How Koia Charted A Path To $200 Million In Annual Sales

0:10Hey folks, I'm Ray Lateef and you're listening to the number one podcast for the food and beverage industry Taste Radio. This episode features an interview with Chris Hunter, the co-founder and CEO of Koya, a fast-growing brand of refrigerated plant-based beverages. It's rare for an independent consumer brand to generate$100 million in annual revenue. Chris Hunter has built two of them. Chris is the co-founder of plant-based beverage company Koya, a maker of vegan protein shakes and smoothies that are sold nationwide at retailers including Whole Foods, 7-Eleven, Sprouts, Publix, Kroger, and Safeway.

0:50Koya recently picked up another major retail partner in Starbucks, where the brands' vanilla bean and cacao bean protein shakes are now available in the cafe's cooler cases. In this interview, Chris, who co-founded Koya in 2016 and previously co-created and helmed controversial alternative brand for Loco, spoke about the importance of goal-setting in his personal life and that of his business, lessons from an aggressive retail strategy early into the brand's development, why self-manufacturing is key to profitability in the company's future, and how to optimize the roles of celebrity partners.

1:29Hey folks, it's Ray with Taste Radio. Right now, I'm honored to be sitting down with Chris Hunter, the co-founder and CEO of Koya. Chris, so great to see you. Great to see you as well. So I feel like we always run into each other at trade shows, bump into each other, say hi for like a couple of minutes, and then always in that quick two minute conversation and say, we got to meet up. We got to do another podcast because the last time we had you on the show was 2017. Lots been going on with Koya. Lots been going on with you personally in the past six years. And I want to unpack as much as possible.

2:03So I hope you're all buckled up because I got a lot of questions for you. I'm ready for it. It's crazy. Time flies. That was six years ago. Yeah, I had to check the episode date because I thought it was like 2018 or 2019, but no, it was 2017. You know, that's one of the beauties of this industry, not time flying, but you mentioned running into each other. I think that it was pretty shocking, surprising, exciting for me to jump into this industry and realize how much of like a community there was around it. I feel like a lot of my best friends are from this industry now and developed over the past six years.

2:41So anyway, it's great to be reconnected. Absolutely. So, Chris, you know, I walked into my local Starbucks here in the Boston area and got to say I was a little surprised to see what I saw in the cooler case. And that was a bottle of Koya. Well, more than one bottle of Koya. and I was thinking, oh, is this a test? Is this a regional kind of thing where Koya's in Boston area Starbucks or what's going on here? Yeah, you're starting off with a bang here. Yeah, we're really excited about any level of support and partnership with Starbucks. And it's been something that's been in the works for literally seven years since day one with Koya.

3:23And so like, as an example of that, when I go back to the early days of Koya, it was a blend of proteins that included hemp protein. And we talked to Starbucks really early on and realized that hemp, although federally legal, was going to be an issue for them to ever put in the stores. And so we made that adjustment seven years ago in preparation for what we didn't expect to be such a long exploration period. But seven years later, we have started to work with Starbucks. and you'll see Koya nationally in Starbucks stores over the next few months. So really exciting partnership. It's kind of one of those things that I look at, it's the perfect fit, right?

4:04I mean, the stat that we heard from the CMO of Starbucks is that 100 million people walk through Starbucks stores globally a week. And now this is only in the US. But when you think about that level of exposure and awareness, this is truly the prime example of what I call revenue generating marketing. It's like we're selling the product, they're selling the product, but the exposure in those locations is just unprecedented and very validating for a brand like ours, but also a perfect fit. I mean, when people go into Starbucks, they're looking for, you know, a healthy snack on the go to accompany their coffee.

4:44So we're really excited about it. I'm glad you saw it. Very exciting stuff. Did you approach them seven years ago and you've just been continuing that conversation since? Yeah. So if you remember back at that time, there was a woman named Deb Hanna with Starbucks. She was working with Hippies and some of the other brands. And so I flew out to Seattle to meet with her and then she transitioned out of that role and Starbucks went through their own kind of changes and then COVID hit. And so it was really just a long wait and see period, I guess, in between Deb and now. but it was something that I personally took on as my project and goal to get us into Starbucks.

