How a New CEO Helped This Protein Brand Turn a Profit

0:00We started actually not measuring ROAS, return on ad spend. we started measuring return on profitability. Because it's not about being rich, it's about being able to propel the journey forward. Hello, I'm Schweng Esther Shan, and this is Shopify Masters, your companion for starting and building a business. Today, we're talking about a total transformation, taking a business that's losing money and making it profitable. Our guest today did that in just five years. Brad Sharon is the CEO of Aloha, a company that makes protein bars, shakes, and powders. He joined the company in 2017 and restructured the entire organization to start building the business again almost from scratch.

0:46Now Aloha is on track to do$100 million in revenue this year. Its products are available at Kroger, Whole Foods, Wegmans, and other major retailers, and they are the number one bar brand on Thrive Market. Brad is here today to talk about the strategies he's used to make Aloha profitable. Thank you so much for being here, Brad. Good morning. Nice to see you. So Aloha is a lot different than when you first joined the company back in 2017. What was Aloha like? Well, look, as you said, it was different. It was a good idea, poorly executed. It was just the products weren't good enough. There was no margin structure.

1:26It was bloated. They were acting like they'd already made it as opposed to like any good startup is, you start from zero and your job is to put one foot in front of the other and really make something sustainable and interesting for a consumer to lean in and go, huh, I want to learn more. I want to give it a shot. I want to try. And so there was a company called Aloha. They They produced nine or 10 different product categories. They were largely online. They dabbled in some retail business, but they weren't retail experts. And it failed. It just flat out failed. Raised a bunch of money, lost a bunch of money, it failed.

2:01So I got to know the lead investor of that old company who's a German entrepreneur and a great karma guy, just a great, altruistic, thoughtful human being. And obviously, that's what you want in any investor base, is you want someone that understands that you're trying to build something special. And you're not just doing it for an exit. You're not just doing it for the money. You're not doing it for a website. You're doing it to build something better for others. Yeah, there's a purpose in there. There's a purpose. Great way to say it. There's a purpose in there. So yeah, we started from scratch.

2:32We blew up everything. Start again. Got rid of everything. From the physical office, went remote. From the product categories, got rid of them. From the retail model, chucked it out. From the financial model, well, there wasn't a financial model. It was losing. Created one. So just started to build blocks of success so that by early 2019, the walls of the house had been built, right? We were ready to start decorating and start figuring out whether we were going to be attractive to invite people inside the house and get them to stay a while and check things out. That was the goal. I'm sure a lot of listeners are wondering who is this Brad guy coming in, blowing everything up, but you actually have really extensive experience at major consumer packaged goods brands like Nature's Bounty, Kind, and Chobani.

3:22What were some of the things on your checklist that you wanted to change for Aloha when you first arrived? When you're in the moment, you just want to be putting positive steps towards the business, right? But you don't want to be doing random stuff. Like you said, I had a background. I mean, I was trained up at PepsiCo. I had worked at Under Armour as the head of men's marketing at Under Armour when we were battling against Nike. I was the head of marketing at Chobani when we were battling against Dan and Yoplait and the Yogurt Wars. So I'd been through some stuff. I'd seen some things. You know, honestly, you started with the product.

3:55You started with a product that you'd actually want to consume, your product that is better. Now, some people say better is unique and different. And I say better is better. Yes, it has to be new and novel and interesting. It has to be compelling, but it also has to meet the needs of the consumer. So in the case of, you know, protein bar business, big business,$6 billion plus business, just domestically in the U.S., big brands, Clif Bar, Kind Bar, Power Bar back in the day, you know, all those things. You want it to be something better, better macronutrients, better claims and third-party identification so that consumers would trust you, better packaging and branding like any consumer good.

4:36It's got to stand off of the shelf or sing off the website. It's got to make people interested to learn more and taste and texture. This is food. I mean, it's food. Like how much stuff do you have to put in your body that you need to really think through the sacrifice before you actually go, wow, this is great. And you're like not satisfied. We've all been through that. We've all experienced that as consumers. So there's got to be something better. So I started with the product. And food is so habitual, right? You're asking someone to change their routine, to try something new and actually give their dollars towards Aloha, right?

