Khloud Has Khloé, But Community Builds The Brand

23:34Jeff Rubenstein:Download it now at tasteradio.com slash octopi. Do you need to scale your team faster without compromising on talent? Join Oceans for a live webinar on April 20th and learn how leading companies are hiring top global professionals who are ready to grow with your business. Register for the webinar now at Tasteradio.com slash Oceans. That's Tasteradio.com slash Oceans. I almost feel like, and I mentioned this before we hopped on the mics, that Starbucks is benefiting from this deal almost more than you guys are, right? I mean, Starbucks, let's call it what it is, has been having a hard time. Do you see it that way?

24:13I mean, do you see Starbucks as, and I know you don't want to be like, yeah, we're bigger than Starbucks. But again, I mean, do you agree with me on that point? Yeah. So Starbucks is brilliant. They brought in a woman named Tressie Lieberman to be their chief marketing officer. She came from Chipotle with Brian. Who was their new CEO or was their new CEO from like a year ago. Correct. And Chipotle did a phenomenal job, I think, of democratizing their digital influencer community and building out a very progressive sort of brand, especially in the restaurant space. And they're applying that same pressure and that same strategy to what they're doing at Starbucks.

24:48And so for us, while the distribution was lovely, 13 ,600 doors just in the U.S., 1 ,500 in Canada, lots more in Latin America and the Caribbean that we're now in, it was less about the distribution. It was more about the power of that relationship. They have, in my opinion, one of the strongest, most connected brands culturally and digitally. And that is the exact point that we want to be playing in. where popcorn can meet pop culture. I like that. You would think you're in marketing or have been in marketing for a few years. I mean, that's... Well, I'm a retired marketer. You're a retired marketer now.

25:21First half of my career was in marketing. Second half was in selling. I don't know if you can do that. It's like an entrepreneur. Once an entrepreneur, always an entrepreneur. Once a marketer, always a marketer. Maybe. Yeah, maybe. You know, you've worked with so many amazing brands and ones that are now iconic. And we've mentioned a couple, Vitacoco, Poppy, Coca-Cola, relatively iconic. But every one of those brands, when they started out made some mistakes. And in some cases made really big mistakes. It seems like everything's been going along swimmingly with cloud, but I got to think there've been some hiccups here and there.

25:52Have there been and how have you addressed them? Many hiccups. More than your audience probably wants to hear. No, we want to hear about all the hiccups. You know, everyone talks about the great stories and people learn and get the great lessons from Taste Radio. But every single time I talk to a very loyal listener, they're like, you need to get some folks on there who will tell us the horror stories as well. Because the solidarity is part of it, right? Everyone's gone through these problems. Totally. Yeah. So the most important position at the company, in my opinion, is not the head of marketing or the head of sales, especially not for a brand that has this kind of momentum and mojo.

26:25It's actually the head of operations. Because if the front of the house is moving at an aggressive pace and the back of the house is not able to keep up, then you have a recipe for challenges. And I'm not going to lie, 29 ,000 doors within six months requires a very sophisticated operations team. And we were slow to bring on more talent quickly. We did not find the right commercial partners on co-manufacturing and production. And we had our handful of challenges, big challenges. And we had at the beginning about two to three months of out of stocks or we'll call lower stock where we couldn't fulfill all the demand.

27:02In the month of January, as an example, we were only able to get 64 % of our total POs out the door. That's not going to make Target happy. Left a lot on the table, right? And so we've now evolved. We've identified a new partner. We've signed a long-term supply agreement. It's with a world-class production partner who has A-plus quality and has the ability to scale with us to their 17 plants across North America. We were with two independent folks that couldn't scale at all. So that's one very important lesson. Make sure you hire the right head of operations on day one and make sure that you have the right production partners to scale with you, especially if you're going at this pace.

27:39The second thing I think we've learned, this is probably the most important lesson for me, is that you don't need to be discounted. We made the mistake, I think, of listening to certain retailers that were pushing us to a bargain basement low price because they thought the only way we would get to the velocities that they expected is if we were at a discounted price. And so we took that advice and we went with it. We did not need to do it. As an example, at Target, we've pulled back on 100 % of our promotions. There are no promotions. We run everything every day at full price. And the velocities are still well-exceeding expectations.

28:08And so we over-promoted and we under-delivered. And so we had some pretty real challenges, right? That created big time out-of-stock issues that we are now just finally recovering from. And I can probably give you a hundred more. But over the course of the last seven, eight months, we have scaled very, very quickly. And we've now commercialized, I think an A-plus partner for manufacturing, and we brought on an A-plus team to support our operations. Every single time I talk to an entrepreneur who's scaling their brand very quickly, they talk about operations as being critical. And I was just talking to the founders of a brand called Protein Pines, which is a really great company led by these two young guys.

