#368 - The Bootstrapper's 9-Figure CPG Playbook: How Azuna Went From DTC to Amazon to Retail With 300% YoY Growth & 2x LTV

0:05Scott Dancy:This is D2C Pod, where the worlds of creators, consumer goods and brands collide. We get behind the wheel to show you how today's biggest products and ideas are made, launched and scaled. If it's shaping the future of commerce and culture, you'll hear it here first. Catch new episodes weekly on Spotify, Apple Podcasts or D2CPod.com. Be sure to check out our newsletter for weekly breakdowns and recaps linked in the show notes. So before we kick off today's recording, I've got one more for you. E-commerce costs are rising. USPS changes alone could push delivery costs up more than 25 % this year.

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1:18Scott Dancy:What is going on DTC pod today we are joined by Scott Dancy who is one of the founders and CEO of Azuna, which makes products in the air freshener sort of space. So Scott, one of the reasons I was really excited for this interview is because not only the product category that you guys are in, I think it's super interesting, but the speed at which you've built your business, the product strategy that you guys have rolled out, as well as how fast you've been able to really scale things across the board, across multiple different channels. So I think it's really interesting. I'm super excited to get into it.

1:55Scott Dancy:So I guess before, you know, we get too far ahead of ourselves, I'll kick it over to you. Why don't you give us a little bit about background about yourself, how you got into building Azuna, how Azuna started, and then we can get right into the rest of the details. Yeah, I would love to. So Scott D 'Ancy, I'm the founder, CEO of Azuna. So I started the business in end of 2019. And my background is I grew up in New Jersey. I went to college in upstate New York, moved around, moved to Buffalo. My now ex-wife, who I have two kids with, was from Buffalo. So moved here to raise a family basically in 2003 when my daughter was born.

2:39And now she's got 22 and a 20-year-old, 22-year-old daughter, 20-year-old son. And got separated, I believe, and think it was 2014. 2014 and in about 2016, um, you know, just bachelor learning, quite frankly, how to do laundry again. And, uh, my washing machine broke and my son had one of his best friends over playing basketball. And the dad came in and said, here, try this. This'll get rid of the smell. And it was a tea tree oil based, um, air freshener that his family's contract packaging firm was working on and it worked. And I was like, this stuff's great. Like where are you selling it? I mean, they really weren't and um i don't know if you remember the show envy or the movie envy with jack black and uh um who was the other guy in it but but where they literally they create poopy gun and it just like blows up and i was like this is like amazing this like gets rid of everything i tried in my kids room a car and uh to cut to the chase about two years later i said what are you doing he's like nothing i said let me let me try it right i always thought it'd be cool to to build a brand.

3:43I, my background was staffing industries, technology and healthcare, a partner in oil and gas drilling programs, a gravel pits, a concert promote. I mean, a lot, a lot of stuff, some work, some didn't. Right. But I thought this was really cool and had an opportunity. So he basically said, all right, fine. It's came company with manufacturer. We gave him a little bit of equity for that and they would make money off the manufacturing. and you know I started the business we came up with the name of Zuna I like to tell people kidding around it's the ancient mind goddess of fresh air but it was just another friend of mine who is now my next door neighbor became an investor that owned the domain name company and he owned it and I just thought it was cool I didn't want to do something like clean air or you know something I wanted to be like a name like when I took a business class in college they talked about Kleenex every no one knows no one asked for the tissue paper right they asked for the Kleenex.

4:36So I wanted to be, if you're going to ask for your teacher oil-based air freshener, it was going to be Azuna. So we started in 2019 and for about seven to eight months, I was literally packaging everything myself. So if you can picture it, I would literally go to Home Depot every morning for the seven to 10 orders that we would get. And I almost failed kindergarten because I couldn't cut and paste really well. So I'm packaging things with crazy amounts of tape, bringing them to the post office, writing the ad copy. I'm a horrible speller. So So I'd spell stuff wrong, learning how to run ads. And in April of 2012, we got up to$12 ,000 that month.

5:12And I was like, oh, this might work. Well, COVID hits. At May, we do$105 ,000. I can't obviously keep up with the demand of just doing it myself. So we have to go to like a 3PL. And we've grown, you know, every year, 300 % every year to the point where, you know, we're, you know, at that magical level of CPGs where it's a lot of fun. And, you know, that in the businesses evolve from like, hey, you're a friend, you want to come work here? You're a friend's kid, you want to come work here? To, you know, hiring, you know, some really good professionals who actually understand marketing, like Maryland is sitting next to me now, right?

