YETI: Roy and Ryan Seiders. How Two Brothers Turned a $400 Cooler Into a $2 Billion Brand

27:57And I think that's when I started losing sleep thinking about what would be the ultimate cooler if we were going to build a cooler for ourselves the way we used them. All right. There's something else I think is interesting because you are selling ICTEC branded coolers. But from what I read, they had some agreement, some distribution or licensing agreement that meant that that brand could not be sold in the U.S. starting in 2006. Yeah. So the original distributor that was bringing the ICTEC coolers into the U.S. market, he trademarked ICTEC in the U.S. So really, as soon as he departed the business, I could no longer use that ICTEC name.

28:42Which was a blessing in disguise. Yeah. Okay. So, you know, you guys start talking about, hey, maybe we build our own. But before we talk about that, what was wrong? What was the issue you had with the existing coolers? Well, you know, there were some quality issues and whether it was a leaking drain plug or a bowed lid. But there was also some functional issues. You know, when you're putting these coolers on boats, you need the ability to strap them down, tie them down to the boat. And so some of the design ideas I had were putting a tie-down slot on either side of the cooler so I could run a one-inch strap through there and lock it down to the boat.

29:27That was already molded in the plastic. That's right. Molded as part of the cooler itself. Yeah. You know, rubber feet were important. And, you know, I started thinking about, okay, having rubber feet, one, it keeps it from sliding around in the bed of your truck or your boat, but it also protects the fiberglass finish on your floor of your boat. A full frame gasket that has a better job sealing it and hinges that were not, you know, a component that were actually molded into the, to the roto molded part so that the lid and the base of the cooler, you know, are part of the hinge system. and you're running a quarter-inch stainless steel rod through there.

30:06So the design that I had in my head, it was purely functional utility, and I put a texture on the top of the lid so you could stand on it. Like a sandy, like a rough texture? Yeah, make it non-slip. And about the time Ryan showed up, I was already booking a flight to go see that Thailand factory. So these were all ideas you had, but you had to figure out if you could do this. Ryan, I just want to bring you in for a second and ask you, what do you remember talking to your brother about? Do you remember saying, hey, we could do this, we could make this, we could create a brand? Or was it not quite fully formed yet?

30:49You know, I don't think it was quite fully formed. I would say that going over to Thailand to the ICTEC factory where the ICTEC cooler was being produced, we were hoping that they would work with us, you know, in an effort to not have failures once the cooler left our warehouse. Yeah. So when you get to Thailand, right, you go and visit this factory and you meet the guy who's running it, I guess, or somebody there. And tell me the story of what you guys, of the conversation you had. So the original intent was to work on the quality issues and try to solve for some of those problems. And I think setting foot on the factory floor, we quickly realized why we were having these problems.

31:35You know, lots of manual labor, lots of customization, lots of imperfect manufacturing process. You know, one example is I kept wondering why the bottom of our coolers had a red stain, right? As they came into the U.S., you'd flip it over and there'd be real faint red stain on the bottom. Well, they would take the plastic cooler out of a mold and they would set it on their floor, which was this dirt red clay floor. And so we were really, we were dealing with the dirt floor manufacturing. So the heat, the warm cooling, it would just absorb some of that clay. Yes, that's right. Because these were white, I guess, these coolers.

32:15Yeah, they were white. All right. And you guys didn't have, I mean, you didn't have a whole lot of capital. You were ambitious, but you didn't have much of a choice. I have to assume that if they were willing to work with you, you would have worked with them. Yeah, I think so. But we realized that this factory wasn't capable of building a design for us from the ground up. And they really didn't want to listen from what I remember. You know, when Roy was talking about ideas for improving the cooler, I mean, it was just kind of in one ear and out the other. And just really didn't want to talk about improvement or design change and stuff like that.

32:53You know, I kind of felt like we ran into a wall there talking to those guys. But you also, you were going to go visit another factory, I guess. This is a trip to Asia. So you're going to Thailand, but then you were also going to go somewhere else. Tell me, you know, how did you even know about another place to go to? So this was the early days of searching for manufacturers online. And I found this factory in the Philippines that was making a cooler for the Australian market. And I reached out to this manufacturer in advance of our Thailand trip. And I said, hey, we're going to be over in Southeast Asia.

33:30We sell this ICTEC cooler. And do you mind if we come visit you during our trip? So we started this conversation with this supplier in the Philippines. And other than just that email communication, we really had no idea what type of factory it was, who we were dealing with. But you knew what they made. Yeah, we knew that they made a cooler. And it was a similar kind of product. Yeah, that's right. When you get, just out of curiosity, this is like a three-hour flight, I think, from Bangkok to Manila. Yeah. And who is the guy, I mean, you have a contact there you're dealing with, and who, like, what do you— His name is Ivan Brown.

34:07He was an Australian expat living in the Philippines and opened up this factory to make a cooler for the Australian market. Got it. So he picks you guys up at the airport. Yes. And actually, the flight from Bangkok to Manila was more expensive than our flight from, you know, the U.S. to Bangkok. And Ryan and I are second guessing ourselves here. Like, do we really want to go visit this factory and spend this type of money to go over there? And Ryan was like, well, why don't you just go without me? And then I was like, man, I don't want to go without you. Maybe we shouldn't go. And then basically we talked ourselves into going like we're already here.