28:48And I asked them yesterday, I mean, how are you managing the scale at which you're growing? Because they went from 14 stores to over 10 ,000 stores in 14 months, or even less than that. And they talked about operations, operations, operations, because clearly, you know, you don't want those out of stocks. Clearly, you want to be able to forecast demand and have that kind of lead time to fulfill all the orders that are coming in. Demand planning and generation, et cetera, they go hand in hand. But I'm glad you talked about that, because even for an early stage brand that maybe isn't 29 stores as opposed to 29 ,000 stores, you've got to keep an eye on operations and hire the right people.

29:23That's right. Yeah. So you speak about demand planning. In the month of December, we had a plan, forecast, demand, we exceeded by almost 3x. In the month of January, we exceeded by 2.4x. The month of February, we exceeded by 2.7x. That's exciting for an investor. It's horrible for an operator because we are underprepared for the volume that the consumer is demanding. And so there are a lot of things we have to go fix to make sure that we are not in a position where we're playing from a defensive standpoint. We wouldn't be playing from an offensive standpoint. skate to where the puck is going to be, right?

29:57And we have not yet achieved that. So we have two months this calendar year, one last calendar year, so three months in a row, where we have failed to deliver 100 % of the purchase orders that have come through. That is a real problem when you start to think about our growth. And to go from launch to 29 ,000 doors is going to require quite a bit. And that level of operational sophistication is being built as we speak. And we're really, really proud of the team we've established. For a simpleton like me, there's a simple answer to such problems. Say no. Why don't you just say no to these retailers?

30:33Good question. So you could say no, but then you run the risk that there's a two-year delay before you get back in. So what we're trying to do now is very quickly build our supply capabilities, increase our points of distribution responsibly and smartly, and take on channels one at a time. So the typical strategy is you start in natural, Then you evolve to grocery. Then you go to mass. Then you go to club. And then your last stop on the train would be the C-Store Channel. For us, we launched with Target. So we went mass on day one. And now we're working to get grocery up and running. We're working to get natural up and running.

31:11We're just launching at Fresh Market, for example. And we haven't even launched Whole Foods yet. So we have a lot of work to still do to retroactively get the train moving in the right direction. Yeah. With all the celebrity endorsement, with all the Instagram mentions, all the social media content out there, there are going to be people in stores who are not part of the demographic that are paying attention to the Kardashians. There are going to be people that are a great fit in terms of customers for cloud, and you've got to have people in those stores. And your ground game seems like it's going well right now, but how do you prepare a ground game for a year from now?

31:49Is that something you even think about? it? Yeah. So the question we're debating at the moment is, should we continue with a direct distribution model where we go in through warehouses, retailer warehouses, or should we identify a DSD partner? My training in beverages was always DSD. Right. Right. So you have a KDP, Coke, Pepsi, Frito-Lay, Uts, whoever it is, big national partner, and you scale through them. They have account people. They can help you with in-store merchandising. They can serve as, real partners. Other option is you build it yourself and you go warehouse direct and you have merchandisers that are either third party, relentless advantage, Danny Stepper's organization or others like that.

32:27And you build out an army of people internally who go store to store. We have not yet made that decision. We've been approached even at the show, Expo West, by all kinds of big national partners who have seen the value of what we're creating and want to participate in the upside. We just don't know yet which direction we're going to go. We're still evaluating? But I think back to your earlier question, the answer to me comes down to a single word, and it's discipline. So it's easy to say yes. It's much harder to say no. And we have been very hesitant to launch in certain places. As an example, Costco, the club channel, about nine months ago came to us with multiple regions and an authorization ready to go, asking for buy docs.

33:07I have lots of examples of regional buyers from Costco that have said, we're ready to go right now. And we waited a long time to re-engage in those conversations. I don't know yet where we're going to be launching the club channel. For now, our focus is on winning in the current 29 ,000 doors. We have plenty to chew on. Good news is that our current velocities are well outpacing expectations. I look at the Target example. Our dollars per TDP in the most recent 24-week period are outperforming every other salty snack at Target. 100 % of them, including Doritos and Fritos and Pringles and Lay's and all the big players.

33:47And what's more interesting is that 80 % of the consumption is coming from folks that are new to the category of popcorn, meaning that we're bringing in a new generation of snackers. People are new to the category of popcorn? Correct. This is a numerator file. Happy to share it with you guys as a follow-up. It's a pretty impressive fun fact. Eight zero percent of the folks that are buying cloud at Target are buying popcorn at Target for the first time. That's, yeah, my mind is blown. I don't know what to say about that. It's very strange. But it seems like the opportunity is humongous then at that point.

