A Controversial 'Tok-ic.' Mission Impossible? Not For Ziba Foods.

25:54It's like, it's red, it's hot. It's called Haunted House. there's pilipitaka which is they translate on the side for you so i know this is yellow firecracker but this is where john craven if he were here would make a joke about mike but anyway continue why don't you just do it i don't know how he's too clever for me yeah he's good at that jackie anyone i'm setting myself up yellow firecracker this one's orange habanero and yellow bell pepper And this one is like, is the one that would replace everything else. You know, any other hot sauce occasion that I have, I would just put this. It's like a Frank's hot sauce situation where I just put that on everything, you know.

26:36And then there's the Harabara, which is jalapeno and serrano. It means lush green in English. All right, it's time to get to our featured interview for this episode. As I mentioned at the top of the show, Rafi Vartanian and Patrick Johnson are the co-founders of Ziba Foods, a premium brand of Afghani-grown heirloom nuts, seeds, and dried fruits. Founded in 2015, Ziba set out to create and maintain an ethical supply chain from farm to bag, including fair and direct trade with Afghan farmers, along with living wages for its women-centric workforce at the company's processing facility in the capital of Kabul.

27:19I spoke with Rafi and Patrick at Expo West 2023 about their vision for Ziba and how they articulate the brand's compelling story and product value to consumers and retailers, how they navigated the complexities of the U.S. troop withdrawal from Afghanistan in 2021 and subsequent return of Taliban rule in the country, and how contingency planning factors into their long-term business strategy. Hey folks, it's Ray with Taste Radio right now in Anaheim, California for Expo West 2023. And sitting in front of me are Rafi Vartanian and Patrick Johnson, the co-founders of Ziba Foods. Gentlemen, how are you?

27:57Good morning. Good morning. Good morning. Rafi, can you just give us a brief history into Ziba Foods, how it got founded, and what you're doing today in terms of product selection and retail? Sure. Ziba Foods, Patrick and I founded in 2015, and with kind of a shared passion, not only for food, but also for, I think, approaching development in a different way. We come from varied backgrounds, mine in shipping and logistics, Patrick's in distribution, sort of always with a backdrop and history of skirting around development and working in developing countries, but didn't sort of marry those two things together.

28:33And I think when we were both in Afghanistan for different reasons, we're just absolutely enamored with the range and quality of dried fruits and nuts that were there. And sort of the light went on about, well, how can we bring this to market in a different way? And sort of an idea that spilled over into a business plan, spilled over into raising a bit of money and finding some partners, sort of landed us with maybe not the smartest business idea is to build a factory before having a customer. But that is what we wanted to do, which was to maintain and keep all of the value addition of products in country, as opposed to sort of the traditional path of exporting raw materials, even with their high quality and have them lost along the way and not be able to showcase what farmers and growers are actually able to do.

29:18Meanwhile, we can sort of build skill sets, hire and work with marginalized communities. In our case, we decided to actually almost exclusively hire women, and that's sort of maintained throughout our journey since 2015. Our packaging, case labeling, everything is done at our factory in Afghanistan. So everything that you see on the shelf is done by hand or as little by any sort of machinery as possible in Afghanistan. So it enables us to hire more people as well. We're not looking to expand into modern machinery only to the extent that it helps us with sealing packages, etc., for food safety reasons.

29:57But everything else is done in our factory and then sort of ends up in the shelf as it is. I mean, there's a long process between the factory floor and the shelf, but that's the fun logistics part that I think I got into this for. I'm just enamored with your story and everything that you do. and I'm thinking about all the aspects of Ziba Foods that you put so much emphasis on and that you really spend a lot of time on. What do you lead with? How do you just talk about Ziba Foods to someone when you only have 10 or 15 seconds? Yeah, that's been a challenge really since the very beginning. Even talking between ourselves, it's like, what do we lead with?