34:45We're already in Thailand. Let's just take this three-hour flight. And then we land in the Philippines. All right. So, Ryan, you guys land in the Philippines. What do you remember about your first impressions getting there? Oh, so, you know, this was 100 % outside of our comfort zone, you know, growing up in Driftwood, going to these countries, you know, we'd never had any reason to go to. But I remember flying in and you're signing your paperwork as you're on the plane, your custom paperwork in big red letters, death to drug traffickers, you know, and it was just, it felt really funny to go there.

35:20Well, we roll in having never met this guy. And, you know, Ivan, he picks us up in like an Azuzu Trooper type vehicle. And it was a lot of traffic, really crowded. Well, come to find out, kind of like watering your yard where you either have an even or odd, you know, address on when you can water your yard during a drought. That's how they control traffic in Manila. And so he had the wrong license plate that day to be driving around. So as we're leaving the airport, you have these kids with machine guns trying to stop us. He's trying to bribe them to let us go. And we get a little speed built up, and one of them steps out in front of us, and Ivan just keeps on going.

36:03That guy steps out of the way, and it was a wild experience. I didn't know if we were going to end up in jail or what was going to happen. But we end up making it to his factory that was inside the old U.S. Clark Air Force Base, which is out of, I think the name of the town there was Angeles City. And, you know, the first thing is we walked into his factory floor and it has concrete floors. And so that's a big improvement, right? And he's an engineer by his background and started sharing some of these ideas that I had built up in my head over the years. And his machinery and equipment was definitely more advanced than the Thailand manufacturer.

36:43manufacturer. So you could see right away that this was going to be our path to making our own cooler. When we come back in just a moment, Roy and Ryan head down that path to a brand new manufacturer. And it works out great until they get a horrible piece of news. Stay with us. I'm Guy Raj and you're listening to How I Built This.

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41:51Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2006, and after realizing that their manufacturer in Thailand doesn't want to make improvements to the IC tech, Ryan and Roy connect with a guy named Ivan who has a factory in the Philippines. So on that trip, we had found our future. We had found the factory that we were going to work with. And he was already building a cooler for the Australian market. We essentially white-labeled that. But at the same time, we started developing the original Yeti that was designed from the ground up with our own ideas. OK, so to clarify, like initially, just to get your business off the ground, you figured, OK, let's just buy the off-the-shelf ones.

42:35We'll put our label on it while we actually develop this cooler we've been dreaming about. It's going to take us some time, but let's just get this going with existing inventory. That's exactly right. The minimum would be a container load, like a 20-foot container load would be the minimum order. So yeah, it was kind of a handshake deal and let's do it. And by this point, after visiting him, up until this point, we knew we were going to start with our own brand, but we didn't have that brand name yet. Yeah, I'm curious. How much would a container load cost at that time? I think if I remember correctly, around$30 ,000.

43:15And that was probably for a 40-foot container. And that would be roughly 300 units, maybe 350 units coolers of different sizes. And you guys must have been pretty confident you could sell those because you knew that you had sold these ICTEC coolers before. And so you knew how to bring them in, but still 30 grand. I mean, for two guys who are worried about the cost of flying from Bangkok to Manila, that's no joke. No, it's not. But I knew the demand was there in the US. Yeah. And we, at this point with ICTech, I built out a pretty good book of business. And I knew if I could get coolers in there on the retail shelves, that there'd be sell through.

43:56And the frustration that we had with the ordinary coolers falling apart, you know, that frustration was real and we were providing something that was a solution to it. So you guys go back to Texas. Tell me about how you start to think, because you're going to start importing these blank, you know, chests, right? Coolers without a brand name to it. Tell me a little bit about that conversation you started to have. It was literally on the flight home, Ryan and I were sitting side by side and we started putting together a list of potential brand names. And I think going back to our dad's business and growing up in the industry, I think we had a pretty clear idea of what made a strong name or a strong brand.

44:42Now, I can remember using Sage Fly Rod as a kid, which was one of my dad's customers. And it's a very premium, high-end fly rod. And I love that name, Sages that named after the green stripe in the back of a rainbow trout. On the other hand, you had another very premium fly rod called G. Loomis, another one of my dad's customers. And it was named after the founder, Gary Loomis. And I remember thinking to myself as a kid how terrible that was to name a brand after a founder. And I think we had a pretty good feel for what made a strong name. And so we began to put together that list on the flight home from the Philippines.

45:24What were some of the names you were talking about? I think Sherpa made the original list. Tundra made the original list. And those are two names we used later. You wanted names that would evoke like fishing or hunting or something else. Really cold durability. Sherpa is a Himalayan mountain guide, the frozen tundra. And it has kind of a tough feel to it, tundra does. But we also felt like Toyota, you know, Tundra truck, they kind of own that name. And, you know, Yeti made the original list of names. And I think right away, I liked it. I liked that it had a kind of a punchy sound. I liked that, you know, is this Himalayan ice monster that's from a tough, cold environment.

46:11I liked that it had four letters like sage. Looked good on a hat, you know. I felt like we probably had a winner on that list, but I get home and I start losing sleep thinking about this name, knowing how important that decision was on a brand name. So I go out to like 20 family and friends and I start running through these 10 names and I'd get their feedback, which you better be careful what you ask for because, you know, you start getting their feedback. And yet he got mixed reviews at best. You know, for some people, it felt too cartoonish. For others, like even this, like gross, this hairy, smelly Bigfoot possibly.

