Rinse and Reflect? Two Serial Entrepreneurs And The Lessons They've Learned

0:00Learning from past successes and failures, two entrepreneurs walk us through what they're doing differently running a food brand new. second time around.

0:20Hi, everyone. Welcome to the Nosh Podcast, where we go inside the business of natural, organic, sustainable, and healthy food. This is Lucas Southerd. The team is off this week, so instead, we've brought you a special episode revisiting a segment from Nosh Live in Santa Monica last December. This conversation featured Susie York, CEO of The Better Chocolate Company and founder of Love Good Fats, and Matt Clifford, CEO of Can Do and founder of Barnana. Nosh's Carol Ortenberg spoke with York and Clifford about how the lessons learned from running their first CPG businesses have shaped how they have approached their current food companies.

1:00Take a listen. In this session, we're going to talk about growth, success, and struggles with two successful and very honest entrepreneurs reflecting on their past roles and what they're doing differently the second time around. So please welcome Susie York, CEO and co-founder of The Better Chocolate Company and founder and board member of Love Good Fats, as well as Matt Clifford, CEO of Can Do and co-founder of Boranina.

1:39I stumbled because, you know, I called it, what would you do if you had a do-over? But it's like not that you need a do-over. You guys just apparently like to keep subjecting yourselves to being a BPG company. Yep. Or sick. So tell me about both of your companies that you have now and what your role was at your previous companies. Susie, how about we kick it off with you? At age 50, I read a book, Big Fat Surprise, said we were all misled for 40 years and fats were good, sugar is evil. I had a 20-year CPG career, PepsiCo, Procter & Gamble. So I said, I'm going to start a brand. I'll be an entrepreneur.

2:15And I was 50, dining room table, started a brand, Susie's Good Fats in Canada. I love Good Fats, rolled into the U.S. So within a year, we sold$100 million. I gross sales in 36 months. And the velocities were like numbers we had never seen before. So it was a pretty wild ride for my first startup. I remember it just came out of nowhere and then it was everywhere. So we got listed everywhere. And then we wound up going national in the U.S. So the Canada velocities, it was, you know, if you did by 10, we would have been a$250 million brand if you multiply it out per capita. So it was like really, really fast start.

2:57And then we went national at the two large banners, Walmart Kroger, just before COVID. So it certainly had the highest highs of my life. And then, oh my goodness, it got pretty hairy. So I did that for about five years. We had a couple of VC partners. And then we brought in an experienced CEO. So I stepped out of the day-to-day about a year ago. And I was looking at different things to do. And I kind of had found this bean to bar authentic small chocolate craft factory manufacturer in Ecuador. And he said, I have these formulas, five years making these formulas, 100 % single source, all that incredible stuff.

3:41You got to taste them. And they're formulated, infused with adaptogens, the second most popular word of the day. What was the first most popular word? Margin? Yeah. Yeah. Gross margin. And, uh, I couldn't resist, you know, I, like, I never thought five years later, age 55, I would take my life savings again and do it again. But my partner said like, you know, when you have like, I kind of think about the four Ps and it was just too good of an opportunity to pass, like the products, incredible opportunities, just the white space is perfect. We want to displace gummy bears. And so I'm, you know, and it's, and he has the product.

4:21I know how to build the brand. So I'm at it again. We're launching in a couple of months in the U.S. and in Canada this month. And how about you? Susie, you're amazing. We started Barnana in 2012, almost the opposite of your story. We're all young, naive, had no clue what we're doing. I was 23. And I probably wish I would have met Kristen, you know, before that. That would have been nice or Maybe you bumped into Bob earlier. But the idea for Barnana was one from really passion around reducing food waste. And I was talking to the spins folks here, and it was amazing to see that we have an upcycled certification now.

5:01And we were doing that 10 years ago. So we're a bit ahead of the curve. But that business premise was we were going to reduce food waste in bananas by making snacks out of bananas. And so we started that in 2012. And it's been a 10-year journey, and it's been amazing. and the brands continue to grow year over year and kind of cut our teeth in the industry through that, but really just, I think, more lucky than smart for this industry and so many great people helping along the way, both from a capital perspective and also just from advice. It's one of the great things I love about this industry is everybody's willing to help.

5:34And then just about two years ago, I met this amazing human, Adam Bremen, who's here in the room. If you guys, Adam, wave your hand. Where are you, baby? There he is.

5:47Yeah, I mean, I'm going to get choked up because like, you know, I think this industry is great. We all sell products. But really, like the beauty of what we do is helping people. Right. And that's why I love what we do. I can do and help my boy Adam. And, you know, we're building something bigger with this idea of, you know, I think there's meaning in products. Right. And then if you can associate that and we can deliver healthy nutrition, low carb, low sugar food and make somebody feel a way. I think that's really, really important. And this is what Adam has done for anybody that's on our team and anybody that meets him.

