252. Building an Operating System for Your CPG Business

0:00unknown host:Welcome to Startup to Scale, a podcast by FoodBevy. I'm your host, Jordan Buckner. Join me as I talk to aspiring entrepreneurs, seasoned industry experts, and everyone in between as we unlock the keys to growing from startup to scale.

0:18unknown host:As CPG founders, we spend so much time reacting, reacting to orders, retailers, buyers, inventory issues, and last minute decisions. But at a certain point, both demand structure and it's important to have that built in your business so that you can manage all of these things that come at you at the same time. So today I'm talking with Brian, who grew a company called Mustard & Co and also is a co-founder of PZ, about what it really takes to build an operating system for your CPG business so that you can manage both inventory supply chain issues along with sales so that you can get a strong grasp of your business.

0:54unknown host:Brian, welcome to the show today. Hey, Jordan. Great to be here. So before PZ, which we'll get into, you were building Mustard & Co. Tell me a little bit about what that business was when it started and why you started it.

1:05Brian:Yeah, absolutely. It was a creative outlet for me in the early 2010s. I was working at a grab-and-go sandwich and salad company, and one of my co-workers came in with this honey curry mustard and passed it around the kitchen. We were all trying out with this spoon. And as soon as I tasted it, I was like, man, we have to put this into a bottle and take it around town and sell it. And I kind of just threw it out there as a joke. and he was like, all right, let's do it. And I always wanted to start my own business, always wanted to build a brand and all that. And so we sure enough, we came in at night, started making mustard.

1:33Brian:We had the brilliant idea, in hindsight, not brilliant at all, to put it into a Boston round bottle because it was cool. And we were trying to be fashionable, not functional. We learned that very quickly. But yeah, it was great. We started with just one mustard and then grew it into a whole line of mustards and kept it as an independent business, serving independent grocers and meat shops, and gift shops and all that sort of stuff.

1:56unknown host:That's really exciting. What did you find were the biggest challenges as you were growing that business?

2:01Brian:Yeah, I think everything. I mean, we figured it out, everything from scratch, but I'd say the biggest challenge was finding focus. There was so much to do, whether it was like designing the label or coming up with new products or finding new customers or we would place a purchase for mustard seed and the farm they were getting it from and said, sorry, we're out, finding another supplier. There was an endless list of things to do That was also what was so exciting and fun about it is like figuring out all those little things, but prioritizing across every little thing to make sure that we were doing the right thing at the right time.

2:34unknown host:Yeah, I find that just the very core experience of what every founder is going through. And things are kind of messy at the beginning. I'm curious, I'm always fascinated, like what software tools that you use to start managing the business early on? Were you using like spreadsheets and Excel to like track orders or inventory? Kind of what were you doing to manage that?

2:55Brian:Yeah, absolutely. I mean, like everyone else, we started with QuickBooks, use that as like our basic accounting software, started with spreadsheets like everyone else. I'm a tool geek. I'm like very much into tools and tech and all that. So I was constantly looking for a product that would help us manage all of these moving parts, whether it was from sourcing new ingredients or receiving them and purchasing them or even managing our manufacturing to know what was going into a finished product that we would then sell to a customer. So I was constantly on the lookout. I tested probably everything under the sun.

3:26Brian:There's a lot of products that I tested that do not exist still, or sorry, no longer exist, but never really found anything that met my needs, really understood me as a day-to-day operator of like what I was actually doing boots on the ground in the kitchen space or in the warehouse space or driving around town delivering to grocery stores. And so I just stayed in spreadsheets, kept on refining those spreadsheets, eventually turned them into these like low code, no code tools that manage all of our day to day operations, soup to nuts. It worked really well, but it was a lot of work. And I particularly enjoyed it, but it was a lot of maintenance, a lot of tinkering.

