[00:00:03] Ray Latif: Hey, thanks for listening to the BevNET podcast. I'm Ray Latif. I'm here with John Craven and Jon Landis. We're at the headquarters of BevNET here in Watertown, Massachusetts. This is podcast episode number 48. It's the week of Expo West, which means that we're all a little frazzled. Four dozen. But we haven't left yet, so we still have some life in our bodies. Yes.
[00:00:20] John Craven: What do you mean four dozen? Four dozen pot, 48.
[00:00:23] Ray Latif: Oh, 48, yeah.
[00:00:24] John Craven: Four dozen podcasts. The four dozenth?
[00:00:27] Ray Latif: What number is a gross? Is that 144?
[00:00:29] John Craven: Yeah, we're close.
[00:00:32] Ray Latif: This is podcast episode gross. Can't wait to get to that one. So some pretty stellar interviews in this episode. We got Nick Giannuzzi, for those of you who don't know him, he's a pretty influential and well-known attorney in the food and beverage space. Got another guy, a small guy, not very well known in the industry named Seth Goldman. He only created Honest Tea, along with another guy named Barry Nailbuff and Josh Wand, who's the founder of Force Brands. It's a well-known staffing agency and staffing recruiting agency in the beverage and food business. Forced to be reckoned with. Yes, he is. You guys listen to these, I'm assuming, yes? Yes. I think I took part in two of them, so.
[00:01:12] Jon Landis: What'd you think about Nick Giannuzzi's? Well, I always love hearing from Nick. I mean, he's someone who, you know, for those of you who don't know him, and if you don't, you should, you know, he's one of these guys who's connected to just so many different companies, mainly on the M&A side, you know, starting with people raising money in early stages all the way up to When they exit, it's always just great to get the perspective of someone who's connected to that part of the business. You know, I think it's something that really speaks to sort of the positive future that is still ahead of us in this industry too. So that was kind of my takeaway.
[00:01:50] Ray Latif: Yeah, he's got a ton of insight on you know, what's trending. He was famously the vitamin water attorney when Coke acquired the company, and gives some great perspective on how the industry has evolved since that time. So, great listen.
[00:02:05] John Craven: Well, for a long time, not just for the acquisition, he was their attorney for a long time, wasn't he? You are correct.
[00:02:10] Ray Latif: Yes, yes.
[00:02:11] John Craven: I'm always surprised at how, like John just said, how many people he's connected with. And I don't know how the guy has, you know, that much time. Like, there's only 24 hours in a day, but he seems to be able to squeeze every minute out of every hour and make it all count.
[00:02:26] Jon Landis: Well, he's in the interview talks about adding more people and is, uh, I guess soon to be, uh, I don't know, opened or found, or if he's still looking for it, a West coast office.
[00:02:36] Ray Latif: Don't, don't give too much away.
[00:02:38] Jon Landis: All right. We also got a WCB.
[00:02:42] Ray Latif: We do not in Santa Monica though. We're a low rent place called San Diego. Seth Goldman, so we went and visited, or I went and visited Nick in New York. Seth Goldman came to our office here in the Boston area. It was great to see him. He was bringing in some Honest Sport, the revamped Honest Sport, which we talked about, kind of talking about what went into the revamp. But, you know, we'll save those details for a story that Martín Caballero, our senior staff reporter here, wrote, outstanding article. So you want to really get the nitty gritty on what exactly happened. read that story, but Seth talks about the market for sports drinks and specifically the segment of natural sports drinks. He also talks about kind of what went on behind the scenes between VEB and Coke and the creation of that product and touches on some of the recent deals, mega deals that have happened in the industry, including buying Kavita. Get his take on that.
[00:03:33] Jon Landis: Yeah, I think it was also fun to ask them the question about, you know, why an organic sports drink is going to work now. You know, they've tried it before, Gatorade's trying it, and I guess it's not really working. So yeah, definitely some great perspective on that.
[00:03:47] Ray Latif: Yeah, I asked a leading question about why they didn't sign with PepsiCo back in the day, too. So stay tuned for that. Lastly, we got Josh Wand, one of the one of the great friends of BevNET and a great guy and a really fun guy to be around. And John Craven and I went and visited him in their offices in Tribeca about three weeks ago or so and really great interview.
[00:04:06] John Craven: Yeah.
[00:04:07] SPEAKER_??: Oh.
[00:04:09] Jon Landis: Or, or we were waiting to see who was going to say he was going to follow up on that. Well, I'll, I'll go. Uh, I was just going to say, you know, similar to kind of the perspective you get from Nick, people who are hiring and just what the climate is for hiring as well as, you know, for Nick, like what the climate is for people raising money or, or getting investors, whatever. I think those are two areas that are always of interest to me just because they kind of are indicators of just like, what's. kind of coming down the pipe. You know, if companies are hiring, if companies are successfully raising money, like that's a good sign. Josh kind of gives a real positive outlook just in our chat with him.
[00:04:47] John Craven: I want to say that I think it always speaks to the importance of knowing an expert in their specific field, such as hiring, which can seem really dry. But these guys are in the trenches every single day, filling positions and talking to people and talking to brands. They really know a lot of these nitty gritty details about staffing out and hiring. And when you're on the surface, people might say, there's really not a whole lot to it. But that's not really the case.
[00:05:16] Ray Latif: Yeah, yeah. In all three interviews, I feel like we get a sense of temperature. We get a sense of where the industry's at in terms of heat, in terms of how many people are interested in getting into it, from the entrepreneurs to investors to retailers. And all three interviews are really a good indicator of the excitement and the passion that's coming into this space. Definitely. Yeah. Let's just kick things off with Nick. And please enjoy the next 40 minutes or so. All right, we're here in Manhattan at the offices of The Giannuzzi Group. I'm sitting in front of Nick Giannuzzi, who's the founder of the company. It would make sense The Giannuzzi is running The Giannuzzi Group. How are you, Nick? I'm wonderful. Thanks, Ray. I appreciate it, and I appreciate you being here today. I think we've tried to connect in the past, and we've tried it a few different times, and I'm really glad that, because you're an extremely busy guy. Before we started the podcast, I asked, you know, what's your day-to-day like? And I said, oh, is it like an eight to six? Your answer was not eight to six. What's your work schedule like?
