682: From $2M in Debt to a $250M Gum Company | Pur Gum

27:22The first thing is you have to have patience and you have to set your expectations that like you're not going to become a millionaire tomorrow. The best result you're looking for is that the brand you're building is sustainable. So I called it the broader the foundation, the higher the peak. So for us, that was the more stores that we're selling and the more stores that we're reordering, the higher it allowed us to build our business. And for entrepreneurs today, if you're willing to sacrifice in your early days, that will pay off exponentially in the later days. This parallels entrepreneurs that go out and take money and fundraise.

28:00When founders take money too early because they want cash or they want to take money off the table or they want to secure a larger salary than they would otherwise be making, you give up a huge piece of the future. And the biggest gut check or the risk appetite that entrepreneurs need to figure out is how much of the pie do I want in the future? And what am I willing to give up today to retain that? And that advice is what I tell the entrepreneurs is retain your equity. Struggle at the beginning. Don't buy the fancy pants. Don't buy new things. Get by with what you need and make the sacrifices so that you can reinvest your capital in your business and retain your equity.

28:47At what range, top line, did you actually start really kind of, I guess, paying yourself well as a founder? Yeah, I benchmark. Mark, so in my founder day, like making$100 ,000 was like, it was cool. People said six figures. And when I was making$100 ,000 solely off gum, that was my like North Star. And the$100 ,000 over time went to$150 ,000 and$200 ,000. And then I stopped because I'm more motivated the less money that I make because I want to feel like I need to keep doing it. And I think some people get very comfortable. And when you find too much success, you get a little lazy. And one of the tricks that I always do today is I try to keep the lowest possible balance in my checking account is possible.

29:37So when I open my phone and I look at my app, I'm like, oh, I have no money. And even though I have money and thankfully, you know, I'm comfortable and I'm okay, it triggers my brain to say today, you got to go out and hustle. And that is just this little fire that I go back to my early days when I think about all the sacrifices that I made when I was working hard and I actually had no money. These are the pushes that remind you that, hey, you're the same person. You have more responsibility, but you're committed to growing. And that's what we continue to do. It's interesting you say that because I can definitely relate.

30:18I always one of my mentors always say said used to say to me you know you want to have at least six months three to six months of your opex in on your balance sheet in reserves and he said I but I like to have you know 12 to 24 months and I'm like okay wow all right so for us that was you know millions and millions of dollars and and I I can actually relate that there was some hard times that I went through with founder in the business. And I was accepting a period where we were making losses because we had such a strong balance sheet. And it is very dangerous. I actually really agree and resonate exactly what you're saying.

31:05How did you learn that? Is that something that was always there or you experienced the same thing as me? You know what? But I just learned that from the loss, like being negative and knowing that I just can't stop. I think about like my motivation has never been money. I think when your sole motivation is money, you achieve whatever financial goal you're looking for and then you want a new one. But when you're looking for something like staying power or consumer connection or hearing someone say, I chew pure, not gum. I chew pure. That's like I use a Kleenex. I have an iPhone. That takes your brand to another level.

31:49And I'm a competitive person. I'm hyper competitive. And I think a lot of entrepreneurs are. I want to go out and win the day. I don't think about it like I want a million dollars or$10 or it's not about the money. I want big POs, but I want little POs. I don't want to hear our sales bill ring when someone says we got a big retailer. I want to hear it ringing all day because we're getting all retailers. And the best advice that I could summarize the pure story in is we assemble the crumbs to make the cookie. We've never built our business on one big retailer. We have built it on tens of thousands of independent retailers across all geographies.

32:33and we still run that same program all over the world. We find independent health food stores, gourmet grocery stores, smoothie shops, health food stores, and we put our products in there. We don't start at Tesco or Walmart or Woolworths or any of the big retailers because you get lost. You have to connect with your consumers. You have to stand out with the crowd and you have to harvest so many crumbs to make the cookie. I love that. So you guys had an international expansion and you exploded when you hit duty-free shops. Talk us through how you were able to land that, you know, airports, duty-free shops, putting Pure in front of health-conscious people, affluent global travelers, you know, without spending on traditional marketing.

33:25How did you negotiate those initial duty-free contracts? and how did you get those deals landed? Because there's a lot of founders that listen to this podcast that perhaps your definition of D2C is different than the typical direct-to-consumer online, Shopify, buying from your store, no paying a fee to Amazon, no discounting your product at a wholesale rate to retailers, like pure D2C founders, online Shopify that want to, you know, add some diversity to their revenue mix? What advice would you give? How did you do it? I think that that would be really valuable to our listeners. So I looked at the duty-free market and the international market is like, where do influential people go?

