401: Erin Patinkin

0:28This episode is brought to you by Resi and American Express. What people don't understand when they're coming from outside of the industry and into it is that it takes a year to grow a carrot. Just to make a plan for scale when you're creating a dehydrated vegetable bar, you got to think about the futures of kale. This is Taste. I'm your host, Matt Rodbart.

0:59Aaron Patankin is the co-founder of Ovenly and has advised some of the food world's most interesting brands, almost exclusively female-founded, including Kismet, White Mustache, Pop-Up Grocer, Great Jones, and Seed & Mill. Aaron is an old friend of ours and is one of the sharpest minds in the consumer packaged goods world. On this episode, we talk about so many topics, including some of the brands that excite her and the common mistakes founders make but can't help making. We also hear about her time running ovenly and what is next for Erin Patankin. It's so great having Erin in, and I hope you enjoy this conversation.

1:44Erin Patankin, welcome to This Is Taste. Hi. Hi. Great to see you. So good to see you. Thanks for coming in this morning. I appreciate you driving down from Kingston. You're welcome. Let's start with Kingston, because I feel like you have lived there for a while. And it's a really interesting town, about two hours outside of New York. Really cool food scene. What's happening there? Well, you know, I bought my house about five years ago, and it's really changed in that five years, I think, for the better. There was just a lot of empty retail spaces that young folks are coming in and taking and opening things.

2:19So it's still small, but it's a, especially a restaurant scene that is focused truly on farm to table. A lot of the restaurants are working with the farms that are within a 20 mile radius to procure all of their meat and produce. There is a very interesting social justice bent. I think the restaurants that are going on upstate, there's a lot of work around And, you know, doing fundraisers for either progressive policies, progressive politics, LGBTQ rights. It's been it's a really interesting restaurant community because of that. And also because I think a lot of really good stuff is starting to open up there.

3:05There's a restaurant called Mirador. Yeah, let's go. Let's go into Mirador, which is one of the few I haven't been to. And you were just over the moon about Mirador. And I'd love to give it some space. Why is Mirador so? It's very slept on right now. And I'd love to hear your thoughts on it. It reminds me, you know, I think there's a nostalgia for me for it. I started my first company, Ovenly, in 2009. And there was such a community of food entrepreneurs in a very small geographic region of Williamsburg, Brooklyn, kind of Park Slope. And there were so there was such a tight knit community of hospitality people.

3:41We would meet for happy hour, have dinners, you know, monthly meetings. etc. And, you know, I could walk into my local, you know, which for a long time was diner and know everybody. And I get that same sense day one out of Mirador. You know, the first time I went in there, I knew a lot of folks. There are a lot of ex-hospitality people from Brooklyn and New York, and it's just such a warm and inviting place. On top of that, they're featuring Spanish food, largely from Hayen because it's a sherry bar too. Nick, one of the owners, is importing sherry himself he private labels some of that stuff and um it's just great it's it the food is phenomenal the hospitality is phenomenal i love how you draw the comparison between kingston in 24 and brooklyn in 2010 because i so agree and i just had to make it clear that kingston has a lot of full-timers like myself i live in orange county full-time you live full-time we're not like going back and forth in the weekend nothing against that but it's a different it's our home it's our home and we want to make it our home and where we spend 80, 90 % of our time.

4:44And Kingston has a lot of people who left the city, live there. What are a few other restaurants that you like that are in Kingston? Eliza is great. Clio, amazing. I've heard great things. Oh, Clio's absolutely excellent. And Hope, one of the owners I've known for a long time, she used to be one of the senior people at a conference called FAB, which is a conference about women in business and food. And so, you know, there's a just going back to the Brooklyn versus upstate, it's starting to feel really complete. I just heard and I don't know if I'm supposed to know this information that someone gave it to me that the meat hook is opening in Hudson.

5:24You know, Mel Baker just opened Hudson. There's some really great hospitality people coming up to open places. But I think that there's Harada Market out in Accord. There's Ali's Pizza. There's Gaskin's, which Sarah Gaskin has done so much for the Germantown community and bringing good jobs there. I feel like I'm missing Stissinghouse. It's just there's a really good pizza. The whole lower Hudson Valley is phenomenal. And I love just focusing on Kingston, too. I think Kingston Bread is a place that you have to stop by. Kingston Bread is great. Amazing. and I really did like my meal to Liza and I think Phoenicia Diner chef is now opening is now running the kitchen there and a co-owner and I love what they're doing there and what's the place on Lower Broadway that I always forget about the all day that has the guy from the pasta guy Rosie's Rosie's amazing Rosie's is a place to definitely keep your eye on because I think eventually it'll become a dinner spot and be really ambitious but I love going there for the all day so yeah okay that's the Kingston Report I mean I'm glad that we could talk about that from the jump.

