[00:00:10] Ray Latif: Hello, and thanks for tuning in to Taste Radio, the number one podcast for the food and beverage industry. I'm producer and host Ray Latif, and you're listening to episode 220, which features an interview with Jim, Jake and Jordan DeCicco, the co-founders of surging beverage brand, Kitu Life Super Coffee. Just a reminder, if you like what you hear on Taste Radio, please share the podcast with friends and colleagues. And of course, love it if you could review us on the Apple Podcasts app or your listening platform of choice. When we last featured the DeCicco Brothers on Taste Radio, it was May of 2018. Their two-year-old brand was still known as Sunniva Super Coffee, and was on pace to generate $3.5 million in revenue by the end of the year. Rebranded as Kitu Life in September of 2018, the company has since been at a torrid pace, having built a national distribution network and retail presence that includes Kroger, Publix, Target and Walmart. Earlier this month, the company announced a master distribution agreement with Anheuser-Busch InBev, which will carry Super Coffee on its trucks nationwide. ABI also bought into the brand via its investment arm Zx Ventures as part of a new funding round for the company, expected to be in the $25 million range. Growing up fast? It's an understatement for Jim, Jake and Jordan, whom I recently spoke with about their company's spectacular rise. As part of our conversation, the brothers opened up about riding the wave of growth, and why their success has been as much about avoiding the wrong moves as it is about making the right decisions. They also discussed the role that mentors and advisors have played in steering strategy, how they've adjusted their management style to meet the needs of an evolving workforce, why they've simplified communication about the beverages, and their perspective on raising capital and aligning with strategic investors. Hey folks, it's Ray with Taste Radio. I'm gonna call right now with Jim, Jake and Jordan DeCicco, the co-founders of Kitu Life Super Coffee. Gentlemen, how are ya?
[00:02:11] Kitu Life: Ray, we're doing well, man. Thanks for having us back on the show.
[00:02:14] Ray Latif: Thanks. Jim, great to hear your voice. And who was that, Jordan? Yeah, you got Jordan here. Thank you so much, Ray. Excited to be back on. Excited to have you. And Jake, how are you doing?
[00:02:24] Kitu Life: Oh, I'm feeling dangerous, brother. How are you?
[00:02:29] Ray Latif: I like to hear it, my friend. I like to hear it a lot. And, you know, we had you guys on the show just about a couple of years ago. And I remember the first thing we started talking about was that you were all living in an apartment in a We Live building in New York. Are you guys still living together?
[00:02:45] Kitu Life: Yeah, man. Hey, Ray. This is Jim. Yes. So, thankfully, we've graduated from We Live. That said, we all still live together, Jake Jordan, and I. We're in the Seaport District of downtown Manhattan. Thankfully, we don't have to share a bathroom anymore, so we upgraded this year. But we work together, we live together, we travel together, we take vacations together. A lot of what we do is together. Never stops, Ray.
[00:03:10] Ray Latif: You know, one of the other things we chatted about was your appearance on Shark Tank, which took place, I think it was about four months before we did our interview for that first episode of Taste Radio. And while you guys didn't get a deal, I'm sure the Sharks are kicking themselves, thinking that they probably should have pulled the trigger on a deal. In particular, Rohan Oza, who turned you guys down. Do you think Rohan regrets his decision?
[00:03:37] Kitu Life: I don't think Rohan has enough humility to kick himself. But no, but in all seriousness, we're, uh, we're friendly with Rohan. He's one of the only sharks that we stayed in touch with after the show. As you guys know, he is a supporter of Bulletproof coffee and high brew coffee. So unfortunately we couldn't work together, but I think he's rooting for us, you know, and we're, uh, we're certainly stealing shelf space from his brands.
[00:04:03] Ray Latif: It's interesting because he's an investor in a brand called Poppy, which was originally called Mother Beverage. And Mother Beverage was the winner of the New Beverage Showdown the year that you guys were in the New Beverage Showdown.
[00:04:13] Kitu Life: We lost to them.
[00:04:16] Ray Latif: Well, you didn't win. I wouldn't say you lost to them, but you didn't win the competition. But it's interesting to see that dynamic because they appeared on Shark Tank and Rohan did invest in that brand. But as you mentioned, Jim, he's already invested in a couple of their coffee companies. $4.5 million in sales in 2018. You guys are projected to do $70 million this year, which is incredible. I wonder how much of the growth that you've been seeing was in the plans, in the cards, versus just going a million miles a minute and just hanging on for dear life.
[00:04:52] Kitu Life: Hey, Ray, you got Jake here. I'll take a first crack at this. I'm sure these guys will add on, but definitely the latter, right? Like we're moving a million miles an hour and hanging on with your life is how it seems a lot of the time. But I think like the biggest thing for us in the last two years and all of that, that revenue growth has really been organizational growth. And then adding the right people to the company and adding the right processes is really what has allowed us to achieve that scale and not go out of business in the process. And really adding the right investors, right distributors, right partners, right manufacturers, that has all been instrumental in our growth. And I think that we found something back in 2016 that worked and scaled it to, when we talked two years ago in 2018, That really was just the sweat equity of what Jim Jordan and I were putting in and some of our earliest employees who are basically our co-founders. In the last two years, like I said, it was all about aligning ourselves with the right partners and making a commitment to true blitz scaling and trying to create something that's going to be around not just in two years, but in 22 years. That's really been our mentality over the last two years, and really the last 12 months has been a big cultural shift internally for our organization.
