Advice Line with Sarah Kauss of S'well

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2:09Hello and welcome to the advice line on how I built this lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show who will attempt with me to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Send us a one-minute message that tells us about your business and the issues or questions that you'd like help with. You can also send us a voice memo at hibt at id.wondery.com and make sure to tell us how to reach you.

2:51And also, don't forget to sign up for my newsletter. It's full of insights and ideas from the world's greatest entrepreneurs. You can sign up for free at gyros.com. And we'll put all this info in the podcast description. All right, let's get to it. My guest today is Sarah Kaus. She's the founder and former CEO of Swell, as in the famous Swell bottles. Sarah, welcome to the show. Thanks for having me, Guy. I'm thrilled to be here. It's so great to have you back. We first had you on the show, well, the last time, the only time, was in April of 2020. It was right at the beginning of the pandemic, and it was just kind of a nutty time.

3:31I remember you were sitting in your living room or your house, and everybody was freaking out. Yes. And at that time, I still remember, Guy, at that time, I thought, wow, this pandemic thing has been going on a few weeks. It feels like forever. I had no idea it was going to change our lives, really, for decades to come. So for those of you who haven't heard the story of S.W.E.L., Sarah started it in 2009, basically after getting the idea on a hike that you had a thermos and you took a swig and it was warm water. And you thought, why can't bottles keep water cold? So you left your job and then you launched this company.

4:09And six years after launching Swell, the company made$100 million in revenue. It's an amazing story full of pivots and problem solving and massive risk taking. But eventually you built it into an incredible business. And by the way, if you listening have not heard the episode, just scroll back and check it out. It's in the podcast queue, but we'll also put a link to it in the show notes. Sarah, you are no longer with Swell, just to be clear, right? Like the company was acquired, I think, two years ago or three years ago? Exactly, two years ago. So yeah, I'm a free woman. I sold the business and I'm not associated with the brand at this point anymore.

4:50And how does it feel? I mean, to be, it was your life for what, 13 years? Yeah, 13 years it was my life. You know, it's bittersweet. the overriding feeling when I sold the business was relief. I was so proud of the company and the brand and the team. And I was incredibly happy to land the plane in a soft place that I knew that this brand that I built and loved would go on, almost like sending a kid off to college, I would say. I was proud of what I had done. I still miss it. I still miss it sometimes. I'm still in contact with some of the team. I obviously still love the brand. I buy at full price now off the website.

5:32You don't even get a discount? No, I should have negotiated. All founders out there, when you sell your business, negotiate a lifetime discount because I forgot to ask for that. I mean, I think Tom Rinks of Sunbum, who was on this show a couple of weeks ago, I think he gets free or discounted suntan lotion forever. He's probably a better negotiator than me. No, I probably, I mean, I probably could ask, But I'm happy to support them. I actually really love what they're doing right now. Yeah. All right. So, Sarah, before we get to today's collars, let me let me ask you a question about positioning.

6:04Right. Because I think I think all of our collars today have, you know, unique products that they're trying to position within larger markets. And, you know, I mean, water bottles, even when you started in 2009, I mean, it was already starting to get crowded. And it's, of course, continued to become more and more so, right, with like Stanley Cups and Hydro Flasks and Yeti and O 'Hallis and everything under the sun. What was your process? Can you remind us of your process of getting your product onto the shelves? Because I know, if I remember correctly, you were in New York City and you went like store by store.

6:41The idea was you'd get them into Bloomingdale's and then you'd be gangbusters, but that's not how it happened. No, that's not how it happened. And really for me, Gaia, it was a crowded marketplace, but for Swell, it came down to positioning. I saw a position in the market for a higher quality water bottle, something, again, that kept things hot and cold, but was more of a fashion hydration accessory than something that you would take to the gym or on a hike. I didn't want something that looked like a camping canteen. I wanted something that looked as elegant that you could buy it in the MoMA design store or would be in the holiday window at Bloomingdale's, places where we were featured eventually.

7:22But you are recalling correctly that in the beginning, it was just me hoofing it into stores with my backpack, asking to leave a couple water bottles on a shelf, sometimes even on consignment, just to see if they would sell in those stores. Okay. Sarah, let's take our first call. You ready? I'm ready. All right. Caller number one. I think it's Kiara is our first caller. Hi. Yeah, it's Kiara. Hello. Welcome. Kiara, tell us where you're calling from and just briefly about your business. Okay, cool. I'm so excited. My name is Kiara Munzi. I'm calling from San Francisco, California, and I'm the co-founder of Chiji, a breakfast company on a mission to replace oats with chickpeas and all sorts of breakfast foods, but starting with the first ever instant chickpea hot cereal.