6:28We have so much more to cover. But yeah, definitely head to Kingston specifically. I love that town. But Aaron, I wanted to ask you about a little bit about what you're doing now in your career. You're always so thoughtful and so on top of it. We chat a lot offline. We went to college together and we'll get to that. And I've known you forever, but you founded Ovenly, a very, you know, I would say influential bakery and bar snacks company going further back and then a CPG company. And then you worked at Seymour. You were a co-founder there. And I'd like to get a sense of what you're doing right now as part of your consultancy.

7:05I know you're working with female-led businesses in food, but what exactly are you doing? I think the easiest way to describe what I do is that I go into companies as a co-founder in residence. Like you said, I founded Ovenly and then I founded Seymour Meats and Veggies. And then after that, I've been I don't call myself co-founder anymore because I usually come in for about a year. So I call myself a founding partner and I'm a founding partner of four other businesses that I've launched since 2020. Shout them out. So Sweet Deliverance, which is a really great nutrient dense granola company. House of Kajana, which is a frozen Indian meals brand that has some big news that will come up soon.

7:52On the show? Are we going to break it? I can't. But I wish I could. I love House of Kajana, though. Yeah, you sent me some. It's a really great product. Really great. I helped launch BOD, which is a sensorial body company that's just launched, and old friends launched it. They're doing an amazing job. And I'm helping launch a prenatal postpartum snack company that is founded by this amazing functional nutritionist called Mom Snacks. Great name. Just announced. Great name. Seymour, I loved it. I love it. I don't know if it's past since present. Is he still by Seymour? Oh, yeah. It's a fantastic.

8:28Four regions of Whole Foods, Target. It's just great. It's better for you meats in a general term. It's more veggie than meat, but great tube steaks, man. Good job. Good job. Thank you. All right. But more about your founder in residence. What are you helping with with the CBG companies? So if I come in as more of a founding partner, what I will do is, and this is what happens, someone will come and say, I have an idea and I want to launch it. And I say, okay, let's do it. And so I've had pretty extensive experience now taking an idea of a product and doing what's called commercializing it. So, you know, these are companies that want to scale.

9:09I usually work with companies that have either done a fundraise or I help them go into fundraise. And we use that capital to make the product so that we can take it nationally. So that's that side of the business. The other side of the business, meaning my consultancy, is I will go into companies that are at a very important point in their life where they're doing somewhere between$100 ,000 and maybe$1 million in revenue. And they have grown organically. And they look at themselves and they say, holy shit, I got to fix this so that I can scale without going out of business. or I have to fix this in order to scale because operations are like not working and we don't have a plan and no strategy.

9:55It's the extreme pressure point that founders, you know, see often. And that dollar range is very common. I mean, it's like a very, it's the bottom of the pyramid of these founding companies. And you see a lot of tears, I would imagine. Yeah. And so, oh my gosh. I mean, I'm also sort of a untrained psychologist, but I, yeah, I will go into certain companies and I will help them completely redo their operations, look at their finance, create a strategy for the future. It's still sort of a co-founder and resident's position, but in those roles, I lean pretty heavily on operations and finance when I go into that kind of role.

10:33Do you take a blend of equity and take a rate or how do you blend your fees? Yeah, it depends. It depends. Yeah, it depends on the client and how much I really believe in the ability for the product to succeed. What mistakes are you fixing right away? What are you seeing? I would like to hear about a common mistake that you fix over and over again. A lot of founders listen to our show and a lot of folks in the industry do, and I'd love to get your take. I'll tell you the top two when I go in to fix a company. One, there are no systems, especially in the food industry where you have a bunch of creative founders and a bunch of folks who are coming out of culinary.

11:10It's almost as their companies exist through pure will. Like I sometimes walk into a company and I think, how did you even get to a few hundred thousand in revenue? It's really through pure well. It's like an art project for some of them too. Yeah. It's virtual. You know, they're so, they just are getting things out, but there's no organization. Like we're just making the work, but it's just. We're just making it happen. Yeah. Right, right, right. So that's the first mistake. And I think it's really hard when you maybe only have one staff member who's yourself or, you know, you and one other person to be able to sit and like be in the audience and look at the play and say, what is going on here?

11:47And like, what moves do I have to make to fix this and to make the show work? So I think it's hard for founders who don't have a lot of support to do that. But it is something that I would encourage anyone who is a small business to do sooner rather than later. So that's one is just systems are missing. And two, margin. I mean, I work in product companies. I do some work outside of product, but it's almost entirely product. And either that product is represented through retail environments. It's a restaurant, it's a bakery, or it's a consumer package product. and 99 % of the time, even when founders think they know their margin, their margin is incorrect.

