740 Sammy Kestenbaum: Co-Founder & CEO of PRETZELIZED

0:00Kara Goldin:I am unwilling to give up, but I will start over from scratch as many times as it takes to get where I want to be. You just want to make sure you will get knocked down, but just make sure you don't get knocked out. So your only choice should be go focus on what you can control. Hi everyone and welcome to the Kara Goldin Show. Join me each week for inspiring conversations with some of the world's greatest leaders. We'll talk with founders, entrepreneurs, CEOs, and really some of the most interesting people of our time. Can't wait to get started. Let's go. Hi, everyone, and welcome back to the Kira Golden Show.

0:45Kara Goldin:Today, we're crunching into the snack aisle with my guest, Sammy Kestenbaum, who is the co-founder and CEO of an incredible brand that I was not aware of, fully admit, but boy, am I a big fan. So Pretzelized. And Sammy is no stranger to building incredible winning brands, but with Pretzelized, he's creating something completely new, a pretzel meets pita chip hybrid that's already shaking up shelves in over 50 % of shelves nationwide. So think oven-baked pretzel crackers and twice-baked pretzel pita chips, all designed to give snackers two favorite snacks in one. And I'm excited to dig into what inspired Pretzelize, how Sammy and his co-founder are carving out space in a crowded category and what it takes to pioneer an entirely new snack format.

1:49Kara Goldin:I think that that is even tougher than just being a founder. I can't wait to hear Sammy's response on that. But Sammy, welcome to the show. Super excited to meet you and have you here. Yeah, Cara. Awesome. Love being here. Great to meet you too. Been following Hint for so many years. My kids' favorite product is still the hint, little water boxes that you did. We love those in my house. But, you know, love to be here. Thank you so much for having me today on the show. And I want to welcome you and all of your guests into the Pretzolution. We're excited to have you guys join. This episode of the Kara Golden Show is brought to you by Range Rover Sport.

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3:12Kara Goldin:Inside, it's next level comfort. Active noise cancellation and the cabin air purification system elevate every drive. And with a plug-in hybrid option offering up to 53 miles of electric range. It's all about performance and purpose. So if you're expecting the best, like I know you do, the Range Rover Sport is your perfect ride. Build your Range Rover Sport at RangeRoverSport.com slash US slash sport to configure your Range Sport today. Again, that's rangerover.com slash US slash sport. Trust me, you'll be glad you did. I love it. So let's start at the beginning. When someone opens a bag of pretzelized, what are they really buying into when you think about this concept and this promise to consumers, to buyers who are going to be putting your product on the shelf as well.

4:18Kara Goldin:What are they really buying into? Sure. Well, the concept of pretzelize that I came up with Jason Cohen, who's our co-founder here, the concept of pretzelize is very simple and one that everyone can understand. Everything tastes better as a pretzel, right? So when you think about it, and I'll tell you the story of how pretzelize was really conceived. We had just sold, my partner and I, we had just sold our previous businesses. And we were out, you know, doing a little celebratory vacation with our families. And we love going on vacation together. We're good friends. But almost more importantly, my kids are younger than his.

4:57His kids babysit mine and it makes it nice and easy for us to go on vacation together. So we go out and we're having dinner one night at a steakhouse there in the Cayman Islands off a seven mile beach. And that's the part of why we named our company that. Seven Mile Brands. So we're at Seven Mile Beach eating at a steakhouse and the waiter comes over and puts out the bread basket. You guys can all, you know, relate to that moment. And on top of the bread basket is one pretzel beget. And Jason looks at me and I look at him and you could hear like the OK Corral, you know, standoff going on. And he looks at him and he looks at me and I look at him and I grab the pretzel and he says, I'm paying for dinner.

5:38Why do you get the pretzel? And I said, well, I'm hungry and you're too slow. And he looks at me and he says, I don't understand. Why can't they just pretzelize the whole basket? And I look at him and I go, wow, what else would you pretzelize? Well, Jason was originally the founder of Veggie Straws, and we'll talk a little bit about Parm Crisp was one of my first brands. But as snack people, we just started naming all different types of snacks. And we came up with this concept because while we were not the first people to create a pretzel, pretzels are one of the oldest snacks over 2 ,000 years old.

6:15We are the first to make it available in multiple formats, specifically snacks, to everybody. So when we looked at that and we're talking about what type of products, the pita chip was such a natural way to launch this brand. So we went to one of the largest retailers in the country, which was Kroger. We didn't have, and this will, I think some of your entrepreneurs that are listening will appreciate this. We didn't have a sample. We didn't have a, we had a concept. We didn't have a product. We didn't have a price. And the concept was pita chips is the second largest category next to pretzels in Delhi.

