[00:00:10] Ray Latif: Hello, friends. I'm Ray Latif, the editor and producer of Taste Radio, the number one podcast for the food and beverage industry. In this episode, we explore the value of personal relationships between investors and entrepreneurs in conversations with the co-founders of Vail-based private equity firm Manna Tree Partners and the founders of three portfolio companies, Verde Farms, Health-Ade and Gotham Greens. Just a reminder, if you like what you hear on Taste Radio, please share the podcast with friends and colleagues. And of course, we would love it if you could review us on the Apple Podcasts app or your listening platform of choice. It goes without saying that food and beverage investors love solid business fundamentals. Gross margin, velocity, and brand awareness are critically important when making funding decisions. As much as anything, however, personal alignment with entrepreneurs in terms of character, vision, and demeanor is core to the investment philosophy of Manitree Partners. A private equity firm whose stated mission is to invest in the future of human health, Manitree holds stakes in 11 companies, several of which were represented at its inaugural Global Health Forum, which focused on the future of longevity through food and nutrition. At the conference, held in March, I sat down with Manitree's three co-founders and three portfolio company entrepreneurs to examine the origins and development of their respective relationships. The conversations revealed how kinship and endearment for one another established a baseline for trust and helped create positive outcomes for each of the companies. The conversations paired Manna Tree CEO Ellie Rubenstein with Dana Ehrlich, the founder and CEO of leading grass-fed beef company Verde Farms, Manna Tree Chief Investment Officer Ross Iverson with Daina Trout, the co-founder and Chief Mission officer of gut health-centric beverage brand Health-Ade, and the firm's president, Brent Drever, with Viraj Puri, the co-founder and CEO of indoor greenhouse pioneer Gotham Greens. Hey folks, it's Ray with Taste Radio. I'm here in Vail, Colorado at the headquarters of Manitree Partners. And sitting down with me right now is Ellie Rubenstein, the co-founder and CEO of Manna Tree Partners and Dana Ehrlich, who is the founder and CEO of Verde Farms. Eli, how are you?
[00:02:41] Ellie Rubenstein: Thank you so much for being here and having us on.
[00:02:43] Ray Latif: Thank you so much for joining me. Dana, how are you? I'm doing great. Yeah, it's great to meet you guys. Ellie, I've read so much about you. And Dana, I'm getting more familiar with Verde Farms. And so this is an exciting moment for me. I'm also really excited to be here because tomorrow is the Vail Global Health Conference, which Manna Tree Partners is hosting, is organizing. And based on what I've read about the show schedule and the list of attendees, it seems like it's going to be a pretty amazing event. Ellie, can you talk about the overall vision, focus, goal of the event?
[00:03:16] Ellie Rubenstein: Sure. So first of all, we are based in Vail, Colorado. I was a ski racer. This is where I've always considered home. I left home at a young age. And so this was my home away from home. And so the first part of building an asset manager that was focused on health as well as supply chain was where are we going to be based? We want to be relatable to our founders. That is not a city. So if we could be on a farm or in a mountain or somewhere where the authenticity of who we are, you know, we're in partnerships when we work with founders. So that's why we're here. So why a health forum? So as the daughter of somebody who, you know, grew up in private equity, as well as my mother, who is world renowned in Arctic circles, I've attended a lot of investor forums or health forums or, you know, think tanks and investor events. And so the idea was, number one, this is not a fundraising event. This is a stakeholder event. We wanted to say thank you to the community, as well as let some of our CEOs meet each other and everybody else kind of in the community. The second thing was bringing people to Veil. We have a really unique culture. We do team workouts, we work out together, we eat together, we cook together. And so for others to experience that, we always talk about it, but unless you experience it, there's something about the feeling of it. So we wanted to invite people here to see the mandatory culture. Why health? Manna Tree has always believed that essentially vertically integrated companies that are much further upwards on production, agriculture, and have control over their supply chain will really de-risk an investment. So in today, in the world, there are really five risk areas that we look at, right? So we're looking from COVID, we're looking from climate change, we're looking from supply chain issues, looking from inflation, and we're looking from geopolitical. That's risk. The second part is if we are a niche sector manager focused on growth, equity, investments, improving human health, then you have to be able to go category by category, every aspect of the food supply chain and say, number one, is it healthy for you? Is it not? And does it address those five areas of risk? So food has unfortunately become pretty political and very divided. And so we have tried to take a non-confrontational approach and run by data. Culture is everything to us. I'm not a New York City girl. I was raised in the mountains. And when we met Dana, it was my partner, Brent. I love how he tells the story. Dana said, maybe he doesn't know this, for 17 years, bankers from New Canaan, Connecticut would knock on our door and they'd show up in suits. And you showed up in sweatshirts and camo. And we realized that This is someone we work with. And so Manitree really as a firm has always been about relationship stewardship. We don't want to be seen as, you know, people coming in and taking over your company. We try to be a very active partner and helping the founder. We're very founder friendly. We don't go in and remove founders. We say, what do you need help with? Not here's our idea of the company, but let us partner. And so I think that my partner, Brent, who's been on the board with Dana, that has really spoken to how Manitree operates.
[00:06:15] Ray Latif: Dana, you'll be participating in a panel tomorrow that's focused on the health of the food supply chain, which is totally apropos given Verde Farms's mission and business philosophy. Can you briefly talk about the company's history and its development as the leading brand of organic grass-fed beef?
[00:06:32] Manitree Partners: Absolutely. And thanks for the great introduction. Let me start with how Verde actually started 17 years ago. So I grew up in the suburbs of Austin. I didn't hunt. I didn't fish. And I went to the supermarket and bought beef in a styrofoam package and wrapped.
[00:06:51] Ray Latif: Shout out to the suburbs of Boston.
[00:06:53] Manitree Partners: Yeah, and didn't know anything about the beef or really the food supply chain. But I was always interested in both entrepreneurship, environmental sustainability, and the health of individuals. And I did a semester abroad in Argentina, in Buenos Aires. And it was there that I discovered, one, that when I ate the beef, which is grass-fed beef, and I didn't even know there was a difference at the time between grass-fed and grain-finished beef, that it would never bother my GI system. And I was diagnosed with ulcerative colitis about 25 years ago. And so what I put in my body really affects how my system works, and that did really well. The second thing that happened is I went out to an estancia, which is basically a working bed and breakfast cattle ranch outside of the city, and saw cattle out on pasture. And that just opened my eyes. And again, I didn't know anything about the American system, so there wasn't an aha moment until I got back to the U.S. And I started to look for pasture-raised beef, grass-fed, organic in 2004, 2005, was really just becoming into the mainstream and not as popular as you see it today. And I had a bad meal at a steakhouse and went to Costco looking for grass-fed beef or Argentinian beef and couldn't find it. And that was the aha moment. And I started to look at what was important for me as an individual, as well as what the trends were. And when you put together organic and grass-fed pasture-raised with the beef, addressing the concerns about human health, environmental sustainability, and animal welfare, they fit really well. And now, almost 20 years later, it's a large category that's growing, and we've become the leading brand within that segment. Outstanding.
[00:08:45] Ray Latif: You know, it's interesting. There's a section on Verde Farms' website that lists media articles about the brand, about the company. And there was one from 2016 where you guys were in business for 11 years at the time. And the article was titled, No Venture Capital Needed or Wanted. Now you were one of a number of folks that they interviewed for that article. But four years later, Mandatory made a $15 million investment in Verde Farms. Now, Mandatory is a private equity firm. It's not a venture capital firm. And a lot can change in four years. But where did you see the synergies? Where did you see the alignment between your two companies?
[00:09:22] Manitree Partners: I think Ellie actually laid it out well with her story. So we talked initially with angel investors, we talked with VCs, and we talked with private equity groups. And we met with people in Manhattan and Greenwich and, you know, every other stuffy place around the country. And we had term sheets. And what we look for in a partner, certainly the dollars had to be there, the valuation had to be there, you know, kind of the way the term sheet was structured. But the personality of the group really mattered. And I have the same story of, you know, we talked to Brent on the phone once, and then he came out for a management meeting. We met at a fancy restaurant on Newbury Street in downtown Boston, and he showed up in jeans and a hoodie. And I'm like, that's it. We met The New day, we had a really good discussion, and Brent walked out, and I'm like, yep, this is it. And we presented a term sheet, and there were some discussions, but engineer to engineer, it was relatively straightforward, it was a great fit. The fact that they're in Vail, we're doing the conference tomorrow, I'm going skiing on Friday, we're in jeans and hiking boots at the moment, last August, or August of 2020, I took my family to Alaska and visited Ellie, stayed at her mother's house. We went fishing together with my entire family. That's just emblematic of the underlying relationship. And we can get into more details on the business side, but it's been a really good personal fit. And that's really important.
