[00:00:03] Ray Latif: Hey, thanks for listening to the PepNet Podcast. We're here for a special edition on location in Baltimore for Natural Products Expo East. We're joined by John Haugen, the Vice President and General Manager of 301 Inc., the venture capital arm of General Mills. John, thanks so much for joining us. It's great to take a couple minutes with you guys. Thanks. Yeah. How's your Expo East going so far?
[00:00:22] John Haugen: What's great, just spending time on the floor. I think you just see the continued energy in the industry today and so much optimism about these young brands. And obviously some brands have been around for decades as well, but I really like to spend the time walking the floor and really hearing the stories of these brands and hearing their challenges and their growth aspirations. And so I just get a lot of energy whenever I'm here.
[00:00:47] Ray Latif: Yeah, it seems like a pretty energetic show at this point. And even though with 301 and General Mills, you guys mostly focus on food brands, you made a pretty significant investment and advisory investment or capacity into Tio Gospacho, the bottled soup brands, earlier this year. How's that relationship going so far?
[00:01:06] John Haugen: We're off to a great start. One of the things is we get involved with these brands. A lot of people have a mindset of the investment is an end point and of course for us it's really the starting point. And so we're probably five to six months into the relationship with Teal and has been just tremendous so far. Just really learning the business, getting arms a little bit more around the usage occasion You know, it's a new category. Beverages have been around for a long time. Soup has been around for a long time. But the idea of this type of an offering that can really deliver multiple benefits and in that portability format, we think is an ingenious idea. So we're learning a lot, spending a lot of time with Austin Allen, CEO, founder, and his team, and trying to be that indispensable partner to help them grow.
[00:01:55] Ray Latif: Now that's been the difficult thing with Bottle Soup in general. I mean, when Tio first came out, retailers were always asking, OK, where do I put this? And he was always saying, OK, maybe you can put it here, but then maybe you can put it here. Have you been able to help him and help that brand define a shelf presence, a shelf space, the right way to merchandise that kind of product?
[00:02:14] John Haugen: Yeah, it's a great question. And I would say it's very much a work in progress. We're privileged to work with a number of brands in our investment portfolio, whether it's Rhythm Kale Chips or Good Culture Cottage Cheese. And the fun question to ask with a lot of these small startup brands is just step back and say, OK, where should I find this in the store? And I know one place you won't find it is you won't find it in the canned soup aisle. Taking that out of play, then you think to yourself, okay, should this be in a grab-and-go set? Should it be next to some of the other high-end HPP products and juices that have hit the market, more on the fruit side? Really, what is that usage occasion? And I would say the role that we're playing is we're helping answer that question. And I think the good thing about all these things is that they're testable propositions. And so ultimately, I think the two questions you have to keep in mind with any of that is, what is going to benefit the consumer and the consumer experience? And what will be most intuitive over time for them to find that product? Both today and then as the product starts to mainstream and people get more used to looking for this product in the store. But the other important thing that you have to think through, I think, is what is going to be the most productive spot for the retailer to think about it? Because ultimately, while the retail landscape continues to change dramatically, most retailers aren't adding feet and feet and feet of refrigerator cooler space in their stores. And so, for them at the end of the day, it will be what will be the most productive use of that real estate to really help drive the turns and sales velocity to really help that product succeed.
[00:03:52] Ray Latif: And in terms of General Mills, I mean, you know, that's a pretty significant partner for TO to have. And in terms of your presence and I guess kind of throwing your weight around a little bit to kind of get him where he wasn't able to get before, is that something that you guys are able to do? And you know, is that part of the partnership?
[00:04:10] John Haugen: Yeah, you know, that's, I think, one of the most fun parts of my job, frankly. And the first thing I would have to say is, with T.O. or any other products in our portfolio, I have to really stress that the most important thing for T.O. is that they feel like they're running their business. Because I think one of the mistakes that big companies like General Mills can make is to come in here and be very heavy-handed about saying, okay, now we've made a small investment in your company, and we're gonna tell you how to run your business. I don't think that's the right way to do it. What we want to do is we want to sit down and thoughtfully plan and think through what are the core strategies, what are the core priorities, and then say, how can we help accelerate? How can we help you get there more efficiently, more effectively? And so, you know, it is at the right time. People talk a lot about big food companies. Big isn't bad. Big is just big. But for a brand like T.O., relative to if there are needs on the manufacturing side, or there are needs from securing specific appointments with a co-packer or with a customer. That's where the leverage and scale of a generalist can be extremely helpful. And so what we're really trying to do is find the spots to come in and really help accelerate TO's business without coming in and saying, okay, here's the playbook. Because I think that really, for all of our partners, it's really important that they feel like they run their business.
[00:05:35] John Craven: Right. And how do you look at like something, I don't know, take a TO since we're talking about beverages here. How much do you guys worry about sort of like the grand scheme of where a category like that can go? I mean, it seems like you're in a bunch of different categories that I guess maybe are sort of unknown just how big they can get too. But it sounds like you guys are really focused on just being down in the trenches and helping these guys with immediate problems. So how do you balance that with the sort of bigger picture?
[00:06:01] John Haugen: Well, I think it's a great question, John, and I think part of it is for us really sort of the DNA of 301 Inc. is this is exactly what we should be doing because I think we're all aware of the tidal wave of change in the food industry today. And I think it's Peter Drucker's quote, if we spend all of our time defending the past, That's far riskier than really working to create the future. And so what we're really trying to do in 301 Inc. is to be able to navigate into these areas. And frankly, we don't have all the answers. And we don't know exactly where this category is going. I think that's exciting. It can also produce high amounts of anxiety as well.
[00:06:43] John Craven: become entrepreneurs for sure.
