[00:00:03] Ray Latif: Hello, thanks for listening to the BevNET podcast. I'm Ray Latif, the managing editor of BevNET. I'm here with our editor-in-chief, Jeffrey Klineman, Seth Reiter, Neil Martinez-Belkin, and a very special guest here at the BevNET office, Mr. Seth Goldman, the co-founder of Honest Tea. How are you, Seth?
[00:00:19] Jeffrey Klineman: I'm great. Good to be with you guys.
[00:00:21] Ray Latif: You've recently moved up to a TEO Emeritus now these days. Very cool. Very cool. He's ascended. How are you spending your time these days, Seth?
[00:00:32] Jeffrey Klineman: So about half my time is still with Honest Tea and it's everything from thinking about innovation to expansion to strategy. And then another half of my time is as executive chairman of a company called Beyond Meat. which is based out in California near Los Angeles. And so it's really a fun evolution for me because I still get to be part of a brand I love, an enterprise I love, that is still very mission-driven and still growing at a very fast pace. And at the same time, I get to get back into the struggle, more, I don't know if I say struggling, but, you know, challenger role of an early stage company, trying to get, that is on market, but trying to figure out how to expand and really take advantage. Once again, also very mission-driven. So good mix for me. I wonder how you'd compare where Beyond Meat is to where Honest Tea when it started to get involvement from Coke. So actually, from a sales perspective, it's not that Beyond Meat is pretty much at the level where Honesty was when we did our first transaction with Coke, but from a sense of tapping the opportunity, Beyond Meat is in the very, probably the, you know, just end of the first inning. We've demonstrated the concept, but we've just started, we've just launched a product which we'll be tasting later today called the Beyond Burger, which really for us is a transformational opportunity because it is the first plant-based burger to be merchandised in the meat section of a grocery store. And the notion here is that there's a much broader opportunity to disrupt the burger than the tea bag. Well, the whole meat category. So if you want to sell to vegetarians, then you go to the 8% of the, you know, where the consumers buy those products, which is the freezer. If you want to sell to everybody else, you go to the meat section. And if you're successful in doing that, the meat section evolves from being a place where you can buy hamburgers and chickens to becoming the protein section. And you can buy cow protein, chicken protein, and plant protein. We're just getting started at that level of opportunity. And it takes a product that can deliver on that. And obviously, it's been really interesting for me to meet with all these meat buyers around the country. These guys are meat buyers. Why don't you give me a veggie burger? I'm a meat buyer." And then they taste it and they say, okay, this isn't a veggie burger. At least not like I've had before.
[00:02:42] Ray Latif: It's interesting because we're going to be trying these later on and you know when they say, you don't sell the steak, you sell the sizzle.
[00:02:46] Jeffrey Klineman: I'm selling the sizzle.
[00:02:47] Ray Latif: I'm feeling the sizzle right now. I can't wait to hear the sizzle pretty soon actually.
[00:02:50] Jeffrey Klineman: Yeah, that's also neat. This is the only veggie burger I've seen that actually does sizzle. when you cook it without oil. Now you're a longtime vegetarian. Ten years, over ten years, yeah. My whole family. We've struggled. I got three boys, they're all athletes. We basically said, we're not eating any more of these veggie burgers. They just don't taste good. They're not satisfying. They're like the consolation prize. And my sons used to bring them to barbecues and just be embarrassed. I spoke at a camp earlier this week, which I don't normally do, but I owed a friend a favor. And I was talking to the kids. I said, you know, how many of you have tasted a veggie burger? And all the kids went, eww. And that is the perception of veggie burgers. See, I disagree with that. I am a longtime orderer of the veggie burger. I just think of it in terms of a sandwich. So I get my veggie burger with cheese and bacon. Think it's fantastic and I found out recently I was actually at a restaurant and there's a term for that sandwich because I Believe it or not. I'm not the only one who orders that they call it a hypocrite You know, it's a hypocrite for table four and There you go. Well, I'll be curious to hear what you think of the burger today.
[00:04:03] Ray Latif: So it's interesting, you know, one of the other things that you brought with you today was the newest line from Honest Tea, which is the Honest Sport.
[00:04:11] Jeffrey Klineman: Right.
[00:04:11] Ray Latif: It's a new line of sports drinks. Tell us about the development and why you guys got into this.
[00:04:15] Jeffrey Klineman: This is in a pilot phase, so these are not ready for national launch, but we are testing in the Whole Foods Mid-Atlantic stores. It's good we try them out on DC first. Called Honest Sport. It is an organic drink. It satisfies the definition of a sports drink according to the American Academy of Sports Medicine, which is certain level of carbohydrates, certain level of electrolytes, you know, sodium and potassium, and then obviously water. And this came from a triathlon I did last fall. You're a distance runner. Why are you all of a sudden doing triathlons? It's good to diversify. I find as I get older, if I only run every day, my legs get sore. So I mix it up with some swimming and biking, and it extends my shelf life as an athlete.
[00:04:54] Ray Latif: You're looking good, Seth.