46:54And so I got out of that informal polling and I was way more confused than I went into it. So I just like, gosh, I don't know if I'm making the right decision here. But what happened next was the validator. I went back to the same group of 20 people like two weeks later, and I had one question. I said, hey, out of my list of 10 names, which ones can you remember? That's the only question I had. And all 20 people, they could remember maybe one or two names at best, but the one constant they all could remember was Yeti. Wow. So that was all the validation I needed. Whether they liked it or not, it struck a chord, and that's Marketing 101.

47:36Love it. And you could have – and you probably thought about Sasquatch or Bigfoot or other names too like that. OK. So Yeti. This is 2006. So you land on Yeti. And how did you guys – your brothers – how are you going to structure this business? So up until this point, Ryan was still on his$10 an hour salary. But we knew that we were going to partner up. And I had a decent balance sheet from distributing the IC tech coolers over the years. And Ryan's buy-in to get 49.5 % of the company was to use some of his proceeds from his Waterloo sale. And so he bought the first three container loads of product that came in from the Philippines.

48:27Got it. So about 100? Yeah, 100 grand. About 100 grand. Yeah. Yeah. And Ryan, you I mean, it sounds like you're looking at this business because your brother was going to be the core, the CEO. But it sounds like you didn't really have it wasn't about egos like you were looking at it like, well, he's been in this business longer. He's got a lot of knowledge. Yeah, I know. Roy and I had always got along well. And, you know, I was just thrilled to be a part of it. I did have this money that I could buy the first three container loads cost. eventually we we kind of got to 50 50 and we went to a family friend as a lawyer and he said hey you don't ever want to own anything 50 50 and so it was just automatic hey roy you're 50.5 i'm 49.5 i was i was excited as i could be you know yeah okay so now you um you're gonna wait for your first container load or the first three i guess to come in and how many how many how many coolers would fit in it?

49:24Because at this point, you're just selling one size, right? Yeah. So we're selling multiple sizes of this first generation cooler that was called the Yeti Sherpa. And so roughly 350 units could fit on the container load. We started selling through that and then we got another one coming on the water. So that was over a period of a few months. And you had a warehouse already because from the time you were working with ICTech? Yeah. I had a warehouse just down the street from where we grew up. So I'm thinking that first cooler that's coming in or that first container, is it just the two of you unloading cooler by cooler, stacking them up in the warehouse or did you start, did you bring in some people to help you or?

50:03No, it was us. Like it would take us a full, you know, three hours to unload a container. It's like one by one by one. And were they in the container? Were they in like cardboard boxes? Yeah, they were already pre-packaged, ready to be shipped back out in a cardboard box. So I'm assuming you went back to the existing retailers that you had relationships with through IC Tech and said, hey, we got this very similar, cooler, better, new brand you guys in. Is that what you started to do? Yes, that's exactly right. We had the network of retailers that we'd built out over the years, and we basically introduced them to a new, better product.

50:40So it was a natural way to introduce it. And at that point, we started phasing out the Thailand cooler. You start phasing it and moving entirely to the Philippines-produced cooler. Did you have any issues with – because an Igloo cooler was like$30,$50, right? Or a Coleman or something. Like did you have any issues with some of these stores saying, I don't know? Because just help me understand, like at that time, probably just making one cooler and then shipping it must have cost you at least$100 per cooler. Yeah, that's a pretty good – I think by the time it landed in our warehouse,$100 would be about right.

51:21But yeah, part of the challenge was convincing these retailers to resell our products. And a lot of them got it right away, but there's a lot of pushback based on the pricing. like, hey, my customers, they won't spend$300,$400 on a cooler. So I can't tell you, you know, how much resistance we got with this initial, you know, trying to sell these into these retailers with, you know, a premium product. But there was a pretty unique dynamic going on where when I walked into McBride's in Austin or Barings Hardware in Houston or the Tacklebox in San Antonio, which are small little sporting goods stores or hardware stores, none of those guys were selling coolers although every single customer that was walking through their door was a cooler user like if you're walking into a sporting goods store you're a cooler user so we weren't replacing another product on their shelves we were giving them a cooler to sell and the reason they weren't carrying coolers is because the big guys the Coleman's and the Igloos they were chasing the mass market retailer they were chasing Walmart Yes.

52:31Target. And probably at one time, those cooler companies had a decent product. But after years and years of competing for that shelf space at Walmart and Target, it was a cost of engineering exercise and it was a race to the bottom. You know, the prices were low and the quality reflected that, which ultimately created our frustration. but also it created a huge void in the market because a small sporting goods store with limited square footage, they can't make any money off of a$40 cooler. You know, it's all - They're going to make five bucks. Yeah, that's right. And it's all about these small shops, it's inventory turns, you know, dollars generated per square foot.

53:13And so here we are, we showed up with this three or$400 cooler and we gave them a product to sell that was actually differentiated than what was being sold at Walmart down the road. And they could put a hundred dollars in their pocket after they sold one. In other words, you guys, it costs you about a hundred bucks to make it. You sell it to the shop for maybe 180 or 200. Okay. And then they can turn around and sell for 300. That's exactly right. And knowing that every customer that walked into those doors was a potential buyer, all you had to do was convert a small percentage of them to make it successful.

53:51So let's talk for a moment about divide and conquer. Like, Roy, it sounds like you were out there pounding the pavement, trying to convince store by store. It's a lot of work, right? One retailer at a time. Tell me a little bit about how you guys were dividing things up, I think Roy really was more about product design and running the business. And Roy had a family at the time. He married and kids, and I was not. So I could really hit the road at that time. So by the time I got there and the coolers started coming in, Yeti branded coolers, I was going to trade shows in an effort to find new retailers.