[00:06:44] John Haugen: Exactly right. And you know, part of the story of where we've been with 301 Inc over the last couple years is part of our history was we were actually out creating these products and launching these businesses ourselves. And what I found as we started to do this and frankly struggled is that the best ideas are at Expo East. The best ideas are in the marketplace today. And so, it's really, really difficult. General Mills has been in the soup business for a long time. We got a great soup brand called Progresso Soup. It's a great brand. It's a great business. So, that does not mean that we should think about launching Progresso as a fresh soup. A refrigerated, drinkable soup. So when you look at the trends and the needs and what people are looking for in the marketplace. You see something like this and you say, you know, I don't exactly know where this is going to go. You know, people immediately after we made the investment at Teal, they said, they said, oh, that's interesting. But what, you know, is that a soup or is that a beverage? And I said, yes, it is. And I said, we're going to work with them to navigate what that looks like. And so we're really going through this process with Austin and his team. And we're learning so much. And I think we'll continue to apply that learning to make sure that that consumer value proposition is exactly where we want it to be. And that's a work in progress. I would say that Austin would say that we're not there today. And so we're excited to work with him to define that.
[00:08:07] Jon Landis: Do you think some of it is part of maybe right place, right time? I mean, we have seen drinkable soups before, not really to much success. But now we have a General Mills-backed drinkable soup. We have Sonoma Brands with a lot of muscle behind theirs. Is it just like the right time for the marketplace at this moment that everyone's kind of gunning for it? Does that have anything to do with it, or is it just kind of coincidence that we have a lot of resources going into this new emerging category right now?
[00:08:38] John Haugen: No, I think it is, John. And I think timing is definitely part of it. We've certainly seen products that have been remarkable, but they just maybe were a little bit ahead of the curve. And so I think we're moving into this. I think certainly we've seen tremendous growth in HPP beverages. And so I think that occasion has been much better defined over the course of the last couple of years and people really see that benefit of that freshness and that experience and also that portability. And so I think it's just, at least to us, it's intuitive that we're taking that benefit and we're just bringing it into a new day part, a new occasion. And I think about the nutrition needs that people have on the go, especially millennials. and things that were once considered convenient. Breakfast cereal. I still think breakfast cereal is convenient. A lot of people think that the bowl and the spoon, for instance, make it not convenient enough for their life. That's just where we are today. So I think about some of these convenience benefits, and I think about the totality of all those factors, and I think there's still a ways to go. I think we see that occasion really coming into focus.
[00:09:45] Ray Latif: So you mentioned nutrition, you mentioned portability. How important is functionality, specific function, to what you're looking at in your current investments and innovation in the brands that you advise at this point?
[00:09:56] John Haugen: Yeah, I think function, functionality, I think is really, really important to us. You know, we've got some other brands in our portfolio that we either have in the 301k investment portfolio today or ones that we were involved with bringing into General Mills. And so I think about a functional benefit like high-protein snacking, for instance. And this is where I think, you know, traditionally companies tend to look very sort of vertically at categories and not enough across the spectrum of consumer benefits. And so I'll give you two examples. So you think about a brand like Epic Provisions, which is a brand that we recently acquired, great high protein meat snack, clean label product. And then you look at a product like Good Culture, which is a single-serve, high-protein, grass-fed organic cottage cheese. More protein than Greek yogurt, less sugar. Tremendous product. If you think about this with sort of a traditional CPG marketing mindset, you would not put cottage cheese and beef jerky in the same sentence. But I guarantee the consumer does. If it's 3 o'clock and somebody needs a high-protein pick-me-up snack, One day they might take an Epic Provisions meat bar, the next day they might eat a cup of cottage cheese. So I think we have to really redefine how we think benefits. And so I think that is definitely something that's very top of mind as we're looking for these new investments. But I think even beyond that, I think people are just looking for natural ways for their food to work harder. And so I think about nutrient density, which is kind of what brings me back to Teo. And I think about all the great nutrition that is in a bottle of Teo Gazpacho. I think that's a great example. I think about Rhythm Superfoods. And I think about people want great, satisfying snacks. And there's some other things that I've seen at the show. I've seen a lot of high-protein chips and things like that. And we've got a great partnership with a brand called Kite Hill, which makes a plant-based yogurt, cream cheese, and specialty cheese company. Now, the question is, what took those so long to suddenly peak? And what's really going on there? And I think for a lot of those high-nutrient-density, benefit-driven snacks, I think what's held them back for such a long time is that people, at the end of the day, simply are unwilling to compromise too much on taste. And I think now what you're finally seeing is that the taste has caught up. So if I have products side by side, one that has super high nutrient density and one that doesn't, but from a taste and enjoyment perspective, both deliver, well, why wouldn't I choose the one that has more nutrient density? And so I think that's the era that we're in. And I think that's the one thing that I continue to see coming up at the show. You know, we think of, back to my plant-based observation, it wasn't too long ago that if you put the words vegan and cheese in the same sentence, you'd get your face slapped. Because, I mean, you were ahead of the penalty box if you were gonna do that, right? And now, suddenly, you're seeing these great, I mean, Kite Hill cream cheese, it's a phenomenal product. And I look at that and I'm like, Well, why wouldn't I just eat that if I'm looking to, you know, adopt a more plant-based diet? So I look at that, I look at something like a TO when it really has just power packed, but it's not only about the nutrition. This stuff just tastes great. And so that I think is a combination, a total package that we're looking at.
[00:13:14] Ray Latif: Outstanding. This has been a really great discussion, John. Thanks so much for joining us. I know you're an extremely busy guy, especially at this show, and I really, really appreciate the time, as do the other Johns, I'm sure. Yes, thank you.
[00:13:25] John Haugen: It's my absolute pleasure, guys. Thanks for the time.
[00:13:27] Ray Latif: Thank you very much. Hope to see you again soon. Great.