6:49But nobody has changed the pita chip since really Stacy's launched in the 90s. But I like to argue since Moses walked the desert 3 ,000 years ago and created matzo, which is arguably the first pita chip. That was really the last piece of true innovation of what a pita chip is. So we took pita chip and we took pretzels as the two largest segments in the deli category. And we basically combined them. What if Stacy's pita chip and pretzel crits had a baby? And out came this awesome, wonderfully crunchy pretzel pita chip that has pretzel on the outside, pita on the inside. One of the crazy decision points as entrepreneurs, you're always, it's constant, right?

7:32Every day, all day long, you're making decisions that could have wide ranging effects of your business. But the reason that we did this is we really make a pita chip at this company. Our custom, you know, proprietary process is what turns it into a pretzel. But we have another line of products that we launched, which is our cracker line, which is the first pretzel designed for the cracker set that gives you the velocity of a salty snack, but the usage and versatility of a cracker or a snacking cracker. We went right into that as a secondary offering almost three months after we launched our pita chip.

8:10And the genius, if you will, the concept really behind that was there are no pretzels in the cracker aisle today. Pretzels are the number four salty snack category in the country. So we went down the cracker aisle and we said, how can we make crackers better? How can we provide something that no one else was doing today? And the answer we came up with was combine this great cracker like a Cheez-It, like a goldfish that everyone knows and loves like a wheat then but turn that transform it into a pretzel and i'll tell you carrie the the the reception that we have had you know in only we've been uh selling product for less than 18 months today and like you said before we're in 50 of grocery stores nationwide pretzelized was the number one new snack launched last year according to Spence.

9:05So the concept, the concept is great. The concept is being received phenomenally by both retailers and consumers alike.

9:13Kara Goldin:I love it. So how long did it take you from that idea sitting, I love the visual of this, on that seven mile beach in the Cayman to actually, it's so fun. You have to go back there now as an anniversary celebration, if you haven't already, but it's how long did it take you to actually get that first bag on the shelf? Well, it's funny that you say the first bag, because I was going to say that we are still working on it today because we're always improving our product, our packaging every day. But it took about two years, year and a half, just to get the concept into the right spot where we can feel comfortable presenting it and delivering the right product to the consumer, to our shopper.

10:01So we really scoured the earth. We had this concept of a pretzel pita chip. And we went worldwide to try to find this equipment, to try to find a co-packer and a manufacturer. We failed miserably. For a year and a half, we failed every time we tried. So many different reasons. But we just kept staying at bat. And that's a constant theme here at Pretzelized. and at our last companies is just stay at bat. Sometimes the product, you know, sometimes the product, the first product you go in with is not the product that winds up being the home run. You just have to sell enough different products and enough iterations to get that one that, you know, takes off and skyrockets.

10:44But anyway, so going back to your question, we really just, we scoured the earth, couldn't find it. we partnered with a co-packer that we had a 20-year relationship on. They were out of capacity. We bought the equipment. This equipment is the size of a football field. It's all customized for us and our products. We basically had to take three different manufacturing capabilities and kind of sandwich them all together to create the product that we have today. So a lot of painstaking effort, but I think something that's underplayed in our world a little bit, And the guys at Keychain, you know, Jordan and his team are doing a great job.

11:23But the thing that gets underplayed is the relationship of suppliers and how valuable that is to an entrepreneur. You know, everyone always wants to talk about, and you could probably relate, I'm sure you have tens of dozens of stories, but everyone always wants to talk about the sound and the retail relationship. And while we certainly have best-in-class retail relationships, our power is our ability to execute and what I call our excellence in the execution model. And that really centers around our team, our team members here in the office and abroad, and our suppliers. Without our film suppliers that we have a 25-year relationship, our box suppliers, same thing, ingredient suppliers, our Copac network that we've developed over the years.

12:06Without that, we can't execute on those key programs that allow those retailers to have so much faith in us that we could bring products to them without a sample, without a price, and just have open conversations. Because if we feel it's something worth chasing and they feel it's something worth chasing, they know that we're the team that's going to execute that to the promised land.

12:29Kara Goldin:Definitely. So I would imagine when you were going into retailers, you had some relationships from your previous lives, but also you were developing a new category within a category snacks. So how difficult was that to get people that are doing the buying to receive your product? So because there's things called planograms that many listeners will know about, maybe some are not as familiar with, but it's a big deal. I mean, sometimes I remember when we were first launching Hint and we had an unsweetened flavored water. I mean, we literally watched the buyers at some stores say, so which category does it fit into?

13:22Kara Goldin:Because if it doesn't fit into one of those categories, it's above my pay grade. I cannot put your product in there. And I would imagine you probably heard some of that as well. Yeah. Interestingly enough, I started my career at the Haines Celestial Group back in 2006. And I was the brand manager for our Earth's Best Baby Food. So believe it or not, 26-year-old with no kids, never changed a diaper in my life. And all of a sudden, I'm responsible for the formula business, the diaper business, some of our Sesame Street business. And it's funny that you talk about the categories. One of my favorite stories is when we launched our pouches.