54:36Yeah, I think early on, we thought that this company was going to be very similar to our parents where we could handle it, maybe hire one or two employees to help us in the warehouse or answering the phone. And we quickly realized this opportunity was going to be bigger than what we grew up with. How did you realize that? Just the demand. The demand was coming. But in that, you know, obviously trade shows where you get more distribution, but it sounds like really you're focusing on Austin, San Antonio, places within a few hours drive. We were really focusing on the Gulf Coast states. You know, that's what got us into the cooler business.

55:14Like Texas, Louisiana, Alabama. Yeah, down into Florida. And you didn't have to create a use case because people were using them for putting fish or drinks. Really, you're just, all you had to say was, it's just better. You didn't have to say, here's how you can use it. Every one of our customers had been using coolers their whole life in their outdoor pursuit. So I think they could recognize right away that this was a different animal, that this was a better product. And like I said, there was a frustration in the market around durability. Ice retention was kind of a secondary piece to it. And with thicker walls and a full-frame gasket, people could recognize that, oh, this thing's going to hold ice longer.

55:55And then we did start leaning into product marketing and educating the consumer on the why. And I read that somebody who I guess really helped out with that was this guy named Walt Larson who ran an advertising firm in Minneapolis. And I guess he was pretty well-known in the industry, right? And what – like you guys met him at a trade show? Yeah. I was at the ICAST trade show one summer actually, that Fish and Tackle Manufacturers trade show. and Walt walked by, stopped, you know, I'm running the booth. And, you know, at the time I didn't know who he was, but he stopped and said, Hey, Ryan, you know, I've walked the whole trade show and your product is really the only one that gets me excited.

56:40He says, I think you got a great product, but I don't think you're doing a very good job of educating the consumer of why they would pay$300 or$400 for a cooler. And I came home, told Roy about them. And I think we were playing up to see him the next week. And, you know, he had a compelling case for how we needed to educate the consumer. You know, when someone pays three or four hundred dollars for a cooler, they're going to justify it to their buddies. Yeah. And it started with the tagline that he helped us create called, you know, wildly stronger, keep ice longer. Right. And then we built off of that.

57:17Yeah. And he was real big into customer testimonials and into having a pro staff. At the time, outdoor television was huge. The outdoor channel, the sportsman's channel, there was one called Outdoor Life Network, and it was kind of at its peak. But you guys didn't have a budget to advertise on those places, did you? You know, we didn't have a budget, but we were growing the business and we were cashflow positive. From year one, you were cashflow positive? Man, we really were. We were living off the land outside of Yeti, right? Yeah. Kathy, my wife, was teaching school. I was driving my high school pickup truck, living in a house that my parents owned out on their property in Driftwood.

58:04And so we were taking no money out of the business. And like our dad's company, our dad never went to outside funding. He built it by bootstrapping it. And that's just what we knew. We had to make this thing work by itself. It wasn't even on your horizon, the idea of, oh, let's go raise money. Like it wouldn't even have occurred to you at that time. No, no, not at all. We did end up working with a local bank to get a revolving lot of credit to get us through seasonality. but never did we ever consider going out and raising money to bring in an outside investor. Okay. So it's, you know, 2006, great.

58:44First start, you've got full year, 2007. I think you guys at least doubled 2007 in sales. Yeah. I think we went from a half million to 1.2. So we doubled. So you could see momentum. And again, it's like store by store by store. And I wonder, because Ryan, you were doing a lot of that traveling and also going to trade shows. Did you ever try to pitch one of the big stores like Cabela's or Bass? Or were you just too small at that point? At the time, I would hang around the trade shows in hopes of getting a Bass Pro Shop or a Cabela's type buyer to stop by. But it really worked in our favor to go to these independently owned sporting goods type stores, you know, with the bigger guys, once you get these bigger customers, they start naming their terms and, and hitting you with all kinds of penalties and stuff like that.

59:44And so I felt like once we started selling to some of these bigger accounts, we had the power to say no, when they were trying to push us around, because we didn't have to have them. We had a really diverse retailer network that we could sell all the product we could get and all the product that we could manufacture and had the power to not get bullied by any of the bigger guys. In meantime, Roy, you're still obsessed with this cooler design. So were you going like 2007? Are you faxing or email, maybe emailing at this point, design schemes back and forth to Ivan in the Philippines? No, actually, Ryan and I ended up flying back over to the Philippines in 2007.

1:00:29And we're making a replica by hand with their mold makers. And Ivan and I are hand sketching my design ideas. We're taking it down to the factory floor. And over the two-week period, we have the cooler that's been kind of stuck in my head for the last couple years that I've been dreaming about. We have a physical part. integrated hinges, integrated anchors, you know, rubber feet, rope handles, all these things that kind of came together. And again, it was purely functionality driven. All right. So you guys spent a couple of weeks in 2007 perfecting, finally, this cool that is your design. And just out of curiosity, how did you protect it, right?

1:01:16It's, I mean, Ivan's making him in the Philippines. You trust him, but how do you make sure that no one's going to rip it off? Is there any way to do that at that point? Yeah, there was definitely some opportunity to apply some patents or intellectual property. But learning from our dad, once again, you know, we grew up understanding that getting a patent is an expensive process, but even more expensive as actually protecting it when you do have infringement. So we felt like it was kind of a waste of resources. Instead of playing a pre-event defense, it was more about being offensive-minded and putting money into the brand.