4:00unknown host:Yeah, you know, I'm probably similar to you with my CBE brand T-Square that I ran. Like we built out these complicated Google Sheets models that had our like sales dashboard. Or we were as like inputting orders and lines, inputting our raw ingredients and our finished products as we were self-manufacturing or energy bars to. And everything was like pretty working pretty well. But like if we missed a email from a buyer that didn't get manually added to the spreadsheet, then like that could cause an issue. But yeah, when we're doing like under$500 ,000 in sales, like it was manageable. The thing that kind of broke us is I was building it kind of piece by piece as we needed and had all these complicated formulas.

4:40unknown host:And then once we had a new product line, the entire system broke because it was not built for variable products. We were just like manually type in, but everything was like hard coded. Like if this specific name is here, then do this. And I realized like I'm going to have to reinvent and like rebuild this entire spreadsheet in my system because nothing is working anymore. And so I was like, I thought it was working well until it just like completely broke from.

5:05Brian:I mean, that was basically my life for a decade. I really enjoyed it. Like I was, I was known as the mustard guy, like outside of our workspace, but within the workspace, I was known as like the spreadsheet guy. I was like constantly tinkering with the spreadsheets and it was effective, but it like, I was constantly doing it. And I just, I just really enjoyed it. And I was like, you know, a few years into it, I was like, I should probably take a vacation. Right. And like a lot of like people that start businesses, like get to that point where like, I've been working nonstop for the last four or five years.

5:32Brian:A vacation sure sounds nice. And I remember like, how am I going to take a vacation? Like these spreadsheets run our business. And if something breaks, which, you know, always happens to some level, to some extent, you know, a few times a week, what's like, what are we going to do? And it was always that like, I'm not sure if I can walk away because what happens if we don't know what deliveries to make, you know?

5:53unknown host:You know, Brian, it's actually really insightful because I'm a big fan of people trying to figure out what they want to do in life. And one of the best ways of doing that is by looking back on the things that you really like doing. And it's so insightful. You're like, people knew Mr. Mustard guy, but that was actually like the spreadsheet guy. But then now you've taken that love of building tools that actually work and built your new company, PZ, which is really built as like an operating system, inventory management system for CPG brands to better their business. and you're like, oh, that's actually something that you found your passion in or building as a way to help out other founders, which is actually kind of cool.

6:30Brian:Yeah, I mean, cool is one word. Some people might seem very, very boring. I love tinkering on this stuff. I mean, yeah, I double down on like what I love the most of just like building these workflows and these processes into tools and making them seamless and work end to end. That's what we've done with PZ. I'm kind of taking that 10 years of experience and distilling it down into a single one-stop shop to be able to do everything from receiving, purchasing, sales orders, work orders, everything.

6:57unknown host:Yes. I mean, this is really cool. So I know there's a lot of companies out there doing some version of like inventory management or sales, but I always love products that build things from the operator's perspective, right? Like the tools that you wish you had to easily run your business in the way that you think. And so tell me a little bit more about PZ and how you think about how you're thinking about like building it so that as operators your businesses, right? It could run really well so that you can understand your business. What are some of the philosophies behind the software that really inspire you?

7:28Brian:Yeah, there's a number of like features that we've that we baked in based on what I think is an optimized workflow. And I think it's effective for other people. And that comes through when we show people and they're like, oh, that makes sense. A couple examples that come to mind are like one, for instance, is what we call universal cart purchasing. If you think about how you place a purchase order. And this is like for all the, you know, all the CPD nerds out there, right? You think about how you create a purchase order, you go in your QuickBooks, you start with your supplier, your mustard supplier, and then you enter in the mustard.

7:58Brian:And then you go to the next one, you enter in your oils and vinegar provider, and you enter in your olive oil and your vinegar, all that. But you have to start with the supplier first. It's like supplier centric. And so when I would have like my team go around the warehouse and like take stock of what we had and what we need to order, they may see the mustard seed and the olive oil in the jars. And depending on who we were getting it from at the time, they didn't necessarily know who the supplier was. They would just say, hey, I need more jars or I need more olive oil or I need more vinegar, not I need more olive oil from Napoleon Oil Company, et cetera, et cetera.

