[00:00:10] Ray Latif: Hello friends, I'm Ray Latif and you're listening to the number one podcast for the food and beverage industry Taste Radio. This episode features an interview with Nick Mindel, a partner with Amberstone, a San Francisco-based venture capital firm focused on mid stage investments in fast growing consumer brands. Just a reminder to our listeners, 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. Over the past year, Amberstone has invested nearly $75 million in food and beverage companies led by what the firm describes as, quote, extraordinary entrepreneurs. The term is central to Amberstone's investment philosophy and has helped guide the firm's funding decisions since its launch in 2019. Amberstone's current portfolio includes fermented foods company Cleveland Kitchen, Javy, a brand of coffee concentrates, refrigerated snack brand Honey Mama, Partake Beer, which is a maker of non-alcoholic beer, and Juneshine, a producer of hard kombucha and canned cocktails. In an interview featured in this episode, Amberstone partner Nick Mindel and Taste each company is helmed by ambitious and capable leaders who firmly adhere to business fundamentals. There are other founders that fit that description, and it's the reason, he noted, why the firm will continue to deploy capital despite any concerns of economic slowdown or a tightened funding environment for CPG brands. As part of our conversation, Nick explained Amberstone's positioning as a mid-stage investor and shared specific details about each of its funding deals of the past 12 months. He also discussed the influence of trends in how the firm evaluates investment opportunities, why innovation isn't as impactful as it might seem, and the financial metrics that will make or break a company. Hey folks, it's Ray with Taste Radio. Right now, I'm honored to be sitting down with Nick Mindel, who's a partner with Amberstone. Nick, so great to see you.
[00:02:21] Nick Mindel: Hey, great to be here, Ray.
[00:02:23] Ray Latif: When I first started messing around with Clubhouse back in the day, I think it was like the third wave of COVID. We were thick in the third wave of COVID. I really, you know, was wondering if the platform was actually going to be useful in any way, shape or form. And it was in some ways here and there, but I think the best thing that ever came out of Clubhouse was meeting you, Nick, was having this opportunity to get to know you. And we've worked together a number of times since, and I'm so glad that we have.
[00:02:53] Nick Mindel: I'm honored and wow, that's saying something if that was the best thing to come out of Clubhouse. I really appreciate that.
[00:03:00] Ray Latif: No, in all seriousness, it's been great working with you over the past year or so. You've joined us as a co-host for our Elevator Talk series, which has been amazing. I've gotten to know your team a little bit as well. It's been fantastic. Cessna Mac, who's one of your partners as well, She joined us for Elevator Talk as well. I mean, it's just, it's been exciting to learn about Amberstone. It's been exciting to see how the firm has really dove deeper into this food and beverage industry. We'll talk about some of your investments as we go on through that throughout this conversation, but your name just keeps popping up all over the place, Amberstone and Nick, both.
[00:03:37] Nick Mindel: Hopefully Amberstone first, if I'm doing my job right. It's our brands and our brand partners that really garner all the attention and I get forgotten about.
[00:03:45] Ray Latif: Yeah, well, you are wearing the Juneshine t-shirt, so... Gotta represent. Definitely reppin', yeah. Yeah, yeah. We chatted a few days ago in preparation for this interview, and I was asking you about a day in the life of Nick Mindel. Can you share with our audience a bit about what a normal day looks like for you?
[00:04:06] Nick Mindel: Yeah, of course. Yeah, I'd say first and foremost, no two days are the same. The majority of my time, though, if I had to give you kind of a standard day, is certainly spent in one way, shape, or form on Zoom or Microsoft Teams or Google Meets with potential brand partners that are looking to join the Amberstone platform, the Amberstone family. And then I would couple that with certainly discrete projects that our portfolio companies are tackling and that we take as much of a role as they ask us to take So, you know, whether that's kind of getting our financial house in order or bringing on new team members to help support the growth of our businesses to, you know, getting them ready for potentially series B or an exit, you know, we, we get involved in a lot of different facets. So, you know, certainly kind of splitting our time between looking at new opportunities and working with our brand partners to, you know, help them execute on their goals and their strategies for the longterm.
[00:05:06] Ray Latif: When you are speaking with potential brand partners, you know, how often are they brand new to the industry or early stage? And, you know, how often do you give them a second look? I guess, how do you evaluate these folks for potential fit with Amberstone?
