free cracker, but they do gluten-free, nut-free, kosher, dairy-free, like literally everything.

10:31And they're totally allergen-free along their whole supply chain. It's a, not only is it kind of an interesting concept and pretty tasty product at that, they also are really involved with the BIPOC community in Chicago area and hire a lot of people who were formerly incarcerated and very involved in their kind of mission of giving back to the Chicago community. I actually have met the founder of Global down at Expo East and he ran into her there. And I told Erica this at the time is like, you know, it feels like something that might be more for the parents than for the kids in terms of introducing your your child to to pod thai or you know some other product that you want to go out to eat but i mean look there are infants all over eating you know their their regional cuisine all over i wonder if there are countries where you know hot dogs and hamburgers are are kind of designed for kids to to to introduce them to the american diet you know do we do we have sort of like child-friendly american cheese in say uh germany i wouldn't be surprised but i don't know if it It really holds the same cachet as having an infant eat, like a more wholesome, maybe historically based regional cuisine like Pad Thai or Tikka Masala.

12:17But you never know. Everybody loves a hot dog and hamburger. Certainly baby led weaning on one hand has gotten has seen a rising interest. I believe a couple of the meal kit D2C services have launched versions of their purees that are more focused at that group. When Once Upon a Farm acquired Raised Real, that sort of took them into that world a little bit. You know, I think touching on the allergen side gets a little tricky. There was a issue a few years back when the FDA sort of went to a lot of these brands that were introducing allergens to kids and said, whoa, slow down. Like you're kind of positioning this as a drug or something medical.

12:57And you really need to watch your wording because you don't have the scientific claims to back this up yet. So those were mostly powders. I don't know how this will play out with whole food options. Yeah. The other thing I can say is that anyone who's had a kid who eats so much of one thing that they must have a global palate has always been impressed at that child's ability to later reject that food. I mean, some of these sounded delicious, like tahini, feta, olive oil, medibole. I'd top an egg with that, some avocado toast. That sounds delightful. Yeah, I was looking. I was like, well, that sounds like something I would eat for dinner tonight, maybe.

13:41So, you know, kudos to her. She seemed like she knew some good areas, like you said, Jeff, that would both cater to kids, but maybe more importantly, the parents. Were there any other themes that you saw at the event, speaking on a more macro level? One of the big reasons it was being put on and something that was highlighted by many speakers was kind of bringing up the CPG community in the Midwest and Chicago at large or the Chicagoland area and kind of putting some real focus on the area's proximity to the agricultural industry, which I thought was very interesting. Also, as we know, a lot of manufacturing and retailer headquarters tend to be located in the general kind of Midwestern region.

14:29It is an interesting point that you bring up, Lucas, because when brands do start on the East or West Coast, you know, that often is where they have to focus their distribution at first. And being, you know, more towards the middle of the country, I'm sure it opens up a bunch more opportunities for you when you're thinking where you want to go first. Yeah. And, you know, something that was brought up by a couple of different people I talked to was the fact that the Midwest is kind of a good representation of the American consumer a little bit more so than you'll find on the coast. Yeah, I've always been really interested in companies that come out of Chicago or even Austin, you know, those places that you can sort of pick going left or right.

15:19But if you've mastered the middle of the country, it's easier to sort of flood toward one coast rather than having to just fly over most of the country to service clients on either coast. I always find Minneapolis fascinating. There's so many retailers and big companies there, but you often don't hear about as many small emerging brands coming out of there. Yeah, I think a lot of these sort of traditional big food or big retail environments create a bunch of spin-out venture funds or spin -out brands. You know, your busy coffees come out of a General Mills alum. The one that I'm interested in seeing develop as an ecosystem actually is Bentonville.

16:15Oh, yeah. There's so many smart salespeople, smart executives kind of who've worked for the company store in association with the company store for so long that they're trying to start to do some of their own things. And can they develop a thriving ecosystem there as well? Lucas, since this was a venture conference, you know, did you feel like there was a lot of stress regarding funding right now and the economic climate? Because we keep hearing about how hard it's going to be to raise capital, at least in the near term. Yeah, I mean, it came up in a variety of talks as well as conversations I had with some investors as well as some brands.

17:05There's a general concern as we've been reporting on and as we've been hearing from almost everyone we talked to. The capital markets are continuing to tighten. And that means, at least from the investor perspective, a lot of the investors I talked to are saying, you know, we are making new investments in new brands. But for the most part, we're kind of just re-upping on existing portfolio brands. Well, certainly, Lucas, we'll be keeping an eye on that. Sounds like, you know, Chicago brands are not immune to the pressures we're seeing across the industry. Speaking of capital sources, though, last week was interesting in that we saw one company, Above Foods, Transact.