30:35And it can differ. I mean, you got to know your audience for sure. But generally speaking, we try to strike a balance between, okay, we do have a compelling social mission for the business, but the quality of these products is superior. And that's the message that we have to drive home to people is you have to try these. And the reason for that is largely goes back to the fact that these are heirloom varieties and they're wild grown products. So our mulberries and pistachios, they grow wild. They're not farmed at all. These are just products that grow in the foothills of mountain ranges and are foraged by local communities.

31:11They're unadulterated. They're not genetically modified. So they're not grown in a way to maximize yield per hectare or anything like that. Usually and almost always at the expense of the quality of the products themselves. And also taste. I mean, it's just incredible. Flavor from flavor to nutrition. They're standout products. And we try to send that message most clearly. And then we do also say, you know, by the way, the best way to do this, the best way to bring these products to market is to do it in a way that keeps the value closest to the communities that work so hard to grow them in the first place.

31:48And that is working with farmers and paying them fairly, and then having the processing done in the same place where they're grown. And that's our factory in Kabul, paying a living wage and hiring as many people as we can. And for us, that means basically not just a marginalized population, but even within Afghanistan, probably the most marginalized population within that country, African women. And they're just incredible workers and they support huge communities. We estimate that one of our employees probably is providing a living livelihood for at least 10 people. Wow. That's on average? Yeah, that's on average.

32:28So the Afghan average household size is around nine, so nine or 10. So every job we create is paying, you know, the cost of living for a family for the year. And that was the easy part for us to sort of make the decision of how to approach the development side. I think for us, we led with our stomachs for sure. And then, you know, realized that why would you not pay farmers? Well, how would you not? I mean, this is, I think where our more professional backgrounds has helped inform how we approached this business plan and the business in general, even though we have no background in CPG, we've gotten a massive learning curve since attending, whether it's a fancy food or expo in terms of how this side of the business works.

33:13And it's been worthwhile for seeing the team develop as well, right? People who also didn't have processing experience becoming our plant managers and doing the label work, whatever else it is, right? Because our team is not just, you know, on the factory floor. People have been promoted throughout. We've had our pretty much a near 100 % retention rate since, you know, we built the factory in 2015. And, you know, we've had just team members with us for eight years. It's been incredible to see them grow. Well, when I first encountered Ziba Foods, I was on Martha's Vineyard, actually, and I was at a specialty grocery store and I'd seen your figs and I'm like, wow, these look amazing.

33:45And I bought them that one. Wow, they taste amazing. And it was interesting though, because I never really knew too much about the story of why you started the company, why it's based in Afghanistan, the fact that you employ a predominantly female workforce and all the other amazing things that you do in that country. That being said, I think I paid $8 for the pack. Is that within the range? Is it sort of like a$5 to$10? average price point for all your products? Yes, but it really, you were at a specialty store in Martha's Vineyard, you can imagine. That was a very unique experience. And that's how we started, and we had to sort of start in that specialty because, you know, again, Patrick mentioned, you know, as we test the supply chain out, we didn't have the volumes, and we had to air freight everything out of Afghanistan because we didn't have the volumes to justify a container.

34:32You know, at one time, it was$10 a kilo to air freight, if not more, and plus all the clearing charges, et cetera, et cetera. So that, of course, went into the pricing. But now we've reached a stage where we're doing a full container load, you know, nearly every month, maybe a little bit more regular than that. It enables us to lower our price dramatically. Also volumes in general, so that's the simple economics do work in that way. So we've seen our 150 gram or five ounce bags as low as$6.99 or so, which is fantastic. I think it makes it a lot more accessible. I think to your point, your question earlier about how we can succinctly talk about Ziba, which we obviously cannot still in 15 seconds.