[00:11:00] Ellie Rubenstein: I'm a strong believer in culture. And you know, as somebody who, one of the reasons I've always said Carlisle did so well is my father really believes in relationship. It's very rare to have a CEO that's not just in charge of fundraising, but call it relationship building and what do you need? And that's something that I was raised around. And You know, as a founder and CEO myself, I really try to build the relationships of the founders, CEOs, because I know what it's like. You know, you have investors. I have it to tell you what you want to do. And I want to learn from them. So I invited him up there. I said, you know, I have a great relationship with Matt O'Hare at Vital Farms. And we always said, you know, we like Vital Farms, right? They are the example of vertical integration, conscious capitalism. and clean protein. And so we've always said Verde is very similar. But I said the relationship matters and why it's important from an investor standpoint. You know, we didn't originally win the term sheet of Vital Farms. We were outbid with equity checks, almost five times ours valuation double. And so it really does come down to culture. And we're finding we're able to put downward pressure on valuation by saying, let us be your partner and help you. You know, and I think they can speak to that. Once Manitree is there, we really help. Brent's background is unique in that he's a supply chain guy. He's a, you know, a Lean Six Sigma certified engineer. And so he really helps go in and be a Partners and Viraj think that now that our industry has so much tailwinds in it, there's a lot of capital coming into the space, but it's not informed capital. And right, a lot of founders like Dana has been going at it for a while. They don't just need money. They need knowledge and research and relationships, not just money. You can get money anywhere. And so I think that's something we've really tried to do is say who's right for the board. We help bring in Johnsonville. We personally have the CEO on the board alongside Brent. And so, you know, Brent was tasked with building a professional board, right? We were the first professional money in. And that's something that we're really proud of. And so it was important for me to host Dana and his family there. I wanted to show them how I knew supply chain from hunting, from flying, from fishing. I wanted to show them a real salmon and how they go upstream and what the life cycle of a salmon was in the same way that there's a very large passion and culture in Uruguay for the same issues. You know, again, I think we've really resonated around, we don't try to call Verde just a meat company. We say they're really the experts in call it the ESG space that meet all of those and culture. And I think they've done a remarkable job for so long doing that. And so that's why they did go build their own brand of beef. So, you know, I think it's been a wonderful relationship. And so, of course, being here, but talking about health and why beef can be a contributor to that from the environment, this is a narrative we want to do. And really, it's not mandatory we want to say it. Dana is the example of it. And so that's what we try to do is let Dana talk about it.
[00:13:49] Ray Latif: Well, it sounds like you didn't just find an investor for Virta. You found a friend in so many ways, Dana.
[00:13:55] Ellie Rubenstein: I got chills. Thank you. I appreciate that. You know, my father has a famous line. He goes, Ellie and her Partners and Viraj, they don't just want investors. They want to be friends with their investors. And what we actually do, we want to be friends with the founders and the investors and the network. That's really important to us. And I think that was part of the culture I saw with both my parents.
[00:14:14] Ray Latif: It definitely seems like you guys are close, which is awesome.
[00:14:17] Ellie Rubenstein: We were going to give you a picture from the Alaska trip, if that's okay.
[00:14:20] Ray Latif: I would love a picture from the Alaska trip. Thank you. Just to go back quickly, were you looking for money in 2020 or was this just an opportunity that came your way? We were. And I'm asking this because The New York Times article that I referenced noted that Verde had revenues of $50 million in 2016. So a $15 million investment sounds a little low, honestly, for a company that's already doing that type of business.
[00:14:44] Manitree Partners: Yeah, so we've been, as I said, we've been talking with different investor groups to find the right partner on how we could accelerate the business. And we've had a very strong supply chain from the very beginning. We've had great relationships with farmers and different packers, predominantly in Uruguay, but really globally on multiple continents. A couple years ago, we launched our own manufacturing facility. So again, we could vertically integrate and take control. We have almost all of our production going through that facility. But we wanted to continue to invest in the brand. And I would also say that the timing was really good because we saw sales just explode during COVID, especially when food service shut down. A lot of the beef processing facilities across the US as labor, you know, went away and, you know, sales just boomed. So the timing was really good for the investment, but we continue to focus on the Verde brand as the platform and as the focus for the business. There is a lot of private label within our space. But I think what we've seen is that consumers want to know where their food is coming from. And they want to trust. And it's really complicated. I could throw out a whole bunch of terms from organic, grass-fed, pasture-raised, never, ever, no antibiotics, no... It's really confusing for people in the industry, never mind the consumer. And the brand has the ability to be a shortcut for the consumer to know that they're voting with their dollars to do the right thing. And that's what we want to be for the end consumer.
[00:16:26] Ray Latif: You know, I've talked to your partners quite a bit, Ellie, about addressable market. And there is an addressable market for consumers who want organic grass-fed beef, for sure. But how large can that market be? And how does that play into this belief that investments in our food system should be an investment for all because, again, there is a price point that some people just can't afford when it comes to the type of products that you sell at Verde.
[00:16:59] Manitree Partners: So from an addressable market, first, the organic grass-fed segment is the fastest growing segment within the beef category. Beef is gigantic, you know, tens of billions of dollars. The better for you segment is also, you know, the organic as a subcomponent is the fastest growing. Better for you is faster growing than everything else. We're now hundreds of millions of dollars on the organic grass fed side, approaching a billion dollars on the better for you. So it has become a legitimate market on its own.
[00:17:34] Ellie Rubenstein: What growth equity does is funding business innovation. And so what that means is trying to find the category winners where they are the closest to helping get that economy of scale. So eventually the price point comes down. One of the things I want to point out that we really loved about BirdA was they're actually not direct to consumer. The average consumer that is affording meat is actually still getting it at the grocery store. Right. So the other thing that we're really always nervous about is customer adoption and customer concentration. We don't tend to look at things that are only in the natural channel. We look at things that are actually in the mainstream grocery stores, because that is again, where the masses are. The third part about that. on meat is that my partner, Brent, I don't know if you know this, they're a plant-based household. We have many, many members of Manitree that are plant-based. However, if they are going to feed their family's meat, they're going to want the best. And so that's why that premium price is going. If you look at the willingness to pay in kind of ag econ, the number one thing is Taste Radio the number two is health. Price is actually, sometimes it's nutrition and price. The last is actually environmental concern. But again, taste, while you can see some of that in plant-based, the nutrition is not there, as well as the price point is still too high. And so we are very price sensitive in terms of what is realistic. One of our advisors, Jason Lusk, who's the head of ag econ at Purdue, he has some of the best beef consumer research out there. And so you have to remember that there's a phenomenon that as people get wealthier, they actually pay more for protein. And so that's what we're seeing is that, you know, there's still protein, you know, on the dinner table. And so that's why you're seeing that this is not an elitist brand. We don't tend to go after CPG where there's no traceability over their supply chain or elitist, right? You know, we, we look at what is the average customer salary and again, where the grocery stores. And so I want to be clear about that because eventually when it is mainstream, that price point can come down.
[00:19:28] Ray Latif: Again, the partnership has been the key to the success of the investment to this point. Ellie, originally you said, you know, we don't replace founders, but how do you help founders? What's a specific way that you guys have worked together in which ManaTree has really benefited and supported Verde Farms over these last two years?
[00:19:49] Ellie Rubenstein: Brent's work of really respecting Dana is huge. We've looked at companies where the founder's percentage is so low. There are certain companies where the founder becomes executive chairman. Dana is founder and CEO and was really the right person to do that. And I think what Brent has done a really good job is saying, where can we help you? And so Brent is very great at governance. And so a lot of that has been helping Dana identify, in this case, it was actually a lot of management team that had to be replaced as well as build a board. And so what was very interesting about that is when we did the press release on Verde, that's when Johnsonville Sausage reached out. And they read that. We also had people asked to buy the company right when we did the press release. One of the things that we try to do is say we have to do right by the founder and what their vision was. And so they've really been working hard since we closed it on executing on the vision of what it is. And I think that it's been much more about where does Dana see the potential and how can we help with relationships or whatever else? But again, it's not my story to tell. I always say, I respect founders and they're The New who built the company. And I think it's unfortunate when investors come in and just think because they're a higher percentage on the cap table that they can run the company. That has never been our goal. That's why we're growth equity and not buyout.
[00:21:08] Ray Latif: Dana, Ellie referenced some of the management changes that you had with Verde and mandatory support in advising for those management changes or advising for new folks to come into the fold. How did that work with you? Because I have to think some of those folks were with you for some time.