5:13That's something hard to do. Something they've never seen before. Now it's easier to do in retail, right? Where you're buying one bar for$2.50, $3.00. That doesn't break the bank. It's harder to do online where you're asking someone to buy 12 of something they've never tried before. But in the digital space, you have more information. You can compare and contrast. In retail, also, there's just the brands that make it to retail. I mean, you need to have an entire infrastructure, a supply chain, financing, backing, promotional strategy. Like, I feel awful for any young entrepreneur starting off and saying, I want to be in the food business because the vast majority of companies fail.

5:52There's a lot of pitfalls. If your product isn't good enough, if your financial model isn't sustainable, if you can't produce on time and in full, the retailers are demanding. online and offline. They have a business to run. They know how to do their business. And honestly, there's a lot of selection of things they could buy and put in front of the consumer. So how are you conscious of that? I mean, it is daunting to think about all the things we had to do to get this company to the point where it is today as a leading, truly a leading brand, and maybe one of the largest independent-owned companies still out in the market today versus the big consumer package good conglomerates.

6:29But it starts with putting one foot in front of the other day by day. And then there's an experience set of not making silly mistakes. We make mistakes. Trust me, I make mistakes every day, but we don't make stupid ones. And so as you build a business, getting into those kinds of mindsets is really important. So for Aloha of the past, it was in a lot of retail stores, but it was actually overextended and not profitable in those channels. What did you do differently in retail? Well, I mean, they were ahead of the curve when it came to DTC. We own Aloha.com. It's a great website, great SEO, SEM.

7:06It's a wonderful, wonderful aspect in terms of getting people to access your brand. It was important kind of to get the model right. So we pushed away from DTC for the moment because if you're willing to lose a lot of money on DTC, if you're willing to buy a lot of trial and acquisition, you can get some good sales. Your profitability is screwed. You're actually not building an audience that actually will grow with you. You're just having to replace them. You're trying to replace the money that's going out faster than the money that you're spending. You know, it doesn't really, at the end of the day, make sense.

7:40You're hoping so much that something's going to happen in your favor. And I learned a long time ago, it's an old adage. I didn't make it up. Hope is not a strategy. It's not. It's not a strategy. I wouldn't bet on hope. I have hope, but I wouldn't bet on it. And so the only thing we have is time. It's our most precious asset. So I'm not betting on hope. I'm betting on experience and betting on smarts and rigor and trying to do the best thing. So we pushed away a little bit of DTC. We paused it. We said we weren't going to lose money on it. And I started to build a retail strategy of building with retail partners in regions who would adopt the brand and kind of become more of a retail partner with emphasis on the partner.

8:21So places like Harris Teeter. Harris Teeter, if you don't know, is a regional. Carolina is largely D.C. area, down to Georgia maybe a little bit. They're owned by Kroger, but they operate independently. But I found great buyer partners, a guy named Matt and a guy named Matt. So the two Matts and I would go to a hockey game, and we'd sit there and talk. We'd talk about business. We'd talk about the category. We'd talk about growing together. I'd talk about what does winning mean for them. And they'd ask me, what does winning mean for you? And over years now, since 2018, they've been one of my best and closest partners.

8:55Not the biggest one anymore because of their size, but certainly the first and one of the most important. So having a good retail business was important. And then on the digital side, I went to Thrive Market. Thrive Market felt like the most discerning consumer. They have so many values-based decision factor. They're really smart about their curation, their editing. There's a trust mark that they do for their consumers. So if you go in and see a product on Thrive, you know, as a Thrive consumer, that it's been vetted by them to a high degree of standard, right? They care about what they offer to consumers.

9:29That was important. And then the big behemoth of Amazon, the ultimate marketplace, but not doing it from a position of a lot of companies say, I need to lose money on Amazon. And I was never willing to lose money in any account. So understanding our P &L, understanding the business model, understanding 1P versus 3P. Once we got those three kind of anchors in place, regional retailers, a partnership, a good business and thrive with the right consumer base, and an Amazon business that's going to make us profit, make us money, then I could go into other things. Bigger box retail, a big emphasis on aloha.com, which is a great asset for storytelling and new products and limited time only and the relationship then with consumers like I had with the retailers.