5:50Like, so now, you know, we've got our own manufacturing facility. We have a big 3PL. You know, we have 10 ,000 square feet of office space in the biggest building in Buffalo, which is, you know, kind of cool for where we're at. And I love the fact that we're doing it in Buffalo because, you know, most of these big CPGs, they're L.A., they're New York, they're San Fran, they're Chicago. And, you know, we've built this little unicorn in Buffalo and did it with a lot of people. And, you know, today was an interesting day for me because I've been doing my one on ones with everybody for the past year and I've owned several businesses.

6:27And, you know, this is one where I really feel like every single person is like in it for the for the for the business itself. You know, they want to, you know, individually grow. And that's, you know, my goal for them. You know, we have several guys who are former top 10 employees at Dr. Squatch and some other companies. And, you know, they're really having a good time and we're having a good time.

6:48Scott Dancy:Yeah, I mean, it's awesome. And congrats on all the growth so far. I think there's a lot of threads that I want to pull on here. So we'll kind of go down each one. But one thing that I think is really exciting that you mentioned is like, this is super relatable because as tons of operators do, you start out building your own product, you start out packaging yourselves, fulfilling the orders. One day you get to the point where you're like, oh, wait a minute. Now I can't do this anymore. I need to scale up to a 3PL. and you know I think this is that's a major growing point because like a lot of brands are able to make it into you know the monthly six figures and stuff but once you start to like scale up and start to like scale like once you get past like 10 million a year it starts to be scaling starts to become a totally different beast right yeah getting your first sales like it's something that everyone can relate with but I think what you guys have unlocked is like you said it's just the consistent growth it's being able to not just grow and do it that one time but continually grow and grow and grow and get to the next level.

7:46Scott Dancy:So I'd love to kind of, you know, before we get too far into that story, I'd love to kind of first unpack the product layer, right? Like what were the first things that you did? What went into the R &D? What was the, I mean, you kind of described the MVP of the first product, but like, let's say once you're, you know, really starting to sell, you've moved into the 3PL and you start to build the product that's scalable. What form factor was it in? How were you thinking about the product strategy? How many products did you have? Just characterize the business a little bit at that time. So when we first started, we were basically, it's a teacher oil-based gel and Marilyn's grabbing me some stuff right now.

8:26So when we first got started, we would just have these refill packages, a gel, and we would have these plastic jars that you filled it in and we would sell them individually and we were doing okay but we had an average order value of about 22 now it's 83 and the reason being is i was selling mostly these plastic pocks for you know they were kind of expensive for what they did um and we were selling everything individually then i sell these individually and then i started looking online to buy shirts one day and there was this company true i think it was called tree true true true class of tees they didn't sell you one t-shirt They sold it to you in bundles, right?

9:04So you felt like you were getting 50 % off of everything. So I learned about bundle volume discounting and started building, you know, different bundles and then with discounts to it. And that helped our average order value. One of the big pieces was instead of plastic, especially as a sustainable business, we then got these glass jars. This was about four years ago. When I bought them, they said, you have to order a million at a time. I did not have the money for a million, but I said, order them anyway, because I'll figure it out. and we did, and we went through them. It took about a year to go through them, so it created a cash flow issue for about a year, but it was also like the catalyst that got us to that level because now all of a sudden we look like a natural product.

9:46We are a natural product, a natural product that actually works really, really well, but then the catalyst was that you could put it around your house and not have it look like this little plastic jar sitting around, right? We still have the plastic. They're good for our pet and our active and other pieces, But this allowed us to really go to our target audience. Target audience is like almost 90 % is 30 to 55-year-old women. So, you know, now all of a sudden they want natural. They want, you know, something that looks good. And we had that. Then we developed into different sprays, both surface and air freshener sprays and wipes.

10:20And we've pretty much stayed with those levels. We, you know, eventually get in some other products. But, you know, we're the largest purchaser of tea tree oil in the world. um so we we basically have a really good you know connection for that that uh gives us a nice moat around our business um so i have to go to australia pretty often and when i say teacher oil i mean australian teacher oil like there's chinese there's indian but like the australian atti certified which is the australian teacher oil industry association certified there's very little there's surprisingly little in the world right so you know it's kind of like wines nothing against Long Island wines, but I'd probably rather have Napa or, you know, you know, the Bordeaux wines and were those.