35:11I think a consumer instinctually understands story, origin and taste very quickly and increasingly hones in on that and buys according to that when they sort of see something. So they want to make sure that it tastes good. That's, you know, I think above all, but it somehow tastes better when you believe in its origin and its story. And I think we're able to communicate that in our packaging, which we're really, really happy about. Absolutely. And, you know, when you turn around the package, I'm holding in my hand your trail pairing of mulberries and apricot kernels. It's a 1.76-ounce pouch. And on the back, right by the Nutrition Facts, you have Ziba means beautiful.

35:49And I think that encapsulates everything that you guys do with the brand. And I have to go back to this concept of managing and running a business and a factory in Kabul under a Taliban-run government. Sure. Which sounds like an extraordinarily difficult thing to do. Maybe it's not. And when I think about when the United States pulled the military, its military, out of Afghanistan and the chaos that ensued, it seems like your business was in jeopardy. That seems like the crisis of all crises. First of all, when you found out that the United States was going to be exiting Afghanistan, what was your initial reaction?

36:34And how did you make sure that your factory was going to remain under your control and that you are going to be able to continue to support the employees and partners that you had? Yeah, I think you can speak to that very well. But to set the stage for his response, this is also against the backdrop of the pandemic is happening at the same time. Yeah. So we were dealing with COVID for a year and a half before the Taliban problem. And as well, it was also a global supply chain crisis going on at the very same time. So freight rates globally were super high, super slow. And so we were dealing with multiple crises at the same time, any of which might have been existential crises.

37:19But anyway, so that's sort of the backdrop of when the Taliban took over. It wasn't like everything was going really great because we were dealing with. And also in Afghanistan, there was a typhoid epidemic that no one heard about because everyone was talking about COVID. So there was also there was typhoid going on as well. Yeah. And I think at that time, as you said, it wasn't just those really chaotic and terrible few days in August right after kind of the last troops left. This was a known fact that the U.S. and coalition forces were going to pull out of Afghanistan months earlier. In fact, not maybe even a year earlier.

37:56But again, no one expected it to sort of unfold in the way that it did. So we were definitely concerned in advance about what we may or may not do, what may happen. But Patrick and I, we have a pretty high risk tolerance in general. And I think we feel that... Building a factory in Kabul. Yeah, that's risk-seeking, risk-seeking. Yeah, that's fair. Hopefully in the right ways. But also we've also looked at, you know, there's always a delta between perceived risk and actual risk, right? And so I think we're decent at managing the actual risk and not really worry about the perceived risk so much.

38:27Having said that, we always felt just during the course of that we're working in and we didn't bring something new to Afghanistan, right? All we're doing is providing marketing and logistics support to a community and country and a population that has been doing this far longer than we have heard about it. And even Armenian, we have a history of producing amazing sour cherries and dry fruits and nuts, et cetera, from a little bit further north and west. But nothing like this. And this is part and parcel of their culture. So from that perspective, we had understood that even during the Taliban's first run, shall we say, after their civil war in the 90s, and even actually prior to that, during the civil war, during the Russian invasion, during the Russian occupation, dry fruits and nuts were produced.

39:11They were traded. They were exported. So we felt that this industry would carry on no matter what. Now, how are we going to survive within that? Well, I think our initial business model was always going to allow for it, which is that we don't have any expats on payroll in Afghanistan. Our production facility is 100 % Afghan. Our plant manager, our general manager, our accountant, our marketing team, all the factory workers, we don't have to worry about sort of a, you know... Flight. Yes. We're not supported by the U.S. government in any way. We didn't sort of have any ties in that way. We're a for-profit business that's running in the country.

39:46Our ability to go in and out, that was maybe put into question. And that had already been affected because of COVID. So we were already, we were running the business from afar for the first time, putting a lot of faith and trust in our general manager to run the show there, which he did just an unbelievable job throughout and continues to. So yeah, that was our ability to go back and forth was the biggest. Quick tangent, how does one get in and out of Afghanistan as an American? It used to be you could go to Dubai and get a visa from the Afghan consulate there, same day process. And then you fly.