[00:04:55] Jeffrey Klineman: Thank you. Thank you. I appreciate that, Ray. As are you, Ray. Neil, you were up too late last night. So what I think is interesting about this is it's sort of an evolution of the Honest Tea origin story. That's right. That started with a run too. What we say on the package, we say at our PSs, we get a lot of mileage out of our mileage. Often when I go running, I get new ideas. See, that's fantastic because Honest Tea as an organization early on was known for thrift in its marketing budget, but you would reuse a couch for a long time. You're actually reusing the story. It's authentic. In this case, it's a triathlon as opposed to just a run. But I got to the finish line and they had this award ceremony and somebody came up and he was on a team affiliated with a large beverage company, which I won't name. And I'm like, why is that this particular company having a triathlon team? As I looked at the audience, I don't think anyone in this group of 3,500 athletes is buying that particular beverage. There isn't an organic sports drink, and there should be. And when we set to formulating this, and I'm eager for us to open and try some samples, it's a really clean, clear taste. So let's start with the lemon, because that is my favorite. I will say that it should be with a pilot launch. Some of these are better than others. So I think that the lemon has got a really nice, clean taste. We've got the bottles open there.
[00:06:12] Ray Latif: Well, Neil wrote a recent story for the magazine on sports drinks and talked to you about it. Sure. Neil, why don't you give us a live review here, or at least the podcast review. Oh boy. Of the Honest Sport Lemon. I'm going to try some too. As an athlete yourself, how are you feeling about this?
[00:06:29] Seth Reiter: I like that it's like very lemony. I like that. It's like strong on the citrus. He's also looking much better now.
[00:06:35] Jeffrey Klineman: Yeah.
[00:06:37] Seth Reiter: Thank you, Jeff.
[00:06:38] Jeffrey Klineman: One of the things we found when we tasted the category is there's a lot of adornments. There's a lot of, frankly, unnecessary tastes. So we thought, let's make this clear. Let's put in lemon juice, obviously some flavoring, the sodium, the potassium. Not a lot of salinity to it though. It meets the requirement. And one of the things we're doing in this pilot is we do expect to, we're going to be evolving towards sea salt. So this current formulation doesn't have sea salt, but it will when we do a broader launch. Doesn't Knudsen's... I think it's called Recharge. Yeah, isn't that organic? Or does it just use sea salt? I don't know if it is organic. I can tell you that it has not captured the shelf as the go-to sports drink in the natural shelf. It certainly has not. I think I've seen it in the gutter, which is the meter, once. We use the gutter meter. It's almost too juicy. So this does have juice, but this is light. You know, I've done this after a long run and it just goes down so cleanly. So here's the question, because I was up all night thinking that Seth is coming in and you have to have a good question for Seth, which is, of course, why I look this awful.
[00:07:41] Ray Latif: It's actually not why I look this awful. I come by it naturally. I come by it naturally. It was weird after you said that there were crickets, but you look fine, Jeff, you know?
[00:07:49] Jeffrey Klineman: No, you look great, Jeff. Yeah, thank you. So I was, when Seth comes in, you have to have a good question for him. And I was trying to think part of the beauty of Honest Tea was yes, the organic and the story, but also that sort of whole leaf tea moment, you know, the curation of the tea. And I wonder what the whole leaf tea equivalent is for this. I mean. Yeah. It starts with being organic, right? We're not going to claim this is fresh squeezed juice. It's not, it's juice concentrate, but it is organic fair trade sugar. And, you know, we go to sea salt as the salt ingredient. From a label perspective, it is as clean as you'll get for a sports drink. You know, we looked at, and there are some drinks, as you know, that try to get their potassium from other sources. And let's make it really simple. few ingredients, mostly let's make the taste really clean. And we've launched this in one store so far, Whole Foods Pentagon City, and it has taken off. It's really exciting to see.
[00:08:43] Ray Latif: Yeah. I mean, it's interesting when I'm looking at the label, I always turn to the Nutrition Facts. It's probably much the first thing I do whenever I look at a new beverage and I see the sugar count. It's interesting. It doesn't taste very sweet, but there's 23 grams of sugar in the lemon variety. And that's been a big part of Honest Tea. You stand on this not too sweet platform.
[00:09:00] Jeffrey Klineman: That's right. Just a tad sweet. So this is on the lightly sweeter side of sports drinks, but we don't use the word just a tad sweet. Part of the definition of a sports drink, it has to have a certain level of carbs. So I'm a little skeptical about the idea of a zero calorie sports drink. Basically, it doesn't meet the formal definition of it. So ours, we needed sugar. Were you at all skeptical about the idea of a sports drink on the whole, though? Because there are, you know, or you've always been a believer in salt. You mean some people say you don't need the sodium, you get it elsewhere? Well, no, the sodium can be restorative post-workout. That's why we have it in there. I mean, I do think there's a role for it. I love our tea. And I actually drink a prior to this, I was drinking Honest Tea orange mango, but you do miss some of the sodium and the potassium. Now you are sort of stable mates with a pretty good source of hydration in Zika. Oh, okay. I thought you were going to say Powerade. I thought you were going to say Powerade too. Thinking more of the VEB kind of thing. It's a more refined, it's a special state. It's all the same family. It's where the organic horses tend to roam, is over at VEB. The base question is, was there any thought to using coconut water as a... Not for us. I wanted to get to that really clean taste. And there are some sport drinks that are positioned as sports drinks that have coconut water. And I like the taste of pure, clean coconut water, but I don't like that in a sports drink. Like Zika's pure, clean coconut water. Especially their new bottle, the taste of that. That practice I think is phenomenal, but it's not the same. When I'm thirsty for Zika, it's not the same occasion when I'm thirsty for a sports drink. And so for us, it was like, let's make this clean, let's deliver on the occasion, the consumer need that they have after exercise, and then let's get out of there. Let's not try to cure cancer and restore their sex drive in the same beverage. Let's just make this what it is supposed to do.
