[00:00:05] Melissa Traverse: Hello, everyone. Thanks so much for joining us today. I'm Melissa Traverse, Director of Community at BevNET CPG Media, and I'm so excited to welcome you to today's NonBase webinar. BevNET's NonBase is focused on helping CPG founders and operators navigate the challenges of scaling and building more profitable businesses. If you haven't already, please check out nonbase.com. It's BevNET's platform for the CPG community where you can find more tactical content like this. Today, we are talking about what actually breaks when a CPG brand starts working. The operational issues, the cashflow strain, and the reality that founders often hit a ceiling before the business does. A big part of that is how teams actually solve those problems, especially when it comes to hiring. What you can take on yourself, what you hand off, and how bringing in the right support can either get you to the next phase of growth or slow you down. And we have got a fantastic group here to talk about all of that today. Leading the conversation is Evan Walther of Oceans's Talent. Evan works so closely with scaling brands and sees these patterns show up again and again, particularly around founder bandwidth, early hires, and building execution capacity across teams. We are also joined by Troy Bonde, co-founder and CEO of Sous Tomato Sauce, Troy has built one of the fastest growing brands in a highly competitive category and knows exactly what it's like to go from getting into retail to actually selling through on shelf and all of the issues that come up along the way. Our final guest is William Hicks, CEO and co-founder How Magic Mind Mental Performance Shots. He has built an incredible digital and subscription business before expanding into retail and has had to navigate hiring operations and finance across two very different channels. Evan is going to lead us through the conversation, walking through those key inflection points from founder bandwidth and early app support to cashflow, retail execution, and what it looks like to build a team that can keep up with the growth. So with that, Evan, again, so great to have you here. I'm going to hand it over to you to kick things off.
[00:02:18] Troy Bonde: Thanks for having me, Melissa. As you said, I'm the Director of Marketing at Ocean's Talent. We place AI-fluent executive operators in marketing, operations, and finance in more than 600 companies and a lot of brands that you've heard of, including everyone on the panel today. So today we're talking about the gap that almost nobody warns founders about. It's a stretch between $2 million and $20 million in revenue when product market fit is real, but the company isn't built to handle what comes next. So I'm joined by three operators who have each lived through it. Troy Bonde, co-founder of Saws, the pasta brand now in over 7,000 stores, and that's probably way beyond that at this point. William Hicks, who co-founded Magic Mind, the productivity shot doing more than a million a month in digital marketing alone, and Ian Myers, who founded Ocean's Talent, which has built teams of operators inside a lot of the consumer brands you know. We're going to dig into what actually breaks first, what got hired too early, what looked like marketing but wasn't, and how cash flow goes from boring to terrifying. So we're going to start with the first three bottlenecks after product market fit. And our thesis is that founders hit a ceiling before the company does. So before we get to hiring a cash, I want to start with what actually changes after PMF clicks. Because product market fit, you know, can feel like the finish line. But as you guys are very aware, that's when the real work begins. Troy, you've talked about cooking for 58 days straight. Can you walk us into that moment?
[00:03:53] Sous Tomato: It was a nightmare for us early. I mean, we had launched four months into the business. We met with Target. We were offered chain-wide distribution. They did wave slotting. They gave us global side cap. It was a huge PO. The PO itself was larger than the prior four months of revenues in the prior four months of business. Lifetime revenues were effectively fewer dollars than that single target PO. We were cooking in LA on a single line, small batch, which we still are really small batch, but at much greater scale with eight or nine lines. And we had to cook for 58 days straight through Saturday and Sunday, two ships a day, just to fill a single target PO. And transparently, we still delivered it a week late. But one of those things where I think when When we and we were fortunate to find PMF early, I'd argue, you know, I think as a, as a young naive founder it's, it's always so tempting to say yes and I think target had proposed to us such a great deal in partnership that we felt like. The brand would work there. We could turn and it would put us on the map nationally, not just to prove product market fit in LA and New York, but to prove it in Toledo, Ohio. Right. And so we had said, yes, it was a great, ended up being a great launch. But to me, you know, at the time I was running sales, marketing, finance, ops, logistics with my co-founder. And really one of those things where if we hadn't brought in the support, I'd have been much later than just a week. And that can, as you all know, crumble a business early stage that is running a tight ship from a capital perspective and cannot afford even late fees alone at some of these big partners. It's one of those where I think scaling quickly. Leads of course, to huge supply chain constraints that can compound into massive dollar loss, but also have ripple effects across the organization. So, I mean, we ended up having, you know, we'd, we'd brought in a partner at oceans and effectively saved my life. I felt like at the time I was almost the bottleneck. I think founders early on trying to juggle everything become the bottleneck across each department of their own business in many ways. and to be able to step back and really exhale and deliver on time and full for all future orders and to be able to more effectively consumption and demand plan and to be able to focus my attention where it's probably best focused was a huge unlock for us with Ocean. So nightmare scenario that turned into a great outcome as much of scaling early stage CPG is, right?