[00:21:24] Manitree Partners: Yeah, let me just talk about the board first and then go on to the management team. We now have a world-class board. So Pablo and myself, the two co-founders, plus Brent, the CEO of Johnsonville Sausage, a billion plus dollar, better for you, sausage brand.
[00:21:41] Ray Latif: And can I ask, is Johnsonville an investor in Verde?
[00:21:43] Manitree Partners: They are. Okay. And then Jane Hilk, who's the former chief marketing officer of Kraft Foods. There's a great board.
[00:21:51] Ellie Rubenstein: They had to build the board after Manitree. That was Brent and Dana sitting down and saying, we have to build a board.
[00:21:57] Manitree Partners: And not only having the people on the board, but the right cadence, the right processes, a compensation committee, audit committee, you know, just how do we grow up as a company and formalize these processes? And so there's been a lot of work and just. We really respect Brent that he's acted as a board member, but not trying to replace me or step on my toes and let the management team run things, but with the right level of engagement and involvement. So that's been great.
[00:22:30] Ellie Rubenstein: The goal of Manitree was never to be known as Ellie's food fund. I've heard people say, David Rubenstein has a food fund. I say, no, what's really exciting now is that the work we're doing with founders is speaking on its own. And so we really love hearing that, that word on the street that, you know, Brent and our team is really good at working with founders. We wanted Manitree to be a brand in and of itself of known of rolling up your sleeves and being operators versus just cap table investors. That was never the experience of why we built this. I mean, I just didn't want that. And that's somewhat what you see in venture capital and CPG. And a lot of that has to be you're taking smaller stakes. So we owe it to the founder if we are taking a larger stake to make sure that, you know, we're pulling our weight as well.
[00:23:12] Manitree Partners: And then let me move over to the management team. As companies grow, and again, we were roughly 15 years in when the investment was made, that's a long time. And so the company naturally goes through phases. I was a chemical engineer, I think about phase change.
[00:23:29] Ray Latif: And so you- You were a chemical engineer before being the founder and CEO of a grass fed company? How long is the podcast?
[00:23:36] Manitree Partners: Yeah, and I used to work at Intel as a semiconductor manufacturing engineer.
[00:23:39] Ellie Rubenstein: We do our background on CEO search.
[00:23:42] Manitree Partners: Impressive stuff. I yeah. Wow. Okay. I think there's just a natural evolution of individuals in the company. And, you know, we've had my first employee is my controller, and she's been with me since 2009. And there are other people that have gone for part of the ride, but there's a ceiling. And we've replaced people over time. And we go with the analogy, sometimes it's a family, but I also like the analogy of a sports team. And we want to have the best people on the field. And today, we have replaced my entire executive team over the last 12 months. And we now have world-class individuals that can take us to that next level. And we want to be the best. And we want to have the best people on the field. And it starts with having the right team at the top. We've also started our manufacturing operation about two and a half years ago. We also completely overhauled that team. And it's doing great. It's ahead of expectations. We just started a second shift. We're bringing more volume, more products, more automation. And all of that is a result of having the right people on the team. MANA has been very supportive and encouraging of that process and very supportive throughout it.
[00:24:58] Ellie Rubenstein: Yeah, our job is again to listen to what that's a very hard transition, sometimes going from venture capital while they skipped over it. But, you know, you are usually replacing management, building boards, sometimes the CEOs leave. And so we first look at it in due diligence as this is the CEO that we want to work with. And so then it's how do you help him on that? That's a very hard emotional journey to go through if some of these people have been there through inception. Again, I just want to emphasize that the other thing is that what we learned through this is there's a big education that's needed on why beef actually can be good for the environment and can be good for your health. Because the battle you're really facing more is against feedlot cattle, right? Again, I go back to that political statement, not all beef is bad for you. And so that's what we've learned through it is it wasn't just the management and the board level, but there was an education and awareness that had to go out within the consumer. And it goes back to why they had to invest in the brand of Verde.
[00:25:52] Ray Latif: Ellie, Dana, we've only been talking for half an hour. I feel like we could talk for another three, four hours. Unfortunately, we don't have the time, but this has been amazing. Thank you so much for sitting down with me today. I have a feeling our audience is going to get a ton out of this and I really, really appreciate it.
[00:26:06] Ellie Rubenstein: Well, I will say one of the reasons I really love Dana and his family, you know, those of us who love food, right. Family dinner is everything. And so the fact that they're raising their kids and, you know, they probably eat beef. I think they're sick of eating beef because that's what they're eating every night. So I will give you a tidbit. If you want to come tomorrow at three o'clock, I am doing a cooking demo with Sam Cass. Uh, you should know that means a lot to me because when Obama came to Alaska, I actually was voluntold, I had to give my caribou backstrap to the president. And I said, why? He doesn't hunt. And they said, well, then you educate somebody on sourcing clean, you know, wild game meat. And Sam was the, Sam is the, uh, was Obama's chef and in charge of food policy and innovation. And so when we met Sam during, during mandatory, um, he said, I know you, you're the huntress. And so tomorrow he is going to see the caribou in my office. It's downstairs. Yes, we have a processor in a gym here. He's going to see it there. And the recipe that I wrote to say, you know, thank you to Dana for being here is a homemade taco recipe using bird eye beef.
[00:27:06] Ray Latif: You know, true story, I did circle that as part of the schedule for tomorrow, so I'm excited for that.
[00:27:12] Ellie Rubenstein: Totally.
[00:27:12] Ray Latif: Thank you. Yeah. But once again, thanks so much for taking the time. Totally excited for tomorrow and really looking forward to sharing this with our audience.
[00:27:18] Ellie Rubenstein: See, there you go. You know, it's like happy Father's Day, Dad. I don't have time to hunt anymore, so I just have to eat verde all the time.
[00:27:25] Ray Latif: Well done. Thanks again. Thank you.
[00:27:26] Ellie Rubenstein: Thank you.
[00:27:29] Ray Latif: All right, folks, this is Ray from Taste Radio back here in Vail, Colorado. This time I'm sitting down with Daina Trout, who's the Chief Mission Officer Health-Ade and Gotham Iverson, the CIO, that's for Investment Officer, of Manitree Partners. Dinah, how are you?
[00:27:44] Dana Ehrlich: I'm fantastic, Ray. Good to see you.
[00:27:46] Ray Latif: It's so, so great to see you. And Ross, it's incredibly great to see you in person.
[00:27:51] Verde Farms: It's nice to be face to face versus the Zoom world. Thanks for coming to Vail.
[00:27:55] Ray Latif: People don't realize that when I'm doing these Zoom interviews, I'm looking directly into a lens. I'm not really even looking at the person I'm speaking with. I'm looking into a lens. And now I'm actually looking at you and it's... So much better. That's great.
[00:28:07] Dana Ehrlich: Yeah.
[00:28:07] Ray Latif: And great to have Dinah here.
[00:28:08] Dana Ehrlich: Looking in the eyes.
[00:28:09] Ray Latif: Yeah. I like it. Yeah. Look them in the eyes for sure. Dinah, this is your third time from what I recall.
[00:28:14] Dana Ehrlich: Third time's a charm.
[00:28:15] Ray Latif: Absolutely. Being on Taste Radio. The first two times you were the co-founder and CEO of Health-Ade. Now you're the co-founder and Chief Mission officer of Health-Ade. Yes. That role changed in August of last year when Manitree and First Beverage Group became the primary owners of Health-Ade. That's correct. Yeah, so tell us a bit about how your role has changed. Let's start there.
[00:28:38] Dana Ehrlich: Cool. So as the company got bigger, though I loved leading the people at Health-Ade, there were parts of the job, just the CEO job, that forced me away from the things I really loved to do and was really good at. So sort of less involved I got in brand and innovation, for example. So I felt this sort of calling to get back into that and use the opportunity of the transaction to be a really perfect springboard for that type of transition. I designed the role, I coined the title, I worked with First Beverage in defining what it would be, but they were really open to whatever I wanted to do. And essentially what that is, is high level to unlock Chief Mission of the brand, like to help the brand realize its mission. I don't know if you know this, but Chief Mission has evolved over the years. I think we always knew it had to do with gut health, but it wasn't until the last few years that we really realized we feel we're sitting on like a goldmine, I guess you could say, with the gut health opportunity. And we really honed in on a vision that we want to unlock the power of gut health for consumers. We'd like to be the brand people think about when they think about their gut health. We want to help educate. We want to be like the true trusted advocate. And so this is like a five-year, 10-year thing. This isn't something that just happens with a campaign in one year's time. And it really does need a leader. It needs some entrepreneurial spirit, because it's sort of like building something where it wasn't before, necessarily. I mean, we're all over it, but we haven't strategically gone after that. And that's very much my role. So what I actually do is involve myself day to day with how the brand communicates to the consumer. I write all of the scientific content. As you know, my background's in nutrition, so I get to relive and revive all of those awesome memories. So I write all the content. I'm heavily involved with innovation, how we position the brand and how we continue to unlock it in the future. So things like scientific research, how we partner. with other brands and maybe scientists to like further the knowledge of consumers and even further kombucha. And then from an innovation standpoint, obviously I want the platform to expand, but always around like gut health centric products. So yeah, that's a little bit about what I do without being too esoteric. Did that make sense?