5:23Well, congratulations on achieving your goal. And that's a great segue because I do want to talk about goals. And, you know, I think entrepreneurs often see headlines on LinkedIn or on BevNet and Nosh, and they're like, wow, you know, this company did this or that company did that. And, you know, look at all the revenue they're generating, look how much money they raised and so on and so forth. And it almost feels like they're losing sight of their own vision and their own goals and their own hopes and dreams for their brands and for themselves. And I want to talk to you, Chris, because I know goals are important to you.

5:53How do you goal set as a father, as a husband, as a, you know, in your personal life? And how do you do it in your professional life? And how do both impact the way you lead, Koya? Great question. Look, I think myself, like probably many entrepreneurs, life just feels so busy, right? And I can get wrapped up in the day-to-day of three young kids running a business. There's a lot going on. We're growing fast. And so what we have found as a family is taking the intentional time to set goals at the beginning of each year. And so how that looks for me personally is my wife and I will take an overnight trip that can be to a local place or traveling somewhere with the sole focus of recapping the prior year and planning the next year.

6:45And that looks like, what do we want to do together? What are my personal goals? What are my personal growth goals? What are my business goals and hers, right? And it starts there. And I think the parallel there is like, it takes time and intentional focus to establish goals for the company as well. And much like, I'll keep you on the parallel between personal life and the business life, much like personal life, there are seasons or phases and recognition of that is really important. So I'll give you an example. For me right now, the recognition is that my sons who are 11, 9, and 5 will only be 11, 9, and 5 once is really important to kind of solidify the season of life I'm in, right?

7:28And so keeping that front and center is really important to everything else I do. Well, I'll draw that parallel to the business. You know, early on, we were in a high growth, high burn macro environment, but also like phase of our company. And the macro environment has changed, right? I would say about two years ago, it really focused on hunker down profitability. You need to prove it out, not just have a model to show how you can become a real sustainable company. And so we're now in that phase of the company. That doesn't mean we're not trying to grow. That doesn't mean we're not trying to generate awareness.

8:03It just changes the way you do things, right? And so back to your original question around goal setting. For me, it starts with the highest level lens that you're going to set on whatever it is you're looking at. So for family, it's like, this is the season, right? It's about optimizing while the kids are a certain age and maximizing that. And in the business right now, it's about like making sure we're a long-term sustainable and break-even or profitable company, right? versus growth at all costs. And, you know, we'll just go raise more money if we need it. So that's where I would start. I would say digging in deeper, the next level for me personally is like, how do you check in on that, right?

8:41And I'll start this time with the business perspective. But we have an amazing team. Our president, Mike, has done a really good job of setting a culture of transparency to really hone in on ownership. And so what we do is every Monday morning, we do a leadership call and we have our leadership notes. and it starts out with our quarterly goals, which are individual, right? So my quarterly goals are going to be different than, let's say, the VP of operations, but it's going to be that. It's going to be our priority accounts. So for me, I'll list out the top priorities for the company, but another person may have whichever ones they cover.

9:16And then we go through our open items. And the point of that is there's a weekly check-in and accountability to where I'm sharing it with the team and they're sharing back if there's misalignment or if they feel like we're operating kind of out of alignment with what we're saying. Our goal is this, but we're doing this. So I think that frequency of check-in is how we help maintain kind of the GPS towards our goals. And it would be the same with family life. We're not perfect at it, but the idea is on Sunday afternoons, we sit down and look at kind of the prior week and the future week and see if we're still heading the direction we want to be.

9:52That type of reflection is so important to know that you are either ahead of what you're trying to do or behind or right on target. When you talk about quarterly goals, can you give an example of one of those goals? I mean, is it revenue-based? Is it distribution-based? How do you think about the kind of goals that you do want to set for the company? So it'll be all of the above, right? And there is no right or wrong goal in our eyes, right? So for me, as an example, one of the goals for the last quarter would be to move 100 % of production in-house. And as you know, a year ago, we vertically integrated.