[00:06:13] Ray Latif: I guess that after this is all over, you could probably write a book called The Art of Blitzscaling, because that's exactly what it sounds like. Jake, you talked about the right partners, the right retailers, the right distributors, the right investors. But when you're going so fast, is it hard to be decisive about who you're aligning yourself with? Is it hard to make those decisions that could impact your brand again, not just now, but 22 years from now?
[00:06:39] Kitu Life: Yeah, I would say this is something that we've preached from the beginning. It's not about going with the right partners. It's about avoiding the wrong partners. I truly believe that. And you're not gonna bet a thousand, that's impossible, but just our big thing has always been when we make big bets, you gotta be right on those big bets. And we've done that a few times, especially with partners and also learning from those partners and those big bets. And one of the ones that comes to mind is the world of DSD. And that was a big bet that we probably didn't do right one of the first or second times. And then when we got with Big Geyser here in Metro New York, They're perhaps the toughest distributor to make it with in the country in this market of New York City. It definitely took a lot out of our company, our bandwidth, and we've been able to take those lessons of working with a big geyser type partner and now apply it nationwide and now into a master distribution agreement with Anheuser-Busch and have over 400 distributor partners that cover every county in the country. So I think when it comes to partners, it's not always about getting the very best and being 100% on the great ones, but just really limiting the bad partnerships. Because one too many bad partnerships is really what will put you out of the business in this business. Yeah, and Ray, this is Jim. Just to add on there, I think the right way is the way that works, right? If you're going to make a decision, yes, to your point, when you're moving fast, you have to make quick decisions. Work hard to make those decisions the right decisions. Whether it's Big Geyser or Polar or whoever, no distributor is going to build your brand without you supporting them. So I think once you act on a decision, it's you and your team's job to really make that the right move.
[00:08:24] Ray Latif: Jake, you mentioned that making it New York City can be the blueprint for making it elsewhere in the country. And back when we talked a couple of years ago, a lot of what you mentioned in terms of distribution expansion was on a regional level. It seemed like your strategy was really grounded in this thoughtful, dig deep in a particular region and own that region. you know, how has that changed? I mean, obviously you're going national now with AB, but was that national distribution play something that you guys have been thinking about for a long time or is that the opportunity presented itself and you were ready to run because you had been so prepared?
[00:09:07] Kitu Life: Yeah, no, definitely. I think our inch wide mile deep strategy, you know, that you're referring to worked so well early on for that product market fit stage, which was the first two years really in our business. And we kind of learned the nuances and Jake mentioned the partnership with Big Geyser. I mean, we learned so much those first two years. a really small local company that we felt like, hey, we could go out and raise the capital we need, right? Because it's super important in this business, which we all know. The key thing that Jake mentioned was getting the right people in the right markets to lead the charge in those markets. And that's what's really allowed us to scale into a national brand. We still did it strategically, Ray, in a sense that it wasn't just like, okay, we won the Mid-Atlantic and we won New York Metro, now let's go everywhere, right? It's been two and a half years of the next market needs to be the best market for us. So Southern California, right, where we know our brand will resonate. Texas with a great partner like H-E-B to drive a lot of the volume in Texas. The Midwest with great partners like Jewel Osco and Meijer. And then if you go into the Pac Northwest, you need some of those Kroger divisions and you need some of those Safeway divisions. So, you're still piecing it together strategically. It kind of comes together as a national distribution network, and that's when we decided, hey, we do have this really fragmented network now. We're doing a great job with our local teams, but it's kind of hard for our teams to do their best job without one common distribution partnership. And that's really where we decided to double down with Anheuser-Busch and make the MDA come to life, which we think is going to propel us for the next 12, 24 months as we continue to blitzscale.
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[00:11:20] Ray Latif: The wrong decisions, I want to go back to that point that Jake made about making the wrong decisions. Was there a wrong decision that you successfully avoided? You know, when you're going into Texas or when you're going to Southern California, we've seen brands that just bite off more than they can chew, even if that opportunity is a great opportunity to drive awareness, drive revenue. You know, for one reason or another, it just didn't work out. Looking back, Did you guys dodge a bullet? And if you did dodge a bullet on that wrong opportunity, what was the process by which you thought that this could be the wrong fit for your company?