11:03Scott Dancy:Got it. That, you know, that makes a ton of sense. And yeah, I think that's really interesting, especially on the packaging front. That's something that a lot of businesses see as well, right? The MOQ just to get a custom bottle done, like, you know, you have that glass bottle. Sometimes it can be insane. So you might start out and you might ask yourself, when is the right time. And, you know, in hindsight, it seems like that was something that worked out really well in your favor. But I think there's also probably other brands that maybe that may not be the right decision for for you guys. That form factor was everything because it needed to live in the home.

11:36Scott Dancy:Right. Yeah. And the other part of it was at that point, it wasn't like I did that like day one. It was like people like this, but I know that they'll really like this and this will do it. I mean, it was probably semi crazy, but, you know, I've been a lifelong entrepreneur and done some kind of crazy stuff so like it wasn't it didn't feel like his nuts but it was it was definitely a seminal moment to get us to that to that next level and you know we've done that a couple times like we've we've been the official order eliminator of four professional sports teams um two major colleges you know like those were hindsight good and bad decisions but they were expensive ones but they gave us credibility you know big big net you know um bravo type influencers and things that nature we've taken some big swings to get to where we are but you know if you think about it right no one's ever seen a chitri oil-based odor limiter a job before like the average person where i was like what is this snake oil like so i had to have like you know some credibility behind it and you know we developed that but the product really works we have we were just looking at it like we have one of the best retention percentages in the industry to the point where like our rep at recharge called us and was like can you consult for us on how this is going like so our customers love the product and then that's the thing like and i know if anybody's out there listening that is building probably if you don't have a good product you're screwed i don't care what anybody says right like you can you can sell ice to an eskimo for all i care like if you don't have something good it's not going to last and i think that's been you know the pillar of success here is that we do have a great product that is marketed well but it's a great product to start.

13:13Scott Dancy:Yeah. And I think the couple of things, if you just like kind of zoom out on the macros of what you guys are doing, not only do you have like a good product, but you're also competing in a space where a lot of the incumbents are using a lot of synthetic ingredients as well. Right. And that's something that people are really trying to move away from. So I think the fact that you've got the all natural ingredients is massive, but also just yeah, the packaging, the branding and everything. One thing I'm curious about is when you were first starting to grow, what were your growth strategies? Were you just running meta ads?

13:48Scott Dancy:Were you seeding influencers? Was it doing creator stuff? Like what was working initially to get you to that, you know, first threshold? So when we started, it was basically meta and Google and we were just before iOS 16. So you could basically retarget people for 30 days. So our original ROAS was like four to one on new customer acquisition. Now people are lucky if they can get one to one on scale. Right. So I was like, this is pretty easy. I'm just right. I'm learning this stuff on my own. I'm writing ads that like, I think I might've created the strategy of doing spelling mistakes so that people will tell you that it's spelling within there.

14:26And then it becomes more, you know, know, engagement. So in the beginning, it seemed like it was a little bit easy. And then all of a sudden, like it got hard. And you know, your your metrics were worse. And now like our metrics are really good, but because we have returning customers, right? So but my my strategy was, how do I get returning customers? If I can't get new ones. And so we had to sustain losses for a couple years. And, you know, we didn't raise a lot of money, we realized, you know, some friends and family money, like nowhere near what most brands our size have raised. But we had to we had to make sure that we realized that in my opinion, if you don't get to something in three years that you can see that a hundred million dollar revenue point, whether it's five years later than that, then, then quit, you know, just because like you have to, you have to have the momentum.

15:12And the only way to get momentum is to be able to, you know, burn the midnight oil, sustain those losses, because unless you're a celebrity brand or you go, you get lucky, you go viral in a video, like Like the best videos only have a couple of weeks of really good performance and you have to be constantly turning that. So now, I mean, not only do we spend millions of dollars a month on ads, we spend hundreds of thousands of dollars a month on content. You know, so like and that's just to basically get average new acquisition, new customer acquisition performance. But if you can retain those customers, think about it, right?