10:29And as you're probably aware, that doesn't immediately mean day one, you produce all of your product, but there was a transition phase to that. So that's an example of a goal is like, how do we get 100 % of our production coming out of our own facility? Another may be revenue or velocity growth in a particular retailer or channel. You know, another may be successful execution of a marketing program. So it's really, for me, it's company-wide because I view my job as the co-founder and CEO as really the problem solver for the top priorities. And so, as I always tell my team, sometimes I'm going to be really deep in ops and I'm going to be on calls that I'm normally not on and I'm going to be digging in and that may feel uncomfortable to me and to them, right?

11:15The next month, I may be on none of those calls because it may be a marketing focus and we may be exploring, you know, big initiatives there. And so, so they can be pretty broad and diverse in terms of what the goals are. Bringing production in-house is a huge step. It's a huge decision. It's riddled with challenges. and risks, and it doesn't necessarily seem like the best path for a lot of non-alcoholic beverage companies. I mean, typically you see self-production in beer, wine, spirits, some fermented beverages like kombucha, but traditional beverages, coffee, tea, smoothies, what have you, it just feels like it's a hurdle that's almost too overwhelming for most companies.

11:59Why was it such an important thing to do for Koya? and how does it help line the path for your future? Yeah, so I definitely come from the school of thought of like asset light, don't own production. Why would you vertically integrate? Again, the president of our company, Mike, he was the CFO over at Fusion. So we had a long working history together. And when he joined this company, what, six years ago, we both said the same thing. We do not want to own a manufacturing facility. And, you know, I think a key to keeping a company afloat is being open to changes and new information and assessing the current reality.

12:42And what we assessed, really driven by Mike, during COVID was that we were in a really risky situation. And it felt comfortable, right? Because we had a co-packer, we had a redundant co-packer. we checked all the boxes that incoming investors or people would say you need to check to have stability in production. But what we knew is that there wasn't a ton of stability in some of those co-packers. And so as an example, Glambia shut down Aseptic Solutions about a year after we had transitioned out of that. And it became something, vertically integrating became something that was a bit contrarian at the time.

13:26We were kind of fighting an uphill battle with ourselves, with investors about why it made sense to suddenly becoming like an essential or it made us look really smart. And when I look back, some of the things that Mike had pointed out were COVID exposed all kinds of things, you know, issues and concerns around reliability of ingredient providers, reliability of our co-packers, whether that meant the quality of the product or the timeliness of the production. And so just it really made us susceptible. And then I think the icing on the cake, not the driving factor, was that we could really control our potential to achieve our margin targets.

14:12I mean, for a product in our space, the goal is 50 % gross margins, 40 % net, right? And as we looked at that, the only way to do it was to bring a lot of these things in-house and start chipping away at them. And I will say that it has not been easy. I don't think I underestimated the lift that it would be, but I still underestimated it, if that makes sense. Like, even as much as I knew it would be tough, I still underestimated just how difficult it was. And so to the credit of our team, I mean, look, the beverage industry is hard, as you know. Producing beverages is hard. Producing low-acid beverages is quite possibly one of the most difficult things that you can get into.

15:01And our team has navigated it amazing. So, you know, look, I'm not saying it's perfect even today. But all the credit to even getting us to this place goes to our amazing team, because if it were only me, there'd be no chance that we would be vertically integrated because I have no clue about manufacturing. But it seems to be working. You had mentioned that Koya had its first profitable month recently, and you talked about the importance of your margin structure and how vertically integrating fits into that. You know, it's interesting because I think in the past, it really was about top line growth and to attract certain investors.

15:42But it seems like those investors do want to see healthy margins, solid fundamentals. Yes, I think one of the dangers for entrepreneurs is getting too wrapped up in whatever the mentality of the day is from investors or from strategics. It's like high growth at all costs, all top line. And now it's all about profitability. The reality is that they always want both. And there's going to be a few degrees of fluctuation of how important growth is versus profitability or at least a path to it. So what I've come back to, and believe me, I've meandered in this chain of thought over the years, what I've come back to is like really just doing what we feel is best for the fundamentals of the company, sustainability of the company is what's best.