[00:11:56] Kitu Life: Yeah, that's a great question. And there's two that come to mind. And the first takes us all the way back to 2017. We were 18 months into our business. We were doing really well in Wegmans on the East Coast. And we got a call from Kroger. And they said, hey, this Super Coffee is interesting. We like your positioning. It's a little simpler than Bulletproof. It's kind of like the Frappuccino. We want to launch you in one of our divisions. We want to be methodical, 150 stores. We're like, this is perfect. Where are we launching? They were like, Ralphs. That's LA and Southern California. We were like, well, we don't have anyone there. We can't run the playbook that we just ran at Wegmans to be successful there. That was the first time that I think the three of us looked at each other and said, we can't do this. We don't have a plan to be successful there. We passed on Kroger. And we didn't get another bite at Kroger for another year and a half thereafter. We launched at Kroger earlier this year, actually. So that was a tough one for us. And then on a larger scale, back at the beginning of 2019, Walmart came to us and said, hey guys, we have our Taste of Tomorrow sets going live in 4,300 stores. We want to put four of your SKUs in, double face them, you know, the eight facings and the planogram. and we want to launch Super Coffee nationwide at Walmart. And all three of us right away said, this feels a lot like Ralph's back in 2017. We don't have the manpower. We don't have the playbook. We were just starting to get into a few regions of Target and really starting to do well there, but didn't have this national team built out. And that's what really, at the end of the day, the Super Coffee brand has worked because of our account level execution. So we had to make the really difficult decision to pass on Walmart. And again, that led to a year and a half almost in the penalty box at Walmart, where we just launched in Walmart recently in 900 stores in the Southeast, through our DSD network with Anheuser-Busch, and we're breaking sales records in those stores now at Walmart. But it was an example of having discipline and avoiding something that we just didn't feel confident in and we didn't have the financials to do it. So I think those two examples are ones that probably come to three of us. Do either of you guys have any add-ons? Yeah, right. Those are the problems that we avoided, I think, or wrong decisions that we made. One of them is we were eager to launch in New York City. I think, as you know, we launched our brand in Washington, D.C. in 2016, and we wanted to tackle New York City, the state where we came from. So the first DSD partner that would take us was Dora's Naturals, and we were eager at the opportunity. Big Geyser wasn't returning our phone calls back then. So we eagerly jumped into New York with Dora's Naturals, and they proved to be the wrong partner. And granted, we had a lot to learn there, but we were a shelf-stable item. They were a refrigerated distributor, so there were some limitations there. And as you guys know, exclusive contracts in the DSD world are quite restrictive. So for us to leave Dora's to go to Big Geyser, It was a very expensive and quite candidly, a seven-figure decision, a seven-figure mistake that we made to do that. It was a great lesson. In a sense, Dora served as an incubator to Big Geyser for us. So we really got our feet wet in New York City with Dora's before we paid the breakup fee and moved over to Geyser. Yeah, that one's tough.
[00:15:20] Ray Latif: Seven-figure mistakes are kind of tough to recover from, especially if you're a small company. You know, I think about your brand versus other fast growing beverage brands, and there's not a lot of them that have been in your position. And I'm thinking that, you know, throughout this process, and making these tough decisions that mentors and advisors have been so critical. What's been the most impactful guidance that you've heard from your mentors? And when I say mentors, I know the biggest of which are probably the one that has guided you the most is Seth Goldman from Honesty.
[00:16:01] Kitu Life: Yeah, we attribute a lot of our success to the guardrails that our mentors and advisors put in place and Seth being the best one for the beverage industry. And even as recently as December of 2019, at our 2020 planning meeting, we had the whole company together and Seth was our guest speaker. And the lesson he's been preaching from day one too, which we've kind of bent a little bit, but is really make sure you're not losing touch on the focus strategy and supporting your core retailers. And don't try to grow too fast because he's seen it, right? And now even at Beyond Meat, he understands that There are a lot of challenges, and we're experiencing those challenges now of just growing pains. That advice has been great for us, even though we have grown really quickly. Not growing too fast has guided those decisions to Jake's point of avoiding the Walmart mistake, avoiding the Kroger mistake, being methodical about what we do and where we go next. That's been one thing that's been super helpful. I think another thing that is truly invaluable is just building the best quality team and being patient with your hiring and investing in hiring more than you'd ever imagine. A lot of people also onboarding and training employees too. That's stuff that you don't have to worry about as a really young company. But as you scale, the best way to improve your company is literally by improving your hiring process and the people that you're adding to your company. So that was advice we've gotten from our board, from several entrepreneurs, from several different industries. And it's this universal principle. If you want to improve your company, just improve the quality of people you hire. And that's a principle that we take very seriously here right now. Yeah, the one add-on I would have there too is I think we were incredibly lucky to have Seth as our first and primary mentor. Then when you talk about comparing Super Coffee to buy, the foundation that Seth laid for us to go to market, and then you can take Seth's focus and Seth's strategies and compare them to some of our other mentors like a Jerry Rita from Big Geyser or just some of the more aggressive folks like Ken Kurtz within the industry, I think really gave us a best of both worlds approach. And that's something that Jim does such a great job for our brand is getting a diverse portfolio of advice so we can really understand how other brands have done it and how we can kind of put our own touch on it.
[00:18:20] Ray Latif: How many folks do you have on your team at this point?
[00:18:22] Kitu Life: We are 85 full time and 150 part time.
[00:18:27] Ray Latif: That is incredible. And I can't imagine the, I guess, the challenges of managing a complex network of folks like that. But what's clear is that you're willing to get your hands dirty. Jake, you mentioned at the top that, you know, you guys are doing demos at Wegmans. You're making those trips to introduce the brand to new consumers at the retail level. And what's clear is that you're not managing your business from a boardroom. When you are in the trenches with your team, is that something that resonates with them or is it something where it feels like you're checking up on them? I guess what I'm asking is, how do you work with your team on the ground so that it feels like you're working shoulder to shoulder, side by side versus being a sort of supervisor or management employee relationship?