15:46Whatever it's costing you to acquire a customer costs you zero to maybe three to four percent to keep them. So try and find them first.

15:53Scott Dancy:Yeah, and that was the other thing I was going to say I love about the business model. Not only are you, you have this kind of tailwind of the positioning of having a natural product in a space where a bunch of the incumbents like are super synthetic, but you also have subscription economics baked into your product offering. Right. And you've got the refill sleeve. You've got something that works in both retail, in Amazon, indirect. People can refill. You're able to have subscription that actually makes sense. I think a lot of people probably, you know, force. There's some brands that like suit subscription really well.

16:29Scott Dancy:Other people here. Oh, let me build a, you know, high like a really high margin, cheap product that's easy to ship and throw a subscription on it. But it really needs to make sense with what your product offering is as well. And I think you were able you guys, you know, have that. I thought about it. Someone told me from the beginning, the best subscription model is the razor razor blade. Right. Like you buy. So here's your razor. here's your razor blade you know this last 60 to 90 days get yourself in the beginning when i started subscription i would give people the option of one month to 12 months and people would do the 12 month just to get the extra percentage and they would be buying way too much because no one knew what it was they would do like four different plastic jars one of these every month and then they would quit after because they just like i have too much right so now we have like a really good visualization of what people need and those customers are lifetime like our lifetime values double the industry standard and even more than that for subscribers.

17:26Right. And we're still relatively new. You know, when you look at the life of Azuna, basically. But, you know, I think that because the gel is a consumable and because it works and because when it hardens, you know that you need to refill it. We we have a perfect subscription model, you know, and the beauty of it is, too, is like, you know, you want to make sure that, like, you're doing what you can to make a difference in somebody's household. And, you know, the people can notice it, right? Their house is smelling more fresh. They don't, they're not getting sick. Their dogs aren't, you know, coughing up, you know, their lungs and stuff like that.

18:02It's kind of, it's kind of cool to see in the long run.

18:04Scott Dancy:Yeah. And one thing I'd love to kind of also dig into is as you guys scale. So one thing that you said is like, you guys started to grow and as you grow, you, you know, you have to invest more into the business and this is obviously a good problem to have, but it's something that, you know, brands that are doing a good job are going to run into. How did you deal with funding the growth? Because if you're growing fast enough and you're constantly growing at like 300 percent every year, the inventory buys get bigger. The ad spend goes up. You need more money to fuel it. And I know you mentioned raising a little bit of friends and family capital, friends and family capital.

18:38Scott Dancy:But as you were growing, what did that picture look like from the business? Right. Like, how are you thinking about your balance sheet? How are you thinking about your cash allocation? How are you thinking about reinvesting into growth versus, you know, making sure you weren't burning too much? How did you balance that equation as you were growing? So we last year was our first profitable year and we were profitable by the millions and we still weren't bank financeable. And that's the hardest part about being a CPG is that, you know, the best part about it is because I was in the staffing business where I would get paid 90 days and have to pay somebody like eight times before I got paid once.

19:12We get paid the next day basically right we're a shopify store um proudly one of the few shopify stores who've had a one million orders you know we've got that little thing up here right um but i love that side of it so there's a lot of mcas out there um we use one clearco that i've used all of them but i've had a lot of success with them thank you clearco um you know but it's still it's still expensive money right there's nothing worse than as an entrepreneur realizing that you made a million dollars in a month and you still feel broke because you literally had to reinvest all that and like teacher oils like you know they plant it you know it's not like we can you know i gotta make sure that the crop is available that is distilled like we gotta have you know six to nine months of inventory on hand and it's very expensive um you know these glass jars you know you gotta buy you know a couple million at a time so i think that's where it becomes difficult i think that's where a lot of people have gone like the venture route which nothing wrong with that i I chose not to.

20:12I'd rather I'd rather feel broke for a little while than give up equity. And I think but I think it's a it's a it's a tough piece and it's all about how quick you want to go. Like, you know, to make a long story short, I went through a relatively nasty divorce and went broke. So I need to make this work. So I needed velocity. I needed to probably take chances that the average person might not have and knock on wood. so far they've paid off but um i would suggest really getting a good accountant which we did who was actually my long-time personal and business account for several businesses sold his firm to come work here and gave him some equity and he's literally changed everything around from operational and financial standpoint where i can sleep at night um but that would be my suggestion to any, you know, entrepreneurs to really understand your numbers.