[00:05:24] Nick Mindel: Yeah, we look at the full spectrum of opportunities. These are brands that, you know, can be pre-revenue all the way to brands that are potentially doing north of 20 million and trailing 12 months. You know for the most part where we play is sort of in the series a and we define that as really writing a three to ten million dollar check and need brands that are of scale to be able to digest that type of check. That doesn't mean though that we won't speak to early stage opportunities. I think there still is a large part of this job and of this industry that's built on relationship and built on trust. And we love, I mean, it's probably the more exciting aspect of my job is to talk to these brands that you're six, eight months into their life cycle and get to know them, get to know the teams, see them at Expo East or Expo West. And when, you know, they tell me, hey, we're going to be a 4 million next year. And I go, OK, like, see when it happens and then they come back to me in 12 months and they're like hey you know we've been talking to you at least once a quarter now and by the way we're at four million we're ready for that check it's one of the coolest feelings I've seen and and I've had so you know for us like I would say the majority of the opportunity that we we look at are brands that are kind of within our wheelhouse but I absolutely love speaking with early stage brands and love watching them scale and being a sounding board for them, a point of advice for them, and oftentimes being the group that can help introduce them to some earlier stage investors that can help them maybe get that $500,000 to $1 million seed round done, and so that they can have the ammunition to scale to the point where they are ready for an investment from us.
[00:07:05] Ray Latif: So we've sort of scratched the surface on what you guys do, but I think just to go a bit deeper into Amberstone, the history of the firm and its focus would be great for our audience, for context for the rest of our conversation. So, you know, talk a bit about the foundation of the firm and what you guys are doing within the food and beverage industry.
[00:07:26] Nick Mindel: Yeah I think it's important to kind of take a step back and look at fundraising on the grand scheme of things. It is extremely difficult to raise capital and I don't want to minimize that at all. When you look at the spectrum of raising capital however that friends family and angels round is. fairly robust and liquid in terms of the market that you can tap on the other end of the spectrum. You have phenomenal brands like ACG and BMG and Catterton that will write a 20 million dollar check. And that is a very robust and liquid market. So where Emerson plays is really in that sweet spot of 3 to 10 million where you've outgrown friends and family, but you have yet to scale to the point where some of these larger funds will write 20 million plus. That's where we step in to help you really at pivotal moments. Maybe it's going from D to C to retail or going from natural to conventional, introducing new SKUs, building your team. This is where we love to get into the weeds with you. It's both operationally focused and financially focused with us.
[00:08:28] Ray Latif: So on your website, the firm talks about investing in, quote, extraordinary entrepreneurs. Can you define what that term means?
[00:08:39] Nick Mindel: Yeah, I mean, I'll do my best. It certainly is a broad statement, but you know, I think it distills to having a deep understanding of their business and the markets that they operate within, as well as a thoughtful game plan for how to grow their brand. This has to come as a balance of confidence in themselves and confidence in their brand, while knowing what they don't know and trusting the team around them to support them. So in other words, we're looking for a true ceo that isn't try of their business and un business is going. And I t anything, that's, that's to find. It's tough to le you've created. It's tou to trust others. And it speaks volumes if you can because it it gives us confidence as a CEO that you have brought a team on board around you that is high caliber ready to execute and ready to scale with you as an entrepreneur. And so you know to us that that I think captures a lot of what we look for in terms of who we back and why.
[00:09:46] of hard: Guessing your margins? That's risky. Belay Financial gives CPG brands the clarity to scale smarter, faster, stronger. Get your free inventory ebook by texting TASTE to 55123 and start making data work for you. Vibrant Ingredients is the natural ingredient partner powering food and beverage innovation, delivering flavor, function, and protection through a science-backed portfolio. Vibrant delivers purpose-driven solutions that help brands create extraordinary experiences. Discover what's possible with Vibrant today. Visit VibrantIngredients.com.
[00:10:33] Ray Latif: So I'm hearing strong manager, strong leader, and correct me if I'm wrong, I didn't necessarily hear visionary or innovator. Do those terms apply to that larger term of extraordinary entrepreneur?
[00:10:48] Nick Mindel: They can. I would say that we're not necessarily changing the world with a different type of almond butter. But what we are doing is finding brands that I think democratize food a bit that bring healthy into the conversation and that are changing the way in which we eat. I don't necessarily know if that needs to be a visionary individual or a true innovator. But I think to a certain degree, there has to be some ability to be able to grow your brand, to introduce new SKUs, and to speak to the consumer in a way that you know, really they haven't been spoken to before.
[00:11:35] Ray Latif: When you're first taking a meeting with an entrepreneur, how much of the conversation are you evaluating the entrepreneur versus the brand versus the business?