[00:31:05] Ray Latif: Absolutely. And I had the pineapple creamsicle today for the first time. So good, right? So good.
[00:31:11] Dana Ehrlich: Yeah. That was awesome. I mean, I just love that. Have you had that one yet, Russ?
[00:31:14] Ray Latif: Yes, I have.
[00:31:15] Dana Ehrlich: I mean, it is really good. Have you had the berry lemonade yet?
[00:31:17] Ray Latif: That's brand new.
[00:31:18] Dana Ehrlich: That's brand new. It's not even on the shelf yet, but I think we sent some to BevNET.
[00:31:22] Ray Latif: I saw the press release today.
[00:31:23] Dana Ehrlich: Yeah.
[00:31:24] Ray Latif: So that's how I know it's brand new. But I got the pineapple creamsicle from the managery offices and I have about six more in my bag, actually. I'm sorry.
[00:31:31] Verde Farms: We have a healthy cooler in the office now thanks to Dinah and her team. So we have lots of kombucha around.
[00:31:38] Ray Latif: Ross, we briefly talked about Health-Ade in our interview a couple months ago or from a couple months ago. And I'm wondering, you know, the vision that Dinah outlined for the brand, did you share that vision from the outset or has your vision for the brand evolved to where Dinah sees it today?
[00:31:55] Verde Farms: I think we're probably happier with it because of what she just said. I mean, if you think about a brand that is in that better for you category, we do a lot of food investing. This was our first beverage investment at Manitree. So we wanted a rock solid brand to get behind. We saw the movement of Google searches around healthy microbiome gut that was just accelerating. And Health-Ade as a name alone was so much better than the other players in the category. So we thought we could build a lot off of that. But to your point, that entrepreneurial mindset of saying, you know, what got us here won't get us there, I think is where a lot of the foundational kombucha brands were at. And so to get behind a brand that was accelerating is what we saw in Health-Ade's numbers, but also just in, you know, you know, Dinah's willing to stay on with the business. I mean, how rare is that, that you get a founder that says, hey, I got us here and I want to keep going. There's a lot of it where they just want the exit, they want the payout, and they want to kind of, you know, go on their yacht and go from there. So it's- No yacht for me. We're lucky to have you still involved.
[00:32:59] Dana Ehrlich: I was going to ask. No yacht, but happy to be in Vail. I mean, it's kind of cool how we met actually. So we met well before the first beverage investment. I'm happy to go into it.
[00:33:09] Ray Latif: Yeah, that was going to be my next question.
[00:33:11] Dana Ehrlich: You know, so right around when me and the marketing team really sort of had this aha moment about leaning into gut health in a very big way, that was when the sky sort of opened up and we're like, wow, we can go really far with this. And we were looking for a relatively small investment to basically get us fully across The New.
[00:33:33] Ray Latif: What year was this, by the way?
[00:33:35] Dana Ehrlich: This was 2020, right? 2020, yeah. Yeah. Okay. So we were looking for a relatively small investment just to get us across the, you know, COVID sort of finish line slash getting us fully to profitable, like that was all we needed. So we were doing a little bit of research into who might come in to help fill out our cap table. And we were open to new investors, of course, Cabo and First Beverage were on. But they put a lot of money into the business. They've been in there a long time. So we did a little bit of searching on who we might bring in that could be different. And we came across Manna in that search. And it really did seem different, not just on paper, but actually from our conversations. I feel like, and I'm looking at Ross like, did you feel it too? We had like a really special connection and they were really into wellness and health and had all these connections there. So for me, that was the attraction to MANA. It was this sort of special value that I felt no other investor had in the space, at least for sure. and their willingness to be a bit patient with it. Because Chief Mission, as I discussed, is not something that, you know, is going to get you to 100% growth next year. It'll take some time to build it. And I just really felt like it jived. So when we finished, right in that period, we were talking with MANA, and I think even getting ready to get to a term sheet, First Beverage shared their strategic move, and we figured out a way to partner the two. So it was kind of cool how that happened.
[00:35:04] Ray Latif: That sounds kind of complicated.
[00:35:06] Verde Farms: Maybe I'm wrong about that.
[00:35:07] Dana Ehrlich: Well, it took a long time. It was over a year.
[00:35:10] Verde Farms: We were ready to go. We were at the altar and with a check in, we got a call from First Beverly and said, hey, can you just sit on the sidelines for a while until we navigate a future path? And I remember being super bummed thinking, oh, we're going to lose this deal. And our whole team was just so excited based upon what you said as well, of saying, this is the perfect entry for us to get into a beverage. And then like investing, a lot of times you're just patient. You let things kind of work their way out. And then when we re-engage with first beverage the spring later, we went on a capital raising and a lot of our network and investors, they saw the opportunity immediately. And it was not hard for Manitree to raise the capital to execute on the deal.
[00:35:50] Ray Latif: And I think this comes to the crux of why I wanted to speak with both of you, because you developed a relationship, Dinah and Ross, and I'm sure the other leaders of Health-Ade, Vanessa and Justin, with the Manitree team. Yet Dinah has a new role with the company, Justin is no longer with the company. So part of your interest, part of that beautiful relationship that you had cultivated with Health-Ade is different now. So how does that affect your interest in the company? Does it?
[00:36:24] Verde Farms: I don't think so. And I think for us, it was less different than maybe the first beverage team that had been part of the earlier ride. But with Jack Belcido, The New CEO coming in and watching Jack and Dinah interact, it was like very comfortable for us as investors. This is not your typical private equity, come in the room, shove people aside, cut jobs, do all these things. It was more of, how do we put more resources towards what's already there? And then to watch you work with Jack and that comfort level there, it's hard. I mean, I've sold a company before and the guy that bought my company said, I need you for six weeks, not a day longer. I've done this 14 times before. And when the CEO stays, it's a disaster. And so there's obviously a question of like, how can this work? Where does the loyalty lie? I'm not there day to day to see where the loyalty is, but when I'm at board meetings in these planning meetings, it's very clear that Jack appreciates the vision and the entrepreneurial eye that Dinah brings to the room and we needed to grow the business. And so as an investor, I feel like I have the best of both worlds. We've got Jack on the corporate side, we've got Dinah on the entrepreneurial side, and you know, we just have one more spot to go in order to be the number one kombucha brand in the U.S.
[00:37:35] Dana Ehrlich: That's right. You know, you're very entrepreneurial, Ross. I've gotten to know that in you, in the board meetings. I love it. You're like, can we do it one month faster though? I'm like, yes, the energy we need.
[00:37:45] Verde Farms: That's where my roots started. So you never outgrow your entrepreneurial roots. Yes, I agree.
[00:37:50] Ray Latif: Well, you mentioned it, Donna. What do you see as the urgency with health aid at this point?
[00:37:56] Verde Farms: Well, I think everybody's navigating the supply chain issues of the day that is happening, but I think where Health-Ade has the customer interaction, the customer loyalty, and then the consumer loyalty. So I look at is not a lot of this country knows what kombucha is. You go around the world, we have investors in 18 countries. They don't know what kombucha is.
[00:38:14] Ray Latif: Where is household penetration for kombucha at this point in the United States?
[00:38:17] Dana Ehrlich: We're around 14%, 13, 14%.
[00:38:22] Verde Farms: Better than I thought, actually. Yeah. And we think it's still a growing category. I think a lot of people will say, well, it's not growing. Well, you don't know what's coming from this functional beverage world. You don't know what the soda decline, where it's going. But when we talk to investors, they know that there's a shrinking market. We also talk to beer companies that know beer is a shrinking market and the, you know, non-alcohol alternatives and kombucha has got a great way to party with. So you've got great flavors. Tomorrow, we actually at our event, we'll be showcasing some of those with a local restaurant. And I think there's just a lot of other, I don't want to call micro trends because they add up to more of a mega trend with, you know, reducing sugar, going away from soda. But I think the consumer is just getting healthier. And what you've built with a brand that I think is unique is it's more accessible. to a consumer to get into this gut health mindset. And that's a hard line. A lot of our company is like, how do you blend the scientific with that kind of consumer appeal? And I think the marketing team has done a great job with the brand.