1:01:56It makes so much sense. I mean, you could chase copycats and it could bankrupt your business. And we've had brands on the show that went through that. Or you could just focus on really making a brand that people associate with quality. And that's what we were doing. And also, I think it's important to note that we owned our molds. Like when we built these tools, we paid for those tools. So we had ownership of that mold making that created the design. Got it. Okay. So you've got a cooler, I think, by early 2008. Yeah, we're launching 2008, and it was the Yeti Tundra. And we finally got to a place where this is a cooler that we built from the ground up.

1:02:38And we came out with probably at the time six or seven different sizes. And they range in price from what to what? Oh,$245 to$600 or$700. Gil, I'm just curious because we've had, you know, over the last 10 years doing this show, we've had certain products and certainly in cosmetics where the founder very deliberately priced their product at a premium tier because it signals quality. I mean, it's great because the margins are great. But you guys weren't playing that game. Like you were literally pricing it because of the cost to manufacture it, right? Yeah. Our pricing exercise was purely driven on what do we need to price it at to make money right today.

1:03:20It wasn't like, hey, let's appeal to the psychology of people. No, no. It's like if we're going to buy a cooler for$100, we're going to have to sell it for$300 because$100 is going to the retailer. and then the$100 is going to us. And all of your business at this point is not direct to consumer. It's through retail channels, your wholesalers. The majority of it is through our specialty retail channels. Now we would sell direct to consumer if they called. Or maybe you had a website. I'm sure you had a website by that point. We had a website, but it just had our phone number on it. Okay. So if they called, we were going to sell them.

1:04:00But we weren't going on our way, out of our way to sell direct to consumer. Okay. So you guys launched this Tundra and it really takes off. I read that within a few months or maybe weeks, you're bringing a container a week? Yeah, that sounds about right. This is 2008. We're hiring a lot of folks to come in to help customer service, to warehouse work, to everything in between. And with Ivan and this Philippine factory, we found the perfect partner to help get Yeti off the ground. All right. So everything's going great. Yep. September 23rd, 2008, you tried reaching Ivan and you can't get a hold of him.

1:04:45Yeah. So I... And I send Ivan an email and he didn't respond, which I thought was a little bit unusual, but I didn't think much of it. So I call him that evening, which would have been his next morning. And I get a hold of his wife and that's when we found out that Ivan had tragically passed away. On the phone, she says he's gone. Yeah. I don't remember a whole lot about the phone call. I just remember feeling this gut punch and I just, you know, telling her, you know, sorry for her loss. And, you know, I – it was a pretty big shock to the system. I know this is a tough, tough time for you guys because he was a friend and tragically he was killed in the Philippines.

1:05:45What did that mean? I mean aside from just the personal loss, I mean he was running the factory. Was it going to affect inventory? I mean you were depending on a container coming in a week. Yeah. So I remember I got off the phone call with his wife and I called Ryan. I shared the news with him. and um you know i don't i didn't it was it was a big personal loss so first and foremost you know ivan was more than a business partner we'd travel over to the philippines to visit the factory he would come over to the u.s and attend trade shows with us so we had really developed a a friendship over those few years that we knew him and um and i don't think i slept at all that night and and um Like I said, this is 2008.

1:06:41We're going from$1 million to$3 million in sales. I think we have probably six or seven full-time employees. And I remember Ryan and I went into the office the next morning, and we told the small team that we had about what had happened to Ivan. And I think we told them that we're going to make the most of it, but it doesn't look good, and there's a good chance that y 'all need to go ahead and start looking for your next job opportunity. Yeah. Because we really felt like without Ivan's leadership, this factory was not capable of running without him. Hmm. I'm connecting the dots here. You're thinking our business is done?

1:07:22Yeah. We're thinking it's done. Why don't we come back in just a moment how Ryan and Roy slowly piece their business back together and how they start to market Yeti using bears. real grizzly bears. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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1:10:09Hey, welcome back to How I Built This. I'm Guy Raz. So it's a fall of 2008, and Ryan and Roy are reeling from the news that their manufacturing partner, Ivan, has been murdered in the Philippines. The details aren't clear, but what is clear is that the brothers can no longer work with Ivan's factory. So they decided to do something unexpected. The first thing we did was we sent out a price increase to our retailers. And we probably had maybe 150 retailers at the time, but we felt like if this was going to be our last inventory, we were going to liquidate a higher margin. To basically to maximize cash.

1:10:52Maximize cash, perhaps slow things down a little bit. While you're trying to figure out. That's right. So the idea was, let's just raise the price. It might piss some people off, but it'll slow down sales for now. And then we will have time. Yeah. And just to clarify, the reason why you couldn't rely on the factory in the Philippines at this point was because from what I understand, And there was a dispute between some folks involved in the factory over who was going to run it. And so manufacturing came to a halt. They were not making anything there for a while. The factory was shut down. And all your molds were there.

1:11:28That's right. But long term, no matter what, even if the factory got back up and running, we really had a lack of confidence that the factory could continue to operate without Ivan's leadership. Yep. So as we kind of try to get the lay of the land and try to figure out next steps, we sent out that price increase. And it was a meaningful price increase, maybe 15%, where it took a cooler that retailed for$295 and pushed it up to$350, which was a meaningful barrier. When you jump that$300 barrier and go to$350, like Yeti was already had a reputation of they're durable, they're well insulated, but damn, they're expensive.

