The art of letting go with Vincent and Andrew Kitirattragarn of Dang Foods

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3:18You guys are the best. Hello, everyone, and welcome to How I Built This Lab. I'm Guy Raz. So as you all know, How I Built This is a show that celebrates mistakes. In fact, I think of this show as a kind of a yellow page, as a directory of mistakes. And the idea is that by listening to the amazing stories of founders and some of the mistakes they made along the way, you can learn how to avoid them yourself. Well, back in January 2022, we did an episode on a brand called Dang Foods. It was started by two brothers, Vincent and Andrew Kitteratrigan. And if you haven't heard it, it's worth your time.

3:59You can scroll back in the podcast queue to find it or just search Dang Foods in your podcast app. Anyway, Vincent and Andrew have family roots in Thailand, and they want to bring Asian-inspired snacks to grocery stores. They built Deng into a pretty impressive brand to a point where you could find their rice crackers and energy bars and coconut chips at Whole Foods and Target and Walmart. But unfortunately, the business ran into trouble, and a lot of it had to do with the pandemic. The brothers were faced with a series of difficult choices. try to sell it, try to save it, or declare bankruptcy.

4:38Both Vincent and Andrew agreed to come back onto the show to talk about what happened and why. It was a really courageous thing to do. Most of us don't like talking about failure or setbacks. But when we do, we can help ourselves and help others understand the value and lessons of those setbacks. When the pandemic hit, Vincent and Andrew had to navigate huge changes in consumer demand And then a global supply chain crisis. I remember thinking with Andrew, like, we really came to the conclusion that it was an existential crisis for the business. Yeah. Because two of our three product lines are imported from Thailand.

5:19And so when your cost of goods, the freight, you know, goes from 5 % to 30%, that's a big increase. Wow. And what, I mean, and this was all COVID related. It was just the backlog of shipping. shipping? Is that how it was explained to you? My understanding, it was a supply and demand issue. So people were staying at home and they wanted to buy stuff for their house. And so demand for imported goods increased dramatically. And there wasn't enough containers to go around. I remember when we had you on the show, and everybody should listen to this, you go back and listen to it, because it is an awesome story about how you guys started this, this company, and you guys were cooking and kitchens.

6:01Anyway, And even when you were on the show, you were not a massive company, but you had managed to create a pretty significant brand. If you went into any Whole Foods, you would see, dang, you would see that label on coconut chips and on rice crackers. And you still do in many Whole Foods. But at the time we spoke, there were challenges. challenges. Not just the shipping challenges, but you guys started to see some challenges with the business. What was happening at the time? Yeah. So going back to 2019, I remember we just launched our Dang Bar. It was a keto bar with Asian flavors and ingredients.

6:44And we had launched it with Whole Foods in 2019. The first full year was great, became our number one product line really quickly. And keto, just to be clear, that was a smart move. I mean, this is a hot trend. It's not even a trend. I mean, it's a hot diet, right? I mean, and you've got Bulletproof this and all these different brands that are doing keto. So this seemed like a probably like a no brainer. At the time, there were no keto bars on the market. We're like, wow, this is such a big opportunity. So we raced to develop it and partnered with Whole Foods to launch it nationwide. And it did great.

7:21Like, it was our going to be our driver of growth in 2020 and beyond. But when COVID hit and people were sheltering in place, they stopped buying energy bars as much because it's a good on-the-go snack. And when you're staying at home, you just don't buy bars as much. So that line took a hit pretty immediately. But was there an initial surge? I mean, I know with like Clif Bar, for example, they were flying off the shelves when COVID hit because people were stockpiling food. So was there an initial spike? There was a small initial spike as people were panic buying. But, you know, as people have settled into their new routines of staying at home and not going out to shop at grocery stores, we did see a huge impact on all of our products.

8:04Because you were doing coconut chips, which you had a few flavors, rice crackers, and you had a few flavors. And the energy bar showed incredible promise in 2019. It seemed like there was a world where that could dominate your sales in the future. That was the plan, right? And so with the energy market being as big as it was, we're like, hey, we created this nice niche. We should continue growing it. And so it was kind of heartbreaking to face reality when COVID hit and notice that it's not going to grow into what we had hoped. And so that was just the first kind of multiple waves of challenges, I would say, the immediate impacts of COVID on purchasing habits of snacks and bars.

8:58And then the second wave was this supply chain crisis that caused huge spikes in container prices. So, all right. So all of a sudden, Andrew, freight costs skyrocket. The cost to ship your goods dramatically increase. So, I mean, presumably you had to raise prices, right? We did raise prices. There's just so much that you can raise. So with the container prices going up from 5K to 22K in one month, you can't increase your price on shelf by 400%. Yeah. You just can't do it. Like it's just – you just need to stomach through it. So let me just acknowledge. I know that this is still recent, what has happened today.