40:18There used to be an Emirates flight every day. I think there were about five, six flights a day. It's about two and a half hours from Dubai. Often, sometimes we would go in and out the same day, leave at four in the morning, come back at night if we needed to be there. But in the early days, building the factory, we spent a lot more time on the ground. and then as sort of things developed, our focus became on sales and managing our growth and raising money, whatever it may be, and just really enjoyed. We became a nuisance at the factory, if I'm going to be honest with you, because we wouldn't sort of, we forget to wear our hairnet or shoes or whatever else.

40:49So maybe sometimes it was actually better that we just went to lunch. Your general manager was like, no, no, stay, stay. The pandemic is going to, you know, it's going to keep you guys. We're doing fine. It's nice to talk to you. But it is worth saying. But speaking about the awful period right afterwards, we were definitely in panic. Everyone was in panic. We didn't know, could our team even go to work? I think it was up against a religious holiday at the end of that week as well. So we kind of made a collective decision to close the factory initially, just while the chaos in Kabul sort of, or the airport, I should say, just sort of unfolded.

41:25And this was in August of 2021. Yeah, August of 2021. And two, three days afterwards, when I think the airport sort of cleared out and it was clear that, you know, this wasn't sort of devolving into a street fight or a civil war of any kind, our General Madjawid, we keep calling him our General Madjawid, dear friend and our general manager, talked to some of the other business owners in our industrial area, which is sort of on the Jalalabad Road near, just outside Kabul city, about possibly going back to work. And they also employed, you know, some women, some of them, you know, more so. And they said, well, look, let's, there's no ban, you know, so let's.

42:05Streets are quiet. Everything's quiet. Let's, let's give it a shot. And that's kind of been our path since, you know, in that respect. They went back to work and, yeah, it's not, hasn't been a moment of downtime since. I mean, there's been, I think about three, four months later, there was the inevitable kind of visit, the knock of the door as, as these, you know, Taliban fighters, you know, transition to becoming bureaucrats. and not really like there's a story onto itself. I think that's also so unfolding. So these guys who've been literally fighting for 20 years and sort of now having to deal with paperwork and come around and see who's doing what in what factory.

42:41And they came in and were very happy that we were working, very happy that we were processing, very happy that we have women working. I mean, not to say that I endorse at all sort of government in any way. I think it just shows that there's just this nuance. I mean, the Taliban themselves, they're not a monolithic, right? You have a spiritual arm. You have a military arm. You have a political arm that was in Doha and Qatar for years. And they don't necessarily get along. And they don't know what they're doing either. And I think we just continue to survive in that realm of transitioning from insurgency to governing.

43:15It's very different. And it's also, we have no men inside the factory. Women are working not alongside men, which I think. These were some of the issues that we were maybe worried about that would sort of raise flags in the current environment. And we don't really have it. So we're not ruffling feathers. And as a result, I think we just can continue to operate. And we do feel strongly that even though rights are being cut and we hate it and we will do anything that we can. That's why we're paying so far outside the normal wage range and keep people sort of working because they support their families.

43:47or enables them to keep their internet connections and their data and be able to educate their children, you know, through other means than just, you know, of course that's works for our, let's call it more wealthy Kabul sort of population, you know, relative to the rest of the country. But at a certain stage we had just, we could, you know, Patrick and I can only do our part, you know, and that's with our team and with our farmers and, you know, and we're proud of that. But, but of course on the whole of the country, it's, it's, it's really sad. Yeah, I think it's important to mention that the plight of Afghan women, if you want to talk about that, they're strata in any society.

44:23And the inability right now for Afghan women to have a higher education, to go to university right now, it's a terrible thing. And we desperately hope that that changes. At the same time, that's not the staff at Ziba Foods. They're not from the part of society who would have ever had a chance to go to university themselves. They're just looking for a way to support their families. We're working with them. There are literally millions of them in that situation. We desperately hope that people who are from a different part of Afghan society, women are able to become doctors and professionals and lawyers and everything along the rest of it.