[00:06:49] Troy Bonde: Yeah, seems like a pretty wild time. So William, Troy's bottleneck was capacity. Yours sounds a bit different. You described it as sort of having your day job being emails and calls and your nights being reports and chargebacks. Can you walk us through that?
[00:07:04] Evan Walther: We weren't so fortunate to find a big product market fit Target PO in our fourth month Magic Mind, but we started online and sold just online for the first three years. And for us, it really helped iterate on the products, making it taste better and better, work more and more effectively, improve the packaging, make it retail ready. So we really took our time and learned and improved the products, and then waited to feel that pull from retail before going in about three and a half years into our business. And through that initial DTC only period, we were running very lean. Um, I was the only full-time employee for two years. I like to say I've had every job in the company and that's, that's not probably true anymore. We've finally added a great team. That's now about 18 folks. And, uh, we've managed to hire every one of them is way better at what they're doing than I was, uh, the stop gap days, uh, early on, but it was really taxing and, you know, there's so many things in CPG that are, um. Kind of urgent, but not important little things that you need to do that don't really move the needle on the business, but not doing them, uh, can be, can hold up an entire production run or retail launch and just things as simple as monitoring, um, distributor chargebacks for deliveries. There's all these under delivery notifications that are kind of BS. And all you have to do is email, ask for a photo and they're like, Oh yeah, nevermind. We found it. Um, it happens. It happens all the time, but. When you don't have the bandwidth, all those things just get left by the wayside. And so you leave a lot of dollars on the table, both on the expenses side, but also giving yourself room to grow. So I was just a little too tapped out in terms of capacity. And we brought on an oceans diver, my assistant Divya, a little over two years ago, and she's been amazing and has really unlocked my time in a really productive way. And we've actually brought on two other divers over the years who we've enjoyed working with as well.
[00:08:58] Troy Bonde: Amazing. So I'm curious, what was the moment that you realized you couldn't be the only full-time person anymore?
[00:09:05] Evan Walther: Yeah, the ops side was the thing that started sucking me in the most. And that was my background prior How Magic Mind. I was the COO and co-founder at Brahmi making healthy Italian food. And I was the one man ops department there. And that was kind of my baby and what I thought I was best at. And so, um, We waited to hire for ops, but it was, it started taking more and more and more of my time. We were managing every input that goes into a bottle How Magic Mind. Um, you know, from the case to the label to every ingredient, it was 31 inputs to create a bottle. And I was trying to manage that supply chain in basically my spare time. Um, and it just became completely overwhelming. I remember, you know, sitting in the forecasting. system I built and just questioning whether any of it was even real and, uh, whether I'd made some mistake and like could completely miss forecast the business and, you know, have a working capital misallocation that could, uh, be life threatening. And I said, yeah, this is just too important for me to be doing at 10 PM. Um, you know, overworked and overstressed. And so we started to build out the support. The first role I actually hired was customer support. Um, because we wanted to always have a direct line of comms to our customers. And we managed to hire a great team member who was able to jump on a lot of e-commerce stuff and kind of slowly built the team out from there. So it started with customer support and then operations.
[00:10:26] Troy Bonde: And Ian, you've watched this happen across, at this point, hundreds of consumer brands at Ocean's Talent. What's the pattern you see when a founder is in this exact spot?
[00:10:38] William Hicks: I was just thinking about this as Troy and William were talking, and it's the least, like, for me, CPG, especially food and beverage, is one of the least fair industries I know of, where success is the most painful, I think, out of any. Like, we work with a lot of SaaS companies and doctor's offices and sort of more traditional industries and recycling businesses and whatever. We also work with a ton of CPG brands. And to find success, especially in retail, often means huge production struggles. It means very uneven needs on an employee front to handle certain things, but it might not be full-time and long-term. You might just need it in a crunch. It means a lot of events. It means a lot of step-up and complications. I have seen firsthand what happens when you try to change your co-packer or your co-man, and it's just to deal with new production, and then you're sort of, The most painful thing I saw was a brand that got to a point where they were just big enough to be at one of the big co-packers, but then they were competing with Starbucks for line time. And of course, this guy was going to give the line time to Starbucks because it's Starbucks and not to this smaller beverage brand, right. And so there's all these kind of pitfalls that happen when you scale onboarding onto new retail. Retail partners is like a crazy process. I've never seen so much like archaic paperwork and like old systems being deployed to make people sign up. It's just a very painful thing to watch these companies scale. No offense, guys. I mean, I'm sure you've It's super cool to have like everyone in America putting your sauce on their pasta or drinking Magic Mind before they go do anything with any mental acuity required. But, you know, it is such a challenging industry. But what's been most interesting to me is The breakpoints seem relatively the same across the industry, and the challenges seem relatively the same. And so we've deployed a lot of very similar people, specifically in sort of founder support operational roles, again and again and again and again, because the complexities are usually operational, it's usually a lot of manual stuff, it's usually high attention to detail required, but takes a lot of time. And, you know, there's a lot of communication, there's a lot of customer service, do a chargebacks, you got to deal with shipping, you got to deal with warehouses, you got to deal with your retail partners, you got to deal with the paperwork. It's a very like operationally intensive industry way more so than SAS or, you know, a lot of technology businesses. So, It's been painful to see a lot of my friends who have started these companies get through that hump. But once they do, it's incredible. And it's also exciting to see a lot of acquisitions heat up in the space. And it's become a much more active place for M&A in the past couple of months. And that's, I guess, what everyone's hoping for.