12:31And so I go in and I really look at every single receipt. So they're not calculating their expenses correctly and the margin is higher. It's lower than they think. Yeah, and usually the reason for that is because of the bookkeeping. Exactly. And a lot of times people will hire bookkeepers who have no experience in the field because they're cheap. And those bookkeepers will attempt to create financial analysis that are accurate, but they just aren't. And so, for example, and I think a great example of this is consumer packaged food. There's all this stuff that goes into margin. And this is just very technical and boring, but that ends up in below the margin line.

13:17so you know you got to consider all of your trade spend which is your retail advertising that's not even margin that's a contra revenue so if you spent if you make a thousand dollars and you spend a hundred dollars of couponing for a retail grocery store that hundred dollars comes out of your revenue so it's like you made 900 bucks and then there are all these different things that you should really consider in your margin you know warehousing logistics blah blah blah blah and i often see those things not included in margin and margin when your product company is probably one of the most important assessments of business.

13:48What about EBITDA? Where does that come in? I mean, even though it only matters as long as you have a pathway to it. Right, right. What matters more is that you have cash to cover your losses in the start. To keep the lights on, that's the biggest thing. Yeah, exactly. Which is the margin equals that. If you can have 50 % margins, you're most likely going to have a pathway to profitability. and and that's what really matters even at the beginning i just it's great if you can have it but as long as you have cash to cover those losses that's what matters now i work with early stage companies you know later stage that's all that matters because you know i hear a lot of founders say i want to scale this and sell it and especially in the food industry i think that we have sort of been imbued with a venture capital mindset where the buyers of food businesses are very conservative and they look at the strategics.

14:48Yeah. They're, they're like these guys in Omaha or in Georgia. I mean, they're like so financially Switzerland. Yeah. Great call there or Long Island. I mean, it's really, they're so conservative. Great, great, great. Because they, They're only going to buy businesses that they think they can make money on. The people who actually buy business, not the ones who invest in businesses, but the ones who buy them, are looking for very simple things. They're looking that you have increasing revenue, increasing EBITDA at some percentage that's average for your industry and a good margin. And so if you scale a company to$200 million, but you have negative$100 million EBITDA and no cash in the bank and no pathway to profitability, even if you have a ton of revenue, it's highly down.

15:32And there are a lot. It's a lot. We've definitely interviewed many on the show, and I'm not going to name them because it's not my place, who are in the exact great top line, like off the shelves. Crazy top line. But man, when you look at the EBITDA and you look at the way that they're spending and marketing costs and shelving costs. And back to your point, when founders tell me about wanting to exit, which some have actually said on the record, such a turnoff. And food. I mean, listen, if you're in tech and you're in SaaS, I get it. Like, you're doing one thing and you're, I get it. SaaS is a whole different business.

16:06But if you're in food, like, we're food people here. I don't want to hear about your exit strategy after 18 months. Like, go fucking work in California. Except, I mean, obviously food people in California. But you know what I mean. Silicon Valley. Silicon Valley. Go work in the Valley if you want to do that. I mean, this is a 10-year plan for a lot of these founders. It's a 25-year plan. Better, even. You know, I think even 10 years is too short of a time horizon to really be successful in the food industry, to really be successful. You know, sure, there are exits that happen, but those exits, we hear a lot about these earlier stage exits of some product companies.

16:45But at what expense did those exits happen? Usually to the expense of the investors that have put money in. And it's usually pennies on the dollar, stock trades. You know, it's truly, truly successful. Either you're really rocking and rolling with profits or you're really in a position for a company like Mondelez-DeBayou. It's a long, long time horizon. I hear a lot. I mean, I feel like 70 percent of the people that come to me say they want to exit in five years. Luckily, they're coming to me and I say that's just not. Yeah, you give them the advice that, guys, it's a 25-year plan. You should be in this to win it.

17:26I also try to remind people, I think it's 1 % of companies even get to a million in revenue. That's a great stat to remember. Just to remember, if you can even get to a million, you should celebrate because you're in the minority of small businesses that even can scale. Now, what you do after that million is going to be critical to the next 10 years. But, you know, my mentor always says what people don't understand when they're coming from outside of the industry and into it is that it takes a year to grow a carrot. And his whole point is you're dealing with supply chain. You're dealing with farms.