45:02But it's not like Rafi said, we can only do so much. We're working sort of a different population. And it's worth noting, sorry, Ray, it's also just on the premise of the process. I mean, talk about, you know, there's the social aspect. But in reality, also, when we sort of went back and things sort of, let's call it calmed down, and our team went back to the export office and, you know, wanted to go through the process, we thought, are we closed off? How are we going to move our goods? Exact same people. And just a new, just like an administration change in the U.S. government, there's a new boss who has no idea what they're doing.

45:35The last boss didn't know what he was doing. And all the people actually doing the work have remained in place. And so it became, it was at least one thing we didn't need to worry about was that our process. So we just kind of just kept our head down and kept moving. Yeah. I mean, that's great to hear. Of course, it's not great to hear that, you know, the Taliban is running the show in Afghanistan. But it's good to hear that you were able to kind of keep things going without skipping too much of a beat. That being said, if I were an investor and I was looking at Ziba Foods and I said, OK, well, it seems like things are going well.

46:08and they even went well through this transition and through a chaotic time, I would still be thinking about contingency planning. And I know you guys are not necessarily risk-averse and not necessarily risky entrepreneurs. You know what I mean. I would say, have you thought about the potential of the Taliban taking over your factory or saying you can't operate this way anymore? What is the plan in that case? Yeah, our plan B is something we talk about a lot. And I think that something I alluded to earlier, one of the things we're looking at is we consider ourselves to be passionate about frontier markets.

46:50Afghanistan is one of them. And Afghanistan is somewhere where we have, you know, we had the collective experience professionally and, you know, everything kind of coalesced around Afghanistan. and we love Afghanistan and we will continue to operate there and grow there as much as we can. If that becomes no longer possible, we are going to be diversifying our supply base and other frontier markets. I mentioned Indonesia, possibly West Africa, East Africa. But we're also looking at the possibility of going, for example, into Central Asia to some place like Uzbekistan, which will have a sizable Afghan refugee population.

47:27We could look into building a factory there and employing Afghan refugees and continuing to supply these amazing products, also many of which are grown in Uzbekistan, but also from Afghanistan. You can bring in Afghan raw materials to continue to support Afghan farmers, even in the context of no longer being allowed to have a factory employing Afghan women in Kabul. So we do think about Plan B a lot. It changes, and we continually refresh those conversations. And certainly from an investor's perspective, our potential investor network, the Venn diagram of people who are passionate about developing emerging markets or frontier markets, retail consumer packaged goods, and are risk-seeking enough or interested enough or socially motivated enough to consider an investment like this.

48:16It's a pretty small group to begin with. And so oftentimes what we find is if we can get to, we're going to have good conversations with potential investors, we'll find that they're already aligned with a lot of the things that we believe in. And I think we're having the conversation to begin with. And believe that we can execute on the plan B. I think that's the more important thing. We don't, you know, we have to think about it. We have a plan for it. But also we can probably execute it very quickly in a place like Uzbekistan, where we've maintained networks and ties. is we used to actually do a lot of our, that post sort of new government era, did most of our shipping north, trucking it to Uzbekistan, et cetera.

48:54And so it was a transit point there. It's not SpaceX, you know, what we're doing, right? It's about process, you know, food safety is around process. And especially when it's sort of a combination of some basic equipment and manual labor, being able to recreate that with as much of our current staff, if they wanted to come up, if it got to that point, or other refugees there would not take us very long. Does plan B also include a certain amount of inventory that you always have to have on hand in case you are running out of supply for one reason or another? I mean, if I were a retailer, I would say, okay, how do you maintain consistent supply of this product?