[00:06:15] Nick Giannuzzi: Yeah, it's a, it's a heavy schedule. We're, we're blessed that we're very, very busy. Uh, we've got lots of great clients that keep us on our toes. And so I'm a, uh, up at, uh, 5 30 AM every day guy. And I come into the city and work all day and get home late at night. Uh, and I balance that with raising four kids. So I make sure that at least once or twice a week, um, I'm home to make sure I don't miss the sporting events or the band concert or whatever. It's an uncomfortable balance, but it's a balance.
[00:06:44] Ray Latif: Poor kids, I can't imagine, but that's wonderful. God bless you. You've been involved in this business for a long time. You've been an attorney for quite a bit of time. I did the LinkedIn thing, I think, or actually, no, it was your profile on your website. You went to Harvard. You graduated from Harvard in 1989, from NYU in 1992. So take us through your background. How did you become involved in food and beverage, where there's a lot of people who know your name. You're a pretty high-profile attorney in this business, but how did you get into it?
[00:07:13] Nick Giannuzzi: Yeah, I got out of law school, and I went to the biggest and best Wall Street law firm that would have me. I worked there for about five and a half years, working for very big companies as an M&A lawyer. And I realized that it wasn't my thing. I wanted to work with individuals. I wanted to work with people and help them. And so as a 29-year-old, I went out and started my first law firm with a partner. Thought I was going to do M&A, but when you're a two-lawyer law firm, you don't get any M&A, and so I learned everything else. And one thing led to another, and a couple years later, I got a call from a client out in Queens who told me he had a son that was starting a water company, and he thought we should meet. So in 1999, I went out and met Darius Bykov. who at the time had a company with, I don't know, maybe three or four employees and virtually no sales. And by 2007, Darius and his partner, Mike Rapoli, had grown and sold the business for $4 billion The Coca-Cola. Of course, that's vitamin water and smart water. So I got lucky, I suppose. I was in the right place at the right time. and ended up being with a rocket ship client. And over the years, maybe because I didn't have enough other clients or because I was sticky or whatever. Over the years, as the company grew, they replaced a lot of their attorneys or accountants or service providers, but I made sure that they always needed me, and then I always gave good advice, and I answered the phone when they called. So I was able to grow with them and basically get a absolute crash course on steroids of the beverage industry.
[00:08:56] Ray Latif: We'll get to the question of why are you still doing this having been pretty successful in this business, but we'll come back to that. I do want to ask you about, you know, you mentioned vitamin water. It seems like we've had a little bit of a vitamin water, you know, history lesson going on. You know, we had Mike Rapoli, we had Jerry Rita, now we have you all very, very involved in the brand. and the success of the brand. You oversaw that deal with Coke. You've overseen a lot of deals and a lot of very high profile mergers and acquisitions, Krave Jerky The Hershey's, Covita to PepsiCo. Since the vitamin water deal, how has that landscape for M&A evolved in the food and beverage space?
[00:09:34] Nick Giannuzzi: So of course, the vitamin water transaction was, you know, maybe one of a kind based on size and multiple and everything else. But obviously, we're in a very, very robust environment. We have lots of strategics who have stepped up their game. and they're aggressively looking at and bidding. And obviously this whole sort of natural better for you space is a place where most of the strategics are unsuccessfully implementing products and successfully buying somebody else's products. And so we see that. One of the other transactions that we were involved in recently was the Suja and Coca-Cola deal, which is a step It was just an investment. So you're seeing, and then General Mills has a fund, a 301, where they will invest small amounts, a couple million dollars into companies. I think Danone is doing that now. And so you have this different landscape of the strategics kind of looking at an acquisition of the next big thing in various ways. They don't just necessarily wait for the company to be worth $4 billion. and perhaps that's the cautionary tale of the vitamin water smart water transaction. But instead, they're looking at maybe buying the company over time or buying it earlier in its growth and finding a way either to pull it into the company and run it as part of the strategic, or some of the strategists are actually leaving the company more or less alone to run itself because they know that the founder or the management team got it to that point. It's exciting. There's so much opportunity for young brands to be bought in different ways. And we're not really sure what shift will happen next, which makes it fun for me.
[00:11:30] Ray Latif: You called it a cautionary tale for some of these strategics not to wait too long. What about the brands, these entrepreneurial brands themselves? What kind of caution, what kind of advice do you give them when being approached by strategics and evaluating opportunities from strategics?
[00:11:46] Nick Giannuzzi: Theoretically, I suppose, the founder or the management team or the investors in these fast-growing brands, theoretically, they should hold on because if they're doubling every year, perhaps the purchase price is doubling every year as well. However, we talk a lot in the industry about transactions being based on a multiple of revenues, as opposed to many industries where the multiple is based on profitability or EBITDA. The reason why we talk about multiples of revenue is because these are companies that are growing really, really fast. You know, some of these companies that we've sold, and we've sold probably, maybe we average 10 or 12 a year right now, but some of these companies have no profitability, and they still sell for hundreds of millions of dollars. Why? Because the strategic is seeing the growth. they believe that the growth will continue and they say, oh shucks, the profitability will come later. You know, they run a five year model and they say, okay, this will not be accretive on the day of acquisition, but in year two or four or whatever, it will be accretive either because of growth or also because they'll handle the manufacturing portion or whatever. And so the other side of the cautionary tale is that when you have a brand, that's growing, you don't wanna sell too late. Because if suddenly you are not growing at 60, 70, 90, 100%, but suddenly you're growing at 15%, then you're no longer a sort of quote, revenue multiple company. You have to justify your value on your profitability. And so that's not necessarily so easy, for a young brand to do because the cost savings that are inherent in a strategic don't exist. So I always say, don't bang your head on the ceiling, right? Vitamin water sold when it was still growing really, really well. I don't know how well it grew afterwards. So it grew at the right time. So I think that's the driver behind a lot of decisions to sell, you know, at the time when you maybe you did 50 million in revenue last year, and you're in the middle of doing 70 or 80 million dollars this year, that's a great story. If the next year you go from 80 to 88, then people are gonna be focusing more on bottom line.
