Jeff Church's Tale Of Two Brands. Why Suja Soared And Rowdy Energy Crashed.

0:10Hello friends, I'm Ray Latif and you're listening to the number one podcast for anyone building a business in food or beverage taste radio. This episode features an interview with serial entrepreneur Jeff Church, who's best known for co-founding and helming cold-pressed juice brand Suja. Jeff Church knows the highs and lows of brand building like few do. He led one beverage company to$100 million in annual revenue. He's also lost$4 million of his own money trying to scale another. His experience and perspective on how and why brands succeed, and the reason that they don't, is why I asked him to join us for a live interview as part of an industry networking event in San Diego hosted by BevNet and Taste Radio on September 25th.

1:02As part of a wide-ranging conversation, Jeff spoke about how he navigated Suja through its early development and rapid growth and what he perceives as a decision that was most impactful in the brand's success. He also discussed the failure of Rowdy Energy, a high-profile energy drink brand that he co-founded with NASCAR driver Kyle Busch in 2020 and shut down less than four years later. Jeff, who currently leads an accelerator program for emerging brands, also shared his take on the current landscape for early stage food and beverage companies as he weighed in on the value of innovation, high quality package design, profitability, and staffing.

1:49Thank you all so much for coming out to the BevNet West Coast branch here in San Diego. My name is Ray Lateef. I'm the editor and producer of BevNet's Taste Radio podcast. If you're not familiar with the Taste Radio podcast, We are the number one show for anyone building a business in food or beverage. If you're looking to start from the ground up or help scale your business, we have the answer speaking to founders who have been there, done that. And that includes folks like this gentleman next to me. That's Jeff Church, who is the co-founder and former CEO of a little brand you might have heard of called Suja.

2:24Jeff, thanks so much for being with us today. Thanks so much, Ray. Hey, everybody. Happy to see everybody. You can clap. You can clap. Jeff Church is a legend. You should be clapping. Just old. No, not at all. So we are recording in front of a live audience here. We're going to post this content on the podcast on Taste Radio a bit further down the line. So please no screaming and yelling. Unless you're screaming, listen to more Taste Radio because that always helps, doesn't it? I think so. As I mentioned, Jeff is the co-founder and former CEO of Suja. You've been involved in the beverage industry for a long time.

3:00Talk a bit about your background. Yeah, thanks, Ray. And welcome, everyone. Happy to see everyone here. I've been in the beverage space for about 15, 18 years. I've been in the business space buying or starting businesses for the past 35 years. I guess over that period of time, I've had eight companies of my own, four of which or five of which were companies I acquired and used the assets of the business to fund the purchase price and then built them up over time and sold them. And then three of them have been startups that I've done all in the food and beverage space over the last 12, 14 years.

3:37So I like the startups a lot more, because they're just fun. I mean, they're there. I say fun, you guys are like fun, really, we're having fun. It's fun because of the freedom that you get, you know, the esprit de corps that you get to create. I feel a lot like, you know, as a founder, I'm an artist, and I'm painting a portrait, and I get to paint the culture of the company. and when you buy a company, you don't get to paint that. You inherit a culture based on what you get. You can kind of move it on the margins, but you can't really change it the way that maybe you'd want to have it. So the startups are really nice because you get to create, you know, you're your own artist, and you get to create that portrait the way you want to create it, and you only have yourself to blame.

4:17So that's the only negative about it. You can't blame somebody else. Yeah. I do want to talk about Suja. I do want to talk about Rowdy Energy. I want to talk about a few of the businesses you work with. I do want to take a slightly different tack than we typically do on the podcast in that I want to kind of go backwards and start from the back and go forward here. You know, people talk about startup life all the time and there's a glamour to it. Obviously, there's a hardship to it as well. But, you know, in your opinion, having been involved in so many, you know, what's the most difficult part that people don't realize about startup life, especially in that one to two years in?

4:55Because once you're in the market, once you get the product out in the market, that seems like that's the easy part. Everything else is difficult. But what's the most difficult part in that one to two year stretch? I think the most difficult part in the early stage is you don't have that much revenue to start, right? And your gross margin isn't that high to begin with as a percentage. So your extra gross margin dollars aren't that high. And yet you've got these operating costs that you're trying to build a brand and build a business. And they're out of whack, which causes you to lose money. And I think the first couple of years, you're kind of, you're renting time, as I call it.