8:31Brian:And so like we just did universal cart purchasing, have a single catalog. You add all your items to the cart, just like you would be shopping online. And then the cart organizes it into the suppliers for you, has smarter learning and all that built into it, but it organizes it by supplier in one single experience. And with one click of a button, you can submit three, four, five, 10 purchase orders to all your suppliers in one go. And now I had to do that process over and over and over again. And then it's also built more for like the day-to-day operator of like, it's the user-centric versus supplier-centric.

9:02unknown host:Yeah. I think that's really exciting. It's like taking it from that founder perspective and it still get doled out as individual purchase orders but it's so much easier just to input i really

9:11Brian:like that it's a bunch of little things like that like that's not groundbreaking on its own but like there's a there's a number of like little things that we that we baked in and that we're going to

9:19unknown host:continue to build into the product as we develop it more i mean i think one very important thing that always started as well as you decided to build the software as free for people who are starting out. Talk with me about that decision and then of course, like how you do plan to make money because right, we want you to stay in business. Yeah.

9:39Brian:I think our investors want us to stay in business too. I mean, I do too. Yeah. I mean, we actually struggled with this decision quite a bit. Like when we first started, we were like, Hey, we'll just charge people like 50 bucks a month or something, something reasonable where if we build it to scale and we get a bunch of brands on the platform, we'll make enough money to sustain it, but not like hundreds or thousands of dollars, like many of these legacy RPs. And we eventually landed on this model of free because we were inspired by Toast. Toast is this like POS software in restaurants. And they now charge a very, very nominal amount, but they originally gave away the product for free because they realized that they have all the transaction volume running through their platform.

10:16Brian:There's tiny, tiny, tiny bits of money to be made off of every transaction that when you have lots of transactions running through it, you can make enough money to obviously have a very successful business. We want to do the exact same thing. When you invoice your customers on QuickBooks and you send them that invoice and they pay that invoice on QuickBooks, you're charged 2.99%. I think QuickBooks charges. It's a standard like credit card processing fee. We're going to do the exact same thing, not no more, no less, just the standard. And in that 2.99%, it's like a very small percent of that actually goes to the platform that facilitates that transaction.

10:50Brian:In that case, QuickBooks, in this case, us. And we believe that if we can give away the product, the core product for free. And it's really a really great product, a really great experience. We'll get a ton of brands on that platform and then a ton of transaction volume. Then the last thing I'll say is we're competing with spreadsheets. Spreadsheets are free. Like people are using spreadsheets. They're not signing up for these legacy players because they're hundreds and thousands of dollars a month. They're very complex. They're too much to implement. We have to compete with spreadsheets and spreadsheets are free.

11:17unknown host:Yeah, I love that. I think that's a real reason for everyone to give it a shot, check it out and see if it's going to work for your business because I think that it's very transparent, like how you're doing things. I think with the right mindset of, hey, you want to be successful, the more business grows, not just by setting up some arbitrary kind of fee to get in.

11:36Brian:So I think that's really cool.

11:37unknown host:Going back a little bit and thinking about some of your Mustard & Co days, I'm always curious too, like for you, that business, how did setting up systems help you make better business decisions in terms of like having the information that you needed to run the business?

11:51Brian:Yeah, I mean, I think it took a lot of decisions off my plate. like the systems kind of made the decision for me. And I think an example that I can give is we've worked primarily with independent grocers and butcher shops and these like independent shops versus like larger grocery chains and through larger distributors. And one of the biggest challenges with working with all those independent shops is they're small businesses. They have a million things going on. And so it's very hard for them to manage their own inventory on their shelf. And worst thing for a brand selling into those stores is to have an empty shelf or no product on the shelf.