6:23And, you know, we're really building a platform for Adam on that.

6:30I mean, both of you really in your second set of companies have continued to focus on that mission and improving people's lives. be it your suppliers or the products themselves. When you were thinking about your next, you know, opportunity, did you ever just go like, I'm just going to go for something that's going to make a lot of money? Like what, where did mission, I mean, clearly these will both be successful, right? But you also really seem to keep that human aspect to it. Well, I think the money comes with the positioning and the product and the idea. And, you know, the whole two days is about, you know, the gross margin and EBITDA.

7:10So it's different times than the wild five years. I launched a new experience. So you have to have your eyes on the unit economics. I wouldn't be, you know, risking my life savings without a gross margin. That's quite comfortable to make sure that, you know, we can kind of get through this long winter and then kind of grow from there. But if you have, if you're meeting a unique need and your product delivers on your promise, you know, the money will come. Yeah, I think that's right. I mean, I think for people that know me, I can get really heady really quickly. But I feel like margin is 100 percent key to these businesses.

7:54Right. Obviously, you can't start there because you're not going to make a great tasting product. Right. So, like, I think there's balance between creating, solving a market need and creating a great tasting product. and then ensuring that you have the right product margin to scale. We don't really spend a lot of time thinking about who's going to buy us or how are we going to sell this business. I think we just spend time every day showing up at the store and winning customer by customer, customer by customer. I think if we do that right and stay laser-focused, the outcome will be the outcome.

8:20And I think the other thing we have to admit, everybody in this room, is that so much of what we do here is luck. And I think it's dangerous when you try to chalk luck up and you try to figure out which is luck, which is skill, And, you know, it's execution and then right time, right place and having humility when you're in each of those scenarios. This, you know, session came out of the fact that we were talking at Expo East, Matt and I, and he looked around at some of the booths of newer emerging entrepreneurs. And he's like, gosh, I wish I knew what I wish I didn't know what I knew because I would just do things differently because I didn't know that I shouldn't be doing them.

9:03So this time around, do you feel less pressure? Are you able to do things the way you want to do them instead of the way our industry tells you you need to do them? I think that we talked about this a bit, too, is like I think experience is great. But experience also, I think, can can jade your opinion of some things. Right. And that also because everything's changing so quickly. So I think you always have to have a beginner's mindset. it. But I think there's still structural things that just don't change. Right. And it's helpful, I think, to have that in the back pocket. I think the key one, at least for us, is I think ability to say no.

9:43You know, I think when you're at least when I was young and we raised capital, you had this desire to want to hit the revenue projection at all costs. And I didn't have the discipline or the ability to see around the corner that like, oh, maybe just hitting that next year's milestone, it's really a short-term win. Instead of thinking about like a five-year journey of like, what's the best, most sustainable way to build an amazing business? And I think experience gives you that a little bit. Can you give an example of something you said yes to that you, you know, in retrospect, wish you hadn't?

10:19I have a lot of those. You know, I mean, a lot of people in this room, I met like our first year at Expo West and we launched the brand and, you know, we're dancing around in banana suits and I had no, I didn't even know what a shipper was. Right. I had no clue what we were doing. We didn't even have like item codes. We said like, Unify was like, we told people we were in Unify. We weren't even in Unify. We literally did not know what we were doing. And this, this guy, I thought his name was Wegman when he introduced himself. I'm not kidding. And I didn't know what Wegman's was. And he was like, we love your product.

10:52I'm like, great. We'll ship it. He's like, great. You're set up my cat. We'll ship it. It's great. Like, he's like, perfect and he's like what's your code so i was like i'll email you right and so we sent we like committed to wegmans and i was like i was so excited we got this retailer on the east coast and didn't know how many doors it was but like that's the kind of stuff of like i love that naivete but yeah we shouldn't have launched in wegmans as our first account we were based in san diego that was a stupid move right but like we made it work suzy what's something you did that now you're like, oh, that was a, that was a mistake.

11:24Well, just on the experience side though, and we had a lot of fun at lunch because we were talking about, you know, I've worked at two massive companies, P &G and Frito-Lay PepsiCo. And, you know, I was there when some of the biggest bombs. You have to share the one we were discussing. Yeah. Like I, you know, I, I was at, at PepsiCo when P &G and PepsiCo partnered and they launched the, you know, the, the dietary, uh, the new, it was a fat that wasn't fat. Cause we all know fat was bad back then. And so you just, you know, kind of ate the chips and it, the fat went through you literally went through you.