[00:11:47] Nick Mindel: first meeting, not so much the entrepreneur, it's really about the business fundamentals. Do you have good velocity? Do you have strong margins? Have you grown the business in a capital efficient way? Do you think that there is a pathway to profitability? Are retailers coming on board to continue to grow your SKUs and your brand presence? Are they going to place you into different parts of the store? Are your KPIs online strong? Are you showing good repeat purchase behavior? Those are really the types of questions we're going to look at first. If those check the box, then we're going to make it a point to come and meet with you and your team in person. Spend at least two days with you and really start to get to know you and the rest of the team around you to understand who we might be backing here.
[00:12:35] Ray Latif: You know, just looking at your portfolio, and we'll talk about the companies within that portfolio in a moment, but I'm thinking about category as well. And these brands operate in fast-growing, exciting categories where they appear to be the market leader, or at least in the top two or three. How much does category matter to Emberstone?
[00:12:58] Nick Mindel: I'd say we're fairly category agnostic. To us, it's about having metrics in place that are measurable, repeatable and transparent. And if those measurements are hit by any brand in any category, you're going to have a good shot of taking a bus, taking a deeper look at you. Yeah, there's definitely some verticals that might move a little bit slower than hot sauce or baking products would be two that come to mind. But You know, if the average velocity in those categories is one unit per store per SKU per week, and you're doing three, that's an outsized opportunity for us to get involved in very large categories that may or may not be growing that quickly, but you still might be the best in that category. And so, you know, for us, it's not necessarily about the category you play in, but the performance within your category that's important to us.
[00:13:49] Ray Latif: I'm jumping ahead here, but I can't help myself. You know, the investment or the funding environment for food and beverage seems to have changed pretty significantly since I've been covering it, at least in the last six years. I think about investment firms getting really, really excited about innovation, about trends, about categories. And, you know, speaking with you, Nick, and you're certainly not an outlier here, it feels like investment is very much about the fundamentals now and thinking about, is this a good business? And can we get our money back and then some? Do you feel like this is generally the way things are going now, or is Amberstone really just focused on business fundamentals in a way that other investment firms haven't yet gotten to at this point?
[00:14:39] Nick Mindel: I can't speak for other investment firms. I think there are a number of groups that we've worked with, invested alongside of, and have a lot of respect for that simply view the world differently than we do. I will say from our perspective, it's always been about fundamentals. It's one of the core pillars on which we founded Amberstone was that we were going to have guiding North Stars that we would look at for every opportunity we were evaluating. And if it didn't hit those North Stars, we weren't going to move forward with the opportunity. And so for us, it simply was, can we find great brands with great leaders that have good fundamentals? And I think if we can repeat that, over and over again with the brand partners that we brought on board and who we continue to evaluate over time, that'll lead to a successful outcome for us and our brand partners. But that's simply how we view the world. I think that there are going to be ups and downs in the investment cycles. I think right now the cycle we're in certainly is focused on fundamentals and cash flow, but we've seen these cycles come and go. We've seen groups that say, let's raise $1 to bring $0.50 to the top line. And now it's, let's raise $1 to bring $1 to the top line. But I think there's a real opportunity that two years from now, we probably are switching back to less capital efficient models. I think it's just is the ebb and flow of things, unfortunately.
[00:16:08] Ray Latif: I like the way you ended that, unfortunately, because it's true. I think you're 100% right. I mean, at the end of the day, you want people to create great businesses that have a great growth margin, or at least one that is, you know, industry aligned or aligned with what you expect out of the industry. You want cashflow, you want a path to profitability. These things are not crazy. You know, they're not things that you wouldn't expect to ask of people who are starting any business in any industry.
[00:16:36] Nick Mindel: No. I was raised in the restaurant industry. I mean, I watched my dad start a chain of restaurants and take them public. And to him, profitability and building a profitable business was always important. And so to us, I think we certainly understand that it's going to take money to get off the ground. It's going to take money and cash to build up working capital. It's going to take some money and there will be some losses to start, but you know, at least having that viable pathway to profitability is what's core to us.
[00:17:11] Ray Latif: I'm so glad we're there. We're speaking about this. And I know there are folks in our audience who are probably like, well, you know, all this is great, but, you know, I don't think Nick really understands. We have a really differentiated business here. Our brand is definitely unlike anything that's ever hit the market. And I hear that a lot. Some of these brands are fantastic and some of these ideas and products are really special. But it's again, a business. And I think bringing people back to reality is kind of tough and cutting them down a little bit is tough, especially when they're surrounded by people, friends and family or whomever are saying, you know, this is going to be awesome. You're going to do such a great job. Do you have to have that conversation with folks often as bringing them back to the basics, so to speak?