[00:14:12] Ray Latif: That's very, very interesting. So it's almost like strategics are measuring the temperature, how hot this brand is at a time, and they may overpay, or they may pay a multiple that they wouldn't have paid or won't pay the following year.
[00:14:26] Nick Giannuzzi: Yeah, it's a bit of a cat and mouse game. So what I love about my business is that, and my kids make fun of me about this sometimes, but my friends are, are mostly my clients, right? We spend so much time together. We fight so many battles together and you know, I have these calls with all of my clients over 20, 30 million in revenue. We have, whether some of them, you know, once every six months, some of them, once every week or two, we have that conversation about when is the right time to sell? Because if your company does 30 million in revenue this year and 60 million next, you probably shouldn't have sold this year. You should sell next year because you just increased the value of your company. Theoretically, you doubled the value of your company. And so when you're in that growth cycle, you really don't want to sell too early. On the other hand, If you're too big, there's less buyers. If you flatten, there's the possibility of getting a much worse multiple. So the founders, the management teams, the investors, they're thinking that way. And then the strategics want to make sure that they're not buying a company when it actually reaches sort of the moment when it's when it ceases to grow. So it's it's balance.
[00:15:39] Ray Latif: Yeah. Fast growing companies often bolster their staffing teams, their executive teams with strategic operators, VP of strategy, what have you. It sounds like. You have an opportunity as the attorney to offer some strategic advice in their growth strategies as well. From a legal sense, I guess, how are you advising some of these clients on how to grow and how to be disciplined in their growth?
[00:16:05] Nick Giannuzzi: I'm the very first to say that even though I've been in this industry for almost 20 years, there's some things that I'm not the expert on, right? And I'm smart enough to sort of see my limitations. You never want a lawyer telling you how to fix your packaging or how to handle your marketing. Although, having done this for a long time, I've seen a lot of things that work and don't work. When it comes to growth, I think you have to develop, especially in beverage, you have to develop a logical, cohesive plan. And there's experts who do that. There's people, you can't do better than Mike Rapoli and Mike Rapoli's strategy because he's done it, he knows it. And again, I'm the first to say that when it comes to things like that, I'm willing to put in my two cents, but it's an observer, a guy on the sidelines view. I will say, Having watched, you know, Vitamin Water and Smart Water and watching Vitacoco and Ascensia and Spindrift and Body Armor and, you know, Hint and all these other companies that we've worked with, I will say they spend money and some of it is throwing mud on the wall. and hoping that the right thing sticks, and they don't all get it in the beginning. I tell all the young entrepreneurs, there's something wrong with your product, there's something wrong with your approach, there's something wrong with your sales approach, but you just need to go at it and modify it. When you strike the vein, when you actually get it, some companies are great with DSD distribution. I mean, I watched Vitacoco and, you know, sort of grow in a couple markets and suddenly it becomes a thing and every distributor wants you. And I always joke about pushing the dominoes towards the middle of the country, you know, win on the coasts. And when you have the energy and the fire, then push the dominoes towards the middle of the country. I think Essentia has been, to a large degree, that same type of success. Other companies, other products aren't gonna work the same way. Mike Rapolli mentioned that the world isn't just New York and LA, I think he said. There's the whole- He said that many times. Yeah, and he said it to me many times, and I listen when he speaks. And so, that product is unbelievably successful. BodyArmor's just crushing it. you know, they're not necessarily focused only on, you know, the coasts where Vitacoco and I think Vitamin Water and a lot of the other brands, that's where they had their initial successes and they banked on that.
[00:18:32] Ray Latif: Right. You mentioned when companies have the energy and the fire to go into the middle of the country, that's when they should do it. The energy and the fire is also very much tied to the capital, which you alluded to. And, you know, Mike Rapoli, mentioning Mike, he did have a great podcast. You mentioned that you listen to it as well. you know, he's got a lot of money to work with. And brands, you know, that raise a lot of money are usually pretty effective in building out their distribution networks. But raising money inherently comes with its own, you know, set of risks. How do you advise your clients to align themselves with investors that share the same values?
[00:19:08] Nick Giannuzzi: So I would say, just to give you some sort of, you know, perspective on size, I think in the typical year, we do somewhere around 150 plus rounds of financing. for our clients. We have 500 or 600 clients in the food and beverage space. Most of them raise money every 12 months, 18 months, 24 months. And we do all sorts. When you're a young company, you do convertible debt, and you do simple common rounds. And as you get bigger, you do rounds with more sophisticated either angels or funds or family offices. And so the great thing about this market is, number one, there's lots of money. Number two, there are some really, really good partners out there. I mean, there's a group of private equity funds, and it's growing, that are super sophisticated, that during the process of negotiating with them, you have to sit down and you have to understand how they see the growth of the company and how committed they are for the next round. You have to feel out. So we're hoping to grow 80% next year. What if we grow 25%? Are you still my partner? Are you still going to fund? But the great thing about the market is at almost every level, sort of from a $2 million raise up to a $100 million raise, there's super sophisticated private equity and family offices out there that if you spend the time and you do your research on them as they're doing their research on you, you can find partners that make all the difference.
[00:20:41] Ray Latif: You mentioned that there's a lot of money out there. There is. Seems like every time I turn around there's a new private equity firm or some more money that more people that just want to buy into the growth of the food and beverage space. Do you see that kind of well drying up anytime soon?