12:05So it was like, like three years of work and multimillion dollar launch million dollars a plant. And within like three days it was dead. You know, it was just like crazy, right? So experience, like I, you know, so I had a lot, a lot of experience with the five multinationals and there's something to say for the playbook, right? Like you, you, you, you kind of want to know how to build brand and have experience. And then it's kind of the same with, with startups. Like I learned, I've been in natural for 10 years, but there's still a lot of the fundamentals we've spent like two days today learning that.

12:43And I think that's kind of really important, but there's magic that happens with the founders and there's magic with connecting the dots and kind of putting a couple of things together and seeing what others don't see. And then, you know, we're relentless, like, you know, you have a problem and you're going to work through it. So you kind of want to keep all of that, even though you have experience, you know, there's a bunch of things I would do differently. Like I, you know, I launched a brand that, you know, scale at insane numbers doing the wild, uh, the wild west, uh, five, you know, three to five years.

13:16So definitely slow things down. And, you know, we had people throwing money at us. And so we kind of focused on like revenue growth versus profit growth and stuff. So now I think we've spent two days talking about that, but we definitely learned that lesson too. One thing that we learned that you guys differ on is manufacturing and how this next time around, you're really pro self-manufacturing. You're a supporter of contract co-packing. So how did you kind of come to that decision? Susie, let's start with you. Your factory is not close to you. So I met this gentleman. He has a factory in Ecuador and we created a new company.

14:00So we have transfer pricing. We basically own, you know, the P &L has no markup for the co-man. So that allowed us to get a gross margin that gives us some breathing room, allows us to be profit positive year one. And, you know, like it's a much more reassuring dynamic and we can have a chocolate, a bean to bar chocolate at prices that, you know, has never been seen before. So for me, that was really important. Like today, you know, and I founded a founders group in Canada, founders helping founders. I think there's a few here. And the advice I give is, you know, like look at your gross margin and don't, you know, I had a founder last week, 11 % gross margin.

14:43And I was like, no, no, no. You know, like times are too tough for that. So for me, that was important to just make sure. And it's a means to an end. if you can get the same means to an end with a call man fantastic yeah i mean i think totally right it's it's all gross margin driven right and i think it depends on the product the category you know in my opinion is if you can get the gross margin where you want to be without having to make your own product you know like when you're running a manufacturing business you're running two businesses you have a big blue collar workforce that have shifts and line times and hours and of equipment and maintenance.

15:21And it's great when you can get those businesses because they really boost gross margin. But I think it's just a really, it's a challenge. These brands are really hard to build and that's a whole different set of challenges, you know, like to deal with on a day-to-day basis. And the capacity field. Yeah, capacity issues and scale. Look at, I mean, look at the laundry list is really long of the brands that have had their own manufacturing and have done extremely well. So I don't think that there's like a definite yes or no here. Probably another good panel of brands that have done it both ways that have exited.

15:55On the exit side, you also get benefit for the manufacturing too. So that's a plus. Your supply chain is a little easier this go around than the Barnana side. Oh my gosh. Can you tell us a little bit about that? Like on the manufacturing side?

16:10I was looking at this when we like five years in, you know, to Barnana, we had a consultant and come in and he mapped out our supply chain and he put it on a presentation for us. And literally it was like a thousand lines going across the U.S. And I was just like, what are we doing? Like the way he did it. Yeah, we were importing bananas from Ecuador via three different ports. And I mean, it was a really complex business that we built, naive in a way. But we've simplified it over time. This business is much simpler. We make bars and it's very simple. and cube out. It's a great way to ship it. It's just a easier, easier business.

16:50You've made your supply chain more complicated this go around. Yeah, a little bit. Like, I mean, I spent five years saying bars really ought to be from a co-man because everything we kind of heard, right? You can scale once you get to 10, 20, 30 million bars, like the world's your oyster in terms of the co-mans. So it is a little bit, I mean, it's for a lot of brands, you know, you're like, oh, that seems far away, But it really is, you know, a plant. And then instead of kind of a truck coming, driving up, it's a boat. And the rest is pretty similar. But we will, you know, as we scale, we've mapped out the three years and we have to kind of map out capacity and stuff.

17:30So there's quite a few options as we grow. But right now we're focused on filling the plant and have a bit of a couple of options once the plant's full. How are you guys approaching hiring and bringing in subject matter expertise this time? Because I know both of you were quite lean in your first companies. I mean, I still take the lean approach. I think, you know, if we can solve an issue with a process or a technology before people, I think we should do that. And then I think it leaves this room, when we hire people, let's hire the best people, right? And I think it helps preserve grade A talent, helps preserve culture.