[00:39:21] Dana Ehrlich: Yeah, thank you. I think that's always been a goal of ours, even from the beginning, right? From the font we pick on the label to the liquid flavor, to how we talk about it, it's meant to be accessible because we see it as a mainstream thing in the future. I think there's another mega trend too that's coming and it's not just overall health. I really do think gut health is going to become its own trend and I want to be there to totally capitalize it. But I mean, I think from an urgency standpoint, you didn't ask me, but I'm going to answer that question. I would love if you did. You know, you have to be urgent all the time because it's a competitive world out there and there are moments and there's momentum. And I found in my 10 years of doing this that part of our competitive advantage at Health-Ade was taking advantage of that momentum right then and there. No matter how difficult it was or complex it was, you got to act like that plate's going to be empty if you wait till tomorrow. I certainly don't think we should ever lose urgency. And I think that's part of the problem with companies as they get larger. And that's one of my personal goals as I stay at Health-Ade is to keep that urgency alive.
[00:40:30] Ray Latif: You guys seem so aligned on the future for this company, for the future for this brand. I'm going to ask a controversial question. Donna, do you wish you had met Manitree many years ago?
[00:40:40] Dana Ehrlich: Yeah. I mean, in a lot of ways I do, you know, but it's, it was sort of also a perfect time. Cause I had, I'd mentioned this earlier. We only came into this realization that gut health was the, you know, sort of like the answer.
[00:40:54] Ray Latif: Versus kombucha.
[00:40:55] Dana Ehrlich: Yeah. We were really focused on how we were the best kombucha.
[00:40:58] Ray Latif: The highest quality kombucha money can buy.
[00:41:00] Dana Ehrlich: Exactly. The best tasting and highest quality kombucha you can buy. Yes. I have it tattooed on my body. Yes. But it wasn't until a couple years ago that we really realized, okay, like there's a lot here with gut health and that this is really the answer for The New five years. And I think that's one of the special things that MANA brings to the table for us. Certainly there's international distribution and First Beverage would say that's one of the reasons they partnered with MANA in a big way. But for me, it was that science, that wellness, that kind of global responsibility piece. as it related to gut health, their interest in that. We were jiving on it. Like we went calls that were supposed to be an hour were two hours because we kept talking. Ross connected me with scientists. Like it was a very cool thing. So in many ways it was the right time because I'm not sure we were even there and ready for Manna's connections and at an earlier time.
[00:41:51] Ray Latif: You built the company to a hundred million dollars the way you have. Plus. Plus.
[00:41:57] Ellie Rubenstein: I'm sorry.
[00:41:58] Ray Latif: A hundred million dollars plus. the way you set it out to be built. I'd been to your manufacturing facility. Had you been to their manufacturing facility, Ross? I mean, it is unreal. You will never see anything like that again. It's changed though, right? The way you make health aid has changed and will continue to change as you expand internationally. How does that sit with you? And I feel like it has changed because of the change in ownership, right?
[00:42:24] Dana Ehrlich: No.
[00:42:25] Ray Latif: No?
[00:42:26] Dana Ehrlich: No, not at all. There's been no change in process since the change of ownership. Yeah, no, the change in process. And like you said, this is the seventh. I mean, people don't know this, but there have been seven major, I would call them enhancements or elevations in our process. And it has to do with scalability, you know? And no, I mean, these sit with me really well because we painstakingly did it the right way, not the fast way. And there was no compromise to the liquid, but it took time. We did not compromise at all. I mean, I was a part of this project. I led it with a great team behind me. I mean, 20 or so people on me worked for almost two straight years on figuring out how we can do this without compromising anything in the liquid. And even, let's make it better. So we analyzed it from a gut health perspective, probiotics, prebiotics, postbiotics, stuff that we had never done in the past. We understood in this process that Health-Ade really was superior to the other kombuchas and we were really excited about that. We wanted to obviously maintain that. So no, none of that was compromised. I feel really proud of it. It could have gone differently though. I think that if there was a different leader in the seat, certainly one that didn't care as much about that quality, it may have been more compromised because they were really easy turns we could have taken.
[00:43:41] Ray Latif: Well, that's the scary thing, right? Yeah. And that you've got to trust your investment partners to make sure that that doesn't happen because that reflects upon you. And I've seen that a number of times where a company has been sold and the soul of that company has changed. And I think that would be heartbreaking for any founder. So, Ross, how do you make sure that doesn't happen?
[00:44:02] Verde Farms: You know, in finance, you have all these levers to pull. I think when we launched Manitree, we had a commitment to the same set of values, which was, you know, ingredient integrity. As we know, the food industry, where we spend a lot of time, it's been a race to zero. How do you get to the cheapest calorie? And then obviously, how do you, you know, get your consumer somewhat addicted to those calories through salt, sugar, and those items. All of the companies that we've invested in, I would say we give the same promise to. It's saying, we're not going to make you sacrifice an ingredient integrity, if it's an animal protein, your animal welfare practices, to get another 2% out of gross margin. We've got to figure out another way. And so, you know, kind of that entrepreneurial spirit, you can grow your way to a better EBITDA as well. And so for us, we don't come in and attack that, which in a lot of investors do. I mean, in any industry is you go in, you'll try to cut out the fat. And then what happens is you make some core mistakes. I think we're in an era now where people know that values-based businesses, ESG-based businesses are starting to outperform. You made a good comment though. Sometimes it takes a little bit more time. I think that's our biggest challenge as investors is that IRR clock starts ticking the day we wire the money to the company. And we just have to make sure that the consumer is adopting those values at the right speed. And then our value will grow year after year after year.
[00:45:26] Ray Latif: At the end of the day, though, and this is also something we talked about the first time we spoke, you and I, Ross, there is a desire for return on investment. And again, that, you know, you want that aligned. Dinah, you want that, that vision to represent that return on investment to be aligned with the vision of the company. Can you still ensure that Dinah at this point?
[00:45:47] Dana Ehrlich: I mean, ensure is a strong word, but I think we're all good people at the table and we consistently ensure that we're aligned. So, I mean, I guess things could change and then I'd be really surprised though. I mean, remember that Jack, to as a CEO, he's not a private equity guy by trade, right? He was a CEO first and for many years and then had a stint in private equity world and now as a CEO again. So I think he understands how to really lead people. He's a really good leader, different than me, but strategic. And I hear a lot about private equity people that come in and try to be CEO and horribly fail. Well, this really isn't that. And one thing from the get-go, even before we signed the papers, once I knew this deal was happening, I was on the phone for countless hours with Jack. Just ask him how many hours I made him sit with me on. And I wanted to ensure that he was the right person and cared about the things we cared about and was gonna let me do the things I wanted to do. And he has been so supportive of all of that. So I would be really surprised if it didn't work out, to be honest. There's no way for me to insure it, but it does feel like we're all holding hands.
[00:47:00] Ray Latif: That's incredible to hear. You know, this notion of gut health has bled into soda, essentially. I mean, Booch Pop or Health Aid Pop at this point is one of a growing number of products out there that are promising a probiotic benefit to sparkling beverages. I could name, I don't know, half a dozen at this point. It seems like that would be an easier play for ManaTree, given the interest in that space. Health-Ade Pop is, again, you know, one part of that. But I think the kombucha part of what you guys do is still a massive opportunity. So if you're looking at, you know, the opportunity versus the established business, how do you evaluate that, Ross?
[00:47:46] Verde Farms: Here's my challenge, and I don't give away our playbook, but at the end of the day, there's no secrets in investing. Eventually it always gets out there. Food and beverage, and I think right now is in this era where there's always a celebrity attached, there's an athlete attached, and you feel like, oh, it must be a great brand, it must be a great company if you've got that attached. It's really, really hard, you've done it, to go from five million to 15 to 30 to 50. And the investment risk along that pathway is pretty hard. How many beverage companies started when you did? What, 95% of them don't exist anymore? And it'll be the same in this next rung. So building a platform is something we saw with Health-Ade. And whether it's POP, and if POP gets to $20 million or $40 million and stops, great, let's go do another product to add to that brand platform. And you can get to $300,000, $400,000, $500,000 in a lot of different ways. But you got to have the economics and the expertise and the team of a hundred million dollar business to build from. And some of these startup companies, they're doing great. I mean, I want to cheer them on. I think as it's one of those things, as consumer awareness grows of why have, you know, more health benefits in a pop category, I think it'll help health aid pop.