[00:10:50] Ray Latif: Well, it's interesting. One of the things that VEB has, VEB sales or VEB brand sales are obviously going to be smaller than the big time Coke brands, but you've kind of walked, or Honest Tea's kind of walked a fine line with some of the innovation that the brand has come out with, you know, Honest Fizz, which is an organic soda for a soda company. And then recently, I mean, obviously Honest Sport with Powerade. And you know, we, supposedly Gatorade's coming out with an organic variety pretty soon, you know. Were the Powerade folks or did you talk to those guys about, hey, we want to create a Powerade organic, you know, why are you guys doing this at this point?
[00:11:22] Jeffrey Klineman: No, we certainly obviously communicate with everybody in the family about what we're doing. So this didn't catch anyone by surprise, but it's certainly a different market. Powerade isn't sold in the Natural Foods channel. It wasn't like we were cutting into their existing customer base. And in a sense, it is almost a different offering too. It's not like they have an organic drink. We saw a few years ago when Gatorade brought a natural to the Whole Foods channel, it didn't do that well. No, no, it didn't. And I think, so here's an interesting case where you've got a brand with great sports drink credentials that came into the natural channel and didn't do well. We're a brand with excellent natural credentials going into the sports drink aisle, starting the natural channel. And so it'll be interesting to see how we do. We're off to a great start. It's only one store, so one data point is not enough. And I do want to clarify, this is a pilot, so there's an expectation this will go national, but we're going to tweak it. I mean, the bottle, as you see, is the same bottle that we use for Honest Tea. That's certainly not a long-term strategy. label and even some of the formulations I think are still in evolution. So I expect what we put out probably a few months from now will be evolved from where we're starting. But as always, I wanted BevNET to be in on the ground floor of tasting it. I'd like to try the berry real quick. As I do that, I want to talk to you a little bit about Honest Tea a long-term strategy for Coke. Certainly the idea was to build billion dollar brands. And we're on our way. You are on your way. And it's a long way to the full build out, I think, of what Coke sees Honest Tea be. You hear a lot of people talking about investing in a brand and a brand platform. And you guys are certainly expanding that platform. So what I wonder is for you as the person who had to really push fast growth originally to get that momentum as an entrepreneur, to attract the kind of capital that one needs to develop scale, how has being in the sort of mass that is Koch in Atlanta, how's that changed and extended your thinking about the horizon for Honest? Well, it does make it all more possible, more real. It's interesting, as I was driving over here, I was thinking by the end of this year, we'll be 10 times larger as a company than we were when Koch first invested. And that's pretty neat as a data point. So 200 million? Over 200 million, yeah. And that's with great momentum. And steady growth. Yeah, steady growth. That's a dollar volume. That's not a case volume because, of course, when you talk about the occasions we get from all the brewed tea that we're selling and Wendy's and other restaurant channels, that's the big multiplier on those. But that also says we have the foundation to keep building this. And so obviously what we also are creating, we came in as a tea brand with some kids' drinks. It's now a master brand, you know? And we'll talk about this with Beyond Meat as well. The goal isn't to make one real strong entry in one category, but when you can create a master brand, this'll be an interesting test with Honest Sport. We know it extends to kids. There's no reason, if you do it right, it shouldn't extend to sports drinks as well. We're launching in Europe later this year, and that's really exciting. A Meister brand. Meister van, yeah. So that's fun to see that I see the path for how it can happen. And that's exciting. I mean, obviously there's a lot of work to be done still. We're no longer at the top of the mountain, but at least you see the road we have to take to get there. And we have the tools and the partner that can get us there.
[00:14:35] Ray Latif: Are you driven by VEB's mantra to create a billion dollar brand?
[00:14:39] Jeffrey Klineman: Yeah, absolutely. When we talked about whether or not that we're the right partner, and by the way, that's not just VEB, that's certainly VEB's charter, but the rest of the company buys into that too. And they understand that this is what their expectations and the investment they've, the commitment they have to building that. So I love that vision and it's certainly one I've bought into.
[00:14:59] Ray Latif: So what are more opportunities beyond brand extensions? Where do you sell Honest? Where do you sell that brand beyond where it is today?