5:29And you feel like the clock is ticking, you know, on you before you run out of money. And that's a very destabilizing, you know, thought to know that, okay, I'm now one month closer to my 18 months. Now I'm five months closer. Now I'm seven months closer. Now I got to raise money, but maybe it doesn't look that great to raise money. So that early stage from that standpoint is very stressful. I think the first hires that you make are really, you know, stressful hires. because if you hire wrong in the very, very beginning, it's a real, you know, kind of puts you back type move. I call them fatal flaws.

6:01But I think, you know, the money side of it's really challenging, you know, in the beginning and running out of money, not having enough money, you know, and then, you know, just continuing to build that out. I mean, it changes over time, but I think that for me is the most difficult part. I think also, you know, as a founder, we have to be somewhat risk tolerant, right? And we have to be somewhat comfortable with looking over the abyss, you know, over the cliff and into the abyss. And we have to be somewhat comfortable with that. And that's a hard thing to do. Especially, I find it hard for a spouse, you know, that isn't necessarily directly in control of the situation, you know, to also do that.

6:36So for those of you that have spouses that are doing this kind of stuff, please, please, please communicate and over communicate, you know, with them because, you know, they're, they don't have the control that you have and you're playing with their life assets as well. I mentioned the glamour that's associated with the food and beverage industry. It feels great to be able to say, I created this, and then go to a store and see it on shelf and maybe have someone buy it off the shelf. You're like, this is crazy. I did this. At the same time, you're wondering how many more people are going to buy this?

7:06How do I get more people interested in seeing my product out there? And sometimes you get lucky. Sometimes you're just in the right place at the right time. And I'm not saying Suju was lucky, but Suju was definitely a brand at the right place in the right time. And I think your leadership helped the brand take advantage of that opportunity. When you do think about finding yourself in a good situation where you do have the ability to scale quickly or at least attract attention quickly, talk about that process. How do you start thinking about where is the first step and then where is the next step?

7:40And how do you look 10 steps into the future? I mean, do you even do that? Yeah, that's a really good question, Ray. I do. Whenever I start a business or acquire a company, I call it begin with the end in mind. It's kind of a Stephen Covey concept, seven habits of highly effective people. And I'll actually write the selling memorandum when I'm doing the due diligence to buy the company or to start the company. So I'm kind of writing my strategic plan. I'm then working backwards on that plan and trying to see where I have holes in that plan. So do I not have a good route to market? Do I not have good intellectual property?

8:14Do I not have the right team? And I start to see the holes. And it's kind of like a five-year process that I'm looking at it. So if you kind of start with where you want to get to, even with this revenue and your profits and all that kind of stuff, and then work backwards, you're able to kind of break down, you know, where do I have the holes that I need to fill in here? In Suja's particular case, though, we were really lucky in that we were the number three cold-pressed juice company to come out. I mean, there were some other little ones around the country, I'm sure. but we were behind Blueprint, Cleanse, and Evolution Fresh.

8:45And both those companies were running out of money right as the market was coming up. So they were just a little too early. And both those businesses, Evolution Fresh, as it turns out, didn't sell for more than$15 million to Starbucks. And had he been able to hold on another year or two, it would have been a wholly different outcome. So a little bit of his luck in terms of timing. You know, right as we were launching, both those brands were acquired by larger CPG brands. And, you know, as you know well, Ray, but when bigger companies acquire little companies, oftentimes they lose that founder esprit de corps and that kind of, you know, just that we're going to take the hill.

9:24We're going to win this game. We're not going to let anything get in our way. Just that fighting attitude, they kind of lose that. And both the parent companies that bought both those companies, one of them diverted HPP machines to Blueprint Cleanse to another one of their divisions outside of Blueprint Cleanse. Can you imagine how demoralizing that is to have that happen like right away as you're partnering with someone? So, you know, they both were acquired and they kind of went off the road. So all we had to do, and I won't say all because we grew from, you know, from zero to 100 million in six years.