[00:49:02] Dana Ehrlich: Yeah, I mean we see that there's a lot of meat on The New with kombucha still. And while we're stoked about the prebiotic soda market, obviously we're in it with pop, there is still a lot that remains to be written about that category. It's still relatively tiny growing, yes, and some cool players that are making But at the end of the day, a company that's going to do, or a brand, or a product, that's going to do really well has to be scalable. It's got to be healthy, right? It can't just be 400% growth, but you're losing $50 million a year. So to me, there's still a question on the table, are any of these going to be profitable?
[00:49:40] Verde Farms: There's a brand that didn't say. Well, I mean, you see these posts all the time I love on LinkedIn. We grew 300% last year. Well, you started with a hundred thousand in sales.
[00:49:50] Dana Ehrlich: Yeah. And that profitability piece is to me a really important one. Where Health-Ade Kombucha is right now is like a really special place in many ways. It's just the beginning because you're now a healthy business. You're not a startup anymore. Yeah, you've surpassed 100 million, but it's not so much the number. I think it's more that all the dynamics work out. You've got a team that's there to stay. There's not a lot of turnover. You've got a P&L that works. You've got enough distribution, enough proof points that now you're like ready to invest it into, you know, into, let's say, international markets, etc. So really the opportunity with kombucha is huge. And if we suddenly jump ship or lose focus and just go to that sort of sexy new startup world, that would be a really big mistake in my mind. I want to play there. I want to nurture that potential, but I'm not seeing, right now to me, kombucha is still the big ticket item.
[00:50:45] Ray Latif: Yeah, I mean, in many ways, you know, I think people have talked about kombucha as plateauing at this point, but internationally, kombucha is still a very, very underrepresented beverage category. I think the thing that at this point I'm curious about is, you know, Dinah, you have all this experience, you have all this desire to continue to grow this brand, to see it to its potential. We were joking about this before we got on the mics. One of my least favorite, I don't know, phrases I hear a lot in food and beverages, we're just getting started.
[00:51:20] Dana Ehrlich: And I just said it just for you.
[00:51:21] Ray Latif: No, but you did say it because I know we were talking about this before we got on the mics, but it feels like health aid could be just getting started, right? I mean, like, even though you are at a hundred million plus in August of last year, there really is potential to be that billion dollar brand.
[00:51:40] Dana Ehrlich: Definitely. In kombucha alone in the US, there's potential. Lots of it. Then you think about international, that just triples that. There's the on-premise market. And like he talked about, like Ross mentioned in the beginning, 50% of the consumers that should be drinking kombucha don't even know what it is yet. So yeah, I see this sort of like plateau in the category. By the way, health aid's not plateaued. you know, and we continue to bring new consumers in, I see that as just growing and growing. But what I was going to say is, as I see this as like, we're going to look back at this as like, I don't know if it's an S curve or what, but like, we're just getting started in terms of kombucha hitting the mainstream market. This is not the time to stop.
[00:52:21] Ray Latif: Well, when health aid hits that billion dollar mark, perhaps James Quincy, when, if he's still sitting at the table, will be like, Oh yeah, that health aid, I remember that brand. Maybe we should get back in that business.
[00:52:35] Dana Ehrlich: Yeah.
[00:52:37] Ray Latif: Yeah. You know, Dinah, I remember back when I visited you guys at the Van Nuys facility.
[00:52:42] Dana Ehrlich: Remember that? Yes, I do remember.
[00:52:44] Ray Latif: Those were the days, weren't they? But it's so incredible to see you today. It's so incredible to see you partnered with a firm like Manitree and the relationship that you guys have, you know, it's unquestionable. It's clear. It's obvious. It's beautiful. And I thank you both for sharing it with us and our audience today. I wish you all the best and can't wait to see the future of Health-Ade. Cool. Thank you. Thank you. Thank you. All right, back here in Vail at the headquarters of Manitree Partners, sitting in front of me right now is Brent Drever, the co-founder and president of Manitree, and Viraj Puri, who is the co-founder and CEO of Gotham Greens. Gentlemen, so great to see you. Thanks for having us. Great to be here. Isn't it great to be here? Today's conference was spectacular. Well done, Brent, to you and your team. Oh, it was a special event. So this was our first annual Global Health forum in Vail, Colorado. And it was an opportunity to bring about 70 people together to talk about population health, Global Health, some of the unique things that some of our companies are doing to combat some of the challenges with putting healthier food on people's plates. And we saw just a mix of speakers. So we had the CEO of ValHealth, the hospital chain in the mountain communities of Colorado. He was talking about some of the challenges they're facing and what they're doing to overcome them. We had two governors, which was amazing. We had the governor of Colorado and the governor of the state of Alaska. And they talked about some of the challenges they face within their own state. So we get this public, we get this private. And it was just a really unique time to come together to talk about health of human beings. And that's, you know, part of Manitree's mission is improving human health. And it was just a great way to come together in a wonderful place. Absolutely. And I really loved your panel with the governor of Alaska and Dana from Verde Farms and Jason from The New Primal. Faraj, I also loved your panel with Carl from Evolve Biosystems and Daina Trout from Health-Ade. Just from top to bottom, a really outstanding, highly educational, highly entertaining conference. And it comes on the heels of major news for Gotham Greens. You guys are making a big investment in the expansion of your greenhouses. Viraj, can you talk a bit about where you guys are right now in terms of your development and what this expansion means for the future of the company?
[00:55:09] Manna Tree: Absolutely. We're going through a really exciting phase of our growth where we're accelerating the impact that we can make through producing healthy greens, using a fraction of the resources compared to conventional farming and just doing it on a much more meaningful scale. Our company is about 11 years old, so we've been around for a while and we were very cautious early on in our growth, just putting one foot in front of another. really trying to be certain to ourselves and our stakeholders and investors that there was a real path to scale our business. And we reached that inflection point a few years ago, and that manifested in a substantial national expansion of our greenhouse facilities. And like you said, a few days ago, we announced The New chapter in that evolution of growth, which is doubling our size from 600,000 square feet of greenhouse to over 1.2 million square feet of greenhouse and some new locations, including one in Texas, outside Dallas, one outside Atlanta and Georgia and another facility in Colorado. So just really, really exciting chapter in our growth. And I think just given so many things happening both locally and globally, including COVID-19, the crisis in Ukraine, it's just further underscoring the value proposition that more robust, localized, resilient supply chains can play. And that just combines with all the themes we talked about today around public health and the impact that healthier food can make in improving health and reducing the costs that we spend on addressing health issues rather than addressing the root cause. And then finally around climate change. Some of our most populous regions in the country and around the world and our food producing regions are facing an existential threat around natural resources. So it's just a fantastic time to really be scaling our business and what better place to sort of announce it than being here in Vail with MANA and a bunch of amazing food and beverage companies.
[00:57:06] Ray Latif: Absolutely. Viraj, this is your second time on Taste Radio. The first time was in February 2020, just before the pandemic hit. You and I met at your greenhouse in Gowanus on the roof of the Whole Foods over there. An amazing conversation. I was still blown away by what you guys were doing. And I assume, Brent, you and your team had been following the progress of Gotham Greens as well at that time. It's probably the reason you guys invested was because of that podcast episode, right? I mean, 100%.
[00:57:34] Verde Farms: Of course, yes.
[00:57:35] Ray Latif: But in December, you guys led a Series D $87 million round for Gotham Greens. Let's talk about the origins of that relationship. When did you first learn about Gotham Greens, Brent? And what made you really interested in this company? You know, for us, we knew that there was something there with indoor agriculture. And so we looked at about 25 different companies in the space. And when we came across Gotham Greens, they were doing it at scale. They were able to prove it, greenhouse after greenhouse, that they're innovating to get better, more efficient, produce higher yields and so forth. But they were doing something special by building a brand. And when you can build a brand, and so we saw that they had dressings and pestos beyond just the leafy greens, it was significantly different than what we saw with other companies. But there's a lot of capital going in the space. But we just liked the unique economics and just how they really were thinking about expansion. So for us, we got really involved through a relationship we actually had with JP Morgan. And Viraj and his team had a relationship with JP Morgan as well. And what was it, Viraj? You guys were going to do a big external round at the time and then COVID hit. And then it was like, well, we still need to do a round. And so I think we got a phone call of just saying, do you guys want to talk with him? And we said, of course. And then we just, it came together, you know, a handful of months later, but the unique there is we built a relationship in the first four months of the pandemic. So we did a lot of unique things. I mean, to go visit two greenhouses during the pandemic was really unique for us because we flew to Chicago, right?