[00:13:33] Evan Walther: Like in the test, the pain doesn't go away. You kind of have to love the pain.
[00:13:39] Sous Tomato: You become numb to it in some way, right? Yeah, exactly. It feels like in this business, it feels like you're doing something wrong if there's no pain. Like you're, you're, there's, you're not, you're not pressing hard enough or you're, you're pushing in the wrong areas, you know?
[00:13:54] William Hicks: Can I just ask a lot of people say in this a lot, like if a lot of founders I talked to in the space, like say, don't do target nationwide, don't do Costco early on, like stay the hell away. They're just going to mess you up. You know with what hubris did you say yes, and how did you make it work for you when it seemingly is like a Like a fake success, but actually death now For so many other brands.
[00:14:22] Sous Tomato: Yeah. Yeah. No, I well, you know, it's funny you said I had a a major consumer investor say that effectively to my face that you guys are screwed for saying you shouldn't have said if it doesn't work, you're screwed. He said it in a way that I can't say on a live podcast. I think a lot of that I think that conventional wisdom isn't necessarily as applicable today as it maybe was 10 years ago. And to me, the playing field from a channel strategy perspective has been leveled through social commerce and through the accessibility of information and the opportunity for virality from a consumer brand today. I can, you know, we can more easily and, and, and will honestly, I'm sure understands this much better than I do, given his DTC business is a hundred times mine, but we felt really confident that we could genuinely be incremental to the set at target by driving high intent in Gen Z and millennial and young mothers and fathers shopping for kids who might be digital first or would be willing to walk the aisle with their kids and have their kids point out a jar of summer lemon marinara because it's bright and colorful and exciting or because they'd seen it on socials. I do think if we felt like we couldn't If we felt like we had a great business and a good product, but not a great brand, we wouldn't have done it. But I think brand is the unlock in my mind that really does allow you to drive intent to acquire and to reacquire, whether it's in a Whole Foods in New York or in a Target in Minneapolis. It's not easy. I think the greatest risk, in my mind, isn't the sell-through component. It's more so the capital required from an inventory standpoint and trying to shorten order to cash. It's no secret that operating an undercapitalized consumer business is very difficult. I think conventional wisdom is broken. In my mind, though it was probably a decision that we had made with being naive young founders, the Target team has been great. They've been so supportive. It's been an amazing partnership for us. We have more innovation coming with a lot of these partners. To me, if The expectations are level set. And from the beginning, you really have a clear thought out plan to not just jump into a crowded center store category and hope that the consumer who is in their habitual consumption routine pulls product, but that you feel the data will show that you can drive new dollars to the set. you know, you can pretty confidently win. Right. And so I think that, and again, it's not easy and it's incredibly costly to drive consumers to store in many ways. And your lowest CACs are going to be that shopper who's already there. But to me, I do think the opportunity to build brand digitally has kind of busted down that barrier of this thinking that a new brand can't win in, in certain channels.
[00:17:54] Troy Bonde: Yeah, so that's actually a great segue to the next thing I want to talk about, which is cash flow. And so, you know, you've got Target four months in. It feels like a huge win. What's the cash story behind that and what surprised you about it as growth accelerated?
[00:18:13] Sous Tomato: Yeah, transparently, we raised venture pretty early. So we'd funded all of our growth, even actually to date with venture dollars. And again, William Hicks probably more competent in this area than I am. But to me, you know, I've always been hesitant in funding the business with debt or even in PO financing. I think where it's likely most valuable, even today for us, is to shorten order to cash and then negotiate terms with our co-man or with some vendor partners that are our largest vendors on the GL. You know, in the last 24 months of the SaaS business, we have been 100% funded by venture. And in the early days, we were self-funded by the savings that we'd had. But I think, you know, the opportunities today as well are more abundant than ever for early stage CBG founders to fund their businesses in creative ways. But, you know, it really is, especially as, you know, when you're growing, incredibly quickly, very early in the life of a business. When you don't even have a year of historical P&Ls, it can be difficult to have a debt partner be willing to stick their neck out for you as well. I do think negotiating terms, I think the way to solve that would be rather than net 15 with your command, can you be net 45, right? Or can you be net 60? And across the board, with even things as small as packaging partners and for us glass suppliers and cap suppliers and our label supplier. And there are many ways to stretch cash on both ends, not just kind of injecting the balance sheet with some liquidity, but also in stretching just how far that balance sheet goes.