34:17Influential people travel. They travel all over the world. And when people are in duty-free, they're actually looking for flavors of the world or product of the world. And the other cool thing, and this was an inspiration for me from early on watching vitamin water in New York City. When vitamin water was in New York City, it was everywhere. It was in the pizza shop, it was in pharmacies, convenience stores, and everyone was drinking it. And if things are big in New York City, they're big worldwide because everyone's coming to the city to have a great time and to see what's cool. I looked at duty-free as my New York City And getting pure in the hands of influential people, affluent people, people who cared about being health conscious and bringing something cool home to wherever they were, it opened the worldwide lens of this is a local product for the globe.

35:12And, you know, people aren't price sensitive consumers when they're shopping in places and they have lots of time. People are price sensitive consumers at their local grocery store. How much was my laundry detergent? How much is my soda? What are the things that I consume every day and how much do those things cost? And I think chewing gum is one of a few items that most people couldn't say how much they paid for the last pack of gum that they bought. Whereas people know that if a hooded sweatshirt is$250, they either know that's expensive or not expensive. And that shapes their sort of consumer culture of what they're looking for at what price points they're shopping.

35:55The D2C model for us when we had our Shopify site was very important because we wanted customers to buy all of our SKUs if they didn't have access to them. The problem was for us, we couldn't make money doing it because of the shipping cost. So if someone's ordering$30 or$40 worth of gum and it's costing$15 or$20 to ship, in Canada and Australia are actually very similar in that regard because you have huge landmass and you have variable shipping prices. In the US, you can actually get a flat rate box. So for$9, you can either fill it with bricks or feathers and ship it across the country. So that was why we switched the D2C model to our D2C model, which is fulfilled by either Amazon or direct to retail.

36:41You have to make sure you're making money because between click ads, social media spend and digital advertising, you're not aligning where all your money's going. And that's the danger of being an entrepreneur. You look at your balance sheet at the end of the month and you've made a lot of sales, but you've made no money. So I'm curious, like what kind of percentage mix do you guys have? Because you guys are heavy retail. what do you have from a MER mixed ratio of paid advertising? Is it 10%, 20%, 30 %? So today we're very focused on maintaining profitability with digital advertising. We don't want to go too deep.

37:24If we spend$20 for a$5 sale, it's going to be very hard for that customer to become profitable over time. So we're very targeted and we're very strategic. The greatest thing for us about digital advertising is you can target customers who like specific flavors, specific formats, and that fit the demographic information that match who you'd be targeting. It's very efficient. So we challenge ourselves to say, are we good at it? Are we getting better? Are we learning more? And with all the digital tools today, you can really get competitive. And that's what we do. And we compete with ourselves to see if we can become more efficient throughout the month and ultimately set the bar a little higher for the following month.

38:07Yep. Okay. So just to delve a little deeper, just for everyone that's listening, because I think they'll find this really helpful. Yeah. If you guys are on track to do sub$250 million top line and I'm not sure what the spread is between online sales, Amazon included versus retail. You guys would be spending at least, right? Like$2 million a month, right? We'll spend over$1 million a month, about$10 to$12 million for the year. and we scale it up because we look at it like if we're winning, we continue to stack it and we press the bets. And all we're looking to do is keep pressing. So there are so many consumers searching chewing gum or candy or mints or breath freshening, and we want to get in front of the right consumers.

39:03And it's all about feeding the beast and continuing to double down. But your your number is actually pretty good. You're very good at that. Yeah. Look, we help a lot of - If you're looking for a side hustle, we can do some digital marketing. Look, our bread and butter is helping DTC founders grow through our coaching programs and membership. And yeah, I see a lot of numbers. We help a lot of founders scale their ads, optimize their store, all that good stuff. So yes, we have the MediaRama founder, but then we also have a big training and education and community arm where we really help DTC founders.