34:21I mean, it seems like it's almost like Poppy, right? I mean, for all the consumers that weren't drinking soda before, Poppy became their first soda. Exact same thing. Yeah. Yeah. Very interesting. What else is amazing is your PR team. Cooper Consulting over here is also a world-class organization. Yes, absolutely. And Rachel and her team are just doing an amazing thing. And obviously, you know, for all the praise I give this team, I think it really matters. PR is important. And making sure that you're sending the right message out to the right audience is critical. When you're looking for PR help and support, what are you looking for?

34:56How do you know when you found a partner that can deliver on what you need to do, particularly as an early stage brand? So PR has completely changed. Ten years ago, 15 years ago, PR was writing a brief and then pitching it to 15 editors of long lead magazines and maybe local morning radio and local morning television. Radio? I know this is taste radio, but this is a podcast. We're going back. This is digital radio. It's much more evolved. Oh, I see. XM. And today, it's as much about the influencer and about the digital social apparatus that you're building as it is about those original outlets.

35:35So the way that we approach PR is very different. And I don't think we're necessarily looking for a traditional firm. There are plenty of traditional corporate firms that represent P &G and Coke and Kraft and Nike, and they can do great long-lead outreach, and that's fine. But what we're more excited about is somebody who can take our content, amplify it in the appropriate way through the right digital channels and reach our next generation audience. Remember that we're not talking to grandma. We're talking to Gen Z. And because we're talking to a younger consumer, they consume media in a different way.

36:05And so we have to have a Rachel Krupa who understands how to translate corporate messaging that is written in a brief to much more dynamic conversation messaging that resonates with a younger consumer. We go back to the fun fact about the 80 % of folks at Target, they don't necessarily read the newspaper, and they're probably not watching a lot of TV. And if they are, it's probably YouTube TV or some sort of a nonlinear format. So how do we engage and connect where they are? You need a next-generation PR company for a next-generation brand. Exactly right. All right. Jeff, thank you so much for taking the time.

36:39I know how busy you guys are. Thank you. And I really appreciate you sitting down with me today. Really excited for Cloud and really excited for the tortilla chips. Please send some to our office. Yes, we will. I can hold them in mine and not share with any of my teammates, especially the Buffalo one. Good product, isn't it? Really good product. Yeah, yeah. Once again, thank you so much for the time and I look forward to staying in touch. Thank you.

37:03That 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 and our video editor is ryan galang our social marketing manager is amanda smerlinski 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 podcast app or your listening platform of choice check us out on instagram our handle is bevnet taste radio as always for questions comments ideas for future podcasts please send us an email to ask at taste radio.com on behalf of the entire taste radio team thank you for listening and we'll talk to you next time

38:06Hello, I am Melissa Travers here for the Taste Radio podcast, talking about some of the biggest tension points that CPG brands and founders face when they're scaling a brand, and those are Financial Accounting and Inventory Management. I am joined by Matt Lynn, inventory accounting guru from Belay Solutions, and he is going to shed some light on all of this that is going to help everybody out quite a bit. Matt, thank you so much for joining us today. Thank you for having us, Melissa. It's great to be out here at Expo West, and it's great to sit down and be able to chat this because it's kind of a passion project of ours, working mainly with CPG brands and hoping to help them scale.

38:48It's been such a pleasure chatting with you and the team and learning all about what you do over there at Belay Solutions. Can you tell us a little bit about yourself and what your role is and the kinds of solutions that Belay gives to CPG brands and founders? Yeah, absolutely. My role with Belay, I'm actually our inventory accounting manager. I run our inventory department. So we work with CPG brands, taking them from spreadsheets, putting them on inventory management systems, and really helping connect their tech stack between their sales, online marketplaces to that inventory management system, even down to their financial systems like QuickBooks.

39:25Belay overall is kind of an outsourced accounting firm. And with that, we're helping teams. We have different levels with bookkeeping, controller level work, even high level into CFO type items. So we really help those brands in any way that they need financially. And then I just have a subset of a department where we're really just laser focused on inventory. It's certainly a complex topic and there are plenty of places to go wrong. Let's start by going right and start super simple. Can you tell us what some of the biggest red flags are that would help a founder understand or, you know, the person running a brand understand that it really is time to get some help with some of these areas?

40:07Yeah, absolutely. I think some of the early red flags is just everything is chaos. So when they're looking in their financial software, maybe they don't really have an accounting background, and they're kind of just piecing it together and doing their best. And what they'll see is that reconciliations take forever, if they even happen. They have a lot of transactions that don't get coded, or they just put them into placeholders to just get rid of it so it's not an eyesore. They'll notice they have revenue but no cash. or they notice that they have a good amount of cash, but their blind spot is really seeing the vendor invoices that are sitting there just needing to be paid.