1:12:13And so I was bracing myself, sending out that email and just like, okay, here it comes, Ryan, let's get ready for all the negative feedback from our retailers. And really it was crickets. None of the retailers called up. We blame that price increase on a cost of raw materials increase, which was total bullshit, it, but we had to tell them something. And what was happening with our retailers is the demand continued to come in their doors and people were continuing to buy coolers and they were selling coolers maybe one or two a week, which was really good numbers for a small retailer like that. And their margin dollar expanded.

1:12:54With that price increase, they were making more money. But meantime, how were you trying to frantically get your molds back from the Philippines? No, we were trying to get them to open back up. And like you said, there was a dispute going on. Yeah. But we also, the second thing we did that same week is we started identifying potential roto molders that could build our product for us. And this time we're going to focus on the U.S. Okay. And, you know, there's a big industry, especially in the Midwest with roto molding. Certainly for auto manufacturing for parts. Yeah, it's farm equipment. It's water tanks.

1:13:35There's very little consumer products other than maybe kayaks. But we started booking flights to go see them. And we wanted to focus on the U.S. because, one, you know, Ivan getting killed was a really big scare for us. And the last thing we wanted to do is go back over to Asia. And then two, we'd be shedding that overseas freight expense from the shipping containers, which was on a large cubic footprint, like a cooler, was a pretty meaningful piece of the cost of the goods. And then we'd be decreasing our turn times and lead times, which would help with our cash cycle. So we had a feeling that the U.S.

1:14:14could be competitive, although that we'd definitely be paying a premium for labor. And Ryan and I show up to this factory in Iowa. And the first thing they asked us, well, can you share us your CAD files with us? Well, I think at the time I didn't even know what a CAD file was. You know, we were making these molds. On paper. Yes. And then you were, and you didn't have a computer model of it. No, no. We were making these replicas by hand the old school way. So I began to work with one of their engineers to start putting this Tundra into a digital format for the first time. So it wasn't long before that Iowa factory, we had this kind of this next generation design.

1:15:00And then they also introduced us to these really high end Italian made molds. and the fit and finish of the product was just superior to these sandcast molds that we were making in the Philippines. Meanwhile, back over in the Philippines, that factory got up and running again. It's back online. It's back online. And we took everything we learned in the U.S. and we took that technology and we brought it to the Philippines. We started gaining more and more confidence that this Philippine factory could run without Ivan's leadership. And it wasn't long before the Philippine factory was making this next generation design as well.

1:15:44So, you know, as tragic and like, oh shit moment as this was, we came out the other end of it 18 months later, just like a much stronger, dual sourced, better product, financially healthier because of that price increase. But it was a nightmare of an 18-month period. Oh, it was a nightmare. Okay. So one of the things I'm curious about is marketing. And we talked a little bit about this with Walter Larson, who came aboard. And I saw that already in 2009, early 2009, you created a YouTube channel, which is, this is early YouTube. I mean, this is not, you know, this is still pretty early days on YouTube when people still thought of it as cats, you know, cats on skateboards.

1:16:28but you put out a YouTube. Do you remember what the thinking was behind that? Because again, you know, you're still, you're growing, but you don't have a massive budget for advertising. And what did you think you were going to do with YouTube at that time? Well, I, you know, I felt like we could create some really short videos talking about the value proposition of, of Yeti. And I had a high school buddy that owned a camera and some audio equipment. And then we started getting into some funner videos of my friend, the same guy that owned the camera, found this bouncer down on 6th Street here in Austin and hired him to come do this video where it's talking about the difference between an igloo cooler and a Yeti.

1:17:15Yeah. And it's this 500-pound man versus a Yeti. It shows him tearing up an igloo, right, slamming it on the ground, stepping on it, hinges breaking, lid caving in. And then he tries to do the same thing to a Yeti tundra, and he's throwing it off cliffs. He's jumping up and down on it, and just there's no better way to share a durability story than that kind of funny content. The one that I think anyone who knows about your YouTube channel may know is a very one that I think probably just transformed this whole strategy, which was you had a video of a bear trying to open a Yeti cooler that was packed with peanut butter and fish, fresh fish.

1:17:57And it's an amazing video. Anybody listening can find it because, spoiler alert, the bear cannot open it. They cannot open the Yeti cooler, which is, I mean, man, what a great way to explain how good this thing is. If I remember right, there was an interagency grizzly bear committee, and they actually contacted us and said, hey, we think that your cooler might be able to get certified as a bear-resistant container. So all these places that require bear-resistant containers for camping, you have to have this certification on the container where you're storing your food. And so we sent out our smallest cooler out there.

1:18:37And then they throw it in there with the grizzly bears that they have at this grizzly bear and wolf research center. And if it can stay out there for two hours without the bear being able to get into it, they'll give you the certification. And it just spoke to the durability of the cooler. I mean – It's so cool because you open it up. I mean even today, it says certified bear resistant. And even if you're not going to be anywhere near a bear, it's just – you know that it's – It's like, oh, I got a cooler that can withstand a bear attack. Amazing. But even at this point, you're not yet on the radar of the big guys, right?

1:19:12You're still too small because I kept thinking like where are the copycats? When are they going to come in, right? I kept looking over my shoulder thinking, man, someone is going to figure us out. I felt like someone that was better capitalized, more resources, engineers, whatever, were going to come in and outdo us, figure out something that was better than us. So, yeah, I think we were running as fast as we could to fill that shelf space at the specialty retailers because that's where the void was in the market. And I think in 2009 and 10 is when we really, there was a tipping point. And that is when we started getting phone calls from Pennsylvania and Oregon and Montana.