[00:17:59] Nick Mindel: I don't necessarily have that conversation as explicitly as that, I think. More than anything, the consumer will tell you if your product is truly differentiated and if your product is never before seen and is resonating, the data is going to tell us that. We can look at spins or IRI and we can tell who's moving off the shelf and who's having great velocity and who's doing that without a significant amount of promotional spend. And to us, that's going to represent great brands. That means that the consumer not only is trialing your product, but they're coming back to buy it more and more. We can also look at your online information. We can see through Shopify that you know your repeat purchase behavior is significantly higher than the industry average and that people are are not churning off of your product. They're continuing to buy it and they're continuing to stay on board. So to us we let the data do the talking. It's it will tell you whether the consumer is buying your product and coming back to buy your product more. And to us, that is going to drive good capital efficient growth if you have the right unit level economics to start with. So if you're in food and beverage and you're below 30% gross margin with freight included, you're going to have a very, very tough time scaling. If you're north of 30% and you have strong velocities, you have a very good opportunity at scaling.
[00:19:25] Ray Latif: Come to Nick with strong numbers, then he will listen to you. Let's talk about some of your partners, since we've mentioned them a few times, or at least mentioned the group. Specifically, I want to talk about five of your partners, starting with Cleveland Kitchen. Cleveland Kitchen, you led their $19 million Series A round. This is a great brand. You know, Cleveland Kitchen, a leader in fermented foods, Kraft fermented foods, to use that term. What did you see in Cleveland Kitchen? I know we talked a lot about the fundamentals, we talked about entrepreneurship and leadership, but specifically with this brand, why did it stand out to Amberstone?
[00:20:06] Nick Mindel: Well, I mean, Mac and Drew stand out just because they're both six foot five. Yeah, that's an easy one. But no, I mean, in all honesty, all jokes aside, Mac and Drew truly are phenomenal leaders of their brand. They come from a humble background of family food and family oriented food that has driven the authentic brand story around Cleveland Kitchen. Yeah, really, they're democratizing fermented vegetables to parts of the country that historically haven't been as interested in eating these products. And they're doing this all while partnering with Midwest-based farmers, utilizing innovative packaging to reduce their shipping footprint, and supporting those farmers in their backyard. Coupling that with strong margins, category-leading velocity, and an incredibly capital efficient growth story, it was kind of a no brainer for us. It's just the leader and the brand and a category that we're very excited about and that we think has a real opportunity to move from really the edges of the United States into the core of the United States.
[00:21:05] Ray Latif: I like that you mentioned innovation and packaging that led to more capital efficient spend or a more capital efficient business, because I think that type of innovation is exciting to you. Talk about, you know, how they explained that to you and how it relates to the rest of their business. Because I think fermented foods in general is not really, you know, the most innovative people in fermenting foods for millennia, millennia, exactly. So the innovation side of what you're talking about, you know, how did that play into your decision as well?
[00:21:38] Nick Mindel: You know, I think first and foremost, like we don't scream environmental or social anywhere on our website, but we are sort of all of that first generation that's watching Pollution impact, plastic impact, climate change impact happening really on a daily basis at this point. And so to us, brands that are living embodiments of trying to make the world a little bit better certainly are appealing to us as we evaluate opportunities. What the team there was doing was not only creating innovative packaging that reduced the shipping footprint, but also innovative packaging that increased the shelf life of the product itself, which reduces food waste along the way. So for us, it was sort of a twofold impact there. And I wouldn't say kind of the innovative packaging drove their capital efficient growth. I think their branding coupled with the quality of their product drove velocity, which drove people to come back to purchase their product continually. So you didn't have to kind of repurchase a consumer over and over again. They try the product and they come back and buy it, which allows that brand to grow top line without having to dedicate a significant amount of capital towards marketing and customer acquisition.
[00:22:57] Ray Latif: Now I'm just waiting for the old pickle in a bag, which is on the horizon, I hear.
[00:23:03] Nick Mindel: We just bought a pickle factory in Sonoma, so give it just a little bit of time and we'll be there.
[00:23:09] Ray Latif: It's one of those things that people, they might laugh at when they hear it, but you know you're going to pick it up because, you know, who doesn't want a pickle every so often? And it's a very convenient way. You don't want the whole jar. You just want a pickle, maybe.