[00:20:17] Troy Bonde: That gives me a call back to William talking about a forecast that he was making at, at 10 PM and wondering whether they were real or he was going to tank the business.
[00:20:26] Evan Walther: We did take on some debt early on and I'll never do it again until We are, you know, 10 million plus EBITDA profitable, so we can have a normal bank, give us a revolving line of credit. Um, but yeah, I, I had made a mistake in my model and how I integrated the debt payments. And it was a very simple thing that is embarrassing for someone who started his career living in spreadsheets, uh, in investment banking, but totally botched it probably because I was over, overworked and overtasked and, you know, realize we had. less than 90 days of cash remaining and our runway and had to do a urgent, uh, friends and family rounds. And it was me going to my network and saying, you know, we really believe in this business and the growth trajectory is amazing, but. We need this capital ASAP and can't do an institutional round. And fortunately, I was able to get enough cash to make it through that and ended up raising an institutional VC seed rounds about six months later on the tailwinds of some great growth that we had been seeing along the way. Um, but yeah, that, that experience already was sort of against the idea of debt before you're profitable, but, um, we went to kind of, I went against my best judgments and, and it's tempting when you see a term sheet for, for cash in your inbox to take it. And I just think it's a mistake because I think it can, um, it can hide issues in the business and prevent you from focusing on stuff that matters. Like Troy said, I mean, terms are the most important thing and really your sales channel mix is another underrated. thing when you're talking about cash conversion cycle, um, if you can manage to build DTC first, you're getting paid on day zero of a customer interaction. Um, so we were able to get our, the, the big unlock for Magic Mind on the cash front was, um, I went from ordering those 31 inputs that went into one bottle to finding a partner that would order all of our ingredients on our behalf. and then create this nano encapsulated concentrate that made the products now five times more effective than other vitamins and supplements, but also allowed us to have them invoice us and we negotiated 60 day terms with them. So I went from paying for a harvest of matcha, you know, five months in advance, to paying for something 60 days after production, oftentimes when we'd sell through about half that inventory on DTC. So we were able to build the business very capital efficiently once we were able to focus on those terms. And we now have 60 day terms from all of our key suppliers, which has been a game changer for us.
[00:22:59] Troy Bonde: Well, paying for matcha five months in advance sounds incredibly painful. Yes. Yes, it is.
[00:23:06] Sous Tomato: Those are how my tomato buys go. I wonder if they can, if we can do something that encapsulates my sauce and will be incredible. You need to make an intro there for me.
[00:23:16] Evan Walther: We should. Yeah. We should talk after Troy.
[00:23:18] Troy Bonde: Figure that one out. Ocean's Talent gets involved on the accounting function quite a bit. What do you see that goes from manageable to, I mean, I guess you've touched on it a bit already, but from manageable to mission critical fastest in this band?
[00:23:36] William Hicks: One thing I would say just Troy and William have both had their experiences and they both have like a really fundamental understanding of the cash needs of the business. And I think they're not lucky. They made incredible products and those products did well and they were able to raise capital. But I think there's a lot of people that are, where access to capital is just incredibly difficult, even if you have a great product. And in that, you know, those are those are worlds in which cash flows even more dire if you're, you know, not able to make calls to get people to put some cash in if the situation is dark and you know, what I'm often surprised about is how little it is considered. Like I don't talk to a lot of founders that are really like we got to negotiate terms. That's like such a huge thing for our business. There's a lot of them that don't even realize you can. you know, there is a young company, they're sort of in there, they're making their product. And then they're negotiating with these much bigger companies who are giving these huge legal documents. And it's all seems to be templatized and standardized. And you're sort of like, Okay, well, if those are the terms, those are the terms. And so, you know, one of the things I've seen, at least when when we work with folks, you know, on the operational front, it's really freeing up the founders to do more important things than filling out paperwork and coordinating logistics and answering customers and things like that. Not that there's anything more important than talking with customers. We all agree that's the number one most important thing. On the finance side, there really is a lot of learning. I think there's two big issues that I see. And again, this is just stuff I've observed. I've never really lived the life of a CPG founder. And one is a visibility problem and the other is just a thought problem. So a lot of folks can get pretty far into the life cycle of their company without real financial visibility. And without that financial visibility, it's very difficult to make good financial decisions. I think Troy and William both kind of have a background in these things and to have more accessibility and ease of understanding these things. But a lot of founders in this space seem to be people that like came up with this stuff and someone was like, you should sell this. And I'm like, yeah, I should. And their business before that was like a dog grooming salon or something like that. And so they're not coming in with like having spent their life in spreadsheets or whatever. And so A lot of the roles we put in with folks on the finance side are people to come in, to take everything, pull it together and make it something digestible that they can talk with the founders about and point out areas that need to be improved, help with forecasting. I mean, I assume that forecasting is really, really important in this business, demand planning and knowing what to order, especially if they order matcha five months in advance, you really got to know exactly how much matcha you need to order. And without that visibility, it's difficult. And then just getting people to think about it. Again, I think far too few found, I mean, I was talking to Nick Sharma about this the other day. It was just like, founders like wake up and they're like, whoa, I got a cash problem. And then it's very reactionary, like solve to it, as opposed to thinking about managing cash as a huge part of the business from day one and having a finance partner. You know, a lot of people we put with the CBG brands are that like, here's how to make cash flow a serious focus for your business as you scale.