[00:59:15] Manna Tree: That's right.
[00:59:16] Ray Latif: And we met in Chicago.
[00:59:17] Manna Tree: Empty plane.
[00:59:17] Ray Latif: empty plane and it was a day trip for us in Denver and it was a day trip for you I think from New York and we just uniquely kind of connected but that's a big part of our relationships with our companies is we've got to get to know the team and that face-to-face was so important but what Gotham Greens is doing is truly unique and it's just I've still since we made our investment I've probably seen another 20 companies raising capital and we still have not seen a company in the indoor controlled agriculture space that is doing what Gotham Greens is doing at scale. That's such an interesting part of the story about how you guys felt like you needed to meet in person. Now, it's a lot of money we're talking about. So like maybe a Zoom call wasn't sufficient, you know, to make that investment. But it speaks to what I've heard from other partners and portfolio company founders over the past couple of days, which is the relationship is so important to the point where it almost becomes investor, founder are friends as much as they Manitree Partners. Viraj, I got to think that when you were raising money for that Series D round, there were a lot of people knocking on your door. How much did that initial meeting affect or influence your interest in working with ManaTree?
[01:00:36] Manna Tree: It was instrumental. I cannot emphasize how important it was getting to know the MANA team. And just for a little bit of context for the listeners, our Series D round was really the first time we brought in institutional capital. So our A, B, and C were led and syndicated by family offices. And family office investors are very different from institutional capital. There's, there's a sense of patience, there's a sense of style. And when we were gearing up to do an external round, like Brent mentioned, the pandemic hit. So our very, um, rock solid family office investor said, look, we'll put some money in, we'll get the round going. And maybe this is a great way to bring in some institutional capital to join the round. And it was sort of a baby step. moment for us, right? And we wanted to be very selective in who we brought on as a partner. Like you said, you alluded to, we had certainly received term sheets from institutional investors in previous rounds, as well as the deed. But there was something about Mana that we really, really liked. We liked their focus. this very specific focus on consumer food and health and agriculture and food systems around human health. We liked that they were a young fund. We liked that they were entrepreneurial. We really liked the culture and the people. And they had a super successful track record in the short time of their existence with scaling and helping to, in the case of Vital Farms, which has a lot of parallels to Gotham Greens, And we thought, hey, if we're going to go institutional, they bring the rigor. And to be really clear, I mean, they ran a very, very rigorous due diligence process, which I think is fantastic. And as David Rubenstein, I guess, famously said is, if you want to be a good investor, you have to ask a lot of questions. So when they asked a lot of questions, it was sort of assigned to us. Now, I didn't know the David Rubenstein quote at that time, right? It's a little bit of revisionist history, but it kind of comes full circle. And so we just, we really like Mana, we like the vibe, we like the energy, we like their focus, we like that they were young and entrepreneurial. And it's been a really great relationship over the last two years.
[01:02:35] Ray Latif: David Rubenstein was the keynote speaker for the forum today. And I wrote down that quote, what makes a great investor? Curiosity is the answer. And Brent, the curiosity I'm wondering about in the case of ManaTree investing in Gotham Greens is where can this brand go? What do you see as the potential for Gotham Greens and how do you help them get to where that potential lies? You know, one of the things that we looked at, and I really like this question because with my background, I'm always thinking of scale. And how can you actually scale a business like Gotham Greens? And what Gotham Greens is unique is you can establish a new footprint almost anywhere on the planet if you can make the feasibility study pans out. With our investor base, you know, it's pretty international, is we actually have investors that are looking to take this type of technology and this type of platform into their region in the world, because where there's areas that have food security issues, This is a great solution and it doesn't matter if it's a hot or cold climate. You can actually leverage the greenhouse technology to manage through that. So we saw the scalability of this and what Gotham Greens was unique as I mentioned a little bit earlier is. You know, they've already launched their ninth greenhouse. So every time they get better in their understanding, can we make it a little bit bigger? Is that the right size footprint or, you know, managing in different climates? Because if you've got a greenhouse in California, it's going to operate differently than Chicago, than Baltimore, than Denver. So it's really important. We just saw that they're keep adapting to these different climates. And we just see that ultimately this is a winner in the category because they're proving that you can successfully put a new greenhouse that can service a population for locally grown, which is really important. As Viraj mentioned, Gotham Greens is doubling its footprint, expanding into cities that it hadn't been in before. Where did it make most sense in terms of your advisement for this expansion? I would say at a board level, you know, I sit on the board of Verage, we talk about that on a regular basis, is to say, could we go into the city in the state of Minnesota? Could we go over to the UAE in the Middle East? And we just talk about it. But more importantly is, what's the network that we have access to? So Manitoba has a big network that could actually establish you know, from a land use perspective or construction or have the right resources over there to help guide the process. Because if we've got a proven footprint or a platform, how can we actually leverage that? So we just bring in the relationships and then we have access to different people and different conversations that can enable us to really have a meaningful conversation, just not a wish list. But The New thing with Viraj and his co-founders and their team is they've got such good experience that they're able to actually shoot down some of those ideas pretty quickly too. Because we've had a few of our investors that actually have reached out to directly to be like, really want one next to some sort of facility in their town. And they're like, that's a lot of work. And we're just, we can't sign up for that today. but maybe down the road. So it's all about the network effect that we're able to leverage. And MANA brings that. And we're always challenging. I mean, Viraj and I met with a group out of Mexico just recently, just to have a conversation, right, Viraj? I mean, that was our goal, is just to explore what could it look like if you actually were to go into a different valley in Mexico, and what are the economics? And so we're just trying to explore it. see if there's something there, and then bring it back to the board to action it to say, is this something we want to put on our long-term strategic roadmap?
[01:06:14] Manna Tree: Yeah, I sort of neglected to mention that when you asked about what were the attributes that really attracted us to MANA, and I neglected to mention that this global network is very, very significant. When we first met MANA, we asked about their providence. Where do they come from? Who do they know? And who their LP base was? And we were just, we were really awestruck by the depth and the diversity and the caliber of their network. And if you're building a company, any sort of company, but particularly one that's as complex as Gotham Greens, having that broad and diverse network is incredibly important for any young company, growth stage company.
[01:06:52] Ray Latif: Manitree has a lot of Manitree Partners and, you know, Brent, you brought up what seems like it might be a sticky situation when a limited partner reaches out to Gotham Greens and says, hey, you know, you should build a, build a greenhouse here. How do you deal with that? You know, because on The New hand you do have a responsibility to address your investor needs and their desires and their demands. On the other hand, you're there to support the growth of one of your portfolio companies and, and do it in the best way possible. So, you know, what happens in that instance? You go back to the, we're in the business, it's a for-profit business. So some of these are very tied to a philanthropic endeavor that maybe an LP has. And that's not a bad thing, but we have to say, we still have to be profitable. What's really interesting when you interact with LPs is they generally could have a connection through the real estate arm that might make it work. Or they may have access to a population base or a relationship with a retailer that we may not have a strong relationship. So you just have to do the feasibility, but we have to make sure it's just not a shiny object that they're just trying to bring to their community. and it's just to put their name on the front door. Most of our LPs are not even interested in that. They're actually trying to solve a problem within the community that they reside, or maybe the community that they came from earlier in life to say, this might be really good. So it's just having, is it real, is the first question, and then really understanding the value-added partnership that may bring it to life. So it's a real conversation, but you can wade through that one pretty quickly just by saying what's the true intent. And most of the time, 99 out of a hundred, it's always going to be like, they're trying to do something for a community that they once lived in that actually is underserved. And we just have to try to figure it out if we can make it make sense. So the idea was well-intentioned. Yeah, without a doubt. But when Viraj gets that phone call, what do you do, Viraj? Do you call Brent immediately and be like, ah, I got to get back to you and let me call Brent? Or what do you do in that instance?
[01:08:49] Manna Tree: I think it's really just on a case by case basis. And we want to be strategic, but we also want to be opportunistic. And, and I think what's also good about Manna is, is that they're an incredibly supportive partner, but they give at least us, and I would imagine there are other portfolio companies, the independence to really manage the company and leave a lot of the decision-making to us. They're there to guide, they're there to ask questions, they're there to support, but. I think if Brent makes an introduction, I think it's fair. Brent, I'm looking over at him making sure he approves of the answer, but that, you know, he trusts me to make the right decision whether to pursue it or not.