[00:23:22] Nick Mindel: Yeah, I hear you. I hear you.
[00:23:24] Ray Latif: Let's talk about Partake Brewing, which is a fast-growing brand of non-alcoholic beer. If you haven't heard, folks, non-alcoholic beer is becoming a fast-growing segment within the overall beer category. It's still tiny, but fast-growing. You joined or Amberstone joined the company's $16.5 million Series B round in March. You know, earlier we talked about category and how you're a little bit more agnostic about, you know, what you're investing in as via category. And I have to think that you were looking at non-alcoholic beer and figuring, look, we've got to get in that business.
[00:24:05] Nick Mindel: It wasn't a conversation where we said we have to get into non-alcoholic beer, but there certainly was conversation that if the right opportunity with a brand that presented the right fundamentals came across our desk, we would take a look at it. And Partake Brewing certainly hit that. I think You know Ted's realization that that Crohn's disease and alcohol don't mix but his unwillingness to trade the social experiences and flavor of high quality beer really was an authentic story around partake. And then to think through the performance of the brand certainly in Canada where When we invested, I believe they were the number four NA beer in terms of total sales, and they were the number two in terms of fastest growing brand in Canada. Their limited data from the United States represented that they performed very, very well at the Northwest in Whole Foods. And we believed in Ted and his team's ability to expand this out into the rest of the United States with the tailwinds of NA beer. But to me, I mean, you can't just go out and create an N.A. beer. You have to create a product that satisfies the flavor profiles of beer today, which is, you know, a Peach Goza, an IPA, you know, a Phenomenal Amber, like these types of beers that the palette of beer drinkers are expecting today. And you had to create a product that, you know, a regular beer drinker would be proud to drink. And I think that's what really more than anything impressed us about Ted. You know, he also had great margins, he had great capital efficiency and the velocity was outstanding. But, you know, really this authentic creation story for a brand that had significant tailwinds in a category was really exciting for us to get involved with.
[00:25:45] Ray Latif: One thing that's aligned with both Partake and Cleveland Kitchen is the fact that self-production, self-manufacturing is a big part of their businesses. I wonder if Amberstone has any kind of specific interest in brands or companies that own their own production.
[00:26:06] Nick Mindel: Yeah, I'm laughing because when we came together prior to COVID, we really were focused on kind of a co-packing model. We thought that that would remove a significant amount of capex and overhead and that it would lead to more efficient outcomes. One of my partners, Alex, has a significant background in manufacturing, particularly food and beverage manufacturing. And as COVID started to disrupt the supply chain, we saw more and more small brands really being either having their line time reduced to co-packers or being kicked off the line entirely or having minimum order quantities raised. And the fact that we just had brands that were producing themselves actually insulated us a lot through some of the different tough points that a lot of brands faced during COVID. And so I think it's really altered our view to an extent where we are fairly open to brands that produce themselves. I mean, Juneshine being a great example as well. Honey Mama also self-produced. These brands have been able to weather the supply chain storms and have been able to maintain their production levels to a point where they are continuing to service their retailers and have not faced any shortages or any points where they've had to short the shipments that their retailers are expecting. And so, yeah, sometimes it's better to be lucky than smart. And I think we got very lucky in this one, but we're also appreciative of the complicated nature of running your own production. And I think we bring to bear a significant amount of experience as a fund in self-manufacturing that certainly helped us through the last two years of partnering with these brands.
[00:27:48] Ray Latif: So as supply chains start to become a little bit more stable, Are you saying that it's still smart? I guess, what should listeners be taking from what you're saying now?
[00:28:03] Nick Mindel: The smart move is to evaluate your brand and where your skill sets lie. If you have experience in self-production and you're confident that you can execute on that strategy, I certainly don't see any reason why you wouldn't self-produce. If that's not where your core competency is, there are so many phenomenal, phenomenal co-packers that have emerged from COVID, stronger, better equipped and ready to take on small brands that are going to be outstanding partners for you. If someone like you bar comes to mind out of Los Angeles where they not only have the capabilities to produce a significant amount of differentiated products, but they also have a dedicated R and D team internal to their production facility that's going to help you create new products that can be run on their lines that are going to be innovative, fun and speak to the consumer. I don't think there's a right or wrong answer. I think it's doing what you believe is best for your organization, doing what's best for where your core competencies lie, and doing what's best for where you think you can build margin and where you want to put dollars to work.