49:29I mean, it seems like you're buttoned up. It seems like even through very challenging times, you've been able to maintain a consistent supply to your retail partners. But again, that is part of this all, this contingency planning, when thinking about where you are and where your factory is. Yeah, in terms of supply product and inventory, it happens that there's a single harvest season in Afghanistan that runs from about June, July, August, a little bit into September. So in order for us to, you know, we're a for-profit business. We're inching our way, you know, towards sort of cash flow break even.

50:01And in order for us to achieve adequate margins for these premium products, we need to buy right at the harvest point when quality is the best and the prices are the best. And also we have in our facility, the way of post-harvest handling, which is critical for these products, we have a better way of handling these products and storing them than you'll find in the open market. So we basically buy a year's worth of products at the harvest point and we keep them in our factory. So it solves that problem. We need to do it for other reasons, but it does solve that problem of, you know, if we need to up and move, we have inventory to last us till the next harvest season.

50:37Well, that's great to hear. You know, I feel like there's something about Ziba Foods that's so incredibly niche and beautiful in that regard. Sometimes the most unusual approaches to consumer brands are the most intriguing, the most interesting, the most fun, really, in so many ways. But again, you mentioned a number of times you're a for-profit business and for-profit businesses scale. What does the scaling strategy look like? How do you think about your product selection, whether or not there's one or two products that will be the scale drivers for your brand will be the one or two products that end up potentially at a mass retailer like a Target or Walmart.

51:17Yeah. Yeah. I think this is where our trail mix and trail pairings and the sort of additional step of value creation comes in. Now that we have a relatively solid supply chain, we understand where the raw materials are come from, putting them together in interesting ways. And that can be in trail mixes. It can be in fruit and nut bars. It could be a nut butters and nut paste. The nut butters that are made with these Afghan products are outstanding. And so we can incrementally add in those new products. You can scale that way. And then it's really, you know, focusing on just fighting the fight for the shelf space in the United States and growing through distribution sensibly and learning from those around us and taking as many tips as we can from seasoned experts in the field.

52:02As we walked over here, we walked by a huge queue of people waiting for their Kroger first pitch, where we had gotten up around six o 'clock in the morning last year and waited in that same line or sort of early and it makes a difference. It worked. And so we've been given the opportunity for a couple of our products, our figs, which you mentioned earlier, and our mulberries at around 330 locations, sort of within the Kroger family. And so we're getting to that stage of growth where we can scale. We feel confident in being able to accurately predict a measured growth trajectory year on year so that we can raise the working capital for each successive harvest.

52:41And I think, as Patrick said, grow responsibly in that way. And I think we're starting to understand that just opening doors doesn't mean anything else. We also need to get this in front of people and have them taste it and sort of have it go off the shelf. So finding that balance is, I think, our kind of next mission is sort of whether you find marrying sort of growth with velocity and still though getting in front of both retailers and consumers. Well, I hope that today's conversation gets into the ears of enough people in the industry so that they do have a good understanding of what you guys are doing with Ziva Foods.

53:14Thank you so much. It means a lot. And as you rightly say, we've weathered a couple of storms in the last couple of years. So if we're on the other side of it, I think that's possibly a good sign. Absolutely. Patrick, Rafi, thank you so much once again for joining me today. Thank you. And thanks, Ray. Good luck with the rest of the show. Thanks so much. Thank you. That brings us to the end of this episode of Taste Radio. Thank you so much for listening. Taste Radio is a production of BevNet.com Incorporated. Our audio engineer for Taste Radio is Joe Cratchy. Our technical director is Joshua Pratt.

53:48And our video editor is Ryan Galang. Our social marketing manager is Amanda Smirlinski And our designer is Amanda Huang Just a reminder, if you like what you hear on Taste Radio Please share the podcast with friends and colleagues And of course, we would love it If you could review us on the Apple Podcasts app Or your listening platform of choice Check us out on Instagram Our handle is BevNetTasteRadio As always, for questions, comments, ideas for future podcasts Please send us an email to ask at tasteradio.com on behalf of the entire taste radio team thank you for listening and we'll talk to you next time