[00:15:05] Jeffrey Klineman: We're continuing to see great opportunities in food service. And what's so wonderful about food service is you're able to get it. It's marketing every day. You know, if your product, our products in the Chick-fil-A kids meal, that means that every parent who buys their child a kids meal, a Chick-fil-A is being exposed to our organic brand. And they obviously, if they're going to Chick-fil-A, they're not always looking for organic products. So we're getting that kind of exposure, which in turn then leads them when they go to the grocery store, my child liked this in the kids meal, I'll be able to buy it. How long have you been in the Chick-fil-A kids meal? That started this year. I think it was February of this year. So relatively recently, obviously the same with Wendy's started last year. I just find it amazing given where Chick-fil-A has been politically and socially. And yes, there's been a great deal of change in that organization, but it does make for strange bedfellows, this business, right? Every person and in turn every customer, meaning, you know, restaurant or grocery stores is on this path towards trying to get to healthier, to authenticity, to transparency. And so we're happy to be a partner for anyone who wants to be on that path. Do you think a couple of years ago that would have been something that you would have really aspired to for the brand? Yeah, absolutely. We want to sell to everybody. Anyone who comes to us with a sincere interest in this, we want to sell it to them. The only thing we won't sell to somebody who comes to us and says, well, we want to put honest on the brand, but we want to make it not organic or make it super sweet or anything that's not core to what we're doing. I mean, that's, what's so wonderful about them or Wendy's where, you know, for Wendy's it was like, okay, well we want not just fair trade tea. We want fair trade sugar, obviously organic. And when I taste the tea, when I go to a Wendy's and I taste the tea there, I'm like, wow, this is Honest Tea. I mean, it tastes like it's supposed to taste, which is just so wonderful. So we are agnostic. As long as someone's going to not compromise the brand, we'll sell to anybody because it means we're furthering our mission, furthering our reach and our impact. When we talk about that term, it may get overplayed, but it's democratizing organics. Democracy means you're spreading it everywhere. It's not for the elites. It's not for a particular political leaning orientation. And ideally, it's not economically exclusive either, at least in terms of the channels we're selling to.
[00:17:12] Ray Latif: Now you see some opportunity for Honest Tea in food service. Is there opportunity for Beyond Meat in food service?
[00:17:17] Jeffrey Klineman: Oh my goodness, yeah. And as you'll taste, there is. Veggie burgers are a real shortcoming for the food service industry. And so just like I said, a lot of people are trying to move towards a healthier path. I haven't met a person whose doctor hasn't told them they need to cut down on their red meat consumption. This burger, my sons, who are, as I said, all athletes, but if they eat this product every day, I'd be happy. You know, there's no cholesterol. It has fat, but, you know, you need some fat in the diet. And so, tremendous opportunity. And by the way, with Beyond Meat, we talk about a master brand as well. What's neat about that vision of creating a plant protein in the meat section is, unlike the rest of the meat section, the rest of the meat section, there's not much branding going on. You don't think about, you know, I want this brand of burgers. It's pretty generic. There are some strong brands out there, though.
[00:17:58] Seth Reiter: What would that be?
[00:17:58] Jeffrey Klineman: So, Angus or Nyman. But Angus is more just like a description of a cattle.
[00:18:04] Seth Reiter: Yeah, sure.
[00:18:05] Jeffrey Klineman: Yeah. Naiman, I guess, is a brand, but in general, probably over 80% of the burgers sold are sold private label, just sold, you know, bought at a store. But if you think about plant protein, I can't envision a day where someone's going to say, well, I just want the, you know, Safeway's plant protein burger.
[00:18:19] Ray Latif: Right.
[00:18:20] Jeffrey Klineman: So I do think the branding will be important. And for us, we want to have the Beyond Meat section of the protein section. So you have your Beyond Burger, but you could have your beyond bacon. You could have your beyond chicken free breast or I mean, whatever it is, when you get the technology, right. And you get the brand connection, right. And you become recognized as the brand that delivers satisfying, nutritious plant protein in the meat section. That's also a great opportunity to be a master. Now there's competition out there. Always competition, you know, that's what makes the world go round. Impossible Foods, for example, just managed to get their burger onto Ezra Klein's podcast. Oh, is that right? Yeah, absolutely. Well, I got onto the BevNET podcast. Ezra was swooning. Was he? Yes. But I mean, I think there's a question of what's the difference between these kinds of products?
[00:19:10] Ray Latif: Sure. Before Seth gets into it, we should note that the grilling is about to begin.