[00:29:10] Ray Latif: Here's a brand that I'm embarrassed to say I'm unfamiliar with, and I was kind of surprised when I saw them on your website, to the point where I don't even know how to pronounce the brand name. Javy Coffee Company. Is it Javy or is it Javy? Javy. Javy, that would make sense, given that it's Javy Coffee company. Yeah, yeah. You led their seed round, $4.65 million in January. That was their seed round. Talk about this brand, because it's kind of interesting.
[00:29:37] Nick Mindel: Yeah, you know, Javy, it's a it's a craft coffee concentrate brand that when we looked at it, not only was the product quality incredible, but it was hassle free and cost effective. Their price per serving is about half of any of their competitors. And to us, we watched a brand where the two founders are incredible at growing a brand online. They partnered with us to eventually help them get into retail. And the product that they are putting out is at a price point and of a quality that I think is unseen in the market today. And that's going to have real appeal to mainstream America, mass America, that some of their coffee concentrate and more esoteric and fancy kind of coffee brands that exist today that have been extraordinarily well funded simply can't appeal to the Walmarts the same way that I think Javy did.
[00:30:38] Ray Latif: Are they primarily direct to consumer or are they entirely direct to consumer today.
[00:30:43] Nick Mindel: So really launched last year have scaled incredibly quickly. And I think that's a testament not only to the founders but also to the product itself. It is a delicious product that packs packs a punch. You are going to feel it. You're going to be well caffeinated. But the ease in which you can create Javy Coffee in the morning and the taste profile of their product really is extraordinary.
[00:31:07] San Francisco-based: Do you want more repeat buyers on Amazon? Well, this free resource in collaboration with Straight Up Growth will help your brand turn first-time buyers into long-term subscribers. Download Winning the Repeat Purchase Game on Amazon now at Taste Radio slash SUG. That's Taste Radio slash S-U-G to start building retention-driven growth for your brand on Amazon. Scaling a beverage brand into major retail comes down to operational readiness. From packaging lead times to co-manufacturing strategy, the details can make or break a launch. In a new ebook in collaboration with Octopi and Asahi Beer USA, industry leaders share what they've learned in helping brands scale. Download it now at Taste Radio slash octopi.
[00:31:57] Ray Latif: Now, this is also an interesting investment because it's a seed round. And earlier you talked about your sweet spot as being in that Series A round. You know, for listeners who are looking to raise their seed round right now, you know, I heard a lot about how Javy is differentiated and, you know, a great product. But since you only launched about a year ago, I don't think you guys have, or I would assume that there aren't, there isn't a ton of sales data out there. There isn't a ton of data about this company. So how do you evaluate companies that at this point are still pretty early into their development and don't have that kind of data that say a Partake Beer a Cleveland Kitchen would have?
[00:32:40] Nick Mindel: Ray, without giving too much away, Javy had scaled to a point where they could pretty easily digest that type of check. Okay. The data was available. The amount of customers that they had through Shopify was fairly extraordinary. And they had scaled to a point where we had a lot of confidence in the KPIs that we were seeing, the repeat purchase behavior we were seeing, the opt-in to subscription that we were seeing, and the scale in which they've grown that business was... I don't know what... what something steeper than a hockey stick is like they didn't they didn't even have the flat part of the hockey stick where you kind of go flat and then up they just kind of started up i'm curious did you guys find them or did they find you you know a little bit of both it was uh it was kind of a a quick conversation when i was in los angeles and then you know really cessna had done an extraordinary job of being plugged into the beverage space. She had experience within coffee and really kind of led the charge, got connected with the Javy team, and has been instrumental in working with them to really get them on a very stable footing and being ready for Series A. But yeah, it was a little bit of both, a little bit of outreach from them and a little bit of follow-up from us and a lot of back and forth and kind of creating a partnership that we believe is going to be very successful over time for everybody involved.
[00:34:09] Ray Latif: Let's talk about Juneshine, heck of a company, heck of a brand. You guys are a longtime investor, led their Series B round, which brought in $24 million for the company. That was in November. You know, hard kombucha is one of those things where I think, say, three or four years ago, there was a ton of excitement because there was just a ton of excitement around fermented beverages and kombucha in general. But hard kombucha was, I think, you know, correct me if I'm wrong, or at least correct me if I'm wrong in the way that you guys viewed it, was still It had opportunity, but it had to be a very, very specific type of consumer. It wasn't something that was going to be consumed in, say, Kansas City or other—I don't know why I'm picking on Kansas City—but other Midwest parts of the country. You know, how did you evaluate Juneshine. As it's evolved, we're starting to see the company and the brand evolve well beyond hard kombucha into other categories as well. What did you see about this brand in particular that really excited you about the future of hard kombucha and Juneshine?