[00:19:24] Kitu Life: Yeah, that's a great question. I'm going to go a little bit deeper. You got Jordan here, Ray. And it really comes back, actually, it starts with our purpose and our core values. So our purpose is to inspire positive energy for positive change. And we believe the best way to do that in this business, at least, is being face-to-face with our partners, with our customers, doing the frontline work. So, it's something that we preach practically every single day, right? So, it's not a surprise to our team when they see us on our hands and knees packing out the shelves or doing a demo with them, right? So, it starts with that purpose, but then actually living up to that. There's a great book that Jake's reading it right now, but it's called What You Do Is Who You Are. by Ben Horowitz. I recommend it to every entrepreneur, but it basically says like, look, be very clear about your purpose and your values as founders and as a company, but then make sure that you're living up to them every single day. So it's almost like we preach being out in the field and supporting our partners so much, that if we weren't out in the trade doing it with our team, they would kind of think, wait a minute, these guys aren't aren't legit. They're not they're not, you know, living up to the words they're telling us every day. So that's why we're out in the trade every day. And I think everybody knows how important it is in this business. So it makes sense for us to preach it, but it makes more sense for us to make sure we're actually out there doing what we're what we're preaching. Yeah, very well said. To the question too, when we are out in the trade, it's certainly not checkups. Other brands use this idea of like a milk run, like show me your best, show me your worst. We use it as an opportunity to Spend time reinforcing our purpose with our teams, seeing what they're seeing, seeing the challenges that come up in their markets. Each market is so uniquely different, from New York City to Houston to Austin to NorCal, SoCal, every market is uniquely different. And as sales leaders, we can't set goals and set objectives and case minimums for those markets. If you've never been on a route ride in San Francisco, that's going to be very different than a route ride in Los Angeles. So that's one thing that we certainly want to practice what we preach. And then another thing is just our teams go through so much in the field. And I think the past quarter, Q2, has been a unique challenge with all of the COVID stuff that hit. And obviously in food and beverage, we were an essential industry. But right when COVID broke, those first couple of cases up in the Pacific Northwest, the first thing that Jim Jordan and I did, we talked about it. And I got on a flight and went work with our rep up there in Seattle and Portland, just so we had all of the information. So to your point, we never want to be making boardroom decisions without firsthand insights of what's happening in the market. And I think that's really what's allowed our 85 full-timers to be aligned with three kids running this company that have never done it before, but we're willing to do it with them right now.
[00:22:19] Ray Latif: Jim, you and I chatted before this interview and you mentioned that you have admired Howard Behar, who was a former president of Starbucks. And one of the things that stood out to you guys was that he mentioned treat employees not as a line item. but as human beings. And I thought that was a really amazing thing to say. At the same time, you know, employees don't always work out and there are some people that are better fit than others. When you go through that hiring process and when you do evaluate your employees as they develop within your company, what are some of the signs that something isn't working and how do you have that conversation with a person so that you can get them back on the right track or if necessary, let them go?
[00:23:04] Kitu Life: Yeah. And this is something that Jordan and I are especially passionate about Jake too. But I mean we stand behind this idea that our team is our barrier to entry. And with that it's if you take care of your people they take care of the business. And that's a line straight from Howard Behar who's taken us under his wing as one of our mentors. And he at Starbucks for Howard it wasn't about the coffee. It was about the people. And there wasn't customers and there wasn't employees, it was human beings serving human beings. So for us, I think leading from the front lines is a good example, leading by example, gets people to buy into the mission and sort of do as you do, rather than as you say, because I think you got to be about action rather than sort of just verbalizing it. And the trickiest thing, when somebody's not working out, if they're not bought into the mission, if they're not doing what you expect them to do, the hardest part as a manager or a leader is having those candid, transparent conversations with them. I think a lot of people avoid those conversations because they're uncomfortable. But for us to be transparent with our people and let them know, I mean, we have a rule here, it's called the commitment to trust. I'll say to you, I'll be like, hey, Rayman, we got to have a commitment to trust conversation. When you hear that as the listener, it triggers, okay, I got to listen respectfully. I'm going to get hit with some constructive feedback right now. Keep an open mind, don't get defensive. For me, my intention as the one delivering that feedback needs to be to make you better as a human being, as an individual, and as a teammate at Super Coffee. And it's those conversations where we lay out like, hey, man, you're not really living up to the expectations and sort of talk through data points, right? You provide the data to what they're not doing, and then you provide recommendations on what you'd like to see them do. And also a willingness, right? Like, don't just tell somebody they need to get better and say, I'm willing to help you get better by hitting more accounts with you today or have a weekly one-on-one to debrief what you achieved." As managers, not just the three brothers, but all of the managers within the Super Coffee team, they need to have those relationships and those critical conversations with their direct reports. Jordan, I don't know if there's anything you'd like to add. Yeah, yeah. No, I'll just touch on before that. And this comes straight from, we learned from some advisors from Google and their people operations team. But again, the best way to improve, right, right. If you're, if you're having employee issues, you know, you got to look at the root cause, which is ultimately your hiring process. So we want to make sure we're hiring great people who share our values, who are going to make the company better. And obviously, you know, we're not naive in the sense that we know not every employee is going to be perfect, no matter how detailed the hiring process is. So we kind of like to think of it as looking at the two tails of performance. You have your top 10 to 20% of people, and you want to make those people your role models in the company. So figure out what makes your top 10% of people the best people in the company and amplify those qualities in those people. And then you got to find the bottom 10% to 20% of people, the 10% to 20% who haven't figured it out yet at Super Coffee and maybe aren't performing as good as they can. And instead of saying, you know, doing the old school way of cut your bottom 10%, no, how can we invest in these people? Because if we hired them, there was something in them that we saw, and you can look back at the hiring reports, something in them that we saw that we love. So let's try to get out of them. And we do quarterly performance reviews. We use objectives and key results, OKR format. So, we're constantly giving feedback, constantly trying to help. And yes, over a period of time, a quarter, two quarters, we have probations and performance improvement plans and these things. If it's not working out, then you just got to tell the employee, hey, you know, it isn't working out, probably best for you and ultimately best for the company if we decide to go separate ways. So again, culture, maintaining culture and scaling it, you can obviously put a lot of practices and techniques in place, but sometimes letting go of people, letting them go their separate ways is the best thing you can do.