9:53But all we had to do was kind of hold the stick in the middle of the road. And, you know, actually execution is something you can control. You know, demand is much harder to control because you can say, well, I want more sales. I want more sales. And you can put the things in place to get them, but you may not get the sales. Whereas execution, you know, you can control that. You can be very detail-oriented. And we were really, really detail-oriented. I would send literally half a pallet from San Diego to the East Coast for business in a full truck. You know, as you can imagine, what a disastrous idea that is from a profit standpoint.

10:29But, I mean, I would do that because I was petrified of the cold chain and breaking the cold chain and having – because you never know if it sits on a dock for a couple hours and it starts heating up and the micros start growing because of that. You just don't know. And you'll know it in two months when you have product blowing up on people. But, you know, that's not a lot of fun either. So, you know, we just had to keep the stick in the middle of the road. Again, not easy, but easier than trying to get demand out of the thin air. I want to go back to something you said about thinking about the end first.

11:02A lot of people here are like, you know what? I want to create a brand that is lasting, that has value generations after I'm done with it or I exit the business. And that's pretty ambitious. How do you factor ambition and the potential of a brand when you are mapping out that business strategy? That's a good question. I wish I thought of that question. It wasn't on the questions we talked about, Ray. You know, from a strategy standpoint, I mean, I'm just, it's how do we get up the hill fast enough, as fast as we can? How many people are going to strap on my back to come up the hill with me? Who else can strap people on their back to come up the hill?

11:41And that's why the skill sets of an early stage founder are very, very different than the skill sets of a professional manager that comes in much later stage. Frankly, I find that really, really boring. In fact, you're doing pre-meetings. And if I do another pre-meeting with Coca-Cola, I think I'll shoot myself in the head. But they do them or take 12 people to a top-to-top, you know, with a retailer when, you know, you guys are probably used to taking yourself and maybe a salesperson or a marketing person. And I like that environment because that environment, you know, you're very lateral in your thinking.

12:12You have to understand route to market. You have to understand, you know, your marketing strategy. You have to understand the distribution network. You have to just understand a lot where literally I would show up at meetings with Coke and there'd be 12 people in a meeting for an hour with one buyer on the other side. And, you know, the salesperson actually didn't know how the product was getting to the customer. To me, that's not very much fun. So I like the earlier stages. I don't necessarily love, you know, the fact of you're worrying about am I going to make it or not every day, every minute of every day, pretty much of your existence.

12:45But I, you know, I find that that's, you know, that's what's kind of worked for me is just, frankly, to outwork it a bit. All right. Here is a question that was on our list of three questions. Thank you. Let's get back to those, Ray. In hindsight, when you think about Suja and the success that you had with the brand, in hindsight, what was the most impactful decision you made that helped the brand get to that point? Oh, I'm glad you asked that question, Ray. Do you want to pull out your cliff notes here? The ability to pivot. And I call it fake it till you make it. And these businesses are shit show businesses in the beginning.

13:21And this is, you know, there's. Yeah, I didn't. You had that in your notes. Apple podcasting. Make us do a check mark here. Use one profanity word you say, right? Okay. I'm sorry to interrupt you. But, you know, they're tough businesses, you know. And where you start today, I guarantee you, five years from now, your business is going to look very, very different. And, you know, the top 10 SKUs that we had when we started Suja, only one of them is in the top 10 SKUs today. In fact, probably seven of them aren't even in the portfolio. So, you know, things change over time. And until you get to a place where you're operating at the median level of velocity and you're set, or you're operating at a nice, you know, ROAS on Amazon and those metrics are in your favor, you're kind of renting time, as I mentioned earlier.

14:03And you're, I call it fake it until you make it. And you want to pivot. I mean, Silly Putty, the product that we've all used a lot or kids used a lot, started out as a wall cleaning product and turned into a product that they realized they could, they used it to clean marks off the wall and they realized it could do a lot different. The things we start can be very different than where we end up. And I think it's just important to keep innovating, keep being intellectually curious, keep pushing yourself out there until you get to a spot where you've got a product that's actually really working.