12:25Brian:And so just building a system in which we would actually track the cadence in which all these stores would place orders and then emails would automatically go out to them if they surpassed that cadence, if it went past that threshold and they hadn't yet placed an order. And they actually found that quite helpful, right? This was before so much email was landing in everyone's inbox and they would actually find those reminders quite helpful and be like, oh, I should go check the shelf and I will place an order for this. And so it was like taking that decision off my plate of like, who are all the customers that I need to contact this week and just building that into a system, building that into a tool alleviated just one of many decisions that we had to do.

13:02unknown host:Yeah, I mean, that's so important. I mean, I can tell you that from my own experience, I'll just speak. One thing that I was really bad at at the beginning and always sought to improve was retaining existing customers. So much of my focus is always on like getting new customers, which is great because that's when you think of like where growth comes from. But then you start realizing how many other customers that you are working with, you don't give enough attention to, kind of fall by the wayside and not having a system to really track the relationships and the order cadence and volume with these customers.

13:32unknown host:so that you can send out either an automated or manual reminder, do check-ins with your retail buyers, some of the small stores too, they'll be like, hey, how are things going? How can I help? How can I kind of support you? Are really powerful. And I think then like seeing the system and being able to track like, oh, this customer hasn't ordered in two months when they normally order in one. Let's check in, make sure everything's going well. They're not having any issues. Because a lot of times I found that people who are buying your product, they won't necessarily tell you what's wrong or if there is something wrong, they'll just stop buying.

14:04unknown host:But if there's a problem and they're like, oh, the last batch, one of them showed up broken. I didn't say anything, but I decided not to buy it anymore. Those kind of things happen all the time, but you reach out to them and they tell you and you're like, oh, let me send you an extra case for free, right? For your issues. They'll be like, oh, this is really great and continue to stock you. And so like having that data to support you and like bring some of those things front of mind, I think is so important.

14:27Brian:Yeah, I think as one lesson I remember learning early on is getting on the shelf at all these places, is just like a quarter of the battle, right? Like staying on the shelf is the actual challenge in many ways that could be like maintaining the relationship that could be doing the demos and the marketing to like draw audiences to those stores to buy your product. But yeah.

14:44unknown host:One thing I'm curious about how you approach it with PZ is a couple of things. When you're buying ingredients, especially in the day's market, prices are changing over time, right? In terms of like, you might buy an ingredient that's a dollar last week and it's$2 the next week because of some some shift. Are you able to then like track how your product cost is changing over time based on like the inputs that are going into it or like what's your thinking around kind of like product costs and margin?

15:12Brian:Yeah, absolutely. I mean, we capture all that data, right? So we have all that data. It's actually something that we added just like a couple of weeks ago as COGS. Obviously, that's a very important aspect of running a business and understanding your margins. So you can now see the COGS directly in PZ. But yeah, the nice thing is we have all that data. will be able to help you like report on that data and do analysis on that data. And I think taking it like one step further, I think one of the things, and again, this kind of goes back to like having systems in place to eliminate some of this work or decisions off your plate is like, one of the things I love doing was I was constantly looking for new suppliers or like asking people like, hey, where do you get your spices or where do you get your oil?

15:49Brian:And I always found the simplest thing for me to do is just pull a report of like, hey, I found this new olive oil provider, pull a report of how much olive oil I bought over the last year, what our current price range is, and just say, hey, can you match this or beat this? And then it diversifies your supply chain a little bit more. Having all that data in one place just to be like, pull it real quick and send it, was a huge time savings, I suppose.

16:14unknown host:Yeah, I think that's really helpful. And one thing that I always advocate brands do now is to have like two or three suppliers per ingredient. Yeah, for sure. Because you never know how prices are changed or someone might be out of stock and it delays the whole process. So you want to like build up that reserve optionality to order from multiple suppliers if possible. The other thing that I've often seen as a problem is this conflict between the sales part of an organization and operations. And as you grow those kind of become like two competing factors. I'm curious with any of your existing customers, like how people are using it, like if it's working well, where the sales people can come in and put orders, make sure everything's right within there.

16:50unknown host:And also people running operations can work off of the same data to be able to manage that together.