39:41And clearly, like the scale is incredible and it does work. And I'm an analog guy. So like I have learned this digital and immersive world. And like the first thought of spending$100 worth of ads, that was the hardest money to spend. But when you see that$100 turn into sales and you recycle that$100, and the best strategies are doubling down if it's working and you keep pressing and pressing, those numbers get big. And if your strategies are working, you've got a great source of revenue and scale. Yeah, and look, depending on the brand, this is how I worked out kind of where you'd be and you guys are obviously on the lower end because you're more heavy retail is typically we find a brand should be spending anywhere between 10 to 30 percent of their top line in paid advertising but that's a purely digital that's that purely digital online you're obviously from your total top line is there's around five percent but um not even but uh yeah that that's kind of how i worked out that metric and and where you might be playing because i know you guys are heavy retail uh i gotta talk with I could talk to you all day, man.

40:58This is awesome. I've got to talk about Dragon's Den though because, you know, equivalent to Shark Tank, we have Shark Tank here in Australia. We have Shark Tank in America. I've interviewed basically every shark on the show or been on the front covers of our magazine. And you did a full circle. It was really cool. So you're on season nine of Dragon's Den. You pitched$1 million for 10 % equity at a$10 million valuation. You had three dragons that put in offers and you accepted a deal from two, a joint deal from Jim, Trevling, and Arlene Dickinson. What metrics did you use to justify that valuation and how did that capital really help with growth and unlock that next phase?

41:47Because a lot of these shows, a lot of the deals don't go through after due diligence. So yeah, talk me through that. So I'm going to tell you, I'm a marketer. And when we had the opportunity to go on to Dragon's Den, I was actually quite nervous that you're putting yourself out, you're being vulnerable, but not just to a private investor, to a national television audience. And that is much riskier than it seems. because if someone doesn't validate your idea or they don't support what you're doing, it turns negative very quickly. So when I heard the dragon say, we love this idea, I chew this product, this is something I've seen before, it really calmed my nerves and allowed me to focus on the pitch.

42:31The reason I did one for 10 was because it was simple to understand. And this is a television show. And when the audience has to spend five or six minutes doing the math that you want$2.6 million for 17 % equity, they stopped listening to your pitch. I found when I was on Dragon's Den, I thought more people wanted$1 million than they wanted$1.7 million or 850 ,000. It was a very digestible number and$10 million just made the math very simple. And that's what I pitched. And that allowed me to stay focused on my pitch and get the attention. Valuation is subject to so many things, diligence, perception, all that stuff.

43:16But I wanted mine to be understandable so that people could then focus on pure gum and the difference that we're making in the chewing gum industry. You obviously had a deal. It went through. How did it help afterwards? And what did you use that money for? So our deal actually went through and then we did not follow through with it when it scaled. The filming took a long time. Our business was continuing to grow. We had passed $10 million in sales when we were pitching the show. We had won some business after the show, and it continued to scale. So by the time we were ready to do a deal, we had come into more money, and we were in a good financial position.

43:58But we maintained a really strong relationship with the Dragons, and Arlene actually was incredibly helpful. We brought her to Switzerland to see the factory. She's a marketing and Canadian icon and was really able to kind of support our vision and give us some guidance and just advice in the experience that we were lacking to make some good moves going forward. And we just kept going. And that goes back to my point earlier about retaining your equity. Like, what do you really want to give away as opposed to what do you want to keep. And I was willing to make another sacrifice to not take money, to not put more money on our balance sheet, to say, I think I can do it one more turn.

44:40And thankfully for 10 years, I have still said, I think I can do it one more turn. And you also went full circle. So you ended up back on Dragon's Den, but not pitching, but investing. So you returned as a guest dragon season 20. So this was this year, only a couple of months ago. So you sit on the other side. When you're looking at a D2C brand, CPG brand today, what kind of unit economics are you looking for from a gross margin to LTV metrics, CAC to LTV ratios? What's a non-negotiable before you would write a check? So Full Circle was incredible for me because I had the instant connection of knowing how the pitcher feels, being all in on their brand, being vulnerable, and pitching it to the dragons.

45:32I loved my experience in the den. And when I heard the stories, the first thing that mattered to me was the founder, was the entrepreneur. Is this person going to put everything on the line? Are they going to prioritize the scale and the passion and all the pain and challenges for their brand? Are they going to put that first? The next metrics are, is there a path to profitability? I don't look at brands today and say, are they making money today? It's really, are they making money in the future? And can they become more profitable with scale? One of the deals that I did on the show was a frozen pizza company that does deliveries.