[00:20:56] Nick Giannuzzi: You know, it's one of the things that people ask me the most because I think we do more transactions because we do such small transactions and bigger transactions that we do more than, I think, a typical investment banker. We do more than any other law firm. And so we can track it. And we do track it. So we keep some statistics on the rounds of financing that we're doing. And what we're seeing is every year, there's more. I mean, we also have more clients every year. But every year, there's more. I think the rate of success is super high. If anything, it's not falling off. Perhaps it's getting higher. And rate of success, I mean, I go out, I want to raise a million bucks from friends and family, or I go out and I want to raise $25 million from private equity. There's just a lot of money coming in. And the money for good companies, they always close the deals. We start a financing. I think we close that round with all or most of the money they wanted to raise. I mean, this I don't have really tallied, but like 95% of the time. And you have other sophisticated groups that maybe are not historically consumer brands or food and beverage. that are moving into the space more and more so. I have meetings once a week with a new family office or a new private equity fund or someone that is trying to move into the space. So my conclusion right now is that it remains incredibly vibrant. Strategics are buying in a very aggressive way right now. Obviously, if the economy turns, if things get difficult, then I don't know exactly what will happen. I think that the funds out there have raised their money, and the family offices have money, and they're looking for opportunity. And the reason the money is coming here is, I believe, other than tech, or maybe in including tech, this is the most fertile ground. And it's going to remain fertile because every single day, there's a new entrepreneur out there with a great idea that could change the market. And those sources of money are looking for that deal.
[00:23:07] Ray Latif: Okay, there's a lot of money out there. I hope this isn't offensive, but there's also a lot of lawyers out there. And, you know, you're an attorney in this space. I don't think competing is the right word, but, you know, looking to align yourself with good businesses. You know, how do you differentiate yourself from some of the other attorneys that are out there? And, you know, why do people come to you?
[00:23:30] Nick Giannuzzi: So the first thing I do is I make sure I'm, as you said, available. I'm available to anybody who wants to speak with me. I take every phone call. I take the phone call from the guy who says he's got an idea but doesn't have a name or a product yet.
[00:23:43] Ray Latif: Is that a short phone call?
[00:23:45] Nick Giannuzzi: No, it's pretty much a half hour. And I go to every trade show. You know, one of the reasons to go to all the trade shows is to see my existing clients, but it's also to meet new people.
[00:23:54] Ray Latif: Sure.
[00:23:55] Nick Giannuzzi: So to answer the question, why would somebody come to us instead of anybody else? You know, sometimes I have clients come to me or potential clients come to me in the fashion industry. and I sit down with them and I say, sure, we can help, but there's gotta be somebody better out there. There's gotta be somebody who spends 12 hours a day for 20 years doing that, and it's not me, but there's nobody in this space. that has put the time in that I've put in. There's nobody in the space that me and the other 12 lawyers here, nobody else has that type of experience. And quite frankly, nobody, I don't think anybody has the passion either. This is what I do, and my role is to make these companies successful. Again, I know I'm quote only the lawyer, so I don't have a bigger image of myself than that, but every opportunity that I can get, for them that's moral and appropriate at the same time, I'm going to give them. And I think that if you speak to any of my clients, any of the bigger clients that have fought the battles, and I think that every single one of them will say, but for Nick, you know, not that they wouldn't have been successful maybe, but the road would have been bumpier. The result would have been a little worse. And that's my objective. And that's, even if it's egotistical, I want to win every single time. I want every single one of my clients to achieve their goal and achieve their goal is grow, grow, grow and sell for a lot of money most of the time. And I just don't know that, um, There's a law firm out there that has the information and knowledge base and experience that we have. And every single day, we've got 12 lawyers working 10, 12 hours a day to further separate ourselves from the next competitor. And we're based in New York, and we have a lot of clients out on the West Coast. And so we're moving this year to open a West Coast office as well. in LA, because that's kind of what the market wants. And I want to be there as needed, and we're going to put very knowledgeable lawyers there so that we can cater to that.
[00:25:58] Ray Latif: Very cool. We only have a couple of minutes left, but I did want to talk about, in most cases, you have some sort of equity in some of the brands that you work with. What's your approach to investing in brands in some cases? How do you kind of balance the legal aspect of what you do with the investment aspect of what you do?
[00:26:18] Nick Giannuzzi: So we have a lot of clients, and we've invested in on a proportionate basis, very, very few. We don't invest in new clients. We want to develop a relationship. We want to get to know each other. I never want a client to come to me because they think I might invest. I want them to come because they think we can make the difference from a legal perspective and a know-how perspective. And when we do invest, we like to be, I always used a phrase, we're the tail and never the dog. So when we typically invest, it's maybe we're working with a client and somebody is putting $10 million in, one of the big private equity funds. But the client would like to raise a little bit more. And at some point, we might put our hand up and say, hey, do you want another million bucks or something? We do proper conflict waivers and other things that make sure that we give absolute full disclosure and we comply with law. That's how it is. And, you know, if there's ever a client that says, gee, Nick, we'd rather you not invest, then we don't invest.
[00:27:21] Ray Latif: Sounds like though, you know, having taken a short tour of your office, which is really quite nice. And, you know, hearing some of the clients that you worked with. It sounds like just on a personal level, you've done really well for yourself. And having spoken to some of your clients, it sounds like you have a pretty good career that you could kind of hang it up if you wanted to. What keeps you motivated? Why do you keep coming back every single day?
[00:27:45] Nick Giannuzzi: So I guess there's two things. There's the practical aspect of the fact that I have four kids.
[00:27:51] Ray Latif: I forgot, I forgot about that.