17:52They merged with a blank check company and they're getting ready to go public. At the same time, venture firm VMG called off its own SPAC, stating that they couldn't find a target to acquire. We have this two-year period where, or this two-year kind of timeline on SPACs and a lot of people are, where you had to either invest or give back the capital to your investors. And a lot of brands just are, or a lot of SPACs just never, never really found the kind of partner that they wanted to work with, you know, with the IPO market just tanking the SPACs tanked with them. We saw a few transactions. I believe that Xevia was a SPAC.

18:47Strive was a SPAC. It's been, I think, less robust than a lot of people thought it would be. There are a lot of investment vehicles that just aren't really that active right now. And it remains to be seen whether conferences like the one that Lucas just attended is going to create another environment in which investment starts to fire back up. But right now it's, you know, sort of slow and we're still looking for some interesting founder stories, you know, on their own investment practices or their own fundraising practices to move forward. Well, one of those stories is our featured interview today.

19:43I sat down with FitJoy president, Norman Tolliver, to hear how he's had to essentially relaunch salty snack brand FitJoy as almost a new company as it went from being a bar brand into pretzels. We discussed how he got buyers and his investors on board with the change. It's a timely chat since during this podcast, Norman announced the company's latest funding round of$3.5 million. It's first since making this jump. So let's get to that. Hi, Norman. Thanks so much for joining me today. Hey, Carol. Good to talk to you. I know you have some exciting news we're going to announce on the podcast today, and we'll get to that for sure.

20:23But I want to set the stage a bit so people understand FitJoy's history. When did the company start and when it began, what was the elevator pitch for what FitJoy was? I started working in CPG back in late 2011, early 2012 with Nutribolt, who is the parent company of Cellucor and Saivation. Cellucor is the brand that's C4, which is number one selling pre-workout in the world. Now the fastest growing beverage. which salvation is kind of a post-workout branched chain amino acid. The idea came about for FitJoy back in 2015, officially launched it in 2016, and it was actually launched underneath the Nutribolt umbrella.

21:08So it fit in, at least initially, the functional lifestyle food brand underneath that umbrella and immediately launched into all GNCs, all vitamin shops. And really at that time, in-store, it was Quest Bar. It was one bar and it was us. And we were going one for one with them. And so when we started kind of looking at the portfolio of products that we had underneath that umbrella, everything seemed to fit really well for the future, what we wanted to do there. And then we looked at FitJoy, where it was from a margin perspective, from an attention perspective kind of internally, and then from a lifestyle brand.

21:46And so we came up with a plan to be able to bifurcate FitJoy actually out from underneath that umbrella. And that plan started to come together in 2017. March of 2018, we officially bifurcate. April of 2018, we get the notice from both GNC and Vitaminshop within a week of each other that they're discontinuing us nationally everywhere. So an absolute internal kind of freak out. we were trying to figure out what we wanted to do in the future, how we were going to sustain the business. But in the meantime, to keep the lights on, we were going, because of the relationships that I had in the past, to be able to launch everywhere on the grocery side, really calling in a lot of favors and asking me to be able to get some distribution.

22:33And I can tell you this. So going into all of the buyer meetings that I was having and putting a deck in front of them and having them open it and see protein bars and having them roll their eyes at it. And I have to imagine what it's like selling like an IPA or a cold brew. Everything was the writing on the wall, not only the GNC and vitamin shop, but also, you know, from a data perspective, from a category perspective, really from a buyer perspective, what we were doing with protein bars is not a sustainable future for us. Okay. Well, I think you teed this up, but, you know, if you go to the FitJoy website now, there's no protein bars on there.

23:09So what happened? Yeah. So this is the natural progression from protein bars into pretzels. I guess they both start with P, you know, so you kept some constant. Yes. They're both packaged goods. That's about as aligned as we can get there. So we, at that moment, you know, we had the funding in place. You know, we were luckily had some distribution with the protein bars at that time. We knew it wasn't as sustainable future. But at that time, we internally said, okay, let's sit down. If this is going to work, how are you going to make this work? So we immediately started kind of looking at all the consumer trends that were out there.