46:12And they are a D2C business. They have a Shopify store and they were selling their pizzas online. It's very expensive with dry ice. It's very expensive with shipping, delivery. So it wasn't about can they make money today? It's are the founders exceptional? Are the founders willing to find efficiencies? Can they fill in the scale? Can they go to retail? Can they find other ways to make money? And that's the metric. You know, customer acquisition cost is if you're a multiple of times. So if you're spending two or three times of what it costs to sell your product, you need to make sure that the frequency of that product is four, five, or six times before they change.

46:55You have to make sure that when you're investing in frequency, there's a path to profitability. And that's what I look for. So the entrepreneur first, path to profitability. And then is it a business that makes money or is it a business that sells? And even today, 16 years into my journey, I struggle with valuations on companies that don't make money. I just, I don't get the not making money. And that's more than fair. And it is not in vogue now to, well, in the AI world, it is in vogue to not make money. But otherwise, there has been a massive shift. I'd say in the past four or five plus years post-COVID era where investors are looking at businesses and valuations have definitely gone down multiples of revenue really focusing on profitability as well.

47:53It's definitely not in vogue. There's obviously an AI bubble happening right now and everyone seems to be launching the newest thing or they've got a crazy AI feature as part of their business. It's crazy. You know, we interviewed the founders of Allbirds and now their pivot has been legendary into AI, right? So we interviewed them on the front cover, which is crazy a few years ago. So yeah, it's been a wild ride to watch, but no, it is not in vogue right now to not have a business that is not profitable unless you have an AI startup. So we have to work towards wrapping up. A couple of last questions.

48:31One around absorbing the 39 % tariff. So this is a recent one, right? Tariffs have been absolutely crazy the past 15, 16 months from recording this. And now it's being reversed and you can get money back and all this crazy stuff. But last year, there were import tariffs that were imposed coming from your Swiss manufacturing facility from the US. And what was the impact on your gross margins? How did you optimize internal procurement to survive? Because you've got volume and 39 % on top of that is a large, large amount of margin being eaten up. So how'd you work through that? So the tariff is one of my nightmares that will be in the Hall of Fame of nightmares.

49:22And for us, the other compounding crazy piece was the US dollar and Swiss franc split to the widest gap that they had on record. So it was 39 % tariffs, and then it was also another 20 % in currency. So it was a disaster. and what it really did was it checked, what do we wanna be when we grow up and what challenges are we gonna face and what sacrifices are we gonna make? Because the early way to handle the problem that people did with tariffs is they pass the cost through to the retailer or to the customer. We couldn't disrupt our market. Last year was our largest growth year. We grew by over 30 % last year and that was all tariff paid.

50:10So it was brutal, but we stayed the course and we persevered it. So I can say to you 17 months later, man, we absorbed all that. We ate it. It was the first time that we were running negative margin on product. And as we were selling more product to more retailers, it was done at what we called an investment. And what it did was it said, we're more focused on the future than we were focused on current profitability. It doesn't take one day to build a retail relationship, but it does take one day to mess it up. And if we went to our retailers and said, you've got to absorb 39 % and we went to our customers and said, the product's now twice the price because by the time you put the margin on it, we would have lost a lot of business.

50:56But what we did was we said, we believe in the future and we're going to figure it out. And every challenge that we've ever had, we've challenged ourself, does scale solve the problem? And this was the first time that scale actually amplified the problem. And the decision that we made to absorb it and kind of me as the founder give back the 39 % of operating cash that we would have otherwise had was a decision to say, let's stick with the growth. I love what I do. I love the business that I've been a part of building and I love the team that I work with. But if I would have made the wrong decision to change the price, cancel listings, not ship customers, you can't unwind that.

51:41And I think that giving up the money was a good choice at the time and it earned us new opportunities today. And you know what I said earlier, it's not about the money, it's about winning. And I was more focused on winning the sales and winning the customers than I was on making money off of each of those transactions. Yeah, that's wild. So you guys went into the red by doing this? Yeah, we were running at a – I mean there isn't enough margin to give 39 % cost of goods, add on another 20 % for an exchange. You were talking about north of 50 % on top of the cost of good and you can't absorb that with inside funding, marketing fees, shipping, logistics.

52:25Like you just – you can't absorb that. So did you have to raise money? No. We have – like we run a great business. We have money. We make money. We've made money every year since we've been scaling. And it's not about letting that money just be spent on frivolous things. I think it goes back to the bootstrap nature. You never know what the market's going to throw at you. And if you're not prepared for the battle, you're going to lose it. Did you at least have a timeline that this thing might go away? So that's a great question because every time we thought we had a timeline, the goalposts moved.