16:30And if we're running a business that we really believe in and that we're really showing has success in the market and that the consumers are demanding, any of that stuff, meaning investment or acquisition or partnerships will come. And I think, look, I think it's proven to be true. Let's call it six months ago, we made the comment, maybe eight months ago, we made the comment to our internal investor base and to some other potential partners that we were talking to that we're going to go heads down. We're not going to distract ourselves with anything except for executing on our plan. We're not going to talk about getting profitable and show you a model that gets us the profitability.

17:10we're going to get profitable. And fortunately, in July, we were able to show that we had our first profitable month. Now, I'm not going to suggest that it's all roses from there, right? It's a business. There's ups and downs. But we proved it. We wanted to not talk about the idea that we were going to launch in Starbucks. Let it happen, right? And so what happened since then is some of these things start to happen. And then all of a sudden, you're getting a lot of inbound calls and requests and congrats and things like that. But it's because we were focusing on the business, not because we were focusing on what investors or strategics told us was the key.

17:47The allure is still there, though. And I got to think that some of your investors and probably some folks in your team are thinking, oh, well, hey, we got this offer or, you know, I'd love to be involved with this firm. But, you know, as the CEO of the company, you know, a lot of that, I think, lands on your shoulders about who you want to be in business with. How do you vet potential partners and how do you think about how you might want to be involved with them in the short term versus the long term? Just like you vet, you know, potential investors and team members, you know, it's through conversation.

18:22And I think I've learned a lot over the past seven years. Back at Fusion, we barely raised any money. And the little bit of money we did raise, I didn't lead that. And so with Koya, I've been very active. We've raised quite a bit of money. I've had a lot of conversations. I've learned quite a bit. And some of the learnings out of that are like, look, who you get in the negotiation process is who you get as a partner, right? And so don't assume that if they're really tough and beating you up, they're going to change their tune. once your partners, you know, there's a bit of that. There's a bit of like, start to focus on what you know or like gating conversations.

19:00Like if, as an example, somebody says, look, it's super important to me that you have X velocity in this channel or I don't even wanna have a discussion, whether that's an investor or a buyer, like get that out early. And then you can know whether this conversation should go further or not. Because I will say like, fortunately, I have a really good team that supports me and frees me up to have some of these conversations, but it can take over, you know, conversations with potential strategics or investors or partners or whatever it may be. And so it's always alluring. It's always interesting. We have investors.

19:37At some point, they expect a return, of course. But I think everyone would agree in general, but especially in the current climate, like running a good, sustainable business is the number one priority. And so that's how we keep our focus or try to. Among your investment team or roster are several celebrities. You have quite a few, actually. Perhaps the best known is Chris Paul, the NBA superstar who is now with the Golden State Warriors. Are you a Warriors fan now? I'm not a huge basketball fan, but I'm a Chris fan. Gotcha. You know, when you think about your celebrity partners, how do you optimize their role and their impact in the development of the company?

20:22Yeah. So, I mean, look, we have a lot of celebrities involved in the company in one way or another. Chris is a good example of someone who was actually helping us more proactively, whether it's gain awareness or with relationships. Another person is Kevin Love and his wife, Kate Love or Kate Bach. And then there's a lot of investors, you know, well-known people, but they literally put their money into the company. There's no requirement or deliverables. And so they're treated very differently, right? I mean, we look at all of the investors, but especially the ones that have an audience or a high profile, and we try to figure out what works best in their lifestyle that can help us gain some awareness or exposure.

21:01And it's as simple as that. There's no requirement to do it, but if we can provide them products for an event or whatever it may be, that's great. With people like Chris or Kevin or Kate, we look a little bit more specific on what is going to move the needle and drive the business forward. And I think many people, including me in the past, look at these types of partnerships as pure awareness play. They have 11 million followers on Instagram, or they have X million people watching them every night of the game. and so they can help gain awareness for the product. And I think that's valuable, but I don't think that's always the most valuable.