18:06You know, just to make a plan for scale when you're creating a dehydrated vegetable bar, you got to think about the futures of kale. You can't just scale for scale sake. Absolutely. I mean, agriculture is such a big part of it. You know, I had Andrew Benin on twice from Graza. And, you know, we're talking about real agricultural headwinds for companies. I know he's trying to buy olive oil from all around the Mediterranean. You name the company's coffee. It could be chocolate. It could be obviously figs. I mean, I want to segue over to Expo West. We both were there last week walking the floor. I was there only on Wednesday.

18:47Thank God. Wednesday was intense. I'm not a user. It is a wild place. It was fun. And everyone I saw was listening. Great to see you. I met some listeners of the show, which is cool. I want to hear a little bit about some of the things you saw, I guess. Broadly speaking, and I don't want to get into the trends of X-Y-West. This is not that kind of a show. But in general, Aaron, what were you seeing that excited you? Let's actually think about the positive side because there was a lot of janky-esque shit there i must say i'm gonna i'll end my negative there but yeah yeah um shout out to one of my clients i think who actually won this thing called the nexty award which is sort of oh yeah right those are cool oscars of expo west um they're really trying to create a new hispanic brand that is true to oaxaca it's called ya oaxaca you can look it up ya oaxaca.com yep that's um founded by susana trilling who's a oaxacan chef you know they're really trying to create a hispanic set that is true to Oaxaca, using Oaxacan ingredients, supporting Oaxacan suppliers, and really their products are restaurant worthy, you know, their restaurant and, you know, rightfully they won this award for that.

20:00So I think seeing, I didn't see a lot of that type of set this year where there's a company that's saying, I'm going to really tackle, you know, this thing that's true to my heart and scale it and create a bunch of products. I felt like, yeah, Oaxaca was really one of the few that was doing that. And they're doing malaise, right? They're doing moles and they're launching nationally into Whole Foods in June with marinades and Escovete. Yeah, I'm excited to talk with founders on the show. They're the best. Yeah, you have great taste in founders. Was there any category that excited you or surprised you that was that was popping?

20:35I think no. You know, I get very overwhelmed by those shows. So I walked I was volunteering with Yahuahak on Thursday and it was just in and out of a bunch of my friends who were there. So I felt like I spent so much of Thursday actually just talking to people. And I walked the floor on Friday. I was happy to see, and I haven't been since 2022. And this wasn't popping per se, but I was happy to see the change, which was I saw a lot of regenerative farms doing humanely raised meats, which was interesting to me because two years ago, everything was about hyper-processed fake meat. none of those companies that I saw two years ago were there.

21:18And I think for good reason. I personally believe a lot of those products are not good for you. Yeah. You're being very kind. I mean, it's a cursed category. But it's also just made with crap. I mean, when you look at the scale of farmland that some of these companies need to grow and the monoculture that goes into growing those companies, they're not necessarily better for you. And I really believe in regenerative farming and I believe in eating regenerative meat, you know, you know, whatever people believe that's fine. But I was happy to see that that was the change that we were moving out of this, like, hey, we're going to have all these hyper processed foods, but they're not really meat.

21:56And we're going to say that they're better for you. And I just think that's smoke and mirrors. So I was happy to see that that was that trend seemed to be really when when a company aligns with Burger King, you know, that that tells you a lot. Right. There isn't really a helpful element to that company. I don't even say the name. I went to the regenerative section. It was a separate tent. And it was interesting to see like regenerative as a sticker, like organic as a sticker. And there's, it was a real push. And I tried to poke a lot of holes in talking with the folks. Like, I always feel like certified organic has a lot of problems, the problematic certification.

22:28And any of these certifications are quite expensive and, you know, exclusionary. So I think, but regenerative in general as a idea, I love to see it everywhere. I mean, I'm glad it's becoming part of vocabulary. I just worry that the sticker is what's going to drive everything. Yeah. I hope that it doesn't become the next organic certification because I agree with you. I mean, regenerative practices are very specific. When I hear that word, I think, you know, you're stewarding the land. There's no spray. You're using nature. You're building ecosystems. And as we know, that's really kind of what organic used to be.

23:08And so I hope that The term regenerative isn't co-opted by the USDA. I hope you're right. I fear it's already starting. For now, we're seeing the beginnings of it, and hopefully it's not all smoke and mirrors. But just going back to one thing in that regenerative tent, I do think we are moving, even at scale, to something a little bit better. And I feel, I do feel hopeful for that because I think the big, big, big players in the industries like the Mondelez's and the Unilever's are looking in their crystal ball that they should have been looking in in 1980 and saying, holy crap, if we don't do something about farms, agriculture, regenerative farming, climate change, we don't have businesses.