[00:35:23] Nick Mindel: I think first off, you have to, the way I viewed it, so I invested in the seed round as an individual, and then their second seed round, and then the fund got involved in the A before leading the B. We have been there every step of the way. The way we always viewed it was that beer is a declining category, seltzer has potentially plateaued in terms of this extraordinary growth that it's had, but certainly still a very strong category. And you're talking about hard seltzer specifically? Hard seltzer, yeah. So generally kind of this more kind of, I think it's called F&B in Nielsen, is this catch-all for areas that are stealing share from some of the more traditional day-to-day beverages that you would drink in the alcohol category. And when I looked at Juneshine, I saw an absolutely stunningly delicious liquid in a can with a brand that spoke to me as a consumer. It didn't kind of give off this sort of crunchy vibe, I would say. And it opened up to me the real opportunity to steal share from beer, to steal share from seltzers, to steal share from traditional kind of daily drinkers. And so you know that was that was the initial thought like OK let's let's take share. How big can the share be. Well regular kombucha is about a four billion dollar category. I guess if you really wanted to look at it like that. So could this grow to be a $2 billion category, roughly 50% of the regular kombucha market? And we said, yeah, we think that's possible. And so let's back what we believe is probably the best brand in that category. And thus far, it's proven to be that. It's the number of hard kombucha in California, which is the biggest market nationally. It's also the number of hard kombucha nationally. But What really impressed me was Greg and Forrest. The founders you're talking about? The founders, yeah. So there's some question mark around co-founders and how we would view that, but they have such discrete skill sets that complement each other so well. We knew that it simply wasn't wasn't going to be finished with kombucha. We believed that they could grow to dominate the hard kombucha brand and the hard kombucha category, but we knew that there could be more. There had always been discussions around launching a ready-to-drink cocktail. To us, we believed in this Better for You, Better for Planet alcohol platform that they were building. I think that belief has really been validated with the launch of the RTD Spirits. you know, eight grams of sugar, eight to 10 grams of sugar versus 23 grams for somebody like a cut water, it's significantly better for you. The product that they deliver is absolutely delicious. And they are now growing in two categories, one where they are the clear market leader, and one where you have significant tailwinds, but you're growing probably with the lowest sugar content and the best product in a can within the spirits category. And so, you know, to us, just incredibly excited about what that team is executing on and how they're executing.
[00:38:44] Ray Latif: Now, this wouldn't be an episode of Taste Radio without talking about Honey Mama. My colleague and co-host for Taste Radio, Mike Schneider, is probably the biggest consumer of Honey Mama. I wouldn't be surprised if 50% of their business is coming from No, in all seriousness, g You've been involved, or Emerson's been involved with this company for some time as well, led the seed round and the recent Series A round, $10.3 million in September of last year. Honeymamas, though, is, you know, part of this refrigerated snack or, you know, sort of sweets category that has been growing, but it's challenging in so many ways because it's still a relatively small part of the store. You know, how are you evaluating Honey Mama terms of opportunity to scale within that set?
[00:39:43] Nick Mindel: Certainly Perfect Bar sort of paved the way for everybody. It's a great success story of what high quality ingredients done in a simple manner with a clear viewpoint of who your consumer is that helped kind of pave this path where we're following in that path. where Perfect Bar is, you know, maybe that morning or post-workout product, or that afternoon and evening compliment, or that clean indulgence where you can feel good about what you're putting in yourself while still truly enjoying it as a delicious experience, as you said, Ray. So that's kind of the macro view of what got us excited. As we dug in, though, it was, It was really came down to they were the number one dollar per GDP in the category and it wasn't even close. Every one of their products performed in a very very tight range of velocity dollar velocity. Every single one of their products was at least in the top 10. And as a brand they were the number one overall. So to us again it came down to fundamental performance. They just found a consumer and that consumer continue to purchase their product. Now, there is also excitement about the category. I think the team at Midday is a marketing machine. They are a lot of fun, but more than anything, they are one of those brands that's really helping to grow this category and bringing awareness to the cold box, to the refrigerated section. So I think with what they're doing, with what Honey Mama doing, with what somebody like a milk bar and Sweet Lauren's and Perfect Bar, you're really starting to see this critical mass happen within the refrigerated set. And that critical mass, I think, is only going to continue to draw consumers to it. And that's getting reflected now in the expansion Honey Mama into Target, the nationwide rollout in Sprouts and the Whole Foods, their first rotation into Costco. These all wouldn't happen if that critical mass wasn't happening currently.