8:12Nice. Okay. Chi Chi is the brand. Yeah. Kiara, can you tell us what's the question that you brought for us today? So my question for you both today is how do we increase our in-store grocery sales as a brand new product that nobody's ever heard about or is really even looking for in the hot cereal category? All right. We'll get to your question in a moment, but let me ask you a couple questions about the brand first. Tell me about the product. So it's oatmeal, right? I'm looking at the website now. It's basically oats that are made from dehydrated chickpeas? Yeah, exactly. So there's no oats at all.

8:49It's just chickpeas, so it's grain-free. And tell me about the genesis, the idea. How did this start? Yeah. So it started kind of from a personal experience. I used to eat a ton of oatmeal, like regular oatmeal from the packet, you know, maple brown sugar flavor, et cetera. And I would eat that every day. And like an hour after eating that morning oatmeal, I would feel a little tired, a little hungry, like right after. And I realized it didn't have that much protein. I went to Google and saw that people were adding protein powder to the oatmeal, but that ended up making my stomach hurt and tasting really chalky.

9:28So then I just kind of looked around actually in the grocery aisle and I saw chickpeas going into other categories like pasta. I don't know if you've had like, yeah, sure. Yeah. Yeah. All those other chickpea brands. And I said, why aren't chickpeas in the breakfast category? Yeah, that's cool. I mean, chickpea and you're right. Like oatmeal does like people think of oatmeal as this really healthy thing. And I guess there are things about it that are healthy, but oatmeal does spike your blood sugar for most of your blood, your glucose for most people. It actually, because it's high in carbohydrates, it's not unhealthy.

10:02It's just, it can create like a crash like a couple hours later. Yeah, exactly. And that's a lot of our customers are diabetic or they do wear those glucose monitors and they're looking for an alternative to oats and we're right there. So how did you do it? I mean, tell me, I mean, because I think you just recently graduated from college, right, in the last year or so? Yeah, I graduated less than a year ago. My co-founder is actually still in college. But we started off really in our dorm room rolling chickpeas with the rolling pin. You would cook the chickpeas and then you just like roll them and smash them down?

10:40Yeah, just to make them into an oat shape and then dehydrate them. And that was kind of like our initial version of what this product could look like. And that worked? I mean, you would basically cook the chickpeas, roll them, dehydrate them, and then when you rehydrated them, it actually kind of had an oatmeal-like texture? Yeah, exactly. Surprisingly, it did. And it almost is a little less mushy than oats. Sometimes people think oats are a little mushy and watery and the chickpeas kind of hold their shape a little better. All right. And so how did you take the next step? Like how did you, for example, how did you just finance the first run of this product?

11:20So after we had this weird bowl of chickpea mush, basically, yeah, we had to figure out how to commercialize it, how to do our first production run. And the first step was the hardest step of making the whole business, which was basically a year of me calling different chickpea farmers, chickpea processors, co-manufacturers to try to get them to produce it at scale. And obviously it was hard because it was just me as like a 22-year-old being like, can you flake chickpeas for me? Can you like make this chickpea oatmeal product? I have this new startup idea. And what I've learned, especially what I've learned on your show, is that a lot of times when you start calling co-packers, they don't really give you any time because you're just a nobody.

12:06But after about a year, I did find some great partners to kind of help me scale it. And then, of course, yeah, we needed the money side of things. And as two college students, we had literally no money in the bank at all. But what we did to finance it was actually enter ourselves into a bunch of pitch competitions. And we raised over$100 ,000 just with pitch competitions that were non-dilutive. And we traveled around just giving our pitch to dozens and dozens of judges. I love that. That's awesome. Congratulations. Let me ask you one more question and then I'm going to bring Sarah in. Tell me a little bit about where the product is sold right now.

12:44Are you mainly selling direct-to-consumer on your website? Are you in stores? Yeah. So right now we sell 95 % of our products through our own website on Shopify. And then about 5 % of our sales are coming from around 30 Los Angeles grocery stores. Awesome. Okay. Sarah, before we start to tackle her question, do you have any questions for Kiara about the business? Yeah, Kiara. It looks like you're creating an entirely new category. something I feel I have a little bit of experience with. But one of my questions for you is your placement in grocery store. Where are you placed right now today? So right now we're placed in the hot cereal category with the regular old oatmeals, which is actually one of our biggest problems because a lot of our customers actually don't eat oatmeal because they might be diabetic or gluten-free.