[00:19:13] Jeffrey Klineman: The grilling's about to begin. We'll get a microphone over the grill. Exactly. So first of all, I'll just say, I know Pat Brown, the founder of Impossible Foods. It's a, you know, what he said, which I agree with is, of course, we're in the same category. But when we think about competition, there's a lot bigger players. The meat industry is a much larger scale competitor, you know, than what we're doing. So I have tasted their product. I think it's a good tasting product. There are nutritional differences in terms of fat levels and some important ingredient differences as well. It may be that what I've tasted is in the prototype stage. I would say our product is already commercialized. Yeah, they're going slower. They're trying to develop a almost fake meat as opposed to a protein enhanced plant structure, right? I don't know enough about, I don't want to speak on their account. I would say that we're really excited about what we've developed. What's so neat, we were doing this at the Whole Foods Pentagon City where this launched and what I was- What did you do, live there? Pentagon City? I mean- I spent a lot of time there. We had Honest Sport launching on one side of the store and we had Beyond Meat at the other side of the store. So you're sprinting back and forth. I was just going back and forth, enjoying the feedback on the demos and seeing the sales. What we saw with the Beyond Burger, we would grill up burgers and people would be lined up to taste them. As soon as we tasted them, the shells would empty. As soon as people tasted them, they'd buy it. And that's just an extremely strong response to the sampling. And what basically got to the point where we said, we can't keep doing these demos, we're going to run out. And we did run out of stock. See, I find that people are looking for an excuse to do the right thing. Yeah, just got to make it easy. It's very funny. So I talked to my co-founder, Barry, about this before I- Barry Nailboff. Barry Nailboff, yes. My dear Barry Nailboff. He said, well, I get the idea. He says, but wouldn't it be better if people just ate protein from Whole Foods like lentil salads? And I said, well, of course, Barry. I said, and of course, it would also be better if people brewed tea at home and brought it in in thermoses everywhere. I said, but you know, we made a pretty viable business out of bottling tea and making it convenient. And the same thing here, we need to make these products as accessible to meet the expectations of the occasion. that they have. It's one thing to change consumer behavior fundamentally. It's another to meet the consumer where the consumer is and be able to help them make it easy. So I've found that as veggie burgers themselves have improved in composition and quality, and as someone who's been a vegetarian for 10 years, you've probably seen that slow gradual improvement. I actually think the veggie burger is an evolutionary dead end. It was like, what were those, you know, the forms that didn't make it? What do they call it? Anyway, wherever they went, sort of humans went in one direction. The astralopithecus of the burger. Yeah, like at my point of view, after this, I'm never eating a veggie burger again. I refuse to call these veggie burgers because they are so fundamentally different.
[00:21:56] Ray Latif: They look completely different.
[00:21:57] Jeffrey Klineman: And the smell, can you guys describe the smell?
[00:21:58] Ray Latif: Yeah, it's getting some good onion smell too. I'm looking at them on the grill right now. They're pink. If I didn't know they were Beyond Meat burgers, I'd say, well, those are, those are hamburgers. I mean, they look, it looks like meat.
[00:22:08] Jeffrey Klineman: They go great on a grill, go great on a bun, go great with ketchup. I mean, it really is all the same occasions. That's what I said. You've got to make this easy. You've got to deliver on the proposition and expectation a consumer has from every detail. Sensory, you have to be able to hear it. You have to be able to smell it.
[00:22:22] Ray Latif: Right.
[00:22:22] Jeffrey Klineman: And it's got to be able to have the mouthfeel and it's got to have the taste. Can you undercook these lettuce? There's no danger. You're not going to get E. coli. Yeah, I was wondering what, how are they best served? I like them on the grill. No, no, but I mean, rare, medium rare. That's all your call. I wouldn't go too rare on it. There's not a danger, you know, as long as the product's stored properly, but I like them medium well.
[00:22:42] Ray Latif: That'd be a good trick. You're April Fool's. You're like, I'm just gonna eat raw meat for the rest of the day. Beyond Meat, actually. I should note also, Jon Landis has graciously been our, he's our chef today. Thank you, John. Normally on the podcast, but he's grilling up these burgers for us. So thanks, John. While these are cooking, we came to the conference room and started talking about some things that we're gonna talk about on the podcast. And one of the things that came up was your stance on organic, non-GMO. So just to clarify, what is your stance on organic?
[00:23:08] Jeffrey Klineman: I've been a long time supporter of organic. We were the first brand back in 1999 to launch an organic bottle of tea. 2004, everything we sold became organic. So that's continued to be the case. And from my point of view, organic speaks to authenticity of ingredients. It speaks to traceability of ingredients. And so the extent that consumer wants to know what's in their food, I don't want to say it is the ultimate, but it's certainly as much further along as a standard than any other standard out there. And so it shows a commitment to environmental stewardship and sustainability. Some people claim it shows a commitment to health. Obviously, that's not something we will claim for a lot of different regulatory reasons. It's something I believe in deeply. I've been to the communities where we source our product and you can visually see the difference between an organic tea garden and not just see it, you can hear the difference too. So an organic tea garden has much more biodiversity. You see spiders in between the plants versus a conventional tea garden. You don't hear the birds, you don't see the monkeys in the trees. One garden we were at, it was just shortly after some heavy rains and the organic tea garden was still intact, but the conventional garden had had a mudslide because the heart, the animal life and the plant life wasn't hardy enough. It wasn't resilient enough. From our point of view, organic is a great way to be investing in the ecosystem and obviously in communities as well.
[00:24:19] Ray Latif: Now, where do you stand on non-GMO labeling with organic products?