18:11So I tend to probably hire really slow and the team probably doesn't like me for that because they're probably a little stretched. I'm always an advocate of trying to solve it with technology first. It's my opinion. And initially my first company were a million a month run rate and we had four people. So, you know, I'm kind of a founder who had like, I literally had my fingers in 30 different buckets, like the six buckets illegal between the two countries and trademarks and all the different things and stuff. So, but we kind of had, you know, function head of ops, function, I was marketing, function head of finance and just a second ops person.

18:49And then we outsource sales. Like we were able with four people to kind of have, you know, a$12 million company this time around. It's actually pretty interesting because, you know, we're, we're just kind of three or four employees. There's myself and my partner are in Toronto and the plants in Ecuador. Uh, we have a finance in, in Mexico that, uh, that we're looking at some help. We have an Ecuadorian social manager, uh, and, um, uh, and outsource, uh, like have someone also in Argentina. So we're, you know, we're truly remote, you know, everyone's on teams all day long and I fly back and forth cause it's a lot of fun, but it's truly remote so far.

19:31And we, you know, we mapped out scaling and we're, you know, there's a core in Ecuador, but the talent is, doesn't need to be there from ops and finance. How are you guys handling investment this time? And what'd you kind of learn from the first round? Yeah, I mean, we talked, we had a very different investment journey. So the Barnana journey, we, one, we didn't really know what we're doing because we were so young. So I don't think people really wanted to give us a lot of capital. It was more of a necessity in the beginning. so I call that milestone-based financing and we had to hit every milestone every year and you know we just kept raising money in different environment you know this the can-do journey I think very similar actually you know we've been fortunate to just have a really good network of people that have done it in the past and so it's very friends and family for this brand and also just trying to be as capital efficient as possible so we have not raised much capital to date.

20:31And, you know, I think just being stewards of that, it helps also, I think, stay focused on doing the best for the brand. You know, we've been fortunate to also get pretty good lines of credit with a lot of creditors in the space. And so that's been helpful as well. I think the fine balance between, you know, getting a lot of capital and just, you know, not being too lean, but not overextending. So first time around, it was crazy. We were doing a three minute, three million round and we were getting five and are doing, we wanted to do five and people are saying, no, you need to do 20. And it's like, like, okay, you know that, so times have changed a little bit.

21:07Um, right now we just wanted to make sure that we're capitalized enough to make sure we have a good runway. We're not going to have issues. We do have cashflow to manage, um, as we kind of buy, you know, six months ahead of the inventory. So we just did a raise and we oversubscribe, but just enough to, you know, just enough so that we kind of have a nice runway and we don't have to worry about like the cost of goods and the purchases. And then we'll see after that. I can't believe we're almost out of time already. Uh, when we talked on the phone, I think we talked for like 90 minutes. So, uh, uh, there was a lot of honest discussion, but I think to wrap things up, you know, we've talked a lot about how you've changed and how you've changed your business strategies.

21:49I want to flip it. How do you think the industry has changed around you from the first time to the second time? A lot. Yeah. 180. Listen, I think in many ways it was easier 10 years ago to scale a brand. I think the DTC noise wasn't as prevalent and Whole Foods operated regionally. And a lot of these retailers, I think, were a lot more receptive to small local regional launches. I think that industry has changed a lot. Obviously, you still have like the Airwans and the Bristol farms of the world, but like to do it at scale, I think it's different. And the big thing that changes the capital markets, the capital markets today are, are just in a different way, a different space.

22:28And I think the, the optimist in me sees that as probably a good thing. It's a good thing for like the longevity of, of, you know, kind of good products on shelf. And I think the entrepreneurs that are in this room and this pitch slam that are doing great things, like, I think it's a really exciting time right now and just, you got to be more disciplined and, uh, the underlying trend, the consumer is going to be there eating great food. That's not going away. Yeah. But the, the bar's definitely gone up in terms of, you know, like you, the expectation is, is that you have to have a better product.

23:01You have to be more capitalized and, you know, it's harder for just the small little startups that 10 years and five years ago, even. So the bar's higher, so do more homework and, and, and kind of work it harder, but the strong brands will rise above that. Awesome. Well, thank you guys so much. I really appreciate you taking the time to chat with me today. And those are good, wise words to end NOSH live on. So thank you so much. Great job, Carol. Thanks. Round of applause, everybody.

23:33That wraps up our episode of the NOSH podcast. Please rate us on your podcast platform of choice, subscribe, and continue to tune in next week to hear more about the world of natural food. And if you liked what you heard in this episode, check out the rest of our past coverage of NOSH Live events on nosh.com. Thanks for listening.