13:40So they're not even in the category. Yeah. I see. And I'm on your website now. Is your product gluten-free? Because I don't see that it says it on the packaging yet. Yeah, it is gluten-free. Well, I know in my local grocery store, which is a Wegmans, a nice big chain here on the East Coast, that they have a gluten-free section of the grocery store. So I was thinking, just looking, you have beautiful packaging, by the way. Tiara, I was just looking at your website. I was thinking if you could more prominently display that this is a gluten-free item and get that on the front of your packaging. That could be really helpful.

14:15Actually, we are kind of in the midst of updating our packaging. So it will stay gluten-free on the front. And then another change that we're making is instead of calling it oatmeal, we're actually changing the name to hot cereal because we found that a lot of our consumers were confused about why we were calling it oatmeal because there's no oats in it. Yeah. So, all right. So your question is how do you increase grocery sales, right? And you're mainly in grocery stores, you said, in Los Angeles right now? Yeah, exactly. So I'm mainly interested in learning how to increase sales when we're already on the shelf.

14:50How do we get random shoppers to pull our product off the shelf? I think something, Sarah, something you said, which I think is critical, is that this is like a brand new product. This is an invention. This is something that doesn't exist. Do you have any competition? Are there any other brands that are making chickpea hot cereal? No. We're the first chickpea hot cereal, which is why we're very urgently trying to move fast so we can be kind of the chickpea oatmeal. Yeah. I mean, Sarah, I mean, I think about you going door to door in New York with Swell Bottles. To me, it seems like this is – it's a no-brainer for samples, right?

15:30And that costs money to get people to do the samples in stores. But to me, it seems like this product is kind of screaming out for a sample table. Have you guys done some of that in the grocery stores? Yeah, we have started doing that. And that's basically where all of our sales come from is when somebody's in there doing samples. So we're trying to ramp that up a bit. And we're also planning to hopefully do some, like right now we sell in five serving bags, which is a pretty big bag. So we might start selling in single serve pouches so that we can just hand out samples to people as well. That's great.

16:08I think sampling is a wonderful idea because the more you can have people taste your product, know that it's not only healthy, but it's delicious, would be, I think, a wonderful idea. Yeah. Kiara, if you could be on any shelf or any part of the grocery store, where would you want the product to be? I don't really. I think I would want us to be in hot cereal, I think. I don't really see any alternative to that. Yeah. I mean, it's like plant milks. Many plant milks want to be or beyond meat. They want to be where the meat is and plant milks want to be where the milk is. And to me, it makes a lot of sense that this would be exactly where you would go and look for oatmeal.

16:46But I do think that you have an opportunity, and it sounds like you're moving in that direction, to really emphasize things like a hot cereal, take out oatmeal. Grain freeze, great. 10 grams of protein, that's a lot of protein. And I feel like that could pop a little bit more. Protein is really – I feel like protein is the new gluten-free. It's just in everything now. So to me, that's a huge selling point. You know, high protein, high fiber is another thing. People are really excited about fiber, six grams of fiber per serving. That's that's a lot. I mean, that's great, you know, and and and I feel like that is especially as people are getting more interested in gut microbiome and gut health.

17:28I mean, fiber, protein, I'd slap both of those on the front. Yeah, I think you're so right. My advice would also to try to find your influencers, not necessarily the big brand name influencers, but the hyper local influencers that care about fiber, protein, glucose. The more that you can get individuals to really share within their local communities to go and find this product on your website or in their local grocery store, I think it'll extend your reach. Because my example is with Swell, we sold over 50 million of our original Swell bottles before we spent a dollar on marketing. We asked our consumers to get out there, take the product, and to ask other consumers to give it a try.

18:11The more that you can do that, before you know it, those people are going to be organically sharing on their stories as well. Yeah. And this, again, I mean, you have a product that is differentiated. No one's making it right now. But it means something really critical. And I don't know if you heard our episode with Magic Spoon, but if you haven't heard it, it's worth listening to. That is a, you know, it's a grain-free, sugar-free breakfast. They use allulose and they use like whey protein to create this puffed breakfast cereal that tastes like Cocoa Puffs or Fruity Pebbles or whatever. Well, the minute that they put that out and into the marketplace, there were a bunch of other competitors that some came just right before, some came after.

18:54You are going to have competition. And so you're right to try and get this out there quickly. I think that there's an argument to be made that you should also concurrently – and Sarah, you might disagree with me here because you didn't do this – look for some more capital. Look for investors. Sarah didn't do it. You never did it. You scaled your company without investors. It's an amazing story. But I think maybe in this case, it could be worthwhile. Do you have a different take, Sarah? I'm not anti-investment. In the last few years, I've been working as an advisor and a board member to a bunch of companies.