[00:27:20] Troy Bonde: The spreadsheet is not going to save you. It's the system around the spreadsheet that is, or even more than that, you shouldn't be the one trying to run the spreadsheet while you're doing it.
[00:27:29] William Hicks: I just have a spreadsheet in the first place. It's not easy to, I mean, pull all these things together. I mean, maybe William on like, if you're doing just. Online, you got, you know, those platforms probably have tools to help you see everything, but especially I'm sure Troy, if you're in retail, this is a lot of like manual work and like pulling all your disparate information sources together to actually understand everything.
[00:27:49] Sous Tomato: I had a call with the, our ops team yesterday, and it is. Unbelievable how fragmented when you work with, you know, four or five distributors, and then you go direct at a handful of accounts. Like you think about, even as we talk about negotiating terms and being diligent in managing your cash conversion relationships with each vendor. When you look at where MyAR stems from, it's like this web of so many vendors and so many customers and a handful of distributors and retailers, both direct and fragmented. You're right in many ways. That alone is near impossible to effectively and efficiently forecast as well. And honestly, that's where Evan, on the point you made earlier, Anjali on our team, our diver, has been Looking at how she has helped us to integrate and think about AI in the business, it actually is somewhat, it's not a perfect solution because none of these things ever will be, but I'm proud of how my team internally has leveraged AI to build efficiencies and work toward as good an answer as we can get. But it is the the fragmentation of the business, especially in retail, is makes for a near impossible task in forecasting when I think back to when the business, you know, eight or nine months ago the business was like three of us, four of us, right. And I was, I was doing all of our forecasting or demand planning, I hadn't even built consumption forecast because I didn't know the difference at the time. And they were looking back, they were so inaccurate, like unbelievably inaccurate. And in some way, it all worked out. There's this other core component of operating a business and telling yourself that it will work, and it did. But I don't know how I slept at night then. And I think building the team around me and having Anjali on the team does help me sleep a little bit more. But the fragmentation of retail is, in many ways, something that can be impossible to navigate.
[00:30:12] Troy Bonde: makes sense that AI is helping in a big way there to navigate that level of data. And like you said, these complex webs that you're dealing with. I want to shift gears a little bit and talk a little bit about marketing. Marketing that works versus marketing that looks good. And Troy, you made a great point about how without a great brand and product, you couldn't have done what you did. And without those things, marketing can just be a lot of paid noise. Will, you're spending, I hear, over a million a month on digital right now. So I'd love for you to take us in. What started to move the needle, and how have you scaled that?
[00:30:52] Evan Walther: Focusing on LTV first and kind of not having to find some breakthrough miracle to cut CAC in half, but actually like work with the CAC that the market is giving you. Then expanding AOV and LTV was the biggest unlock early on. Um, and I think for us as a subscription product, not everything can be a subscription. Now it's, you got to get your LTV, what makes sense in your customer's consumption habits. But, um, because we are a daily use item and, you know, 50% of our customers are taking Magic Mind every day and 92% are taking it three days a week or more. Um, we were able to build this kind of ritualized, uh, behavior and this subscription business model that actually worked for our product. Um, so the first thing was kind of unlocking that and messaging. really enforcing and enhancing it as this daily use item, not just a five hour energy you take when you're feeling down, it's a daily investment in your mental performance with all of our clinically backed ingredients. So that's that was the biggest unlock early and just Enabling subscription allowed us to go out and spend and learn on performance marketing and paid social. Um, our two biggest marketing channels, uh, in the first five years of the business were just Facebook and Instagram ads. And we stood up an influencer marketing effort. Um, that was pretty unique doing direct deals with micro influencers, uh, about 500 deals a month, uh, average deal size, like 300 bucks with a team in Eastern Europe that we built out internally. Yeah. Um, but there's, you know, you look at all those 500 deals and talk about, you know, what's pretty marketing versus what's good marketing. Not all of it was that pretty as these, you know, YouTubers who have 10,000 subscribers and, um, you could never tell what type of mention would drive sales. Um, there was really no demographic. Uh, precursor to success, our best performing ad one year ad read was from a woman doing cottage core in England, uh, tending to her garden and the Cotswolds and just her authentic love How Magic Mind really came through. And it like, it was the highest efficiency integration we really ever, ever did. Um, so it gets back. Yeah, it's you can never guess that and so we just found that more than kind of polish the authenticity of the Mention the referral the the promotion was what made it work And that definitely held true and in the influencer channel
[00:33:29] Troy Bonde: Well, yeah, I can sympathize with your team doing 500 of those a month. I ran partnerships at Oceans, and yeah, that's a heavy lift. For sure. And so, Troy, you know, William Hicks the benefit that he can, you know, basically see someone, you know, when he does marketing, he gets to see the purchase right away from the customer. For you, it's a lot different. How do you know what's working?