[00:24:22] Jeffrey Klineman: So I'm a supporter of transparency for consumers as much as possible. I think non-GMO labeling is certainly a step. Obviously, I think organic is a step further. From our perspective, we've always been committed to organic and I'd say if you can't get to organic, then labeling non-GMO is a fine place to start. Seth, I'm looking at the label here and it has... For Beyond Meat. Yeah, the Beyond Meat label and it has this delightful UPC code with an actual It's turned the wines on the UPC into a little grill with burgers and a spatula. It's GMO free. It's not organic. Is that part of your mission as chairman? It's a long-term commitment. And just as it was with Honest Tea, you know, when we started in 98, we had organic sugar, but there really wasn't organic tea. Yeah, we're committed to a supply chain with Beyond Meat that will get us there, but you have to take the long-term view. With Fairtrade, we started our first Fairtrade item with Honest Tea in 2003. We didn't get our whole line to be Fairtrade certified until 2011. You can't flip a switch and do these things overnight. The other thing with Beyond Meat right now, some of the protein sources actually come from overseas, and we have a long-term commitment to being able to source that in the United States. Somebody, we saw something on our website of, oh, you want to put cattle farmers out of business. And of course, we don't want to put farmers out of business. But if we can create a value-added ingredient and grow it domestically, that would be a great thing to do.
[00:25:42] Ray Latif: We had also talked a little bit about the confusion that's out there with multiple labels on a bottle or one label on a bottle or package. Some people are confused about non-GMO means organic versus organic means non-GMO. How do you educate and how are you guys educating on the honest side and on the Beyond Meat side?
[00:25:59] Jeffrey Klineman: Well, it's, you know, it's hard. We are, by definition, the organic companies are smaller than the conventional companies. And so our ability to educate consumers is in something that we don't have the same power to do it. So we certainly try to communicate wherever we can. And part of an industry group called Organic Voices that ran a campaign, mostly online and social, trying to help raise awareness about what organic means, that it always does mean non-GMO. Was Gary Hirshberg, he was part of that, right? Gary's, you know, been a longtime friend and ally and mentor. And yet Gary's also the leading voice of the Just Labeling campaign.
[00:26:34] Seth Reiter: Sure, sure.
[00:26:34] Jeffrey Klineman: They're not mutually exclusive. You can be in favor of GMO labeling and also be a supportive organic. As an industry member. Yeah, because it's a continuum and GMO labeling is the first step, but obviously organic is a higher level of transparency. I guess the question is though, for the consumer, it's almost as if you have to be a nutritionist or someone inside the industry to actually be able to distinguish the difference. And I worry about the cannibalization of both movements due to putting so much emphasis on one or the other. the overall aims of organics, from a consumer standpoint, doesn't it misdirect some of the energy to focus it too heavily on non-GMO? Certainly, from my point of view, we, at Honest Tea, have used the organic sealant. That's what we'll continue to use because, from our point of view, that's the highest level certification and it's something that works for us. And, you know, I think consumers' level of awareness All right, we got burgers here and there's ketchup too, if you guys want. I brought some Sir Kensington's. Sir Kensington's, yes. Well done. Are you an investor in Sir Kensington's? I'm friends with him. I'm indirectly an investor, so I'm an investor in a fund that- Invested in Sir Kensington's. Yeah, and so I'm certainly, you know, we share a lot of some of our employees and There's a lot of mission alignment there, I'd say. Yeah, for sure. So that looks seasoned to your taste, but you should eat it now while it's warm. Great. Do you ever put Fabanaise on these? I'm not a mayonnaise consumer in general, but if I were to use a mayonnaise, it would be Fabanaise. I think Fabanaise is fantastic. Beyond Meat uses a veggie, we have a veggie chicken salad, and that uses Fabanaise.
[00:28:08] Ray Latif: Before we had the burgers, you were on a roll.
[00:28:11] Jeffrey Klineman: My point of view was that consumers, it's a continuum. And so more informed consumers, you know, the more they start to look, they'll become more educated about it, just as they were with nutrition labels. You know, initially nutrition labels were just about calories. Then they start to look at carbs and they start to look at fat. Then they start to think about per ounce. And so I think here too, it's hopefully, I mean, organic is still, as you know, Jeff, it's early in its evolution for people's awareness. And so that's still work to be done. But you guys have worked so hard. And awareness is so much further along. It is, exactly. And in fact, you can see it in the growth of the Honest brand as one of the sort of standard bearers for organics. And you also, as we've talked about, have this sort of generational movement that starts early childhood. It's totally changed the The baby food industry and those brands are starting to extend forward and you guys are grabbing the baton with honest kids. The question is, should that movement have to compete with a generational non-GMO movement? As long as we're providing consumers with more tools about transparency in food, it's a good thing. And you want to empower consumers. They have the expectation that companies will inform, they'll have access to this information. So I think more tools, more about the specifics of how these things are produced is a good thing. So I'm seeing people eating the burger. Ray, what do you think?
[00:29:38] Ray Latif: I want to ask your target consumer, the millennial in the room, Neil Martinez Belkin. I mean, you were looking intently at the package and you just tasted it. What do you think?
[00:29:46] Seth Reiter: I was looking at the package and looking at the ingredients because I was trying to find really what it was that was making this taste. Just like you were saying earlier, Ray, looks like a burger, smells like burger, sounds like a burger on that thing. And it tastes the same way. The experiences, I liken it to having a hamburger, not to having a veggie burger.
[00:30:03] Jeffrey Klineman: That's the nicest thing anyone said all day. I told you how good you looked. That's true.
[00:30:09] Ray Latif: Looking at this, the plant-based burger patties. I mean, is this something you'd pick up? What's the retail price on this?