1:20:02And these were retailers calling us up and saying, hey, I've had three customers over the last two weeks come in and ask for your product. I guess I need to start reselling them. So we were literally answering the phone and setting up retailers 10 a day. You know, one of the things that I mean, I guess in the mid 2010s, there were so-called cooler wars, which you had a bunch of different clones and other brands trying to get into this space. But I guess around 2010, 11, you start to see some brands explore this space. Coleman got into it. Pelican, which makes cases for cameras, starting to make kind of Yeti-style coolers.

1:20:47What do you remember first starting to see? Because it's both a validation, but it's also scary, right? Because you're like, uh-oh. Oh, I think there was some concern. I think we joked about someone coming out with the Yeti killer, you know, if I remember right. As you know, every healthy – you need some type of competitive landscape. And I think everyone that came into the market that seemed like all at one time, they were all fighting it out for second place. Yeah. And we felt like we had nailed the product and that it was going to be hard to improve on it, which it was. Yeah. So, all right.

1:21:26So I imagine now that, you know, once you had$20 million in sales in a year, you're starting to get attention, capture some interest from investors. And at this point, you had not taken it on any money. This was self-financed. and indeed by the middle of 2012, you guys agreed to sell some of your shares to a private equity group and that would enable you guys to take some money off the table, retain some ownership. If it was me in your situation, I would have done the same thing because I would have thought, okay, we've been on this journey for six years. There are a lot of big players coming into this space.

1:22:08We're not as well capitalized. Like we do need some institutional backing if we're going to compete. So maybe I'll sell, you know, a chunk of my ownership or most of it and take some money off now and work with this better capitalized group to build out our business. Was that your thinking at the time? So, yeah, in many ways, that's exactly right. I think we looked up in 2011 and Ryan and I had not taken a dime out of the company or very little, minimal amount to live off of. So we had zero wealth to speak of outside of Yeti. You know, again, I was driving my high school pickup truck, living in, you know, a house that my parents owned out on their property.

1:22:52And we had some meaningful scares along the way, including the loss of Ivan. And we had, you know, competition coming. Now, I think I probably lost more sleep thinking about what, what if, what if, you know, what if there's a product liability lawsuit? What if there's a, you know, volcano that goes off in the Philippines, which is a real thing. And so having all your eggs in one basket and bootstrapping this from day one, you know, it was time to diversify ourselves personally. So mid 2011, we start running a process of taking Yeti to market, which we had no idea what that looked like. But as we kind of narrowed it down to a handful of potential buyers, we were really just looking for a liquidity event to take some chips off the table, but also a partner that could help us navigate the next stage of growth.

1:23:50Yeah. At this point, I think it was the reported amount was like close to$70 million for about a two-thirds. I don't know if that's exactly accurate, but that's what's been reported. But if that is accurate, it's pretty good. You guys are going to walk away with a nice amount of money, which will enable both of you to feel financially secure for life. But you still get to keep a significant percent of the business, I think, roughly 10 % each, right? Is that about right? Yeah, that's about right. I can't remember the exact after-tax take-home, but in the end, it was a life-changing event. When those wires crossed into our bank account, I think I probably slept better that night than I had in the last six years.

1:24:40I mean, Ryan, this is better than the Beretta shotgun, the$3 ,000 Rolex that you got from that. Yeah, no, it was a lot better. And And it was a fun – that was a fun process to be a part of, to go to market, to the private equity and have the interest that we did. And pretty soon you're right back in it and you're excited about the future of Yeti. Did you – I mean so up until this point, you were a cooler brand, right? You're making – you're known for coolers. But now you've got Cortec behind you and the product line is going to expand. I think within the first few years, you introduced the soft bag, the soft cooler bag, and then the drinkware, which from what I read initially, some people on the board thought that might be a distraction.

1:25:30That really your cooler business and getting into the insulated cups, coffee cups and whatever, that was not the business for you guys to get into. Yeah. So to kind of set the stage, Yeti grew to 100 million in sales just on hard coolers alone. Wow. I think this is by 2013. Yeah, that's right. And up until that point, there was still runway in the hard cooler market, but kind of the big knock on us during the sales process is that we were a one product company. And the obvious extension to us was soft coolers. When I walked into Target, the same dynamic existed in soft coolers as it did with hard coolers.

1:26:15They'd been commoditized. They would leak. They would fall apart. And so you could see the market opportunity was big. And by that time, we had built out a good team of engineers and designers. And then Ryan came over to my desk one day, and he put a vacuum-insulated bottle on my desk. And he said, we need to do something in this space. And I think it was a clean canteen. Yeah, Ryan, what do you remember about that? Oh, basically, I had one of our dealers that was real successful with the hard coolers. He was a gear guy like me, and he sent me a vacuum-insulated bottle. And I just took it home, put ice in it, drank water out of it.

1:26:57and the next day there was still ice and I'm like this thing's amazing and vacuum insulation had been around forever with a bunch of different brands but I took that bottle in and threw it on Roy's desk and say hey we need to look at this and then a month later Roy shows up at one of our monthly operations meetings with a 30 ounce cup and a 20 ounce cup he called it a Yeti Rambler and so I didn't have a vision to turn it into a drinking cup but I just thought that the vacuum insulation was cool and I let Roy take it from there. After getting Cortex Blessing it was a real short putt on getting it to market and standing up the supply chain it wasn't long after that that we introduced these two sizes.