21:40And I'll give you some examples. You know, Chris, as an example, joined a call with Walmart and firsthand expressed how much he supported the product, how it fit into his lifestyle and how he felt that it was a good partnership to have healthier plant-based options to a broader array of people that may shop at Walmart versus, let's say, a Whole Foods or something. That was really valuable. The buyer enjoyed hearing firsthand from Chris. Kevin and Kate have done similar things. So sometimes a non-obvious way of supporting is actually even more valuable than the obvious, kind of like mainstream awareness perspective.

22:19And then the reality is all of the people that are invested in our company, whether they're traditional investors, celebrity investors, or more forward-facing people like Chris, Kevin, and Kate have a lot of connections. And so, you know, figuring out what opportunities exist through their connections and where they can like kind of grease the wheels to make things happen. Those are some less weighted but highly valued opportunities that I think a lot of people may miss. You'd mentioned that Chris had been on the call with Walmart. How do you know when to enter conventional? How do you know when you'll be able to support the brand adequately in those channels?

23:03Yeah, I mean, it sounds very methodical and well-planned in retrospect. And at the time it was, and then you face the reality of the world and life. And it's really hard to say no when you have the opportunity to go into a big retailer or, you know, a place like that, that maybe is a leap for you. I'll give you an example. When we first launched, I think, which I shared with you a while ago, but we launched in Whole Foods nationally. Our second large customer was Wegmans. Our third was Giant Eagle. I was scared to death to go on a Giant Eagle, a traditional retailer from my neck of the woods where I grew up.

23:36Just, I didn't know if it would fit. Again, it was hard to say no. So we took the leap and then we made sure it worked. We over-supported. So I don't know that there's a real formula to know exactly when to do it. What I will say is there is one metric, if I'm ever looking at a deal to invest in or even at our own company, the one metric that is as telling as it can be is velocity or dollars per TDP. And so we look at it now on a where do we rank on dollars per TDP versus competitive products, and we set our own internal benchmarks. And if we meet or achieve that internal benchmark from a velocity perspective, we assume and expect expansion.

24:20And so the reason I think that's so important is because if you look at it that way, again, it sounds perfect, right? It has not been perfect over that. It's really hard to say no. But when you look at it that way, it doesn't become a pitching thing. You're literally just presenting to retailers what is best for you and them, right? I believe in win-wins. And so I think that's the way to think about how you can support on a broader channel. I'll give you an example of that. We entered into Ralph's, which is a Kroger banner, as a test. It's in our backyard of Southern California. Not my backyard anymore, but the company's kind of origin backyard.

24:58And our team was able to go in and support it, make sure the product was on the shelf, do some samplings, things like that. within Ralph's, Koya's three SKUs, so our vanilla bean, our cacao bean, and our chocolate banana became the number one, number two, and number three SKUs in that channel or in that retailer. They still are as of today. And that's out of our competitive set of all the nakeds, boathouses, suja, whatever else is categorized under us. That made our conversation with Kroger Corporate a lot easier and different than it had been if we were kind of at the bottom of that velocity range and asking for expansion.

25:34And so I think that's how we think about it. Look, we've made some mistakes in the past. We've gone into some retailers assuming that we had a lot of awareness and momentum and maybe under-supported them. And that's a mistake I would caution people against because it's much harder to go back and fix an issue rather than just address it on the front end and never have an issue. So I guess maybe to answer your question, And another way to think about it is what does your budget look like? And can you give that retailer the full support that, you know, it needs to 100 % be successful and not take a chance on it?

26:10Well, there's a lot to unpack there. I want to go back to Giant Eagle and saying, you know, you made the decision to over-support Koya in their stores. What does over-supporting look like? What does that mean? So we hired, so we had a broker in place. We went through a DSD initially. So normally, it's often, I should say, it's one or the other. It's a DSD or a broker or a merchandiser. We did all of them. We did brokers. We did DSD. We did merchandisers. We had internal people focused on the account. So that's what it would look like in terms of a support from manpower or focus. We went heavy on temporary price reductions or discounts to gain trial.