[00:27:52] Nick Giannuzzi: I don't know how I forgot about that. I joke with them at least every couple months that if it wasn't for them, I'd be retired. But that's not the real reason. The real reason is, I absolutely love this. I mean, the phone's going to ring tomorrow, and it's going to be some 22-year-old graduate from college, or it's going to be a 32-year-old former fashion person or whatever, and they're going to say, hey, I have this idea. I just got the trademark and I want to do this. And that's going to happen somewhere in the United States. this week or next week or the week after that, and that company, a couple years later, five years, seven years later, is going to sell for $100 million. And that's what happens in the space. And I think it's so exciting. And to work your whole life to finally be good at something, to finally have a knowledge base that differentiates me from other people, and being able to help the next brand do that, that's fun. I always joke that I don't know many happy lawyers. I wasn't a happy lawyer when I worked in a big law firm. It just wasn't my thing. And I'm happy every single day. I absolutely love what I do. The lawyers I hire, I try to hire smart, energetic, amazing lawyers, but I hire for personality. I want to be with people at the stage who are people you'd want to be with and have a drink with and socialize with. And my clients want that as well. So we have an office here. that we made not fancy, but fun. We have a fun office where people don't wear jackets or ties. They pretty much only wear sneakers and jeans. And we work kind of crazy hours, but I think everybody here, maybe not every day, but I think everybody here has a lot of fun.
[00:29:43] Ray Latif: Yeah, it certainly seems like that. Having walked around your office, it definitely does not look like your typical law firm. Certainly not a Wall Street law firm. It's not like the one you described working at earlier in your career. But kudos for that. And we've flown through this. And I feel like we could do another half hour. But maybe next time, maybe in your LA office. That would be a date. Let's hope to do that by the end of the year. I think that's an idea. All right, Nick, really, really appreciate you taking the time. Thanks so much. And I look forward to hearing from you again soon.
[00:30:13] Nick Giannuzzi: Thank you. I'm grateful for the opportunity. Appreciate it.
[00:30:16] Ray Latif: All right. As we mentioned before, a wealth of information coming from Nick Giannuzzi. He is definitely one of the foremost attorneys in this business. Just a great person to get perspective from, whether you're a first timer in this business or, you know, someone who's been doing it for 30 years.
[00:30:32] Jon Landis: Well, I think also, you know, he sort of mentions you shouldn't trust your lawyer about Packaging, I mean, I'll say, I mean, I think for someone like Nick who's seen so many products, I would trust any advice that he gives you for any entrepreneurs that are out there listening. You know, he obviously has had some great success. And I mean, I think he's an industry expert in a lot of different areas. So, you know, always great to hear what he has to say.
[00:30:54] Ray Latif: Yeah. We took some Instagram footage of this, but his office, the conference room that we were sitting in was just loaded with products.
[00:31:02] Jon Landis: I mean, there were probably- He's got some real winners in there.
[00:31:04] Ray Latif: Yeah, he really does. But there were probably, I don't know, 200 or so brands just on display just in that conference room. So yeah, he's seen a lot. Right. Another guy who's seen a lot of Seth Goldman and let's turn to that interview. All right, we're in the kitchen here at BevNET HQ in Watertown, Massachusetts, and we're joined by Seth Goldman, who's the co-founder and TEO Emeritus of Honest Tea. Seth, thanks so much for coming out.
[00:31:27] Seth Goldman: It's always great to be with you guys, especially here in the HQ.
[00:31:29] Ray Latif: I know, it's pretty awesome, right? Especially when it's nice and balmy in Boston in February. What is it, like 65 degrees outside right now? Doesn't feel quite right. Yeah, I'm enjoying it.
[00:31:39] Seth Goldman: It's not how I grew up in Boston.
[00:31:41] Ray Latif: Yeah, sure enough. You came out here a few months ago. I think it was in April of last year. And you introduced Honest Sport, and we were frying some Beyond Meat burgers in the conference room. And now you're back, and you've got a sort of new look, a revamped Honest Sport, and sort of introducing it once more. And it's going wide this month or next month.
[00:32:01] Seth Goldman: So last year we were doing just a pilot in the mid-Atlantic, and we wanted to put it into the marketplace and the Natural Foods channel and understand what worked and what didn't work. And the first thing we learned is this proposition does work. It actually, we saw in a lot of the stores in the mid-Atlantic, we were outselling our tea line on a skew-per-skew basis. But we also saw some label elements and some flavor formulation elements that need to be evolved. So you'll see here a new label with, I'd say, sharper edges versus what we used to have was a round ball on the front. Some people thought that meant it was a juice drink, which it's not. We also were able to work on the formulation so that it is now very simple, still simple, it's still organic, but we've only used sea salt for the sodium in the drink, and that's a nice movement towards that clear, clean label.
[00:32:48] Ray Latif: What is it about the category itself that you see as a big opportunity for Honest Tea for VEB?
[00:32:54] Seth Goldman: So what happens is people who drink sports drinks are people who are generally health and fitness conscious. And of course, the people who go to the Natural Foods channel are also health and fitness conscious. And so you've got a group of people that are probably exercising several times a week who probably are buying their sports drinks elsewhere because the Natural Channel isn't really giving them an option. And if you look at the ingredient decks of the mainstream sports drinks, like I said, there aren't organic varieties and there are a lot of ingredients that wouldn't be allowed in a Whole Foods or in a lot of the natural channel stores. So I think it seems, and of course the experience will prove out, but it feels like it's a simple proposition and clear proposition to a consumer that doesn't have something right now.
[00:33:40] Ray Latif: You mentioned before that I asked you about the opportunity for organic sports drinks and how large that segment can be within the entire sports drink category. And you mentioned that it's kind of at a zero point right now, which is where Honest Tea was 19 years ago. Of course. I'll ask you again, I guess, you know, as far as, you know, the opportunity in terms of size, market size and sales. Yeah. Do you have an idea of, you know, how large this can be?