53:05And the other thing that I was completely wrong on is I thought Switzerland would have been immune from the tariffs. I thought if the tariffs were on European goods or they were in the MENA region, who's going to pick on Switzerland? It turned out that Switzerland was the only second to like Miramar in terms of what the tariff was. It was the most expensive tariff in the world. And it was completely crippling to the Swiss industry. And the funnier part is in Switzerland, we are the only chewing gum export. Like they could have just said, there's a tax on pure gum. So you must have though also not just wear it and just try and sales queue as all.

53:45You must have looked for other alternative manufacturing sources, all sorts of things to weather, right? And yeah. So manufacturing is something that we don't look for alternative sources on because you need to make sure that your supply is there. We have an amazing, amazing factory in Switzerland. The quality of our products are amazing, and you can't just change that real fast. our strategy from COVID and our strategy with the tariffs were actually quite similar. It's the diversification of distribution. The 39 % tariff was only in the US. So we had major problems in the US, but we have a double digit market share in Canada.

54:23We have the number one selling product on Amazon across Europe. We sell gum in Australia. We sell in other parts of the world. So what happens is your whole margin blends down, but you're able to stay alive. And in COVID, what we saw was certain countries shut down. And then with chewing gum at impulse, that used to be the last thing you'd see at every grocery and every convenience store. And then it turned into hand sanitizer and masks. So the gum was hidden in the back of the store and then people aren't freshening their breath because they're wearing masks. But in Florida, there was no COVID.

54:57So it wasn't a problem and you have diversification of distribution. And that was the lesson, the entrepreneurial lesson of scaling the business, which is you don't want to have all your eggs in one basket. You don't want to focus only on one location, geography, customer, whatever you call it. We never knew that there would be tariffs, not at this rate, but fortunately we were able to neutralize the impact so that it didn't crush us, but it did hurt. All right, Jay, so this has been a crazy wild ride. You started this business over 14, 15 years ago now. And yeah, you've built it into a quarter of a billion dollar a year empire in a highly competitive space, fully bootstrapped, super impressive.

55:46You've survived so many different storms. I wanted to ask, you know, what is next? You love to compete. You love to win. what advice would you want to give to DTC founders, founders in the e-com space, looking to get into retail, looking to grow, looking to scale? What would you like to share with our audience to finish off? I challenge myself to see how does Pure retain its place in the future. And when you build a great brand, it's really hard to do. I can't imagine doing something else because I've put so much passion and time and love into building the Pure company. And when you build something special, the kind of sexy thing to do today is to sell it.

56:28And someone once said to me, dairy farmers sell the milk and meat farmers sell their cows. And when you have an opportunity to make money and you continue to grow and scale and there's white space in front of you and you're having fun, keep going. Don't let go of what you love because your purpose in life is what's the most fulfilling. And sometimes if you just have a pile of money, you'll get bored. You'll sit on the couch and you'll say, what really is my purpose? But if you use your brand to impact communities, to make a difference in people's lives, you feel so fulfilled. And what I still push myself to do every day is win.

57:07Are we the pack of gum that comes out of someone's purse? Are we the pack of gum that's in someone's desk or in their car? And if we're not, why not? And when I look at the global gum market today, as big as we've come from day one, on a global scale, I think, okay, only three people out of every hundred in the world are buying a pack of pure. Can I get another five? Could I get six? Could I get 10? It's the first time in my life I'm not even competing to be first place. I want to be second place. But the reality is we're winning. And it's the perspective that you put in your mind is what is your championship?

57:47What is your victory? But keep growing your brand. And if you're having fun doing it, that's what makes entrepreneurship the most special. Jay, thank you so much for being so open, honest about your journey, the good, the bad, and being really transparent how it's all going. Congratulations on all of your success thus far. And I look forward to continue watching the journey. You're welcome back anytime. Thank you again. Thank you so much. Thanks for having me. Hey, FounderFam, thank you so much for tuning in today. And if you enjoyed this episode, please take the time to leave us a review and let us know what you think.

58:21This podcast is 100 % free. We work so hard to go out and find the most successful founders and entrepreneurs all around the globe. So your feedback helps us grow, improve, and even bring on more incredible guests and insights. So if you have a second, please take a moment and leave us a review. It really means a lot to me and the founder team. It makes so much of a difference. Thank you again for listening and I'll catch you on the next episode.