10:15I could go to that naturally from a position of strength as opposed to just trying to throw stuff on the wall and see what hits. You did have conviction on what you wanted to do for retail, right? You picked those strategic partners who might be smaller and more regional. You gave a chance to those online marketplaces like Thrive and Amazon. You also had to say no to some opportunities. You had to let go of some partnerships with some pharmacies like CVS and Rite Aid. How do you look at certain opportunities and actually turn them down? That's a great, great point you bring up. It's so hard for entrepreneurs who are so desperate for people to like us to say no.

10:59And it is critical. Yeah, CVS and the drug channel just wasn't a primary trip mission. If I'm going into those accounts, which are really general stores that happen to have a health bent to it, I'm not looking for a snack, really. But it also wasn't their primary business model. They're not interested in making sure the shelves are stocked with the best and greatest protein bars or drinks or powders. I mean, they're interested in making sure that the pharmacy is stocked and beauty is stocked and I can get my toothpaste. Like, that's their business model for the most part. So that didn't make sense.

11:30Others, some of the bigger box retailers that the company was in before, I had to walk away from because I wasn't making money on it. If you actually had a P &L, you could say, oh, I need this so much. And I did this early. I tried to make something that I knew financially was iffy, but I thought I needed it as a kind of just a grasping onto something, some validation point. And we had to walk away. We were just losing money. And if you're not in a world of wanting to constantly raise money from investors and give away equity and stake, maybe that's a strategy, but I don't think it's a good one.

12:05And the job of any startup is to stay in business. That's the job. Yeah. It sounds like the most important thing for you was that financial discipline to actually focus on profitability. So throughout all of this rebuilding, letting go of partnerships, building up new ones, you also made a huge change for Aloha.com where you re-platformed and brought the company onto Shopify. Talk to us about that decision. Yeah, look, when the world is falling down and you're like Atlas trying to hold things up, right? And you don't have a big team, by the way. We were at eight people then. At one point in time, Aloha had 60, 70 people on staff.

12:48It was nutty. We're a 20-person company today, by the way, 20. As big as we are today and the momentum that we have today, we're still 20 people. So we were eight then. You don't have the resources to do much of anything, to be perfectly honest, let alone build a website from scratch. I think we were on Magento. There were three engineers on staff, I believe. I don't know what they were doing. but no, you wanted to go to a platform that was smart, savvy, efficient, effective. Like why reinvent when you're trying to make sure that you have a snorkel above the water that you're breathing through?

13:27Because you're not even above water right now. So like have a good partner like Shopify, very established, great tools and tactics and build from that position of strength. That was our goal. And that was the recommendation of our head of digital, Stephen Gamelin, who was an expert and veteran from PepsiCo. He ran a big business at PepsiCo. And in 2019, he joined me. And we had already made that decision to go to Shopify by then. But it was about, okay, here's what the platform really allows us to go do. Here's what they're great at. Let's take advantage of that. Now, from that platform, we can add on a stack that logically makes sense.

14:03And that takes us from one to two to three to four in terms of customer sophistication, storytelling, availability, fulfillment, and all the other aspects that you need to make sure that the consumer at the end of the day is happy about their purchase and wants to keep coming back on their own dime without you having to buy them again. After that replatforming, I'm sure you're rethinking the direct-to-consumer strategy. You're reinvesting into that channel. How did you bring that back into the mix of things? Well, look, I mean, we never walked away from it totally. It was just not prioritized.

14:39Once we chose to invest in it again, it was a lot of trial and error. And we weren't willing to go crazy. Again, this is a startup. Startups should be financially savvy. There's not an infinite amount of cash or capital around, or at least there's not any that I wanted to do because I hated raising money. We never made a bet that the whole company was riding on X. There was never such a big initiative or campaign or idea that all of us were biting our nails to figure out whether it was working or not and whether the company would survive. I mean, those are bets I was never willing to take because I wasn't willing to sacrifice all the good effort and endeavors of the people striving towards making this thing viable.