19:32I'm even an investor myself now in a bunch of companies. I'm not anti-investment. I can see what capital smartly applied to good brands at the appropriate times can do. So just be cautious and make sure you're using the capital appropriately. You're still thinking about your margins and your burn. and try to find someone that can help you with the spend. Hopefully it's someone that's actually done something in a category similar or adjacent to yours. In addition to capital, they bring some other help in sales or other resources. Okay, great. Kiara, it's awesome. Congratulations on the brand on Chi Chi.

20:12We're gonna be following, I mean, I'm gonna look out for it. I know in a short period of time, I'm gonna see it all over the place. Congratulations. Congratulations. Thank you so much. Thanks so much for having me on the show. Thanks. Thanks, Kiara. It's cool. I mean, it's a great idea. Yeah. I love the thinking behind it because there is, right, there's chickpeas now in everything. But not in breakfast yet. Not in breakfast cereal. Not in hot cereal and pasta and cookies and crackers. But yeah, that's cool. Started in a dorm room. Some of the best things are started in a dorm room. Yeah. I love it.

20:49Okay, Sarah, we're going to take a quick break. But when we come back, we will be talking to a caller who is looking to bring greeting cards inspired by his Latino heritage to national retailers. Stick around. I'm Guy Raz. You're listening to The Advice Line right here on How I Built This Lab.

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23:31Hello, welcome back to How I Built This Lab at Viceline. I'm Guy Raz, and joining me to take calls today is Sarah Kaus, the founder of Swell. All right, why don't we bring in our next caller? Hello, caller number two. Is it Jesus on the line? Hello, Guy. Hi, Sarah. Hello, Jesus. Hello, hello. Welcome. Tell us your name, where you're calling. Well, you know your name, but tell us your full name, where you're calling from, and a little bit about your business. Yes. So my name is Jesus Rubalcaba. I'm calling from Salinas, California. And my business is Paper Tacos Greeting Cards. So Paper Tacos are cards that are rooted in Latino culture and tradition.

24:11Nice. Okay, cool. So greeting cards rooted in Latino culture and tradition. What's your question? The question that I have is, how can I tell the importance of representations that Paper Tacos Greeting Cards brings beyond Latino specialty stores? Got it. Okay. Let's talk about your story first. So what was going on in your life when you started this company? What were you doing? Yeah, so I started the company in 2017, and I've been a designer for the last 20 years, so I was working at Healer Packard at the time. but as a designer I got to a certain point where I felt the need for something creative where I wasn't bound by guidelines from big brands and you know it started because I my mom's birthday was actually coming up and I went to a local grocery store to look for a greeting card for her and my mom's you know first generation immigrant here to the United States only speaks Spanish and I was happy to see you know a wide selection of Spanish cards but I didn't really see anything that resonated with me, like in the sense of like a culture or traditions or, you know, from the Latino experience.

25:20And so, that's kind of got me thinking, we're so much more than just Spanish language. You could incorporate our food, you could incorporate our music. There's, you know, even within Latinos, there's so much diversity from what country you come from. And even here in the United States, my mom being first generation versus me being second generation and first born here, we're so different. And so, you know, just by using Spanish, I felt that there's still a lot more that could be represented there. And that's how the idea started. And I started doing it on the site. I'm looking at the site and the illustrations are so fun.

25:55They're so cool. Do you do all the illustrations? Yeah, about 90 % of them are done by me. Now I'm partnering with other Latino artists, which helped me produce some of the cards. They're so bright and joyful. And like some of the cards, I mean, that are, I mean, some of them are in English, like have a flantastic birthday, which I love because I love making flan. And then some are in Spanish, but everybody knows what Feliz Cumpleaños means, right? I mean, so tell me who in your mind is the ideal customer for your products? Yeah, so the ideal customer would be, I think someone exactly like me, like born in the United States, still has really strong cultural ties to their background, speaks both English and Spanish.

26:41So throughout the day, they're switching back and forth. And not only people that are shopping at, you know, like I mentioned, Latino specialty stores, but, you know, I shop at Target, and I shop at Walmart. So I would like to see more of that representation there. So that's like the type of people that I'm targeting for my products. All right, let's bring Sarah into the conversation. I still have a bunch of questions, but Sarah, you probably do too. Yeah. So I'm on your Instagram and man, you have some amazing designs. I'm with Guy. They just make me smile. They're bright and they're happy. I'm a card writer.