[00:26:55] Ray Latif: Is it hard sometimes because the work-life balance for you guys skews more toward work? I mean, is it hard for you guys because work is such an important part of your lives and such a dominant part of your lives to see someone that has to take time off for their families or that has a different kind of work-life balance?
[00:27:15] Kitu Life: Yeah, it's a good question, man. And it's something that we had to get better at and evolve with as the team grew. But for the three of us, we work a lot, but we love what we do. And I think what we're starting to see in America and globally is this shift, especially with millennials and Gen Zs, that work and life are starting to become synonymous. And it's the age-old adage of, if you do what you love, you never work a day in your life. It's true. This is a lifestyle. And we don't mind working on Saturdays and Sundays. We enjoy it. Our family's into it. This is our life. It's not a job, and we don't punch out at 5 p.m. That said, we do have many employees who have families and young children who, especially right now, it's very difficult because they're now stay-at-home teachers. And with that, we do ask a lot of our people. Super Coffee's not for everybody. It's not a nine to five, like I said. With that, we do offer unlimited paid time off if people are getting their jobs done. It's one of those things like if you perform, if you hit your goals, if you do what you're supposed to do, we don't care where you work from, we don't care when you work, as long as it's getting done. Even sometimes, I mean, we have a lot of people who love to work really hard and to avoid burnout, we almost have to encourage them to take vacation because otherwise, burnout is a very real thing. Some people have mandatory, mandatory time off. Yeah, mandatory vacation.
[00:28:34] Ray Latif: Yeah, you know, it's interesting. Mike Kerbin from Vitacoco mentioned that very thing. He said, you know, there are some people that will just never take time off. And he's just like, look, get out of here. You know, you need time off. And if you're not going to take it on your own, I have to make you physically get up out of your seat and go home, which is important. I think, you know, the burnout is real. And there are some people who are just workaholics, you know, for better or for worse. It sounds like you are personally evolving in terms of how you see this work-life balance.
[00:29:06] Kitu Life: Yeah, that was something that was really hard for us, truly. A lot of the people that we hire, our initial hires, were first-time professionals, joining the Super Coffee team. When we try to lead from the front the way that we do, it can create some pressure for our employees to feel like they need to do the same. Very candidly, I think that's been something that the three of us have faced and tried to work on and been open to and have more empathy, just because there are some people on our team that this is a job, they come in, they put in their time, they hit their goals, and they crush it. If they're exercising their unlimited PTO, that's what we want. I think that's taken some growing up from the three of us to be okay with that and recognize that this person has a family, that's what makes them great. for a lot of our employees is providing for their family. So they should be able to spend time with them. But that was definitely some of the evolution of the three brothers for sure.
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[00:31:18] Ray Latif: So we know what makes your employees great, or we know what you expect out of your employees to make them great. Let's talk about what makes the liquid great. You know, when we first met you guys at BevNET Live and you participated in the New Beverage Showdown, a lot of what Super Coffee was seemed to focus on function. And it was not a complex beverage, but it wasn't just a regular cup of coffee. There was a lot more going into that. And it seems like the perception of what Super Coffee is in terms of a beverage has changed, consumer perception that is. Can you talk about, you know, how you've had to change your positioning or how you've had to adjust your marketing and promotion to fit what consumer perception of the brand is today?
[00:32:08] Kitu Life: Yeah, and you got Jordan here. And similar to my comment on improving the company with adding great people, we also believe the best way to improve the company is by improving your products and only launching better products than your current products. So to that, Ray, I think early on, you know, and there's a book out there called Crossing the Chasm that I'll refer here, but we were solely focused on function. solely focused on MCT oil and keto. And it was confusing because we also want it to be like this delicious, better for you Starbucks item, but it wasn't clicking in the customer's mind. It didn't reflect it in our packaging whatsoever. None of our POS or digital marketing was relating with people. So while we did have a very core group of early adapters, which is talked about in the book, it wasn't scalable and we were never going to cross that chasm into a mainstream brand. until we might have done this backwards, we admit, because we didn't have a lot of capital, but until we actually took the time to say, wait a minute, let's slow down here. So it wasn't until a year and a half into our business where we invested in a branding agency and branding exercises. We did all of our own branding in-house, and that's why it was confusing because the three of us each had our different view of what we wanted the product or brand to be. So finally, we wised up and said, hey, we do have a good product. we do have some product market fit, but if we want to be a mainstream brand and challenge Starbucks, we got to invest in the brand itself. What we ultimately landed on was Key to Life, which was the rebrand from Cineva, with Super Coffee really taking the stage and simplifying our message less from MCT oil and keto to better for you, zero sugar, but still great taste. And we found immediately with the new packaging and new materials to go along with that, it resonated much more. People just wanted the Starbucks Frappuccino, but they just didn't want 40 grams of sugar to go with it. So we wanted to be that brand that catered to that. And oh, by the way, if you are keto and you do like MCT oil, then you're really going to love our products. but we made it as accessible for a college kid who was drinking Starbucks Frappuccinos every day as we did for, you know, the keto 40-year-old mom who's always on the go. So it was about bridging that gap for the customer, obviously constantly improving the product line, but it was more to your point of improving and simplifying our messaging so we could cross that chasm to become a mainstream brand.
[00:34:33] Ray Latif: I'm sure retailers love that, at least mainstream retailers, when it's very easily understood by the consumer what your product is. Certainly help them to pick it up and put it in their carts. You know, in terms of retailers, you guys, every time I look at Instagram, I see just these incredible displays, end caps, you know, center store. I don't know what you'd call them, like mountains of bottles. You know, how do you get retailers on your side? I mean, we talked about Walmart and Kroger and turning them down and, you know, it being hard to get back in their good graces. But, you know, once you are in their good graces, how do you work together hand in hand so that the brand is not only succeeding, but thriving in their stores?