14:34We launched at Suja a new product every eight days over a seven or eight year period. And we killed a product every 14 days, which really upset our ops people because that difference really built this big surge of products that we were making 50 SKUs every week. But I think the pivoting is really important and the understanding that it's okay. Some people will say people used to accuse me of churning, meaning that I keep just launching the launch and I got to let the cake bake in the oven. I agree that that's part of it. But until you're in a cash flow break-even spot, you're renting time. And, you know, the longer you go without getting that profitability, the harder it is to be there.

15:15I saw one of the early Suja vets, Jessica Pratt. Did you dry heave every eight days a new product? No, she caused it. She caused it. She was on the cost side. Well, we're going to do an oral history of Suja at some point. Stay tuned for that, folks. I did mention a brand, Rowdy Energy. This is another brand that had a lot of potential. I thought I said that one wasn't on the list. It seems to be on my list right now. No, we actually featured you and the founder of a very famous race car driver, Kyle Kellbush, on the podcast. Didn't work out as well as Suja. Talk about the history of that brand and sort of the biggest challenges and the reason why it just didn't work out the way you thought it would.

15:58Yeah, I think there's a couple reasons it didn't work out. And believe me, that was a gut punch, you know, because you kind of walk away after a suge and you think, hey, I'm doing pretty good at this. I've done this a couple times now. I've got some good track record. And then, boom, you know, we created a fantastic product in Rowdy, but we just couldn't get the sales. And we got the distribution. We got the doors. But we couldn't hold the shelf. And you want to talk about something painful, you know, getting into 25 ,000 doors and then Chinese water torturing, you know, door by door by door by door until you're down to zero doors.

16:30Very, very painful process. Very difficult category. And someone told me, someone very smart told me, don't go into energy drinks, Jeff, right before I went into energy drinks. I think that was me. Yeah. And I know people do it. I did it. So sometimes we have to learn on our own. But if you look at some of the categories that are the most competitive right now, like hydration and energy, they're very, very difficult to make it in. because any kind of digital advertising you're doing is very expensive, or you've got to be really creative about how you're doing it because you can't buy, you know, kind of keywords because they're just too expensive and they won't convert economically, you know, for you.

17:12So you've got to be able to, you know, adapt with all that stuff, and that's not easy to do. So, I mean, I think with Rowdy, I also, I was invited to partner with a NASCAR driver, and I thought, okay, a celebrity is going to work. I didn't really realize that the celebrity that had contacted me happened to be also considered the bad boy of NASCAR. So we were launching a better-for-you energy drink into the NASCAR environment, and I just don't think they cared about low sugar and all that. I got really good at learning all the drivers in NASCAR, if anybody wants any help with that afterwards. But we raised$25 million, lost it all,$3.5 million,$4 million of my own money, lost it all.

17:54Very, very difficult. I think in the energy drink space, unless you can get the right celebrity that can really help you kind of rise above the clutter or just get something that creates energy, you see it. I mean, they pop, you know, Ghost pop, Alani New popped, you know, some of the energy drink brands. But unless you pop or have some reason to pop, and most of those brands have come from the powder market, supplement market first through GNC and Vitamin Shop and places like that. So they already had kind of built up, you know, followers. So they had the ability to pop. And I also think we didn't go DSD.

18:27We went broadliner. And I mean, they both have their challenges. Everybody knows. I mean, you know, the OIs on KHE and Unify aren't overly fun, right? But DSD is being in the back of the corner in the DSD store is really not fun. So it was challenging. I also think I got caught in the transition from a traditional, you got to get to a customer consumer seven times before they actually will go into a store and pick up your product. That model changed much more to the influencer, you know, social media platform type model where it was about finding a trusted advisor that you would, you know, follow.

19:01And that kind of disintermediated my seven step idea. And I kind of I was late, I think, in trying to see that. But, you know, really strong learning lesson, very humbling. But it happens. You're going to strike out. These are challenging things to do. You know, I mean, I think, you know, you start a business and what's the odds of early success? I mean, 20%, 30%, something like that. I mean, I feel like now I used to feel like I could get a business maybe to 95 % success. And then the last five or 10 was luck and opportunity and timing. Now I feel like it's more like 75%. But that last 25%, if you don't get it on your side, it's a real strong headwind.