[00:30:14] Jeffrey Klineman: $5.99 for two quarter pound burgers. You know, it's more than organic grass-fed beef, but not that much more.
[00:30:19] Ray Latif: This is something I would definitely pick up. I'm totally riffing on my personal tastes here. It's a little bit more expensive than obviously hamburgers are and stuff like that. But I mean, is this something that you would say, Hey, you know, I think this is something where I would share this with my family, my friends at this point.
[00:30:32] Seth Reiter: I was just thinking that because I never go and buy a veggie burger or a plant-based burger, but I really enjoy that. And John just wrote a little note to me and I realized what I didn't like about it so much as the texture, the texture of it is so much more like having a hamburger than it is having a veggie burger. And I think that's probably the most prominent point of differentiation that I noticed.
[00:30:51] Jeffrey Klineman: A positive, positive. It reminds me, this is actually sort of in a good way, of some of the kind of cheaper meat burgers I've had. You get grass-fed or you get really prime beef burgers and they have a certain refinement to them.
[00:31:09] Ray Latif: It's a good point.
[00:31:10] Jeffrey Klineman: But I mean, that said, it's very evocative of those great kind of burger times like summer camp, you know, where you're just getting these kind of discs that have been thrown on the grill and they have a loose pack to them. I'm not sure what kind of plant matter is creating that pack. texture. I mean, it almost tastes like, or has the bounce of a quinoa, but it's really pretty impressive from the perspective of trying to create an ersatz burger. Good. That's the response we're hoping to hear.
[00:31:43] Ray Latif: I mean, I think the texture is interesting because it is reminiscent of a cheaper meat, but it's in a good way because you know, it's not cheap meat. When you're eating the cheap meat, you're like, God damn it. Why am I eating this cheap meat? You know, I'm like, you're biting into one of those hard parts.
[00:31:55] Jeffrey Klineman: It's like an eyeball or a tooth. I'm usually thinking cheap meat. I want to try this out on my kids. I don't know if you guys have done the sneak test yet. Yeah, well, you know, we have this debate. So is the goal here to perfectly replicate a burger so no one can tell the difference? And it really isn't. The goal is to perfectly replicate the enjoyment someone gets out of a burger. You're welcome to do a blind taste test, but the goal isn't to be so someone can't distinguish it, but it is to make it... You're never going to get me to replicate the enjoyment I get out of a burger. You know why, Seth? Why? Because I like to eat the soul of the cow. You'll miss that with this. You will not be able to eat the soul of the cow here.
[00:32:31] Ray Latif: But a thousand people stopped listening to sound.
[00:32:33] Jeffrey Klineman: We don't have a thousand people, but of the four, two of them are no longer with us.
[00:32:39] Seth Reiter: So I've been in the background here and I must know that I cannot keep quiet. And the few comments I wanted to make were lemon sport is very much like a lemonade to me, less than like a lemon Gatorade.
[00:32:52] Jeffrey Klineman: And I feel like we have like a little summer barbecue in the studio here with burgers and lemonade and looking at it on the plate, I can absolutely see making a whole plate of burgers with some Beyond Burger and people just not knowing which is which. I mean, I think I would definitely be able to tell the blind taste test, but you could certainly just have a platter of burgers there and you would not really be able to tell a difference, especially if you had no idea that there were veggie burgers on the plate with it too. So I could totally see that happening. That's great. And to me, like what we see here, what we hope will happen is let's say it's burger night and the shopper, maybe the mom is walking down the aisle and says, all right, it's burger night. I'm going to have two, cow burgers and two Beyond Burger. And the point is you were at the moment of decision where we're an adjacent option. And previously, if it's burger night, mom's shopping and she's walking by the burger, the meat aisle, she's not thinking about going to the freezer four aisles away in a freezer cabinet where she never goes to buy protein. And it's also the convenience point. Let me just share a few amazing statistics why we think this is such a big opportunity. Both dairy and beef have declined almost on the same slope for the past 40 years. The losses in dairy have been recaptured by plant-based dairy to the point where 14% of the dairy sales are almond milk, soy milk, and rice milk. In the meat category, which is a much bigger category, so you're talking about $14 billion in dairy, $197 billion in meat. In the meat category, less than 1% of the occasions have been captured by plant-based protein because of the inferior performance. As anything else, any other protein source? Sure, people move right to the lentils and they move to the other plant-based protein substitutes, just haven't captured that occasion. So, if you get it right, if you get a product that delivers, it stands to reason you should be able to get that 14% of the $197 billion and get a $28 billion opportunity if you can deliver on it. And so, as the first brand to get a product to be carried in the meat section, it's ours to lose. There's a lot of work to be done between now and $28 billion, but we've got the right start to make that happen. How are you finding the slotting fees in meat versus beverage? We're not paying slotting. My point of view is because here's the reason why. There's not enough of this product. We're not going to be able to fill up the grocery shelves of this country for several years. So we've gone to stores and we've gone to stores and meat buyers and they said, we're not going to carry it. We want it, but we want it in our produce section. Or, you know, we're going to put it with our veggie dogs. I said, thank you. Someday we may work with you. But the only partners we're going to work with now are the ones who merchandise it the right way. And there's no slotting fee. Because why would we pay sliding fees when we've got a line of grocery stores that want to carry this without a sliding fee?