[00:34:07] Seth Goldman: Well, sports drinks is a larger category than tea, right? I think it's about 6 billion versus 3 billion, at least sort of the latest numbers I've seen. And the idea that when we think about what really drove our growth in tea was that we knew a lot of people moving to tea were coming from other categories where there wasn't organic. So they're moving towards tea often for health reasons. And so if you had told me 19 years ago there's no organic tea, it just made sense that there was going to be movement in that direction. And I'd say the same with the sports drink category. Much larger category, more consumers, everyone's looking more at labels, they're thinking more about health and environmental. impact not just on the ecosystem but on their bodies. So the idea that there wouldn't be interest in organic sports drink is, it just feels like that's a pretty clear opportunity.
[00:34:53] Jon Landis: Although it's pretty interesting to see a certain competitor Gatorade going at it and the numbers just don't seem like they're there yet.
[00:35:03] Seth Goldman: I think what may have happened there is they may not have built equity with a core audience. They went wide with it. Just speculating, of course. Just speculating. But what we know we're going to do is go deep with a core audience, make sure this works, the proposition works, and there probably will be some continued refinement as we go. But we know this is a consumer that's got an openness to our brand and a channel where they're going to be receptive to what we're offering. And if we build it well in the natural channel, certainly past experience shows mainstream wants it. And as long as they give it the right prioritization and focus, we think there's certainly more growth to come.
[00:35:41] Jon Landis: The point I was going to add on there is that one might argue that Gatorade might honestly have negative equity with the consumer that they're going after. No pun intended. There you go. Whereas, like you said, you're coming at it with all of that equity, maybe no equity in sports yet, but that seems like you don't have negative equity in sports.
[00:36:04] Seth Goldman: That's right. That's right. So then there's the case of, who's better positioned to go after that organic-leaning athlete? Is it the sports credential or the organic credential? And the market will let it, will inform.
[00:36:14] Ray Latif: There's also the natural consumer, you know, that's not necessarily looking for an organic product. And Body Armor is really targeting that consumer as well. I mean, they're targeting a large range of consumers, anyone who's wearing sports strings. But their positioning is that we're better because our ingredients are natural. We had Mike Rapoli on the podcast a few weeks ago. You know, I want to get your thoughts on sort of competing against that kind of a product, a sort of a natural blended or natural ingredient focused product. Sure, yeah.
[00:36:40] Seth Goldman: And I'm friendly with Mike and I enjoyed listening to that conversation and I agree with him. You know, there's two brands that have 99% of the market. So, I don't get up in the morning thinking about competing with Body Armor. I think about there's so much opportunity. I think he's exactly right, the idea that All the consumers across the country only are really interested in having two choices. It just doesn't make sense. So there should be a ton of opportunity for people looking for different options here. And if we're the 1% competing against each other, we're just focused on the wrong thing.
[00:37:11] Ray Latif: Yeah. Can you take us behind the scenes? I'm kind of putting you on the spot on this. Sure. When you're creating and you're innovating and launching a product that already sort of Coke already markets. Yeah. You know, Coke has Powerade. Yeah. How does that work? I mean, you have to clear it within the Coke system.
[00:37:27] Seth Goldman: So one of the things that's great about the whole Venturing Emerging Brands model is they're open to experimentation. So we came up, or I really in this case, I came up with this idea. I said, yeah, I was in a triathlon and I said, it just doesn't make sense. There's not an organic drink like this. And I brought it back and discussed it. And one of the things that really helped us gain support for this, it was clear that as the company thinks about where are the categories where there's opportunities for premiumization. Sports drinks is clearly one, and it's not a space that Powerade is playing in. So we can build this in a way that's complementary to the other offerings within the portfolio. That always helps. And if I were part of Pepsi, it would probably be a tougher case to present. So this felt like a white space, certainly within VEB, but even within The Coca-Cola portfolio.
[00:38:14] Ray Latif: So way back in the day, this is all part of the plan, you know, instead of selling to Pepsi, you were like, I'm going to create an Honest Sport one day.
[00:38:22] Seth Goldman: So for example, one reason we didn't have as much of a conversation with Pepsi 19 years ago was because they had the Lipton bottle tea brand. It was a strong tea brand and it played in many different, they had the premium and the value and so there wasn't as much space to play. But what's nice about this is to feel like we've got a brand that's been around 19 years, that's inside a larger corporate entity, but can still be entrepreneurial. We're launching this with much more of the bootstrap approach. So we do have a marketing budget, and we'll be doing it. But this is going to be, it's sort of a skunk works. It's a smaller group of people working on this, and we're not going to be part of, at least not now, the large portfolio management process.
[00:39:04] Ray Latif: All right. I can't, I can't not ask you about the mega deals that just were relatively mega deals that just happened by was a mega deal for sure. And then Kavita as well. Yeah. You know, you've been in this business for going on 20 years. What's your take on those two?
[00:39:18] Seth Goldman: Look, we're clearly seeing the, breakup of categories and sort of big companies hold on the beverage aisle, meaning big traditional categories hold on the beverage aisle. So these all point to it's going to continue to fragment. And that's happening not just in beverage, it's happening in food. And you're going to see more deals like this in the food world too. So I think it's exciting, certainly exciting for the entrepreneurs, but it's also exciting for the pipeline. because it means we're going to continue to see more ideas. And these big companies, look, these are expensive bets they're making. So, they're clearly making these bets with the belief that they can buy these companies and make them bigger and make more money. So, I just think these are good trends for health of consumers, for diversification in the marketplace. So I love seeing it.
[00:40:03] Ray Latif: And does VEB feel any pressure to kind of keep an eye on what's going on in terms of these big deals? And are they being pressured by their superiors to kind of get ahead of the game?
[00:40:14] Seth Goldman: Every major food company is feeling the pressure of change in the marketplace. I mean, it's happening so quickly. And if you just think of what's happened in the past five years, how market shares have shifted, how consumer behavior and preference and shopping patterns have shifted. So every major company is feeling the need to move quickly, to make new bets. And you just heard it this week from James Quincy, the new CEO The Coca-Cola, saying we've got to change our mix and how we think of things. And that's happening globally, too. So yes, there's pressure, but there's also certain approaches that are working. And we're going to continue to embrace those approaches too.