23:54And all of a sudden, the business case, unfortunately, needs business case in our capitalist society is what's going to drive change. And the business case right now is showing these companies that if they don't do something, they're in trouble. The young C-suite assistants who are angling to be the next leaderships of these companies in 20 years, the ones who are smart and have the MBAs are exactly to your point, are like, we are going to be out of business if we can't figure out how to actually maintain our consistency and our velocity. And climate change is going to affect both of those. Totally.

24:30And we've seen it happening in the last four years. Oh, my God. Yeah. I have to call her and I'm going to have her on the show. I got to meet Sophia Chang from Oddball, which is a very interesting – she's disrupting Jell-O. And she's doing it with all natural. So she has no gelatin. It's with konjac and other natural, mostly East Asian products. Like seaweeds. Exactly. And I tried – she was backpacking it. So there's a whole industry around the backpacker at Expo Wax where you just kind of get that$50 badge and kind of go ham. She and I linked via Andrea Hernandez. So thank you, Andrea. And I really like the product.

25:11And I love meeting a founder who is not at that one million rev level, but is great with media. I mean, she's fucking fantastic. And she'll be on the show. We're going to have a great episode. That's awesome. Did you run into any backpackers? I didn't. Yeah. Yeah. All good. I really was, I don't know. You're working too. I was working the first day. And the second day I was walking around with a couple of friends and trying every new product so that by the end of the day I was feeling sick. The intake of food at Expo West is tough. I thought it was a little overcapacity on Wednesday. That's just my one note.

25:47Do you feel grocery stores as entertainment is a thing? Do you feel – I know you've worked in this industry. I feel like the media coming out of the grocery industry is better than ever. I think that grocery is more exciting than recipes, frankly, to cover, to write about, to obsess about. I love having founders on the show. What do you think? I don't think that the mass grocer of the world is that fun. But I think what is true. I think that what happened in the pandemic was everyone realized that consumer package could be fun in a way that they didn't maybe before the pandemic. because we were all just staring at our computers online all day.

26:27And even though in-store shopping is back and online shopping for groceries is way down, I think there kind of came into the American consciousness, at least, this idea that you could discover products. And I think grocery is starting to realize, oh, I can't just have Frito-Lay on the shelf. I have to be a place of discovery because that's what my consumer expects. We've got to have Hay Day or NCAP. or a Bora or whatever it is. Or a Bora and our NCAP. Yeah, we've got to have cool brands that are NCAP, not just in - Even my Adams Fairacre has a new product section now and there's like Fly By Jing and Omsom.

27:02That's so great, but you're a fan of Adams. So is Tamar. I love Adams. Yeah, it's not my favorite in the upstate, but that's a different show. Adams is good. Sorry, but continue. I'm with you. And when I say like grocery shopping, it's like going to shop right is not fun, frankly. but to your point i think this discovery of products this idea that we're thinking about product drops we're excited about these small luxuries in life like this amazing popcorn that has a flavor profile i've never had a popcorn i'm like i'm down with it like and andrea writes about so eloquently in her in her in her sub stack yeah i think what grocer has to catch up with is this if they both want to be a place of discovery for new brands and attract younger consumers they've got to fix their model and it's just a major the amount of money that it takes to scale in grocery is absurd and you know i won't name names but there are chains where you just you just have to pay three to four thousand dollars per flavor so that's called a skew yep to just be on the shelf and then you have no guarantee that they won't kick you off the shelf so you could as a small business say wow i have this carrot dangling in front of me i want to take it i have these four different products i'm going to spend that sixteen thousand dollars just to be on the shelf and then i'm going to invest in paying demo people to demo that product to try to make it work couponing as you mentioned earlier merchandising yeah couponing is a little less but they're things called off invoices and all these different trade spend line items that you have to really invest in to make one chain work is so onerous on a small business can we just add a retail media too you have to actually spend money that's what trades yeah trade spend is yeah it's retail marketing it's off invoices it's scan that's the tack in my shoe right now temporary price reductions all retail media is attacking my shoe i i i just can't the retail media just annoying it's like literally pay to play that is what retail media that is what it is And so what happens is what we're seeing, what I'm seeing, because I work with women, is that if you have less money, you just have less placement and you have less visibility.

29:14And so what you have to do is work your butt off on social to get that name and to get the right placement. Whereas another company that might have more funding is just going to end up, it really comes down to dollars and cents. So I think that if grocery stores who want to have these younger brands on shelf and want to direct younger consumers and want to have their locations be places of discovery, they have to do something better for these younger brands. And Unify, Next, and Kehi, Elevate aren't enough. Like these distribution plays that last for a year or two, I just truly feel it's not enough.