40:40And so they just lack that clarity that's gonna really be around the corner. You know, you were talking about one of the red flags that comes up that I think makes so much sense. When somebody asks you what your numbers are and you can't come up with the right number, that's a big problem because that's something that you really should be able to share with decision makers who, you know, you're ideally looking to do business with, what should you be able to call up at a moment's notice? Really at any time, you should be able to know an accurate margin. It's amazing how many founders we end up talking to that they can tell you their revenue numbers.

41:17I can tell you they're selling price. And then the minute you start talking about cost or their cost of goods sold, they just get a deer in headlights look. So really it's very hard to tell, am I even making money? Or if you don't know your entire landed cost, maybe you know what the freight cost is, the duties separately, but you're not really getting that as part of your unit cost. So it's really hard to tell, am I even making money or am I losing money from the very beginning? And do you recommend that founders are able to call up a margin by channel? Absolutely. And depending on the number of products and channels, you kind of want to know what are your best sellers, which ones are making the most and which ones maybe you're not making as much.

41:56But especially if you're branching out and you're doing D2C with B2B, absolutely want to know that. Gotcha. You mentioned that when things feel really chaotic, that's probably a red flag. I would say that it probably almost always feels chaotic if you're running a CVD brand. And I know this may be hard to quantify, but is there a revenue number? Is there a number of doors number that would help a brand understand whether or not it makes sense to bring on a partner like Belay? Understanding that so many brands are bootstrapped or they might be tight for cash. What is that friction point? Absolutely.

42:34So there's not really a set number. It's a little bit different for everybody, depending on where you're at in your process and sometimes just your level of understanding of financial aspects. You know, when you're first starting and you really cash conscious and don't want to spend that much money, you may keep it on yourself. But as you're growing, as you're getting into those six-figure revenue numbers, and especially as you're approaching seven, you want to make sure you've got good financials. Because as you scale to that point, most likely you're going to be looking to raise capital. And investors, the first thing they're going to look at is your books.

43:02And are they clean? And do they show a clear picture of your business? You know, another area that folks might look to to organize some of the chaos are their systems. So many folks stick with Excel spreadsheets for a good amount of time. How do you know that you need to outsource some of your accounting to an organization like Belay Solutions versus maybe signing on to a Sint7 or NetSuite or something like that? Well, that's actually something we really help with. When it comes to that cost question, that's something that trips people up. And sometimes if you just have a turnkey business, you buy and sell a finished good, you can maintain with spreadsheets.

43:40And we've had clients with million dollar revenue that can do that. But we see so many brands nowadays are using contract manufacturers and they're just sourcing certain parts of their product. So when you start talking cost, they have no idea exactly what their unit cost is. So that's where we come in and we kind of understand, we'll speak with the customers and the clients and get their needs. And then if we think they're ready for a system, then we'll help put them on that system so they can get some of that clarity. And it's not something we force on anybody. There are plenty of times where founders come to us and we'll tell them bluntly, you're not ready for it right now, but we'll let you know when we think you are.

44:14That sounds like excellent advice. What should a founder or somebody running a brand look for in an outsourced accounting partner? Like, are there certain checklist items that they should make sure that their partner be able to execute or be able to help them understand? Absolutely. I think one of the keys, there's a lot of outsourced accounting firms out there. Some focus on service-based SaaS companies. But if you're a CPG founder, you really want to make sure that your accounting firm has CPG experience. I would ask them, you know, what kind of brands have they worked with? And even beyond that, industry specific, because there's so many subsets of CPG.

44:51And that's something that I think is great about what we do with Belay is that we kind of run the gamut. It's kind of like the insurance commercial. We know a thing or two because we've seen a thing or two across a broad spectrum. Probably getting references is always helpful, right? Absolutely. All right. So this all sounds great. I think we have a really good understanding of would it make sense to hire an outsourced partner? You know, what some of the things you should be looking for are, what does offloading this kind of work mean for the brand? What can this do for lightening the load of a founder or lightening the load of a brand operator?

45:27Like how does that help them in their everyday business? It just tries to really help quiet the chaos. So what we're looking to do is just take some of the weight off that founder's shoulder. Let them focus on building the brand, building the business, getting that exposure. If you don't have sales, you really don't have anything. So we want them to be able to focus on that while we take care of your back-end office work. And we can just present that to you on a monthly basis. You can help make decisions. You can take that to investors. And really, you can just focus on growing your business. I feel like I felt founders and the folks who are running brands collectively sigh a breath of relief just hearing that.

46:04How can people learn more about Belay Solutions? So people can text TASTE to 55123 for their free inventory guide to get started. Matt Lynn, inventory accounting guru at Belay Solutions. Thank you so much for joining me here at Expo West. It's been such a pleasure to chat with you and learn about what you all do over there to help founders and brands with their financial accounting and inventory management for everybody else out there. Thank you for listening to the Taste Radio podcast. I am Melissa Travers, and we'll see you next time.