21:05Like I get made fun of all the time. Cause they're like, you know, you do everything. And literally this is like an example, like on the back of an envelope of what you think sales and cashflow is going to be, but I am within 1 % last year within the projection in the beginning of the year, very sophisticated board members who sold billion dollar businesses told me you're going to do this number. I said, we're going to beat it by 35%. We beat it by 35%. We were in the same amount of millions as I said, more than that. And it's just, you got to know your numbers, right? You don't have to be a financial accountant to figure out how to put it on the balance sheet, but you got to at least know what your revenues are and an idea of what your gross profit is.

21:45Because at the end of the day, it's revenue, gross profit times whatever your gross profit is minus your ad spend, minus your internal costs. That's how much you make. There's a million ways to go at it, but that's that's what it is and if you don't have a good understudy what it takes to get that i'm an investor in several cpgs some of them i realized that that money's toilet paper at this point not because they don't have a good product not because they're not like passionate you know um uh entrepreneurs they don't know their numbers and they don't care to they care about the clicks and all the other crap and honestly you know we have a thing here too and it's sort of digressing but like data doesn't care about your opinion.

22:23You know, like I don't care like what anybody says we should call something or what you think is good products. And we test it, test it, test it, consumer testing, and then lean into it. And that's really, it took a long time for me to learn that because, you know, I always cared about my own opinion and others. And now I just care about the data and it's, it's much more financially successful for all of us.

22:45Scott Dancy:Yeah. And I think there are so many nuggets of wisdom that you just dropped there, but I think knowing your numbers is so important. And one thing I like to, when, even when we opened the conversation, you were talking about, like one of the first things you mentioned was like your AOV, right? Like just being on top of the AOV and understanding that, you know, by having a higher AOV that creates more optionality for you. Right. And you're right. And sorry to interrupt, but like When people come to me to invest in their business and they're like, well, I've got an amazing product and the margins are great, but the average order is$20.

23:20I'm like, well, then you can only go to retail. You can't sell it online. Your cost of acquisition, I don't care how good you are, is going to be 50. So you can break even on that, but you can't lose two and a half times on that first acquisition.

23:31Scott Dancy:Yeah, exactly. And then I think the other thing that's super spot on is knowing your numbers, especially as you're growing, it starts to matter. Because like when you when these businesses start to blow up and start to take off, like you're seeing and like many successful brands do like these are these are like orders of magnitude. The decisions just become exponential. Right. So when you're dealing with P.O.s, like you're saying, million bottle P.O.s, when you're dealing with pricing, you're hitting a million orders. All of a sudden, these aren't like little sort of decisions or things where you have to be really airtight on because like being off by, you know, two or three dollars on a fifty dollar AOV that adds up really fast over, you know, a lot of orders.

24:16We were talking about our staff meeting today. Marilyn was in. I said. One percent used to mean we didn't mean that every one percent is a million dollars now. You know, so like every decision that's off by one percent, you either made or cost the company a million bucks. You know, so we have to be, you know, every, the devil's in the details on every single thing we do. And the funny part is I'm probably the, in my past life and even up to now, the most least detail oriented person in the world. But, you know, now I know, like, I know exactly what needs to be done. I know, you know, the numbers, I can't do it.

24:50Like in the beginning, when I started, I did all the packaging. Like, that's what I tell everybody, right? Like, I know I can do it. Like I, I literally set an alarm on my phone for two hours every day for two years. So I could wake up and look at the Facebook comments and respond to them so that people knew. And sometimes I would be like so sleepy. I've responded or my own name as opposed to Azuna. And then, you know, like, oh, crap. Now I got like 70 new Facebook friends of people. But, but like, it was cool. Cause it was like, it made me realize, you know, in my mind, the product, the marketing is great.

25:20And I'm sitting here with my VP of marketing. She's probably going to shoot me when I say this, but like marketing is important. But if you don't have really good customer service and you don't have a good product team, like you're screwed because the customer experience is the first line of defense. And if you don't have a good product, you can't sell anything, you know. So obviously, marketing is extremely important. And so is, you know, the operations and logistics and all that type of stuff. But like those are the two things that I did both myself to start, you know, and and and it was fun and I'm glad I did it.