15:23And it certainly is more than viable now. But back in the day, in 2018, 19, even 20. Oh, by the way, there's a little thing called COVID in 2020. You know, the category went down 35 % because people were in their homes. 2021, supply chain crises. Couldn't get products in ports. Not enough truckers on the road. Not enough workers in plants. 2022, little thing called inflation. I mean, there are three pillars of startup businesses. So if we didn't have a financial model, if we weren't willing to make choices, if we weren't willing to say no to things, we would have overextended ourselves really quickly when the market factors came against us, the wind would blow and we would fall over.

16:06I guess for our listeners, you still are very financially disciplined. And when you were relooking at the website, reinvesting more into direct-to-consumer, what were some of the initial things that you invested in? What were some of the initial things you experimented with? Well, Stephen's the expert. I mean, one of the things is hire good people and trust them to make decisions and hold them accountable to deliver certain results. But more important, it's the thought process into why they were doing what they were doing. Stephen and his digital team started making smart bets, accretive bets.

16:39They wanted to reach out to consumers. They understand the geotargeting and regional capabilities, right? This is a big market in the US. But at the same time, there are pockets and portals that are more like to adopt smaller brands and new brands and others. Go there, build an audience. Don't try to be national. There are affinity groups, health-oriented groups, protein and fiber, satiety. There's all kinds of areas that these guys and ladies can target in terms of the interest levels. So they went and did that, and they figured out there were certain portals that were jumping. They were very conscious about how the website and the pages were working.

17:14Were we making our point three-second clear for what the product is, why is it better, and click to try? We started doing things like upselling people at the very end as they got to the checkout. We started to spend more effort on fulfillment, knowing that people were going to buy from us versus Amazon. Our delivery is a lot faster than Amazon in a lot of cases. People are surprised by that. That matters if you're buying from a brand. That's an important flex in today's direct-to-consumer space. Yeah. Just thinking about it from a consumer standpoint, I think is the most important thing. Our team was always putting the consumer first as opposed to the tech stack.

17:57They were putting the practical question first versus the intellectual question first. They knew that success was going to be a long road and not about a short hit. They weren't interested in metrics or measurements that were CYA, you know what I mean, in nature. I wasn't after a gotcha moment. What I was interested in, we started actually not measuring ROAS, return on ad spend. we started measuring return on profitability. Because it's not about being rich. It's about being able to propel the journey forward. By having a good experience with you today, and by me having a good financial model on that, I'm able to have another interaction with you and your friends tomorrow.

18:42It's that relationship part so that over time, I became like peas and carrots with you. I'd be symbiotic to what you wanted in terms of propelling your daily life. which is the benefit of this category we're in. It is a good category. It makes people healthier. It makes people happier. It makes them more vivacious. It's a good actor in the broader food context and food world. We genuinely believe that. That's not bullshit. We believe that. So how do we make sure that message comes out in our DTC environment and does it in a way that the relationship can keep growing over time? It's fascinating to hear about all the ways that you've changed Aloha to rebuild it up again.

19:25I just want to take a moment to thank our listeners for tuning into the show and hope that you will take a moment to subscribe to Shopify Masters. Check out our back catalog of episodes. There's a lot of great conversations in there and tell a friend about our show as well. Thank you so much. We talked about one of the first things you did was actually make the product better and over the years, you've actually continued to do that. You've expanded into new product categories. What is your approach when you're thinking about new products to develop? Yeah, I think it's a great question. I get asked it a bunch and people expect me to say, like, I'm always developing new ideas.

20:09Like, I think that's like the innovators. They think entrepreneurial folks are all about the new thing. Sometimes the best idea is not doing things as well. a brand like Aloha, don't you think it could be a lot of things? I mean, I had one person once in a meeting tell me, Hey, wouldn't it be great if Aloha, if you came out with a skincare? No way. Yeah. Way, way. Yeah. It's exactly right. And it was all a straight face by the way. And I'm like, Oh, that's so insightful. Cause Aloha and Hawaii and, and son, I get it. It's good. No, not going to do that. You know, we're in big categories right now.