[00:35:19] Kitu Life: Yeah, you got Jake here, right? That's a great question. That's like the billion-dollar question of our industry. How do you turn your retailers into partners? That is what our team is fighting with every day. A big piece of that starts with simple positioning, which Jordan just touched on. The customer needs to understand it. And once you can start showing some success and you can start showing some customer adoption, it's really just going deep. And that, a lot of the time, starts at the account level. It's the most basic blocking and tackling of our industry. But just being there and putting the retailer's needs first is really what we preach to our teams. Understanding how can we add value to your set? We know that Super Coffee can add value in a variety of ways, but the Kroger in downtown Houston, we might add value to that store differently than we do to the Wegmans outside of Rochester, New York. So that's one thing that we're always focused on. whether it's our field marketing team that can offer some awesome weekend activation, or it's our distributor who can service them three days a week, whatever it is, it always comes back to this idea of adding value for the retail partner first. I think that's how we position ourselves as partners. And then secondly, just using data to our advantage is really what we try and equip our field teams with. is push the data story. We always go in as a high-margin category item, even if it hurts our margin. We know that the retailers want to have best-in-class margin. And then, last but not least, the philosophy we use internally is look like a billion-dollar brand. That's what we ingrain in our sales team's heads, our field marketing team's heads, is if the retailer is going to give you space in their store, make it look pretty. Don't let it be dangling boxes. Don't put POS up that looks absurd. Play to that retailer's strengths. But I think those three steps of adding value, leveraging data, and then looking like a billion-dollar brand in this space is really our playbook from taking a retailer to a partner. And I just want to add on to Jake mentioned that, and obviously our team going brick by brick is how we refer to it. But literally store by store, building those relationships at the store level is so key. And that's why you need the people in this space. And that's why the people, not the coffee, make all the difference. In the last piece that Jake didn't touch on was also profitability for our customers. We know that a lot of these retailers make a 20 to 25 percent margin on the category leader of Starbucks Frappuccino. We know that. So we make sure on Super Coffee they make a 35 to 40 percent gross margin. So they're making more money when they sell our bottles What other incentive, obviously, than just being great people and great partners behaviorally, what other incentive matters for them? So to Jake's point, how can we help? How can we make you look good, make you feel good about giving us this 100 case display at the store level? And that's what's worked really well for us.
[00:38:28] Ray Latif: Raising money is one of the most challenging parts of the beverage industry. There's no getting around it. And it seems to be the number one issue that entrepreneurs have. You guys have been raising money at a pretty healthy clip. And as you mentioned, have recently partnered with Anheuser-Busch and gotten investment from their venture capital arm, Zx Ventures. It's really interesting because I can imagine that there have been a lot of suitors over the past couple of years. When you decided to align with Anheuser-Busch, what made that opportunity really attractive versus, say, a Coca-Cola or a Pepsi or a Starbucks or Nestle?
[00:39:12] Kitu Life: Yeah, so I'll kick this off and then Jake's got a lot more color here, but we started building a relationship with Zx Ventures and the Anheuser-Busch team back in the summer of 2018, so about two years now. Stayed in touch over the years. We didn't do a deal with them in our Series A, which closed in December of 2018. In 2019, they tracked our progress. We told them a number that we'd hit that year, and we beat that number. That validated our brand and our ability to go out and drive sales. Really, this year, as we were looking to do something bigger with some of the partners you alluded to, we were raising our Series B. We were talking to strategics. A couple of things happened in the beverage industry that really were the stars aligned for this partnership to really make the most sense. I mean, my brothers and I, like, we started Super Coffee to attack the Starbucks Frappuccino, and sort of joining them in the North American coffee partnership with Pepsi would have been awesome. You know, it would have been a cool dream come true. That said, in Q1 of this year, Pepsi acquired Rockstar Energy, and they announced that they would be distributing Bang Energy. And we saw, even though we had an opportunity to work with Pepsi this year, we thought that they would be focused on the transition of those two multi-billion dollar brands between Rockstar and Bang, in addition to pushing all of the Starbucks Frappuccino. That said, we've already been working with a bunch of AB wholesalers. We recognized AB lost a billion dollars in revenue by this Bang transitioning out of AB's system into Pepsi's system. And we had a strong position to become AB's number one focus in non-alcohol this year. and we worked to build an exclusive contract with them, and we were able to execute on that pretty swiftly after that announcement of Bank's departure. Yeah, one thing I'll add on, a good story about how really the AB deal came to life, and this goes out to our good friends out there in the desert at Hensley Beverage. We were getting ready to grow in that market. We had just hired a really talented regional sales manager who was based there in Phoenix. She was running some of the Sprouts business for us. That's where their headquarters is. We really wanted to get some strong DSD behind it. We knew that Hensley's really the best in the state of Arizona. We got the contact information for the team at Hensley and hit them up and said, hey, we're going to be in the market and would love to have a meeting if you're there. We weren't going to be in the market, but we flew out anyway once we were able to land a meeting. We had that meeting with them. They really were aligned with Super Coffee, but they said, hey guys, There's one limiting factor, and we have an exclusive on Super Coffee portfolio with the Keurig Dr. Pepper brands. So while we would love to work with Super Coffee, we can't do that. So what Jim mentioned, we went back to the relationship that we had been cultivating with the team at AB Corporate and said, hey, guys, here's this scenario. We have one limiting factor. Is there any loopholes? They said, no, sorry, boys, that's all we got. A week later, we get a call from Anheuser-Busch saying, hey guys, we did find a loophole. You must have made a strong impression on the team at Hensley because they really want your brand. And the loophole is if we align as some type of strategic partnership, then we can launch you guys at Hensley and get around that exclusivity. So we put together a small case milestone where Anheuser-Busch could earn equity in our brand. And this is back nine months ago, and it gave us the opportunity to launch at Hensley. And from then, Jim Jordan and I have had access to a lot of the folks within Anheuser-Busch. We've took a step from like courting each other to formally dating, learning each other's systems. And along the way, we really learned that we think that Anheuser-Busch and Super Coffee can kind of build this next wave of coffee together. But it really did just start from some cold emails to Jim's point, keeping a relationship alive from back in summer of 2018 when they chose not to invest us and being a little scrappy and enforcing a meeting on the guys at Hensley. So I think it's just a great scrappy story of how to form a long-term partnership, and now we hope to be partners with Anheuser-Busch for the next 20 or 30 years.