9:51And I really appreciate you guys coming on to talk about it. I think it's really courageous and I think it's also important because as you know, this show is about – it's designed to be free business school, master class for anybody who wants to start a business. or was thinking about it or was just inspired by it. And you guys built an inspiring business and brand. And it's a great story of how you did it. But of course, great businesses, I mean, even ones that we've had on the show, don't always make it for a variety of reasons. COVID was a black swan event and had a huge impact on your business.

10:33I mean, you had to really cut costs, right? Just to stay in business, just to make sure that you could survive because you could only raise prices a certain amount before people would stop buying your product. But in order to stay alive, you had to probably do things like cut back on expenses, I gather. It was a matter of survival, right? And it was definitely one of the hardest things we had to do. The cuts to the marketing and the spend were easier. The layoffs were a lot harder and we needed to do it because we didn't have control in the near future over the revenue side. Yeah. When you, you know, when you're not profitable and not growing, it's, it's tough.

11:20Uh, I mean, the only options are to fundraise, right. Or look for acquirers. So, you know, we looked for fundraising, but, uh, it wasn't coming And we had to pivot to look for people to – people would be interested in merging us with another business or acquiring the business. So I guess around March of 2022, you really started to look at your options sort of with a more urgent lens, right? So one option would be, can we find investors? And did you guys go out and see if you could raise money? Yeah, we went to, I want to say, five or six dozen potential investors. Wow. And spoke to them about the situation that we were in, that it was a – that cost had skyrocketed and that we thought it was going to be a short-term thing.

12:22And that cost would come back down and we would end up being more profitable. But it's tough to fundraise when you're not growing and not profitable. And yeah, it wasn't an easy sell. Yeah. That must have been hard. That must have been really hard to do that, to really go from place to place and hear no or thank you or we'll get back to you. Guy, it was extremely hard. I remember talking with Vincent and we were discussing whether or not we wanted to approach our friends and like our colleagues about potentially putting in some money. And I told Vincent that I didn't want to go to my friends to do that.

13:08Like I felt like the market was telling me something and I felt like it would be misleading in my heart to ask them to put in more money when I maybe started to not believe. Yeah, I bet. And so when that didn't work, one other option is, of course, could you sell? Could you find a buyer for the company? And what did you guys try to do? Yeah, we collectively got together with our board at meetings and came out with a list of people that we're going to go after and who's going to talk to them, you know, brands and or, you know, organizations that would be interested in acquiring us. But the idea was, you know, we might not make sense as a standalone entity, but it does make sense as an add on.

13:55Like we spent 10 years building this brand that people understand and know and go back and look for. and you know if you already have a group that's operating a business you can tack this on to it and you know we had talked with probably another close to 100 brands well and uh a lot of them you know were interested some of them were worried about supply chain issues um and we actually ended up you know getting an offer some offers from interestingly these you know do you Remember the kind of SPAC craze? Oh, yes. There was like a whole craze of, you know, these public companies that would basically entities that would go public and then look for an acquisition later on.

14:40And so there were quite a few of these in our space and we talked with them. But in looking closely at those businesses, it didn't feel like a right fit. And nothing ended up making it past the finish line. And you guys, what was your objective? I mean, you could have just wound down the business and declared bankruptcy. There's lots of things you could have done. I mean, you had raised money. I think you'd raised, I think about$10 million. But was your objective to at least try to get some money back to the original investors? Yeah. So we had raised a little above 10 million. And the goal was to try to make them whole or have that equity roll over into another entity.

15:30But ultimately, it's very tough to, I think, align incentives during mergers and these types of acquisitions. And so nothing really fit the bill. I think part of that too is we wanted this thing to live on. Somebody else take it and keep going with what we made. It doesn't have to be huge, but just keep going with it. We spent 10 years building this. It's named after our mom. It's very personal to us. And to see it disappear, I mean, it felt to me like it would be almost the loss of a loved one. There was a definite grieving process when it came down to letting something like this go. We're going to take a quick break.

16:14But when we come back, how a chance encounter at a holiday party reinvigorated Vincent to get back into the business of, well, building a business. Stay with us. I'm Guy Raz, and you're listening to How I Built This Lab.

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21:13Hello, and welcome back to How I Built This Lab. I'm Guy Raz, and my guests today are the founders of the Asian-inspired snack food brand, Dang Foods. So I guess you guys did decide in the summer of 2022 to do the wind-down option, right? What did that mean? What did that mean you were going to do? Andrew? What we decided to do is, with the board's permission, we stopped ordering inventory because we didn't see a path forward and that the supply chain at that time was not being alleviated. So we decided that we were going to sell off our assets and have this time to try to sell the company while we sell off the inventory for nine months and ultimately return whatever cash is left to the creditors.