20:44What I like about our powders and our drinks business, which is our smaller parts of our business, and they're only focused largely online, is that it allows the day parts and occasions. This goes back to like my CPG days, my PepsiCo days, right? You're always thinking about how your products are going to be used in the context of a daily life. And so they talk about day parts and occasions. And some products are better for dessert time, and some are better for morning, and some are better for on the go. But what I like about our categories is that they are so versatile. And so I don't feel the need to divide my armies as a small company competing against very, very big companies who we have a lot of respect for.

21:22We know they're good people, smart people, and they have a ton of resources. We don't have those resources. We have to be much more choiceful. So part of the strategy is, yes, there's a role for powders and drinks because it allows me to expand day parts and occasions with the digital environment. The powders of drinks are more ritualistic in terms of behavior. Consumers fall into them and stick with them. It helps them stay on track. In bars, it's more about the snack and the fun and the taste and so forth. By the way, they can also coexist. But people say, hey, what are you going to launch next?

21:56We're staying in our lane. We have a lot to play for here. If the time comes where the brand is so big and powerful that we have a logical adjacency that fits under their brand that delivers on this mission of being a healthy advocate for a healthy life. It fits in our B Corp values even as well. I would love to consider it, but what I'm not willing to do is sacrifice the core business, the financials of the company, or even our true delineation on making sure you have a great experience today and you'll come back tomorrow. It's that focus. It's saying no to things, even no to great ideas. You say, you know what?

22:35Not yet. One other thing very important to how Aloha has been able to be sustainable, financially disciplined, is the fact that it's also employee-owned, which I think is so fascinating. How does that contribute and incentivize people to build for the long term and stay financially disciplined? Well, it's their own money. I mean, everyone can read it. But if it's your own money, you treat it a little differently than if it's someone else's. The 2010s and early 2000s, I mean, they're the rise of private equity and venture capital and entrepreneurship, right? And you see stories and articles about how much someone raised, you know, hundreds of millions of dollars or 10 million.

23:20What you don't really pay attention to is those are investors. Those financial people are going to get their money first. Like they're going to get their return first. It came down to fairness to me. And it ain't fairness, as I didn't want to put others in front of folks putting in the effort to build it. Fortunately, I found altruistic investors who shared that philosophy on the belief that we're all better together when everyone wins. The company is measured in terms of performance reviews on the company. Yeah, we look at personal performance and so forth, but financially, it's the company wins, you win.

23:55Company loses, you lose. It's a team mentality. It goes back to my days growing up in Minnesota playing hockey. Like it didn't matter if someone had a great game. If the scoreboard was they had three and you had zero, you lost. So it's that kind of fairness that came into the model of Aloha that when we recapitalized, when I recreated the company, refounded the company in November of 2017, it wasn't a debate. We were going to be employee owned. When you are employee owned, it is your money. Under Armour did this really well. Under Armour had, when I was there, Kevin Plank, I don't know if it was him or others, but it was so ingrained in the company's owner mentality that it was on the printers.

24:39It said, make$1 like three. It said that on the printers, on the wall, on the bathroom stall. So when you're talking to your digital marketing person, it's so easy to say, get me XYZ growth. And if you're not an employee owner, you could see that maybe there's some behaviors or strategies they put in place that are a little bit more risky or they're driving a certain growth profile. But they're not actually propelling the business forward from an EBITDA standpoint, which is the fuel the company needs to grow on. So the incentive structure was important. The innate fairness was important. And that's also one of the reasons we became a B Corp, is about using business as a force for good.

25:20That all goes hand in hand. So what I don't want is asymmetry. I want to make sure that the values of the company are reflected in the product, in our partner and operating model, in how we treat our manufacturers and our ingredient providers, in the code of conduct we expect back from them, the kind of people we partner with in the world, especially in Hawaii, with Kupu, which is the foremost expert in terms of regenerative agriculture, student and vocational development in the food world, and about sustainability in terms of bringing entrepreneurship to life there on the islands. It's those kind of choices.