[00:33:59] Sous Tomato: Yeah, I mean, a significant portion of our marketing budget goes to in-store activities, right? Retail media, Target, Roundel, Instacart, 8451 at Kroger. And those I love because they are so measurable. I can see direct attribution to velocity growth. The difficult part in finalizing budget end of year, I remember saying this in a team meeting last year, is that I look at the marketing budget and I know that half of it is in some way not going to work. I just don't know which half it is. There is some beauty in that because I joke that the half that doesn't work actually might work two years later or a year and a half later. The event we have in New York in the West Village that leaves a lasting impression in the mind of the consumer who was either introduced to Saws or who is a fan of Saws already is something that's immeasurable but has inherent value. And so to us, it can be incredibly exciting. And I think it's fun for our marketing team to be able to do these things and not be held to strict KPIs and outcomes. But at the same time, I'm biased internally. I love to be able to measure an outcome from dollar allocation. But it's this interesting balance of brand marketing. And I guess you could call it pseudo performance marketing, though. It's really just retail media for the most part. But yeah, I mean, that's kind of, I would say the split generally leans more so toward retail media for us. I mean, my goal is to acquire that lowest CAC consumer and drive trial as much as I can. I mean, I even look at our digital channels, like Instacart, for example. I think we're still 70, I looked last week, I think 71% new to brand. 71% new to brand in nine, 10,000 stores, that's a ton of consumers that have not yet either been introduced to or tasted products. We definitely focus on the marketing end in getting sauce to lips, but we also have this incredible brand opportunity in a category that we feel has been dominated for too long by New York restaurant to retail. And so we can do things fundamentally differently. And I think the beauty of the brand is that we do have permission to do what many others can't. And that's where the marketing team loves to go crazy. I think each are exciting in their own way. Retail media and measured results maybe aren't as glamorous, but it's daunting and in many ways fun to be able to allocate spend to things that have more unpredictable outcomes.
[00:36:58] Troy Bonde: Ian, you've watched marketing spend conversation from inside a lot of these brands. What's the pattern that you see when marketing-led growth starts to crack?
[00:37:10] William Hicks: panic usually. You know, I think to Troy's point, we're living in a really strange world. There was a formula in D2C, Ecom and CPG, if it's selling online for a very long time, which was contained within the existence, within the dashboards of essentially Meta and maybe Snapchat and then TikTok. And everything was very measured and you could really understand it. And it was just a very financial exercise in marketing as long as you got the creative right. And I think now it is much more complex than that. And you can get a ton of results from a woman in the Cotswolds saying how much she loves your product. And you can get a ton of results from like, Somehow some guy in Japan has discovered this when he was on a trip somewhere and now he's making you know Japanese whatever's about it and that goes viral in the US and it's like a it's like a strange exercise in things that don't pay off for a year and things that convert to checkout immediately and To be honest, I'm actually curious. I'm not even going to answer your question, Evan. I'm just going to ask Troy and William Hicks'm really curious about the difference between marketing for, and tell me if I'm wrong, William, but marketing for a category that I think you created from scratch, which requires such a heavy educational component, I would imagine, compared to marketing a redefinition, a reinvention, an innovation in an existing category, which is essentially education versus like conversion from an existing habit, right? So do you guys have any thoughts about the differences between those two requirements and how you grow?
[00:39:06] Evan Walther: We really are trying to create a category around mental performance in general and Our thesis is that mental performance will be as big if not bigger than physical performance in the coming decades as we care more and more about long term brain health and the way we feel and perform on a daily basis. But it takes a long time to explain it. I mean, even the like, kind of one liner How Magic Mind has evolved over the years. And it's been a kind of a constant topic of of debate internally, because there's just so much that we want to say that doesn't stick. And you need to kind of really focus on the top level thing. So I think it was really important for us to go do to see to start and to continue to educate the consumer through longer funnels there. When we get plopped on retail shelves, and someone has not been indoctrinated, To the brands, um, the panel of the product is doing a lot of heavy lifting and it's pretty tiny. Uh, these are our DTC cases that are 15 packs behind me. The retail cases are actually only two bottles wide. So we have two and a half inches of space to communicate what the heck this thing is. Um, and even less based on the bottle itself. Um, so it's, it's a challenge, uh, to, to tell that story in retail alone. Um, for us, we focus on getting the product to people's hands and sips on people's lips. Um, so like Troy was saying, you know, we really big believers in retail media and, you know, you can kind of think about a lot of the stuff you can do on Instacart as like digital demos and like getting people to actually try the products. You can measure repeat rates on Instacart. You can kind of get to what an LTV looks like and start to underwrite that. Um, but we're trying to spend our dollars as close to the register as possible in retail, just to drive trial. So whether it's big promotions to get people's interest, um, or retail marketing, like Instacart around Dell, um, we just want to really incentivize people to get it in their hand. Cause our experience is when people try the products typically for a couple of days, like they feel the magic, they feel the effects and they become customers. Um, Um, so it is a process to, to educate the consumer and it's definitely a challenge for us in retail.