[01:09:24] Ray Latif: Yeah, that's always, I mean, Raj, it's funny because you don't get the things that I get. And so I usually just give you The New that actually I, you know, it's like, this might be worth exploring. So we try to filter it or screen it a little bit. Well, I'm sure it's helpful given the experience at ManaTree in terms of its leadership and management team and its global network of investors amid a supply chain crisis, amid an inflation crisis. And this is something you talked about today. Viraj, you'd mentioned that costs are going up everywhere, but we're doing our best to outrun them with economies of scale. And part of that is using automated production methods. And when we spoke a couple of years ago, we talked about technology and the use of technology to support the scaling potential for Gotham Greens. And this was a quote posted on Instagram. You had said, technology is an incredibly important asset, but our people are a larger asset because you can buy very sophisticated technology, but you still need people to optimize it and run it well. Outstanding quote. That being said, when costs are going up, you do have to reduce your labor a bit, don't you? And that does affect the human element of what you do.
[01:10:37] Manna Tree: Yeah, absolutely. And I forgot about that quote, but that's a good quote. And I actually stand by it 100%. And I don't think they're mutually exclusive. And this is what I mean by that. Yes, you could have a conveyor system that brings a product from point A to point B, which would reduce some of the human capital that's required to perform that task. Or you can use some sort of a machine to seal a package rather than it being done by a human hand. So I think in some ways we are relying on increased automation to reduce labor and be insulated against some of those labor costs. However, machines don't just run themselves, right? You need smart people, particularly in farming. Now, plants don't grow themselves. We can have the most sophisticated sensors and computer control systems and conveyors and automation, However, plants are not widgets, okay? They don't grow themselves. And I think in the indoor farming space, there's a lot of sort of commentary and a narrative around autonomous growing and how sophisticated technology will allow plants to grow by themselves without human intervention. And I think that's certainly possible in the years to come, but we're not there today. So when I talk about human capital and the importance of having a strong team, it's around the plant sciences. It's around making strong, smart decisions on a daily basis in terms of operations, in terms of supply chain, in terms of customer service, sales, and culture. You know, ultimately, at least not yet, artificial intelligence is not there yet. Machines and technology cannot drive culture. And I think that's really what I meant by that quote. So yes, we are automating a lot. We're introducing a lot of automation into our greenhouses. But I stand by the quote. I think our biggest asset, undeniably, is the caliber of our people. That's a great quote. I think you would agree.
[01:12:25] Ray Latif: Oh, absolutely. This is also something I brought up a couple of years ago, which is that some people might be skeptical about what you guys do because it is packaged in a plastic bin. I don't know what the term is you use for- Clamshells. Clamshells, yes. And I know you're working toward a better package for these products, but Brent, I mean, I'm sure you want that as well. I'm sure you and your team have been looking at that as well. Yep. How do you work collectively to get there? I mean, as an investor, I mean, it seems like that, again, isn't your primary focus, but it is your primary focus in so many ways. Yeah, when you think about improving human health, you start to look at it through a lens of 360. So, you know, how is this product being produced? What is the impact on the land or the environment? And then what is the impact of the packaging and the whole process? And I remember actually talking to Braj about this when we were doing our diligence on the company. We asked about packaging and Verage is on top of that. There's solutions that are coming, you know, just at Expo West a couple of weeks ago, and you're starting to see the innovation cycle hit it. It's not there. It's not at scale quite yet, but there's investment going into the space. And we want to be at the forefront of that, but we also have to do it in a way that's sustainable. Like, can it keep up with our existing production right now? So it's out there, but I think you would agree, Verage, I mean, that's something that we talk about even at the board. But it's not if we just don't have the right solutions, but maybe you can talk about the changes in some of the lids just to know reduction of plastic.
[01:14:01] Manna Tree: Rewind about 11 years ago when we started the company and our initial packaging concepts were not plastic based. They were compostable fiber based containers. And those were our mockups. And when we first presented the products to our first retail customers, they were thrilled to see a non-plastic option. Lo and behold, we're about a week or two away from launch, and we're doing our final shelf-life testing, and guess what? The product was not holding up well. The packaging was sort of acting as this desiccant. It was sucking the moisture out of the leaves, and we were just a deer in headlights. What are we going to do? We've spent millions of dollars to build this greenhouse, and all these products are ready to launch. The customers are waiting for them, and we don't have a sustainable packaging solution. We very begrudgingly picked what we thought was the least of all evils, which was 100% recycled plastic. And for 11 years, we've been trying to get out of it. And it's been really challenging to find solutions. However, like Brent said, the industry is finally catching up. The big players are developing more sustainable packaging solutions and a small step in that direction. is in our latest greenhouse in California, which is now slowly going to be rolling out to our other regions, we've actually replaced the rigid plastic lid on our containers with a thin resealable film. And that essentially reduces our plastic use by 33%. So it's a step in the right direction. It is certainly not a long-term solution. And we are working on a few things that we'll be excited to roll out in The New couple of years that we believe and we'll get rid of the single-use plastic. I mean, it's hard for me personally to reconcile it. Like in my home, for example, we don't use plastic water bottles, right? We're like the water bottle family, right? That always has their reusable water bottles and all the rest of it. So it's a hard one for me as we scale our business to be putting, you know, a lot of single-use plastic out there. But I do think that the the benefits of our farming system and the amount of natural resources that we save, those benefits do outweigh the costs. And it's not a perfect world, but we do still wake up every day knowing that we are making a positive impact on the world and consumers and public health.
[01:16:06] Ray Latif: Brent, I'm curious about how ManaTree thinks about the end game or the exit game, whatever you want to call it, for Gotham Greens. You were working with a similar company, Vital Farms, you know, commodity-driven brand that eventually went into the public markets, launched an IPO. And I had talked to Adriana about this yesterday, which is that, you know, there are three ways of exiting these days, M&A, public markets, or another financial sponsor. You know, how do you see the future of Gotham Greens? in terms of its exit strategy or, I guess, evolution? It's a good question because that's what we started talking about with the board and Viraj and his leadership team initially, right, when we first made the investment just a few months later. Because a lot of these things, you have to look at where the public markets are, as if that's an example, like, could it be an IPO? The IPO market could be an option for the company, but we have to look at the state of the IPO market right now is pretty flat. And so we're not in that position today to say it'd be a great exit, but maybe in two or three years, it could be a very viable option because you've got the revenue base, you have the bottom line, you know, margins and you've proven scale. You know, you might have 15 to 20 greenhouses at that point in time, and you could actually really show that we can scale this and you can look at it as a global footprint. If you go to the public markets, they want to look at the pathway for that investor base because it's, you know, you have a new investor base of where could you actually take this to next. So that's still out there by all means. I think there's a lot of strategics that can see value in a company like Gotham Greens because We have something that a lot of companies don't have is consistency of the outcome, meaning the product consistency and the reproducibility of the process that Gotham Greens is able to provide to that distribution center of that large retailer on a regular basis. And they're not getting exposed to some of the challenges that you might see in the outdoor growing space. So we could see that. But also another option that we explore quite a bit and Raj and I talk about quite a bit is the international component. There's sovereign wealth funds. There's a lot of large family offices on a global scale that are saying this might be an asset that we would want to have in our portfolio for life. Because food security comes into play. We like what it's going. That's where the industry is headed. And so we can see a couple of unique pathways. And that's the greatest thing about a company like Gotham Greens is it does have optionality. Well, no matter where Gotham Greens, leafy greens are grown or sold, they have to taste great, which is something you articulated today, Viraj. And they do taste great. I bought one of your pestos from Whole Foods a couple of weeks ago, and I guess I just forgot how good it was. And the fact that it's vegan and the fact that it's just like something that just goes with everything. And then I bought, you know, one of your clamshells of leafy greens from one of those 15 minute services. We were talking about this last night, Getter in Boston, and it was like four bucks. And I'm like, man, what a value. And so I'm really, maybe I'm overstating this, but I really think there's a great future for the company. I'm so glad that you guys found alignment, found friendship, found a relationship that really works and works to the benefit of all, and I mean all consumers. And I'm excited for the future of the company. I'm excited for the future of this relationship. And I'm so excited that you guys are sitting down with me right now. Thank you so much for taking the time. I really appreciate it.
[01:19:37] Manna Tree: Great to be with you. Thank you. Thanks for having us. Love it.
[01:19:43] Ray Latif: That brings us to the end of this episode of Taste Radio. Thank you so much for listening, and thanks to our guests, Ellie Rubenstein, Dana Ehrlich, Ross Iverson, Daina Trout, Brent Drever, and Viraj Puri. As always, for questions, comments, ideas for future podcasts, please send us an email to askattasteradio.com. On behalf of the entire Taste Radio team, thank you for listening, and we'll talk to you next time.