13:57And, you know, Plum was kicking our butt. We were late to the game on pouches, but we got it launched. Now, after we launched, we talk about our Sesame Street brand and how we try to trade up, age up, excuse me, that consumer. So we won in consumers that were three and under, but like everybody else, we were trying to find out how to sell pouches of pureed fruits and veggies to older kids, five, seven years old. And every time I went into a retailer, I got the same piece of feedback. I don't know where to put it. Does it go in my applesauce set? Does it go into my baby set? Because if it does, you're not going to age up that way.

14:34And what it took was really go-go squeeze, creating their category. They didn't do it by themselves, by the way. They went out to three other pouch companies that were making pouch pureed food, and they said, we know that there's a category here, and we need to develop this category. It's not going to happen if we go there by ourselves. So how do we as a vendor community come together to help build out what that category ultimately should be? So my first brand that I was fortunate enough to create with a few partners was a brand called Palm Crisps. So I was working in Hain for about 10 years. I was doing very well there.

15:15I was the youngest director in Hain history. I had a pretty big job. And it was an honor, actually, to work with some of the people that I worked with there and got to learn from, like Irwin Simon and John Carroll. And that's actually where I had the opportunity to meet my current partner, Jason Cohen, who's one of my mentors, and really someone that I've worked with for 15 years. When we bought veggie straws from Jason, when Hain had bought veggie straws from Jason, they needed somebody that understood the product portfolio that can help capitalize on what Jason was best at, which is club sales.

15:49He was the king of Costco at the time, still is. But it was really a function of how could Sammy help bring all these different products, right, and help Jason bring them into club. Well, like most entrepreneurs, Jason wound up selling his business and eventually having an earn out and leaving the company to start his next thing. And I eventually left with him about a year later, and we launched a product. And the product was called Dippin' Chips. And I don't know if any of you or any of your fans or your fan base know Dippin' Chips, but Dippin' was an absolute failure. And I love talking about my failures.

16:33You know, Karen, I'm sure you're the same way as an entrepreneur. We are trained to find the failure in everything to make our product, to make our offering, to make our pitches the best they can be. And the way you do that is you learn from your failures. So we launched Dip and Chips. We built it out to about 30 % of grocery stores nationwide. And within a year, we realized we had a great product and a cool looking brand, but nobody wanted it. There weren't consumers for it. People wanted less premium chips to go with their deli dips and other items. So we had a problem. We had a great product, great distribution.

17:13Nobody wanted it. We realized that pretty quickly. And we found this very small company called Kitchen Table Bakers. It was a friend of a friend. I had met the founders in the past. I love the product. We talked about doing a deal. It never happened. I'm going to tell you the Parm Chris story because I think it's one that a lot of your fans here will resonate with. So we had talked about this and just, we didn't do a deal. Couldn't make anything happen. and we love the product, stay in touch. Almost a year later, I had a gentleman sitting in my office that used to be a Sam's Club buyer. And I'm telling him this kitchen table baker story.

17:56And as I'm telling him the story, he gets a call from a buyer. Now we all know, any of us that have sold a buyer, when a Walmart calls you, when a Sam's Club calls you, at Costco, Whole Foods, when someone, when a buyer calls you, I don't care who they are, you pick up that phone and you talk to them, right? So he picks up the phone and he starts hysterically laughing. And I said, Ben, what's so funny? He says, well, the Sam's Club buyer that I'm talking to right now is looking for a Parmesan crisp. Do you know anyone that can make that item? And I said, well, I know these guys that I was talking to, the Kitchen Table Bakers team was there yesterday.

18:31I spoke to them. It's Sam's Club. Why won't they buy the product from them? And very simply, it was, we don't know them. We don't know if they can make four pallets or six pallets, let alone the 600 pallets we would need to start the program. And I said, well, what if we bought the company? Would you buy it from us? And she said, absolutely. We know you guys. We've been doing business with you for years. So I called Seth and Barry. I called Seth and Barry. I said, I got good news and bad news for you. Bad news is you didn't get into Sam's Club. The good news is if we can do a deal, we have the purchase order in hand.

19:05Well, 30 days later, we closed. We took an operation that was running 30 hours a week. They had a very small 4 ,000 square foot facility. We took a production that was running about 30 hours a week, moved it to a 24-7 operation. And I would say we literally rocked it to the wheels fell off. The wheels were falling off the racks. We were running this place so hard. And on September 19th, 2016, we were able to deliver 600 pallets of product to Sam's Club. And that is literally what started the Parm Crisp brand. There is a theme here. And that theme is we partner with our retailers. Our retailers know what's going on in their stores better than any piece of research we can do.