[00:43:15] Ray Latif: Well, it's got to be amazing to look back on those two years when you're asking probably for a small amount of money and then saying, hey, our company's valuation is X today. And then has to push saying, wow, you know what? You're right. We're going to have to invest a lot more money than we could have when we did in 2018. That being said, when you are making these deals and selling equity in your company, how much concern do you have about dilution, about losing control of your business? Because this is a story we've seen countless times in the food and beverage industry.
[00:43:46] Kitu Life: It's a tough paradox because in order to grow as quickly as we're growing and build a business that's valuable to strategics, we need to do it with other people's money. You and I talked about this. We're building our dreams with other people's money. I think some entrepreneurs say that they'd rather own a small percentage of a big company than 100% of a small company. And this is the path that we've chosen. You know, you've likened us to buy, be AI, and I think that's right. You know, buy in vitamin water. There are other examples of brands that have raised a lot of cash to grow quickly. We're not totally concerned with dilution because we recognize that we do need to raise money to grow quickly. And at the same time, those investors that are coming on are sort of adding value to the business as well. And the one other point to mention is even though Jake Jordan and I don't own the majority equity or outstanding shares, we do control three out of our five board seats. So we are still the decision makers, which was important to us throughout this fundraising process.
[00:44:50] Ray Latif: I can imagine it would be. Well, you know, this is just such an amazing story. And I feel like we could probably do a podcast interview once every six months just to check in and see how you guys are growing because you're all growing so fast. And it is in many ways similar to that vitamin water buy story and you It's just going to be incredible to see where Super Coffee and you guys are in a year's time. I can't thank you enough for taking the time to be with me this morning. Good luck with everything going forward. And yes, let's catch up in Boston, New York really soon. I have a feeling it's going to be, it's going to be fun.
[00:45:26] Kitu Life: Awesome, Ray. Thank you so much, brother.
[00:45:29] Ray Latif: Thanks for the opportunity, man.
[00:45:31] Kitu Life: The pleasure is ours. Thank you.
[00:45:33] Ray Latif: See you soon, Ray. Thank you very much, guys. See you soon. That brings us to the end of Episode 220. Thank you so much for listening, and thanks to our guests, Jim, Jake and Jordan DeCicco. You can catch both Taste Radio and Taste Radio Insider on Taste Radio, the Apple Podcasts app, Stitcher, Google Podcasts, and Spotify. 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.
[00:46:18] Sunniva Super: Hello, I am Melissa Traverse here for the Taste Radio podcast, talking about some of the biggest tension points that CPG brands and founders face when they're scaling a brand, and those are financial accounting and inventory management. I am joined by Matt Lynn, inventory accounting guru from Belay Solutions, and he is going to shed some light on all of this that is going to help everybody out quite a bit. Matt, thank you so much for joining us today.
[00:46:48] Zx Ventures: Thank you for having us, Melissa. It's great to be out here at Expo West and it's great to sit down and be able to chat this because it's kind of a passion project of ours, working mainly with CPG Brands and hoping to help them scale.
[00:46:59] Sunniva Super: It's been such a pleasure chatting with you and the team and learning all about what you do over there at Belay Solutions. Can you tell us a little bit about yourself and what your role is and the kinds of solutions that Belay gives to CPG Brands and founders?
[00:47:15] Zx Ventures: Yeah, absolutely. My role with Belay, I'm actually our inventory accounting manager. I run our inventory department, so we work with CPG brands, taking them from spreadsheets, putting them on inventory management systems, and really helping connect their tech stack between their sales online marketplaces to that inventory management system, even down to their financial systems like QuickBooks. Belay overall is kind of an outsourced accounting firm. And with that, we're helping teams. We have different levels with bookkeeping, controller level work, even high level into CFO type items. So we really help those brands in any way that they need financially. And then I just have a subset of a department where we're really just laser focused on inventory.
[00:47:58] Sunniva Super: It's certainly a complex topic and there are plenty of places to go wrong. Let's start by going right and start super simple. Can you tell us what some of the biggest red flags are that would help a founder understand or, you know, the person running a brand understand that it really is time to get some help with some of these areas?