[00:40:51] Ray Latif: Yeah. I got to imagine that James Quincy is waiting and really excited to announce Honest Tea is the next billion dollar brand The Coca-Cola company. I'm ready too. Of course you are. Yeah, sure.
[00:41:01] Seth Goldman: Well, we are expanding into new markets around the world, which is exciting for us. And it's consistent with what he said about thinking about diversification in markets. And it's interesting, Europe is actually less diversified as a beverage company. We don't use sparkling and still anymore, but there's there's more sweetened drinks and less unsweetened drinks in Europe.
[00:41:21] Ray Latif: So do you have a target date? Do you guys have an idea of when Honest Tea hit that billion dollar mark?
[00:41:28] Seth Goldman: Oh, no, I don't, we don't have a target date, but with every year we're getting closer and we're seeing more growth and getting more mainstream opportunities. Just launched on as kids and Subway, which is something we're really excited about. So, you know, as long as those things keep happening, I'd say we're still, it's, it'll happen in my lifetime.
[00:41:47] Ray Latif: Steady as she goes. All right, Seth, this has been great. Thanks so much for being with us. Great work on the new one. Thank you. So now you know why Seth and his team did not sell to PepsiCo. Do we? No, I kid, I kid. Another really great interview. Every time I talk to Seth, I feel like I learn something. And, you know, it's one of those things that's really important. I think this is part of the reason why we do these podcasts is because you get so much great perspective from people who've been doing it for a long time. And Seth's been doing this for, what is it now, going on 20 years? Yep. And whereas we might question the idea and the value of getting into the sports drink category, considering how difficult it is. He sees something, and he sees the angles that we don't see.
[00:42:33] Jon Landis: Right. And also, I don't think we talked about his book during the interview, but if you haven't read… Mission in a Bottle? Yeah, Seth and Barry's book, which is like a business graphic novel, some really awesome stuff in there. I would highly recommend reading that.
[00:42:48] John Craven: I got to say the thing that always impresses me about Seth is how approachable he is, friendly, cordial, and his memory too, because that guy must have met thousands and thousands of people in this industry. But, you know, I spent an hour with him at his office once and the next time I saw him was about a year later and he immediately remembered me and that day and tasting shrubs and drinking vinegars in his office. You know, that for me was kind of cool. I mean, you know, someone like that. That it got a little weird. Yeah, I guess so.
[00:43:20] Ray Latif: We'll save that story for another day. Anyway. Sorry, Seth. Sorry, Seth. All right, on to Tribeca and the offices of Force Brands, where we met up with Josh Wand. All right, we're at the offices of Force Brands in Tribeca in New York City, and we're joined by the founder of the company, Josh Wand. Josh, thanks so much for having us. Yeah, thanks for coming by. So for those of our listeners who don't know what Force Brands is, and I'm assuming that's only a few folks, but still, can you give us sort of an overview of what you guys do here?
[00:43:49] Josh Wand: Yeah, sure. a recruitment, staffing, organizational design platform for high growth food and beverage companies. So as they're looking to hire their teams, build their boards, build executive leadership teams in sales and marketing or finance or ops, or even the street teams, we help connect them with the people that are passionate about their brands that have the experience to help them grow their business. Yeah. How long have you guys been doing this?
[00:44:12] Ray Latif: 2007 we started. Very, very cool. And your offices are pretty amazing. If you're a food or beverage brand and you happen to be in New York City area, you should come out and see their office. It's one of the nicer ones I've been to in this great city of ours.
[00:44:25] Josh Wand: Thank you, thank you. Yeah, we call it the treehouse. There's a lot of wood in here, and there's a lot of cool people that happen to work here. A lot of brands put their money out on the streets, you know, and we put it in our office, so the people that work here feel like it's a special energy and a really dynamic space. I was actually talking about all the booze you have on the shelves. Yeah, you have an impressive amount of booze in here. Well, at the end of the day, you work a long, hard one, you gotta drink it off.
[00:44:46] Ray Latif: So there's a good amount of craft spirits here. Yeah, I can certainly see that. There's literally any kind of spirit. that you could possibly want, and plenty of wine and beer as well. But he also has some great non-alcoholic beverages too. He got some T's Tea up in here. This is good stuff, for sure. Delicious stuff. I drink it almost every day.
[00:45:03] Jon Landis: So you guys are pretty tied into the hiring scene and it being early on in 2017. People like to talk about the climate for Josh Wand what companies are doing out there right now. What are you guys seeing?
[00:45:17] Josh Wand: I've never seen it so healthy ever. It's incredible. I mean, granted, this is a very busy time of the year because budgets are approved and it's January and companies have initiatives and growth objectives for this fiscal calendar year and they're bringing people on leadership. But the amount of investment, as you know, the amount of acquisition that's happening. And just the new interested parties that are coming into the space has just created a really competitive climate where there's great job opportunities and they're actually clamoring for talent. Finding all the right people is really the challenge. It's not about the resume, it's about the human being. And there's a lot of high growth brands that have been through successful transactions or work for big global CPGs. And we find that the market's really kind of gone to another level where they're paying higher level compensation. compensation, better benefits, and really creating healthier work environments to not just attract people, but actually retain them now. You saw it a lot in tech, and now you're seeing it in food and beverage.
[00:46:10] Jon Landis: And what about sort of the supply and demand? Is there kind of a balance there, or what should companies who are listening to this expect when they're trying to hire this year?
[00:46:19] Josh Wand: Yeah, sure, sure. I mean, I think it's really identifying what it is that you're trying to accomplish as a company and what your mission and vision is, because everyone's got different growth goals and objectives and finding the right type of humans that have the skill sets to help you accomplish that. I would say that the days of paying people, you know, nothing and hoping they're going to work for equity, you know, are over because most high growth companies are offering that. So being really competitive and valuing people and making sure that, you know, they're able to live a better quality of life so they can really, they don't have to focus on what's happening at home financially. They can actually focus on the job and building the business and really doing a bang up job. And so we're seeing that from an HR recruiting hiring perspective, compensation and benefits are like really, you know, they're in check based on cost of living. And it's really awesome. It doesn't mean you can't be scrappy and save a little bit here and there, but it's really become a healthier space over the past couple of years.