22:02And how much inventory did you guys have at that time in the US? We had, the thing about that Vincent didn't mention is not only were the freight rates up, but the average time in port also spiked during that time from 50 days to 100 days or seven weeks to 14 weeks. Wow. Just because there wasn't enough manpower to move it out quickly. Yes. So it flowed, but in parts of 2021, we were really, really short. And then because we had to overorder it towards the end of that, we started getting a huge surplus. So by the beginning of 2022, we had like nine months and we had a bunch of cash sitting in coconut chips and rice chips at our warehouse.

22:55I cannot imagine how difficult this time was. I'm sure it's still even raw now talking about it, you know, in late 2023. But how are you guys coping with it, you know, just personally, emotionally, you know, having to for a variety of reasons, mainly because of the circumstances of the global pandemic, having to wind down this brand and business that you'd worked on for over 10 years at that point. Yeah. I felt like I lost purpose. Um, I felt like I lost a loved one. I felt, uh, like I let my team down. Um, I remember going to the park and crying and then I also remember telling when I have to tell the team this, like just breaking down, like I couldn't hold it together and just crying as well.

23:48So for me, there were a lot of feelings of loss and grief as if it were a part of my family. Andrew, how about for you? Guy, I think this is why my brother and I were such a good team, is because we're so different. I felt a huge sense of relief, huge. and one of the reasons why is because I felt like in the months leading up to the decision including even on your show last time we were there we had to wear somewhat of a mask in front of the public in front of employees in front of creditors our friends and family and in making this decision, I felt like we could start to take that mask off. Yeah.

24:42And that you could start to move to the next chapter in your life, maybe. I'm wondering, Vincent, back to you, I'm feeling that sadness for sure. And I really empathize with that. And And I wonder how you, what helped you just emotionally cope with it? What was helpful during that time? It was about, I'd say, a three-month depression or depressed period. And I sought out a therapist during that time just to talk through these issues. I had a support group of other entrepreneurs, and they were able to lend some perspective on loads that they had went through as well. But I also leaned on Andrew.

25:33I mean, Andrew was my rock during that time, and he really helped keep things together and keep a really positive perspective. He kept reminding me that, hey, this is just chapter one. We learned so much from this, and we're just going to put our learnings to work to us in the next chapter. And hearing things like that would keep me motivated. Yeah. I've been going to therapy for like 10 years. It's like I've had much more time to process my feelings along the way, I think, than Vincent did. And that's why I think that's why emotionally I think I was more ready. And I wasn't as suede. And maybe I should have been.

26:16Maybe that's more human of Vincent. Like maybe I should have been like that. Maybe there's something missing. But I did emotionally feel prepared. I guess in the midst of this, Vincent, you had heard of an opportunity, and it was with a small brand that was working on or making and selling direct-to-consumer frozen soup dumplings, Chinese soup dumplings. And you connected with them and basically started working with them. Yeah. So I sometimes get investment opportunities sent to me and I usually don't pay them much mind, but one really caught my eye, which was there's a restaurant in Seattle that had to shut down during COVID and they lost almost all their revenue and they pivoted to shipping frozen soup dumplings locally.

27:08And when word got out, they got demand from other cities and started expanding to other cities. At the time it was XEJ and now it's Mila. The name of the company is Mila. Mila, yeah. And when I studied abroad in Shanghai in college, I had soup dumplings there. And when I tried these, I thought they tasted authentic, exactly like I had in China. Yeah. And it was a unique product because it came frozen raw and you had to steam it at home. But the result is a restaurant-quality dumpling. and I had to get involved. So I actually wrote a check and invested in the company back in 2021. And then towards the middle of 2022, I got an update from the founders that, hey, we're doing really well.

28:02We grew 500 % and next we're looking at going into retail. And so I connected with them about the retail piece because I had been doing that for the last 10 years. and I joined them at the end of 2022. Wow. And up until the end of 2022, the idea was you would wind down the brand and sell the assets and then return as much as you could to the creditors. And that would be it. That would be the end of Dang. That was basically where you guys were headed? Yes. From a paper perspective, that made sense to set like the what you're describing makes sense. And Vincent and I also just wanted the brand to live on.

28:52So we say assets, but we were really selling the brand and everything so that that could live on with somebody else. So you were looking for somebody to take on the brand name. Yes. And maybe they could continue it. But so far up until that time, you had no luck. You could not find anybody. Correct. Um, but I guess eventually you did. Vincent, you met somebody at a party who just happened to be, tell me the story. Yeah. So I went to a holiday party in December, 2022, and it was an eighties theme party. And so I was wearing an Adidas tracksuit with, you know, a boom box, uh, in the style of run DMC.