1:27:37Yeah. The 20 ounce and the 30 ounce no colorways just stainless steel with a clear plastic lid and like we caught lightning in a bottle and for the first time Yeti had a product that had mass appeal it wasn't just our hardcore outdoorsmen that were users. We were selling them to soccer moms. And it was, it was this affordable luxury, you know, that although not everyone can afford a three or$400 cooler, they could afford a$30 cup. And you had already that double-walled water bottle market was out there, Hydro Flask Clean Canteen, but nobody was thinking about a coffee mug or a cup, a tumbler. Yeah.

1:28:19Just so happens a real simple cup design, that market opportunity is so much bigger than bottles. Right. And soft coolers came into the market at about that same time. I think they were about a month apart, but it was drinkware that really changed the trajectory of Yeti. And we went from$100 million to$400 million. That's amazing. In a matter of 18 months. 18 months. In 18 months. And that was highly, highly supply constrained. We could not keep up with demand. And we couldn't even keep up with the cooler demand because the brand awareness, we're selling so many cups, brand awareness was exploding.

1:28:59So drinkware turned into our half of our business basically overnight, but it was elevating the entire brand in all of our products. I mean, it's an amazing story because it's a completely new product line. I know that By 2015, right now, that's almost – it's about nine years in. You stepped down as CEO. And Ryan, you stepped down as president. I imagine both of you guys now – we have had founders on the show who had private equity come in, got bought out, and are still with the business 20 years later because they just lived and breathed it. But it sounds like both of you guys had felt like it was time you wanted to move on.

1:29:44Tell me your thinking behind that first, Ryan. Why did you want to step down? I felt like we had worked, put in a lot of time, you know, during the years of 2006 to 2012. And I didn't really want to be pushed anymore. Roy was good at pushing me, getting me to work harder and really kind of seize this opportunity up. And, you know, once we had some financial security, I was ready to do more hunting and fishing and family things. It wasn't like you weren't like, I'm going to start my next business. And I'm not. I love that. You were like, I want to do more hunting, fishing and hang out with my family.

1:30:22Yeah. And I still wanted to be involved in Yeti, but more at my own pace. And Roy and I are still employees of Yeti today. But I, you know, I haven't been into the office in years. And you had a young family. I think you had gotten married. around, went around 2012? 2011. 11, okay. And then 2012 had our first kid. And so I was, you know, looking for a break and looking to, you know, I wasn't, didn't want to come into the office and grind it out. And Roy, you had already had, you had kids by the time you guys launched Yeti in 2006. So your kids had only really known you working and grinding at Yeti.

1:31:02Was it similar for you or that you wanted more time with your kids and to just hang and – or be a dad full-time or did you – were you already thinking, all right, I'm going to launch my next business and start all over again? No. So the irony of things was the outdoors is what brought us to Yeti in the first place. But in many ways, it took us away from the outdoors as well because we didn't have time for it. You know, we didn't have time to go spend time on the water or, you know, annual elk hunt or tarpon fishing trip. And I might be home with the family, but I wasn't being a good dad. I wasn't present.

1:31:41You know, my mind was on Yeti. And, you know, what we were doing was not sustainable. And I think we recognized that. And, you know, today I get to come in and have fun when I want to. Yeah. And it's a creative outlet. it. When you guys think about this journey you took, right, you know, I mean, even just falling into this cooler business in a sense, Roy, because of outfitting boats, right? And then that it could have been rubber mats on the boats that became the thing, right? It could have been ropes. It could have been the engines on those fishing boats. It was the coolers. How much of where you got to and how this journey kind of went, do you attribute to the work that you put in, the grind, which is a lot, and how much do you think had to do with luck and fortune and just the stars aligning?

1:32:36Man, the stars definitely aligned. And you can see these stepping stones growing up in the outdoors with our parents and growing up in our dad's business and kind of getting the playbook of a small business and then finding the right people and whether it was Walt or in even a door closing on us, like the loss of Ivan, but another door would open. So timing was everything. I would also say we were willing to kind of put ourselves out there and show up in the Philippines when we were in our 20s. And we put ourselves in a position to kind of have this luck, right? Right. And even the luck of being born in the United States of America, it's a real privilege to be able to kind of choose your own path and do whatever you want compared to what I've seen in other places I've been, you know.

1:33:30So, you know, it's interesting because, I mean, your dad obviously is a model, right, with Flexcoat. And it sounds like when you guys started Yeti, like that was sort of your vision, like it was going to be a nice lifestyle business. And but there was no sort of like grand plan to turn this into an international brand. I know I would say where we got lucky was picking an industry or picking a product category that could spill outside of the fish and tackle industry yeah I think we thought we were doing something like our parents right and that's that was the goal to live the lifestyle of you know what our parents had and like I said our parents put four kids to college they they got to do things as they wanted to do them.

1:34:18And then, you know, Yeti began to take on a life of its own, and never, ever in my wildest dreams we ever think it would do what it did. And it's been an amazing ride. That's Roy and Ryan Cedars, co-founders of Yeti. By the way, the brothers still see a lot of each other. In fact, they live right across the street from one another. Meanwhile, their dad, Roger Cedars, recently turned 80 and finally sold his own business, FlexCode. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please do sign up for my newsletter at GuyRoz.com or on Substack.

1:35:03This episode was researched and produced by Carla Estevez with music composed by Ramtin Erablui. It was edited by Neva Grant, and our engineer was Jimmy Keighley. Our production staff also includes Casey Herman, JC Howard, Alex Chung, Carrie Thompson, Chris Messini, Catherine Seifer, Sam Paulson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

1:35:35Thank you.