19:56So whether it's Kroger, whether it's Whole Foods, whether it's Costco or Sam, we partner with them to launch our brands. It's how Pretzelize launched. It's how Palmcris launched. They get invested in what they're doing. You find the right buyer that supports you in that way. And really the sky's the limit. And that's how we build our relationships here. So we just go back to your question of category. So that's all we do. We only build categories here. We don't do anything Me Too. If you think about it, when Jason had veggie straws, there were no puff snacks, extruded pellet snacks, excuse me, at the time being sold in the United States.

20:41But yet there were billions of dollars of potato chip sales. Jason found a way to bring that snack format in, change what everyone knows and loves, which is a potato chip, make it crunchier, make it have less fat, boom, new category has been created. I did the same thing with Parmesan cheese. I wish I did. I'd be living on a mountain somewhere. But we found a way to make Parmesan cheese shelf-stable, snackable, high-protein, no carb, no sugar. So again, created that cheese crisp category. That is exactly what we are doing here with Pretzelize. We didn't create a pretzel. We transformed a base product, a pita chip, a cracker, a you'll find out in March what the next category is.

21:32But we transform these products into pretzels. I love that.

22:05Kara Goldin:way you've seen people enjoy pretzelized? If you saw my daughters covered in pretzels and marshmallows this weekend, we love pretzel s'mores, actually, at my house. That certainly seems to be a fan favorite with our kids. And we just launched, for holiday this year, we launched a cinnamon roll version. So now they're covered in cinnamon and marshmallow all over the place. Was there a flavor? You talked about previous failures, but was there a flavor that you've launched that you maybe thought was going to be killer and it wasn't or reverse? Maybe there's one that you launched that you didn't think was going to be so great, and it has just totally surpassed your expectations for it?

23:04Sure. Well, we just launched our Mediterranean flavored pita chip. It has great inclusions. It's not a seasoning. The spices and herbs are all baked into it. Mediterranean, you would assume, would sell well. I did not know in three weeks, it would become our number two seller. It seems to be a fan favorite in the office. But you know what? It's so funny because flavor has such personal preference. And what I mean by that is when we launched Buffalo, I actually hated our Buffalo. I was not a fan. It was too vinegary for me, not enough spice. Took me about five months. It's now my favorite product that we make.

23:46And the way that I eat it, or the way that actually I got to credit my wife Lauren with this, The way that she eats it is with chicken salad. So the buffalo pita chip, pretzel pita chip with chicken salad is a go-to favorite lunch at home and now in the office too.

24:01Kara Goldin:So you have raised capital in building this business. And with raising capital a year, I would imagine that you have a board of directors as well. Entrepreneurs have come to me over the years. I've been an entrepreneur myself and know firsthand that the board is so critical in any entrepreneur's business. You don't necessarily, if you haven't raised capital, you don't necessarily need to build a board yet. But once you raise, people definitely want to have a board. What lessons have you learned in building out your board that you could share with others? So I think it might go without saying that you want complementary skill sets on your board.

24:50If you're an entrepreneur that has not had a successful exit or launched a successful product, which look, not, you know, everyone starts somewhere. It's those advisors, those key people that you lean on. When we started, Jason, you know, was on my first board. Somebody that I, you got to trust these people too, right? There is trust is, it gets thrown around a lot, like the word partnership. Every retailer wants to use the word partnership with us. But, but you have to be secure in yourself enough to really listen to the people that you put in, those places. And I think when you look at it, and we're a little different because both Jason and I have had a few successful exits at this point, I think it goes back to why Pretzelized has had the initial success that it has.

25:42And the number one thing I tell people, the number one reason for that, straight up simply, is we're proven operators. We've done this before, the faith that our suppliers, our retailers, and our employees, quite frankly, have in us to go make sure that we are executing with excellence every single time, that we only make, only sign up for what we can make, deliver at the price and quality that we've committed to. That is really what sets us apart from the average person that's starting a business today. I think it's defining success when you look at your board. No different than defining success with how you look at your business, right?

26:28Are those skillsets complementary? When we look at Pretzelized, why has this been successful? As I mentioned before, it's very easy to understand. Everyone on this call, everyone on this podcast, you've had a pretzel, you've had a pita chip, And somewhere in your mind, you're going, huh, I could kind of see what that experience would be like. Right. So I think and then I think it's where you're going as a business. You know. When I started my first company, you know, over 10 years ago at this point, the market space was very different than where it is today and especially where it was during COVID.

27:05it. You could put, you know, 20 years ago, you could put the word organic on anything and it all of a sudden became a better for you. And now you're organic and you're part of the trend. 15 years ago, everyone started shopping in the perimeter of the store. That's one of the reasons that we really focus on deli and perimeter is because that's where that new, what I call the new shopper. It's not necessarily the organic shopper or the functional shopper. We put all these people in one bucket, really, because they are the new shopper. They are where retailers need to be headed. They're where retailers and brands need to be going.