23:46We honed in on grain-free. We saw what was happening. We figured at that time, we knew it was kind of the tip of the iceberg of where we thought things were going with grain-free. And when we looked at pretzels, there really was no innovation at all at that time. You narrowed in on Salty Snacks. What did you learn from bars that you were like, I don't want to be in a category like this again? Yeah, bars was it was tough. And for a number of different regions, the commodity alone from a margin perspective just doesn't work from a, you know, sustainable kind of business model, at least the way we were looking at it.

24:22Bars is also one of those that at the time, I feel like every store had this like 12 foot set. And it's just a sea of bars. And it was really tough to be able to play in it. And the bar that we had was literally just, you know, it was kind of like a one bar or a quest bar, it was the gluten free, but it was, you know, your 20 gram whey protein bar, it was a 220 calories, tasted absolutely amazing. But so did the other 25 plus bar brands that were sitting there on shelf. And in that category, it felt like every six months, there was this new viral product that would come to life and it would really just kind of take over the entire category.

25:01So from a margin perspective, from a, you know, getting lost in the sea of product perspective, you know, it just, it wasn't where we wanted to be. Well, if you decided to move out of bars in 2018 and you, you know, came up with this idea of pretzels, that change didn't seem to happen overnight though. No, no, no, no, it didn't. And we thought it would happen a lot sooner than it did. We were as naive as could be going into this. It was early 2019 when we did our first actual sales sample run. And it was a two-day run. And I'm not joking or exaggerating at all here. And it went, we did five runs the first day.

25:41They were all horrible. And horrible, I mean, they came out like mushy, just stuck to the belt, or they came out and they were rock solid. The second day, halfway through it, everything was kind of happening the exact same. And so we are sitting there just going, oh, my God, we're not going to be able to do this. Finally, by the end of the second day, which was the last opportunity we had to run this, get a product that came across and it worked. It was Expo West of 2019. I was under the table kind of telling some people about the things that we were doing. and we officially launched the pretzels in November of 2019.

26:17I say officially, it's literally launched into 100 locations in 2019. I remember hearing about this and I was like, wait, the bar brand has pretzels now? And I went to your team, you're like, don't talk about this yet. It's not real. I understand you see a bag. It's not a real bag. It's not a real thing yet. Yeah, we were trying to figure out how we're going to communicate out to the public with it, to our consumers with it. At this time, we obviously are still selling protein bars. Luckily, we were riding the coattails pretty hard of Siete, of getting into Salty Snack with the grain-free trend that they really started kind of for us.

26:56And our bet was right. I went into so many different meetings with the Salty Snack buyers. And I would sit there and meet with them. And they'd have a stack of like six different brands that are all trying to do grain-free tortilla chips. And we were the only ones on the other side doing grain-free pretzels. I remember when we talked about you guys launching pretzels, you were like, oh, we're having these conversations with buyers now. It's a delicate subject. How did you broach those topics? We had a really strong strategy coming out of the gate. We were extremely data-driven on every decision that we were making.

27:33And we made that point and made it really clear on all of our decks and everything we're putting in front of every single buyer of this is us. And this is why you should choose us. And this is why this is going to work on show. Speaking of delicate conversations, how did you get your investors on board with this shift as well? Yeah, I mean, again, it was clear as day that the protein bars weren't going to work. You know, there was no real maturity or life after kind of what happened with GNC and Vitamin Shop. And then, you know, once we started getting the reaction we were getting not only from buyers, but where we were on shelf, it honestly wasn't that hard of a conversation, as crazy as it sounds.

28:14We came in, again, with all this data in hand, this opportunity in hand, this innovation gap that nobody has really touched and said, look, if this is going to work, this is how we see it moving forward. All of our investors got totally behind us. They were super excited about it. And just like us, they wanted to move as quickly as we possibly could to transition. Well, once you got into retail and COVID hits, what happened? What did that look like? Yeah. So again, we launched into retail in Q1 of 2020. The pandemic officially hits in Q1 of 2020. We had this huge plan. Nobody had commercialized a grain-free pretzel.

29:02So when you go in there, nobody knows that it just tastes like a pretzel. So we had to figure out how we were going to drive trial. And we had this, we had this huge plan behind, you know, not only sampling, but some off-shelf opportunities and working with these merchandising groups and getting the product into people's hands. And instead people just came in and cleared the shelves. Instead. Yeah. Somehow, somehow it was absolutely crazy. So, you know, launching really kind of matured into a couple thousand locations by the end of March. But then April and May, Somehow a grain-free pretzel is not an essential good.