19:41And starting a business, raising money, selling a business into what I refer to as headwinds, things that can be somewhat negative versus tailwinds that are pushing you is always very, very challenging. Quick break. If this episode has you thinking about what's next in food and beverage, explore BevNet and Nosh Insider, our subscription platform with deeper insights from the BevNet team. Visit tasteradio.com slash insider to learn more.

20:09Well, I think you created a bunch of solidarity when you said that you raised a bunch of money, You lost a lot of personal money. I saw people nodding and gulping and talking about the challenges of scaling in a very competitive category. We always hear that innovation is really important. And I kind of want to do a little true or false here with you, actually. I mean, Jeff is actually consulting with and working with a lot of early stage brands right now. And I'm sure you get a lot of these questions. So why don't I ask you these questions on behalf of our audience and folks who are probably going to ask you them anyway.

20:39True or false, innovation is as important as ever to stand out. A true, can I ad lib something or not? Nope, that's it. No, I'm just kidding. Go ahead. Yes, please continue. Elaborate. If you look at some interesting statistic in 2020, it was an average of 35 ,000 new products coming into the grocery channel, into the food and beverage channel every month. Now that's down to 5 ,000. So it's dropped seven times in the last five years, the number of new products. And retailers are still putting out new products. Just the money supply has dried up a bit, you know, to help fund businesses to kind of have all that early stage innovation.

21:17And so I think if you're able to innovate today and bring products to the market, you've got, you know, arguably, maybe a little less competition than you had four or five years ago. I mean, you got a whole bunch of other things going on. But innovation is like I said earlier, it's the fake it till you make it. If you are producing your own products, you need to use innovation as a core competency and a strength of yours. Because you know, you're going to have to spend more money on that plant. And you're not going to have the lowest cost to start in the long run, you might, but you have to have other reasons to justify having that plant most of you using Coman, which is the more cost effective way.

21:53But if you aren't, and you can't, we couldn't. So we had to make all of our own products. And having you know, the ability to, if you do make your own products, you should have a model where you're getting you can you can launch a new product in six weeks. And that should be your mantra, because that's how you can take advantage of the asset that you have. If you don't have that, you're a co-man, of course, you can't really do that. But innovation to me is the heartbeat of everything. It's also, for me, the fun, the sizzle, trying to understand how can I layer multiple need state benefits into a product so it's not just an energy drink, it's an energy drink with immunity or it's an energy drink with immunity with zero sugar.

22:30So people that want one, then people that want two, not want three, they're kind of nesting those benefits. So all of a sudden, you're kind of hitting a set of a 60 % of the consumers that want that you're kind of up to 90 % because you've layered in these different need state benefits. These damn investors, you know, the money dries up because they want certain things. They want a path to profitability. And I mean, crazy. This is we're living in crazy times, folks. But sure, false profitability should be top of mind for entrepreneurs. I'm going to say false, but, and the reason I'm going to say false is if you said gross margin should be top of mind for, you know, earlier stage entrepreneurs, I'd say yes, totally.

23:10Gross margin for me is, you know, this is super important. Getting yourself to a 40%, not on a product basis, but on a normal basis where you're looking at your trade spend being included in that and all that. Getting your gross profit to 40%, you know, within your first year or two is really important. and getting it to 50 % within the first three years is really important. Profitability, you know, you need to have profitability to sell the business. People don't expect you to make money in the beginning. They don't want you to lose$10 million a year. But if you're bouncing around, you know, depending on the size of your business, of course, if you're bouncing around it, a half a million to a million dollars of losses in the first each of the first couple years, and then you start to get to break even, you know, in year three or four, and then you're starting to eat into that.

23:55That's a very, you know, that's a fine model. It's profitability is important. But if you don't feel like you have any money or ability to raise money, of course, you got to take it slow and over a long period of time. But there are plenty of businesses that have done that, you know, really well. Jessica's business pop and bottle has done a really, really great job of, you know, steadily and slowly building the business over the long term. And now they're very significant middle market companies. So you can do it without a lot of money, but most of us are raising money. The minute we raise a dollar, you know, we're on the clock on that dollar.