[00:47:09] Ray Latif: So where are you seeing a lot of the interest for hiring coming from? Is it spirits? Is it beer? Is it non-alcohol? And in what categories is hiring growing fastest?
[00:47:21] Josh Wand: Well, there's been so much consolidation in spirits recently that, you know, things have been in a holding pattern and they're really starting to pick up. Craft beer has been on fire in Fuego. And the healthy snack space is, you know, skyrocketing. And it's really incredible. We're seeing a lot in e-comm. People are, you know, they want to sell direct to consumers and they're building out their own functional teams. You're seeing a lot of, you know, food tech companies that are building platforms that, you know, are finding new routes to market. You're seeing companies like Snack Nation, you know, that are delivering to offices directly to consumers at their desks. And, you know, so you're starting to see just a lot of innovation around how people sell. And it's really an interesting time, but I would say right now, there's really not a category that's really down where you're not seeing an immense amount of growth if there's innovation.
[00:48:13] Jon Landis: So everyone's kind of in hiring mode, investment's flowing. Is there an adequate supply of actual talent kind of coming into the industry or is it just people kind of moving around?
[00:48:24] Josh Wand: It's really interesting. You're seeing a lot more coming in. Is a lot of the investment from outside industries such as tech have come into this space and there's just been such focus and attention on what's happening in the healthy or better for you space and people realize that I can actually work in this industry. So I would say that there's an incredible amount of talent in this space. It's identifying what exactly you're looking for. And there's a lot of people coming in from outside the space that are aware of this industry growing so significantly. So there's so much opportunity. There's a lot of people that are working for these global corporate companies that are realizing, hey, I could go work for an emerging brand. And a lot of these emerging brands are really growing up and realizing, hey, I could use this classically trained skill set. So you're really starting to see things change. And I say, listen, there's always great people. You just, you're competing with every other company that wants that person. So if they've done an amazing job, built and scaled a brand, a lot of people want them. So you just have to make your company attractive enough. And that's not always money. Awesome. Yeah.
[00:49:22] Jon Landis: Well, I have a couple more questions. I hear bottles banging in the background. There's like this raging happy hour about to go down out here.
[00:49:29] Josh Wand: It's a new hire happy hour. We hired three new people this week, a new commercial sales director and a couple others, and we like to toast them.
[00:49:35] Jon Landis: You're making a nice pitch for coming to work at Force Brands since they're these... you know, new hire happy hours and stuff. But anyway, we'll let Ray ask his final question, and then we'll let you have your happy hour.
[00:49:47] Ray Latif: Thanks, John. No problem. Well, I wanted to ask about, you know, sort of specific roles within companies and where the hiring need is greatest. You know, is it marketing? Is it sales? Is it HR? Is it distribution? Is it finance? You know, where are you seeing the most need right now?
[00:50:03] Josh Wand: Yeah, I mean, obviously sales driving revenue, there's an insane amount of growth there, because it's the majority of hires for most of these companies, unless they're a manufacturer. E-com, online, sales, I mean, you're starting to see whole new divisions grow within organizations. So if you have experience, or if you worked for Warby Parker, or you worked for Amazon, there's a high likelihood you could come work in the food space and work for one of these food companies to kind of build out a platform. So that's where you're starting to see a lot of outside transition. And then innovation, product development. you know, food scientists, R&D. I mean, we've got a whole food scientist division we're building out right now because so many people are going through plant-based proteins and new innovative, you know, ways to manufacture food. And so there's a big demand there and it's really exciting. Cool.
[00:50:46] Ray Latif: Uh-oh, we're getting called in for party time here. Did you hear that? So it is party time. All right. So we'll wrap up this segment with Josh's wonderful kids about to drag us into the next round. Josh needs alcohol. Yeah. It's time for a cocktail. It is time for a cogs deal. Josh, thanks so much for having us.
[00:51:02] Josh Wand: Thank you guys for coming by. I appreciate it.
[00:51:05] Ray Latif: So you heard Josh's kids at the very end of that. They were a lot of fun to have in the office. And that's a really fun office to be in. All three of us have taken part in some of their exciting parties at Force Brands. And that's one of the great things about the company is they really want to be involved in a way that is fun and exciting. It sort of reflects the passion and fun and excitement of this industry.
[00:51:28] Jon Landis: Well, I'm pretty sure party planning and execution is one of their core competencies over there. Those guys definitely, I mean, it's crazy as we were leaving, even after that podcast, they were setting up some sort of social thing in the middle of their office.
[00:51:43] Ray Latif: Yeah, I think it was welcoming a new client or a new employee.
[00:51:47] John Craven: New people, right. It's a very social type of industry, you know, recruiting, so it makes sense.
[00:51:53] Ray Latif: Yeah, it does make sense. And it makes sense for us to sign off because we have a lot of stuff to do to prepare for this madness that's called Natural Products Expo West. Are you guys fully prepared?
[00:52:05] John Craven: I don't think I could possibly ever be fully prepared.
[00:52:08] Ray Latif: Well, when most people listen to this, we'll be in Anaheim at the, what is it, the Fresh Ideas tent?
[00:52:13] John Craven: Is that what it's called? Or in the hotels because they open up on Thursday. There's a lot going on on Thursday. Yeah, so I'll be in the Marriott or the Hilton somewhere. Okay.
[00:52:21] Ray Latif: So if you happen to see us, look for the folks with the BevNET badges. You might recognize some of us. Come say hi. Tell us about the podcast. Tell us about some ideas, some things that you want to hear about for future episodes. And we'll definitely listen. Hope you enjoyed the three amigos. Three amigos. All right. See you next time.