[00:41:17] Sous Tomato: And I think for us, it's, it's of course, less educational. I mean, we are selling flavored tomato sauce at its core. Um, to, to me though, you know, the core focus in the beginning, it was really two pronged when we launched a target. The question was, um, Do we, should we focus on more effective value communication and really, you know, communicating with the consumer what the value prop of our product is? Or, you know, should we do all that we can to drive brand awareness in store? Get eyeballs on the product and really move out of the inline set and to the perimeter where we have to fish where the fish are in the majority of foot traffic. at retail walks the perimeter. And so I think today what we've seen in the data tells us is that as much as we can do to allocate dollars to getting product from the inline set, a high intent portion of the store, to building an in-store brand block and billboard on display, side cap, or end cap, is where we're seeing our greatest returns. I mean, we had, for example, we had an end cap, you know, three, four weeks ago, actually with Brahmi, William. And we saw huge, huge lift, the highest lift we've ever seen on display at any retailer. And there was no promotion attached. It was just purely display. So, you know, I think what our core focus is, is less about educating the consumer about product and more so, you know, letting the consumer know that the brand and the product is there. You know, they, the consumers never had tomato sauce has never been a discovery category, right? I mean, it's not like beverage where you, you know, you walk to the beverage set and it feels like every time you take a look at it, there's something new, there's something exciting, there's new innovation. It really hasn't traditionally been innovation in premium or value tomato sauce. And so, um, We're trying to fundamentally shift the expectation from the consumer of our category toward discovery and away from commodity. Most of that, in my mind, comes from just driving eyeballs in retail and doing as much as we can to bring product from the inline set to the perimeter, to produce, to meat and cheese sections. where the foot traffic really flows. Fortunately, it can be a good thing and not, but we aren't having to educate about hot honey or lemon or rosemary or the remainder of our assortment. The focus really is getting product out of inline and to the perimeter.
[00:44:11] Evan Walther: I think key to that working is having a bad-ass brand like Troy has. And like, I hope that we, we have and beyond the branch, the product really needs to be amazing. And I think that's something that founders after that sort of 2 million to 20 million phase Ian, um, they kind of think they've checked that box on products and they, you know, want to focus on, you selling to new customers or new suppliers terms, the things we talked about earlier, they're important, but the most important thing is continuing to invest in product quality. And that is the biggest lever you have for retention and repeat rate. Um, you know, the Brandt Gehrs you discovered and the product draws that, that repeat rate. So Troy has an Epic product. So does Brahmi, you guys do more of those end caps together. It sounds like a great partnership. The key thing that we haven't talked about yet is, is on the product side. I just want to call that out.
[00:45:01] Sous Tomato: You're right. And even when William's talking about his LTV numbers, you're right, William. The catalyst for LTV and repeatability is product quality and for you, the utility, of course, as well. I do think in many ways, I always say in my next life, I want to be a D2C founder because you've got this highly subscribable, high AOV and a product of real utility that the consumer can feel gives them what they might expect to be high performance in their daily life. For us, it's more experiential in some way, but to build repeatability can only be done with an experience that the consumer can't forget. So it's a great point. Product quality is the nucleus of our business in thinking long-term is whether the consumer enjoys product enough to go pay for it, whether they buy it on deal or they buy it on display, whether they are willing to go back and pay a full price in the center of the store.
[00:46:13] Troy Bonde: If you were doing it again, one thing you'd repeat, one thing you'd avoid. Will, you can take it off.
[00:46:19] Evan Walther: Yeah, for us, I would... Repeat starting online. I mean, for us, I think it was critical. I don't think our product quality and tying it all together was good enough early on. It just didn't taste good enough. Uh, the ingredients we use are gnarly, but Copa Manieri is my favorite ingredient. The product decreases impulsivity helps with the tension, amazing clinical data, but it tastes like bitter dirt. And, uh, that was a challenge and, you know, we, we worked through it and we wouldn't have been able to without a bunch of iterations. in, in digital and being able to build up a customer base to go to bigger and bigger, more quality suppliers. Um, so that's something I would repeat.
[00:47:02] Troy Bonde: And one thing you'd avoid.