[00:35:24] Seth Reiter: Do you think it's a similar thing to what's going on with Ripple Foods, which we talked about a couple months back? It just occurred to me because of what you guys are doing here with Beyond Meat to your involvement with Ripple as well.
[00:35:34] Jeffrey Klineman: I love Ripple. Ripple's coming into a somewhat more crowded category because there already is that 14% of, whether it's the almond milks, the soy milk, I think Ripple is a superior offering to soy on taste and to almond on protein content. So I think they've got it at the best taste and texture. You're long on pea protein futures here. Oh, I started a pea protein farm. It's amazing how far that has come. It was undrinkable three to four years ago. No, it really is. But here's what I would say, both the technology for Beyond Meat and for Ripple is really plant agnostic. So, we don't call ourselves plant from peas, not that that has a ring to it because it doesn't, but the science is really about extracting protein from plants and being able to do that. And we start with pea protein because it's the most advanced, but you can imagine, and this is one of the reasons Bill Gates is an investor in Beyond Meat, because you can imagine going to Africa where maybe they're not growing pea protein, but there's another plant they're growing that has protein in it. Basically, can you extract that protein from that plant do it with a taste neutral, then the technology around taking protein powder or material and using extrusion to combine it with fat and plants and water, that's agnostic about pea protein. So in the long term, while we certainly appreciate how well it works with the pea protein. I just want to, it's your first ingredient. Oh yeah, it's a key ingredient. But you're not stopping at pea. No, because protein comes in lots of different plants, buckwheat. One of the interesting sources, you guys will enjoy this, is that spent barley hops, once you've brewed beer, the barley hops are a very rich source of protein. Now, we'd have to be able to extract it without getting gluten and obviously no residual beer taste, but there's a lot of different sources of protein in the plant world and so a lot of opportunity. And are the bench folks at Beyond Meat constantly innovating our new plant sources? And will we start to see, I guess, burgers with different kinds of terroir? You know, we don't put that front and center because it's really, like I say, we're more agnostic about it. It's conceivable you could later if there's a different taste element to it, or maybe there's a different nutritional element. When we've ascended as a society, perhaps a bit more. Yeah, we got a ways to go, right?
[00:37:39] Ray Latif: Now, we usually wrap these podcasts up by asking the folks at the table what their favorite beverage was during the week. Now, I don't want to put you on the spot and ask you that.
[00:37:49] Jeffrey Klineman: Yeah, well, it's got to be Honest Sport. I've been drinking it all week.
[00:37:52] Ray Latif: Well, obviously, Honest Sport. I mean, I kind of had the feeling. So I wanted to ask you one other question for the entrepreneurs listening. What's one bit of advice, as an entrepreneur having been in this business for almost 20 years, what's one piece of advice that you can give them that is the most important thing that they need to know going forward to be successful?
[00:38:07] Jeffrey Klineman: One of the themes we've talked about today is making sure you are connecting with consumers in a way that's relevant to them. And you guys know, we've had some innovations over the years that haven't worked. One of them was Honest Coca-Nova. It got interesting, different product. It was a brewed cacao. Big hit in this office. You guys are the only ones. And you guys can appreciate the taste, and I think that's why it worked. But I don't think it worked in the grocery shelf because consumers... We were using it as a fuel source actually. I think people didn't know what occasion it met. Was it a coffee drink? Was it a chocolate drink? Was it an energy drink? Was it a tea? And we didn't do a good enough job making that clear. And so what you're seeing here today, obviously Honest Sport, as the name implies, is a sport drink. The Beyond Burger, the way it's packaged, designed, meets the burger occasion. If you're talking about, I want to change consumer behavior altogether, that's a much longer term, more complicated, more expensive proposition. And so I would encourage the entrepreneurs to think about how am I going to bring something to market that consumers will understand really from the package, what it is, what it's supposed to do. And then the stores will understand where it's supposed to be merchandised, how it's supposed to be marketed. As I said, we don't always get it right. That's certainly something we've learned. It's an amazing idea of sort of incremental changes being able to create what you call that master brand. It's not revolution, but it's certainly more impactful on volume. Yeah. But when we started, we'd hope someday we'd have this master brand, but we started like, we just got to sell some tea. We got to make tea that tastes, you know, good enough that people will buy it. And then if that works, we can think about other things, but you don't always start with the master. But on the other hand though, you don't want to start with the Brand name around one skew. And I'll just give an example. You know, when you call yourself watermelon water, it makes it hard to move too far away from watermelon water. And is that a master brand or is there a master brand you can create around fruit based refreshment? I mean, anyway, just as an example.
[00:39:56] Ray Latif: Well, Beyonce is coming on next week. They're going to call themselves beyond watermelon. Nicely done. Well on that set. Thanks so much for joining us. This has been tremendous. We appreciate you taking the time and coming out to Boston or Watertown as it is. That's the end of this podcast. And if you are listening, you have any questions, comments, ideas for future podcasts, please send them to us. Wow. What's going on with me today at podcast at BevNET.com. All right. Thanks again for listening. We'll see you soon.