[00:41:53] Ray Latif: It definitely felt trendy when we started to see a lot of brands get into their refrigerator snack space. It seemed like consumers wanted to, or at least believed that, you know, these products were better for you or healthier than the alternative. Given that context, do trends factor into, you know, your investment strategy? I don't think we look at trends in general.
[00:42:21] Nick Mindel: I think we look to avoid fads and we look to avoid I would say kind of specific diets like and no offense if anybody is watching that's calling themselves keto cookie. But keto cookie, if that's your brand, it's not going to give you the opportunity to expand to speak to various consumers. You're strictly speaking to the keto consumer. And God forbid a doctor comes out and proves that the keto diet is actually terrible for you and causes massive bone loss or something. And keto goes away. Now your Brandt Gehrs away. versus just these brands that have true staying power. Clean and indulgent is never gonna go anywhere. And so that's what we're backing. We're backing brands that have business fundamentals that make a ton of sense and that are products that have been created that will always appeal to the consumer.
[00:43:14] Ray Latif: Nick, this has been so informational and so exciting to speak with you. I'm so happy that we have this opportunity. I got to ask you about, you know, some larger, I guess, worries that people have about a lack of funding, you know, an impending lack of funding that people are fearing. Recession is a word that's been tossed around quite a bit. What's your take on this idea that recession is looming and that it's gonna hit us any day now? It might be.
[00:43:49] Nick Mindel: It might absolutely be. We're gonna deploy capital regardless of the environment. And I think good brands are gonna continue to receive good capital. I would say maybe that's the advantage that we have is just being hyper-focused on fundamentals if your brand is continuing to perform in a recessionary environment, you're going to get capital. I think, unfortunately, we're going to see a significant shakeout of brands that potentially have raised a lot of money and haven't necessarily grown efficiently or haven't figured out a margin profile that makes sense. And I think those brands are going to struggle to find capital. But for brands that have strong margins that have been able to reduce burn through this time frame that have shown strong efficiencies and strong velocities on shelf, I think they're going to be fine. I think valuations might come back down to earth a little bit, but you'll still find good partners out there.
[00:44:45] Ray Latif: Let's move from LPs to other investment firms. You know, you are invested in a few brands that other investment firms are also, or have also funded. I think about, you know, PowerPlan is one. How do you work with other investment firms? How do you work with other venture capital firms where you're kind of competing for opportunities to invest yet also, you know, could be aligned in these opportunities as well?
[00:45:16] Nick Mindel: I mean yeah. Salva Ventures and Kiva comes to mind. Power plant as you mentioned. Lettoni is another investor that we've partnered with. You really at the end of the day like there certainly is a I would call it you know I think you said the frenemy. I would call it co-op petition. There is this idea that we are going to compete against each other for deals. But there's also this idea that should we decide to do a deal together, we are aligned and making sure that the brand partner has the best outcome possible. That only benefits everybody involved. And so Xero actually is playing nice in the sandbox with others. It's something we get excited about. It's something where the more smart people around the table we can bring, the better the outcome we think can occur. And so yeah from my perspective I mean it's it's kind of fun. I get to see Cuba and I get to see Peter Hall and I get to see all these guys that I've either worked with in the past or or respected the businesses that they built and I get to be an investor alongside of them. It's it's exciting.
[00:46:17] Ray Latif: Yeah, it is exciting and it's been exciting to sit down with you for this conversation, Nick. Again, we've chatted a number of times over the past year and I'm surprised that it's taken me this long to ask you to sit down for an interview for Taste Radio, but I am certainly glad I did and I'm sure our audience is as well. I have a feeling you're going to be hearing from a lot of folks in our audience. I hope so. In the near future. But in the meantime, thank you so, so much for taking the time today. It's been great. How have we not met IRL yet? We'll remedy that at Expo East, yes? Yeah, very much so. We'll grab a beer at Expo. First hard kombucha is on me. Phenomenal. That brings us to the end of this episode of Taste Radio. Thank you so much for listening, and thanks to our guest, Nick Mindel. As always, for questions, comments, ideas for future podcasts, please send us an email to ask at Taste Radio. On behalf of the entire Taste Radio team, thank you for listening, and we'll talk to you next time.