[00:47:02] Evan Walther: One thing I would avoid is I'd probably bring on support earlier. Um, you know, working as a solo preneur for two years, um, was a bit much and, um, I think if I were to start a CPG brand today, the first two things I'd do would be to hire a oceans diver to extend my abilities as a founder. And second to like create a data Lake warehouse in snowflake that pipes your Shopify and your ad spend and your retail sales data, and then let Claude tie into it to be able to gain leverage on, uh, understanding your data. Um, so those are like the two.
[00:47:47] Sous Tomato: must-haves for me in starting a business, and we waited too long on both of them, I'd say. and with conviction. I mean, the team went from three to it's now 11 in the course of probably six months. And so I think I'd have done that the same way. I feel I wish I'd done it maybe a bit sooner, but I do think Will makes a good point. It's not easy to do everything in CPG, especially with a physical, tangible good that is distributed almost everywhere. One thing I think I'd avoid, I would say, likely I'd have focused more on unit economics early. I look back and especially as we've scaled and your TDPs grow immensely and your ACV grows, every cent matters so much. And it might sound cliche, but looking back, I mean, there are little things that I could have done from an efficiency standpoint that now have culminated into huge dollar sums, right? And I just, I didn't know better at the time, and I didn't have the team to tell me. And, you know, William said something earlier that I live by internally, and it's that every departmental lead at Saws is far better at what they do and what they know than I am. And, and so I'm able to learn. You know, daily about, you know, little mistakes I had made in, in beginning this business and really the first four or five or six months of its life. And, you know, the dollars that I hadn't optimized then compounded over time into much larger sums than I would have expected. And so I think, you know, economics and efficiencies and co-manufacturing relationships. are key and, and should be you, you know, most of your primary focus in, in the beginning. And then the hiring component, I wish I had built a team and, and known that I could build a team in a, an efficient and effective way from a capital standpoint, but also operationally, uh, much earlier. And that, you know, again, Anjali and our team has done so much for me to be incredibly confident in, in hiring divers and, and, um, you know, and having a team that is totally remote, entirely remote, but so efficient and effective and far more effective today than the business was, you know, six or seven months ago. So I think those two, though it, you know, I had this hesitation early to avoid hiring and I felt like I could do everything and that I would save money in doing so. If I had handed off the handful of responsibilities that I know I'm not great at, that I don't excel in, And I had focused almost entirely on the P&L and our unit economics. We'd be in, in my mind, a much better place than we are today, though we feel like we're in a pretty good spot.
[00:50:57] Troy Bonde: And Ian, from your seat, what's the pattern in brands that survive this stretch of product market fit and a lot of growth versus the ones that don't?
[00:51:12] William Hicks: A couple of things, I guess. One, they have a lot of money. Troy said something up top, which is the experience of running a, apparently, again, I don't do it myself, but the experience of running a CPG. Brand with a lot of money in the bank is a very different experience from running it with very little money in the bank. And so that is like a crucial part. I mean, it seems obvious, but it is like sometimes not what people do or even think about doing. The other point I guess is around hiring and what was surprising to me was I have seen the CPG community really embrace remote work, which is funny because it's a physical product, right? But you'd be surprised how it's not as if all this stuff is getting made, you know, behind that wall that William Hicks that says Magic Mind on it. It's not like there's conveyor belts running there, right? It's a pretty like distributed operation. The product gets formulated here, gets made here, it gets shipped here, it gets, you know, warehoused here, it gets, you know, sent through. So like, I have been surprised that a lot of CPG brands are very familiar with remote work and are in particular very open to hiring offshore because it is a business that can function async. It's a business that requires a lot of capital efficiency. And if you can get really, really talented people for less money, that is what can help you bridge the gap because there's always a sense of, We've got the POs, we've got the pathway to a certain level of revenue and a level of growth, but getting there without the hands to do it is going to be very, very difficult. But we currently can't afford the hands to do it. And so crossing that chasm by finding high quality folks that are really skilled, but you could get for much less, seems to be a great unlock in crossing those chasms as you scale. I shamelessly, of course, say all these things. My entirety of observation of the CPG business is people who are our customers and are using our talents. It seems like everybody I know is doing it. It's just because I don't know anybody else.
[00:53:41] Troy Bonde: There's a through line that I'm hearing across all three. I think that's the perfect place for us to land. And I see this with a lot of other customers at Ocean's Talent. Growth rewards repeatability, right? So the brands that win, they build systems earlier than feels comfortable, earlier than maybe even it feels necessary. They hire, they get finance hygiene, they build an ops backbone, they have cash discipline, they build it before they need it, because by the time they need it, it's too late. or yeah, you're begging your friends for cash. So we'll end on that. Troy, William, Ian, thank you for sharing and for the candor and for your time today. Melissa, thank you for hosting us. And to everyone online, thanks for spending the hour.
[00:54:30] Melissa Traverse: That concludes another episode of the Nambase podcast. If you enjoyed the show, please leave us a review and follow us on your listening platform of choice. You can also watch and listen to past episodes on nambase.com, and don't forget to join our Nambase Slack at slack.BevNET.com for company updates, industry networking, and community discussions. See you next time.