[00:48:18] Zx Ventures: Yeah, absolutely. I think some of the early red flags is just everything is chaos. So when they're looking in their financial software, maybe they don't really have an accounting background and they're kind of just piecing it together and doing their best. And what they'll see is that reconciliations take forever if they even happen. they have a lot of transactions that don't get coded or they just put them into placeholders to just get rid of it so it's not an eyesore. They'll notice they have revenue but no cash or they notice that they have a good amount of cash but their blind spot is really seeing the vendor invoices that are sitting there just needing to be paid and so they just lack that clarity that's going to really be around the corner.
[00:48:56] Sunniva Super: You know, you were talking about one of the red flags that comes up that I think makes so much sense. When somebody asks you what your numbers are and you can't come up with the right number, that's a big problem because that's something that you really should be able to share with decision makers who, you know, you're ideally looking to do business with. What should you be able to call up at a moment's notice?
[00:49:20] Zx Ventures: Really, at any time, you should be able to know an accurate margin. It's amazing how many founders we end up talking to that they can tell you their revenue numbers, they can tell you their selling price, and then the minute you start talking about cost or their cost of goods sold, they just get a deer-in-headlights look. So really, it's very hard to tell, am I even making money? Or if you don't know your entire landed cost. Maybe you know what the freight cost is, the duties separately, but you're not really getting that as part of your unit cost. So it's really hard to tell. Am I even making money or am I losing money from the very beginning?
[00:49:53] Sunniva Super: And do you recommend that founders are able to call up a margin by channel?
[00:49:58] Zx Ventures: Absolutely. And depending on the number of products and channels, you kind of want to know what are your best sellers, which ones are making the most and which ones maybe you're not making as much. But especially if you're branching out and you're doing D to C with B to B, absolutely want to know that.
[00:50:14] Sunniva Super: Gotcha. You mentioned that when things feel really chaotic, that's probably a red flag. I would say that it probably almost always feels chaotic if you're running a CBD brand. And I know this may be hard to quantify, but is there a revenue number? Is there a number of doors number that would help a brand understand whether or not it makes sense to bring on a partner like Belay? Understanding that so many brands are bootstrapped or they might be tight for cash. What is that friction point?
[00:50:45] Zx Ventures: 3 3 3 3 3 But as you're growing, as you're getting into those six-figure revenue numbers, and especially as you're approaching seven, you want to make sure you've got good financials. Because as you scale to that point, most likely you're going to be looking to raise capital. And investors, the first thing they're going to look at is your books. And are they clean? And do they show a clear picture of your business?
[00:51:18] Sunniva Super: You know, another area that folks might look to to organize some of the chaos are their systems. So many folks stick with Excel spreadsheets for a good amount of time. How do you know that you need to outsource some of your accounting to an organization like Belay Solutions versus maybe signing on to a Synth7 or NetSuite or something like that?
[00:51:40] Zx Ventures: Well, that's actually something we really help with when it comes to that cost question. That's something that trips people up. And sometimes if you just have a turnkey business, you buy and sell a finished good, you can maintain with spreadsheets. And we've had clients with million dollar revenue that can do that. But we see so many brands nowadays are using contract manufacturers. and they're just sourcing certain parts of their product. So when you start talking costs, they have no idea exactly what their unit cost is. So that's where we come in and we kind of understand, we'll speak with the customers and the clients and get their needs. And then if we think they're ready for a system, then we'll help put them on that system so they can get some of that clarity. And it's not something we force on anybody. There are plenty of times where founders come to us and we'll tell them bluntly, you're not ready for it right now, but we'll let you know when we think you are.
[00:52:26] Sunniva Super: That sounds like excellent advice. What should a founder or somebody running a brand look for in an outsourced accounting partner? Like, are there certain checklist items that they should make sure that their partner be able to execute or be able to help them understand?
[00:52:43] Zx Ventures: Absolutely. I think one of the keys, there's, there's a lot of outsourced accounting firms out there. Some focus on service-based SaaS companies, but if you're a CPG founder, you really want to make sure that your accounting firm has CPG experience. I would ask them, you know, what kind of brands have they worked with? And even beyond that industry specific, because there's so many subsets of CPG. And that's something that I think is great about what we do with Belay is that we kind of run the gamut. It's kind of like the insurance commercial. We know a thing or two because we've seen a thing or two across a broad spectrum.
[00:53:13] Sunniva Super: Probably getting references is always helpful, right? Absolutely. All right. So this all sounds great. I think we have a really good understanding of would it make sense to hire an outsourced partner? You know, what some of the things you should be looking for are. What does offloading this kind of work mean for the brand? What can this do for lightening the load of a founder or lightening the load of a brand operator? Like, how does that help them in their everyday business?
[00:53:42] Zx Ventures: It just tries to really help quiet the chaos. So what we're looking to do is just take some of the weight off that founder's shoulder, let them focus on building the brand, building the business, getting that exposure. If you don't have sales, you really don't have anything. So we want them to be able to focus on that while we take care of your back end office work. And we can just present that to you on a monthly basis, you can help make decisions, you can take that to investors. And really, you can just focus on growing your business.
[00:54:08] Sunniva Super: I feel like I felt founders and the folks who are running brands collectively sigh a breath of relief just hearing that. How can people learn more about Belay Solutions?
[00:54:19] Zx Ventures: So people can text TASTE to 55123 for their free inventory guide to get started.
[00:54:24] Sunniva Super: Matt Lin, Inventory Accounting Guru at Belay Solutions. Thank you so much for joining me here at Expo West. It's been such a pleasure to chat with you and learn about what you all do over there to help founders and brands with their financial accounting and inventory management. For everybody else out there, thank you for listening to the Taste Radio podcast. I am Melissa Traverse and we'll see you next time.
